We did not reach a conclusion on the outlook for SaaS Repatriation at the end of our previous blog post Will ChatGPT Kill SaaS?. But that doesn’t mean the fledgling trend won’t have any impact.
(For the uninitiated, “SaaS Repatriation” is the new movement where companies stop using SAAS and develop the they functionality they use inhouse via ChatGPT, GitHub Copilot, Replit and other GenAI coding copilots.)
I foresee at least three areas of impact of SaaS Repatriation in the short term.
1. End of point SAAS solutions?
Much of our assessment of AI BUILD versus SAAS BUY option in Will ChatGPT Kill SaaS? implicitly assumed repatriation of large and integrated SAAS suites like NetSuite, Salesforce and WorkDay. But there are zillions of small, point SAAS solutions. AI BUILD might be able to replicate their functionality quite easily and kill them.
Last week my friend/cofounder @matthew_loper used o1 to turn the transcript of our meeting we had into a project spec, then gave that to @Replit agent. Next day he demo’d the app.
Mind blowing workflow.
Yes, he had to fix some issues but this stuff is only getting better.
— Eric Rachlin (@eerac) October 5, 2024
2. Extract discounts from SAAS vendors
Over the years, customers have noticed that three years’ subscription fees for their SAAS products exceeds the lifetime license fee for their COTS products. This has made them realize that SAAS vendors have very high margins. SaaS Repatriation enables them to posture that they will shut down their SAAS products and use AI to build the required functionality inhouse. Savvy SAAS customers will no doubt use this threat to extract discounts from their SAAS vendors.
3. Pump up valuation of GenAI code assistants
Even if AI never kills SAAS, the posturing that it will disrupt SAAS will create tons of value for GenAI coding copilot startups and their venture capitalists, just as it did for eBook, EV, Fintech and other products that never killed their incumbent counterparts.
eBook hasn’t killed print book.
EV hasn’t killed ICE.
Fintech hasn’t killed Bank.
Digital Payment hasn’t killed Cash.
Crypto hasn’t killed Fiat.
But that hasn’t stopped the creation of trillions of dollars in value by spreading the propaganda that they will. #GoFigure.— Ketharaman Swaminathan (@s_ketharaman) January 27, 2022
While introducing the expression SaaS Repatriation at the start of Will ChatGPT Kill SaaS?, I tipped my hat to the term “Cloud Repatriation“.
For the uninitiated, cloud repatriation is the trend of companies moving their workloads from public cloud to private cloud, largely to save costs.
Cloud Repatriation shot into the limelight when Basecamp and Dropbox announced in 2022 that they were shutting down their cloud infrastructure and moving their workloads back to onprem datacenters. Their move was prompted by the mounting costs of cloud versus predictable costs of onprem.
Two years later, let’s see where cloud repatriation stands.
Dell recently pointed to the repatriation to onprem infra by German retailer Lidl and claimed that 83% of its customers are planning a similar move.
In sharp contrast, Gartner recently dropped Cloud Repatration from its Hype Cycle, citing very little client interest in the topic.
These are diametrically opposite views!
If the jury is still out on cloud repatration after so many years, I don’t expect a conclusive outlook to emerge on SaaS Repatriation for the forseeable future.
Meanwhile, vendors and VCs of GenAI code assistants will posture that GenAI will kill SAAS to pump up the valuation of their companies whereas vendors and VCs of SAAS will claim the opposite to preserve the valuation of their companies.
Life will go on.
