Massive geopolitical shifts, trade disruptions, and economic instability are reshaping costs across industries. Yet, flying under the radar for many companies is a quiet but seismic shift in how software is developed.
By early 2025, AI-driven coding assistants reached a tipping point. Models specializing in reasoning and development became so advanced that an entirely new industry was born. GitHub Copilot led the charge, followed swiftly by a flood of competitors — VS Code, Replit, Create.xyz, Cursor, SoftGen, Windsurf, WrapifAI, Lovable, Bolt, V0, MarsX, AmazonQ, Pear, Devin. The list keeps growing, with new entrants appearing daily.
Even in this nascent stage, some entrepreneurs are generating millions annually simply by instructing AI to write software for them. In mere months, individuals with zero technical expertise are building full-scale applications — just by describing them to AI. Want to launch the next Airbnb? Direct GPT, Claude, or Grok to its platform and build from there. SAP, Oracle, Salesforce, ServiceNow, or Workday? The same approach applies.
I won't debate the ethics or legality of this shift, but I will highlight its timing: the ease and low cost of AI-generated software are colliding with a "Perfect Storm" of global tariffs and economic fragmentation. Hardware and software costs are set to skyrocket. While the full impact of tariffs on global supply chains remains uncertain, one thing is clear — rising costs for AI infrastructure, energy, materials, and skilled labor will hit hard when major software contracts come up for renewal.
What This Means for the Board
Boards must act now. Leading renegotiations, consolidating software landscapes, and locking in prices before inflationary pressures take hold are no longer optional — they are strategic imperatives.
Under normal circumstances, AI-driven software development wouldn't immediately disrupt a company's reliance on enterprise software giants like Oracle, SAP, Microsoft, Salesforce, and ServiceNow. But this isn't a normal market. Costs are rising, legislative concerns around data sovereignty and privacy are intensifying, and AI-generated software is maturing at an unprecedented pace. The packaged software and SaaS industry is in for a rough ride.
If you're on the Board, a CEO, or a CIO, here's what you need to do:
- Lead Vendor Renegotiations Now — Secure multi-year agreements before the full impact of tariffs and cost escalations hit. Lock in pricing while you still have leverage.
- Consolidate Your Software Landscape — Audit every SaaS subscription, every legacy license, every tool that's been accumulated over the years. If you're paying for overlapping capabilities, stop.
- Prepare for AI-Native Alternatives — The next generation of enterprise software won't come from Redwood Shores or Walldorf. It will come from startups building AI-native replacements. Boards need a strategy for how they'll evaluate and adopt these alternatives as they mature.
- Invest in Strategic Agility — The organisations that survive this transition will be those that can reconfigure their technology landscape faster than their competitors. That's not a technology strategy. That's a business strategy.