SaaS is dead; long live SaaS!

There is little doubt in my mind that AI coding models have fundamentally changed the nature of software development in 2026. But is the SaaS-pocalypse real? I think it kinda is, for some businesses.

A history lesson from an elder developer

I think it’s worth reflecting on what the original premise for Software-as-a-Service actually was.

Back in the late 90’s/early-2000’s software was extremely difficult and expensive to produce. Businesses were ordering software for their staff from Microsoft in giant boxes of CDs and manuals, or consultants would fly in to install their database system on the machines in the server room, or you’d have custom software solutions developed by software houses, specifically tailored to your business.

In 1998, I was one of those consultants. On one memorable occasion I flew over from Ireland to London with a CD of custom software for calculating bond yield curves in my jacket pocket. I arrived at Barings Bank by 9am only to discover they had a terminal version of Windows on which the installer wouldn’t run. With nothing to do, and no means of modifying the installer, I left the bank and by 10am I started exploring London for the day before my flight home. To me, nothing demonstrates the difficulty, expense, and waste of software delivery during that period than an enjoyable-but-unproductive day at London Zoo.

And then the web happened. Specifically, businesses started to embrace the idea that we could deliver software over the Internet, through a web browser. That meant you could develop the software in one location, and deliver it to another location, all without shipping CDs, selling software in retail shops, or flying expensive people around the world to (not) install it.

What’s more, you could sell this software to many more businesses which broadened the market for software because suddenly everyone could access it. And, as a software business, you could also take on the cost and responsibility for hosting the software because you were the experts after all. This also broadened the market for software because it could be sold to businesses without any IT expertise or in-house server room.

This also brought about a new pricing structure: instead of selling the physical artefacts of the software in the form or disks or CDs for an expensive one-off purchase, you could now license the software for a small monthly payment to anyone in the world.

The fundamental bargain at the heart of the SaaS revolution was this:

Software is very expensive to produce, difficult to deliver, and out of reach for all but the largest businesses. What if, we instead of spending years developing a software product for a small sophisticated market at a high-price, we delivered software to a global market for a low monthly price.

That, in a nutshell, is the SaaS business model which has dominated the software industry for a quarter of a century.

The model had trade-offs on both sides. In exchange for the lower price—which wouldn’t cover a fraction of the development costs—the software would not be customised to each client. It was designed to address the needs of the masses and, if you needed something different, there was hopefully a competitor in the new global market that would accommodate your requirements. Or the customer would just adapt to the available software.

From the developer’s side, continuous updates were the bargain for keeping customers paying their monthly or annual subscriptions. So the software continuously evolved and added new features; proving its value to existing customers and seeking out new markets.

Those software businesses also had to take on all the liability of hosting the software and it’s data—for thousands or millions of customers—providing the servers, maintaining the software, applying security updates, and all manner of other regulatory work.

I mention all this because the vast majority of people in the software industry today were not in the industry in 2000. They did not experience ordering a floppy disk of software from a classified ad in a computer magazine. Or licence codes on CD boxes. Or running a SparcStation server under the receptionists desk because that’s the only machine compatible with the business-critical software she used.

In short, most developers were professionally born into the era of SaaS and have never considered an alternative model. They have not even conceived that software could, or should, be sold in another way.

It’s my belief that AI fundamentally alters the bargain upon which the SaaS model is predicated.

We still believe software is hard to develop. So we believe it must be delivered to a large market to justify the effort. So we believe we need venture capital to fund the initial production of it. And we need to charge a monthly subscription to make this palatable to customers. And then we need to constantly ship new features to justify that subscription.

I think that sounds like the rantings of a madmen and just doesn’t make sense in a world where software becomes trivial vastly cheaper to produce.

AI changes the SaaS equation

Software is no longer (as) expensive to produce.

We don’t need an army of developers to build it (I’d argue we never did) and the gap between a software idea and a working implementation of that idea is basically zero. We are entering a new golden age of software development, which promises a Cambrian explosion of software—and yes, that’s equally fascinating, empowering, and absolutely terrifying.

We recently bought an electric car and had solar panels installed on the house and, as the Irish summer slowly got going, I started to wonder whether I should charge the car from the grid today or wait until tomorrow to charge it from the sun. It’s a trivial question, not much more than a customised weather forecast specifically looking at solar energy, and I could have tried to search for a suitable solution. I could, but I didn’t.

All this occurred to me as I was going to bed one night and instead of using the App Store’s awful search, I just opened Claude Code on my phone and dictated three paragraphs of requirements to it. Then I brushed my teeth. By the time I was getting into bed, Claude had delivered a mobile-optimised web page that used open weather data for my current location, and calculated which days would be the best days to charge the car.

I did not look at the code. I did not source the data. I have no intention of opening the app for anyone else. The only user is me and the only requirements are mine. There’s nothing to maintain, nothing to iterate on or improve. It was 10mins from “I wonder if…” to “I now have the solution”.

