One Thing is Clear: AI Makes a Lot of Business Software Look Awfully Expensive Today. Is Deflation Coming?

So just how much will AI remake classic B2B software?  We are still learning.

On the one hand, new AI-first entrants are rocketing to $10m ARR in a year.  On the other hand, the classic leaders in SaaS have rebounded from 2024 lows both in terms of growth and market caps.  And all the leaders in SaaS are leaning in on AI, from Salesforce to Asana to HubSpot to ServiceNow and more.

One thing does seem clear though:  AI makes SaaS look expensive.

• There have been so many price increases since 2021, many apps are 40% or more expensive than they were in 2021.  With very little to show for it.
• Everyone is pushing hard on upsells, but for what?  To raise prices even more?
• The power of OpenAI or Claude for $20/month is jaw dropping.  Almost no SaaS app provides that much value.
• DeepSeek has, at least in theory, cut the price of AI for SaaS as much as 90% overnight.
• The power of Cursor, Replit, etc. shows how much you can get on the dev side in AI for just a small amount of spend.  The ROI here can be 100x or more.  And in Classic B2B — you are raising my prices this quarter … again?

Right now, many vendors are looking for AI in SaaS to be, in essence, inflationary.  To charge even more for resolutions, for actions.  On top of a fairly expensive base price.

Salesforce charges $2 per “conversation” for AgentForce — on top of $250/month or more per seat.

Zendesk is charging an extra $50 a month or more for its “Advanced” AI:

But will it hold?  I wonder.  AI makes SaaS look expensive.

An example is the contact center.  What most leaders in the contact center are seeing is 2 steps forward, 1 step back in terms of economics.  On the one hand, everyone from Zendesk to Intercom to Gorgias to Salesforce can charge more — for now — for AI agents in support.  On the other hand, as part of that, many are reducing the number of seats and human agents by 20%-40%.  So while customer are spending more overall with AI added, they are also buying fewer seats.  It’s happening everywhere.  Inflation and deflation together.

Where will this lead?  What if SaaS vendors can’t charge anything extra for agents and resolutions?  HubSpot isn’t charging more – yet.

Then it might be deflationary there, too.  If we can’t charge more in the end for AI agents and AI.  And we also just need that much less … traditional SaaS.

And if DeepSeek and more drops the costs of AI two orders of magnitude over the coming 24 months, can we really still charge $2 for an agent to resolve a ticket — on top of a per seat fee?  Are you sure?

The bottom line is SaaS got very expensive the past 2-3 years.  As growth slowed, almost everyone looked to price increases.  Even leaders like Canva that were always cheap … raised prices dramatically for their enterprise edition.

Those days may be over.  AI, if nothing else, may put pricing pressure on SaaS.  Paying $30-$300 a month for basic workflows, when best of breeed AI is only $20 … sure seems like almost … a rip-off.

And be honest — is your product much, much better today than 24 months ago?  A true leap and step forward?

That’s what the market is beginning to expect, even outside of the early adopters.  That’s what AI promises.  Software is so much better than it was just 24 months ago.  Is your app?

If not, hurry up.

Today, AI feels inflationary for SaaS.  Driving up ACVs.  But it could soon turn deflationary.  If every vendor includes 100 AI Agents for the same price as before.  That do 10x as much.