Partner Finn O’Driscoll recently attended SaaS Metrics Palooza and SaaStock, two of the most anticipated gatherings in the SaaS community.
This article is a review of Finn’s key takeaways from both events, capturing the standout themes, insights, and conversations that shaped this year’s discussions.
Unsurprisingly, AI dominated the agenda across both events. The space continues to evolve at breakneck speed, and the conversations reflected that.
From strategic shifts to emerging challenges, here’s what stood out.
Making AI a core R&D priority
The companies leading the AI transition aren’t treating it as an experiment; they’re making it the centrepiece of their innovation strategy.
AI-native companies allocate around 50% of R&D spend to AI.
SaaS-native companies currently dedicate only ~20% on average.
This growing disparity will define the competitive landscape in the coming years. Success depends on moving AI from a side project to a core strategic pillar.
Jevon’s Paradox and the future of SaaS
A recurring theme was the application of Jevon’s Paradox to SaaS; technological advancements that improve efficiency often led to greater consumption rather than less.
In other words, AI is poised to act as a cheat code for SaaS rather than an existential threat, but only if SaaS-native businesses move fast enough. Protecting and expanding existing moats will require rapid, focused investment in AI, as the next generation of AI-native competitors is building from the ground up.
Optimising for moat, not margin
The consensus was clear: SaaS businesses should be optimising for moat, not margin.
AI is reshaping traditional SaaS economics, and the long-standing 80% plus gross margins may no longer be sustainable.
Expect AI-native gross profit margins to settle closer to 50%, reflecting the higher computational and data costs of operating AI-powered platforms. Operators and investors must quickly adjust expectations and redirect capital toward AI adoption and integration to remain competitive.
Making AI a core R&D priority
The companies leading the AI transition aren’t treating it as an experiment; they’re making it the centrepiece of their innovation strategy.
AI-native companies allocate around 50% of R&D spend to AI.
SaaS-native companies currently dedicate only ~20% on average.
This growing disparity will define the competitive landscape in the coming years. Success depends on moving AI from a side project to a core strategic pillar.
New economics: value capture over predictability
AI is allowing SaaS providers to capture a larger share of the economic value they create, often through outcome-based pricing or usage-linked models.
However, this shift typically comes with reduced revenue predictability, as a greater portion of ARR becomes contingent on performance or outcomes rather than fixed seat-based subscriptions.
The state of AI monetisation
AI monetisation strategies remain highly fragmented across the industry:
- 29% – Incorporating AI within existing packages at no extra charge
- 24% – Offering AI as a premium feature at additional cost
- 20% – Providing AI as paid add-ons
- 14% – Creating separate AI-focused product lines
- 11% – Still evaluating monetisation strategies
- 2% – Unknown
This diversity reflects both the nascent and dynamic nature of AI adoption in SaaS and underscores the experimentation still underway.
From Systems of Record to Systems of Action
The next great SaaS moat will be built by embedding products deeply into customer workflows, moving from being a System of Record (‘What happened?’) to a System of Action (‘Make it happen’).
Winning companies will:
- Integrate AI directly into user workflows and decision-making
- Optimise their AI models using proprietary customer data
- Leverage existing relationships and data assets to build defensible differentiation
The ‘Triple Line’ of SaaS defence
As AI reshapes the landscape, SaaS businesses will need to strengthen what we’re calling the ‘Triple Line’ of defence:
- Data: harness proprietary usage and customer data for insight and innovation
- Domain expertise: apply deep industry knowledge to create tangible value
- Integration: connect people, processes, and technology to drive true adoption and impact
Together, these layers form a defensible position in an increasingly AI-driven market.
New economics: value capture over predictability
AI is allowing SaaS providers to capture a larger share of the economic value they create, often through outcome-based pricing or usage-linked models.
However, this shift typically comes with reduced revenue predictability, as a greater portion of ARR becomes contingent on performance or outcomes rather than fixed seat-based subscriptions.
The state of AI monetisation
AI monetisation strategies remain highly fragmented across the industry:
- 29% – Incorporating AI within existing packages at no extra charge
- 24% – Offering AI as a premium feature at additional cost
- 20% – Providing AI as paid add-ons
- 14% – Creating separate AI-focused product lines
- 11% – Still evaluating monetisation strategies
- 2% – Unknown
This diversity reflects both the nascent and dynamic nature of AI adoption in SaaS and underscores the experimentation still underway.
The bottom line
It’s an extraordinarily exciting time for SaaS.
AI is not just reshaping products; it’s redefining business models, economics, and defensibility.
For those willing to invest boldly, rethink their moats, and embed AI at the core of their strategy, the opportunity to build category-defining SaaS businesses has never been greater.
Author
Finn O'Driscoll
Managing Director
I have over ten years of M&A experience advising high-growth technology businesses, founders, management teams, and corporate investors. I lead Clearwater’s software practice and am passionate about contributing to the continued growth and development of the European software industry alongside the talented team here at Clearwater. I also have extensive transaction experience across other technology verticals including IT Managed Services, Digital Transformation, B2B Data, and Information Services. I have transacted to and for many leading international strategic and private equity investors including Vista Equity Partners, Macquarie Capital, ECI Partners, Inflexion, Bowmark, EMK, Livingbridge, LDC, and Tenzing.
Transactions
Not just numbers on a balance sheet, our transactions represent over 20 years’ commitment to our clients’ future. Helping them change the game. Even before it was ready to be changed.
Supporting a strategic acquisition in customer experience technology
Adviser to Palatine-backed FourNet on its refinancing to support its acquisition of SVL Business Solutions
Cross-border acquisition creates platform for growth in managed IT services
Adviser to Wanstor on its sale to Previder
Leading Dutch warehouse management software strengthens its e-commerce software network
Adviser to Picqer on its sale to Katapull
Sale of a French SaaS provider specialising in recruitment automation
Adviser to Eqwa on its sale to Cegape
