Mar 30, 2025

AI may be threatening traditional SaaS model SECTIONS By Rate Story Synopsis Artificial intelligence may be threatening the existence of the traditional Software-as-a-Service model, forcing even established companies to adapt and innovate, or risk oblivion. Agencies When more than 1,000 softwareas-a-service (SaaS) entrepreneurs gathered in Chennai earlier this week for the annual SaaSBoomi conference , one topic dominated the discussions — the impact of artificial intelligence (AI) on the industry. It was inevitable. In the past two years, AI has been disrupting almost all industries, including SaaS. So much so that Microsoft CEO Satya Nadella, in a podcast hosted by BG2 in December last year, said that SaaS applications will collapse in the agentic era. Most founders at the conference agreed that SaaS applications were under threat, but they saw new windows of opportunity. Girish Mathrubootham, cofounder and executive chairman of Freshworks , said SaaS maybe dead in its current form, but enterprise software is not. Companies need to adopt and evolve with the changing tides, he said at the three-day event. Live Events Case in point, SaaSBoomi has launched BoomiAI, to reflect the larger industry trend and support founders building AI native startups . Discover the stories of your interest In fact, according to Mathrubootham, the shift caused by AI could create a $1-trillion opportunity for the industry. This includes the existing enterprise software market that stands at $300 billion plus the salary time — or opportunities where AI agents and solutions can be used instead of people resources to save cost for customers. This will help make it a $1-trillion industry, he said. Even 2% of this is a huge market opportunity for Indian players, Mathrubootham said, adding that whoever wants can go and get it now. To tap into this opportunity, it is not just enough to create an AI product, but one also needs to reimagine and bring in a cultural shift that can enable the companies to do that, according to SaaS founders. But are the Indian SaaS players ready to do that? It remains easier said than done. ETtech The next Nokia At least three SaaS founders, who are currently building AI-first products and adding AI features in their current products, said they are paranoid. “I think you need to be paranoid because there is so much happening in the market,” said Siva Rajamani, founder of Everstage. He likens this to the iPhone launch in the 2000s. In 2008, Nokia — the then market leader — had spoken about how the iPhone will disrupt the mobile phone market. Back then, Nokia had a closer prediction of how iPhone sales would be the next year than even Apple itself. “But they still could not act,” Rajamani said. “I see a similar thing happening to a lot of Indian companies as well. We all know AI is coming. But if we don’t act, we could be the next Nokia,” he said. This is driving a lot of founders to accelerate their AI adoption and reimagine products and services for their clients. ETtech What is changing? Freshworks’s Mathrubootham, who stepped down as the CEO last year, is driving the company’s AI strategy. The company launched AI agent Freddy, which can do self-service automation for customers. They also have Freddy co-pilot for human users. SuperOps offers professional services automation and remote monitoring management for managed service providers (MSP) and IT teams. One of the things the company does is use AI to streamline their processes and drive efficiency. The company is also building solutions that can help its customers cut down on labour costs. For instance, for the smaller clients in the MSP space, people can be replaced with agentic AI for invoicing, billing and ticket dispatches. “The most important thing is that we want to be close to customers and see how that industry is disrupted and evolving,” said Arvind Parthiban, founder of SuperOps. Everstage, which offers software for managing sales commissions, said its AI-first product is currently under development. The company is also looking to improve the existing products using AI and is constantly in touch with customers to understand their challenges. Changing business models From per user-based pricing, companies are beginning to experiment with different business models. The most popular ones are based on either consumption or outcome. “Freshworks has both the models (per user and consumption-based) for four years. The only thing is, the shift is happening more on the consumption-based model,” Mathrubootham said at the sidelines of the SaaSBoomi event. “As automation keeps getting better, we’ll get more money from automation like co-pilot or AI bots.” Some companies are also exploring a separate costing structure for AI services. Parthiban said while SuperOps is looking at this, first it is allowing its customers to use it for free or offer restrictive access to show them the value of additional features. “Then I will come up with an add-on pricing, which can be charged separately,” he said. However, with customers reluctant, not all of them are seeing changes in their business models. Khadim Batti, co-founder of WhatFix, said the business models have not changed at this point. “As agents and buyers also evolve, we might make it more outcome based,” he said. Even as companies are evolving with customers, they are trying to bring in a cultural shift. Cultural shift Aneesh Reddy, co-founder of Capillary Technologies, said the biggest challenge with this wave is not technology, but a mindset shift of not just company but also employees. “The company’s culture needs to change to make it AI first,” he said. Capillary Technologies has set up a central team that works with each business function such as human resources, customer success and finance to modernise and drive efficiency using AI. For instance, the firm has a bot for all customer success and support teams. “Earlier if they needed something, they would ask our product teams. Now they have DocBot, which reads all our documentation on products and tells people what to do,” Reddy explained. Everstage’s Rajamani said the company is doing hackathons, where employees are encouraged to think AI-first, be it building anything within the platform or company and awarding the winners. In addition, every function in a company has an owner, who is taking an AI-first approach within their functions. “It’s not just building a product on AI, but also as a salesperson, as a marketing person. What are all the things that we could adopt from AI to become better?” he added. This also means that companies are looking to work with or acquire those that align with them. Making allies All said and done, it is not always easy for large players to reimagine what nimble startups have been able to do. It is for a reason that Cursor, where you can create a code using a prompt instead of text boxes and check lists, is an instant success. Large companies are looking at forging partnerships, or acquisitions, or both. For instance, contract management firm Icertis has partnerships with startups such as Harvey. The company is also looking to acquire companies that have strong domain expertise in the areas of procurement, sales and generative AI. Parthiban of SuperOps said that the firm is currently working on a marketplace model. “SuperOps is looking to incentivise new age players to build on top of our platform, where they can access our customer base and sell their products and services,” he said. The company is also open to acquisitions, if they are building critical technologies. “We either have to compete with them or make them," Parthiban said. Read More News on