"Traditional SaaS Is Dead, Long Live AI-SaaS? The Truth About Enterprise Evolution"

AI is fundamentally changing the game for the SaaS industry, making companies rethink their entire business architecture. The old-school SaaS model was built on cumbersome systems of record—you know, those backbone software tools for managing finance, HR, customer data, and so on. These systems were usually put together by a third-party consultants who listened to what you needed, then built this rigid code that ended up being more of a burden than a blessing. And, of course, they'd charge you millions in setup fees, followed by millions more in support fees—basically holding your business hostage to outdated processes and stifling any hope of innovation.

AI is tearing down that outdated model. Instead of being stuck with software that dictates every step of the workflow, AI makes everything more dynamic, fluid, and driven by real data. It's not about being bound to a specific process anymore—now you can just tell AI what outcome you want, and let it figure out the rest. This is a big deal: we're not just simplifying tasks here; we're changing how work gets done, period. often through AI agents (more on agents here) that can autonomously execute tasks to achieve those outcomes. These agents adapt, learn, and optimize, giving companies a level of flexibility and efficiency that wasn't possible before. This is a big deal: we're not just simplifying tasks here; we're changing how work gets done, period.

So, what does this mean for those old systems of record? Well, they’re kind of losing their place on the throne. Historically, these systems were the ultimate source of truth for companies, but now AI-driven systems can access, analyze, and act on data in real time without being confined by the structure of a single system. This fundamentally changes the concept of enterprise software—it's no longer about a static data repository; it’s about having a flow of information that’s dynamic and adaptable.

What’s the counter-argument !

Revenue in the Software as a Service market is projected to reach US$339.10bn?in 2024 and with an annual growth rate of 19.28%, resulting in a market volume of US$818.80bn by 2029. (Source: Statistica https://www.statista.com/outlook/tmo/public-cloud/software-as-a-service/worldwide)

Are these projections realistic !

There's a pretty compelling counter-argument to the AI story.

AI models are fundamentally predictive. They make educated guesses based on patterns, which means they can be super accurate, but they're rarely 100% correct. And let's face it, for some enterprise functions, like keeping track of employee lists or managing customer records, you need absolute accuracy. When Wall Street analysts want exact revenue figures, you can't afford to be 99.9% right—you need to be 100%. You don't want AI making guesses in those situations; you need a solid, definitive answer. So, yeah, you're still going to need a system of record for those non-negotiable requirements.

Plus, those traditional systems of record SaaS softwarestill offer enterprise-level security, compliance, and data-sharing capabilities that AI-driven models haven't quite caught up with yet. These systems have been refined over decades to meet strict regulatory requirements, and the idea that they can just be replaced by AI overlooks a lot of complexities. Companies still need databases that guarantee the integrity and security of their information, and they need solutions that can be audited, controlled, and trusted.

?And here's the practical reality: big enterprises aren't exactly eager to take on the headache of integrating and maintaining complex AI systems by themselves. They prefer plug-and-play solutions that are vendor-supported, rather than being handed an AI model and told to figure it all out. So, you’re still going to need system integrators and consultants to connect all that enterprise data to AI models, map out workflows, and make sure everything runs smoothly. Sound familiar? Yeah, it’s a lot like how clunky enterprise software is implemented today—just with different players and different tools.

?Now, speaking from my perspective on the impact of AI on SaaS in our region, and APAC as a whole, has some unique nuances. Companies here have a tendency to leapfrog traditional technology stacks straight into modern solutions. Many of our customers across SEA, from Singapore to Thailand, are actively rethinking their tech infrastructure to better support AI-driven models. However, there's also a certain hesitancy—we want innovation, but we also need to maintain compliance and stability, especially in markets like Indonesia, where regulatory concerns are significant. There’s no denying that AI is promising, but convincing enterprises to completely overhaul their backbone software will take a mix of patience, evidence, and reassurance that data privacy and compliance are not sacrificed in the process.

AI is flipping the SaaS model upside down. No longer do companies need to be at the mercy of rigid, over-engineered systems of record that prioritize processes over outcomes. Instead, AI allows companies to be process-agnostic, focusing on results and the constant flow of data that drives value. This revolution is just getting started, and the impact will be huge as SaaS companies adapt, innovate, and evolve in the coming years.

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P.S?Image created with Dall-E with prompt: "Create a modern, futuristic illustration representing the transformation of enterprise software through AI. Show an outdated, clunky system of record being replaced by sleek, glowing AI-powered agents represented as dynamic, futuristic lines connecting various parts of a business. Include elements like data flow, automation, and autonomous AI agents modernizing workflows. Emphasize the contrast between old-fashioned, rigid systems and new, high-tech AI solutions, highlighting a sense of agility, modernization, and futuristic technology. Reduce the number of human figures to emphasize technology and data flow, creating a more streamlined, high-tech atmosphere."

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