Understanding the Evolution of SaaS

The Blitzscaling Era for SaaS is over. Blitzscaling Era (2010-2022): - Revenue was just a metric to justify the next round - 80% of features went unused in bloated products - Focus on headcount growth and office perks - Vanity metrics dominated board meetings - Average startup burning $800K+ monthly runway - More funding meant more success - ROI measured in TAM size, not profit margins - Every fundraise was just another dilution to manage The New World of SaaS: The Revenue First Era (2023-????): - Revenue isn't the goal—it's the fuel itself - Unit economics autonomously drive sustainable growth - Focus on profit per employee and customer satisfaction - Systems generate cash flow and compound value on their own - Solutions that multiply efficiency, not just add headcount - One profitable team doing the work of entire departments - ROI measured in revenue per employee and EBITDA margins - Capital efficient execution largely replaces most venture funding As this $3.5 trillion shift will prove: We're not only changing how software companies grow—we're changing who funds the growth (hint: it's your customers, not VCs). This is a complete re-ordering of the startup playbook. It's going to be difficult for many to navigate ("but how will you scale?" cries the VC). The answer: build businesses that don't burn capital but generate it. There's no going back. The only way out is through. And in 2025, profitable efficiency wins. This is the Revenue First Era 🎯

10 years ago, while selling 2FA at HID Global, I had an interesting conversation with SailPoint about a role. Though the timing wasn't right (I was MBA-bound), I've kept watching their journey ever since, including when TB took them private and now being the first major cyber IPO, and like Warren Buffett suggests, I dove into their S-1. What fascinated me wasn't just their numbers (though 40% YoY SaaS ARR growth is impressive), but how they've fundamentally reshaped enterprise identity. Here's what caught my attention: 👉 Market Evolution → Product Strategy: They saw identity shifting from governance to core security before most others. Instead of resisting, they expanded beyond employee IAM into machine identities, non-employees, and AI agents. That's the kind of foresight that builds market leaders. 📈 The SaaS Transformation Story: Going from 40% to 90%+ subscription revenue while maintaining 114% net retention? That's like changing a plane's engine mid-flight. What's more impressive is how they did it: • New customers start with SaaS • Existing customers get flexibility in migration timing: That's customer-centric instead of forcing people into change (cough cough Kaseya) • Built the Atlas platform for future scale Here's what really stands out to me: Transforming their on-prem, legacy, perpetual business model into SaaS must have been a tremendous feat. If you're a traditional IAM vendor, you might want to take a look at some of their GTM and RevOps leaders and learn from them. The real lesson? This isn't just about moving to SaaS. It's about using that transition to fundamentally reshape market position. They've moved from competing on features to becoming a strategic platform play. Will they become the Palo Alto of Identities? No clue, but this humble salesreps opinion is BUY on SAIL. 😆 PS - If you want a thorough analysis on their S-1 check out Cole Grolmus posts.

