Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Why software stocks are getting pummelled

economist.com

Post reply on HN
Print view View original

251–260 of 285 posts

Re: Why software stocks are getting pummelled

#251

Post by aurareturn »

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.

  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.
But it's also much cheaper to develop an alternative SaaS offering, one that is perhaps more custom, nimble, cheaper than the general SaaS out there today.

In the past, maybe it might have taken 2,000 engineers to build a Figma equivalent. Today, it might take 20.

Software will be cheap to develop so competition will be extremely high. Therefore, SaaS companies should not command a high PE ratio in the stock market anymore.

It's physical companies that should command a higher PE ratio. Energy, materials, and chip companies to be exact. This was reversed pre-LLM era.

Re: Why software stocks are getting pummelled

#252

Post by PeterStuer »

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.

Bespoke software development is a huge market. It is incredibly expensive. AI coding agents are not perfect, but just usable enough to be coached through by a semi-IT-literate business person to write some scripts or a little crud site that's needed for a specific LOB task (typically a 30k-250k range project)

The alternatives before were propose the case to IT, and if lucky it gets put on the planning, outsourced to consultants, and delivered 18 months from now for an astronomical investment in both time and cost. Or go at it yourself with Excell and VBA.

The AI thing will be a just 'good enough' barely working clutch of ugly code. Then again, so was most of the consultant produced code.

Re: Why software stocks are getting pummelled

#253

Post by bdavisx »

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.

It's not that cut and dried - it all depends on what your company needs from SaaS and how big it is. SaaS companies like Salesforce don't charge a "small monthly fee" - they charge 10s of millions of dollars per month for large corporations. It's not hard at all to push that money towards AI development and have a better solution built in-house now. Yes, it still takes serious project management skills, but so does integrating Salesforce or other large SaaS software.

Re: Why software stocks are getting pummelled

#254

Post by DangitBobby »

bandrami wrote: post #209
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.

"Where is the output?" remains the giant elephant in the AI room. You can tell because people get mad when you ask that.

The output is good enough for your consumption (or internal consumption) but not good or general purpose enough to sell to anyone. Like DIY projects done by a new homeowner with access to YouTube.

Re: Why software stocks are getting pummelled

#255

Post by ca_tech »

PeterStuer wrote: post #252
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.

Bespoke software development is a huge market. It is incredibly expensive. AI coding agents are not perfect, but just usable enough to be coached through by a semi-IT-literate business person to write some scripts or a little crud site that's needed for a specific LOB task (typically a 30k-250k range project) The alternatives before were propose the case to IT, and if lucky it gets put on the planning, outsourced to…

This exactly. How many small businesses were running some sort of Access database built by someone who knew just enough to meet their business process needs? "Brenda always orders these parts on Tuesday so make sure there is a Tuesday ordering table." Eventually some SaaS solution came in and they evolved their business process because of the proposed benefits. I expect we are going to see a resurgence of good enough software created for the real world hodgepodge of business practices. Not a bad thing in the short term as it will creating adequate efficiency, but long term we are going to reap the technical debt. My prediction is that the next SaaS evolution is going to be platforms for these random solutions. Just as Salesforce captured CMS market, someone is going to capture the AI agent market where users can write and host their LOB code agnostic to the rest of their infrastructure stack and 'slightly' reduce that technical debt.

Re: Why software stocks are getting pummelled

#256

Post by grvdrm »

WarmWash wrote: post #140
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…

I have a prime example of this were my company was able to save $250/usr/mo for 3 users by having Claude build a custom tool for updating ancient (80's era) proprietary manufacturing files to modern ones. It's not just a converter, it's a gui with the tools needed to facilitate a quick manual conversion. There is only one program that offers this ability, but you need to pay for the entire software suite, and the pro…

Is this a tool deployed into an internal production environment? Or is it more of “dev” or “business user desktop” type app that isn’t deployed formally.

I’m working with a company now that thinks that AI is great until you need to deploy to Prod. Probably true in some cases, especially for tools built with Prod environments as targets.

