The 6 Threat Vectors Attacking Traditional B2B Software in 2026 (And How to Fight Back)

“Can your team ship AI features that make you truly smile?  If you don’t smile — your customers won’t either”

Traditional B2B software and SaaS is under assault.  The leaders are all still growing, but in many cases slower than ever.  Stock prices are under pressure in 2026.

But pre-AI B2B and SaaS aren’t being disrupted by a single threat. They’re being attacked from six different vectors simultaneously.

And that’s what makes this moment so challenging — and dangerous.

Per Gartner’s October 2025 forecast, enterprise software spend will grow 15.2% to reach $1.43 trillion in 2026. Global IT spending will exceed $6 trillion for the first time. The pie is getting bigger.

So why does it feel so hard?  Because what buyers want has fundamentally changed.

Here are the six threat vectors attacking traditional B2B software right now:

#1. The Seat Slowdown

The seat is not dead. Cursor, OpenAI, Anthropic—they all use seat-based pricing too. But everyone from Workday on down acknowledges a brutal reality: customers don’t need to add as many seats each year as they used to.

Much of this is headcount slowdown. Tech hiring has flatlined. We are past peak headcount.  Shopify is holding headcount flat for the third year in a row — all while growing 31% at $11 Billion+ ARR.

And AI Agents will accelerate this, although it’s too early to know how much.  For each AI agent a customer deploys, it might be 1-10 less human software seats they need.

As Workday CEO Carl Eschenbach put it on their Q1 FY25 earnings call: “We are seeing customers committing to lower headcount levels on renewals compared to what we had expected. We expect these dynamics to persist in the near term.”

The data tells the story:

• HubSpot’s NRR flat at 103% in Q3 2025, with management noting “customer dollar retention remained in the high 80s.” They added 10,900 customers to reach 279,000 total, but expansion from existing customers has stalled. (Source: HubSpot Q3 2025 Earnings, November 2025)
• Zoom’s enterprise NRR fell to 98%—meaning existing enterprise customers are shrinking their spending. Enterprise customers declined to approximately 192,400. Revenue grew just 4% YoY. Yet the company generated $614 million in free cash flow with a 50% FCF margin. (Source: Zoom Q3 FY25 Earnings, November 2025)

When enterprise Zoom customers are literally declining in number while the company still generates $614M in free cash flow, you’re watching harvest mode in real-time. The seat expansion engine has stalled across the industry.

#2. Price Increases Are Crowding Out Everything Else But AI Spend

Yes, price increases are hurting traditional SaaS—because they’re consuming as much as 50% of incremental IT budget each year.

The endless annual (or even biannual) price increases crowd out room to buy more from others, more new products, more new features.  It becomes almost a death spiral, where there is no room in the IT budget for anything else:

• SaaS inflation hit 11.4% YoY as of January 2025—nearly 5x higher than the 2.7% average market inflation rate of G7 countries (Source: Vertice SaaS Inflation Index 2025)
• SaaS now costs $9,100 per employee, up from $8,700 in 2024 and $7,900 in 2023—a 15% increase over two years (Source: Vertice SaaS Inflation Index 2025)
• 72% of Salesforce’s 2025 growth came from price increases, not new customers (Source: SaaStr analysis of Salesforce earnings)
• 60% of vendors deliberately mask their rising prices, making cost clarity in negotiations increasingly difficult (Source: Vertice research)
• Average company now spends $49M annually on SaaS (9.3% YoY increase), with 66.5% of IT leaders reporting unexpected charges from consumption-based or AI pricing models (Source: Zylo 2025 SaaS Management Index)

Gartner’s John-David Lovelock confirmed it: “The cost of software is going up and both the cost of features and functionality is going up as well thanks to GenAI.” CIOs aren’t getting massive new piles of money for innovation. They’re getting budget increases immediately consumed by vendor price hikes—mostly justified by AI features their users may not even want.

This creates a vicious cycle. Traditional SaaS vendors need price increases to hit growth targets. But every price increase makes it harder for customers to buy new solutions—including yours.  And creates pressue to in fact cut vendors (outside of AI spend) to make room for price increases.

#3. Almost All New Budget Is Going Into AI (and Security)

Your copilot no one is really paying extra for probably doesn’t count. You are either tapping into AI Budget, or you are pretending to.

If you are merely pretending, it is very hard to grab incremental IT budget.

Here’s how the budget is shifting:

• Enterprise leaders expect ~75% growth in LLM budgets over the next year. As one CIO put it: “What I spent in 2023 I now spend in a week.” (Source: Andreessen Horowitz enterprise CIO survey)
• Last year, innovation budgets made up 25% of LLM spending. That’s now dropped to just 7%. AI has graduated from experiment to core operating expense. (Source: a16z State of AI survey)
• Businesses spent $13.8 billion on generative AI in 2024—a 6x jump from $2.3 billion in 2023 (Source: Menlo Ventures survey of 600 US business leaders)
• 76% of AI use cases are now purchased rather than built internally (Source: Menlo Ventures)
• AI buyers convert at 47% vs. SaaS’s 25% (Source: industry benchmarks)
• Spending on AI-native apps soared 75.2% YoY (Source: Zylo 2025 SaaS Management Index)

OpenAI’s annualized revenue hit $20 billion by December 2025. Anthropic grew from $87M to $7 billion in annualized revenue in less than two years.  These two alone are consuming a material chun of incremental IT budget. (Sources: Company earnings reports, Epoch.ai estimates)

If you can’t articulate how you replace humans, dramatically augment humans, or enable the previously impossible—you’re not in the AI game yet. You’re competing for a shrinking pool of non-AI budget.