I’ve been watching the SaaS landscape shift and I think we’re about to see the biggest architecture change since the cloud. If we borrow from Sun Tzu, “go where your enemy isn’t”, in SaaS right now means avoiding building yet another monolithic, vertically integrated stack that locks customers in. A traditional vertical SaaS stack owns the workflow end-to-end in a single niche, great for defensibility, but rigid. Legacy SaaS providers are effectively fixed stacks: their integrations, feature set, and data model are tied to a specific platform (such as Shopify), and evolution is slow because every change has to propagate through the entire stack. An agentic SaaS lattice flips that model to something like this: Composable - Instead of one rigid vertical, you have autonomous micro-agents that each handle a specific function (analysis, attribution, segmentation, profitability forecasting, etc.). Evolving - The lattice can reconfigure itself as new data sources, workflows, or priorities emerge... it’s not bound to Shopify, Magento, Salesforce, or any one ecosystem. Feedback Loops Built In - Every agent continuously learns from its own outputs and the downstream results. When the LTV forecasting agent improves, that improvement flows instantly into the budget allocation agent, retention agent, etc. No Platform Lock - Because the lattice connects via APIs and data layers rather than controlling the whole stack, it can be embedded anywhere. The “deep” part is that each agent can reach vertical SaaS depth in its domain, but the lattice as a whole is adaptive and constantly improving. In other words: Depth without lock-in. Adaptability without losing focus. Every agent makes every other agent smarter. The days of the SaaS monolith are over. Generalists will be consumed by specialists. Specialists will link with other specialists (agents) until they match the scale of today’s legacy generalists, but with stronger product-market fit and better unit economics. Monoliths are dinosaurs. AI was the meteor. Agents are what evolved in its wake. It’s already happening… Just last week, Yotpo announced it was exiting its native SMS and Email products, handing them off to Attentive. Instead of stretching to compete in commoditized categories, they’re doubling down on core strengths (Reviews and Loyalty) and partnering with best-in-class specialists for everything else. It’s a shift from trying to be the whole stack to becoming a high-impact node in a smarter, more adaptive lattice. That’s the battleground where the enemy isn’t. In DTC and eCommerce tech, incumbents are stuck in rigid vertical stacks or thin point solutions. Nobody has yet nailed a truly adaptive, feedback-driven agentic lattice for commerce intelligence. Legacy SaaS providers now face a narrowing window to adapt or reinvent. #SaaS #VerticalSaaS #AgenticSaas #SubAgents

2000's = Software as a Service 2020's = Service first Software 2030's = These become Indistinguishable / Interchangable Let me explain... I spent a lot of years building B2B software designed to not need services. The goal was always to remove the need for services. So that users could do it all on there own. Faster & cheaper... More power for the users was the mantra. This was an important part of the first decade of b2b saas. We were literally digitalizing processes that had previously been analog. B2B Saas vendors were making the impossible possible. The differentiating factors was in the code, UI, and use cases. But... Like a TV or any electronic device... Code and software is now easy to mimic. Today software companies that have a strong ability to service the customer are thriving while the rest are struggling. Feature differentiation is not enough... On the buyer side... Teams are smaller, Budgets tighter, CFO's are saying no to purchases. Buyers expect ROI in 3 months. They want to derisk the purchase and will spend more to do so... They want outcomes, help, deliverables, action, execution, expertise. Software is not enough. Now the vendors that thought they had perfect product market fit are suddenly under pressure from high churn. All this leading to a new era of service led software. Vendors who truly service the customers can charge more and have longer customer relationships. Investors used to punish saas vendors for having too much services revenue But without the services those saas vendors are now bleeding customers. As we go forward... Vendors must have a strong and clear differentiation based on the foundation of Services & Software... Buyers will pay for expert help and guidance. They will pay to have the buttons clicked. They will pay to get outcomes and work done. With AI the line between software and service will blur and become indistinguishable. The future of differentiation... Vendors must --> Have a clear Point of View - the why behind everything they do --> Develop the ability to ensure the customer achieves the outcomes --> Stop building companies for the Total Addressable Market (TAM) --> Build companies for the Total Relevant Market --> Include services in the definition of product market fit --> Scale companies on proven ICP's --> Be relentless on delivering fast time-to-value for the customer Realities... SaaS companies not good at services? --> build partner ecosystem / co market / co sell / bundle --> acquire / combine with services companies --> learn to make services profitable I'm 3 years in to building my first services company... GTM Partners with Sangram Vajre Of course we keep talking about future software ideas... But for now we are intent on --> Creating thought leadership & frameworks about GTM --> Helping exec teams align and transform how they go-to-market --> Getting on calls and doing working sessions with clients

