How to sell in the era of generative AI

The software market is undergoing an unprecedented transformation. In recent years, we've seen a sharp decline in opportunities for IT companies, with new software investments halving. The growth rate of private enterprise software fell from an impressive 112% in 2021 to 60% in 2023. These dynamics are forcing us to rethink traditional sales approaches and look for new ways to succeed.

Market transformation and new challenges

With high inflation and uncertainty about interest rates, CIOs face limited visibility into the short-term trajectories of their organizations. This leads to a reluctance to invest in new long-term projects and overall budget cuts. After actively acquiring software during the pandemic, companies found themselves overwhelmed with SaaS solutions. Now there is a tendency to reduce low-performing software, optimize the existing technology stack, and take a more selective approach to choosing new suppliers.

The emergence of generative AI has created a new mandate for the acquisition of relevant software, which has led to increased competition from GenAI startups and limited opportunities for traditional software. Uncertainty about the future development of technology also affects investment decisions.

New opportunities in the market

Contrary to popular belief, only 20% of new software spending is directed to solutions with generative AI. Market analysis shows that 85% ($3.3T) of total IT spending is attributable to the medium- and long-term impact of GenAI, creating significant opportunities for companies that can tailor their offerings to the needs of different segments.

Data from public companies show a significant slowdown in the growth of PLG companies - from 60% in 2021 to 18% in 2023. In contrast, companies with traditional sales models showed more steady growth - from 30% to 24% over the same period. This indicates the return of the importance of enterprise sales.

Strategies for Success

According to a survey of Fortune 500 CIOs, the key decision-making factors were a clear demonstration of ROI, the ability to reduce costs, and measurable implementation results. Successful companies demonstrate a clear vision of GenAI integration into their products, an understanding of the place of their product in the AI-centric world, and a realistic development roadmap.

Amidst the uncertainty of GenAI's impact and software consolidation, system integrators and large platforms have gained more control over client accounts. This makes it critical to build relationships with consultants, integrate with large platforms, and take a balanced approach to partnerships.

Conclusion

The software market will continue to be transformed by GenAI, but the main opportunities lie in the long term. Success will depend on the ability to balance innovation and practical value, to adapt products or services to changing client needs, and to build sustainable relationships with clients and partners.

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