Was the stock market justified in giving the technology industry a huge haircut (maybe even a decapitation!) this month? Is SaaS going the way of print media in the 90s?
The narrative goes something like this: AI—especially LLMs—has broken the old rules of software. Technical functionality is about to become completely commodified. The moats are gone, and the margins will soon follow. The magic is over.
Chris Paik, Cofounder and General Partner at Pace Capital, put it bluntly:
“SaaS, ARR, magic numbers—these are all shorthand to understand the old model of business building in software, one where the expense associated with creating software was a moat. The invisible hand has been stayed in software for a long time, but LLMs will usher in its swift, familiar corrective force. Majoring in computer science today will be like majoring in journalism in the late 90’s.”
Right now there’s also a lot of smart investors and executives scratching their heads, saying that this sure feels like an overreaction. Here’s my take: I don’t know about short-term stock fluctuations, but what we’re seeing is clearly a signal. And it’s a signal we have to take seriously. I speak from experience.
I was at Salesforce when we helped shift the industry to SaaS. Back then, delivering software over the Internet was laughable to lots of people. To be fair – they had some very reasonable objections! The product was slow. Pages took forever to load. Enterprises didn’t trust the cloud. You couldn’t customize like on-prem. “This is fine for small businesses,” they said. “But big companies? Never.”
A lot of established vendors looked at us and thought: This is just a new distribution model with a lease attached. The product is essentially the same, you’re just asking people to pay over time. If you want to lose a nice big upfront sale, that’s your problem! We’re still shipping units. We still have our moats. We’re fine.
They weren’t fine. Because SaaS didn’t just change distribution, it changed everything. Software essentially woke up. It wasn’t shrink-wrapped discs on pallets anymore. It became a living, breathing service.
Heck, at Salesforce we had to invent entirely new roles, processes, and metrics. Customer success teams. Sales development representatives. Subscription renewals. Multi-tenant architecture. Entire categories of jobs that are now industry standard didn’t even exist!
And the companies that didn’t adapt? They disappeared or were absorbed: Siebel, PeopleSoft, Informix. Today, their mistakes seem obvious: Heavy dependence on large upfront license deals. Multi-year deployments. Sales teams optimized for massive enterprise transactions instead of recurring revenue velocity. Monolithic codebases.
But these mistakes only look obvious in hindsight. Clearly a lot of smart management teams didn’t see the signs coming, or they would have changed faster. Or at least made the effort.
Some did: Adobe, Autodesk, Microsoft. They saw the shift and made hard, painful transitions. They rebuilt pricing. They re-architected products. They even cannibalized their own revenue. They swallowed the fish.
Now we’re being hit with another meteor. AI is not just another feature. It’s not just another module. It changes how software is built, how it’s consumed, how it’s priced, and how value is delivered.
The only rational response to this moment is to assume you’re in danger—and then work from there. You’re not allowed to sit still. You’re not allowed to say, “Everything’s fine.”
As my CTO Pete Hirsch likes to say, “You have to place bets. As a business, you can’t afford not to. You can’t stay on the fence forever, but you also can’t just follow the herd. You need an intuitive understanding of your core IP and a clear point of view on what to build, what to buy, and where to partner. What differentiated value are you delivering to your customers in this new world? Which standards do you bet on? Where do you put your capital? Your talent?”
Across our customer base, we’re seeing enormous demand around pricing and finance in the age of AI. Everyone is grappling with the same uncertainty. Everyone is running experiments. Everyone is recalibrating.
Some companies will get it right. Some won’t. That’s not new. That’s capitalism. Stay paranoid.
No one is safe.
