AI is shrinking SaaS moats, redefining sales

This article summarizes an episode of SaaStr AI’s video series featuring Jason Lemkin, founder of SaaStr.

Jason Lemkin, CEO and Founder of SaaStr / Photo credit: LinkedIn

According to Jason Lemkin, CEO and founder of SaaStr, the advantages that once protected software businesses are fading because of AI. As a result, companies need to focus on two things: building and improving things quickly, and understanding what they are selling.

Losing your advantage faster

The time it takes to build a product that is hard to copy has gotten much shorter. What once took years of development before facing competition now happens in months or even weeks.

The new reality of being copied instantly
Lemkin recalls, “When we launched Echosign, DocuSign…had like 18 months before they decided, ‘Hey, we’re going to copy what Lemkin and his team did.’ … It took like 5 to 6 years for Adobe to decide to copy it. … Google just launched a clone like last year, like a decade later.”

The speed problem is getting worse
This pressure forces companies to create innovations quickly. Falling behind for even a short time can put the company out of business.

Lemkin warns, “Our competitive edges are going to be measured in months when they used to be years, and that compounds. And if you can’t run at that pace, I don’t see how you’re going to…fall to 0% growth.”

AI agents help competitors

This faster pace is caused by new technology. AI agents have lowered the cost and difficulty for competitors to copy a product.

Customers are less loyal
Beyond making features easier to copy, AI agents are altering the basic relationship between users and software. Customer loyalty, which once kept people tied to a company’s products, is now much weaker.

Lemkin explains, “Agents will actually make our moats even weaker and shallower because if the agents can just take a prompt from one app and give it to another app, my switching costs have gone down radically, haven’t they?”

The threat of movable instructions
When what a user wants to do, written as a command, can be moved between different products, a company can no longer keep that customer.

“If I can just give [a prompt] to another agent that does the same thing,” Lemkin continues, “where’s my moat? I mean, there is a switching cost, but it’s so much lower than it used to be. So that’s the kind of stuff I worry about.”

Selling on “value” no longer works

Rapid copying created a new demand for the sales team. Customers now want to talk to experts, making the traditional way of selling based on who you know useless for AI products.

When buyers know more than sellers
In a market with a dozen similar products, the old sales method of building relationships and talking about unclear benefits doesn’t work. Buyers are knowledgeable, and they have no patience for unprepared salespeople.

The outdated salesperson