But eventually people will catch up you can basically create a working product alone with the help of AI.
My prediction is that this will lead to a margin free-fall for many software products where the main moat is the software itself. And a lot of SaaS companies will also become redundant when the AI can code up a tailored solution in an hour for free.
I think so too. But in the meantime there is a quiet goldrush for people who spot niches where they can extract decent (or a lot) of value right now, and for long enough to be worthwhile. If they can get scale enough that thinner margins makes for a worthwhile business when the market catches up, great. If they can't, then we stay lean we might make off with decent ROI.
But that is also a reason to be cautious of chasing capital and think hard about whether you can spend it sensibly fast enough to improve your own ROI...
E.g. I have a project right now where I won't consider taking VC cash because I don't think I can spend it fast enough to buy me enough additional leverage to make enough additional money to compensate for the dilution and the other usual shenanigans before I expect margins will be squeezed out of the niche in question. It also means I don't think the opportunity will ever scale above a certain level, but that's fine - it'll be a quick attempt at grabbing what profit I can.
Also, while we of course shouldn't diminish the potential moat created by understanding the product in favour of only value the tech, we need to also consider that AI's are a levelling factor there too. Claude knows (I've verified what it's said) more about the niche I'm vaguely talking about than I do - it knows pricing, it knows positioning/marketing, it knows conventions and requirements of the niche, and while I'm sure I could have found all of it myself starting from scratch too it shortcircuited an enormous amount of effort to get an infodump that let me know precisely what to look for to verify it. A lot of tech companies will find the institutional knowledge they thought would shore up their moat is worth a lot less than they thought.
> A lot of tech companies will find the institutional knowledge they thought would shore up their moat is worth a lot less than they thought.
I totally agree. I think going forward the primary value of SAS will be the embedded domain expertise in a pre-built product. The comparison of Asana versus Notion comes to mind for project management. Asana forces abstractions of good project management upon you, whereas Notion lets you build it yourself. I think this principle will scale to all software in the future, where the only real value of software or it becomes exported maintenance obligations and a predetermines domain abstraction.
But as you mentioned, I think companies will rapidly find that their own specific abstraction is worth a lot less than they believed.
Perhaps for extremely basic products. Most non-engineers can barely write and untangle their messy thoughts and you think they can just build a spec for an AI to build a product? Hopefully I'm wrong, but I doubt it.
This is what gets me... Even at companies with relatively small engineering teams compared to company size, actually getting coherent requirements and buy-in from every stakeholder on a single direction was enough work that we didn't really struggle with getting things done.
Sure, there was some lead, but not nearly enough to 2x the team's productivity, let alone 10x.
Even when presented with something, there was still lead time turning that into something actually actionable as edge cases were sussed out.
SaaS is extremely vulnerable, companies will be able to modify open source tools to do exactly what they need, and agents will make managing those services easier. This will lead to downward pressure on SaaS prices, and cause them to become more like cloud data management platforms that they let customers build on top of rather than one-size-fits-all apps.
I agree with this completely. I forsee an era of enterprise level 'template' saas products that are expected to be tinkered with and highly customized. I think products like Notion that have an incredibly robust customizability and integration layer are going to thrive, where every single company can use a template engine to build extremely customized applications - and the barrier to building on top of these will essentially become the rate of human speech.
I predict that the commercial market for a lot of software will evaporate as people find that getting AI to whip up a custom solution that fits their unique problem space like a glove is actually cheaper and simpler than trying to make COTS software do the job. We're not quite here yet, but maybe in a few years.
Yes/no. Regardless of the code complexity reduction there is still architecture, planning and implementation. Could someone come by and clone my work afterwards? Absolutely. Will they retain customers with only a little understanding of the product or model? Questionable.
Sure, but there's a whole lot of businesses already using custom solutions made with excel/access/etc that are held together with duct tape and chicken wire, so I think the adventurous spirit necessary is there.
