Will AI Really Disrupt Enterprise SaaS? Aniket Saoji Weighs In on the Future of Incumbents
A deep dive into the balance of power between AI startups and established SaaS giants, and what it means for the future of enterprise software.
In a recent conversation with Aniket Saoji, I had the chance to explore one of the most pressing questions in the tech industry today: Are SaaS incumbents about to be leapfrogged by AI startups? Aniket, who I've had the pleasure of knowing since his days at Google, is now leading innovative initiatives at Workday and regularly shares his insights through his Substack. Together, we delved into the dynamics of AI's impact on enterprise SaaS, reflecting on whether this new wave of technology will truly upend the established giants.
The AI Revolution: A Real Threat or Just Hype?
When I asked Aniket about his general feelings regarding the emergence of generative AI (GenAI) and its potential to disrupt the industry, he shared his excitement but also a measured perspective. "It really is exciting," he said. "I’m trying to think of the last time in my career when I’ve been so excited by a new emergence of technology." Aniket compared the AI boom to other significant tech trends like the rise of mobile and the shift to cloud computing. However, he was quick to point out that while AI feels more emergent, it may not lead to the same kind of foundational shifts we've seen in the past.
He noted, "This one, for some reason, feels like it is the loudest, is the most emergent of all these trends. But what that is, I think, is worth a discussion." This comment set the tone for our exploration of whether AI represents a genuinely new paradigm or simply an enhancement of existing workflows.
Boston vs. New York: The Roads of AI
One analogy that resonated deeply during our conversation was the comparison between the roads of Boston and New York which I had remembered from the HBS 2023 alumni reunion when a professor described how businesses would be affected. Aniket and I discussed how AI, in many cases, is paving over "cow paths"—making existing processes faster and more efficient without fundamentally changing them. "A lot of progress is being made using AI to pave over the cow paths," I observed, "but they didn’t fundamentally change the business."
Aniket agreed, emphasizing that while AI startups are making strides, many of these innovations are more about refining existing workflows rather than creating entirely new ones. "It does feel like AI is a way to enhance current workflows," he said, pointing out that the truly transformative potential of AI might still be on the horizon.
This idea led us to question whether the AI startups we see today are more akin to improving Boston’s meandering roads or if they have the potential to design something as structured and revolutionary as New York’s and Paris’s grid system.
The Incumbent Advantage: Data, APIs, and Integration
One of the critical arguments Aniket made was about the incumbent advantage in enterprise SaaS. He argued that large, established companies like Salesforce, Workday, and Adobe are not as vulnerable to disruption as some might think. "These enterprise SaaS giants can probably take a measured approach," he said, "They don’t need to be the first mover in this. They can kind of see where the market direction is going."
This measured approach is supported by several factors. First, the incumbents have access to massive amounts of data and deeply integrated systems, which are not easily replicated by startups. As Aniket pointed out, "If I’m the incumbent, I have access to the data, which makes my models in the long term smarter than yours because your models are probably on publicly trained data. I’ve got the public and the private."
Additionally, the integration with existing workflows is a significant barrier for new entrants. Enterprise customers are deeply entrenched in their current systems, and switching costs are high—both financially and operationally. "Switching costs are very high for customers," Aniket noted. "It’s tricky to switch from one system to another, and if you do have some new entrant AI enterprise software, it needs to be really good."
The Role of First-Mover Advantage
We also explored whether there is a first-mover advantage for AI startups looking to disrupt enterprise SaaS. Aniket was skeptical, especially given the rapid commoditization of foundational AI models. "LLMs are becoming a commodity as of late," he observed. "Anybody can do the same thing." This commoditization reduces the risk for incumbents who can afford to be fast followers rather than first movers.
This insight was particularly interesting because it challenges the narrative that AI is a game-changing force that will topple the giants of SaaS. Instead, Aniket suggests that the incumbents might actually have the upper hand, as they can incorporate AI features into their existing products without needing to overhaul their entire systems.
The Future of AI in Enterprise SaaS: Incremental Innovation or Disruption?
As our conversation progressed, it became clear that while AI has the potential to revolutionize certain aspects of enterprise software, the extent of that revolution remains uncertain. "We’re still on the lookout for that Uber, eBay, PayPal, or Airbnb level win," I said, reflecting on the lack of truly disruptive AI products that have emerged so far. Aniket agreed, noting that while there are many promising innovations, we might still be waiting for the next big breakthrough.
One area where we both saw potential was in the middle layers of the tech stack—particularly in orchestration layers that could serve as intermediaries between foundational AI models and enterprise applications. We discussed a startup called Multion, which acts as a user to perform tasks across various platforms without requiring API access. "That middle layer could be interesting," he said, suggesting that there might be more opportunities for innovation at the infrastructure level rather than the application layer.
Key Takeaways for Product Managers
For senior product managers, directors, and VPs at tech companies, our conversation offers several key takeaways:
Don’t Underestimate the Incumbents: While AI startups are making headlines, the large SaaS companies still hold significant advantages in terms of data, integration, and resources. These incumbents are not likely to be easily displaced, especially if they can incorporate AI into their existing products.
Focus on True Innovation: Incremental improvements to existing workflows, while valuable, may not be enough to disrupt established players. The real game-changers will be those that create entirely new ways of doing things, akin to New York’s grid system rather than Boston’s cow paths.
Consider the Long Game: AI’s potential is vast, but we may still be in the early stages of its impact on enterprise software. Product leaders should keep an eye on emerging trends and be prepared to adapt as new technologies and business models evolve.
Look Beyond the Hype: It’s easy to get caught up in the excitement around AI, but it’s important to critically assess whether these technologies offer real, sustainable advantages or if they are simply a flash in the pan.
Leverage Your Strengths: For those working within incumbent SaaS companies, the key is to leverage the strengths of your organization—data, integration, and customer loyalty—to fend off potential challengers. Incremental AI improvements might be enough to maintain a competitive edge.
Final Thoughts
As we wrapped up our conversation, Aniket shared his outlook on the future of AI and enterprise SaaS: "It feels like we’re just getting started, and the next 5-10 years will be significantly different from what we imagine our day-to-day is right now." His optimism is tempered by realism, recognizing that while AI is a powerful tool, the true disruption may still be on the horizon.
For product leaders navigating this landscape, the challenge will be to balance innovation with practicality, ensuring that they are not only adopting AI for its own sake but also using it to create real, lasting value. Whether you’re at a startup or an established giant, the key will be to stay agile, informed, and ready to pivot as the future unfolds.
Read Aniket’s original substack on this topic.
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