Tell HN: I'm a PM at a big system of record SaaS. We're cooked
BigCo SoRs, differences aside, have historically been a good, low-drama way to make a living in tech. RSUs, ~40-hour weeks, generally smart colleagues, and real problems to solve for F100 customers. Our products work, but are not loved. Enterprise sales runs the show.
I have no concerns about a scrappy AI startup or indie dev replacing us. The real threat is other SoR vendors, the cloud providers, and of course the AI labs themselves. All of them are coming for our SaaS margins, and as an industry we are woefully unprepared.
Every major SoR has its core competency (HR, ERP, CRM, etc.), but also a long tail of lesser-known portfolio products that increasingly overlap with other SoRs and serve as growth vectors. The competition here is only going to accelerate. As a huge enterprise, you’re not going to rip out a component your SoR for a cool startup or a vibe-coded internal tool... but you would seriously consider doing so if the alternative comes from another SoR vendor you use and is cheaper.
The public cloud providers are explicitly positioning themselves as the place where your business data, AI agents/LLMs, and critical applications live. This is on a direct collision course with SoRs’ own AI platform ambitions that they are banking on for growth.
The AI labs themselves have the same ambition. Note where systems of record sit in OpenAI’s Frontier press release marketecture: a dotted, nearly invisible line at the bottom [2].
SoRs aren’t dead, and they’re not being disrupted by vibe coders. But the path forward is brutal.
Which brings me to the hardest point that applies to me as well. SoR teams are not known for fast execution, cutting edge AI adoption, product taste, or engineering excellence. These are exactly the strengths of our new competitors. We also struggle to attract this kind of talent. People who fit that profile go to FAANG or the labs. We could try to compete with RSUs, but those are down ~50% over the past few months, and the industry is under increasing pressure from investors around stock-based comp and M&A in general.
The goal here is an honest take from someone on the inside. There’s a difficult road ahead. I think SoRs will always continue to exist in some form but I don’t think the recent market corrections are overblown.
[1] https://news.ycombinator.com/item?id=46888441 [2] https://openai.com/index/introducing-openai-frontier/
32 comments
[ 2.5 ms ] story [ 50.0 ms ] thread1) previously healthy surplus in the SaaS market is shrinking
2) established SaaS companies have lost all existing moats
3) due to the previous two points, investors are reluctant to spend new dollars in this market to expand or retain market share, making life in those companies miserable.
> But the path forward is brutal
And soon™ this is coming to your industry as well!
Kinda smells like viral marketing.
Great insider feedback. What is the switching cost for a SoR ? Is it embedded so deeply that is impossible to switch (like IBM mainframes). Wont the incumbents make a good living increasing per-seat prices each year to their required growth rates, and their customers have no option but to pay-up.
> Great insider feedback.
Also a common LLM trope.
Don't blame AI for this correction, then.
A poor supplier being replaced by a better supplier that is capable at leveraging AI for a product quality and speed of development bump.
So what are we going to do about it? Genuinely up for a startup here.
TLDR excerpt: - Top layer — the AI agent. The thing that actually executes the work. - Middle layer — the SaaS UI. The dashboards, the workflows, the buttons you click. - Bottom layer — systems of record. The databases, CRMs, and ERPs that store the real data.
Right now, value is getting sucked upward into the agent layer and downward into the data layer. Everything in the thin middle gets crushed.
If you are a huge enterprise, why not?
How I know this was written by a marketing person. Stop grifting, please.
I’ve been following open-source alternatives long before AI and the biggest drawback was bad UI design, but AI makes that easier and now even more open-source alternatives are launching.
The incentives made this the obvious next step. SaaS are not something that continuously needs to made better, but them being publicly traded means they have to. So what do they do? They add more features that most customers don’t need, they put essential features behind a bigger paywall, they enshittify by adding ads or selling your data. As these SaaSes added more features and the configuration to boot, people were already learning to “program” but within their walled gardens. If you’re already learning how to configure these applications, how big of a step is no-code and now asking a terminal agent to build that one functionality you need?
Before AI became big, you could already see YC funding open-source alternatives to popular applications since they also saw this coming. Notice how they’ve slowed that down now because they know it will lead to their own demise.
Used to take a few days, 90% was never that hard, now it takes half a day or so.
What you’re worrying about is just bigger middlemen.
If you were not a value extracting middleman there would be no fear of replacement, because you can always create more than what you take.
I’m glad if this causes a shift in the industry and we lose x analysts, x architects, x scientists, data engineers and all other formulaic middlemen that just live in a weird middlemen economy.
It is immense luck that we don’t have to actually produce something and we get paid but it is much better if we’re forced to actually do something that isn’t empty.
Another factor is customer expectations, which can have a way of turning into self-fulfilling prophecies. All the hype around AI in software creates a sense of overall change in the air, making large enterprise managers question if they need to do anything about it. And just by increasing how often that question is asked, orgs will end up changing more things faster than before.
ERP world is legacy beyond belief and the technology is neither amazing nor fast as you mention. The trick here is the profound awareness of business processes. I'm a techie in ERP world and deeply aware the business transformation team are the important ones (on implementation... Sales, otherwise,of course :/). The business rules for what we as techies think is simple (payroll, taxes, accounting - how complicated can it be??) are mind blowingly complex yet often poorly documented. I honestly don't know yet if today's LLM can grok them both deeply and safely / consistently enough
My company just switched from slug slow product management driven tech to startup footing. Everything is up for grabs everywhere. And it's always like this in tech when there's a sea change.
> We also struggle to attract this kind of talent. People who fit that profile go to FAANG or the labs.
Hires aren't the problem, culture is. I can take the same new dev that a FAANG hires and turn them into a slug with the development process I see at most b2b saas companies. The flipside is true too: you can take an average dev and set them free and amazing things happen.
Most B2B SaaS companies have three people managing tickets for every developer, executives don't understand bugs are the byproduct of progress (and will be fixed quickly), have name brand enterprise agile-fall style processes, have six months of sprints preplanned, are fixated on UI testing, and do releases like they are publishing CD ROMS. This kind of culture is literally repugnant to innovators, problem solvers, people doing things a new way, and people who value doing things well (because fighting everyone to change for better sucks).
Their only options are to acquire and gobble up as competition shows up or delay by some form of obstruction to current clients leaving them.
One-off SaaS tools will probably see the quickest consolidation, either because the big SoR vendors can build them too with AI tools and offering some reduction in in IT complexities (like vendor mgmt, renewal headaches, integrations, security postures).
New age companies with SoR capabilities being built or having unique and differentiated capabilities will challenge the current SoR players.
SMBs will adopt fast, offer opportunities to new age SoRs.
But it is the way of things.
No one will migrate away in a huge hurry, you’ve got plenty of time to make your plan.
We all notice a shift in the general perception of the SaaS industry. People are afraid, massive change is coming. But that is obvious from all the posts in news outlets, on x, on Reddit etc.
Thus far it’s just a massive hype. The technology has the potential to switch up the business, for sure, but now apart from frontier labs for everyone else it’s just eating money. No company has lost clients due to being replaced by some autonomous agent.
Don’t get me wrong, the technology has the potential, and it will improve, and we will see massive changes. Money will flow to different entities (cloud providers? New players? Who knows). But technology still needs to be shaped into a useful product. Even for coding (undoubtedly the most mature use case for AI agents) the agents still have to demonstrate they actually safe time and money in the long run. So far it looks like they mostly create more work.