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> The fear is that these [AI] tools are allowing companies to create much of the software they need themselves. AI-generated code still requires software engin

> The fear is that these [AI] tools are allowing companies to create much of the software they need themselves. AI-generated code still requires software engineers to build, test, debug, deploy, secure, monitor, be on-call, support, handle incidents, and so on. That's very expensive. It is much cheaper to pay a small monthly fee to a SaaS company.

tossandthrow 8mo ago
That would justify a good multiple of 5 to 10. Not 30 or above as for high growth companies.
- louiereederson 8mo ago
  multiple of what? there is maybe one software company trading above 30x revenue - palantir. many companies growing at 20% trade at single digit revenue multiples.
  - jmalicki 8mo ago
    Unqualified it almost always means earnings (profits).
    - louiereederson 8mo ago
      that is really not the case in software, people commonly go between EV/S and EV/FCF for high growth names. also earnings could mean: GAAP earnings, non-GAAP earnings, ebitda, ebita, FCF, FCF ex share based comp.
airstrike 8mo ago
yes but investors don't know that or for a more charitable comment, I think the issue people struggle with right now is how much of non-AI software will be replaced by AI-native versions. and it's not even a 1:1 mapping. we may see 5 different small companies replaced by a single AI interface. all TBD, but there's merit to avoiding that risk right now if you can just allocate to NVDA and GOOG instead
KellyCriterion 8mo ago
yes, but this does fit into the head of MBA-bobo-management stylers, who believe ChatGPT will replace everyone :)
the_gipsy 8mo ago
Yes, it's just that some companies will fail to adapt, but there will be new jobs.
llmslave 8mo ago
cost will go down 70-90%
- kawera 8mo ago
  SaaS margins too.
firstplacelast 8mo ago
Stock prices are very forward looking, so if half the hype being sold about AI is true I would expect most software-centric companies to be devalued by wall-street (as the test, deploy, support should be automated in the coming years...according to the AI CEO's). However, if I was a wall street analyst and believed the AI dreams I would further be concerned that software companies aren't taking advantage of the last remnants of value before software (and maybe labor) values go to zero. If you've got a gold mine and have recently built the most efficient shovels in the world, why are they not bringing in mass amounts of workers to utilize these shovels before all the neighboring mines. Once all that gold is on the market, the price crashes so it's better to be one of the first mines to get in and dig out all possible value first. I think you either don't believe in the AI hype, which means a lot of silicon valley companies are tremendously overvalued. Or you do, in which case another huge part of silicon valley is overvalued especially when they are not looking to out-innovate their peers (as evidenced by downsizing), but just riding the wave of AI until what they are selling has no marginal value over some guy coding alone in his bedroom. SV is putting itself into a weird position, but still has some time for financial buffoonery before the party stops.
- falloutx 8mo ago
  >If you've got a gold mine and have recently built the most efficient shovels in the world, why are they not bringing in mass amounts of workers to utilize these shovels before all the neighboring mines Because they are completely consumed by the need to increase margins, which they think they will be able to do it with AI by laying off a lot of people. But Saas economy is connected and based on per user pricing, so as layoffs continue, Saas economy is showing its biggest weakness. All of Saas companies also seem to embrace AI so much that they would rather add another summarise button rather than actually making something which cant be copied easily by competitors.
SimianSci 8mo ago
"Small Monthly Fee" is a very loaded term here. Im in the negotiations for these platforms, the price that many of these companies command for their products will very often pay the salaries of a whole software department. Add to this the quality of support being the lowest possible option above "nonexistant" and I would say the risk to these SaaS companies is real. The real benefit of these types of SaaS offerings was their ubiquity across multiple industries and verticals. If a company bought Salesforce, they could very readily find employees that would be able to quickly onboard since they would likley have used it at previous companies. AI software generation is changing this as more and more software being created is bespoke and increasingly one-of-a-kind with these tools allowing companies to create software that fits their unique and specific needs. My hot take here is that the moats previously enjoyed by SaaS companies will increasingly vanish as smaller and smaller teams can assemble "good enough" solutions that companies will adopt instead of paying giant chunks of their budget on pre-built SaaS tools that will increasingly demand more training to Onboard.
- falloutx 8mo ago
  Saas was always fueled by B2B buying through same investor circle. sequoia companies buying from other sequoia companies, softbank companies buying from other software companies. Without this circular buying and selling of the software, the whole B2B software market crashes.
- louiereederson 8mo ago
  >My hot take here is that the moats previously enjoyed by SaaS companies will increasingly vanish as smaller and smaller teams can assemble "good enough" solutions that companies will adopt instead of paying giant chunks of their budget on pre-built SaaS tools that will increasingly demand more training to Onboard. why do people pay red hat/ibm for rhel? they earn pretty good margins too. to parent's point on software/=code
  - lmm 8mo ago
    > why do people pay red hat/ibm for rhel? Because the guy who signed the purchase order had a good time golfing?
mattmaroon 8mo ago
A lot of these companies are not small monthly fees. And if you’ve ever worked with them, you’ll know that many of the tools they sell are an exact match for almost nobody’s needs. So what happens is a corporation ends up spending a lot of money for a square tool that they have to hammer into a circle hole. They do it because the alternative is worse. AI coding does not allow you to build anything even mildly complex with no programmers yet. But it does reduced by an order of magnitude the amount of money you need to spend on programming a solution that would work better. Another thing AI enables is significantly lower switching costs. A friend of mine owned an in person and online retailer that was early to the game, having come online in the late 90s. I remember asking him, sometime around 2010, when his Store had become very difficult to use, why he didn’t switch to a more modern selling platform, and the answer was that it would have taken him years to get his inventory moved from one system to another. Modern AI probably could’ve done almost all of the work for him. I can’t even imagine what would happen if somebody like Ford wanted to get off of their SAP or Oracle solution. A lot of these products don’t withhold access to your data but they also won’t provide it to you in any format that could be used without a ton of work that until recently would’ve required a large number of man hours
- wtp1saac 8mo ago
