The End of Per-Seat Economics
For over a decade, the enterprise software industry operated on a simple, highly lucrative premise: build a useful tool and charge companies a recurring fee for every human employee who needs access to it. This “per-seat” licensing model was the engine behind trillions of dollars in tech valuations, creating a world where software growth was inextricably linked to human headcount. But agentic artificial intelligence has abruptly severed that link. AI is transforming software from a passive tool that merely organizes or enables human work into an autonomous platform that actively performs and orchestrates the work itself.
When an AI agent can autonomously process invoices, qualify sales leads, or manage customer inquiries, the value created by the software is no longer tied to the number of humans logging into the system. This creates a terrifying reflexivity for incumbent Software-as-a-Service (SaaS) companies. If an enterprise deploys an AI agent that can do the work of three human analysts, the enterprise no longer needs to pay for three software seats. As artificial intelligence makes employees exponentially more efficient, companies simply need fewer human workers, which directly translates to fewer software licenses. The traditional per-seat pricing model completely fails to capture the immense value delivered in an AI-first world, rendering the historical foundation of SaaS economics structurally obsolete.
Market Contraction and Strategy Shifts
The realization that AI agents are systematically cannibalizing the very users that software companies rely on has sent shockwaves through the financial markets. In early 2026, a narrative dubbed the “SaaSpocalypse” gripped Wall Street, dragging the broader software and tech sector down by roughly 22%. Broad software indices plummeted by about 25% from their 12-month highs as panic set in over AI’s ability to replicate core functionality and erode installed customer bases. This market contraction is fundamentally driven by stalling net revenue retention (NRR) rates; as penetration curves flatten, seat growth has become a far less meaningful driver of revenue. Buyers are actively shifting their shrinking budgets away from incremental software purchases and toward dedicated AI tooling.
The impact is highly visible across major industry players. Giants like Adobe, ServiceNow, and Salesforce all exhibited slowing growth in their annual recurring revenue (ARR) metrics, which serve as a primary proxy for seat expansion. Faced with this existential threat, the industry is undergoing a massive and frantic strategy shift. Between 2025 and 2026, analysts recorded over 1,800 distinct pricing changes across the software sector, signaling a desperate move away from the dying per-seat model. Vendors are being forced to experiment with dynamic structures, bundling AI credits into base plans or pivoting to outcome-oriented billing, where customers pay for tasks completed or tickets resolved rather than human log-ons. Despite the widespread panic, some industry leaders are actively fighting the narrative; for example, ServiceNow’s CEO executed a $3 million open-market purchase of his company’s stock, and key executives simultaneously terminated their automated 10b5-1 trading plans to signal deep conviction that they will master the AI transition rather than fall victim to it.
The Threat of Agentic Coding
Beyond the collapse of per-seat licensing, SaaS companies face an even more insidious threat: the democratization of software creation itself through “agentic coding.” AI programming tools like GitHub Copilot, Cursor AI, and Claude’s code interpreter have slashed development time, engineering costs, and traditional barriers to entry. By 2025, AI coding adoption among developers had reached an astonishing 84%. This technological leap means that non-technical founders and internal corporate procurement teams can now build custom, complex software applications or replicate existing SaaS functionality in a matter of days without needing to hire full development teams.
This dynamic completely destroys the pricing power that legacy software vendors once held over their clients. Consider the reality of enterprise budget negotiations during the summer of 2026. A procurement manager at a Fortune 500 company, tasked with reviewing IT spending, recognized that they no longer had to blindly accept a vendor’s standard 5% annual price increase. Instead, the manager revealed that their firm was in talks with OpenAI, considering having frontline deployment engineers use AI tools to directly build an internal replacement for the vendor’s software. Faced with the very real threat of being entirely bypassed by an in-house agentic coding solution, the incumbent software vendor was forced to renew the contract with a massive 30% discount. This is the ultimate reflexivity crisis: AI not only automates the humans who use the software, but it also automates the engineers who build it, stripping away the software industry’s monopoly on digital value creation.