Artificial Intelligence is poised to disrupt SaaS (software) companies with the same ferocity that e-commerce leveled against brick-and-mortar retail. Market shifts are traditionally driven by two levers: the optimization of marginal costs and the hyper-personalization of services. AI achieves both at an unprecedented scale.
The victors in this new era will be “full-stack” AI companies, those that own the entire value chain. As foundational models like OpenAI and Gemini begin to offer traditional software layers, as simple, integrated plugins, the “software” itself ceases to be a moat. Over the next five years, the true differentiators will be regulatory licenses and end-to-end operational control.
We are entering a period of painful descent for traditional middleware. When AI can facilitate direct connections between companies and customers, the need for brokers and intermediaries evaporates. Why engage a media production partner or a middleman when a foundational model can execute those tasks instantly via plugins sold marginally to clients? Many legacy business models are not just changing, they are expiring.
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The gradual decline of the traditional SaaS model has arrived. In my previous work for the Harvard Business Review, I coined the term ‘ICT Utilities’ to describe the dominance of companies like Google and Meta. Much like a city’s electricity or water provider, these entities have become the non-negotiable infrastructure of our online existence. Today, that evolution is accelerating; we are moving beyond mere ICT infrastructure into the era of ‘AI Utilities.
Good People, we are witnessing the emergence of vertical-specific AI utilities via products like OpenAI Health, OpenAI Insurance, Gemini Coding, and Claude Legal. When these utilities become the engines of industry, traditional software moats will dry up. The ‘SaaS Empires’ of yesterday are being replaced by licensed, mission-driven operators. In this world, the software is a plug-in; the true value lies in the licenses you hold and your ability to execute at scale using these AI utilities.
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As time goes on, each market will decide what it permits or rejects, it’s not a given that the American giants will continue to enjoy free access to various markets as in the past and present. The world is changing, so we are entering an era where many things will be broken up. If you come from part of the world where none of these is produced, what do you gain by repeating the talking points of SV guys that want everyone else to see the world through their narrow lenses? Once we start interrogating everything, we begin to see the ones that will not hold up.
Our problems 20 years ago haven’t changed much from our today’s problems, yet every few years we are told about a future we don’t even know when it passed, that is if it ever passed our side. So the distractions continue, while the old problems remain.