  If it is not a small fee, I do wonder - is there still advantage to having a provider which one may take out a lawsuit against if something goes wrong? To what extent might liability and security vetting by scaled usage still hedge against AI, in your view?
  - thephyber 8mo ago
    It’s generally a tradeoff decision between comparative advantage of a vendor versus {price cost and contracting cost}. Contracting my cost is the difference in costs for a contract across companies versus a purely internal project. This could involve the lawyers on both sides, the time taken to negotiate which party is responsible for what deliverable / risk, the cost to enforce the contract, the time taken for negotiations/ iterations, etc. One efficient company doing it internally is obviously efficient. Two inefficient companies negotiating a contract is obviously inefficient. The interesting questions are the other 2 quadrants, where the answer may change between the LLM case and non-LLM case.
deadbabe 8mo ago
You can use AI for simple stuff. For everything else, there’s open source.
- kube-system 8mo ago
  Open source doesn't implement, host, and support itself. Some of these software companies stocks are companies selling open source software.
  - coliveira 8mo ago
    Software developers programmed themselves out of a job. They created a huge and growing set of free, tested, high quality software in the form of open source, that can be use for pretty much anything. LLMs will automate a lot of the remaining pieces.
    - deadbabe 8mo ago
      Programming yourself out of a job, is the final, most important command of a job.
    - kube-system 8mo ago
      Programmers programmed themselves out of a job. Software engineers will be just fine.
9rx 8mo ago
Foundational software requires that, but the foundation is pretty much completely built at this point. The workforce required to keep it running is but a tiny fraction of what was required to build it. The past has shown that innovation in hardware can push for the foundations to be rebuilt, but we've also already got computers basically everywhere now. There may not be some new innovation that requires the foundations to be completely rewritten again. The little one-off programs that we thought would keep developers busy forevermore don't require engineers. They often don't even require code. LLMs can natively do a lot of things that historically would have required software.
- manmal 8mo ago
  Such black and white thinking. Even the little tools fall apart at first sight of an edge case if they are fully vibed. Neither Opus nor codex are good at architecture, and it’s not clear they ever will be.
  - 9rx 8mo ago
    You still seem to be thinking about code in the traditional sense. A lot of the software I am using now in my non-tech business isn't rooted in code at all. It is simply asking an LLM to carry out a task. Still programming, of course, but not with a traditional programming language. The LLM will produce the excepted results in realtime. The intermediary step of building an executable is totally unnecessary. In the olden days it would have taken considerable engineering effort to produce a comparable tool. That is no longer the case.
    - manmal 8mo ago
      Yeah let’s talk again in 6 months when the slop catches up with you.
      - 9rx 8mo ago
        Been using it for several years. What is going to change in six months?
deleted 8mo ago
[deleted]
rglullis 8mo ago
> AI-generated code still requires software engineers No, they don't. A domain expert armed with an Excel spreadsheet and the ability to write VBA macros will be enough for most business.
- zdw 8mo ago
  Excel spreadsheets have little to no validation logic that you're actually getting a good result, unless you have a secondary check (most spreadsheets are structured as "single entry" accounting, so lack the checks) A prime example of this was the Reinhart/Rogoff paper advocating austerity that was widely quoted, and then it was discovered that the spreadsheet used had errors that invalidated the conclusions: https://en.wikipedia.org/wiki/Growth_in_a_Time_of_Debt#Methodological_criticism https://en.wikipedia.org/wiki/Growth_in_a_Time_of_Debt#Metho... Just because technology is in use and "works" doesn't mean it's always correct.
  - rglullis 8mo ago
    You are taking my comment way too literatlly. The point is not that people will be using specifically Excel, but that most business only pay for software because it is the tool that gives them the most power to automate their processes. They don't need high availablility, they don't need standards compliance, they don't extensive automated tests, they won't need cloud engineeers and SRE... all you need is some tool that can get the results your are looking for right now. Academia already works like this. Software wrtiten for academic purposes is notoriously "bad" because it is not engineerd, but that doesn't matter because it is good enough to deliver the results that researchers need. Corporate IT will also start looking like this even at mid-sized companies.
    - zdw 8mo ago
      I don't disagree with anything you say here - using a tool that lacks guardrails is fine for a lot of tasks, but if that's the only tool and used where those guardrails go from "nice to haves" to something more critical is where the problem is. I've been in ops for a long time and have encountered far too many "our IP addressing plan is just a spreadsheet with manual reconciliation". I truly wonder if Excel and all it's predecessors and direct clones (Google Sheets, etc.) are holding back industry from making something truly better and more reliable.
keeda 8mo ago
Hmm, I wonder if it would be cheaper to hire a couple of software engineers to vibe-code custom SaaS apps on top of the company's existing data layer instead of paying for a hundred different SaaS subscriptions. Financial considerations aside, one advantage of having in-house engineers is that you can get custom features built on-demand without having to be blocked on the roadmap of a SaaS company juggling feature requests from multiple customers...
- Sleaker 8mo ago
  I'm at a large company that is building connections between all of its different financial systems. The primary problem being faced is NOT speed to code things, the primary problem at large companies is getting business aligned with tech (communication) and getting alignment across all the different orgs on data ownership, access, and security. AI currently doesn't solve any of this. Throw in needing to deal with regulation/SOX compliance and all the progress you think AI might make, just doesn't align with the problem domains.
  - Shalomboy 8mo ago
    Agreed. The SWEs already receive a steady supply of conflicting demands from every possible business unit; the value add for these teams is a working PMO to prioritize the requests coming in.
  - sublinear 8mo ago
    This is also generally true for all mid to large businesses I've ever worked at. The code they write is highly domain-specific, implementation speed is not the bottleneck, and their payroll for developers is nothing compared to the rest of the business. AI would just increase risk for no reward.
  - coliveira 8mo ago
    > getting business aligned with tech (communication) and getting alignment across all the different orgs This is what a CEO is supposed to do. I wonder if CEOs are the ones OK with their data being used and sent to large corps like MS, Oracle, etc.
themafia 8mo ago
