How AI Is Raising The Bar For SaaS Companies

Ed Frederici is Chief Technology Officer at Appfire, a leading enterprise collaboration software company.

AI has revived the debate about whether software as a service (SaaS) can maintain its market position. But the better question is whether SaaS companies can meet the higher bar customers are setting for differentiation, outcomes and value.​

Pressure on public SaaS valuations and questions about AI-driven disruption are pushing organizations to prove their value faster. According to a McKinsey survey from August 2026, nearly nine in 10 organizations use AI in at least one business function, though many are still experimenting or piloting rather than scaling it across the enterprise. ​

Together, these shifts are pressuring SaaS companies from multiple directions. Externally, buyers have more options and higher expectations. Internally, companies must operationalize AI responsibly, rethink how roles evolve and manage the cost of adding AI to products.

These pressures are connected, but buyers feel market changes first. They have more products to evaluate, more AI claims to vet and less patience for software that fails to prove its value. ​

Competition is increasing, and differentiation matters more.

That is why competition comes first. With the ability to generate code becoming cheaper, AI lowers barriers to entry for SaaS products. Differentiation therefore becomes harder and more important. In a crowded market, buyers have less patience for products that are difficult to buy, onboard, use or maintain.​

The strongest SaaS companies will stand out by understanding customer workflows and removing friction. That means solving specific problems more effectively than competitors, embedding governance, risk and compliance (GRC) and business outcomes directly into workflows and making the product experience simple enough to drive adoption.​

Adoption is still uneven across organizations.

Without that foundation, AI remains fragmented instead of becoming an enterprise capability.​​