AI Broke The SaaS Model, Here's What's Next

SUMMARY

Craig Hewitt, a software entrepreneur, discusses how AI is disrupting the traditional SaaS model through five key shifts—speed, customer expectations, agents, acquisition challenges, and velocity—urging founders to adopt an AI-first approach for future success.

STATEMENTS

AI is posing an existential threat to the conventional B2B SaaS model, which relied on predictable recurring revenue and higher price points, but it also opens opportunities for a new era of software innovation.
The speed of building software products has accelerated dramatically with AI tools like Claude Code, Opus 4.5, and Cursor, raising the competitive bar and customer expectations for faster, better deliverables.
Customer expectations for software value have skyrocketed, making it essential for SaaS products to deliver exceptional utility relative to low-cost AI alternatives like a $20/month ChatGPT subscription.
AI agents are poised to replace most traditional SaaS dashboards this year, shifting from manual interfaces like those in Salesforce or HubSpot to proactive, conversational systems akin to Jarvis from Iron Man.
Customer acquisition via SEO and content marketing is declining in effectiveness due to AI-generated content floods and direct answers from tools like ChatGPT, leading to higher costs and crowded alternative channels.
Velocity in software development is now paramount, enabled by AI allowing developers to produce 80% quality code quickly, deploy it, and use agent swarms for automated feedback and iteration.
SaaS companies failing to pivot to AI-first models, such as agentic and asynchronous value delivery, face downward pricing pressure, acquisition difficulties, and potential business failure.
This AI-driven evolution represents the biggest software paradigm shift since the cloud, moving from on-premise licenses to agentified systems that work 24/7 without user input.
Founders must rethink products as proactive agents with access to models, tools, and memory, rather than static dashboards requiring constant user interaction.
Optimizing for rapid iteration—shipping features, gathering AI or market feedback, and learning quickly—outweighs pursuing perfection in code or marketing efforts.

IDEAS

AI tools democratize software creation so profoundly that even non-experts can build products rapidly, forcing established SaaS companies to innovate or perish.
What once seemed like magic—building any software eight years ago—now feels commonplace, inverting the value proposition where SaaS must justify charges against free or cheap AI capabilities.
Proactive AI agents could handle tasks asynchronously, like generating YouTube ideas and thumbnails without user prompts, transforming passive tools into always-on assistants.
The flood of AI-assisted content has saturated search results, rendering traditional SEO less viable as users get instant answers from LLMs without visiting source sites.
Developers can now prioritize speed over perfection, deploying imperfect code and letting AI agents critique it, enabling parallel feature development at unprecedented rates.
SaaS evolution mirrors the cloud shift: from manual, user-driven interfaces to autonomous systems where AI interacts with other AIs, reducing human involvement.
Rising customer acquisition costs stem from a market rotation away from SEO toward paid ads, YouTube, and social, all becoming more competitive due to AI efficiencies.
An agent's core—models, tools, and memory—redefines software, where "tools" evolve from user actions to AI-to-AI interactions, enabling 24/7 operation.
Bootstrapped indie hackers relying on content marketing face amplified challenges, as anyone with ChatGPT can produce elite-level material, diluting visibility.
Publishing 100 landing pages and using AI to analyze traffic winners exemplifies how velocity trumps deliberation, accelerating market learning in the AI era.

INSIGHTS

The commoditization of software development through AI lowers entry barriers, compelling businesses to focus on unique, high-value propositions that outpace generic tools.
Elevated customer expectations demand SaaS products deliver disproportionate value to low-cost AI benchmarks, shifting emphasis from features to transformative outcomes.
Agentic AI heralds a paradigm where software anticipates needs proactively, minimizing user friction and maximizing efficiency in asynchronous environments.
Declining SEO efficacy underscores the need for diversified acquisition strategies, as AI-driven content abundance erodes organic discovery advantages.
Prioritizing velocity over perfection leverages AI feedback loops to foster rapid evolution, turning iterative speed into a core competitive edge.
This SaaS pivot, akin to the cloud revolution, positions AI-first founders to thrive by reimagining products as intelligent, self-sustaining ecosystems.

QUOTES

"Speed has never been faster, never been easier, never been more accessible for creating product."
"Are you delivering the amount of value uh relative to what you're charging as other AI products are?"
"Agents are going to replace most of SAS I think this year."
"SEO and content marketing has been the way that most people have acquired customers at some level... That whole thing just doesn't work as well as it used to."
"It's not how good can I do it. It's how fast can I do it? Get feedback... and iterate as fast as you can."

HABITS

Regularly experiment with AI coding tools like Claude Code and Cursor to accelerate product development cycles.
Assess product value against affordable AI subscriptions, such as $20/month ChatGPT, to ensure competitive pricing and utility.
Prototype agentic features that operate proactively in the background, delivering asynchronous value without user intervention.
Diversify customer acquisition beyond SEO by testing paid channels, YouTube, and social media despite increased competition.
Deploy code at 80% quality and use multiple AI review agents for automated feedback, enabling parallel work on new features.
Publish numerous variations, like 100 landing pages, and leverage AI to analyze performance for quick iterations.

