In a recent podcast interview, Satya Nadella, CEO of Microsoft, outlined a bold vision for the business application in a world dominated by AI.

According to him, the era of software-as-a-service (SaaS), as we know it, is coming to an end, with AI paving the way for a new generation of applications.

The Middle East’s software-as-a-service (SaaS) sector is at a similar inflection point. For quite a long time, most SaaS companies have used pricing strategies that require customers to buy a more expensive plan to unlock a new feature. The goal has always been to push customers into buying more to get more.

But with AI entering the fray, solutions will become more client-specific, and it will become imperative for SaaS companies to start charging their clients based on outcomes. 

RISK BECOMING IRRELEVANT

If they don’t, they risk emerging AI upstarts snatching away what they’ve spent years building. 

“Companies that do not integrate AI into their core offerings risk becoming irrelevant,” says Udo Sglavo, Vice President of Applied AI and Modeling at SAS. “Traditional SaaS providers that overlook AI’s potential to enhance user experiences and automate processes will lose market share to AI-first competitors.”

According to Sid Bhatia, Area VP & General Manager, Middle East, Turkey & Africa at Dataiku, Middle East SaaS firms are beginning to move beyond the traditional playbook as AI gains traction, driving demands for smarter, more adaptive solutions. However, he adds, “Companies that fail to integrate AI capabilities into their offerings risk becoming obsolete, as the region increasingly values automation, personalization, and real-time analytics.”

For decades, SaaS applications have been indispensable in powering business operations—CRM, HR, ERP Systems, project management tools, and collaborative workspaces have all built their dominance on fundamental premise—CRUD (Create, Read, Update, Delete) databases with business logic layered on top.

“But in the future, this logic will migrate to AI agents,” Nadella said in the interview. 

These agents will operate across multiple apps or databases, independent of the back-end system. Once this takes place, companies may start replacing back-ends with AI agents, disrupting the role of traditional SaaS apps.

This means that AI agents, as intelligent orchestrators, will integrate seamlessly across multiple SaaS applications. 

COMPANIES RETHINKING

Experts agree that with the advent of AI, many companies are reassessing their SaaS strategies. This reassessment is not about diminishing reliance on IT professionals, says Fayez Eweidat, Head of Enterprise – Middle East, Turkey & Africa at Juniper Networks, but about how to effectively leverage this technology to complement those teams. “AI-native solutions can unlock value for SaaS providers by enhancing functionalities and enabling predictive analytics, among other benefits.” 

“In the Middle East, where there’s a significant push towards smart cities and IoT, it’s likely businesses are looking for SaaS providers that innovate with AI to further optimize operations and innovate services,” Eweidat adds. 

Traditionally, SaaS has largely remained a system of record-keeping—a way to organize, store, and process businesses’ customer data. But there’s just too much data to process and synthesize. 

But once AI enters the fray, it can get such tasks done much faster and more efficiently than humans. This means that the old business model needs to change. 

According to Rob Van Lubek, Vice President of Sales for EMEA at Dynatrace, despite AI’s ease of use, multiple applications, and relatively low cost, SaaS offers advantages that AI cannot, such as scalability to adapt to evolving business needs, low maintenance with providers managing updates and upkeep, and enhanced cybersecurity, which is crucial. 

“As AI continues to mature and evolve, SaaS companies should seek to continuously improve their offering to demonstrate to customers and partners their real value,” adds Van Lubek. 

In the case of the region’s SaaS companies, when all solutions look pretty much the same, how do you stand out from the crowd? After all, being a major player won’t matter when AI levels the playing field.

While the fundamentals of the SaaS business model are strong, SaaS companies will have to adapt to the new age of AI. A new AI layer is emerging in the tech stack—that of the foundation model, says Stefan Leichenauer, VP Engineering, SandboxAQ. “SaaS companies can mold that foundation model AI layer to enterprise use cases, creating value and providing useful services.”

Eventually, as AI progresses, Leichenauer says we will see more and more capabilities integrated into an AI workflow. “So far, the focus has been on language tasks and language interfaces, but eventually, AI agents will have access to Quantitative AI tools and capabilities that touch on other aspects of the enterprise. SaaS providers will have to make their tools available through these means or risk being replaced.”

MULTIPLE BENEFITS

The incorporation of AI into SaaS offerings brings multiple benefits. Predictive and real-time analytics provided by AI can greatly improve decision-making. It can significantly improve the efficiency of operations for both partner and customer, automating routine tasks and allowing for more strategic use of human skills within IT teams. 

Reducing manual effort is a key benefit of AI in SaaS, reiterates Van Lubek. “By automatically handling menial tasks and freeing up employees’ time, companies can reduce costs, benefit from increased employee productivity, and provide better, more efficient customer service.”

AI can offer predictive insights, which ensures a more reliable, efficient network operation, says Eweidat. “Personalization is another major advantage, as AI can tailor experiences to individual user preferences, enhancing satisfaction and loyalty.” 

“It also allows SaaS platforms to scale intelligently, adapt to dynamic user needs, and deliver deeper insights, driving business outcomes,” says Bhatia.

WILL EVERY SAAS COMPANY BECOME AN AI COMPANY?

While AI is becoming a critical differentiator in the SaaS industry, not every SaaS company will entirely transform into an AI company, says Bhatia, “incorporating AI-powered features will likely become essential for meeting customer expectations and staying competitive.” 

To improve functionality, personalize experiences and offer proactive insights, SaaS companies must embed AI, adds Sglavo. “To survive, they must adapt and deliver AI-driven value at scale. AI won’t replace SaaS, it will transform it.”

AI will prove to be indispensable to SaaS companies, adds Leichenauer. “Any SaaS company that delays implementing AI as part of their service risks having another company take their place.”

Clearly, change is imminent. The only question that remains is, who will be the eventual winners? 

“The winners will be companies who pair domain knowledge with AI innovation and provide seamless integrations with other platforms and systems,” says Sglavo. “The most successful will be those who provide tailored solutions for vertical markets, such as healthcare, fraud, and marketing.”

Success also hinges on data security and compliance, particularly in the Middle East,” says Eweidat. “Companies that utilize AI to deliver superior services and adapt to market demands are more likely to achieve industry leadership.”

There’s also a silver lining for SaaS providers prioritizing innovation, embracing AI as a core component, and focusing on solving real-world challenges. “Those offering seamless integrations, robust data governance, and actionable insights while maintaining a customer-centric approach will dominate the market,” adds Bhatia.