Question for Tech Investors
Trying to learn more about the considerations of using Claude instead of enterprise software. To my understanding, it’s getting cheaper to run AI workflows, but still astronomically more expensive than traditional SaaS.
CRM/ERP workflows don’t seem like they need to be extravagant, so why wouldn’t firms stick with the traditional enterprise systems? I feel like using Claude for the same workflow that exists in SaaS is just shooting a deer with a missile — overkill.
Obviously the market doesn’t agree with this point, and it’s been beat to shit on the news. My question for tech investors — is it actually viable for corporations (and sustainable for LLMs) from a cost standpoint to replace these workflows, or does the overkill argument make sense? Ive heard the price action is based on repriced terminal value (not NTM impacts etc), but what am I still missing here? Any thoughts are greatly appreciated
Bro you're cooking but slightly off the mark, the thesis isn't LLMs replacing Salesforce, it's LLMs eating the army of associates doing the spreadsheet jockey work between the SaaS tools (reconciliation, data entry, etc). Terminal value math pencils out when you frame it as labor arb not software arb, the TAM is just headcount not seat licenses. Fair point on unit econ tho, human-in-the-loop still mogs the margin story rn.
-- a fellow chronically online wharton degen
I know who this is
Based on the most helpful WSO content, your argument about overkill in using AI like Claude for CRM/ERP workflows aligns with some of the skepticism around AI adoption in enterprise software. Here are a few key considerations:
Cost Dynamics:
While AI workflows are becoming cheaper, they are still significantly more expensive than traditional SaaS solutions for many use cases. SaaS platforms like Salesforce or Microsoft Dynamics are optimized for specific workflows, offering cost efficiency and scalability. AI models like Claude, on the other hand, require substantial computational resources, which can make them cost-prohibitive for routine tasks.
Workflow Complexity:
CRM/ERP workflows are often straightforward and don't necessarily require the advanced capabilities of an LLM (Large Language Model). Traditional SaaS solutions are designed to handle these tasks efficiently without the need for the computational overhead of AI.
Vendor Lock-In and Control:
As highlighted in WSO discussions, SaaS providers like Salesforce already have significant vendor lock-in, which makes switching to AI-based solutions less appealing. Additionally, SaaS platforms are deeply integrated into enterprise ecosystems, and replacing them with AI would require significant investment in retooling and training.
Sustainability of LLMs:
The sustainability of LLMs for enterprise workflows is a valid concern. The high costs of running these models, combined with their general-purpose nature, make them less efficient for specific, repetitive tasks that SaaS platforms excel at. This supports your "overkill" argument.
Market Sentiment and Valuation:
The price action you're observing likely reflects long-term expectations about AI's transformative potential rather than immediate impacts. Investors may be betting on AI's ability to unlock new use cases and efficiencies in the future, even if current applications like CRM/ERP workflows don't justify the cost.
In summary, your skepticism about using AI like Claude for traditional enterprise workflows is well-founded. The overkill argument makes sense for now, especially given the cost and efficiency advantages of SaaS platforms for these tasks. However, the market's optimism may stem from the broader potential of AI to revolutionize other areas of enterprise operations in the long term.
Sources: Salesforce: May The Force Be With You, ECB Hikes, Markets Respond | The Daily Peel | 7/22/22, Salesforce: May The Force Be With You, Is this a stupid idea? Leaving PE?, Freelance CRE Analyst Services on the rise?
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