Navigating the SaaSpocalypse: Which Software Companies Will Survive the AI-Powered Storm?

The start of the year has been brutal for software companies, with many facing slowing growth and rising fears about the impact of AI and advanced coding models on their business. This has led to predictions of a "SaaSpocalypse" - a catastrophic collapse of the software-as-a-service (SaaS) industry. But what does this mean for the business of software, and which companies are likely to survive the coming storm?

According to Jared Sleeper, a longtime software investor, the key to understanding the SaaSpocalypse lies in understanding how the software business actually works. "The software business is a very unique business," Sleeper explained in a recent podcast interview. "It's a business that is driven by a few very specific characteristics, including high gross margins, low capital expenditures, and a very high degree of scalability."

However, these characteristics also make software companies vulnerable to disruption by AI and other technologies. "The rise of AI is a very big deal for software companies," Sleeper said. "It's going to change the way that software is built, and it's going to change the way that software is sold."

So what types of companies are likely to survive the SaaSpocalypse? Sleeper believes that companies with a few key characteristics will be best positioned to weather the storm. These include companies with:

• High switching costs: Companies that have built strong relationships with their customers and have high switching costs will be less vulnerable to disruption by AI-powered competitors.
• Unique value propositions: Companies that offer unique value propositions that cannot be easily replicated by AI will be more likely to survive.
• Strong data assets: Companies that have strong data assets and the ability to leverage them effectively will be well-positioned to take advantage of the opportunities presented by AI.

On the other hand, companies that are most vulnerable to disruption by AI are those with:

• Commodity-like products: Companies that offer commodity-like products that can be easily replicated by AI will be most at risk.
• Low switching costs: Companies with low switching costs will be more vulnerable to disruption by AI-powered competitors.
• Weak data assets: Companies that lack strong data assets or the ability to leverage them effectively will struggle to compete in an AI-powered world.

Ultimately, the SaaSpocalypse will be a challenging time for software companies, but it will also present opportunities for companies that are well-positioned to take advantage of the changing landscape. As Sleeper noted, "The companies that will survive and thrive in this new world will be the ones that are able to adapt and evolve, and that are able to leverage the power of AI to drive innovation and growth."

By understanding the underlying dynamics of the software business and the impact of AI on the industry, software companies can better position themselves to survive and thrive in the coming years. Whether you call it the SaaSpocalypse or the CaSaaStrophe, one thing is clear: the software industry will never be the same again.