> AI-generated code AI "generated" code requires a large base of training data to draw from. If we all stop writing code then there will no new code written. Just rehashes of stolen ideas. There is no long tail to this industry or ideal. > That's very expensive. As long as you convince someone else to pay the bill who cares? The real problem is are you losing your competitive edge? If everyone else can crank out the same stolen crap you can then there is no reason for you to even exist.
- SunlitCat 8mo ago
  That's something i wonder as well. AI needs data to be usable. But what if all the data it gets is just generated by AI?
  - themafia 8mo ago
    It has to annotate it too. We've let models do this before. They devolve into an incomprehensible mess in very short order. Errors multiply. Lossy weight compression on erroneous material makes it all that much more worse. https://www.youtube.com/watch?v=QEzhxP-pdos https://www.youtube.com/watch?v=QEzhxP-pdos
falloutx 8mo ago
Other reason could be that investors think companies are going to lay off a lot of their staff and then that will decrease Saas revenue anyway.
freejazz 8mo ago
AI-generated code is not copyrightable and therefore cannot be protected through a conventional licensing scheme.
- tesch1 8mo ago
  Support for this claim?
  - freejazz 8mo ago
    In the US, you can only copyright expressions made by humans. Which part of it do you have trouble with?
epolanski 8mo ago
Atlassian tools for a client like mine (hundreds of employees) can easily cover the expense of internalizing it. It's Jira plus confluence mostly, it's not rocket science. And that's just atlassian. Start adding stuff that costs many many many yearly salaries (special software for managing inventories and warehouses) it starts making sense to prototype alternatives internally. I came to the conclusion that if it's not Teams/SharePoint or the moat is on the extreme legal complexity side (e.g. payrolls), you can at least think of building an alternative that is good enough without needing to be perfect.
- bargainbin 8mo ago
  Don’t forget the salary for every dev team having the Atlassian Jira Jockey to mess around with the board all day and make sure the next 7 epics worth of tickets are in the 9 columns and in prioritised order. Where would we be without them!?
- louiereederson 8mo ago
  jira premium is $15/mo/user for 300 users. you're saying $50k can cover developing the app inclusive of integrations, maintaining it, providing 24/7 service and 3 9s uptime (per the sla)? don't forget compliance and security. maybe the logic is everyone can be fired and replaced with agents?
  - fragmede 8mo ago
    Yes. $50k goes a long way outside of the Bay Area.
    - camdenreslink 8mo ago
      There is no way you would get anything close to as good as JIRA. Your best bet with that budget would be trying to integrate an existing open source on-prem solution (not sure what that alternative is for JIRA).
      - lmm 8mo ago
Spooky23 8mo ago
Lol. ServiceNow, Oracle, Workday, etc are not small monthly fees. That's what the market is shitting on. (Oracle is different, given the corruption and OpenAI grift angle.) My buddy works for a company like these. He landed a $5M contract last year, which netted him almost $800k. There's alot of fat to be cooked out of this stuff, and AI will help smaller entrants attack those margins. AI-based startups like Vanta make it much easier for companies to meet the compliance bullshit the large companies require. Again, it will drive more competition == better values for customers.
- chasd00 8mo ago
  > There's alot of fat to be cooked out of this stuff, and AI will help smaller entrants attack truer words have never been spoken. I work in some of these platforms and lead teams of developers who write customizations. These customizations are not rocket surgery, basic CRUD with some logic requirements that can't be met ootb. It's very time consuming and therefore expensive to clients. The significant moat incumbents have is brand recognition and trust. On the other hand, a hot new "Agent First" consulting firm at 1/3 the price would be hard for a director to not at least experiment with.
- deleted 8mo ago
  [deleted]
doctorpangloss 8mo ago
Haha, maybe… you can stick your head in the sand all you want, but everyone I know whose output is code is delegating 100% of their work to Claude Code today, I cannot see this magically drawing a line at people whose output is configs and emails…
rstuart4133 8mo ago
> > The fear is that these [AI] tools are allowing companies to create much of the software they need themselves. If that's their fear they don't know much how your typical big businesses functions. You've dealt with a large, consumer bank? Many of them still run on IBM mainframes. The web front end is driven by pushing buttons and screen scraping 3270 terminal emulators. You would think a bank with all it's resources could easily build it's IT infrastructure and then manage all the technology transitions we've gone through over the past few decades. Clearly, they don't and can't. What they actually do is notice they have to adapt to the newfangled IT threat, hired hordes of contractors to do the work, then fire them when done. After it's done they go back to banking and forget all the lessons they've learnt about building and managing IT infrastructure. If you want to see how banking and computers should be combined, look at the Fintech's, not banks. But for some reason I don't understand traditional banks still out compete Fintech's. Maybe it's getting your head around both banking and running an IT business it too much for one human mind? That same pattern is repeated everywhere. Why was everyone so scared of Huawei? It wasn't because they built the gear. It's because the phone telco's have devolved into marketing and finance companies who purchase in the gear from companies like Huawei and rent it out. Amazingly they don't know how to run the gear they purchased, instead get the supplier to install it and maintain it. But that meant what some eyes viewed as an organ of the Chinese communist party was running the countries phones with full access to every SMS and voice call. (Interestingly, IBM pulled the same stunt with the banks back in the day: you didn't buy an mainframe, you leased / rented it from IBM, and they maintained it.) It's the same story everywhere I look. These big firms stick to the knitting. If you want to see total, utter incompetence in IT go work whose core business doesn't revolve around IT for a while. These are the firms that still choose Microsoft, despite the fact they've seen Sony's Microsoft based IT infrastructure torn apart so badly by North Korea they didn't know who their employees were, how much they owed creditors or how much debtors owned them for a while. Why do they choose Microsoft? Look around - who else allows you to outsource the know how about connecting millions of computing devices in 1000's of offices to a redundant cloud infrastructure that allows them to share data while providing a centralised authentication / authorisation infrastructure. There is only one choice, apart from developing it themselves which is out of the question. If those businesses did start using what passes for AI today to manage and develop their own IT infrastructure, the result would not be pretty. But for all the shit I'm throwing at them here, I'm confident they are smarter than that. They know their limitations, they haven't done it before, and they won't start doing it now.
aunty_helen 8mo ago
Hyper custom software can allow your business flows to sync together a lot better than the alternative, using zapier to glue a bunch of mostly poor fits and ending up with Frankenstein processes. Also, it allows you to pick and choose what you want from where. We’ve just completed the first month of our internal CRM that has replaced about 500$ a month in subs with something that flows much better and enforces our own internal processes.
