Why SaaS May be on Life Support According to Microsoft CEO

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Microsoft CEO Satya Nadella did a podcast a few weeks ago that has captivated the attention of many. The main headline from the interview is that software as a service or SaaS is dead and or dying. Nadella didn’t explicitly say this but people likely clung onto this take because it’s catchy, salacious, and has implications for how people and companies in the tech industry may do business in the future. There are various paths down the artificial intelligence paved roads to the future and Microsoft's path which relies on SaaS vis a vis Azure (for the purposes of being effective I’m not interested in splitting hairs between SaaS and IaaS when it comes to Azure’s various offerings), is one that could be landscape shifting if not reality altering. So let’s dive into what was actually said and its potential implications on the future.

The following is a direct quote taken from the BG2 podcast where Nadella appeared and made his captivating statement:

“When was the last time any of us really went to a business application right? We license all these SaaS applications, we hardly use them, and somebody in the org is sort of inputting data into it. But in the AI age the intensity goes up because all that data now is easy right? You’re a query away. I can literally say, “hey I’m meeting with Bill tell me about all the companies, benchmarks, invested in.” It’s both taking the web, anything that’s in my CRM database, collating it all together, giving me a note, what have you. So, to some degree, all that I think can be monetized by us and even by these connectors.”

Nadella didn’t say SaaS is dead. If anything that is wishful thinking from those who are lagging behind in informational awareness and competitiveness. Some people wish that’s what he said. That statement was in response to a question about the near future of AI. In essence if a person has the right mindset, what Nadella said is an opportunity for certain companies to future proof themselves. Nadella later clarified his comment in another interview, but I think that part of the problem is the intersection between human intelligence and artificial intelligence. While companies and the people part of those companies are making leaps and bounds in creating applications and software that can mimic thought and better assist us, they are also neglecting personal and professional development that would make them better.

This aspect of this era of technological advancement is an open secret in certain spaces of the technology community. Every conversation about artificial intelligence starts with the amazing advancements that are being made. This is because that is where the money is. Everyone cares about profit, those making a lot of it, those trying to keep and fortify their market share, and those who are losing money. You tell me who is worried about SaaS becoming obsolete instead of making their product better. But after you get past the status report there is always this caveat at the end of the conversation about the concerns of the dangers associated with AI. So people are aware of the negative impacts AI is having and or posing, but those aspects get reframed and the overton window moves to the left so that it becomes a conversation of innovation.

This is what Nadella was saying. The immediate future from Microsoft's perspective is a better version of Apple Intelligence. For that to happen there needs to be memory, tools or applications, and permission/access. Microsoft is creating environments where persistent data on the cloud is available around the world. Microsoft’s AI CEO, Mustafa Suleyman has dubbed 2025 the year of infinite memory. The problem with artificial intelligence is tautological. We are in an era where computation and innovation keeps growing and expanding. But the people doing the work aren’t doing the equivalent work, for, on, or in themselves. Certain people in this space know this to be true and speak about it, but the people they are referring to would rather run with a headline than keep up with the rate of innovation. Business and SaaS applications should consider a future where their proprietary information is dynamic enough to be valuable.

If you go down the road Microsoft is paving and they follow in the footsteps of Apple, there could be a world where your AI or agent resides on your desktop via Copilot, Siri, or something similar, where it's part of the OS. You could query that in house on device agent to do something for you and instead of you having to open 3-4 applications, that by the way you may be paying a subscription for, you could either have that information on device, on the cloud, or somewhere on the web, which isn’t far-fetched, and the agent could populate and organize that information. This could make SaaS obsolete from the perspective of being able to localize information in a way that is on the horizon.

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This is autonomous work or an agent being able to do things for you at command. SaaS companies still have an advantage depending on their business to gate keep or paywall access to proprietary functions of their application. Nadella was saying that the way you commoditize this could be in the form of licensing or an API. Apple Intelligence already does something like this where Siri and ChatGPT can access on device information and communicate that information across certain applications. The future is a sort of open-ended action where you can tell an agent to book a trip for you and your family for three days including the hotel, airfare, and excursions, and it does it. This is easier said than done right now but this is one space for innovation.

As cool and SciFi as artificial intelligence is, it’s also very cut throat, at least right now if not as a characteristic of its existence. Companies and individuals who rely on SaaS as their money maker should be considering ways to allow for AI interaction. Don’t just build a chatbot, create an AI broker space if you will, where two applications can have a conversation and execute a task on the back end. As the world flirts with what could be called the Age of Answers, people aren’t going to want to open their computer, wait for it load, open a browser, search for something, go to that something’s web page, search that something’s web page, maybe login to access the information stored with that something, find their credit card or similar relevant information, and execute a transaction. The future is “hey AI agent go do this.” And the AI’s response should be “Done. Here are the details...”

The death of SaaS isn’t a spectre, it’s an opportunity for improvement and integration. I’m not talking about the morals of this reality of which, as mentioned, are a concern to all who are paying attention. That said, the final point I want to make is on something Nadella also said in his BG2 interview. He said to a certain effect that the quality of care given to people in a corporate environment matters. Winners and losers are defined by their culture. Results aren’t a culture. Culture contributes to results. In that respect I want to conclude by saying that how a team is cared for, educated, and empowered on all levels top down and bottom up, is how you achieve great things with a great product. There are a lot of low vibrational energy vampires and potential killing companies and leaders out there, who again rather run with a headline than innovate, because they don’t value investing in their employees, their product, or their shared psychology. Those companies likely won’t win in the long run.