In August, market data indicates that the fundamental demand for Software-as-a-Service (SaaS) has remained steady, contrary to the warnings of a sharp decline in the first half of the year. This stability is largely attributed to SaaS companies integrating artificial intelligence to drive transformation.
“AI transformation is critical for us,” mentioned a leading Chinese SaaS executive recently. “It feels like our industry’s era has come back.”
At the start of the year, AI tools capable of directly activating software, analyzing data, and executing tasks raised concerns about potential disruptions to traditional SaaS business models. Nonetheless, major software corporations, including Germany’s SAP and the American company ServiceNow, reported increased earnings for the second quarter, with AI significantly contributing to contracts and revenue growth.
For instance, SAP’s cloud revenue grew by 22% in the second quarter compared to the previous year, with its cloud backlog rising by 27%. Similarly, ServiceNow’s subscription revenue increased by 25%, and its annual contract value from AI-related businesses exceeded $1 billion for the first time.
Chinese tech giant Kingdee International Software Group announced that its AI-driven business revenue reached CNY 296 million (around USD 43.9 million) in the first half of the year, marking an increase of 189% from the same period last year. Subscription revenue from AI products jumped by 283% to CNY 146 million, while the contract value for AI-native offerings hit CNY 605 million, a 159% rise.
The SaaS business model is evolving, as users no longer rely on opening a specific application. Instead, companies are shifting toward acquiring capabilities that automate tasks, altering how software is purchased—from licenses and features to automation services.
“The old approach was to create a closed environment for users,” explained an industry insider. “Now, the focus is to position yourself along the agent’s execution path, enabling it to invoke your services seamlessly.”
While recent performance figures are encouraging, they don’t fully confirm that the software industry has undergone complete transformation. However, businesses are beginning to explore software’s potential beyond basic functions, especially concerning how it can automate and assist in achieving enterprise objectives.
“The key is to challenge outdated thinking and develop an AI-native mindset,” stated the founder of Kingdee during the latest earnings call. “AI transformation isn’t just about adding features; it requires a fundamental re-evaluation of the entire software approach.”
Market analyst Charlie Dai from Forrester emphasized that the greatest opportunity lies in reshaping enterprise infrastructure, middleware, and workflows around agent-based AI technology. This includes components like agent runtime, orchestration, memory systems, governance frameworks, security, and observability platforms—all of which will form new technical stacks and engineering practices,” he said.