There is increasing debate across the software and investment landscape around whether artificial intelligence will ultimately “kill SaaS”. This framing is understandable, but it is strategically misplaced.
The real question is not whether SaaS will survive AI, but how software businesses will need to evolve their value propositions, operating models, and economics in response to it.
Historically, the B2B software industry has repeatedly navigated structural technology shifts. Over the past 30 years, it has moved from mainframe to client-server architecture, from on-premise to cloud delivery models, and from desktop to mobile-first computing. Each transition created periods of uncertainty, during which incumbent business models were questioned and valuations re-rated. However, in each case, the long-term trajectory of the industry was one of expansion, not contraction.
AI represents a further, more accelerated iteration of this pattern.
As Fredrik vom Hofe noted in a recent industry discussion, “No, for sure not” when asked whether AI will kill SaaS. However, he also highlighted a critical caveat: SaaS businesses that are not mission-critical, lack control of proprietary data, are not embedded into customer workflows, and are not AI-literate at an organisational level are already exposed.
This distinction is important. The risk is not category extinction, but rather value concentration.
AI is accelerating a shift in which software value accrues disproportionately to platforms that:
At the same time, financial markets are currently reacting strongly to AI-related signals, reflecting a high degree of uncertainty around long-term implications. However, this should not be confused with structural decline. Rather, it reflects repricing in the face of rapid technological change.
A further critical dimension is the speed of transition. Unlike previous technology cycles, AI is evolving on a compressed timeline measured in months rather than years. This increases both the visibility of disruption and the difficulty of forecasting outcomes.
Importantly, this is not a risk cycle in the traditional sense. It is an uncertainty cycle – where outcomes are not yet knowable, but directional change is already underway.
In this context, the SaaS businesses that will outperform are, of course, those actively embracing AI adoption as an embedded capability within their core value proposition – critically, this as much necessitates having AI evangelists in the portco sphere (in-house and advisors), as well as the latest tech developments.
To watch the full discussion between Fredrik vom Hofe and Charles Phipps from our "Value Creation in Tech Portcos" event, click here.
