Page 26 - UNIFONIC PR REPORT - July 2024_Neat

7/31/24, 2:35 PM Latest News
How can these conflicting narratives be reconciled? If SaaS is truly on its last legs globally, what does this
mean for regions like MENA that are just beginning to build their software ecosystems? And perhaps most

intriguingly, could the rise of AI in software development present an unprecedented opportunity for these
emerging tech hubs?

Why AI Might Kill SaaS – And Why It Won't
While cyclical factors like budget shifts from "traditional software" to AI pilots, longer sales cycles, and high

interest rates explain part of the cooling SaaS sentiment, two fundamental arguments make a more
existential case against the future of SaaS.

The AI Swiss Army Knife: One Tool to Rule Them All?
The first argument suggests that AI will become so proficient at a wide array of tasks that it will effectively
replace specialized SaaS applications. This isn't just about raw capabilities. The intuitive, conversational

interface of AI Systems could make traditional SaaS feel clunky and tedious by comparison.
However, the software industry has long alternated between specialized solutions and broader, bundled

offerings for good reason. While all-encompassing AI systems have their merits, specialized offerings will
retain distinct advantages:
1. User Experience: The Power of Less: Simplicity often trumps all-encompassing complexity. Many "super

apps" fail because user experiences that try to do everything often excel at nothing.
2. Hybrid User Interface Advantage: Natural language isn't the gold standard for all interactions. The future

likely combines natural language with purpose-built graphical interfaces, a mix that specialized SaaS
products are uniquely positioned to offer. For example, Sestek, a conversational AI company, demonstrates

this by blending domain-specific user interfaces with natural language interactions in customer service,
thereby optimizing agent support.

3. Power of Targeted Solutions: Businesses prefer targeted solutions to vague, all-encompassing promises.
SaaS products excel at addressing specific pain points.
4. Domain-Specific Edge: Effective AI solutions require more than advanced models. Domain-specific data

and integrations are equally crucial. Specialized software solutions powered by AI have the upper hand here,
particularly in areas not prioritized by general-purpose AI systems.

The Commoditization of Software: Can SaaS Escape the Fate of Media?
Chris Paik from Pace Capital presented a second fundamental argument against a thriving software

ecosystem in his piece "The End of Software". He contends that AI will drive software creation costs to near
zero, commoditizing the industry and eroding companies' ability to charge premium prices much like the

internet did with media. Paik envisions software companies being replaced by AI-powered "platforms" that
dynamically solve customer problems.
While thought-provoking, this argument misses key factors that will allow SaaS companies to thrive in an AI-

driven world:
1. Beyond Cost: The True Drivers of Software Pricing: Software pricing is determined by the value it creates,

not production costs. Like premium media content, businesses will pay for SaaS products that solve real

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