Predictions that artificial intelligence will wipe out software-as-a-service (SaaS) companies are being exaggerated, according to Crypto and AI Czar David Sacks.
In a new episode of the All-In Podcast, Sacks pushes back on the growing narrative that AI-generated code will make large enterprise software platforms obsolete.
Sacks points to long-established enterprise platforms like Salesforce as an example of why the replacement thesis falls apart under scrutiny.
“I mean, I think there’s a little bit of a hand wave going on here when people say that AI is going to wipe out SaaS. I don’t think that’s true. You take a SaaS product like Salesforce, right? It’s a very large system that deals with all of your customer contacts and your revenue.
You’re not going to replace that with code that’s been spit out of a coding assistant that hasn’t been fully vetted. Think about how many bug reports have been filed on Salesforce’s code base over the last 25 years. Maybe millions of them. That system has been tested across thousands of large customers and enterprises.
The idea that you’re just going to rip out that system and replace it with code that’s been probabilistically generated by an AI engine yesterday with a small team to maintain it internally, this doesn’t seem realistic to me.
So again, I think this very dire prediction of all SaaS is dead is overstated.”
But Sacks does not dismiss the disruptive impact of AI entirely. He warns that some SaaS companies are still vulnerable.
“However, I do think that there are some issues here. So if you’re a SaaS product that charges a lot of money, and people only use a handful of your features, then you are, I think, a target to be ripped out with something that’s more bespoke. Because the ROI just isn’t there.”
Sacks also says software companies will need to rethink how they defend their businesses in a world where code generation is easier and cheaper.
“I also think that you have to be really clear about what your moats are going to be in this new world, because it is a lot easier to generate code and to copy. So if you don’t have good moats, then you could be in trouble.”
Investors have been dumping software stocks as of late out of fear that AI is primed to take over the tech sector. The S&P 500 Application Software Sub-Industry Index is down over 20% in the past year.
Altimeter’s Brad Gerstner urged software companies to show that AI is accelerating their business to relieve the pressure.
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