I found the latest rules of investing podcast very helpful for coalescing a bunch of things that we have all been discussing here.

I’m struggling to keep up with how the big picture is evolving (aren’t we all) but Nick Griffin, the guest, framed some of these issues really well and it resonated with me. Admittedly, I often find myself agreeing with eloquent speakers. Even when they are subsequently proved to be wrong!

https://podcasts.apple.com/au/podcast/the-rules-of-investing/id1305615859?i=1000758151600

Constellation Software are a conglomerate of (mainly) Vertical Market Software businesses.

They should know a lot about the AI vs SaaS story – but they are in the latter camp so say that AI will be a net benefit for them.

However they’ve been doing this very successfully for a very long period of time.

They also bring some good insights - felt pretty candid and balanced to me.

I recently went back and listened to their Sep-25 call on AI impacts.

https://www.youtube.com/watch?v=C7GWGmbtAoQ

Thanks to @Solvetheriddle for the tip on checking this out.

Below is some highlights I pulled from the transcript (lightly edited for clarity and where bold is my emphasis).

I'd like to distinguish when we talk about data between the data that is the customer's data and that lives in their system and the data that is our data about the customer and how we interact with the customer and lives in our system.

I don't think is the customer's data is a barrier to anything and anyone whether it's AI or other vendors. But our data about our interactions with our customers is very proprietary and has the potential to be a pretty exciting tool.

There is a lot of focus on data being valuable and the fact that it will act as a mode but in my view what might be more important than data will actually be processes and workflows. Our businesses have incredible knowledge of the end users processes and workflows often better than the end users themselves and I believe this will be the big opportunity for us in looking at those processes try to reimagine some of them by embedding AI in in certain areas and go from systems of record, systems that capture data and allow you to edit and retrieve data to systems of action which in some cases the AI agent or the AI solution will do certain steps that will automate more of the human work.

I believe That vertical market software is the distillation of a conversation between the vendor and the customer that has gone on frequently for a couple of decades. And you distil those work practices down into algorithms and software and data and reports and it captures so much about the business and being able to examine that in a new way because of AI creates new opportunity to modify and change and suggest new approaches. So yeah, I'm hopeful that that unique and proprietary information will be of value.

AI has the potential to allow us to do way more work on making the client happy and customizing our solutions, but it also allows the client to potentially do that. And so, there's a natural tension there.

AI makes it potentially way more exciting for us to provide customization Um, but it also makes it much more likely that the client will do it themselves.

In summary

It's really important to dig in and try and understand to be an anthropologist to observe and test the claims that you hear. and try to understand the current state of the art. there's two ways to do it. One is obviously through sort of sleuthing claims that you hear. Obviously if you have trusted partners from whom you're getting evidence, that makes life a whole lot easier. The other thing you can do is be a scientist instead of an anthropologist and observing. Actually run experiments you know try AI and ideally try it against the alternative. and see if you get significant improvements in whatever it is that you're endeavoring to do. So predicting the future really hard particularly at times like these but monitoring what's happening uh in real time a whole lot easier. You just got to approach it with a healthy skepticism.

Many posts and podcasts are pointing out that Anthropic and OpenAI are still advertising/hiring administrators for software they are supposed to be replacing, such as CRM. Anecdotal but interesting.

The other thing to keep in mind is that although this technology will prove transformational over time, Anthropic just raised $30b (a record for a unporfitable start up?) and OpenAI is just behind them (in time, not raise size), so they are both in peak marketing of their potential uses phase.

This Livewire article provides a useful if simple framework for evaluating the resilience of SaaS companies in the light of the AI threat.

I like it if only because of confirmation bias - I own several of the companies in this list: