For the better part of two decades, SaaS was the greatest business model Wall Street had ever seen. Low marginal costs, predictable recurring revenue, and a customer base sticky by design — not because the product was irreplaceable, but because switching hurt.
That era is quietly ending. And the vendors know it.
The Math That Made SaaS Magic
The SaaS multiple was always a bet on the cost structure. Once the software was built, adding a new customer was nearly free. Gross margins of 70-80% were the norm.
It worked — until the thing that made software expensive to build stopped being expensive.
AI has collapsed the capital required to create software. A small team with the right tools can now build in weeks what once took years and millions of dollars.
The Panic Is Visible — And It's Coming Out of Your Pocket
SaaS companies are not sitting quietly with this reality. They are acting on it, and their customers are footing the bill.
Prices are going up. Multi-year contract extensions are being pushed aggressively — not because they offer customers better economics, but because they buy vendors time.
At the same time, vendors are racing to bolt AI features onto existing products — not because customers demanded them, but because the narrative demands it. An "AI-powered" rebrand buys time on earnings calls.
The Data Trap Is the Real Play
Beneath the AI theater, something more deliberate is happening. SaaS vendors understand that the product itself may no longer be defensible. So the new moat is your data.
The strategy is to make your data as entangled in their ecosystem as possible — difficult to export, impossible to fully own, and conveniently most useful inside their walls.
And here's the absurdity of it at scale: your company is now paying for six, eight, twelve different SaaS tools, each with its own AI layer, each hoarding its piece of your data, none of them talking to each other.
Whose Roadmap Are You Actually On?
This is the question every technology leader needs to sit with. When your vendor makes a product decision, launches a new module, deprecates an old one, or prices an AI feature into your next renewal — whose interests drove that decision?
The answer is almost never yours. It is the vendor's margin, their investor narrative, their competitive positioning.
The Kicker: Own Your IP
Companies that will navigate this transition well share one trait — they have invested in owning their own technology, data, and roadmap.
This doesn't mean building everything from scratch. It means being deliberate about where you accept dependency and where you don't.
The era of cheap, abundant software creation is an opportunity, not just a threat. You can now build what you actually need at costs that were unimaginable five years ago.
The SaaS multiple is a ghost. Don't let it haunt your balance sheet, too.