FACTS

Eight years ago, building software with frameworks like Ruby on Rails or Laravel provided a significant competitive edge due to scarcity of skills.
Tools such as Claude Code, Opus 4.5, and Cursor have made software creation faster and more accessible than ever before.
ChatGPT's $20 monthly subscription enables users to produce elite-level content, contributing to a flood that diminishes SEO effectiveness.
Traditional SaaS like Salesforce and HubSpot rely on manual dashboards, but AI agents could automate these into conversational, proactive systems by year's end.
Developers now use swarms of five or more AI agents to review and improve deployed code asynchronously, boosting overall velocity.

REFERENCES

Previous series: "100 Days Of AI" (daily videos on AI topics).
Product: Outlier (AI tool for YouTube ideas, titling, thumbnails, and project management).
Tools: Claude Code, Opus 4.5, Cursor, ChatGPT, Claude, Manis (for coding and content).
Software examples: Salesforce, HubSpot, Ruby on Rails, Laravel, Next.js.
Inspirations: Jarvis from Iron Man (proactive AI assistant model).

HOW TO APPLY

Embrace AI tools like Claude Code to build and prototype products faster, raising your output velocity while monitoring how this elevates market standards for competition.
Evaluate your SaaS value proposition by comparing it directly to low-cost AI options, such as ChatGPT's capabilities, and adjust pricing or features to deliver superior, justified returns.
Transition from dashboard-based interfaces to AI agents by integrating models, tools, and memory that allow conversational or proactive interactions, aiming for full implementation by year-end.
Shift customer acquisition strategies away from SEO by experimenting with paid ads, YouTube content, and social channels, tracking rising costs and adapting to increased competition.
Optimize development for speed by writing 80% quality code, deploying it immediately, and employing AI agent swarms for review and iteration, freeing time for additional features.

ONE-SENTENCE TAKEAWAY

AI disrupts traditional SaaS but empowers agentic, velocity-driven founders to pioneer a golden age of proactive software innovation.

RECOMMENDATIONS

Pivot to AI-first thinking by reimagining products as autonomous agents that deliver value without user prompts.
Prioritize rapid iteration over perfection, using AI feedback to test and refine features at high speed.
Diversify acquisition channels beyond SEO to counter rising costs and AI-saturated content landscapes.
Build proactive systems that operate asynchronously, like background agents for content optimization.
Benchmark your product's value against cheap AI tools to ensure it justifies premium pricing in a democratized market.

MEMO

In the bustling world of software startups, Craig Hewitt sounds a clarion call: the SaaS model, once the gold standard of predictable revenue, is under siege from artificial intelligence. As the founder of Castos, a podcasting platform he launched eight years ago, Hewitt has witnessed the industry's transformation firsthand. What began as a reliable B2B playbook—recurring subscriptions, high margins, dashboard-driven interfaces—is now faltering. AI's rise, he argues, introduces existential threats, from commoditized development to eroding customer acquisition. Yet, amid the disruption, Hewitt remains optimistically bullish, envisioning not an end, but a renaissance for software creators who adapt swiftly.

The first seismic shift, Hewitt explains, is speed. Tools like Claude Code, Opus 4.5, and Cursor have democratized coding, allowing even novices to prototype at breakneck pace. This accessibility, while empowering, ratchets up expectations; customers now demand polished products faster than ever. Reflecting on his early days, Hewitt recalls how knowing Ruby on Rails felt like wizardry. Today, that magic is mundane, compelling founders to deliver exponential value relative to a mere $20 ChatGPT subscription. The bar isn't just higher—it's stratospheric, forcing SaaS veterans to evolve or face obsolescence.

At the heart of this upheaval lies the agentic revolution. Traditional SaaS giants like Salesforce and HubSpot, with their button-clicking dashboards, may soon yield to conversational AI akin to Iron Man's Jarvis. Hewitt's own venture, Outlier—a tool for YouTube creators—exemplifies the pivot: from a conventional interface to a background agent that proactively generates ideas, thumbnails, and schedules. Agents, armed with models, tools, and memory, operate 24/7, interacting with other AIs rather than waiting for human input. By year's end, Hewitt predicts, such systems will supplant most legacy SaaS, delivering asynchronous value without user effort.

Customer acquisition woes compound the challenges. SEO and content marketing, long the indie hacker's lifeline, are crumbling under AI's weight. With ChatGPT enabling anyone to craft elite posts, search results drown in noise, and users snag answers directly from LLMs like Perplexity without visiting sites. This has sparked a frantic rotation to paid ads, YouTube, and social—channels now more crowded and costly than ever. Rising CAC, Hewitt warns, squeezes bootstrapped operations hardest, underscoring the need for diversified, resilient strategies.

Finally, velocity emerges as the new imperative. Developers no longer chase flawless code; instead, they deploy 80% solutions and enlist AI swarms for critique, iterating in parallel. Imagine launching 100 landing pages, driving traffic, and letting algorithms crown winners—far superior to agonizing over one "perfect" headline. Hewitt is bearish on stagnant SaaS but evangelical for the AI-first: those who agentify their offerings, prioritize speed, and rethink value will dominate 2026. This isn't the death knell, he insists, but the cloud-era pivot reborn, promising a golden age for the bold. As software's frontiers expand, the question lingers: will you lead the charge or get left in the digital dust?