nayroclade 8mo ago
If AI can code, why do you think it cannot handle building, testing, debugging, securing, monitoring, supporting, incident handling, and so on? Consider incident handling. What if your AI sets up monitoring that detects errors or outages, wakes up an agent, gives it the problem context, then sets it to work so it can debug the issue, produce a fix, then deploy it? You now have an end-to-end system that works 24/7. Many issues will probably be resolved before you've even noticed them. If your response is, AIs won't ever be smart or capable enough to do this as well as humans, how has that same prediction worked out for coding? The next generation of AI "coding" tools will essentially be SaaS companies in a box. Agents will code the app, but they'll also test it, debug it, support it, etc. And this will happen in months, not years.
- fzeroracer 8mo ago
  > Consider incident handling. What if your AI sets up monitoring that detects errors or outages, wakes up an agent, gives it the problem context, then sets it to work so it can debug the issue, produce a fix, then deploy it? You now have an end-to-end system that works 24/7. Many issues will probably be resolved before you've even noticed them. Have you ever been actually involved in trying to fix an error or outage? Like actually on an on-call rotation where you had to deal with reported issues?
boshalfoshal 8mo ago
two things: 1. ai being able to code well seems like it would also get pretty close/good at doing basically everything else you described. If coding is a game of reasoning, if you can solve that, you have effectively solved reasoning and you can likely map it to most other problems provided you have a sufficiently good harness and toolcalling setup. 2. Lets assume AI won't replace everyone as point (1) assumes - and it just replaces _most_ people. Under this assumption, we will likely see large swathes of layoffs. Many SaaS companies have a pay per seat model. Less people employed at companies = less seats being paid for = less SaaS revenue. So not only is there a threat of companies just vibe coding various SaaS-es in house, but there is also a threat that the TAM of many SaaS products (which is typically proportional to the # of employees there are) will actually _shrink_ in size. I think the main class of SaaS company that will remain in the medium term are the ones in legally touchy or compliance heavy industries - think healthcare, finance and security (workday for example). But even Workday will be affected by point (2) from above. Overall, I think the mid-long term outlook for SaaS, especially "SaaS", is not great.
thephyber 8mo ago
> It is much cheaper to pay a small monthly fee to a SaaS company. How often do software projects underestimate their cost and timeframe? The LLM-written replacement may prove to be more expensive, but may appear to be cheaper initially when all of the costs and budgets are hidden in the “fog of war”. How effective will vendor messaging warning clients away from writing their own vendor replacements be? Of course a vendor will play up their strengths and will try to play up the clients’ weaknesses. It’s like asking a used car salesman to give you their opinion of a car on their lot — they aren’t seen as neutral observer.
aurareturn 8mo ago
AI-generated code still requires software engineers to build, test, debug, deploy, secure, monitor, be on-call, support, handle incidents, and so on. That's very expensive. It is much cheaper to pay a small monthly fee to a SaaS company. But it's also much cheaper to develop an alternative SaaS offering, one that is perhaps more custom, nimble, cheaper than the general SaaS out there today. In the past, maybe it might have taken 2,000 engineers to build a Figma equivalent. Today, it might take 20. Software will be cheap to develop so competition will be extremely high. Therefore, SaaS companies should not command a high PE ratio in the stock market anymore. It's physical companies that should command a higher PE ratio. Energy, materials, and chip companies to be exact. This was reversed pre-LLM era.
- rreichman 8mo ago
  Which part of Figma can you build with 20 engineers? I think we're still not close to a small team building real-time collaboration software at scale that actually works at the quality level that customers expect.
  - aurareturn 8mo ago
    Probably all of it with a team of skilled engineers and a frontier model.
PeterStuer 8mo ago
Bespoke software development is a huge market. It is incredibly expensive. AI coding agents are not perfect, but just usable enough to be coached through by a semi-IT-literate business person to write some scripts or a little crud site that's needed for a specific LOB task (typically a 30k-250k range project) The alternatives before were propose the case to IT, and if lucky it gets put on the planning, outsourced to consultants, and delivered 18 months from now for an astronomical investment in both time and cost. Or go at it yourself with Excell and VBA. The AI thing will be a just 'good enough' barely working clutch of ugly code. Then again, so was most of the consultant produced code.
- ca_tech 8mo ago
  This exactly. How many small businesses were running some sort of Access database built by someone who knew just enough to meet their business process needs? "Brenda always orders these parts on Tuesday so make sure there is a Tuesday ordering table." Eventually some SaaS solution came in and they evolved their business process because of the proposed benefits. I expect we are going to see a resurgence of good enough software created for the real world hodgepodge of business practices. Not a bad thing in the short term as it will creating adequate efficiency, but long term we are going to reap the technical debt. My prediction is that the next SaaS evolution is going to be platforms for these random solutions. Just as Salesforce captured CMS market, someone is going to capture the AI agent market where users can write and host their LOB code agnostic to the rest of their infrastructure stack and 'slightly' reduce that technical debt.
bdavisx 8mo ago
>It is much cheaper to pay a small monthly fee to a SaaS company. It's not that cut and dried - it all depends on what your company needs from SaaS and how big it is. SaaS companies like Salesforce don't charge a "small monthly fee" - they charge 10s of millions of dollars per month for large corporations. It's not hard at all to push that money towards AI development and have a better solution built in-house now. Yes, it still takes serious project management skills, but so does integrating Salesforce or other large SaaS software.
jeffkumar 8mo ago
I disagree. I think that DHH proved that is not the case with the AWS bill. They saved millions by getting off of it. As software is now 10x cheaper to create, it's going to really wipe enterprise value away from the incumbents. There's going to be companies in the middle where they are fed up with their bills and they innovate in house and get ahead building solutions that are even closer to what they want. Thankfully, this is good for the software market and gives jobs to all those who were laid off at the big tech companies. At least, that's my hope.
assaddayinh 8mo ago
Its much cheaper yo devalue the software company via ai hype buy the buisness qnd the integrate the solution behind an ai layer. Aka as the uber proposition. Our taxitokens just got degilded!

