If you’ve been following the tech headlines lately, you’ve probably heard a pretty scary prediction: AI is going to kill the software industry.
The logic feels solid. If a smart AI bot can write its own code, manage your calendar, and organise your database, why would any company keep paying millions of dollars for “old” software platforms?
The theory was that these tech giants would simply wither away, replaced by a few lines of clever AI prompts.
It makes for a great “doom and gloom” story, but the actual data just came in. And it tells a completely different tale.
The Myth: AI Replaces Software
The pessimists argued that AI would make software a “commodity” – something so cheap and easy to make that it would no longer be valuable.
They expected the big software giants to start losing customers and shrinking as businesses replaced expensive subscriptions with DIY AI bots.
The Reality: AI is a Turbo-Booster
Instead of watching the software industry collapse, we are witnessing a massive power-up.
Take ServiceNow (NYSE: NOW), the giant that runs the internal “plumbing” for most of the world’s biggest companies. Critics thought AI would make their platform redundant. Instead, ServiceNow just reported that their new AI-powered tools are the fastest-selling products in their entire history.
Big businesses aren’t looking to ditch their trusted software for a standalone AI; they are actually lining up to pay more to have AI baked into the systems they already use.
The same thing is happening over at Atlassian (NASDAQ: TEAM), the company that helps developers manage their projects. You might assume that if AI helps a developer write code faster, they’d spend less time in their management software. But the data shows the exact opposite. As developers use AI to produce more work, they are actually completing more tasks and adding more teammates to their subscriptions.
It turns out that AI doesn’t finish the job and let everyone go home early; it creates a higher volume of work that needs even more organisation.
Why the “Big Guys” Are Hard to Kill
So, why aren’t these “old” software companies being replaced by shiny new AI startups? It comes down to what we call “moats” or barriers that protect a business from its rivals.
A massive global bank or a hospital can’t just start using a random AI bot they found online. They need software that has passed thousands of gruelling security audits and legal compliance checks. These established giants already have the “keys to the kingdom.”
Furthermore, they act as the digital foundation that holds a company’s scattered data together. Trying to rip out a platform like ServiceNow is like trying to replace the foundation of a skyscraper while the building is full of people – it’s nearly impossible.
Get Smart: The Wrong Debate
Too often, investors frame this as a binary debate. And that is, for “SaaS is dead” to be right, the incumbents must be wrong.
And that a verdict must be delivered right now.
The big takeaway here is that AI isn’t the “software killer” everyone feared. It’s the ultimate upgrade.
The winners of this new era aren’t just the people building the AI; they are the trusted software companies that are successfully plugging that AI into the daily habits of millions of workers. The “software factory” isn’t closing down, but the machines are just getting much, much faster.
We don’t believe SaaS will be replaced wholesale overnight.
But we’re keeping our minds open to the possibility that AI-powered solutions could become prominent over time.
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Disclosure: Chin Hui Leong owns all the shares mentioned.
