Software-as-a-Service (SaaS) faces a significant threat from AI agents that can replicate software functionalities almost instantly through natural language prompts. A recent CTech analysis asserts, “SaaS is dying as a business category,” highlighting Israeli firms like Wix, monday.com, and Nice suffering from declining valuations due to AI’s commoditization of software. Investors warn that while software itself isn’t dying, SaaS struggles to maintain a competitive edge amid these changes. Notably, tools like Anthropic’s Claude Code allow users to create custom applications, diminishing the need for expensive contracts. Market dynamics have shifted; SaaS companies saw a 6.5% valuation drop in 2025. Pricing models are evolving towards usage-based and outcome-driven strategies, compelling SaaS providers to adapt rapidly. Israel’s tech ecosystem, historically reliant on SaaS, must pivot towards data-centric and integration-focused innovations to thrive in this turbulent landscape marked by AI advancements.
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