tossandthrow 8mo ago

That would justify a good multiple of 5 to 10. Not 30 or above as for high growth companies.

louiereederson 8mo ago
multiple of what? there is maybe one software company trading above 30x revenue - palantir. many companies growing at 20% trade at single digit revenue multiples.
- jmalicki 8mo ago
  Unqualified it almost always means earnings (profits).
  - louiereederson 8mo ago
    that is really not the case in software, people commonly go between EV/S and EV/FCF for high growth names. also earnings could mean: GAAP earnings, non-GAAP earnings, ebitda, ebita, FCF, FCF ex share based comp.

airstrike 8mo ago

yes but investors don't know that or for a more charitable comment, I think the issue people struggle with right now is how much of non-AI software will be replaced by AI-native versions. and it's not even a 1:1 mapping. we may see 5 different small companies replaced by a single AI interface. all TBD, but there's merit to avoiding that risk right now if you can just allocate to NVDA and GOOG instead

KellyCriterion 8mo ago

yes, but this does fit into the head of MBA-bobo-management stylers, who believe ChatGPT will replace everyone :)

the_gipsy 8mo ago

Yes, it's just that some companies will fail to adapt, but there will be new jobs.

llmslave 8mo ago

cost will go down 70-90%

kawera 8mo ago
SaaS margins too.

firstplacelast 8mo ago

Stock prices are very forward looking, so if half the hype being sold about AI is true I would expect most software-centric companies to be devalued by wall-street (as the test, deploy, support should be automated in the coming years...according to the AI CEO's). However, if I was a wall street analyst and believed the AI dreams I would further be concerned that software companies aren't taking advantage of the last remnants of value before software (and maybe labor) values go to zero. If you've got a gold mine and have recently built the most efficient shovels in the world, why are they not bringing in mass amounts of workers to utilize these shovels before all the neighboring mines. Once all that gold is on the market, the price crashes so it's better to be one of the first mines to get in and dig out all possible value first. I think you either don't believe in the AI hype, which means a lot of silicon valley companies are tremendously overvalued. Or you do, in which case another huge part of silicon valley is overvalued especially when they are not looking to out-innovate their peers (as evidenced by downsizing), but just riding the wave of AI until what they are selling has no marginal value over some guy coding alone in his bedroom. SV is putting itself into a weird position, but still has some time for financial buffoonery before the party stops.

falloutx 8mo ago
>If you've got a gold mine and have recently built the most efficient shovels in the world, why are they not bringing in mass amounts of workers to utilize these shovels before all the neighboring mines Because they are completely consumed by the need to increase margins, which they think they will be able to do it with AI by laying off a lot of people. But Saas economy is connected and based on per user pricing, so as layoffs continue, Saas economy is showing its biggest weakness. All of Saas companies also seem to embrace AI so much that they would rather add another summarise button rather than actually making something which cant be copied easily by competitors.

SimianSci 8mo ago

"Small Monthly Fee" is a very loaded term here. Im in the negotiations for these platforms, the price that many of these companies command for their products will very often pay the salaries of a whole software department. Add to this the quality of support being the lowest possible option above "nonexistant" and I would say the risk to these SaaS companies is real. The real benefit of these types of SaaS offerings was their ubiquity across multiple industries and verticals. If a company bought Salesforce, they could very readily find employees that would be able to quickly onboard since they would likley have used it at previous companies. AI software generation is changing this as more and more software being created is bespoke and increasingly one-of-a-kind with these tools allowing companies to create software that fits their unique and specific needs. My hot take here is that the moats previously enjoyed by SaaS companies will increasingly vanish as smaller and smaller teams can assemble "good enough" solutions that companies will adopt instead of paying giant chunks of their budget on pre-built SaaS tools that will increasingly demand more training to Onboard.

falloutx 8mo ago
Saas was always fueled by B2B buying through same investor circle. sequoia companies buying from other sequoia companies, softbank companies buying from other software companies. Without this circular buying and selling of the software, the whole B2B software market crashes.
louiereederson 8mo ago
>My hot take here is that the moats previously enjoyed by SaaS companies will increasingly vanish as smaller and smaller teams can assemble "good enough" solutions that companies will adopt instead of paying giant chunks of their budget on pre-built SaaS tools that will increasingly demand more training to Onboard. why do people pay red hat/ibm for rhel? they earn pretty good margins too. to parent's point on software/=code
- lmm 8mo ago
  > why do people pay red hat/ibm for rhel? Because the guy who signed the purchase order had a good time golfing?

mattmaroon 8mo ago

A lot of these companies are not small monthly fees. And if you’ve ever worked with them, you’ll know that many of the tools they sell are an exact match for almost nobody’s needs. So what happens is a corporation ends up spending a lot of money for a square tool that they have to hammer into a circle hole. They do it because the alternative is worse. AI coding does not allow you to build anything even mildly complex with no programmers yet. But it does reduced by an order of magnitude the amount of money you need to spend on programming a solution that would work better. Another thing AI enables is significantly lower switching costs. A friend of mine owned an in person and online retailer that was early to the game, having come online in the late 90s. I remember asking him, sometime around 2010, when his Store had become very difficult to use, why he didn’t switch to a more modern selling platform, and the answer was that it would have taken him years to get his inventory moved from one system to another. Modern AI probably could’ve done almost all of the work for him. I can’t even imagine what would happen if somebody like Ford wanted to get off of their SAP or Oracle solution. A lot of these products don’t withhold access to your data but they also won’t provide it to you in any format that could be used without a ton of work that until recently would’ve required a large number of man hours

wtp1saac 8mo ago
If it is not a small fee, I do wonder - is there still advantage to having a provider which one may take out a lawsuit against if something goes wrong? To what extent might liability and security vetting by scaled usage still hedge against AI, in your view?
- thephyber 8mo ago
  It’s generally a tradeoff decision between comparative advantage of a vendor versus {price cost and contracting cost}. Contracting my cost is the difference in costs for a contract across companies versus a purely internal project. This could involve the lawyers on both sides, the time taken to negotiate which party is responsible for what deliverable / risk, the cost to enforce the contract, the time taken for negotiations/ iterations, etc. One efficient company doing it internally is obviously efficient. Two inefficient companies negotiating a contract is obviously inefficient. The interesting questions are the other 2 quadrants, where the answer may change between the LLM case and non-LLM case.

