Generative AI Shifts Software Costs from Fixed to Variable, Predicting Financial Slump Before Deployment

The article posits that generative AI is accelerating a shift in software business models from fixed-cost heavy operations to variable-cost structures. The authors note that the median bootstrapped B2B SaaS company spends approximately 90% of revenue on fixed costs, but these can now be automated or consumed as services, such as buying a basic web app for $650. Applying Carlota Perez’s theory of technological revolutions, the authors identify the current era as the 'installation period' following the ChatGPT launch, marked by $27 billion in 2023 investments. They predict an inevitable financial slump due to speculative hype and unclear unit economics, similar to the dot-com crash, before a deployment period emerges. Generative AI is described as a sustaining innovation for products but a disruptive innovation for white-collar work costs, potentially reshaping organizational structures to rely more on senior strategists managing automated systems.