Is the Saa Spocalypse over? And if so, what comes next? | Tech Radar

Overview

News, deals, reviews, guides and more on the newest computing gadgets

Start exploring exclusive deals, expert advice and more

Details

Unlock and manage exclusive Techradar member rewards.

Unlock instant access to exclusive member features.

Get full access to premium articles, exclusive features and a growing list of member rewards.

Is the Saa Spocalypse over? And if so, what comes next?

Many Saa S firms are well positioned to use AI to strengthen their market position

When you purchase through links on our site, we may earn an affiliate commission. Here’s how it works.

For the past year or so, predictions of Saa S's demise have dominated the tech conversation.

Headlines warned that AI tools would replace traditional software, engineers would become obsolete and the Saa S industry itself was headed for extinction.

The narrative became so widespread that Wall Street gave it a name: the ‘Saa Spocalypse’.

Co-Founder of saas.group and Founding General Partner at World Fundis.

While the Saa S market - once the darling of investors - has undoubtedly taken a substantial hit, it is a long way from dead. In fact, I would argue that software doesn't die; it evolves.

The extinction or the adaptation: how AI will impact Saa S market

If history has taught us anything, then it’s that major technology shifts rarely eliminate software altogether. Instead, they reshape it, with the biggest winners often being those agile enough to adapt.

From the rise of the internet to the shift to cloud computing, time and time again we’ve seen established players demonstrate an ability to evolve alongside technological change.

Saa S subsectors best positioned to unlock AI-enabled growth

And I’m not alone in this view. Over recent months a number of high-profile economists, technology historians and analysts have arrived at that same conclusion. JPMorgan continues to champion the Saa S subsectors best positioned to unlock AI-enabled growth. Meanwhile, Goldman Sachs projects the global app software market could still reach $780bn by 2030, with agentic AI ultimately expanding the market rather than shrinking it.

Put bluntly, AI isn’t killing Saa S but rather separating the bad from the good. For years, Saa S startups have benefited from intense market hype and lofty valuations, often with minimum regard given to operational efficiencies, product differentiation or true value creation. Today that playing field looks a lot different. In effect, AI is now acting as a filter, revealing which Saa S models are superior and offer a genuine point of differentiation and, in turn, those which have for far too long favored style over substance.

As growth gets harder, AI emerges as the key to MSP success

Managed Intelligence Providers are the next phase in AI evolution: Here's what SMBs need to know

The enterprise AI gold rush is dead, and most companies aren’t ready for what comes next

For Saa S founders then, it isn’t time to panic. In our experience, investors-in-the-know will be more than willing to overlook the misguided Saa S narrative and recognize a genuine high potential opportunity should it arise.

Take, for example, the mid-market. Although much focus tends to surround the startup scene, I would argue that established software vendors are actually best positioned for AI transformation. After all, they already possess powerful structural advantages, including proprietary customer data, deeply embedded workflows and long-term contracts.

Moreover, they often sit on years of customer data. In this way, unlike startups where the focus is typically product, these firms actually have something meaningful to transform.

Well positioned to use AI to strengthen their market position

Far from becoming obsolete overnight, many are well positioned to use AI to strengthen their market position. Take, for example, Keyword.com. Having early recognized that search itself is changing, it launched a product to track brand visibility across AI platforms like Chat GPT, Perplexity, and Gemini. That repositioning opened up an entirely new growth vector.

In terms of how founders can best navigate this new terrain, it’s important to look beyond product and focus on structural resilience. For a long time, Saa S benefited from assumptions such as high multiples on ARR, heavy adjustments for stock-based compensation, and a willingness to prioritize growth over almost everything else.

That is now being replaced by a much more grounded framework. Investors are increasingly looking at real profitability, on a GAAP basis, and asking harder questions about cost structure, for example around sales and marketing efficiency, and now AI-related compute costs as well.

At the same time, as founders will be aware AI is introducing new variables. Revenue may be less predictable if it’s usage-based, and margins can be more dynamic because of inference costs, meaning investors won’t simply rely on simple rules of thumb anymore.

Valuation is becoming less about applying a multiple and more about understanding the underlying business, with a focus on true earnings quality, defensibility and efficiency.

Another significant but largely underappreciated upshot of the current environment is the emergence of roll-up opportunities.

The Saa S landscape is becoming increasingly fragmented

As valuations normalize and weaker players struggle to differentiate, the Saa S landscape is becoming increasingly fragmented. This creates fertile ground for consolidation strategies, particularly for investors with deep sector expertise.

Importantly too, AI enhances this model by enabling efficiencies across portfolios, from automated customer support to streamlined marketing and product development.

For investors, this is opening up a different kind of opportunity in terms of not just backing individual high-growth companies but participating in broader aggregation strategies that can unlock value through scale and operational improvement.

This means that purposefully positioning your business for ease of integration and standardization could pay dividends.

The short of it? Software isn’t going anywhere. Just like the major tech trends before it, it is simply evolving from a market that is less about hype and surface-level metrics to a more practical, mature model driven by genuine business outcomes.

For founders, this may mean navigating a more complex operating environment. But it also creates an exciting opportunity to differentiate.

Not all Saa S firms are primed for this new investment landscape, so those who pay due diligence by prioritizing intelligence over features, operational prowess and AI interoperability to deliver clear, measurable value will be best positioned to succeed.

We've reviewed and ranked the best business cloud storage.

This article was produced as part of Tech Radar Pro Perspectives, our channel to feature the best and brightest minds in the technology industry today.

The views expressed here are those of the author and are not necessarily those of Tech Radar Pro or Future plc. If you are interested in contributing find out more here: https://www.techradar.com/pro/perspectives-how-to-submit

Co-Founder of saas.group and Founding General Partner at World Fundis.

You must confirm your public display name before commenting

1 More than half of employees are using unapproved AI tools at work

2 These are the 5 best lenses I’ve tested in 2026 so far, from Sony, Canon and others

3 Faster and further reaching — Nord VPN quietly brings its obfuscated servers to its in-house censorship-resistant protocol

4UK government signs £30 million deal to build the world’s first prototype fusion power plant by 2040

5GMKTec’s new $3,600 mini PC recycles Ryzen AI Max+ 395 CPU

Tech Radar is part of Future US Inc, an international media group and leading digital publisher. Visit our corporate site.

Key Takeaways

News, deals, reviews, guides and more on the newest computing gadgets
Start exploring exclusive deals, expert advice and more
Unlock and manage exclusive Techradar member rewards
Unlock instant access to exclusive member features
Get full access to premium articles, exclusive features and a growing list of member rewards