Highlight of the week:
Yesterday, Apple unveiled its GenAI push. If you want a quick summary, their five-minute video is great. But let’s focus on the B2B aspects.
TL;DR Apple Intelligence for developers:
Apple now makes AI features directly accessible to app developers that they would have typically built with OpenAI. This includes AI-powered writing tools (text generation, text summarization), image generation, and the ability to integrate Siri as an assistant directly into their apps.
Essentially, many features that app developers would have built with OpenAI can now be developed natively with Apple APIs.
So instead of having only AI capacity with an OpenAI, developers can benefit from AI capacity + access to user data/app ecosystem by leveraging Apple AI SDKs.
Potential implications:
This move likely indicates the direction other major software platforms, including B2B giants like Microsoft, Google, and Salesforce, will take: offering AI access to third-party developers through their existing APIs and SDKs.
For SaaS startups, this will probably reinforce the importance of platform integrations. Most SaaS products already offer integrations to major software platforms, and they will likely need to update these integrations to make them “AI-powered.”
In the short term, it will also likely “kill” many low-hanging fruit AI-native SaaS products. However, there will still be space for specialized AI-native SaaS that delve deep into specific user stacks or use cases, as the big platforms typically don't want to cover those niches.
Now into the post of the week.
Why businesses don’t buy new SaaS products anymore
Over the past two years, selling new software products to businesses has become increasingly challenging. Many SaaS companies experience decreased growth rates, increased churn, and longer customer acquisition cycles.
This trend is particularly true in mature horizontal software categories such as CRM, marketing, productivity, developer tools etc. The primary driver behind this “SaaS recession” is the current macroeconomic environment, characterized by higher interest rates, inflation, and geopolitical tensions, which pushes businesses to cut costs, including software expenditures.
What makes the situation even harder for new entrants is that the majority of SaaS incumbents have transitioned from point solutions to software suites. In the current environment, businesses seem to lean toward integrated solutions that bundle multiple products into a single offering.
Hence it has become harder to sell new software products to businesses.
From equipment to replacement
Traditionally, the technology adoption lifecycle consists of two main stages: The equipment phase and the replacement phase.
During the equipment phase, businesses purchase a product for the first time because it is new and provides unique value (radical improvement).
The replacement phase follows when most businesses already have the product and their purchases are largely replacements or upgrades of existing equipment.
This pattern has held true for SaaS software, and in many horizontal software categories, we are well into the replacement phase.
From point solutions to software suites
Many SaaS incumbents, such as Salesforce, Hubspot, and Datadog, started as point solutions in the 2000s and early 2010s. Fast forward to today, nearly all of them have evolved into software suites, offering multiple products to their customers. This transition has occurred not only among enterprise SaaS vendors but also among SMB SaaS vendors.
For example, enterprise SaaS vendors like Salesforce, Workday, Hubspot, Marketo, Microsoft, Adobe, and Zendesk have all become software suites. Similarly, SMB/mid-market SaaS vendors such as Intercom, Crisp, Pipedrive, Zoho, ActiveCampaign, Mailchimp, Notion, and QuickBooks/Xero have also made this transition.
Therefore, whether you are an enterprise or an SMB, you no longer need to rely on multiple SaaS vendors for different needs. Instead, you can choose software suites that cover a wide range of your requirements.
And since most new SaaS products in these software categories now offer only incremental improvements, it’s no wonder that customers prefer to buy from their existing vendors rather than new ones. The complexity and costs associated with adding another vendor are simply too high compared to the convenience of using software bundles.
Waiting for the next unbundling phase
Software bundling and unbundling is not a new phenomenon. From its inception in 1970 the B2B software industry has experienced several of these bundling/unbundling cycles.
The big questions are:
How long will this bundling phase last?
What is the technology or behavioral trend that will unbundle SaaS suites?
Is GenAI with AI-native products and autonomous agents going to unbundle the current incumbents?
Would love to hear your thoughts!