AI agents are starting to eat SaaS

I'm CTO at a vertical SaaS company, paired with a product-focused CEO with deep domain expertise. The thesis doesn't match my experience.

For one thing, the threat model assumes customers can build their own tools. Our end users can't. Their current "system" is Excel. The big enterprises that employ them have thousands of devs, but two of them explicitly cloned our product and tried to poach their own users onto it. One gave up. The other's users tell us it's crap. We've lost zero paying subscribers to free internal alternatives.

I believe that agents are a multiplier on existing velocity, not an equalizer. We use agents heavily and ship faster than ever. We get a lot of feedback from users as to what the internal tech teams are shipping and based on this there's little evidence of any increase in velocity from them.

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.

I am the founder of a niche SaaS (https://partsbox.com/ — software for managing electronic parts inventory and production). While I am somewhat worried about AI capabilities, I'm not losing too much sleep over it.

The worry is that customers who do not realize the full depth of the problem will implement their own app using AI. But that happens today, too: people use spreadsheets to manage their electronic parts (please don't) and BOMs (bills of materials). The spreadsheet is my biggest competitor.

I've been designing and building the software for 10 years now and most of the difficulty and complexity is not in the code. Coding is the last part, and the easiest one. The real value is in understanding the world (the processes involved) and modeling it in a way that cuts a good compromise between ease of use and complexity.

Sadly, as I found out, once you spend a lot of time thinking and come up with a model, copycats will clone that (as well as they can, but superficially it will look similar).

I'm seeing the opposite. AI is actually increasing the demand for what would previously be too expensive, bespoke integrations and solutions. Those are now becoming more feasible and doable. There is also the notion that a lot of companies are actually very behind on embracing software or SAAS. Especially in manufacturing it's common to see operations that haven't materially changed anything in decades.

The fallacy here is believing we already had all the software we were going to use and that AI is now eliminating 90% of the work of creating that. The reality is inverted, we only had a fraction of the software that is now becoming possible and we'll be busy using our new AI tools to create absolutely massive amounts of it over the next years. The ambition level got raised quite a bit recently and that is starting to generate work that can only be done with the support of AI (or an absolutely massive old school development budget).

It's going to require different skills and probably involve a lot more domain experts picking up easy to use AI tools to do things themselves that they previously would have needed specialized programmers for. You get to skip that partially. But you still need to know what you are doing before you can ask for sensible things to get done. Especially when things are mission critical, you kind of want to know stuff works properly and that there's no million $ mistakes lurking anywhere.

Our typical customers would need help with all of that. The amount of times I've had to deal with a customer that had vibe coded anything by themselves remains zero. Just not a thing in the industry. Most of them are still juggling spreadsheets and ERP systems.

This article made no sense to me. It is talking about AI-generated code eating SaaS. That's not what is going to replace SaaS. When AI is able to do the job itself — without generating code — that's what is going to replace SaaS.

AI-generated code still requires software engineers to build, test, debug, deploy, secure, monitor, be on-call, handle incidents, and so on. That's very expensive. It is much cheaper to pay a small monthly fee to a SaaS company.

I’m currently working on an in house ERP and inventory system for a specific kind of business. With very few people you can now instead of paying loads of money for some off the shelf solution to your software needs get something completely bespoke to your business. I think AI enables the age of boutique software that works fantastically for businesses, agencies will need to dramatically reduce their price to compete with in house teams.

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.

Jamin Ball had a better take on Clouded Judgement https://cloudedjudgement.substack.com/p/clouded-judgement-12... "Long Live Systems of Record"

Maybe someday we'll see job postings for maintaining these in-house SaaS tools. And someday someday, we'll see these in-house SaaS tools being consolidated as its own separate product. Wait what.

The where this doesn’t work section is chefs kiss

- anything that requires very high uptime

-very high volume systems and data lakes

-software with significant network effects

-companies that have proprietary datasets

-regulation and compliance is still very important

Earlier this year I thought that rare proprietary knowledge and IP was a safe haven from AI, since LLMs can only scrub public data.

