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Why software stocks are getting pummelled

economist.com

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Re: Why software stocks are getting pummelled

#191

Post by CreepGin »

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.

> Everyone says that but I don't see anyone cooking up the next photoshop and selling it at $3/month.

Yup, same reason you can't throw manpower at a software project and expect a proportional outcome (Brooks's Law). AI amplifies what's already there; it doesn't conjure taste or product vision out of thin air.

Re: Why software stocks are getting pummelled

#192

Post by [deleted] »

Spooky23 wrote: post #102
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.

Lol. ServiceNow, Oracle, Workday, etc are not small monthly fees. That's what the market is shitting on. (Oracle is different, given the corruption and OpenAI grift angle.) My buddy works for a company like these. He landed a $5M contract last year, which netted him almost $800k. There's alot of fat to be cooked out of this stuff, and AI will help smaller entrants attack those margins. AI-based startups like Vanta ma…

[deleted]

Re: Why software stocks are getting pummelled

#193

Post by lmm »

rglullis wrote: post #189
lmm wrote: post #178

Earlier quoted context omitted.

If running your business to '90s standards is acceptable, sure, you can use AI to automate your manual processes with the same error rate and keep doing the same thing indefinitely. But if the competitors have real software engineers and have used them to actually improve reliability, you'll be left behind.

What software engineers are being hired to work on: - A facilities management company - A bar/restaurant with a staff of 8 - An Architecture office - A Law Firm with 10 associates - A day care - A car repair shop - A cement factory - A family-owned hotel - A conference/event organizer - A video production crew - A roofing company

Ok, but if your competitors are getting/using software from a supplier who has real software engineers, and using that to operate at a higher level of reliability, then the same argument goes through.

Re: Why software stocks are getting pummelled

#194

Post by robocat »

mattmaroon wrote: post #37
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.

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…

> So what happens is a corporation ends up spending a lot of money for a square tool [SaaS] that they have to hammer into a circle hole.

You are assuming that corporations have the capability to design the software they need.

There are many benefits to SaaS software, and some significant costs (e.g. integration).

One major benefit of SaaS is domain knowledge and most people underestimate the complexity of even well known domains (e.g. accounts).

Companies also underestimate the difficulty of aligning diverging political needs within the business, and they underestimate the expense of distraction on a non-core area that there is no business advantage to becoming competent at. As a vendor sometimes our job was simply to be the least worst solution.

At least that's what I saw.

Re: Why software stocks are getting pummelled

#195

Post by roncesvalles »

margorczynski wrote: post #171
paxys wrote: post #133

Is it AI or just the market realizing that some of these companies were ridiculously overvalued to begin with. Here are the p/e ratios of companies mentioned in the article, after the said "pummeling": * ServiceNow - 70.66 * SAP - 28.70 * Salesforce - 28.15 * Workday - 73.16 * Microsoft - 26.53 So they range from "a bit high" to "still completely bonkers".

I would say that MS here is undervalued. They do not offer some small software package for a given business problem but the whole shebang - the OS, mail, calendar, office suite, IAM, cloud, etc. + support for each and the whole integration. You can't realistically replace that with some LLM solution (in the near-term at least) and they can use the AIs to reduce their costs which is mostly people.

Microsoft has consistently proven over the last five years that they have zero ability to execute. It's an astounding failure after failure to do anything right.

Re: Why software stocks are getting pummelled

#196

Post by robocat »

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…

Was the custom tool developed by copying how the existing software worked? Copying existing functionality is not always possible, and doesn't capture the real costs.

Re: Why software stocks are getting pummelled

#197

Post by its_magic »

TacticalCoder wrote: post #183
margorczynski wrote: post #171

Earlier quoted context omitted.

I would say that MS here is undervalued. They do not offer some small software package for a given business problem but the whole shebang - the OS, mail, calendar, office suite, IAM, cloud, etc. + support for each and the whole integration. You can't realistically replace that with some LLM solution (in the near-term at least) and they can use the AIs to reduce their costs which is mostly people.

> I would say that MS here is undervalued. Windows 11 though...

Yeah, that one is a real gem. BeST wInD0Wz EvAr

Re: Why software stocks are getting pummelled

#198

Post by aabajian »

There are many stories on r/ClaudeCode of developers realizing the power of that particular model.

Think of all the solo developer webapp/mobile "hot" startups (FB, Craigslist, Instagram, SnapChat, Pinterest, etc.).

It is no joke that a seasoned developer can build similar apps with Claude in...days. Not just the app, but the entire infrastructure (e.g. scalable on AWS using Terraform). This includes setting up domain registration, Elastic IPs, provisions the instances, setting up keys/ELBs/email server/Twilio/etc.

What is astonishing is how well Claude can plan. You write a spec, and it will give you an entire plan including ASCII UML diagrams, infrastructure changes, database updates, the code itself, user stories, and test cases. It will then do all the work, including "tricky" things like SSHing over a bastion to run the scripts that it wrote on an instance behind a VPC.

The main obstacle now is the context window. If it were to increase 100x or so, Claude could probably manage an entire software company's codebase at scale.

I'm sorry to say, but there's no way you could use Claude for a month or so without feeling, "We are going to need way fewer software engineers."

Re: Why software stocks are getting pummelled

#199

Post by coldtea »

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…

>The problem with this reasoning is it requires assuming that companies do things for no reason

Experience shows that that's the case at least 50% of the time

Re: Why software stocks are getting pummelled

#200

Post by jayd16 »

mattmaroon wrote: post #37
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.

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…

Why waste your time on something that isn't your core business when, presumably, the SAASes of the world will use the new tech and lower prices as well?
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