Key insights
- The article questions the long-term value proposition of SaaS platforms like Salesforce, ServiceNow, and Workday, suggesting they may become mere UI wrappers for LLMs. It contrasts the rapid revenue growth of AI labs with the slower AI-driven revenue of SaaS providers, implying a potential shift in investment towards AI companies due to higher risk-adjusted returns. This perspective could lead to reduced investment in traditional SaaS, potentially impacting their valuations and future growth.
A recent article it stated "AI Labs (like Anthropic) were adding $5 billion in net new revenue in a single quarter, while ServiceNow AI product, Now Assist, is projected to return $1.5 billion by year's end-- a fraction of that."
This is a just a small portion of overall ServiceNow revenue but as more of the "value" is being generated from LLMs, other services and offering will also be impacted-- eventually, most of the Saas platforms like ServiceNow, Salesforce, Workday end up being a UI wrapper around LLM. Whether and when this will occur, I do not know but at this rate it seems it will happen sooner than later.
Money will follow where risk adjusted return is the greatest, and from that perspective investing in Saas platform seems to provide a higher risk with lower potential return. I would like to hear what other think and really challenge me on this assumption.
For those investing in Saas as a value play, what is your view? Do you feel that $100 invested in Saas platform will result in better return than an AI Lab like Anthropic (when it goes IPO)?