I’m pretty certain AI quadruples my output at least and facilitates fixing, improving and upgrading poor quality inherited software much better than in the past. Why pay for SaaS when you can build something “good enough” in a week or two? You also get exactly what you want rather than some £300k per year CRM that will double or treble in price and never quite be what you wanted.
To attempt to summarize the debate, there seems to be three prevailing schools of thought:
1. Status Quo + AI. SaaS companies will adopt AI and not lose share. Everyone keeps paying for the same SaaS plus a few bells and whistles. This seems unlikely given AI makes it dramatically cheaper to build and maintain SaaS. Incumbents will save on COGS, but have to cut their pricing (which is a hard sell to investors in the short term).
2. SaaS gets eaten by internal development (per OP). Unlikely in short/medium term (as most commenters highlight). See: complete cloud adoption will take 30+ years (shows that even obviously positive ROI development often does not happen). This view reminds me a bit of the (in)famous DropBox HN comment(1) - the average HN commenter is 100x more minded to hack and maintain their own tool than the market.
benzible (commenter) elsewhere said this well - "The bottleneck is still knowing what to build, not building. A lot of the value in our product is in decisions users don't even know we made for them. Domain expertise + tight feedback loop with users can't be replicated by an internal developer in an afternoon."
This same logic explains why external boutique beats internal builds --
3. AI helps boutique-software flourish because it changes vendor economics (not buyer economics). Whereas previously an ERP for a specific niche industry (e.g. wealth managers who only work with Canadian / US cross-border clients) would have had to make do with a non-specific ERP, there will now be a custom solution for them. Before AI, the $20MM TAM for this product would have made it a non-starter for VC backed startups. But now, a two person team can build and maintain a product that previously took ten devs. Distribution becomes the bottleneck.
This trend has been ongoing for a while -- Toast, Procore, Veeva -- AI just accelerates it.
If I had to guess, I expect some combination of all three - some incumbents will adapt well, cut pricing, and expand their offering. Some customers will move development in house (e.g. I have already seen several large private equity firms creating their own internal AI tooling teams rather than pay for expensive external vendors). And there will be a major flourishing of boutique tools.
(1) >>9224