In previous editions of our AI newsletter, we’ve discussed the traditional Software as a Service (SaaS) model, which has transformed businesses by offering cloud-based solutions that are scalable, flexible, and cost-efficient. Companies like Salesforce and Microsoft have built empires on this model, allowing enterprises to subscribe to their software and access it remotely. But as we move into the next phase of technological evolution, we’re seeing a radical shift in how companies like Klarna are recreating SaaS from the ground up. (For an irreverent weekly take on the AI software space, check out these awesome Australian podcasters who, whilst not building their AI workspace product Simtheory, test the latest models with various fun experiments… for example can OpenAI’s o1 build Klarna a CRM system).
This week VC firm Sequoia Capital put forward a powerful argument for this evolution of SaaS… from Software as a Service to “Service as a Software”. In Sequoia’s view, this is more than just an incremental shift in how we build and deliver software. It’s a fundamental reimagining of how services are delivered through AI-driven systems. Traditional SaaS allows companies to subscribe to software that helps manage their businesses—whether that’s customer relationship management, marketing automation, or accounting. However, the model Sequoia describes flips the script. Instead of software being a tool that businesses actively use, the software itself becomes the service provider, making decisions and delivering results autonomously.
One of the examples Sequoia highlights is how companies are embedding AI not just into their products but into their core services. This turns software from a productivity tool into an active player in delivering business outcomes. Whether it’s handling logistics, customer support, or operations management, AI-powered services are poised to operate businesses more directly, freeing up human resources for more strategic initiatives. Sequoia emphasizes that companies must start thinking about their software as dynamic, adaptable entities rather than static platforms. Generative AI can help software self-improve, meaning the more it’s used, the smarter it gets. This has the potential to create a competitive edge for businesses that adopt early, as they will have AI systems that become exponentially better over time.
In essence, Sequoia argues that the future will belong to those who embrace this shift. The era of traditional SaaS is waning, and what’s emerging is an exciting, transformative phase of intelligent, service-delivering systems that act proactively rather than reactively. And they believe this vision is not some far-off future, rather that it is happening now. Sequoia argues that this isn’t merely a trend, but the next fundamental shift in how we think about service delivery. The evolution from SaaS to “Service as a Software” will likely spur paradigm shifts in multiple industries.
We are standing at the cusp of something truly transformative, and now is the time for companies and individuals alike to start experimenting with AI. Waiting for the perfect time could mean falling behind in an era where the speed of innovation is relentless. See the end of the newsletter for a single combinatory takeaway this week…