Posted by throwawaypm123 13 hours ago
Tell HN: I'm a PM at a big system of record SaaS. We're cooked
BigCo SoRs, differences aside, have historically been a good, low-drama way to make a living in tech. RSUs, ~40-hour weeks, generally smart colleagues, and real problems to solve for F100 customers. Our products work, but are not loved. Enterprise sales runs the show.
I have no concerns about a scrappy AI startup or indie dev replacing us. The real threat is other SoR vendors, the cloud providers, and of course the AI labs themselves. All of them are coming for our SaaS margins, and as an industry we are woefully unprepared.
Every major SoR has its core competency (HR, ERP, CRM, etc.), but also a long tail of lesser-known portfolio products that increasingly overlap with other SoRs and serve as growth vectors. The competition here is only going to accelerate. As a huge enterprise, you’re not going to rip out a component your SoR for a cool startup or a vibe-coded internal tool... but you would seriously consider doing so if the alternative comes from another SoR vendor you use and is cheaper.
The public cloud providers are explicitly positioning themselves as the place where your business data, AI agents/LLMs, and critical applications live. This is on a direct collision course with SoRs’ own AI platform ambitions that they are banking on for growth.
The AI labs themselves have the same ambition. Note where systems of record sit in OpenAI’s Frontier press release marketecture: a dotted, nearly invisible line at the bottom [2].
SoRs aren’t dead, and they’re not being disrupted by vibe coders. But the path forward is brutal.
Which brings me to the hardest point that applies to me as well. SoR teams are not known for fast execution, cutting edge AI adoption, product taste, or engineering excellence. These are exactly the strengths of our new competitors. We also struggle to attract this kind of talent. People who fit that profile go to FAANG or the labs. We could try to compete with RSUs, but those are down ~50% over the past few months, and the industry is under increasing pressure from investors around stock-based comp and M&A in general.
The goal here is an honest take from someone on the inside. There’s a difficult road ahead. I think SoRs will always continue to exist in some form but I don’t think the recent market corrections are overblown.
[1] https://news.ycombinator.com/item?id=46888441 [2] https://openai.com/index/introducing-openai-frontier/
1) previously healthy surplus in the SaaS market is shrinking
2) established SaaS companies have lost all existing moats
3) due to the previous two points, investors are reluctant to spend new dollars in this market to expand or retain market share, making life in those companies miserable.
> But the path forward is brutal
And soon™ this is coming to your industry as well!
Margins that were very attractive before, but many industries have small margins and work just fine. restaurants abound on tiny margins.
So I don't think anyone is going to be celebrating if the message is "Don't worry guys, SaaS businesses are now like restaurants: low margin and high risk."
Don't blame AI for this correction, then.
A poor supplier being replaced by a better supplier that is capable at leveraging AI for a product quality and speed of development bump.
My company just switched from slug slow product management driven tech to startup footing. Everything is up for grabs everywhere. And it's always like this in tech when there's a sea change.
> We also struggle to attract this kind of talent. People who fit that profile go to FAANG or the labs.
Hires aren't the problem, culture is. I can take the same new dev that a FAANG hires and turn them into a slug with the development process I see at most b2b saas companies. The flipside is true too: you can take an average dev and set them free and amazing things happen.
Most B2B SaaS companies have three people managing tickets for every developer, executives don't understand bugs are the byproduct of progress (and will be fixed quickly), have name brand enterprise agile-fall style processes, have six months of sprints preplanned, are fixated on UI testing, and do releases like they are publishing CD ROMS. This kind of culture is literally repugnant to innovators, problem solvers, people doing things a new way, and people who value doing things well (because fighting everyone to change for better sucks).
Shoot me now.
Kinda smells like viral marketing.
Their only options are to acquire and gobble up as competition shows up or delay by some form of obstruction to current clients leaving them.
One-off SaaS tools will probably see the quickest consolidation, either because the big SoR vendors can build them too with AI tools and offering some reduction in in IT complexities (like vendor mgmt, renewal headaches, integrations, security postures).
New age companies with SoR capabilities being built or having unique and differentiated capabilities will challenge the current SoR players.
SMBs will adopt fast, offer opportunities to new age SoRs.
ERP world is legacy beyond belief and the technology is neither amazing nor fast as you mention. The trick here is the profound awareness of business processes. I'm a techie in ERP world and deeply aware the business transformation team are the important ones (on implementation... Sales, otherwise,of course :/). The business rules for what we as techies think is simple (payroll, taxes, accounting - how complicated can it be??) are mind blowingly complex yet often poorly documented. I honestly don't know yet if today's LLM can grok them both deeply and safely / consistently enough
But it is the way of things.
No one will migrate away in a huge hurry, you’ve got plenty of time to make your plan.
Great insider feedback. What is the switching cost for a SoR ? Is it embedded so deeply that is impossible to switch (like IBM mainframes). Wont the incumbents make a good living increasing per-seat prices each year to their required growth rates, and their customers have no option but to pay-up.
> Great insider feedback.
Also a common LLM trope.
High. SoR systems tend to either be where or are closely tied to wherever the work is being done. It's an incredibly disruptive thing to rip out and change all of the process and backend systems that run your business. It's why land and expand is such an effective strategy for these companies and everything is sold as an interconnected economy of scale.
I'm quite a bit more bullish than OP, but I would be lying if I said I wasn't worried about the way the market has reacted and the 'new multiple' trend.
There is always going to be a market for a business operating system, we just might be a similar situation to Netflix/HBO last decade, where the race was about which side could shore up their core weakness first: content engine vs. streaming platform.
We're seeing the same thing happen now. Enterprise has the data, business logic, customer base and distribution but it needs to add SotA AI capabilities into the core of the product without just bolting something on. The Ai companies have the models, talent and are agile enough they can turn out demos and compelling pitches abut they're missing the enterprise data, domain specificity and being able to operate with the regulatory and compliance scaffolding that is required to operate in the enterprise.
Both sides are racing toward the middle, but the problems left for the AI companies to solve are arguably the harder ones, especially when the models themselves are rapidly commoditizing or are open source. It's tough to build enterprise-grade infrastructure on top of a layer where your core differentiation is eroding.
There was another comment in this thread about value moving to the agent layer. I'd push back a little on this. An agent is only useful if it has reliable, governed access to the system where the work actually happens. The SoR that builds a credible agent platform on top of its own data and workflow layer has a structural advantage over a standalone agent tryin to orchestrate across five different systems via an API. IMO the strong foundation wins out here.
Another factor is customer expectations, which can have a way of turning into self-fulfilling prophecies. All the hype around AI in software creates a sense of overall change in the air, making large enterprise managers question if they need to do anything about it. And just by increasing how often that question is asked, orgs will end up changing more things faster than before.