Then it dawned on me how many companies are deeply integrating Copilot into their everyday workflows. It's the perfect Trojan Horse.

Note that the author does not mention a single specific SaaS subscription he’s cancelled or seen a team cancel.

The only named product was Retool.

It was common in the early 2000s for big companies to have large internal IT teams to build "line of business" apps. Then SaaS came along and delivered LoB apps for a fraction of the price and with a monthly subscription.

Looks like we're headed back to the internal IT days of building customized LoB apps.

I often give the follow analogy which I think is a good proxy to what is going on.

Spreadsheets! They are everywhere. In fact, they are so abundant these days that that many are spawned for a quick job and immediately discarded. In fact, the cost of having these spreadsheets is practically zero so in many cases one may find themselves having hundreds if not thousands of them sitting around with no indication to ever being deleted. Spreadsheets are also personal and annoying especially when forced upon you (since you did not make it yourself). Spreadsheets are also programming for non-programmers.

These new vibe-coded tools are essentially the new spreadsheets. They are useful,... for 5 minutes. They are also easily forgettable. They are also personal (for the person who made them) and hated (by everyone else). I have no doubt in my mind that organisation will start using more and more of these new types of software to automate repetitive tasks, improve existing processes and so on but ultimately, apart from perhaps just a few, none will replace existing, purpose-built systems.

Ultimately you can make your own pretty dashboard that nobody else will see or use because when the cost of production is so low your users will want to create their own version because they would think they could do better.

After all, how hard is to prompt harder then the previous person?

Also, do you really think that SaaS companies are not deploying AI themselves? It is practically an arms race: the non-expert plus some AI vs 10 specialist developers plus their AIs doing this all day long.

Who is going to have the upper-hand?

This is why I started working on an open source, generic protobuf sqlite ORM + CRUD server (with search/filtering) + type/service registry + grpc mesh, recently: https://github.com/accretional/collector Note: collector's docs are mostly from LLMs, partially because it's more of a framework for tool-calling LLMs than humans

Then this project lets you generate static sites from svelte components (matches protobuf structures) and markdown (documentation) and global template variables: https://github.com/accretional/statue

A lot of the SaaS ecosystem actually has rather simple domain logic and oftentimes doesn't even model data very well, or at least not in a way that matches their clients/users mental models or application logic. A lot of the value is in integrations, or the data/scaling, or the marketing and developer experience, or some kind of expertise in actually properly providing a simple interface to a complex solution.

So why not just create a compact universal representation of that? Because it's not so big a leap to go beyond eating SaaS to eating integrations, migration costs/bad moats, and the marketing/documentation/wrapper.

AI coding IS SaaS. Claude Code is a subscription service I pay to create the exact, niche, I need you to build a form that submits a blog post to Wordpress here’s my api key, here’s the word doc format it comes in, I’ll paste it in the chat and you make a paste from word button so I don’t have to manually enter the form and it works first try. That is the definition of software as a service. And it’s mine and it’s exactly what I need. Tomorrow I’ll need something else…

I’m glad the author of the article mentions a lot of the limitations of this idea, but taking the final sentence:

> But my key takeaway would be that if your product is just a SQL wrapper on a billing system, you now have thousands of competitors: engineers at your customers with a spare Friday afternoon with an agent.

I think it’s pertinent to point out that a lot of SaaS products are aimed at businesses and individuals who don’t have engineers at all.

AI agents aren’t going to disrupt the SaaS market for software intended for businesses like small business retail where the owners and staff have minimal technical knowledge and zero extra time.

I also think that some SaaS products are so cheap that about an hour of effort is too much. Is it worth a month of effort to vibecode a Dropbox alternative? Even some pretty complicated software that is untouchable by agents and engineers’ side projects like the Microsoft 365 suite and Jira are priced at under $20/month/user.

