AI eats SaaS for breakfast

And the story of why we’re building SaaS22

Let’s go back in time—to 1965, a time when basic computers with a measly 2 MB of RAM required large amounts of space, teams of 60 people to load instructions, air conditioning, and cost a whopping $9 million.

Later in the same year, IBM introduced the revolutionary System/360 mainframe—think of it as the Ford Model T of computers, if you will. By dramatically reducing computing costs, the S/360 mainframe helped governments, banks, and other institutions gradually come online and eventually democratizing computing.

Fast forward to 1999, when Salesforce began its journey in a single-room apartment in San Francisco. Marc Benioff, Parker Harris, Frank Dominguez, and Dave Moellenhoff—created the world’s first SaaS company. In just about twenty years, internet and computing costs have plummeted, software has been democratized, and SaaS has become a $340 billion global industry.

Let’s take a look at the relatively simple SaaS martech landscape.

The SaaS martech landscape grew from 150 solutions in 2011 to 11,038 solutions in 2023.

But here’s the underlying story.

Since 2022, the growth rate of Martech SaaS companies has slowed to 10% year-over-year from the highs of nearly 100% growth. Amid the financial downturn, CIOs and CFOs worldwide are tightening purse strings. A survey shows that 67% of companies have cut software budgets to weed out unnecessary tools and control SaaS sprawl.

AI is transforming the SaaS landscape, with super agents threatening to replace human jobs, challenging traditional per-seat pricing models.

Given this backdrop, the responsibility for customer value realization falls squarely on SaaS vendors. Trends like product-led growth, which offered a DIY experience and relied heavily on expensive inbound marketing campaigns, are losing effectiveness.

Value can be delivered either through a large professional services team—or as seen historically through channel partners. Over 80% of all software sales (largely coming from companies like Salesforce, HubSpot, etc., with a thriving partner ecosystem) happens through channels.