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Why software stocks are getting pummelled

economist.com

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Re: Why software stocks are getting pummelled

#241

Post by moi2388 »

falloutx wrote: post #81
SimianSci wrote: post #50

The Value of software is going down, this much is clear to most people. It will continue to demand proper engineering for its creation and operation. But AI will lead to an increase of unique one-of-a-kind systems created by very small teams. And the world will increasingly rely on these unique systems. SaaS companies need to start reading the writting on the wall, their massive valuations enjoyed when software was h…

Everyone says that but I don't see anyone cooking up the next photoshop and selling it at $3/month. Why are we not seeing more options of every tool? Most Saas companies are sales companies at their core rather than software companies. And those sales people are so good that they can sell a todo list for millions.

Affinity. GIMP. Just to name two.

Re: Why software stocks are getting pummelled

#242

Post by fatherwavelet »

poulpy123 wrote: post #12

Maybe just maybe, the markets are not as rational as these people think they are

It is really a type of self serving religious belief in the face of bounded rationality.

On the other hand, these type of companies are really hard to value too.

Re: Why software stocks are getting pummelled

#243

Post by ethbr1 »

jlarocco wrote: post #222
WarmWash wrote: post #214

Earlier quoted context omitted.

No, it is incredibly streamlined because it tailored specifically to achieve this modernization. The paid program can do it because it can accept these files as an input, and then you can use the general toolset to work towards the same goal. But the program is clunky an convoluted as hell. To give an example, imagine you had tens of thousands of pictures of people posing, and you needed to change everyone's eye colo…

I think use cases like that will be where "AI" has the biggest wins. That's a task that I could automate as a developer, but other than LLM "vibe coding", I don't know that there's a good way for a lay person to automate it.

There are two forms of business software gen AI coding is 100% going to eat:

   1. Simple CRUD apps
   2. Long-tail / low-TAM apps
Because neither of these make economic sense for commercial companies to develop targeted products for.

Consequently, you got "bundled" generalized apps that sort of did what you wanted (GP's example) or fly-by-night one-off solutions that haven't been updated in decades.

The more interesting questions are (a) who is going to develop these new solutions and (b) who is going to maintain these new solutions? In-house dev/SRE or newly more-efficient (even cheaper) outsourced? I'd bet on in-housing, as requirements discovery / business problem debugging is going to quickly dominate delivery/update time. It already did and that was before we boosted simple app productivity.

Re: Why software stocks are getting pummelled

#244

Post by thephyber »

wtp1saac wrote: post #62
mattmaroon wrote: post #37

Earlier quoted context omitted.

A lot of these companies are not small monthly fees. And if you’ve ever worked with them, you’ll know that many of the tools they sell are an exact match for almost nobody’s needs. So what happens is a corporation ends up spending a lot of money for a square tool that they have to hammer into a circle hole. They do it because the alternative is worse. AI coding does not allow you to build anything even mildly complex…

If it is not a small fee, I do wonder - is there still advantage to having a provider which one may take out a lawsuit against if something goes wrong? To what extent might liability and security vetting by scaled usage still hedge against AI, in your view?

It’s generally a tradeoff decision between comparative advantage of a vendor versus {price cost and contracting cost}.

Contracting my cost is the difference in costs for a contract across companies versus a purely internal project. This could involve the lawyers on both sides, the time taken to negotiate which party is responsible for what deliverable / risk, the cost to enforce the contract, the time taken for negotiations/ iterations, etc.

One efficient company doing it internally is obviously efficient. Two inefficient companies negotiating a contract is obviously inefficient. The interesting questions are the other 2 quadrants, where the answer may change between the LLM case and non-LLM case.

Re: Why software stocks are getting pummelled

#245

Post by thephyber »

lateforwork wrote: post #6

> The fear is that these [AI] tools are allowing companies to create much of the software they need themselves. AI-generated code still requires software engineers to build, test, debug, deploy, secure, monitor, be on-call, support, handle incidents, and so on. That's very expensive. It is much cheaper to pay a small monthly fee to a SaaS company.

> It is much cheaper to pay a small monthly fee to a SaaS company.

