Software Eats Labor

Market Size: Labor vs. Software

xychart-beta
    title "Market Size Comparison (Annual)"
    x-axis "Market" [Worldwide SaaS, U.S. Labor]
    y-axis "Value (in Trillions USD)"
    bar [0.3, 13]

The Evolution of Software's Role

graph TD
    subgraph "Traditional Software Model"
        direction TB
        A[Physical Records] -- Digitized into --> B(Database / System of Record);
        B -- "Is Read By" --> C((Human Worker));
        C -- "Performs" --> D[Task/Job];
    end

    subgraph "AI-Powered Software Model"
        direction TB
        E(AI System of Action) -- "Directly Performs" --> F[Task/Job];
    end

The New Economic Formula: "Software Eats Labor"

graph LR
    A[Capital] -- Invested in --> B[Companies];
    B -- Buys/Hires --> C["GPUs + Engineers + Coffee"];
    C -- Creates --> D[AI Software];
    D -- Performs/Replaces --> E[Labor];

Changing the Software Business Model

graph TD
    subgraph "Old Model: Per-Seat"
        direction TB
        A[Price per Human User] --> B{AI makes humans more productive};
        B --> C[Companies need fewer users];
        C --> D((Revenue Decreases));
    end

    subgraph "New Model: Per-Outcome"
        direction TB
        E[Price based on job/outcome] --> F{AI performs the job directly};
        F --> G[Customers save on labor costs];
        G --> H((Vendor captures a fraction of savings, Revenue Increases));
    end

How AI Expands the Addressable Market

graph TD
    A["Previous State
CAC + COGS > LTV"] --> B[Business is not viable];
    C["With AI
AI Sales Reps lower CAC
AI Operations lower COGS"] --> D["CAC + COGS < LTV"];
    D --> E[Business is now viable and scalable];

• CAC: Customer Acquisition Cost
• COGS: Cost of Goods Sold
• LTV: Lifetime Value
• SaaS: Software as a Service

Sources:

• Software is Eating Labor