A short interview excerpt where Jason M. Lemkin discusses how AI is reshaping SaaS spending: AI is driving more demand for business software and shifting budgets, but legacy budget freezes, app bloat, and vendor price increases (e.g., Salesforce) constrain new purchases and upsells. He frames AI-driven demand as significant yet tempered by cost pressures and cuts in redundant SaaS apps.
But you've got a long history, Jason, in the SaaS industry. In fact, you created a company called Saster. So you run a massive conference called Saster Annual. You know, what do you see going on in the world of SaaS? And how is that transforming in the age of AI?
Well, look, some of this is marketing and hysteria, right? SAS is dead. But there's a lot of truth in it. Let's. Let's step back. I mean, two things. One, AI is putting more CIO budget and probably more SMB budget into business software than ever before. In its own way, it's like the tidal wave of 2020 because we needed. All of a sudden, budgets went up because everyone was at home. Budgets for E signatures, for context. There was no limits. We're not like that today. But here's a stressor. Traditional budgets are frozen. It. In fact, CAO's are still going around the table at the end of the year and telling every functional head to cut some SaaS apps. We had Kaz, who just took over CEO of Open Door. He told them they had to get rid of 20 or 30% of their SaaS apps or they're gone the first week. That still seems to be a layup. Like, we want you to cut the number of apps we have. App bloat. And worse. Half of our incremental budget's going to price increases. Salesforce raised prices 8% this year. 6%. That compounds. So if I'm growing my IT budget 6% and my core vendors are all raising prices 7 to 8%, how much room is there for another business process workflow app? Like, I'm sorry, the cap of the vendor cutting the vendors and all the incremental budget going to price increases is tough. That's also why even the leaders are struggling with upsell. Right? If all that budget went into my price increase at Salesforce, it's probably harder to buy another cloud, isn't it? At the margin, right?
