Transforming B2B SaaS: 6 Impacts of AI and ChatGPT

Artificial intelligence and natural language processing technologies like ChatGPT will have a profound impact on nearly every industry and in many ways, B2B SaaS has the most to gain (and lose) from the proliferation of AI.

Here are 6 ways AI and tools like ChatGPT will impact B2B SaaS:

1) Natural language application interfaces will become ubiquitous

2) Engineering productivity will increase

3) User experience expectations will rise

4) SaaS gross margins will decline for some

5) Market leaders that embrace AI will build on their lead

6) Legacy, on-premises installed B2B software will fall further behind

1) Natural language application interfaces will become ubiquitous

User: "Generate a chart showing revenue and net profit by product, by year for the past 5 years, and provide the supporting information in a table below the chart. Summarize for me in a paragraph below any idiosyncratic transactions that are having an unusual and significant impact on the results in any one year."

This is what finance users will expect from an ERP in the near future.

AI-driven natural language application interfaces will transform the way B2B SaaS companies can generate dashboards, reports, exports, and analyses and allow users to access and use their data. Instead of relying on engineers to write custom code, applications will make their data available to users so that can query ChatGPT or another natural language model to provide results. These interfaces will result in a way better user experience and cut down on custom requests from application devs. If users can interact with software through plain language it will reduce the learning curve, make it easier for non-technical users to access and utilize complex apps and generate exports, reports, and analyses.

2) Engineering productivity will increase

The integration of AI and ChatGPT in SaaS companies has significantly improved engineering and developer productivity. With the ability to generate output using natural language, engineers and developers can spend less time writing custom code and more time focusing on critical aspects of their products. This will lead to faster development cycles, reduced costs, and higher-quality software. AI-powered tools will also offer suggestions, identify potential errors, and provide insights to improve code quality and maintainability.

Check out GitHub Copilot - tools like this are already having a profound impact on dev productivity.

3) User experiences will improve with optimal use suggestions and auto-complete for everything.

Users will begin to expect features like optimal use suggestions and auto-complete. AI will predict and suggests the next steps to allow users to work more efficiently and with greater accuracy. SaaS companies must keep up with these evolving expectations to maintain customer satisfaction and loyalty.

4) Impact on gross margins: SaaS gross margins will decline for some

While AI and ChatGPT technologies offer numerous benefits to B2B market SaaS companies, they may also impact gross margins due to the increase in usage-based costs associated with AI processing. These usage-based costs can increase with the growing number of users and the complexity of tasks performed by the AI. To maintain healthy gross margins, SaaS companies must carefully evaluate and optimize their AI usage, striking a balance between offering advanced features, controlling costs, and up charging for advanced AI functionality. Jamin Ball has some excellent commentary on this in his 03.31.23 edition of the Clouded Judgement Newsletter.

5) Market leaders will move even faster

AI and ChatGPT are enabling market-leading B2B SaaS companies to move even faster, as they can leverage these technologies to optimize their offerings, streamline operations, and innovate rapidly with their existing custer base. With access to powerful AI-driven insights and capabilities, market leaders can push game-changing features and push further ahead of companies aiming to steal market share. This competitive advantage will help them strengthen their position in the market and drive further growth. Canva's AI Image Generator and Notion AI unleashed significant new AI capabilities over the past several months that make it even more difficult for competitors to encroach on their market leadership.

6) On-premises installed solutions will fall further behind SaaS

The rapid evolution of AI and ChatGPT will widen the gap between on-premises installed solutions and SaaS offerings. On-premises solutions tend to have slower update cycles, making it difficult for them to keep up with the advancements in AI-driven technologies. In contrast, SaaS companies can quickly incorporate AI updates and improvements, offering their customers the latest features and benefits. As a result, businesses are increasingly opting for SaaS solutions over on-premises alternatives, and the added value of SaaS will become even more pronounced.

These are exciting times...