The market keeps talking about an “AI bubble.” That misses the real fragility.
The bigger bubble risk is in SaaS application software—because AI enables new entrants to build broader, business-native solutions that solve conjoined problems end-to-end, not isolated tasks. That shifts value away from “apps glued together with humans” toward platforms that understand the business process.
The Nokia Trap (what’s actually changing)
Nokia didn’t lose because people wanted a cheaper phone or a slightly better phone.
It lost because the category stopped being “a phone.” The product became a computing platform that absorbed whole new jobs (apps, internet, maps, media). Nokia was optimised for the old definition of the product.
SaaS is facing the same trap:
- Many SaaS tools are optimised for problems not productivity of work
- The next generation solves the whole job, across steps, systems, and teams
When the category expands, the old leaders can look suddenly narrow.
The real threat: “bigger problem” products
Most businesses don’t have “a CRM problem” or “a ticketing problem” or “a billing problem.”
They have a revenue problem, a service problem, a fulfilment problem, a compliance problem—spanning multiple tools and handoffs.
Classic SaaS often works like this:
- a set of apps
- connected by integrations
- held together by people doing manual work, chasing exceptions, updating fields, and reconciling gaps
AI-native challengers can compete on a different axis:
- one model of the business workflow
- one place where context lives
- automation that moves work forward across steps
- handling exceptions without a human being the glue
That’s not “cheaper seats.” It’s a different product category: outcome-focused systems rather than tool-focused apps.
Why this hits SaaS valuations
If buyers shift from “best tool” to “best end-to-end outcome,” the SaaS moat changes:
- Feature depth matters less than workflow ownership
- Integrations matter less than shared context
- UI matters less than automation and decisioning
- Point solutions get re-framed as “components,” not “systems”
That’s exactly where multiples compress: when a market realises a product is becoming a replaceable module inside a bigger platform.
What to watch (the early signs)
Not “seat price down.” Look for:
- new vendors winning by promising cycle-time reduction (close faster, ship faster, resolve faster)
- incumbents expanding into adjacencies defensively (copying platform moves)
- customers consolidating around process owners (systems of action), not systems of record
- services headcount shifting from “ops glue” to “exception oversight”
Bottom line
AI isn’t just making software cheaper.
It’s enabling a change in what customers buy: solutions that map to the business, solve multiple connected problems, and reduce the need for humans to stitch workflows together.
That’s the Nokia Trap for SaaS: people keep asking for “better apps” right up until the product category shifts to “business platforms that run the work.”
“–” More exposed SaaS / app-layer
- Salesforce (CRM) — CRM
- ServiceNow — NOW
- Workday — WDAY
- Adobe — ADBE
- Atlassian — TEAM
- Snowflake — SNOW
- Datadog — DDOG
- HubSpot — HUBS
- Zoom — ZM
- DocuSign — DOCU
- Okta — OKTA
- Twilio — TWLO
- Shopify — SHOP
- Monday.com — MNDY
- Asana — ASAN
- Smartsheet — SMAR
- PagerDuty — PD
- Freshworks — FRSH
- Elastic — ESTC
- GitLab — GTLB
- MongoDB — MDB
- Cloudflare — NET
- Unity — U
- Toast — TOST
“+” Likely beneficiaries (AI platform / infra / “system-of-action” enablers)
- Palantir — PLTR
- Microsoft — MSFT
- Alphabet — GOOGL
- Amazon — AMZN
- Meta — META
- NVIDIA — NVDA
- AMD — AMD
- Broadcom — AVGO
- TSMC — TSM
- ASML — ASML
- Arista Networks — ANET
- Super Micro Computer — SMCI
- Oracle — ORCL
- IBM — IBM
- Cisco — CSCO
- Palo Alto Networks — PANW
- CrowdStrike — CRWD
- Zscaler — ZS
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