Is Software Dead? No, It Just Got Harder to Win
A deep dive into AI investments and the future of software.
1The Future of Software
Rory O'Driscoll, a software investor with over 30 years of experience, takes the claims of software's death personally. However, he narrows the question to make it answerable. Software isn't dead, but it has become much harder to win.
2AI Investments
In 2026, hyperscalers will spend approximately $688 billion on AI. This is all the money going into making AI happen. However, the revenue from this will only be around $110 billion.
3Revenue and Spending Balance
The AI industry is spending about half a trillion dollars more each year. This indicates that we will have to wait until 2031-2032 for revenues to catch up with spending.
4Takeaways for Founders
There are two key lessons from this timeline: First, this will continue for years. Second, expect a hiccup. When spending far exceeds revenue, someone will eventually ask why.
5Knowledge Worker Wages
For foundation models to earn a trillion dollars, the money must come from the largest pot: the knowledge worker wage bill. AI must take a significant portion of it.
6Making AI vs. Using AI
There is a distinction between making AI and using AI. The lower layers are about making AI, while the upper layers are about using AI. This is where software turns the model into business value.
7Harness: The New LAMP Stack
Harness is a term for the software layer that turns a raw model into a dependable system. This is how you will build every application in the age of LLMs.
8Real Moats
What can Claude or ChatGPT not roll over? Rory's firm classifies these as moats. Software plus sensors and network effects are some of these moats.
9Economic Impact of AI
The economic impact of AI depends on it taking a significant share of knowledge worker wages. This means a major shift, especially for software developers.
10Investment Mode
AI is currently in investment mode, and this will continue for years. This means a long window of opportunity on top of cheap, improving models.
11Market Pause
When spending exceeds revenue, expect a market pause. This could happen before 2032, and founders should consider this possibility.
12Conclusion and Importance
Software isn't dead, but with AI investments, it has become much harder to win. This signals a significant transformation in the software industry.
Original article: SaaStr — Yazılım Öldü mü? Hayır, Kazanmak Daha Zorlaştı