deadbabe 8mo ago

You can use AI for simple stuff. For everything else, there’s open source.

kube-system 8mo ago
Open source doesn't implement, host, and support itself. Some of these software companies stocks are companies selling open source software.
- coliveira 8mo ago
  Software developers programmed themselves out of a job. They created a huge and growing set of free, tested, high quality software in the form of open source, that can be use for pretty much anything. LLMs will automate a lot of the remaining pieces.
  - deadbabe 8mo ago
    Programming yourself out of a job, is the final, most important command of a job.
  - kube-system 8mo ago
    Programmers programmed themselves out of a job. Software engineers will be just fine.

9rx 8mo ago

Foundational software requires that, but the foundation is pretty much completely built at this point. The workforce required to keep it running is but a tiny fraction of what was required to build it. The past has shown that innovation in hardware can push for the foundations to be rebuilt, but we've also already got computers basically everywhere now. There may not be some new innovation that requires the foundations to be completely rewritten again. The little one-off programs that we thought would keep developers busy forevermore don't require engineers. They often don't even require code. LLMs can natively do a lot of things that historically would have required software.

manmal 8mo ago
Such black and white thinking. Even the little tools fall apart at first sight of an edge case if they are fully vibed. Neither Opus nor codex are good at architecture, and it’s not clear they ever will be.
- 9rx 8mo ago
  You still seem to be thinking about code in the traditional sense. A lot of the software I am using now in my non-tech business isn't rooted in code at all. It is simply asking an LLM to carry out a task. Still programming, of course, but not with a traditional programming language. The LLM will produce the excepted results in realtime. The intermediary step of building an executable is totally unnecessary. In the olden days it would have taken considerable engineering effort to produce a comparable tool. That is no longer the case.
  - manmal 8mo ago
    Yeah let’s talk again in 6 months when the slop catches up with you.
    - 9rx 8mo ago
      Been using it for several years. What is going to change in six months?

deleted 8mo ago

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rglullis 8mo ago

> AI-generated code still requires software engineers No, they don't. A domain expert armed with an Excel spreadsheet and the ability to write VBA macros will be enough for most business.

zdw 8mo ago
Excel spreadsheets have little to no validation logic that you're actually getting a good result, unless you have a secondary check (most spreadsheets are structured as "single entry" accounting, so lack the checks) A prime example of this was the Reinhart/Rogoff paper advocating austerity that was widely quoted, and then it was discovered that the spreadsheet used had errors that invalidated the conclusions: https://en.wikipedia.org/wiki/Growth_in_a_Time_of_Debt#Methodological_criticism https://en.wikipedia.org/wiki/Growth_in_a_Time_of_Debt#Metho... Just because technology is in use and "works" doesn't mean it's always correct.
- rglullis 8mo ago
  You are taking my comment way too literatlly. The point is not that people will be using specifically Excel, but that most business only pay for software because it is the tool that gives them the most power to automate their processes. They don't need high availablility, they don't need standards compliance, they don't extensive automated tests, they won't need cloud engineeers and SRE... all you need is some tool that can get the results your are looking for right now. Academia already works like this. Software wrtiten for academic purposes is notoriously "bad" because it is not engineerd, but that doesn't matter because it is good enough to deliver the results that researchers need. Corporate IT will also start looking like this even at mid-sized companies.
  - zdw 8mo ago
    I don't disagree with anything you say here - using a tool that lacks guardrails is fine for a lot of tasks, but if that's the only tool and used where those guardrails go from "nice to haves" to something more critical is where the problem is. I've been in ops for a long time and have encountered far too many "our IP addressing plan is just a spreadsheet with manual reconciliation". I truly wonder if Excel and all it's predecessors and direct clones (Google Sheets, etc.) are holding back industry from making something truly better and more reliable.

keeda 8mo ago

Hmm, I wonder if it would be cheaper to hire a couple of software engineers to vibe-code custom SaaS apps on top of the company's existing data layer instead of paying for a hundred different SaaS subscriptions. Financial considerations aside, one advantage of having in-house engineers is that you can get custom features built on-demand without having to be blocked on the roadmap of a SaaS company juggling feature requests from multiple customers...

Sleaker 8mo ago
I'm at a large company that is building connections between all of its different financial systems. The primary problem being faced is NOT speed to code things, the primary problem at large companies is getting business aligned with tech (communication) and getting alignment across all the different orgs on data ownership, access, and security. AI currently doesn't solve any of this. Throw in needing to deal with regulation/SOX compliance and all the progress you think AI might make, just doesn't align with the problem domains.
- Shalomboy 8mo ago
  Agreed. The SWEs already receive a steady supply of conflicting demands from every possible business unit; the value add for these teams is a working PMO to prioritize the requests coming in.
- sublinear 8mo ago
  This is also generally true for all mid to large businesses I've ever worked at. The code they write is highly domain-specific, implementation speed is not the bottleneck, and their payroll for developers is nothing compared to the rest of the business. AI would just increase risk for no reward.
- coliveira 8mo ago
  > getting business aligned with tech (communication) and getting alignment across all the different orgs This is what a CEO is supposed to do. I wonder if CEOs are the ones OK with their data being used and sent to large corps like MS, Oracle, etc.

themafia 8mo ago

> AI-generated code AI "generated" code requires a large base of training data to draw from. If we all stop writing code then there will no new code written. Just rehashes of stolen ideas. There is no long tail to this industry or ideal. > That's very expensive. As long as you convince someone else to pay the bill who cares? The real problem is are you losing your competitive edge? If everyone else can crank out the same stolen crap you can then there is no reason for you to even exist.