On the other hand, some entrenched solutions that aren’t all that complicated could be finding themselves with new, smaller competitors.

The problem is that we are still talking only about software. If that is the only thing agents can do then they are just better IDE’s for programmers. This would be an enabler for building stuff faster. Think about it, there is already a huge market for SAAS, but most of the companies have contracts in place, so what we’ll have is just more competition which will drive prices down. Companies will not start changing internal tools, refactoring is a bad investment in general, if you choose that over some new features or products it signals larger issues, so nobody will replace existing cheap stuff that is working.

Going back to the beginning, I think we just lack good tools for other cases where agents could be used. Copilot is not great, chatgpt alone lacks some features to use it for business as is. I think what will happen is that we will see a lot more new tooling pop up that relies on agents in niche markets which will just amplify the power users. It will be another category of SAAS the companies will adopt.

You can already hire Indians to make your own HR system. People still choose SAAS, because the system already works.

You do not want to have to plan out a system with 800 unique requirements yourself. It takes a ridiculous amount of work, and you are then stuck maintaining it.

It’s never been about the difficulty of programming, it’s been about the pain of designing and maintaining.

Ah, yes. If the thing that is false is true, all kinds of interesting things happen! For example, if I became the queen of France, I could make people do silly dances! That is an interesting hypothesis that could play out in my imaginary world!

SaaS maintenance isn't about upgrading packages, it's about accountability and a point of contact when something breaks along with SLAs and contractual obligations. It isn't because building a kanban board app is hard. Someone else deals with provisioning, alerts, compliance, etc. and they are a real human who cannot hallucinate that the issue has been fixed when it hasn't. Depending on the contract and how it is breached, you can potentially take them to court and sue them to recover money lost as a result of their malpractice. None of that applies to a neural network that misreads the alert, does something completely wrong, then concludes the issue is fixed the way the latest models constantly do when I use them.

I dont think any opinion right now is going to be definitive. This is like mixing paint, the edges are still white, while the centre is colored.

What Iam seeing is that customers are delaying purchases of large expensive software. Prime example; SAP. ECC migrations to SaaS model RISE/GROW-PublicCloud are stalling, same with onprem S4 to RISE. I see a whole bunch of my customers instead go with retaining the core but modernize surround apps with intelligent custom apps without feature bloat. For now, SAP/oracle/whatever remains the system of record, the edges are going away. I guess the same is likely happening in other spaces.

This change is coming. Definitely. The current moats around SaaS will fall and the alternate ecosystem might not have moats at all.

There are already plenty of SaaS that offer open source version as a way to push to the cloud and charge for hosting, maintenance, support and some extra features. In that way, a working code have already been commoditized and those companies didn't disappear.

This is what I don't get with a lot of the AI based saas projects - what is your value add? If you can build it with AI then (in theory) your customer can also build it with ai, so why do they need you? In the SaaS world you don't because the cost of development and maintenance just doesn't scale well, but if you're 99% a wrapper around an AI, your 'business' feels easily replicable to me.

But that does leave a weird gap where SaaSes that took a lot of time to make but can now be handled by an Ai won't survive either. If the business stays hand-coded it costs too much to be viable, if it moves to Ai it looses any advantage over doing it youself.

There is a significant risk of uncertainty in all of this, the most damaging aspect really. If AI improves, and it is threatening to, then growth in SaaS may decline to a point where investing in it needs to be reconsidered.

The problem is, nobody knows how much and how fast AI will improve or how much it will cost if it does.

That uncertainty alone is very problematic and I think is being underestimated in terms of its impact on everything it can potentially touch.

For now though, I've seen a wall form in benchmarks like swe-rebench and swebench pro. Greenfield is expanding, but maintenance is still a problem.

I think AI needs to get much better at maintenance before serious companies can choose build over buy for anything but the most trivial apps.

> If I want an internal dashboard, I don't even think that Retool or similar would make it easier. I just build the dashboard

Oh, child.... building is easy. Coordinating maintenance of the tool across a non-technical team is hell.

