We may (or may not) be seeing the start of a new trend, where the disrupter (Salesforce) is itself finally getting disrupted. Flash back a generation, and Salesforce came in with a SaaS model to disrupt Monolithic Software vendors like SAP.
But now, some are arguing, Generative AI enables biggish companies to replace their large SaaS expenses with open source/free/cheap Generative AI software, either with some in-house talent or just from new lean startups with an aggressive pricing model enabled by their use of these AI tools.
Some good discussion in this part of a recent All-In-Podcast:
(Make sure you start 1:04:14 because there’s a bunch of politics and crypto talk before. The discussion on this ends 11 minutes later)
“Generative AI is essentially a enablement layer that allows you to deliver functionality” says Chamath Palihapitiya, who is running a startup doing “8090” - providing 80% of the functionality of what you’re using today at a 90% discount on price. And the other 20% isn’t far away.
Which is essentially the point Clayton Christensen makes in his “The Innovator’s Dilemma” book - that new tech comes in cheaper and does new stuff and most of the old stuff you still want to do.
Palihapitiya admits “it’s not a today thing” and that “Salesforce is not a bad company,” but it’s on the wrong side of this 5-10 year change. And then some discussion about a per-seat model will go away with a consumption model taking its place. If AI starts replacing your people, then you need fewer seats for software they use, and at the end of the day, these pricing models are all just ways to attempt to scale the benefits customers get from your products with the price they pay.
On balance, I think it’s too early to tell whether AI will hurt SaaS companies and their business models, or whether this is just some minor growing pains as the SaaS companies figure out how to incorporate AI and thus provide more value. But, this kind of mega-trend is something to think about and keep in the back of your mind as you think about the long term. One thing I do think is obvious is that Generative AI (sometimes abbreviated as “Gen AI”) IS changing almost everything - business, education, government, etc.