Trust: why companies buy software
Bull and bear case for SaaS companies
AI Eats Software
AI will change how the world creates software. As I wrote two weeks ago, the SaaSpocalypse wasn’t caused by one model release.
The pace of change is accelerating faster than even the forecasters can track.
~4% of all public GitHub commits are now authored by Claude Code, a 42,896x increase in 13 months, projected to hit 20%+ by year-end of 2026.
There are teams where software engineers have a mandate to write no code. They direct AI, monitor AI, review AI, and design the systems that AI executes.
Yet, the core of being a good software engineer hasn’t changed.
System design, functional requirements, latency trade-offs vs. the flexibility of the system. These are all about having the right taste and the right judgment.
AI transforms how engineers execute. It frees them to focus on the higher leverage work that matters: deciding what to build and why.
Trust: why companies buy software
Organizations are teams of people. And people are lazy, in the best sense. They want to do the things they want to do.
If a small business, a real estate brokerage, or a restaurant is focused on delivering a product or service that is not software, they want someone else to manage the software. They want someone else to worry about it. And that someone is better as an entity you can hold accountable than one you can’t.
A company can have 500 different SaaS tools handling 500 specific tasks. They want a button that does a very specific job, backed by a vendor they can call when it breaks.
For example, for lawyers and consultants, folks may tell you lawyers are out of a job because AI can write and review contracts. Consultants are done because AI can produce better slide decks, deeper research, and sharper deliverables.
But ultimately, lawyers and consultants are in the people business.
Partners drive business through relationships. Relationships are built on trust.
People hire law firms to mitigate and transfer legal risk. People hire consultants to bolster their own reputation; or to transfer reputational risk to the consultancy.
For SaaS, companies buy software they trust so they can focus on their own core competence.
People use software so they can focus on doing what people do best.
The bull and bear case for SaaS companies
The bull case is software companies become leaner and enormously more productive from AI.
The best SaaS companies will get stronger and dominate the market, the middle and the bottom will fizzle out. The internet cycle that impacted newspapers and media will repeat itself for software. The star companies will build at 10-100x the speed. They will build better products, more personalized, more fit for purpose. Salesforce already cut support headcount from 9,000 to 5,000 while combined Agentforce and Data 360 ARR approached $1.4B at 114% year-over-year growth.
Not only that, but the barrier to entry will also be increasingly low. Market competition will greatly increase, for the benefit of companies and consumers.
The bear case is software becomes entirely undifferentiated.
Rapid diffusion of software capabilities makes software engineering ubiquitous to any person with a smartphone. Goldman Sachs draws comparisons to newspapers — an industry where share prices declined 95% between 2002 and 2009. The internet cycle that impacted librarians and newspaper clippers will repeat itself.
We should remember why companies buy software.
Both cases are plausible, I’m 100% in the bullish camp.