Nate Clark's Musings

We talked recently about the rise of AI in software development is going to drive down margins for SaaS companies, since it will make the cost of producing software so much lower. Just wanted to post about two recent updates I’ve come across as further evidence that this trend is well underway.

First is a really well done paper by researchers at Microsoft, Princeton, and MIT showing that real-world developers using generative AI tools accomplished 26% more tasks than those who didn’t. The productivity gain was higher for junior developers (interestingly more senior developers showed little-to-no productivity benefits). This is the first study I’ve seen in the real world with a properly done randomized trial. Very cool result.

It’s also worth noting that the paper used GitHub Copilot as the AI assistant, and I don’t know anyone who would claim that Copilot is the best tool out there, and I’d expect much better results as the tools get more effective. If you’re currently a developer, start embracing these!

The second update which I cannot stop thinking about came from Klarna’s recent earnings call.

CEO Sebastian Siemiatkowski said that the company is shutting down its software as a service provider (SaaS) Salesforce and within a few weeks will shut down Workday.

There are large ongoing internal initiatives that are a combination of AI, standardization, and simplification. As an example, we just shut down Salesforce. Within a few weeks, we will shut down Workday. We are shutting down a lot of our SaaS providers, as we are able to consolidate,” said Siemiatkowski on a conference call.

Siemiatkowski added that with the help of AI, the company is able to standardize and create a more lightweight tech stack to operate more effectively with higher quality.

Salesforce and Workday are massive applications. But with increased productivity from AI, Klarna was able to devote a small number of internal developers to rewrite the functionality they needed (and were paying a LOT to other companies for).

This will have massive ramifications on the SaaS ecosystem as more companies start to follow Klarna’s lead. You can all forget the Rule of 40 – in 5 years we’ll be talking about the Rule of 10 😆