Edition 2

"People have never wanted to buy software. It's always been a means to an end... The logical conclusion of that, taken seriously, is: just get the job done for me."

For decades, software as a tool was the best approximation of this, but with AI, companies can now credibly deliver the whole outcome, not just the tool.

Foundation models are structurally unlikely to take responsibility for an outcome, leaving a gap for services companies to do so.

Right now, the AI-native services companies getting the most traction are those providing non-core but essential functions that companies would rather not do themselves.

Why might you pivot your SaaS to AI-native services? 1. Your buyer may be disappearing (read: laid off), 2. It's the best defense against "won't Claude just do this?", and 3. It's ROI or die (read: it may be easier to prove ROI in AI-native services than the often hard establishment of causality between SaaS and business outcomes).

Despite the hype, this isn't easy, and defensibility takes intentional work, because "services businesses are inherently more fungible than software platforms": proprietary data assets, a leave-behind software product ("like Palantir Foundry"), deep integration into the customer's systems of record, and a brand are the early defensibility strategies being pursued.

Last month Salesforce announced it would open its APIs and launch a "headless" product, essentially betting that in an agentic world, its value lies in the data layer, not the UI.

The announcement is a useful prompt for a more interesting question: if you strip away the UI and expose the database, what are you actually left with? Do the classic factors that make systems of record durable persist, or is there a new set of criteria?

In the SaaS era, the system of record was defensible because humans lived in the interface. In the agentic era, that advantage weakens. The defensible layers shift downward into data models, permissions, workflow logic, and compliance, and upward into networks, proprietary data generation, and real-world execution.

AI makes the easy part easy but leaves the hard part hard: "AI lowers the cost of recreating the first 80% of a system of record. The remaining 20%, which are the exceptions, approvals, compliance requirements, and edge-case workflows, is still what separates a useful wedge from a true replacement."

Read the entire article - an estimated 12-minute read - for more on this "headless" term that is the latest AI buzzword (until it isn't), several charts pitting SaaS Era defensibility against Agentic Era defensibility, and perhaps the next AI buzzword, "systems of orchestration".

Ken Griffin, on a recent step change at Citadel: "In the last few months, there has been a step change in the productivity of the AI toolkit. It is profoundly more powerful than it was just nine months ago."

"[I am speaking about] work that we would usually do with people with masters and PhDs in finance over the course of weeks or months being done by AI agents over the course of hours or days. These are not ... mid-tier white collar jobs."

"I went home one Friday actually fairly depressed by this because you could just see how this was going to have such a dramatic impact on society... that's the first time I've seen real impact in our four walls."

Ben proposes an Inference Efficiency Ratio (IER), which is AI product revenue divided by inference cost, i.e., how much revenue you're generating for every dollar you spend on inference.

It needs its own line because inference scales directly with usage, and it behaves unlike most, if not any, COGS that most software businesses have managed before. Blended COGS would hide it until the margin is already gone.

AI COGS, outcome-based pricing, and more are creating new literature and practices in software for the first time since payments or the cloud era.

L'Entrecôte is a single-item Paris steak restaurant that has thrived for decades.

"L'Entrecôte is a reminder that doing one thing, exceptionally well, is a growth strategy."

"There is always an urge to offer more variety, especially if things are not going according to plan... L'Entrecôte is a reminder that doing one thing, exceptionally well, can be enough, even if conventional wisdom says you need something for everyone."

"Turns out, the hard part isn't doing more. It's doing less."