Will AI change the way businesses buy SaaS software?

Can AI impact the SaaS distribution value chain?

We often hear about how AI will impact SaaS businesses from a product perspective. But there’s another aspect that is less talked about, yet important: Distribution.

Historically, the emergence of new technologies has often led to shifts in distribution, such as:

• The creation of entirely new distribution value chains or channels.
• The strengthening of existing distribution channels.
• The obsolescence of existing distribution channels.
• Sometimes, no change at all.

Examples of distribution shifts with emerging tech

As an illustration of these distribution changes, let’s look at how the distribution of books evolved with the emergence of several new technologies.

• 1400 - 1800: The manual printing press eraNew technology: The emergence of the mechanical printing press enabled the mass production of books, significantly reducing their cost and increasing their availability.Distribution shifts: Books were sold directly by the printers, in local markets, by mail through catalogs or through traveling salesmen at first. Later, bookshops in urban areas emerged as a major distribution channel. Prior to the 15th century this whole distribution value chain didn’t exist. It’s the emergence of the printing press that gave birth to it.
• 1800 - 1990: The mechanized printing press eraNew technology: Mechanized printing press (first steam powered and then electricity powered) lowered significantly the cost of production making books more widely available to the public.Distribution shifts: Books were sold in an increasing number of places such as department stores, newsstands, train stations etc. It was also during that period that professional book publishers took a prominent intermediary position in the distribution value chain. In this case, the tech change reinforced many of the existing players in the distribution value chain, it didn’t disrupt the status quo.?
• ?1990 - now: The internet eraNew technology: Emergence of online platforms that sell physical and digital books.Distribution shifts: The internet completely changed how books were sold, disrupting national and local bookshops. Digital books also impacted publishers as an increasing number of successful authors sell their books directly to their audience or through online platforms (like Amazon). Similar to what happened with the manual printing press, this tech evolution gave birth to a whole new distribution value chain (the online one).

And you can find similar distribution shifts in plenty of other industries. For example in the music industry: from sheet music to records, radio, vinyl/CDs/Cassettes and finally digital music, the way music was distributed and sold changed quite a bit.

The evolution of B2B software distribution

Now, the question I am asking myself is whether the recent democratization of AI in B2B software will lead to distribution shifts, and if so, to what extent.

But before that, let’s first briefly look at how the distribution of B2B software evolved from its birth to today:

• 1970s Direct Sales and Mainframe Era: Initially, B2B software solutions were often custom-built for large enterprises and tied to specific hardware (mainframes), often sold or leased as a package with the hardware. Distribution was tied with manufacturers.
• 1980s Emergence of Personal Computers and Retail Software: With the rise of personal computers software began to be distributed via retail stores on physical media (floppy disks). The PC gave birth to a new distribution value channel (retailers, catalogs etc…).
• 1990s On Premise Value-Added Resellers (VARs) and Distributors: A whole industry of specialized B2B resellers emerged. They not only sold B2B software to businesses but also provided additional services (setup, customization, customer support…). In this case it’s mainly an evolution of the existing distribution value chain.
• 2000s - 2020s The rise of SaaS: B2B Software is increasingly delivered over the internet, reducing the need for physical distribution and profoundly changing the way B2B software is distributed. Here we’re in the case of a new tech (the internet) that gives birth to a whole new distribution value chain: From online software marketplaces to SEO, inbound marketing, social media etc.

How could AI impact B2B software distribution?

• First of all, I don’t think that AI will radically change how B2B software is distributed, and will give birth to a totally new distribution value chain. I do not believe that we’re at the same level of shift as what the internet brought us for example (but I might be wrong).?
• At the moment I think that AI could impact B2B software distribution in two ways. First with (potentially) the emergence of new AI-first platforms such as OpenAI, Microsoft etc. These platforms have the potential to become new software marketplaces where SaaS products can build integrations and reach new users. The classic software marketplace playbook.
• We’re still early with this, but in this perspective Sam Altman has pointed to interesting future developments: “ I am looking at a future where instead of artists deleting/restricting their styles in DallE, they get some economic benefit from being part of that ecosystem. We want the artist to say: “That’s awesome.” So one could imagine a similar kind of monetization scheme for B2B software on AI platforms (e.g: You get paid when users use data coming from your software).
• The second change that I can think of is how AI could change the way users search for products. At the moment search (with SEO, SEM and inbound marketing) is a major distribution channel for many SaaS companies. You need to rank well in SEO and offer great content (content marketing) in order to capture leads. But AI platforms could change how people search for products and instead of ranking well in search engines, SaaS companies will need to be sure that they are included in the answer of AI assistants. A whole set of new tactics and best practices will probably emerge on that front.
• What will be the magnitude of these changes? I don’t have the impression that we’re on the same level of distribution shift that we have seen with the On-premise / SaaS evolution. That being said, depending on how AI impacts the way people search for products, it could still be a major change for existing SaaS companies if the classical search/SEO model (with a list of links) gets disrupted by AI assistants.

Let me know your opinion about this whole distribution topic and if you see other ways AI could disrupt it.