Really interesting read, thank you!
I'm currently working for a very traditional SaaS company (let's call us FooBar for the discussion), and I can say that this fear is very real. We talk a lot about the "FooBar killer" which is a theoretical startup company working right now on a better solution than ours. We know that there are a few of those and we even started working on one of our own exactly because of that. If you can't beat the "engineers with a spare Friday afternoon" you might as well join the attempt to replace you.