SaaS Has Evolved and Its Definition Should Too: Subscription-ai-and-Software
The acronym SaaS has stood for Software-as-a-Service since as early as the late 1990s, but it didn’t really take off until the late 2000s. Before then, some software was delivered in an almost as-a-service way, with vendors running a copy of formerly “on-premises” software on the vendor’s own hardware (so-called ASPs, Application Service Providers).
It wasn’t until the surprising success of a company with the motto “No Software” (c. 2004), combined with the decision of the world’s largest bookstore to rent out their extra computers by the hour (c. 2006), that the world began to see the wisdom of truly delivering software not as a product, but as a service. Our firm took the name SaaS Capital shortly thereafter, sensing the sea change that was afoot, and by the end of the 2000s, the acronym SaaS was well known for having become the default delivery and revenue model for new software companies.
We here at SaaS Capital have been thinking a lot about Artificial Intelligence and Large Language Models for a while now. Almost all of our portfolio companies are now using AI tools internally for product development. Many are incorporating AI elements into their user-facing products. Many of our new borrower prospects market themselves as AI-native or AI-enabled.
While my partners and I are less optimistic that AI will change the entire world (at least not any time soon), we do think we’ve hit another technological and nomenclature milestone – another step like the one from on-prem to ASP, and from ASP to SaaS.
My partners and I have begun to refer to SaaS no longer as software-as-a-service, but as Subscription-ai-and-Software.
SaaS is still very much going strong in 2025, but as always, the technology and business models are never standing still. Subscription-ai-and-Software is just the next iteration of the B2B technology business model. SaaS Capital is positioned to evolve with the market, and continue to lend growth capital to SaaS companies of all types for years and decades to come.
