Accelerate your SaaS transformation

I've hardly met a traditional B2B software vendor who hasn't thought about SaaS transformation. However, not all of them have fully transformed into SaaS. One of the reasons is the difficulty of justifying investments in this change. The transformation is expensive, and return on investment (ROI) may be hiding beyond the horizon. Remember the SaaS fish model?

This is why, even though senior leaders want to transform, they often put it on hold. But is this a problem? I want to share a couple of thoughts about why it could be.

I began to hear stories from software businesses about how they were losing deals to in-house solutions. It's understandable, because in the era of AI, software development has become faster and less expensive. However, even though it's a worrying symptom, I think there might be an even bigger threat waiting for traditional software businesses just around the corner.

Even though in-house solutions don't have to fully replicate existing market offerings and need to implement only a subset of features that deliver just enough value to justify the spend on development and operations, I don't really think that this will be a massive move.

Development is only a small portion of the total cost of software. The biggest part is hiding in post-release and operations efforts. It's clear that businesses who develop in-house solutions understand it and would better spend resources on something that will help them grow their business, instead of maintaining the in-house software.

Have you already spotted the opportunity here? Businesses don't want to maintain software which is not their main business. At the same time, they think that developing this software in-house gives them reasonable ROI, compared to existing market offerings. This looks like a gap between what the market currently offers and what is businesses' current willingness to pay for third-party software. And as you know, the market gaps cannot exist infinitely.

Let's look at the situation from a high-level perspective. Building the same software multiple times can't nearly be as effective as building and maintaining one copy of software and sharing it. This is why I don't believe that the trend of building custom in-house software will be massive. However, there might be an even bigger threat.

AI significantly accelerated investments in startups. In 2024 the volume of investments was close to $314 billion in total startup funding, representing a 3% increase from 2023. However, in 2025 the number is $425 billion invested into more than 24,000 private companies globally, representing a 30% increase from 2024.

Do you see where I'm going with this? I think the bigger threat to traditional software businesses is not AI-built in-house solutions, but rather nimble, well-invested, AI-first startups who can offer laser-focused solutions at a fraction of the cost of traditional software offerings available on the market.

These don't even need to be the applications with rich user interfaces. Instead, these could be the AI agents available through the MCP or A2A protocols as a service, which can be easily integrated into existing customers’ software.

You might now ask: 'OK, how can I protect my software business in these new circumstances, and what does SaaS have to do with it?' The answer is simple: SaaS gives your product the value proposition you need to compete in this new world, such as lower upfront cost, faster time to value, reduced operational overhead, regular updates, and flexible packaging and pricing.

The AI era gives traditional software businesses one more push towards the SaaS transformation, because nimble startups equipped with AI can copy you more quickly than ever before. The millions of lines of code in your software don't reliably protect your business from being copied anymore.

Accelerate your SaaS transformation if you want to remain competitive in this new world. This will not only protect your business but also allow you to prosper in this new era of AI.