And this story has been repeated over and over in my personal and professional life in 2026.

I’ve always wanted an analytics solution for tracking my game stats on Star Realms but parsing the log files would be a bit of a pain in the neck. Sure, it would be a fun intellectual puzzle but I never found the energy for that outside of work. Instead I dropped a collection of the log files into Claude and told it to write a parser. Then I iterated with Claude to build a Rails app around that so I can paste in new logs and it would generate charts from each game to help me understand if my strategies were working. No logins. No multi-tenant hosting. No figuring out how to monetise it.

I’ve built a workout tracker for rehab exercise because I couldn’t find anything simple enough for my needs. I even slapped passkeys on it just because I wanted to.

At work—where we’re using AI but not in the 🙈 vibe-coding sense—we’ve seen a 65% increase in the number of PRs shipped to production. We’ve attempted large database migrations in a few days which we’d put off for years. I’ve been able to re-engage with the codebase on a more meaningful level because my AI-partner can fit around my schedule of commitments, never forgets what we were working on, and is now at the level of a senior- or even staff-developer.

I’ve loathed the Rails server output for years as the requests, queries, and log lines scroll past with nothing to distinguish them. You’d click a link in the browser and then spend ages hunting through the console output to find the relevant query your were looking for. So I built a UI to view the server logs individually, broken down by requests. All in, it probably took me 30mins to solve a visceral problem I’d had for over a decade, and then for good measure I threw in a TUI.

I’ve written an in-house AI bot to triage and investigate new issues (which I’ll expand on in a different post because it’s so good). This bot is the stuff I’ve dreamt about for years, which none of our vendors has delivered on, and which I coded up in a single 4hr session one morning. I’ve rewritten it a few times now, and iterated considerably on its features and tools, but it’s now an extremely important tool at Podia. It costs ~$250/mo to run and I’ve invested a few days of effort into building it over a few months. It’s a staggeringly useful tool—one which was literally priceless a few years ago because it couldn’t exist—and it’s now barely a blip on my effort register.

I don’t want to pretend that AI makes software development completely free or trivial for anyone but it’s crystal clear to me that the cost and effort required has fallen dramatically. Solutions which were previously ruled out as too hard, too complex, or too niche are now possible.

Perhaps you’re not quite ready to accept AI tools, and perhaps you don’t believe in the productivity gains I’ve seen. That’s ok but, just as a mental experiment, consider what it means for the SaaS model if my premise that software is now much cheaper to produce is correct. Just consider it as a theoretical possibility…

Why would someone buy your software?

This is really where the SaaS-pocalypse concerns are coming from. In a world where software is cheap to produce, why would someone buy yours instead of building their own?

And there’s definitely a lot of truth in that.

In previous years, there was an opportunity for indie developers and small teams to spend a few months developing a web or mobile app and then sell that to customers. It might not have been a rocketship opportunity for VCs to fight over but it was definitely a viable means for solo developers to make a great living.

As an aside: If you can replicate the software that a $100m company sells, you have not created $100m of value in a weekend. You have, at best, destroyed $100m of value but mostly likely you haven’t understood the value of that business. That software you built is worth exactly zero to anyone else but you.

That era of building a viable SaaS business in a few months is gone. I mean, it technically still exists today but only in the arbitrage sense that the rest of the world hasn’t yet caught on to how quickly and easily software can be built. It’ll be gone soon, I promise.

If you could previously develop a new app in a few months, I can now build that by the end of the week—if not the end of the day. That’s especially because I don’t need to build any of the trappings of a multi-tenant app destined for the mass market. I can choose HTTP basic auth if it suits me. Or none at all. I might not worry about backups. I can host it alongside other internal apps with barely a glancing-thought towards scalability. I don’t need branding. Or marketing. Or billing. I can reuse internal design systems or let the AI run with whatever comes to its mind first.

The sophistication of the software I’ll produce this way is much lower than what an indie dev might have written 2 years ago. It’s not the same product—mine isn’t even a product—but it’ll solve my problem equally well. I don’t have to build the same amount of software to solve my problem that you do to deliver a solution to everyone’s problems.

After all, why would I rent your software for a monthly fee, which probably doesn’t do exactly what I want, in a way that I want it done, and inevitably does more than I actually need? Why would I adapt my processes to fit your software, when I can build my software to fit my processes? Why pay for a platform and only use 20% of its features? Why accept the constant changes and learning required because new features, or redesigns, are forced upon me? Why accept an infinitely flexible monster (go Jira), with all the inevitable trade-offs for usability and complexity, when I could have software that fits my team like a glove?

Why should the local sign makers have to buy the same project management solution as a software company? Why should the small business selling electric gates use the same stock control system as a major retailer?