Many SaaS are not products, but 1-2 features. And an LLM can generate a single-purpose script to replace that one feature you're using. Opus 4.5 does that very well.

As for Retool, I see the several waves of low/no-code products, the current one being LLMs, as repeated attempts to get non technical idea-guys to build their ideas. Where they all fail, and this is fundamental to the problem they're trying to solve, is that idea-guys' ideas crack when meeting reality. And neither Retool nor LLM fix that.

This resonates strongly, especially the shift in the build vs buy calculus happening almost invisibly. What feels under-discussed is that agents are not just reducing the cost of building software — they are collapsing the coordination and abstraction costs that SaaS historically justified. One emerging pattern I’m seeing is teams moving toward agent-orchestrated internal tooling rather than traditional “one-off” internal apps. Instead of rebuilding entire SaaS products, they compose narrow, task-specific agents that sit directly on top of their own data and workflows. This avoids both feature bloat and long-term roadmap dependency while keeping maintenance tractable. Platforms like Coldi AI, for instance, point toward this middle ground: not “replace all SaaS,” but replace the parts that are really just opinionated CRUD, dashboards, or glue code with agents that can evolve alongside the organization. That feels like the real threat surface for SaaS — not total displacement, but systematic erosion of NRR as customers internalize more of the value chain.

I think that there have always been a ton of SaaS things that are basically circular - startup company paying silly amounts per month to another startup company. I think the market for these things will drop as part of AI, but I think that was always going to be the case with higher interest rates as investors questioned the revenue/spend balance.

When it comes to SaaS that's industry specific, I just don't see it'll be that much of a change any time soon. I've worked heavily in the engineering industry and the security requirements that get put upon anything are nuts. It is difficult to enter this market, ISO compliance is important, even being in the cloud is a barrier for some customers, and often the type that you have no choice but to contract with if you want to make a profit because of their outsized importance in the market.

When I speak to customers, they actually quite often have tried to build something themselves. Usually it's been an intern or grad trying to make their life easier. Often it's spreadsheet based, but some go as far as knocking up little Python web apps. In one company I interned in they had a shadow PHP app. They often have a small 'data science' team that has struggled to get access to the data they need. While they can often get something that does the barebones of the tasks, and can do it well, where they fall down is that they're vulnerable to security issues and can't navigate their internal company politics to get permission to host things in the cloud and make their life easy, plus they don't have the experience to know what's good practice. I don't see AI changing things that much in that.

I’m always skeptical when I see (or say for that matter) phrases that start with “just”.

I'm building a vibe-coding platform that helps with building internal apps and dashboards, and this is exactly what I have seen with some of our clients.

A couple of them mentioned that they plan to cancel subscriptions totaling more than $100k/year for the apps they will replace with that SaaS. According to them, they have many subscriptions they keep only because of one feature. Another issue is that their workflows become a real mess when they need to copy and paste data into multiple tabs. Custom-built internal tools seem like an obvious solution. Those who migrate to custom-built tools, however, will face the challenge of orchestrating their lifecycle and creating a consistent deployment workflow, but this is one of the challenges we are trying to solve at UI Bakery.

In my understanding, SaaS products that provide customers access to proprietary data are in a much better position than other SaaS platforms. HubSpot’s acquisition of Clearbit a couple of years ago now makes even more sense because it will help them retain some of their clients.

> I'm starting to see is people really questioning renewal quotes from larger "enterprise" SaaS companies

This practice predates even SaaS.

I read this article expecting to see a specific SaaS that was at risk, and the most I saw was "dashboards." (Which: dashboards frequently aggregate data, while the ongoing work of collection/maintenance/etc. is done by more complex applications.)

The thesis seems to be that companies can use coding agents to build one-off internal versions of SaaS apps like e.g. Workday or Salesforce or Slack or Jira or MixPanel or HubSpot. Which, if one could make such a thing for free and maintain it for free, why not?