SunlitCat 8mo ago
That's something i wonder as well. AI needs data to be usable. But what if all the data it gets is just generated by AI?
- themafia 8mo ago
  It has to annotate it too. We've let models do this before. They devolve into an incomprehensible mess in very short order. Errors multiply. Lossy weight compression on erroneous material makes it all that much more worse. https://www.youtube.com/watch?v=QEzhxP-pdos https://www.youtube.com/watch?v=QEzhxP-pdos

falloutx 8mo ago

Other reason could be that investors think companies are going to lay off a lot of their staff and then that will decrease Saas revenue anyway.

freejazz 8mo ago

AI-generated code is not copyrightable and therefore cannot be protected through a conventional licensing scheme.

tesch1 8mo ago
Support for this claim?
- freejazz 8mo ago
  In the US, you can only copyright expressions made by humans. Which part of it do you have trouble with?

epolanski 8mo ago

Atlassian tools for a client like mine (hundreds of employees) can easily cover the expense of internalizing it. It's Jira plus confluence mostly, it's not rocket science. And that's just atlassian. Start adding stuff that costs many many many yearly salaries (special software for managing inventories and warehouses) it starts making sense to prototype alternatives internally. I came to the conclusion that if it's not Teams/SharePoint or the moat is on the extreme legal complexity side (e.g. payrolls), you can at least think of building an alternative that is good enough without needing to be perfect.

bargainbin 8mo ago
Don’t forget the salary for every dev team having the Atlassian Jira Jockey to mess around with the board all day and make sure the next 7 epics worth of tickets are in the 9 columns and in prioritised order. Where would we be without them!?
louiereederson 8mo ago
jira premium is $15/mo/user for 300 users. you're saying $50k can cover developing the app inclusive of integrations, maintaining it, providing 24/7 service and 3 9s uptime (per the sla)? don't forget compliance and security. maybe the logic is everyone can be fired and replaced with agents?
- fragmede 8mo ago
  Yes. $50k goes a long way outside of the Bay Area.
  - camdenreslink 8mo ago
    There is no way you would get anything close to as good as JIRA. Your best bet with that budget would be trying to integrate an existing open source on-prem solution (not sure what that alternative is for JIRA).
    - lmm 8mo ago

Spooky23 8mo ago

Lol. ServiceNow, Oracle, Workday, etc are not small monthly fees. That's what the market is shitting on. (Oracle is different, given the corruption and OpenAI grift angle.) My buddy works for a company like these. He landed a $5M contract last year, which netted him almost $800k. There's alot of fat to be cooked out of this stuff, and AI will help smaller entrants attack those margins. AI-based startups like Vanta make it much easier for companies to meet the compliance bullshit the large companies require. Again, it will drive more competition == better values for customers.

chasd00 8mo ago
> There's alot of fat to be cooked out of this stuff, and AI will help smaller entrants attack truer words have never been spoken. I work in some of these platforms and lead teams of developers who write customizations. These customizations are not rocket surgery, basic CRUD with some logic requirements that can't be met ootb. It's very time consuming and therefore expensive to clients. The significant moat incumbents have is brand recognition and trust. On the other hand, a hot new "Agent First" consulting firm at 1/3 the price would be hard for a director to not at least experiment with.
deleted 8mo ago
[deleted]

doctorpangloss 8mo ago

Haha, maybe… you can stick your head in the sand all you want, but everyone I know whose output is code is delegating 100% of their work to Claude Code today, I cannot see this magically drawing a line at people whose output is configs and emails…

rstuart4133 8mo ago

> > The fear is that these [AI] tools are allowing companies to create much of the software they need themselves. If that's their fear they don't know much how your typical big businesses functions. You've dealt with a large, consumer bank? Many of them still run on IBM mainframes. The web front end is driven by pushing buttons and screen scraping 3270 terminal emulators. You would think a bank with all it's resources could easily build it's IT infrastructure and then manage all the technology transitions we've gone through over the past few decades. Clearly, they don't and can't. What they actually do is notice they have to adapt to the newfangled IT threat, hired hordes of contractors to do the work, then fire them when done. After it's done they go back to banking and forget all the lessons they've learnt about building and managing IT infrastructure. If you want to see how banking and computers should be combined, look at the Fintech's, not banks. But for some reason I don't understand traditional banks still out compete Fintech's. Maybe it's getting your head around both banking and running an IT business it too much for one human mind? That same pattern is repeated everywhere. Why was everyone so scared of Huawei? It wasn't because they built the gear. It's because the phone telco's have devolved into marketing and finance companies who purchase in the gear from companies like Huawei and rent it out. Amazingly they don't know how to run the gear they purchased, instead get the supplier to install it and maintain it. But that meant what some eyes viewed as an organ of the Chinese communist party was running the countries phones with full access to every SMS and voice call. (Interestingly, IBM pulled the same stunt with the banks back in the day: you didn't buy an mainframe, you leased / rented it from IBM, and they maintained it.) It's the same story everywhere I look. These big firms stick to the knitting. If you want to see total, utter incompetence in IT go work whose core business doesn't revolve around IT for a while. These are the firms that still choose Microsoft, despite the fact they've seen Sony's Microsoft based IT infrastructure torn apart so badly by North Korea they didn't know who their employees were, how much they owed creditors or how much debtors owned them for a while. Why do they choose Microsoft? Look around - who else allows you to outsource the know how about connecting millions of computing devices in 1000's of offices to a redundant cloud infrastructure that allows them to share data while providing a centralised authentication / authorisation infrastructure. There is only one choice, apart from developing it themselves which is out of the question. If those businesses did start using what passes for AI today to manage and develop their own IT infrastructure, the result would not be pretty. But for all the shit I'm throwing at them here, I'm confident they are smarter than that. They know their limitations, they haven't done it before, and they won't start doing it now.

aunty_helen 8mo ago

Hyper custom software can allow your business flows to sync together a lot better than the alternative, using zapier to glue a bunch of mostly poor fits and ending up with Frankenstein processes. Also, it allows you to pick and choose what you want from where. We’ve just completed the first month of our internal CRM that has replaced about 500$ a month in subs with something that flows much better and enforces our own internal processes.