I use those two examples because they are actual examples of conversations I had with local businesses about 15 years ago. At the time, both businesses had these problems and couldn’t find SaaS solutions to their business problems. They actually needed a custom software solution but couldn’t afford it. Perhaps they would have paid $5-10k for the solution but not the $100k+ it would have actually cost to build one.

Today, I do think that equation has changed. I think if I talked to those businesses today we could engage in a successful project to build a custom solution for them—at a price they could afford, in weeks, not years.

So it’s all gone, right? It’s all doom-and-gloom now in a post-AI world. Our jobs, businesses, and livelihoods are all inevitably going to fall to a single Anthropic subscription? The software industry is going to crash and burn?

No, I don’t think so. Not all of it. Software itself has lost a lot of its value but not all software businesses have.

What remains valuable

For the past 25 years, SaaS has been all about the Software. The software was hard to build, so the software was valuable to sell, so the software was the moat against competitors.

SaaS of the next 25 years will be all about the Service. It’s not about delivering software as a service, it’s about figuring out what service you can deliver through software. It’ll be how software enables you to deliver something else: relationships, access, data, trust, expertise, or community.

Given two competing software solutions, the winner will not be based on the feature set. These days you could take a competitors feature announcement and a few help docs, and ship that feature in your product in days or weeks. Hell, if you were so AI-pilled you’d have an agent monitoring competitor announcements and automatically implementing them in your own app (don’t do that; it’s dumb because…). Features aren’t a defence.

The hedonic treadmill of constant feature development, and a constant pressure to broaden the app, just doesn’t have much value any more. More software is not solving more of an individual user’s problems, it most likely just helping the app appeal to a broader market. And that’s a goal which serves the business, not any one customer.

Since everyone needs a slightly different set of features, that inevitably broad set of features in SaaS apps comes at a cost: why is your customer paying $200/mo for an app but only using 20% of the features? At some point that’s going to look like bad value to them but, in a pre-AI world, they still couldn’t justify rebuilding it. In a post-AI world, the customer doesn’t need to replace your entire app, they only need to replace the 20% of the features they actually use and that might only take a few days of effort.

More software has not saved you: it’s just encouraged your customer to seek a streamlined alternative that fits their needs, and that alternative is now easier than ever to build yourself.

What matters much more—and always did—is what features you choose to ship, how you engage with your customers, and how you serve them. It’s all the non-software things which make a difference now.

Here’s what I would bet on…

Anything that’s a true system of record: If a business needs a single canonical place for their data, and you are that trusted party, you will remain valuable. Anything that provides access to a data source: When software is cheap, owning the data is more valuable. Think access to datasets, APIs, payments etc. Anything that connects people and communities: Relationships aren’t replaced by cheap software and, if anything, they become even more important. Anything with a high regulatory burden: payments, healthcare, personal data etc. The software might be cheap but the compliance isn’t and businesses will still pay to have those problems solved. Anything with a high complexity, low-risk tolerance, or niche domain knowledge: Again, businesses aren’t really paying for the software any more, they are paying for the trust and expertise. Anything coupled to hardware: software is cheap but hardware remains expensive so I’d expect this category to remain valuable. Consultants + AI: some think AI will kill consultancy but I think it’ll super-charge them: AI thrives in the hands of experts and withers in the hands of idiots. They are going to be transforming businesses, bringing vastly more software into the world than SaaS ever did. Consultingware 2.0? Internal product teams: I think there’s a huge opportunity for large Enterprises to develop internal tools for a fraction of the cost of the contracts they are currently paying. Small 4-person teams using AI can replace multi-million $ contracts and allow the business to operate the way it wants, free of annual contracts. Anything that agents use: UI components, libraries, APIs, payments, harnesses, models, etc. It doesn’t matter half as much what UI you put on your app, as what UI your customers can build on your API. Anything that gives trust in AI-generated code: tools for hosting, debugging, reviewing, observability, monitoring, auditing, security, etc. Consumer apps: whilst businesses will find software more within their reach to develop, I’m not convinced the average person will be coding their own accounting solution, email clients, games, fitness trackers, or reminders apps. That said, the consumer is usually high-investment and low-margin. Software without an agenda: I could joke than many software startups barely displayed a money-making intention in the past but now we can genuinely build software with no plans for commercialisation—without even a plan to share it as open-source. Just build it to solve your own problems without concerning yourself with anyone else.

It won’t be a dramatic “SaaS-pocalyse” but I do think it will be a restructuring of the software market and SaaS won’t be the default business model.

Consumers will still mostly buy the software they current do, typically from app stores & marketplaces, small subscriptions, or via ad-supported models. Small/medium businesses will still buy some software but increasingly will build internally or subcontract out for custom solutions. I would expect large enterprises, who already have internal resources to develop and maintain software, will be the biggest beneficiaries with a lot more internal building & subcontracting, and a lot less buying.