Is SaaS losing its value in Market Shares?

Introduction

It’s ironic that the very pioneers of SaaS (Software as a Service)—companies that revolutionized on-premises enterprise solutions in the 2000s with their cloud-first approach—are now facing disruption themselves, this time from GenAI.

Take Salesforce, for example. This world’s largest enterprise software company in 2022, has experienced its first major stock tumble since 2004. According to The Business Times, Salesforce missed its Q1 revenue target, pulling in $9.13 billion instead of the expected $9.15 billion. And, as Forbes mentioned, this miss resulted in a 21.6% drop in their stock within just one day after they announced lower-than-expected guidance for Q2 and FY 2025.

Disruption, it seems, has come full circle. In this blog, we’ll explore the impact of GenAI on the SaaS industry and how it’s causing companies to lose market share.

From Boom to Doom: SaaS Industry Analysis (2020-2024)

The challenges faced by SaaS companies today feel sudden and intense, largely because of the unprecedented boom they experienced during 2020-2021. Forbes calls this period the “Golden Era” for SaaS, with a surge in notable exits, including IPOs, mergers and acquisitions (M&A), and record-breaking venture capital funding.

Highlights included Salesloft’s $2.4 billion acquisition, Pipedrive’s $1.5 billion deal, and Greenhouse’s exit at nearly $1 billion—all showcasing the industry’s meteoric rise.

But from 2022 to 2024, the landscape shifted dramatically. Acquisitions dropped significantly, marking a stark change in liquidity opportunities for SaaS companies. On Twitter, Jason Lemkin (Founder of SaaStr) pointed out a steep decline in IPOs since 2021, alongside a 90% drop in M&A activity among the top 10 software acquirers compared to 2021 levels.

It’s a clear sign that the SaaS industry’s golden days have given way to a much more challenging reality.

The Reason Behind SaaS’s Decline Since 2021

The decline in market shares of consistently high-performing B2B SaaS firms reflects the dynamic market environment and complex challenges, likely influenced by the AI revolution.

According to HFS Research, one of the major reasons SaaS is losing its luster is the increased focus and spending on Gen AI, which promises to become a leading application for enterprise IT. With Gen AI advancing rapidly, C-suite executives are reallocating significant portions of the budgets toward these initiatives. HFS’s 2024 Pulse Survey highlights that most Global 2000 enterprises expect IT spending to increase between 6% and 10%.

While companies like Nvidia and Dell, which produce hardware to power Gen AI systems, have seen market demand rise, SaaS firms like Salesforce, Workday, Adobe, and Snowflake—despite their efforts to integrate AI—are struggling to find a clear path into the AI world.

As per WSJ FactSet data, eight of the ten largest cloud software providers by annual revenue saw their stocks decline by an average of 9% the day after releasing their earnings. This shift indicates the growing challenge for SaaS firms to remain competitive in an AI-driven world.

GenAI Outperforming SaaS: A Closer Look

While there are concerns over the dipping sales growth, Salesforce is convinced of the potential of AI-oriented software and features, as the CEO, Marc Benioff, emphasized the long-term potential of AI as being positive for the company.

Obviously, GenAI has brought a breaking point for enterprises that were once tied to the limits of SaaS premiums. In a twist of déjà vu, GenAI is now disrupting the market much like SaaS disrupted on-premises software in the early 2000s.

So why is Generative AI creating so much buzz? In what ways does it outperform SaaS? Let’s dig deep in and see what all the fuss is about.

GenAI Vs SaaS: Six Key Differences

1.Adaptability

GenAI offers dynamic solutions and personalized actions tailored to user preferences—something SaaS can’t deliver. SaaS platforms are limited to providing predefined tools and workflows that require manual customization to meet unique needs.

Example: While a SaaS HR tool can perform standard resume filtering, GenAI takes it a step further by screening resumes using context-aware candidate matching and providing personalized outreach.

2.Innovation

Sure, SaaS automates numerous processes and solves operational challenges. But GenAI doesn’t stop there—it not only automates what can be automated but also generates novel ideas, unique content, and innovative solutions. It sparks creativity and enables quick brainstorming.

Example: SaaS tools can’t create unique campaign copy or suggest innovative strategies to unlock creativity. GenAI can.

3.Scalability

SaaS platforms excel at operational scalability—they efficiently manage increasing workloads or users. However, they lack “intelligent” growth. GenAI scales both operationally and intellectually, improving its outputs as it processes more data and learns from user interactions.

Example: In customer support, GenAI outperforms SaaS by analyzing historical data to predict customer issues, suggesting proactive resolutions, and offering multilingual support at scale.

4.Cost Efficiency

SaaS requires ongoing investments in licenses and integrations, often accompanied by additional workforce costs for task management or data interpretation. GenAI significantly cuts these costs by automating high-value, repetitive, and knowledge-intensive tasks—without compromising quality.

Example: While SaaS accounting software streamlines invoicing, it still requires human intervention for error checks or custom entries. GenAI automates this process entirely, predicting errors and recommending optimizations, saving time and money.

5.User Experience

In recent years, especially post-pandemic, digital transformations have shown that static interfaces and predefined workflows of SaaS tools are no longer appealing—they’re often overwhelming and require training. GenAI, on the other hand, delivers an intuitive, conversational, and natural user experience that feels custom-designed for every user. The power of Gen AI-driven personalization, you see!

Example: SaaS tools with static knowledge bases or ticket-based systems can’t compete with GenAI’s interactive chatbots, which resolve issues in real-time with adaptive learning and human-like responses.

6.Data Insights

SaaS platforms offer structured data reporting and analytics, but they’re limited to surface-level insights based on user-defined parameters. GenAI digs deeper, identifying hidden patterns, providing predictive analytics, and generating actionable recommendations—even without explicit prompts.

Example: A SaaS BI tool might create static dashboards based on predefined metrics, while GenAI dynamically predicts customer churn and recommends retention strategies by analyzing unstructured data.

Conclusion

While Salesforce (and other SaaS companies) have experienced a dip in market share over the past two years, this doesn’t necessarily mean the platform will be wiped out completely. Instead of a sharp decline, it signals a shift—likely driven by the rise of Generative AI—that will push SaaS companies to evolve and adapt to the fast-paced, AI-driven changes in the market.

There’s no doubt that SaaS firms will face challenges due to AI disruption. The rapid growth of Gen AI software and tools is one of the first hurdles, potentially impacting sales pipelines, revenues, and customer dynamics. However, according to Grand View Research, the global enterprise software market is still projected to grow at a CAGR of 11.5% from 2023 to 2030.

At Hyreo, we’ve been at the forefront of Gen-AI innovations, optimizing many of our platform’s capabilities to provide smoother recruitment processes and more engaging candidate experiences. Gen AI and agentic workflows are the future, and if you’re curious about how this can redefine your recruitment, check out our product video to see how we use Gen AI for prescreening, interview scheduling, and more.

Explore: Hyreo: Your AI Recruiter Co-pilot

FAQs

How is Generative AI impacting the SaaS industry? Generative AI is disrupting the SaaS industry by offering dynamic, adaptive solutions and cutting-edge innovations that SaaS platforms struggle to match, forcing companies to rethink their approaches.
What makes Gen AI better than traditional SaaS tools for recruitment? Gen AI goes beyond automating processes by providing personalized, context-aware interactions, such as screening resumes and offering real-time, AI-driven candidate outreach.
Is SaaS still relevant in the age of Generative AI? While SaaS faces challenges from Gen AI, it will remain relevant if it evolves to integrate intelligent, scalable, and adaptive AI solutions to meet the demands of a changing market.

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