nayroclade 8mo ago

If AI can code, why do you think it cannot handle building, testing, debugging, securing, monitoring, supporting, incident handling, and so on? Consider incident handling. What if your AI sets up monitoring that detects errors or outages, wakes up an agent, gives it the problem context, then sets it to work so it can debug the issue, produce a fix, then deploy it? You now have an end-to-end system that works 24/7. Many issues will probably be resolved before you've even noticed them. If your response is, AIs won't ever be smart or capable enough to do this as well as humans, how has that same prediction worked out for coding? The next generation of AI "coding" tools will essentially be SaaS companies in a box. Agents will code the app, but they'll also test it, debug it, support it, etc. And this will happen in months, not years.

fzeroracer 8mo ago
> Consider incident handling. What if your AI sets up monitoring that detects errors or outages, wakes up an agent, gives it the problem context, then sets it to work so it can debug the issue, produce a fix, then deploy it? You now have an end-to-end system that works 24/7. Many issues will probably be resolved before you've even noticed them. Have you ever been actually involved in trying to fix an error or outage? Like actually on an on-call rotation where you had to deal with reported issues?

boshalfoshal 8mo ago

two things: 1. ai being able to code well seems like it would also get pretty close/good at doing basically everything else you described. If coding is a game of reasoning, if you can solve that, you have effectively solved reasoning and you can likely map it to most other problems provided you have a sufficiently good harness and toolcalling setup. 2. Lets assume AI won't replace everyone as point (1) assumes - and it just replaces _most_ people. Under this assumption, we will likely see large swathes of layoffs. Many SaaS companies have a pay per seat model. Less people employed at companies = less seats being paid for = less SaaS revenue. So not only is there a threat of companies just vibe coding various SaaS-es in house, but there is also a threat that the TAM of many SaaS products (which is typically proportional to the # of employees there are) will actually _shrink_ in size. I think the main class of SaaS company that will remain in the medium term are the ones in legally touchy or compliance heavy industries - think healthcare, finance and security (workday for example). But even Workday will be affected by point (2) from above. Overall, I think the mid-long term outlook for SaaS, especially "SaaS", is not great.

thephyber 8mo ago

> It is much cheaper to pay a small monthly fee to a SaaS company. How often do software projects underestimate their cost and timeframe? The LLM-written replacement may prove to be more expensive, but may appear to be cheaper initially when all of the costs and budgets are hidden in the “fog of war”. How effective will vendor messaging warning clients away from writing their own vendor replacements be? Of course a vendor will play up their strengths and will try to play up the clients’ weaknesses. It’s like asking a used car salesman to give you their opinion of a car on their lot — they aren’t seen as neutral observer.

aurareturn 8mo ago

AI-generated code still requires software engineers to build, test, debug, deploy, secure, monitor, be on-call, support, handle incidents, and so on. That's very expensive. It is much cheaper to pay a small monthly fee to a SaaS company. But it's also much cheaper to develop an alternative SaaS offering, one that is perhaps more custom, nimble, cheaper than the general SaaS out there today. In the past, maybe it might have taken 2,000 engineers to build a Figma equivalent. Today, it might take 20. Software will be cheap to develop so competition will be extremely high. Therefore, SaaS companies should not command a high PE ratio in the stock market anymore. It's physical companies that should command a higher PE ratio. Energy, materials, and chip companies to be exact. This was reversed pre-LLM era.

rreichman 8mo ago
Which part of Figma can you build with 20 engineers? I think we're still not close to a small team building real-time collaboration software at scale that actually works at the quality level that customers expect.
- aurareturn 8mo ago
  Probably all of it with a team of skilled engineers and a frontier model.

PeterStuer 8mo ago

Bespoke software development is a huge market. It is incredibly expensive. AI coding agents are not perfect, but just usable enough to be coached through by a semi-IT-literate business person to write some scripts or a little crud site that's needed for a specific LOB task (typically a 30k-250k range project) The alternatives before were propose the case to IT, and if lucky it gets put on the planning, outsourced to consultants, and delivered 18 months from now for an astronomical investment in both time and cost. Or go at it yourself with Excell and VBA. The AI thing will be a just 'good enough' barely working clutch of ugly code. Then again, so was most of the consultant produced code.

ca_tech 8mo ago
This exactly. How many small businesses were running some sort of Access database built by someone who knew just enough to meet their business process needs? "Brenda always orders these parts on Tuesday so make sure there is a Tuesday ordering table." Eventually some SaaS solution came in and they evolved their business process because of the proposed benefits. I expect we are going to see a resurgence of good enough software created for the real world hodgepodge of business practices. Not a bad thing in the short term as it will creating adequate efficiency, but long term we are going to reap the technical debt. My prediction is that the next SaaS evolution is going to be platforms for these random solutions. Just as Salesforce captured CMS market, someone is going to capture the AI agent market where users can write and host their LOB code agnostic to the rest of their infrastructure stack and 'slightly' reduce that technical debt.

bdavisx 8mo ago

>It is much cheaper to pay a small monthly fee to a SaaS company. It's not that cut and dried - it all depends on what your company needs from SaaS and how big it is. SaaS companies like Salesforce don't charge a "small monthly fee" - they charge 10s of millions of dollars per month for large corporations. It's not hard at all to push that money towards AI development and have a better solution built in-house now. Yes, it still takes serious project management skills, but so does integrating Salesforce or other large SaaS software.

jeffkumar 8mo ago

I disagree. I think that DHH proved that is not the case with the AWS bill. They saved millions by getting off of it. As software is now 10x cheaper to create, it's going to really wipe enterprise value away from the incumbents. There's going to be companies in the middle where they are fed up with their bills and they innovate in house and get ahead building solutions that are even closer to what they want. Thankfully, this is good for the software market and gives jobs to all those who were laid off at the big tech companies. At least, that's my hope.

assaddayinh 8mo ago

Its much cheaper yo devalue the software company via ai hype buy the buisness qnd the integrate the solution behind an ai layer. Aka as the uber proposition. Our taxitokens just got degilded!