Service is the software. Read that twice

The hype around AI is fading, but the real disruption is just beginning. Generative AI will transform business models, slashing costs and redefining how we use software – we’re ready for the revolution.

As the media buzz around AI starts to die down, we’re starting to see thoughtful takes on how it’s disrupting business models. We’re seeing smart people agree with Crescendo’s key launch ideas. The consensus is that we’re entering a new era in which generative AI can redefine the boundaries between “software” and “service.”

Why AI is far more than a trend ​

Right now, Software-as-a-Service (SaaS) rules the world. Andreessen predicted it, and the result is what we see today: Billion dollar software businesses, massive cloud infrastructure vendors, and an ecosystem of successful SaaS applications.

Generative AI is about to change everything again.

How companies use software has been changing over decades. We saw a changeover from on-premises software to Hosted Applications and then finally SaaS. Each marked a tech shift that fundamentally changed how companies operate. Business models and job roles changed. We transitioned from periodic upgrades to continuous delivery. We shifted from Quality Assurance (QA) teams to Site Reliability Engineering (SRE) teams. And we moved from bookings to Annual Recurring Revenue (ARR). We shaved margins while increasing top line and earnings potential.

It’s clear that it’s been a great run for enterprise SaaS and those businesses will continue to drive major change using AI. But what happens when AI steps in, and we can swap labor costs out of the equation? A new business model emerges — one that can drive transformation in your own business.

Here are four takes on this phenomenon:

1. Aaron Levie, Box founder, recently commented on this shift:

   “AI agents have the ability to fundamentally change the business model of enterprise software… This all has major implications to the economics of software, and it means that the AI Agent business model goes after a far greater pool of spend than just traditional IT. If software products now directly drive company productivity instead of just enabling company productivity, this could lead to a step-function change in the size of IT markets over time. Wild.”

2. Jaya Gupta wrote this trend will turn the tables on the essence of SaaS, calling it “service as software.” In the SaaS model, a company sells access to a platform, and customers have to use it to create the outcomes they want. With AI, the responsibility for achieving outcomes sits with the company selling the service. The transition is about to be massive, as AI technology consumes large chunks of enterprise spend that’s currently allocated to labor. \

3. Dan Bartus of Felicis published an article recently proposing what he called, “Software and a Service, The Diagonal Software Opportunity.” He wrote: “There’s a rise in companies that increasingly blend AI, software, and services and do so in ways that will change how investors and founders think about services.” \

4. In their attention grabbing report, “The Death of the Big 4: AI-Enabled Services Are Opening a Whole New Market”, Jake Saper and Jessica Cohen at Emergence Capital note that: “Historically, common wisdom has held “services businesses aren’t venture backable … but change is afoot… hastened by AI, cracking open new, huge opportunities for founders brave enough to go against the tired wisdom.”

We agree.

But the last six months have shown us that the transition won’t be smooth. The tectonic plates are shifting, and the tech world is investing hundreds of billions of dollars, rushing out products to try to position themselves for the next gold rush.

Customer experience is on the frontline of this transition, as labor is such an obvious cost for service providers. But of course the technology isn’t a direct replacement. In customer experience, we’re automating some tasks, but we’re also introducing new roles — customer experience design, AI supervision. And CX professionals and expert agents still have a place in all this, too.

We’re designing our service for the future ​

Our business model isn’t just an assembly of parts. We’re going with a transformative design — a full-stack service designed from the bottom-up to deliver the best AI technology along with service professionals who complete our offering.

And (drumroll please) for what we’re pretty sure is the first time in customer experience software history, we don’t charge based on seats, time, or labor. We charge based on outcomes. We’re giving our customers the chance to benefit from AI without getting bogged down with shuffling budget between CX operations and software spend.

These huge shifts in the software industry mean a lot for your business. We’re a company that sees how everything fits together, and we’ve designed a service that’s working to give you the best of this incoming transformation. We’re opening a door to a totally new way of doing business. If we’re truly at the breaking point, like we and so many others believe, it’s not a matter of if your business joins in — it’s when.

Join us sooner rather than later! Let’s talk.