Jared Sleeper on Which Software Companies Will Survive the SaaSpocalypse | Odd Lots

Summary Read

~1.0 min read

The software industry is experiencing a severe downturn, dubbed the "SaaSpocalypse," with major companies like Salesforce seeing share prices cut in half. This panic is driven by two main fears: 1. **Software development is becoming dramatically cheaper** due to AI and cloud code, suggesting existing software companies might be overvalued. 2. **AI could fundamentally transform knowledge work** within a few years, potentially eliminating roles like customer support or sales reps, thereby reducing the need for current software solutions. However, experts argue this view is simplistic. Software companies offer far more than just code, including complex ecosystems, integrations, and network effects. Historically, businesses outsourced software because it was expensive and difficult to build and maintain internally. These companies provide specialized solutions at a fraction of the cost of in-house development. A lack of deep product understanding among many investors may be exacerbating the panic.

Opinions

CRM (stock, NYSE)

The stock's performance is described as 'ugly' and its price has been 'cut in half' from its peak.

TEAM (stock, NASDAQ)

The stock has experienced a massive price drop from a peak of $450 to $86, with its performance described as 'ugly'.

IGV (ETF, CBOE BZX)

The software ETF was down 3% on the day of recording, and the sector's performance was described as 'ugly'.

Topics

Software as a 'Scapegoat'

SaaS Industry Downturn ('SaaSpocalypse')

Impact of AI on Software Development Value

AI's Broader Impact on Various Industries

Value of Software Companies Beyond Code

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