The State of Software: Navigating the "SaaS-pocalypse"
There is a growing narrative in the market that the era of Software-as-a-Service (SaaS) is coming to an end, replaced by a world where AI agents can simply "vibe code" everything. While recent market reactions have been frantic, it is important to distinguish between short-term noise and long-term structural shifts.
While AI is undoubtedly "eating the world," the idea that every enterprise will abandon their robust software stacks to build bespoke internal tools is likely an overstatement.
The Myth of Vibe Coding in the Enterprise
Much of the current anxiety stems from projecting the behavior of five-person technical startups onto Fortune 100 companies. While it is impressive that a small team can use AI to build a CRM over a weekend, large enterprises face entirely different challenges.
Change management at a massive, regulated institution like Bank of America—dealing with security, compliance, and competing internal workflows—is not something that can be replaced by a quickly coded application. Furthermore, there is a fundamental difference between engineers who prioritize "artisanal" code craftsmanship and those who view code merely as a utility to ship products. As AI accelerates, the latter group will likely feel empowered, while the former may find themselves increasingly unhappy in large-scale corporate environments.
The Realities of AI-Driven Growth
Despite the hype, two key metrics suggest that the AI revolution is not just noise:
- Revenue Velocity: We are seeing unprecedented speed to massive revenue. While companies like Adobe or SAP took decades to reach $10 billion in revenue, modern AI labs are scaling at a pace never before seen in the history of software.
- The Token Cost Collapse: The cost of running high-level models has plummeted. In just 11 months, the cost of a million tokens for top-tier models dropped by nearly 90x. This massive decrease in cost, coupled with skyrocketing usage, indicates that AI is delivering genuine, compounding business value.
Market Cap and the Future of Tech
Tech’s share of the global economy is expanding. In 2005, tech represented roughly 4% of GDP; today, that figure is closer to 12%. As AI transforms various services and roles into software-driven processes, some projections suggest tech could account for 15% to 30% of GDP by 2035.
This shift has profound implications for market valuation. The "head and torso" of the market continue to aggregate the vast majority of value. While there is a belief that more startups will reach $100 billion valuations due to the increased surface area of technology, the power law remains in effect: the winners will become increasingly massive.
Strategic Advice for Founders: Durability and Exits
The current pace of technological change is compressing what would typically be a decade-long displacement cycle into a year or two. This volatility creates a unique challenge for founders regarding the durability of their business.
- Build Bundles: One of the best ways to defend a business is to transition from a single-product tool to a multi-product bundle. By cross-selling multiple aspects of a workflow into an organization, a company becomes a default part of the infrastructure rather than a modular, easily replaceable feature.
- Logical Exit Planning: Many companies hit a "high-water mark" of value before inevitably crashing as competitive landscapes shift. Founders should normalize the conversation around exits. Prescheduling board meetings once or twice a year to discuss exit strategy removes the emotion from the process, allowing leadership to make objective decisions about whether to sell or stay the course.
As we move forward, the most successful companies will be those that identify their specific control points—whether through networks, ecosystems, or non-trivial hardware integration—rather than relying on a narrow feature set that could be rendered obsolete by the next wave of model improvements. While the market is currently experiencing a "month of hype," the underlying transformation of software remains one of the most exciting developments in the history of the industry.