There has been much wild speculation about the future of software-as-a-service (SaaS) applications in light of artificial intelligence (AI), with suggestions that a "SaaSpocalypse" will occur due to AI sweeping away the need for core SaaS-based systems. This is not very helpful for insurance companies weighing up their future IT adoption strategies. It is clear that AI tools will be valuable, but customers need a calm, rational discussion about how best to implement the technology in enterprise IT settings. If SaaS vendors want to prove they still matter, they must demonstrate that SaaS is not just relevant but is the indispensable foundation of every successful IT transformation.
Cloud-native applications are the right foundations to embrace AI
The crucial questions customers need to address when deciding how best to transform their IT systems are not whether they should replace their SaaS applications with AI, but what is the best transformation strategy to minimize disruption and provide measurable returns. Having extensive contextual understanding of the specialist workflows and language that different applications use means SaaS vendors are better placed to ensure AI tools work effectively for insurers. The leading AI vendors understand this point, because they know building enterprise software for mission-critical applications is hard and not something an AI agent can unpick overnight.
However, this does not mean SaaS vendors can rest easy. I would agree with Insight Partners: "Trust, user stickiness, and existing ROI may provide some breathing room for cloud-natives to build new AI features that cement value, but they have to hustle to keep that position."
The key phrase here is "cloud native." Applications built for the cloud are better placed to help customers embrace AI, because this approach requires interoperability between systems. This means AI tools can access a single view of all the data across an organization, which is critical if insurers are to have confidence in the decisions these tools make.
Effective AI adoption requires a deep understanding of the insurance industry
That said, being able to integrate AI more easily is not the main reason customers turn to SaaS vendors instead of going to the AI tools providers. Customers are worried about the squeeze on margins due to current economic conditions, and the unprecedented unpredictability in markets around the world. They only care that their business applications help them address these issues. SaaS vendors must show they understand this driver for IT transformation and be prepared to take risks to prove their commitment.
This requires a dramatic rethink of how value is delivered. The agentic AI model switches the focus to achieving business outcomes rather than simply processing transactions. The technology can proactively interpret objectives, break them into tasks, make decisions within defined boundaries and monitor progress.
This resets how users interact with applications. Consequently, SaaS vendors must leverage their specialist industry knowledge to demonstrate they can deliver outcomes insurers want.
It is somewhat ironic that these vendors, who themselves a mere 15 to 20 years ago were seen as the big upstarts, must prove their worth in the face of new technologies. The winners will be those who seize the opportunity, are ambitious and don't just try to defend their existing position. This is likely to be one of the most exciting chapters in the evolution of enterprise software so buckle up and enjoy the ride!
