RB2B reposted this
In the next 18 months, Enterprises' increasing investments in AI will come at the expense of existing technology spend, causing a decrease in SaaS revenues. If you're a SaaS founder, here's how you survive: BACKGROUND Enterprises worldwide have spent $154B on AI solutions in the first half of 2024 According to a recent IDC forecast, GenAI spending will continue to enjoy over +70% CAGR between 2024-2027 But with high interest rates, we are seeing slower than usual revenue growth for the buyers. AI is expensive and a typical AI budget includes costs for infrastructure, hardware, hosting, data acquisition, R&D and salaries. So where is all this money for AI coming from? I see two areas that may contribute towards an increase in AI budget in the absence of high growth in revenues. 1. Decrease in overall spending on SaaS and non AI purchases 2. Decrease in overall hiring with increased employee productivity So what do you if you are a SaaS founder? Remember... As the market shrinks, it also provides non-linear opportunities to some. Here are a 6 things SaaS founders can do to complete against shifting budgets: 1. Realize that most growth in future will come from competitive displacements and not net new growth 2. Integrate AI capabilities in your own SaaS as buyers start to reward SaaS tools with AI capabilities 3. Identify and dominate a Niche or Vertical markets 4. Develop partnerships, ecosystems and community 5. Build marketing and thought leadership for your community 6. Review pricing to stay competitive for your niche In the short run (next 18 months), there will be some pain for SaaS companies that fail to react effectively to these evolving times. Some will even go out of business. But, In the long run (2026+) SaaS companies will thrive with increased operational efficiencies and enhanced user experience with the use of AI. We will eventually enter a decade of digital transformation opportunities where buyers switch to an AI first paradigm causing one of the biggest bull runs the tech world has ever seen. Just make sure your SaaS business survives to witness it.
Or the company can reposition their SaaS product as SaaS+AI and get a .ai domain :-) then they can be part of the AI investments
Haha love the last line. During a slowdown it's not always about winning, but loosing less than your competitor.
Also, if you are priced per seat as SaaS consider people are doing more volume of work with sophisticated tech, so number of jobs is becoming a futile metric.
Santosh Sharan but except for very old SaaS companies with a hard to change code base, every SaaS founders will shift to AI too. Maybe we will even call SaaS > AI agents soon
CEOs may need to go back to day 0 thinking and mentally drop what has been for them a business the last 5-10 years to survive, even if that means shrinking over the next 2 years
Focusing on enhancing customer experience through personalized AI-driven features could create a significant competitive advantage for SaaS companies during this transition.
I guess this is similar to when cloud SaaS entered the picture and started to displace On Prem software. Another shakeup is coming, but it’s coming for Cloud SaaS that doesn’t have an AI play.
Tongue in cheek but when we all lose our jobs who is going to become these incredibly efficient companies customers? Maybe AI will be the buyer and seller, supply and demand .
Douglas Schultz, thought of you while reading through this.
Founder and CEO @ Novelance | Ranked #1 on NetSuite Support Community
1moSantosh Sharan, this is insightful. Do you think most cost cuts will come from the SAAS spending cuts or headcount cuts / slower hiring? Cutting the SAAS spending will be "costly" if the "replacement by AI" isn't fully validated. Many of the AI capabilities need to be better-tested in the enterprise environment. For example, the AI Virtual Assistants are rarely helpful when resolving an issue by chatting with Support.