AI adoption: To what use it's put makes a big difference

Differentiation will rely less on having the most advanced AI and more on making it play to one's strengths

- NILESH JASANI

For decades, software companies thrived on the XaaS (Everything-as-a-Service) model; products were unbundled into separate, recurring subscriptions. Software empires were built on this approach, offering cloud-based services for a monthly fee. This model flourished because it addressed software piracy, ensured a revenue stream and gave business clients scalable access to enterprise-grade tools.

However, standalone subscription software is now under severe pressure. Despite rapid product and feature launches, XaaS companies are struggling to sustain revenue growth. The rise of Generative AI (GenAI) is altering the economics of software, leading to a shift where AI is no longer a product but an embedded layer. This change is visible globally and Indian businesses must adapt.

The success of XaaS stemmed from its ability to create digital moats. Adobe eliminated piracy by making Photoshop subscription-based. Salesforce unbundled Customer Relationship Management software into separate offerings, like its sales cloud and marketing cloud. SaaS firms introduced more modular pricing, offering micro-services separately to maximize revenue per customer. But GenAI has launched an era of instant copyability—new features can be copied quickly. OpenAI's ChatGPT, once a breakthrough, is now one of many AI chatbots, with free alternatives emerging just months after each new iteration.