SaaS

SaaS (Software as a Service) is a software distribution model where applications are hosted by a provider and made available to customers over the internet, typically on a subscription basis. Instead of installing and maintaining software on local machines, users access it through a web browser or API, with the provider handling infrastructure, updates, and security.

The SaaS model transformed the software industry by lowering the barrier to both building and using software products. Companies like Salesforce, Slack, and Notion built multi-billion dollar businesses on recurring subscription revenue from cloud-hosted tools. For startups, SaaS offered a repeatable playbook: identify a workflow pain point, build a focused tool around it, charge monthly, and scale.

AI is now challenging the SaaS model in fundamental ways. Foundation models with tool calling and connector capabilities can increasingly perform the same tasks that vertical SaaS products were built to automate. When a general-purpose AI assistant can manage ad campaigns, draft emails, or query databases through built-in connectors, the value proposition of a dedicated SaaS tool for each task narrows. This has led to debate about whether the traditional SaaS category is entering a period of consolidation, where AI platforms absorb functionality that previously required separate subscriptions.