#4. The Team Is Just Too Slow

This is the honest truth when I talk to so many B2B CEOs at scale. Their teams are just too slow in the Age of AI.

It’s not so much that “AI-native” teams are magical. We all use the same LLMs and APIs. It’s that they are so, so much faster. And they aren’t resistant to change.

The efficiency gap is becoming a chasm:

• AI-native startups average $3.48M revenue per employee vs. traditional mature SaaS at $610K—that’s 5.7x more efficient (Source: Jeremiah Owyang analysis of top 10 AI startups vs. top 10 SaaS companies)
• Gamma reached $100M ARR with just 50 people. That’s $2M ARR per employee. (Source: Gamma Series B announcement, November 2025). Replit hit $300m ARR with less than 300 employees.
• Copilot generates $400M in annual revenue with just 94 employees—$4.2M per employee (Source: TRG Datacenters analysis)
• OpenAI maintains $2.87M per employee even with 3,000 staff (Source: company disclosures)
• AI-native companies are reaching $100M ARR in 1-2 years vs. 5+ years historically—2-3x faster than traditional SaaS benchmarks (Source: Iconiq Growth analysis)

Meanwhile, traditional B2B amd SaaS teams are still debating what to do. When you can achieve the same scale with 5x less capital and 5x fewer people, you can move faster, experiment more, and capture market share while competitors are still in planning meetings.

Calculate your ARR per FTE. If you’re under $500K, you’re in traditional SaaS territory.

But it’s more than that. It’s speed.  Is your team wired for speed?  Or do they secretly wish it was … still 2021?  Many of us do.

#5. TAM Traps Everywhere

So many B2B and SaaS leaders at scale have ended up really single product or have seen their multi-product strategy plateau.

Not everyone wants 200 products from 1 vendor. Not unless they are beloved.

The warning signs are clear:

• DocuSign and PagerDuty have effectively infinite ratios of revenue growth to customer growth—revenue up, customers flat or down
• UiPath’s growth decelerated from 30%+ to single digits as AI disrupts their core RPA market
• Zoom’s entire strategy now centers on “seat expansion” and “price per seat increases”—the classic signs of harvest mode. Enterprise revenue grew just 6% YoY while they tout 50% free cash flow margins. (Source: Zoom Q3 FY25 Earnings)
• Box is at 102-104% net retention with 5-9% revenue growth, leaning on “AI features and Enterprise Advanced pricing” to extract more from existing customers (Source: Box earnings)

When analysts ask about growth and management talks about “seat expansion” and “price per seat increases” instead of customer acquisition, you’re watching a company hit its TAM ceiling.

The best AI companies? They’re actually expanding TAM. When your AI offering has 3-5x the ACV of your legacy product, you’re not just adding features—you’re creating new markets. That’s the difference between riding the wave and drowning in it.

#6. Your Product Isn’t Great Anymore

Okay, this is the silent one you have to be honest about.

So many of the best AI products are simply awesome. From Claude to Sora to the best AI GTM agents, these products don’t just improve productivity. They are awesome. Instantly awesome.

And that makes all the old guys look… old. Like a product you just don’t want to buy unless you have to. The joy is gone in buying traditional SaaS.

The product experience gap is measurable:

• Top quartile AI-native companies achieve 360% new logo velocity YoY in early stages vs. 71% for non-AI peers (Source: Iconiq State of Software 2025)
• AI-native conversion rate from free trial to paid: 43% vs. 37% for non-AI companies (Source: Iconiq)
• Companies with high AI adoption see sales cycles of 20 weeks vs. 25 weeks for low adopters (Source: Iconiq)

When users can build functional apps in minutes (Lovable), or get meaningful output in seconds (Claude), the bar for what constitutes a “great product” has permanently shifted. Every traditional enterprise software experience now feels like filling out forms in triplicate.

The question your customers are asking themselves: “Do I want to use this product, or do I have to use this product?”

If the answer is “have to,” you’re living on borrowed time.

Now Go Fight This. You Have To.

The companies capturing budget in 2026 will be the ones who built AI-native from day one—or successfully transformed before the window closed.

Here’s your audit checklist:

1. Are you accessing AI budget, or pretending to? If you can’t point to AI budget line items you’re winning, you’re competing for scraps.
2. What’s your efficiency ratio? Calculate ARR per FTE. Under $500K means you’re operating with traditional SaaS economics against competitors with 5x your efficiency.
3. Is your product awesome, or adequate? Be brutally honest. If customers use you because they have to, not because they want to, start rebuilding now.
4. Can your team ship weekly? If you’re still on quarterly release cycles, you’re already behind. AI-native competitors are shipping daily.
5. Can your team ship AI features that make you truly smile?  If you don’t — your customers won’t, either.

The market is growing 9.8% to $6.08 trillion in 2026. Software spending alone will hit $1.43 trillion. There’s plenty of budget out there.

The question is whether you’re positioned to capture it—or watching it flow to the companies that figured this out faster.

The window is closing.

Now go fight.

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Sources: Gartner IT Spending Forecast (October 2025), Vertice SaaS Inflation Index 2025, Zylo 2025 SaaS Management Index, HubSpot Q3 2025 Earnings, Zoom Q3 FY25 Earnings, Iconiq State of Software 2025, Andreessen Horowitz Enterprise CIO Survey, Menlo Ventures State of Generative AI 2024, Jeremiah Owyang AI Startup Analysis, Lean AI Leaderboard, company earnings reports.