The #Evolution of #SaaS: From Software as a Service (SaaS 1.0) to Services as Software (SaaS 2.0) When Satya Nadella said, “SaaS is dead,” he wasn’t declaring the end of Software as a Service (SaaS 1.0) but signaling its transformation into Services as Software (SaaS 2.0). This new era is driven by Agentic AI, autonomous systems, and outcome-focused solutions. From #Software to #IntelligentAgents SaaS 1.0 was about tools; SaaS 2.0 is about delivering measurable results. #AgenticAI empowers systems to #predict, #adapt, and #act autonomously. These agents unify workflows across platforms, eliminating silos. It’s no longer about logging into software—it’s about collaborating for outcomes. The #Core of SaaS 2.0: #DigitalInteraction Data Every user interaction fuels AI systems. Why does this matter? #ContinuousLearning: Real-time adaptation for better solutions. #HyperPersonalization: Meeting needs proactively. #ProactiveProblemSolving: Anticipating and resolving issues independently. What #SatyaNadella Shared in His #YouTubeInterview 1️⃣ #Agents Redefine #SaaS: Future workflows will be unified by intelligent agents, not siloed applications. Example: Imagine an agent fetching #CRM data, integrating Office 365, and formatting it into a presentation—all autonomously. 2️⃣ #Hiring in the Agent-Driven Economy: The hiring landscape will shift to prioritize: #ProcessKnowledge: Mastering workflows, not just tools. #Adaptability: Balancing skills with the ability to unlearn and embrace new paradigms. 3️⃣ Power of #Experimentation: Satya emphasizes innovating on the frontier while optimizing existing systems. Businesses must deploy and refine AI systems now. #SaaS 2.0 Demands from #Businesses To thrive, companies must: 1)Embed #AIagents for #proactive decision-making. 2)#Transition from feature-based tools to outcome-driven ecosystems. 3)#Invest in data infrastructure to power intelligent systems. #SaaS 2.0: The Road Ahead SaaS 2.0 is about results, not tools. Are you ready to embrace this transformation and stay ahead of the curve? #SaaS2point0 #AgenticAI #DigitalTransformation #FutureOfWork #Innovation #AI #TechTrends

"Where is AI taking us?" "Is SaaS dead?" and "Will there even be a need for software?" I hope this post puts all the changes we are experiencing into context so we can navigate (and shape) this innovation landscape together. Having sold software for 30 years, I’ve had the privilege of experiencing the journey from on-premises software and data centers to cloud-based SaaS and now toward AI-based systems. This journey reveals a remarkably consistent theme: - Innovation reacts to inefficiency, - it is triggered by drastic changes in the market and - It proceeds at a very high pace, which is uncomfortable for most of us. To explore AI's revolution and anticipated impact, I’ve created a chart that maps the transformation of enterprise software, from the rise of servers and virtualization to the emergence of AI-agent marketplaces. Please trace the journey with your eyes (or finger), and you will see three trends emerge that will likely shape the future of GTM: i) Sustainable SaaS ii) AI-Led GTM iii) Consumption-Based Pricing As a side note, at Winning by Design, we have started using the term "PPX" as a shorthand to describe the various forms of consumption-based pricing, e.g., Pay Per Action, Pay Per Use, and Pay Per Outcome. It allows us to simplify the shift as SaaS --> PPX. Having said that, the next chapter in GTM appears to belong to autonomous GTM systems. These systems are AI-powered to enable durable growth from the get-go, and they are driven by PPX-based business models that will accelerate customer adoption. This is no different than subscription models did for SaaS over a decade ago vs. paying upfront perpetual software. In this, durable growth reflects a combination of GTM Efficiency and high GRR/NRR. The latter is governed by a new First Principle known to all 3,500 Revenue Architects out there (say it with me :-): Recurring Revenue is the result of Recurring Impact. Okay.. so where does that leave us? Well, let’s be clear: SaaS isn’t over—not even close! Many SaaS Scaleups and Grownups will simply evolve, powered by AI, into Sustainable SaaS Scaleups and Grownups. Some will fail, some will succeed. Meanwhile, Startups can choose to either pick Sustainable SaaS or embrace a PPX pricing strategy. And as they go to market, they can now opt for Product-Led Growth (low), AI-led growth (mid), or Human-Led Growth (high-end). Furthermore, AI-enabled GTM motions will democratize GTM, allowing companies from across the globe to compete with the existing SaaS juggernauts. These startups must show up with innovation, as today's buyers are more likely to side with a trusted brand. Simply put, there's something for everyone this holiday season. 💙 💙 💙 👉 What do you think will define the future of software?