There have always been hundreds or thousands of companies that want software engineers but simply don't have the revenue to support them. My first dev job was a small private company in exactly this spot. They basically paid me my salary for six months to figure out WordPress and PHP on the job having only ever done very basic programming stuff on my own in high school ~6 years prior.
The median dev salary across the entire US is something like $130k/yr. There are huge numbers of new or self-taught software devs in low cost of living areas of the country making $50-60k/yr.
In the same pattern there are a lot of businesses where these solutions are not efficient and they MOVED from them to expensive commercial software. It's actually an antipattern to build a bunch of in-house, Excel-based solutions - with AI or not - for these companies.
You are discounting sales, marketing, and branding. Take drop shipping for example: anyone can do this, but the successful ones are those that know how to brand and market the product well.
Not to mention having the right mindset for startups and building a business.
The code and product is maybe only 20% of the story.
I'm not. That edge eventually converges to 0 when you have 10+ competitors that offer the same for 10x less money.
If you don't have some kind of cult following like Apple eventually you'll get margin-squeezed till death and all that marketing, sales, etc. will get cut down to stay afloat.
Of course all of the above is just my theory how this will play out in the long run, I'm no oracle by any means.
Not likely because there is still a lower bound. These 1 person startups are winning partially because they are already 10x cheaper than the incumbents.
But beyond that, it's not likely that there are 10x the number of people who know the domain and have the right mindset plus appetite for risk.
I'm not entirely disagreeing. There are limits there that means we can't assume the margins will go to their theoretical minimum. But you're also in part assuming the models don't increasingly know the domain or know how to research the domain and compile the information for you.
They'll be squeezing margins out of a lot more than just the tech.
Discounting Apple, their products and their customers to a cult is at best jealousy but still blatantly wrong. Lots of competition has been trying to out-Apple them for decades with no luck, and it's not because an iPhone customer is stupid & brain-washed.
They'll presumably monetize their AI (more) on both ends: getting you to pay for more access and getting advertisers to pay to be mentioned more often in the outputs. I mean that isn't really a bad position for them if you "using the Internet" degrades into you just sitting there typing queries in their Web app and never going anywhere else.
That seems unlikely to me. One side is made up of lots and lots of entrenched interests with sympathetic figures like authors and artists on their side, and the other is “big tech,” dominated by the rather unsympathetic OpenAI and Google.
> Coding should be among the easiest problems to tackle, yet none of the big models can write basic "real" code. They break when things get more complex than pong. And they can't even write a single proper function with modern c++ templating stuff for example.
The problem for Google is that there is no sensible way to monetize this tech and it undercuts their main money source which is search.
On top of that the Chinese seem to be hellbent to destroy any possible moat the US companies might create by flooding the market with SOTA open-source models.
Although this tech might be good for software companies in general - it does reduce the main cost they have which is personnel. But in the long run Google will need to reinvent itself or die.
Gemini has been in Google search for a while now. I use it somewhat often when I search for something and want follow up questions. I don’t see any ads in Gemini but maybe I would see it if I search for ads relevant things idk. But I definitely use google search more often because Gemini is there and probably that goes for a lot of people.
Even actually being irreplaceable doesn't help if management doesn't agree.
And increasing costs 10 fold due to letting go of someone that were doing two teams worth of work on some internal system he had 20y of experience with wont show up in some table in some power point.
How they're packaging it now? Terrorism? Child porn? Russian agents?
Either way politicians prefer to push unpopular stuff like this via the EU because the responsibility gets muddied - "we didn't want it, the EU regulation requires us to spy on you!".
It's important to know that the "new" in the title is entirely made up, it's the same draft as last week when they just ran out of time at the meeting, probably because they were fighting about Ukraine stuff.
They've optimized the packaging away. What's left of it now is a recycled paper tag that reads "because", and then if you scrutinize it further, there is poorly printed, barely readable "we're fascists".
reply