GLOSSARY: The SaaS Reset

In late 2024, Microsoft CEO Satya Nadella made a provocative claim on a podcast: "SaaS is dead."‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

The SaaS Reset

THE BELAMY

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Monday, Dec 23, 2025 | By Siddharth Jindal

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In late 2024, Microsoft CEO Satya Nadella made a provocative claim on a podcast: "SaaS is dead." A year on, the comment has taken on an ironic turn.

Microsoft has since quietly cut internal sales targets for its agentic AI offerings after struggling to find sustained buyer interest. In some cases, targets have reportedly been slashed by as much as 50%—a clear signal that the company overestimated near-term demand for its new AI tools.

Despite unparalleled distribution through Windows and Microsoft 365, Copilot has failed to gain the traction of consumer-facing alternatives like ChatGPT and Google Gemini, both of which enjoy stronger usage momentum and clearer user value.

Microsoft's arch-rival, Salesforce, is experiencing something similar. Executives at Salesforce have noted that enterprise trust in generative AI has begun to fray, largely because of the inherent unpredictability of LLMs. While LLMs are powerful, their probabilistic nature makes them difficult to rely on for consistent, mission-critical outcomes.

In response, Salesforce is recalibrating its Agentforce strategy, reducing its dependence on generative AI in favour of more deterministic forms of automation. The goal is to improve reliability, reduce unexpected behaviour and restore customer confidence.

This raises a bigger question for the SaaS industry as a whole: are enterprises starting to redirect budgets away from traditional SaaS vendors towards companies building the AI layer itself?

Revenue projections from pure-play AI companies suggest this shift may already be underway.

OpenAI is projecting $20 billion in revenue by the end of 2025, as rival Anthropic targets $9 billion in annual recurring revenue next year and $20 billion to $26 billion by 2026—numbers that would rival the scale of many established SaaS leaders.

OpenAI, in particular, is stepping up its push into large enterprises and government agencies by adopting a more hands-on consulting approach. Rather than selling AI as a plug-and-play product, the company is increasingly placing its own engineers and researchers alongside customers to customise systems for specific use cases. The model echoes strategies long used by firms like Palantir, Accenture and ServiceNow, where deep integration and bespoke deployment are key to winning complex, high-value contracts.

"We think this is the time where we can build a really significant enterprise business quite rapidly," said CEO Sam Altman, adding that he is most excited about opportunities in finance and science.

Even so, none of this means SaaS is fading away. According to IDC, SaaS still accounts for more than 10% of global IT spending, and nearly every major software company now deliver their products through the cloud.

SaaS isn't disappearing. Instead, AI, a maturing market and changing investor expectations are reshaping how it works.

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Priyadarsanie Ramasubramanian, director of engineering at Tesco, discusses the high-impact strategic journey of Tesco Business Solutions (TBS), exploring how it evolved from a traditional cost-saving back office into a global innovation engine that directly drives shareholder value. TBS has shifted from labour arbitrage to capability arbitrage, taking end-to-end accountability for core enterprise results.

That reset has been most visible in the stock market.

Recent headlines have painted a rather grim picture of SaaS company stocks. In early 2025, the SEG SaaS Index, which tracks a basket of public SaaS vendors, fell sharply while broader indexes moved higher.

According to Finerva, investor enthusiasm has shifted decisively from 'vanilla' SaaS to AI startups and platforms. As the firm notes "the speculation and hype have migrated to AI". Companies lacking a compelling AI narrative or strong revenue acceleration have seen their valuations slip.

Yet, the numbers tell a more nuanced story

A closer look at earnings reveal a different picture.

At Oracle, cloud revenue reached $8.0 billion in Q2 FY2026, up 34% year-over-year (YoY). Infrastructure cloud surged 68%, while SaaS applications grew 11%. Oracle, once written off as a cloud laggard, is now benefiting from AI-driven demand for infrastructure and SaaS products.

Salesforce, long the poster child of SaaS, has entered a more mature phase. In Q3 FY2026, subscription and support revenue rose 10% YoY to $9.7 billion. While the growth is slower, it is far from stagnant.

More importantly, AI is beginning to matter. CEO Marc Benioff said Salesforce's AI portfolio, including Agentforce and Data 360, is nearing $1.4 billion in ARR, up 114% YoY. Agentforce alone crossed $500 million in ARR, growing 330% from last year.

ServiceNow continues to deliver strong results. Subscription revenue hit $3.3 billion in Q3 2025, up 21.5% YoY, prompting the company to raise its full-year outlook and approve a five-for-one stock split.

At Workday, Q3 FY2026 revenue reached $2.43 billion, up 12.6%, with subscription revenue growing nearly 15%. Workday is bundling AI agents into HR and finance workflows, betting on automation rather than experimentation.

Then there's Zoho, the Indian bootstrapped outlier. The company now serves more than 100 million users and has crossed $1 billion in annual revenue.

Public-market peer Freshworks is also showing steadier execution. In Q3 Fy25, the company reported $215 million in revenue, up 15% YoY, pointing to improving consistency after a volatile post-IPO period.

Still, not everyone is convinced this success will be easy to replicate going forward. Y Combinator president Garry Tan has warned that the future of SaaS could look bleak, as vibe coding tools such as Replit can generate functional applications in minutes, lowering barriers to entry.

That scepticism is already visible in the markets. Finerva data shows pure-play SaaS stocks underperforming the broader tech sector by late 2025. Industry analysts, however, see this as a reset rather than a reckoning. As IDC notes, SaaS is evolving toward AI-driven, outcome-based delivery models.

Enterprises are already moving in this direction.

Xebia measures AI success by outcomes, not deployments. Enterprise programmes have delivered two to four times faster innovation, three to five times productivity gains, and up to 40% cost reduction. Clients report multi-million savings, reduced workloads, revenue uplift and faster, more consistent customer experiences, Anand Sahay, Global CEO at Xebia, revealed.

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