Why SaaS is dying and service as software is rising

For two decades, the tech industry has been living a lie. We called it “software as a service” (SaaS), but in reality, we were selling “software as a tool.”

When a company buys a subscription to a customer relationship management system, a project management tool, or an HR suite, it isn’t getting a finished service. It is buying a digital workbench.

Image credit: Timmy Loen

To get any actual “service” out of that workbench, the company still has to hire, train, and manage a human to operate the tools. The second “S” in SaaS was a misnomer, as it was a service only in the sense that you paid a subscription for it.

But we are currently witnessing a fundamental inversion of this model. With AI tools driving down the cost of knowledge work, we are moving from tools to outcomes.

We are entering the era of service as software (SaS).

From how to what

Historically, workflow efficiency defined software value. The pitch was: “Use our beautiful user interface to do your work 20% faster,” with the burden of execution still on the user.

In the SaS model, task completion defines value. The pitch becomes: “Do more by letting the SaS do the work for you.”

This shift is more than a naming convention. It is a total restructuring of the relationship between a business and its tech stack.

See also: SG startup raises $13m for ‘LLM-agnostic’ customer support agents

In traditional SaaS, the software is a passive recipient of instructions. In SaS, the software is an active system of execution. Think AI agents carrying out entire workflows and processes on their own rather than being used as tools.

One example of a company doing this is Indian conversational AI firm Haptik. It is selling agents to SMEs in a bid to shift customer support from a managed workflow to a delivered outcome.

Why this is happening now

Why didn’t we do this in 2015? Because “thinking” was expensive.

Automating a complex, non-linear task – like responding to a nuanced customer complaint or auditing a legal contract – required a human brain.

What this means for startups

Implications for VCs

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