Is This The End Of SaaS Or A Reset? How AI Is Rewriting Software Economics And Reshaping Jobs | Explainers News

Last Updated:February 12, 2026, 09:00 IST

The rise of AI will create a level playing field; prototyping, coding, and deploying products will all be faster and cheaper. It will also raise the bar for everyone, say experts

For more than a decade, the business model behind Software-as-a-Service (SaaS) appeared almost unshakeable: build more features, bundle them into subscription tiers, charge companies per user or “per seat,” and watch predictable monthly revenue compound. That formula is now facing its biggest test yet.

Generative artificial intelligence (Gen AI) tools — from chat-based assistants and automated plugins to AI copilots embedded in browsers and operating systems — are increasingly capable of performing the very tasks SaaS platforms once monetized. Analysts estimate that AI-enabled automation could displace hundreds of billions of dollars in annual SaaS revenue over the next few years, particularly in areas such as analytics, workflow management and customer support.

“The rise of AI will create a level playing field for building functional products; prototyping, coding and deploying those products will all be faster and less expensive. At the same time, it will increase the bar for everyone to differentiate themselves… The focus will shift from ‘can you build it?’ to ‘how can you defend it?’,” points out Kanishk Agrawal, Chief Technology Officer (CTO) at Judge Group India, a software solutions company.

Let’s examine the looming “SaaSocalypse” and whether the AI shift could instead deliver measurable outcomes.

Why The SaaS Model Worked

In 1999, Salesforce launched its customer relationship management (CRM) platform as one of the first SaaS solutions built from scratch, going on to achieve record growth. After the dot-com bust in 2001 and, less than a decade later, the Great Recession, SaaS continued to prove itself a resilient investment model.

The rise of SaaS in the early 2010s was driven by accessibility and predictability. Companies no longer needed to install expensive software on local machines or pay large upfront fees. Cloud-based platforms allowed them to subscribe, scale and update automatically. For vendors, this translated into steady recurring income instead of volatile one-time purchases.

Feature bundling became the cornerstone of this strategy. The more capabilities a platform offered — dashboards, integrations, analytics and collaboration tools — the higher its subscription tier. Seat-based pricing ensured that as a client company grew, revenue grew with it.

High gross margins and predictable monthly revenue streams made SaaS particularly attractive to investors. Public markets rewarded consistency, and venture capital flowed into startups promising scalable subscription models. Across the United States, Europe and India, SaaS became one of the most celebrated technology sectors, often described as the “gold standard” of digital business economics.

When Features Start Becoming Free With AI

Artificial intelligence has disrupted this equation by eroding the perceived value of individual features. Many tasks that once required separate software tools — grammar correction, visual design, coding assistance, customer support automation or financial forecasting — can now be handled by AI systems integrated into broader platforms or even offered at minimal cost.

The shift is behavioural as much as technological. Instead of navigating multiple dashboards, users increasingly rely on conversational AI interfaces to retrieve insights or automate workflows.

Enterprise surveys indicate growing experimentation with generative AI across departments, from human resources to finance. In several documented cases, organisations have reduced or consolidated software subscriptions after integrating AI capabilities that replicate or streamline existing functions. The implication is clear: software companies are now competing not only with each other but also with intelligent systems that do not always follow the same pricing logic.

Does This Mean The End of SaaS?

Critics warn that AI could replace labour-intensive features that once justified premium pricing, allowing smaller businesses to bypass legacy tools in favour of cheaper or bundled alternatives.

However, the counter-argument is equally compelling. Many industry leaders believe AI does not eliminate value — it reshapes it.

“The current AI wave is not a ‘SaaSocalypse’. It is a structural reset of software economics. Traditional SaaS monetised access to features, while AI monetises outcomes. Historically, every shift, be it cloud, mobile, or APIs, redefined software value creation. AI is accelerating that transition. The real change is that businesses will pay for measurable impact, not just tools,” said Ankit Aggarwal, Founder and CEO of Unstop.ai.

Another industry expert, Ritwik Batabyal, CTO & Innovation Officer, Mastek Group, echoed similar sentiment. Batabyal said the current AI wave should be seen as a necessary reset rather than a “SaaSocalypse”. “What we are witnessing is what I call AI margin compression. As intelligence becomes commoditized infrastructure, traditional SaaS margins built on feature breadth and seat expansion are under pressure. Differentiation is shifting towards proprietary data, workflow depth, and execution speed. This is not about the death of SaaS, but about a correction in how value is created, priced, and sustained in software economics.” Mastek is an enterprise AI, digital, and cloud services company.

Which SaaS Products Could Be Replaced?

“SaaS products built around repetitive, rules-based tasks are the most vulnerable, particularly those offering basic analytics, reporting, content generation, or simple customer support workflows,” Batabyal said. “These capabilities are increasingly being absorbed by AI-native tools or embedded directly into larger platforms. On the other hand, SaaS solutions that manage complex enterprise processes, regulated workflows, domain-specific decision-making, or orchestration across systems will grow stronger. AI amplifies their value rather than replaces them, making them more intelligent and context-aware,” he adds.

Successful platforms are embedding AI directly into workflows rather than treating it as an optional add-on. Early case studies suggest that companies willing to rethink pricing and product design often see revenue growth instead of decline.

“The most at-risk SaaS solutions will be point solutions built around output templates — basic copywriting, simplistic dashboards, ticket routing, and rules- based automation,” explains Agrawal. “If you can copy a feature using just a prompt, it is at risk. On the other hand, SaaS that owns structured data or deeply integrates into enterprise workflows will grow stronger.”

What This Means For India’s SaaS Start-ups

India’s expanding SaaS ecosystem sits at a pivotal moment. The country has produced a growing number of globally competitive software firms, many of which derive significant revenue from international clients. Because Indian SaaS companies are deeply integrated into global markets, shifts in pricing expectations or AI adoption abroad quickly influence domestic strategies.

Indian founders are increasingly embedding AI into billing systems, customer success platforms and product development cycles from the outset. Pricing tiers are under review, and AI is often positioned as a competitive advantage rather than a disruptive threat.

Agrawal notes that “the per-seat pricing model will be negatively impacted by AI,” as value will be tied less to the individual logging in and more to computational outcomes. Hybrid pricing models — combining subscriptions with usage-based billing — are already emerging.

What’s The Outlook For The Next Three To Five Years?

The software industry is undergoing a recalibration in which the economics of value creation are being rewritten. AI is unlikely to replace SaaS entirely; instead, it is reshaping how software is built, priced and consumed.

“Over the next three to five years, AI will become both a default feature and a foundational layer for software. Many SaaS companies will evolve into experience layers built on AI infrastructure. The stack is shifting towards models, intelligence layers, and application experiences…The real value will lie in owning the customer context and orchestrating intelligence. SaaS will increasingly become the delivery layer through which AI creates measurable business outcomes,” said Aggarwal.

Hiring pattern will also shift, he adds. Routine roles in the tech ecosystem will be reduced, while increasing demand for high-skill talent. “Manual coding, testing, and operational work will decline, while AI Engineers, Data Specialists, and AI Governance Professionals will see strong demand… Organisations will operate with smaller teams but significantly higher productivity. The definition of a software professional will expand from writing code to designing, managing, and supervising intelligent systems, making adaptability the most valuable skill in the workforce,” he stressed.

While Batabyal said, “Enterprises will need leaders and technologists who can design guardrails, ensure accountability, manage failure modes, and align AI systems with regulatory and business intent. The focus moves from writing more code to governing smarter systems.”