How often do software projects underestimate their cost and timeframe?

The LLM-written replacement may prove to be more expensive, but may appear to be cheaper initially when all of the costs and budgets are hidden in the “fog of war”.

How effective will vendor messaging warning clients away from writing their own vendor replacements be? Of course a vendor will play up their strengths and will try to play up the clients’ weaknesses. It’s like asking a used car salesman to give you their opinion of a car on their lot — they aren’t seen as neutral observer.

Re: Why software stocks are getting pummelled

#246

Post by mattmaroon »

wtp1saac wrote: post #62
mattmaroon wrote: post #37

Earlier quoted context omitted.

A lot of these companies are not small monthly fees. And if you’ve ever worked with them, you’ll know that many of the tools they sell are an exact match for almost nobody’s needs. So what happens is a corporation ends up spending a lot of money for a square tool that they have to hammer into a circle hole. They do it because the alternative is worse. AI coding does not allow you to build anything even mildly complex…

If it is not a small fee, I do wonder - is there still advantage to having a provider which one may take out a lawsuit against if something goes wrong? To what extent might liability and security vetting by scaled usage still hedge against AI, in your view?

Well in that case the provider is likely paying for insurance and charging you a mark up, so you could likely just buy the insurance and save the markup anyway.

Re: Why software stocks are getting pummelled

#247

Post by falloutx »

moi2388 wrote: post #241
falloutx wrote: post #81

Earlier quoted context omitted.

Everyone says that but I don't see anyone cooking up the next photoshop and selling it at $3/month. Why are we not seeing more options of every tool? Most Saas companies are sales companies at their core rather than software companies. And those sales people are so good that they can sell a todo list for millions.

Affinity. GIMP. Just to name two.

Those were made long before LLMs, I was specifically asking for photoshop altenatives vibecoded in last 5 months.

Re: Why software stocks are getting pummelled

#248

Post by mns »

falloutx wrote: post #81
SimianSci wrote: post #50

The Value of software is going down, this much is clear to most people. It will continue to demand proper engineering for its creation and operation. But AI will lead to an increase of unique one-of-a-kind systems created by very small teams. And the world will increasingly rely on these unique systems. SaaS companies need to start reading the writting on the wall, their massive valuations enjoyed when software was h…

Everyone says that but I don't see anyone cooking up the next photoshop and selling it at $3/month. Why are we not seeing more options of every tool? Most Saas companies are sales companies at their core rather than software companies. And those sales people are so good that they can sell a todo list for millions.

OpenAI releases an electron slog of an app, while they have basically unlimited computing power, compared to anyone else except their direct competitors. Why aren't they just pumping out proper software built by their own AI/Codex...

Re: Why software stocks are getting pummelled

#249

Post by btown »

s5fs wrote: post #117
dehugger wrote: post #97

Earlier quoted context omitted.

surprising considering you just listed two primary use cases (exploring codebases/data models + creating documentation)

Exploring a codebase tells you WHAT it's doing, but not WHY. In older codebases you'll often find weird sections of code that solved a problem that may or may not still exist. Like maybe there was an import process that always left three carriage returns at the end of each record, so now you got some funky "lets remove up to three carriage returns" function that probably isn't needed. But are you 100% sure it's not n…

Adding that this just gets worse when databases are peppered with direct access by vibe-coded applications that don’t look at production data or gather these insights before deciding “yeah this sounds like the format of text that should go in the column with this name, and that’s the column I should use.”

And now there’s an example in the codebase of what not to do, and other AI sessions will see it, and follow that pattern blindly, and… well, we all know where this goes.

Re: Why software stocks are getting pummelled

#250

Post by aurareturn »

llmslave wrote: post #5

Software will be easy to create, which will kill moats and margins on existing products. The game is up for pure saas. Smart money started pricing this in one year ago

I totally agree with you and I think it's weird how people are downvoting you.

Software is much easier to create. It used to take 100 people to create a competitor SaaS product. Now it might take 3 people.

Traditional SaaS companies that don't have a data moat is in trouble.

Physical companies will dominate more than SaaS companies in the future. By physical, I mean energy and chips companies.

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