But I’m using Claude Code for a tool that doesn’t absolutely require that sort of environment. It helps a company map data (insurance risk exposure data) to a predefined intermediate layout and column schema.

I know that I’ll run into resistance once I say “this could be deployed to Prod” but I think AI is a major win for Prod-like things.

My professional world largely lives in spreadsheets and relational databases. Neither going anywhere anytime soon. And spreadsheets are the currency of the business and industry in so many ways. They are very prod-like in my opinion.

Re: Why software stocks are getting pummelled

#258

Post by freejazz »

tesch1 wrote: post #213
freejazz wrote: post #95

Earlier quoted context omitted.

AI-generated code is not copyrightable and therefore cannot be protected through a conventional licensing scheme.

Support for this claim?

In the US, you can only copyright expressions made by humans. Which part of it do you have trouble with?

Re: Why software stocks are getting pummelled

#259

Post by magicalist »

mwigdahl wrote: post #161
magicalist wrote: post #149

Earlier quoted context omitted.

> It's not just a converter, it's a gui with the tools needed to facilitate a quick manual conversion. is this like a meta-joke? > I have a prime example of this were my company was able to save $250/usr/mo for 3 users by having Claude build a custom tool for updating ancient (80's era) proprietary manufacturing files to modern ones. The funny thing about examples like this is that they mostly show how dumb and ineff…

It's not just a joke, it's a meta-joke! To address the substance of your comment, it's probably an opportunity cost thing. Programmers on staff were likely engaged in what was at least perceived as higher value work, and replacing the $250/mo subscription didn't clear the bar for cost/benefit. Now with Claude, it's easy to make a quick and dirty tool to do this without derailing other efforts, so it gets done.

> Programmers on staff were likely engaged in what was at least perceived as higher value work, and replacing the $250/mo subscription didn't clear the bar for cost/benefit.

Agreed absolutely, but that's also what I'm talking about. It's very clear it was a bad tradeoff. Not only $250/month x three seats, but also apparently whatever the opportunity cost just of personnel tied up doing "2-3 files a day" when they could have been doing "2-3 files an hour".

Even if we take at face value that there are no "programmers" at this company (with an employee commenting on hacker news, someone using Claude to iterate on a GUI frontend for this converter, and apparently enough confidence in Claude's output to move their production system to it), there are a million people you could have hired over the last decade to throw together a file conversion utility.

And this happens all the time in companies where they don't realize which side of https://xkcd.com/1205/ they're on.

It's great if, like personal projects people never get started on, AI shoves them over the edge and gets them to do it, but we can also be honest that they were being pretty dumb for continually spending that money in the first place.

Re: Why software stocks are getting pummelled

#260

Post by magicalist »

graeme wrote: post #167
magicalist wrote: post #149

Earlier quoted context omitted.

> It's not just a converter, it's a gui with the tools needed to facilitate a quick manual conversion. is this like a meta-joke? > I have a prime example of this were my company was able to save $250/usr/mo for 3 users by having Claude build a custom tool for updating ancient (80's era) proprietary manufacturing files to modern ones. The funny thing about examples like this is that they mostly show how dumb and ineff…

The problem with this reasoning is it requires assuming that companies do things for no reason. However possible it was to do this work in the past, it is now much easier to do it. When something is easier it happens more often. No one is arguing it was impossible to do before. There's a lot of complexity and management attention and testing and programmer costs involved in building something in house such that you n…

> No one is arguing it was impossible to do before. There's a lot of complexity and management attention and testing and programmer costs involved in building something in house such that you need a very obvious ROI before you attempt it especially since in house efforts can fail.

I mean, I'm absolutely familiar with how company decision making and inertia can lead to these things happening, it happens constantly, and the best time to plant a tree is today and all that, but the ex post facto rationalizations ring pretty hollow when the solution was apparently vibecoded with no programmers at the company, immediately saved them $750 a month and improved their throughput by 8x.

Clearly it was a very bad call not to have someone spend a couple of days looking into the feasibility of this 10 years ago.

Post reply on HN