This has been a hard year for software-as-a-service (SaaS) companies. Founders in the space have been wringing their hands and nervously ruminating over the ongoing “SaaSpocalypse”—a term for the sudden loss of investor confidence driven by belief that AI will replace software tools. But is AI actually killing off SaaS tools?
According to Avery Pennarun, co-founder and CEO of Tailscale, David Shim, co-founder of Read AI, and Wen Sang, co-founder of Genspark, 1,000 years of darkness isn’t about to be ushered in by the four AI horsemen of the SaaSpocalypse.
“The fundamental change is that agentic AI is going to … become the new user of software and SaaS.”
Wen Sang, Genspark
“It’s overrated. If you look at earnings, Datadog was hit by the SaaSpocalypse, stock went down, and then all of a sudden they came out and said: actually, our growth is re-accelerated because AI is actually revenue for us,” said Shim while speaking in a Web Summit panel on consolidating AI stacks. “So it’s not a SaaSpocalypse like the money is disappearing, it’s more along the lines of your growth rate slowing down, and then the public markets [are] giving you a lower valuation.”
Shim’s comments came as he, Pennarun, and Sang discussed whether AI is poised to be a solution to the deluge of SaaS tools and applications most modern tech businesses have relied upon.
“The bigger the enterprise, the more programs they accumulate,” Pennarun said. “The average company buys about one piece of software per employee.”
But that’s changing, at least according to Sang, who said that the era of companies going headless—or using agentic AI for front-end tasks like data entry or sales recording—is already here.
“This is happening…You see Salesforce going headless, and you see that when it comes to AI, a lot of the lighter applications are getting absorbed into that,” he said. “We believe lighter applications are going to essentially just be completely taken over by AI. The heavier stuff, it’s probably going to go headless.”
But isn’t that the problem anxious SaaS investors are worried about? Sang says yes and no. He believes that the rapid adoption of agentic AI doesn’t actually mean SaaS will be rendered obsolete, but rather that the end user will change.
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“The fundamental change is that agentic AI is going to … become the new user of software and SaaS,” he said, adding that with that, he sees SaaS usage going up.
Pennarun and Shim share that outlook, but added that not only will there be a consolidation of use under Agentic AI, but that the scope of AI tools will narrow, too, following in the footsteps of the early internet.
“When the internet first came out there were hundreds of thousands of websites for everything you could think of, but it started to consolidate over time,” Shim said. “I think we’re in the Cambrian explosion of AI tools … in very short order that you’re going to see a level of consolidation and [people] saying ‘this is my system of record for meetings, for sales, for CRM.’”
“Any major technological shift—and this may be the biggest technological shift anyone has ever lived through—there’s going to be winners, there’s going to be companies that go into decline, and there’s going to be a whole bunch of brand new stuff,” Pennarun said. “It doesn’t mean the set of software is going to get less. I think it means that all of a sudden you can buy even more software and connect it all together in this incredible hairball that can only be understood by a computer.”
Feature image Web Summit Vancouver. Photo by Alex Broadway.