Fortunately/unfortunately depending on where you sit, magical thinking isn't going to get Claude Code to build Workday, regardless of the quality of your AGENTS.md. Sometimes I wonder if the people who write these takes have spent any real time using Claude Code. It's good, but please be realistic.

Some of the risk outlined here are real for SaaS businesses that rely on user licenses. Automation, APIs and AI are going to reduce the no of people needed which means businesses buying less licenses overall. That's why smarter SaaS solutions are moving towards pay per usage.

This is inevitable, you can't rely on user licenses as a growth metric

Teams I've worked in choose SaaS offerings based on how little expertise we have in the given domain, and the price (which includes actual monies going to the SaaS, but also the expected time of integrating with them and an expectation cost of migrating away from them).

Experienced developers have the humility to understand that there are always roadbumps and risks in building a system in a domain we do not understand, and therefore paying another company with expertise can often be worth it. Obviously some SaaS companies are better than others, which is why there is an evaluation process.

It does not surprise me (unfortunately) that proponents of using AI agents for everything minimize the value of actual lived experience in working in a given domain.

"It was always possible to clone software, but doing so was costly and time consuming, and the clone would need to be much cheaper, making any such venture financially non-viable.

With AI, that equation is now changing. I anticipate that within 5 years autonomous coding agents will be able to rapidly and cheaply clone almost any existing software, while also providing hosting, operations, and support, all for a small fraction of the cost.

This will inevitably destroy many existing businesses. In order to survive, businesses will require strong network effects (e.g. marketplaces) or extremely deep data/compute moats. There will also be many new opportunities created by the very low cost of software. What could you build if it were possible to create software 1000x faster and cheaper?"

Paul Bucheit

https://x.com/paultoo/status/1999245292294803914

Not for my company. In my research AI is just completely incapable of doing what we do in a cost effective way and our customers don’t have the technical know-how to vibe an alternative.

Our customers ask for about AI features and it’s a constant struggle to explain to them that they just aren’t there yet.

Related, Microsoft CEO said that soon the biggest client of Microsoft is going to be agents, not humans.

This article seems to suggest that businesses are going to swap domain-specific SaaS tools, written and tested by people knowledgable in the domain with specific SLAs for vibe coding everything. But your AI subscription is still a SaaS?

All you've done is swapped a SaaS built for your problem domain with another, more expensive SaaS that has no support at all for your actual problem. Why would anyone want that? People buy SaaS products because they don't want to solve the problem, they just want it fixed. AI changes nothing about that.

I worked at a couple of companies that tried to do internal LOB apps. Every single time, these projects have failed because the cost to maintain usually is more than just paying a subscription fee to a third party.

SaaS was always just a transitional phase between desktop software and... this. We built entire businesses around being the interface layer, but if AI can interact with APIs directly, that whole layer gets compressed.

The optimistic angle nobody's exploring: maybe 'eating SaaS' means we finally escape the subscription hellscape where every basic function costs $29/month. If an AI agent can stitch together free/cheap APIs instead of forcing you into Notion/Airtable/Whatever, that's not destruction—that's evolution.

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.

Vibe Coding is so easy nowadays, I coded an app almost by mistake. I put a short cryptic prompt into Kim2 to see how it would respond and it immediately (and very much to my surprise), coded an entire website with the functionality I was thinking about.

It wasn't even a coherent grammatically correct sentence that I entered and it busily went to work building the site I had in mind.

It's not hard to imagine that in the next 2-3 years, anyone will be able to build personalized apps on request.

> most SaaS products contain many features that many customers don't need or use. A lot of the complexity in SaaS product engineering is managing that - which evaporates overnight when you have only one customer (your organisation).

This is the key point. Sure, you don't have the chops to be able to replicate the SaaS product locally with Claude/Gemini, but you don't have to, because you're no trying to make a product that can handle N+1 workflows.