AI-driven applications, consumption pricing a threat for SaaS model, says Snowflake CEO

Sridhar Ramaswamy Snowflake

The Software-as-a-Service (SaaS) model faces potential disruption from AI-powered applications and consumption-based pricing, said Snowflake Chief Executive Officer Sridhar Ramaswamy.

The comments assume significance as they come at a time when several SaaS players have said Artificial Intelligence/Generative AI (Gen AI) is disrupting everything software, which in turn is leading to a shift in their fundamental business models.

“It's potentially the combination of these AI-driven applications and a consumption model that can turn out to be a larger threat for the SaaS model as a whole," Ramaswamy told Moneycontrol during his India visit.

The CEO of NYSE-listed Snowflake talked about why he is operating with urgency, why Perplexity worked, how GCCs in India are driving decision-making for global firms, and his ties with IIT-Madras.

Read the full interview here.

The usage-based approach, he said, will bring in value to customers which is in contrast with traditional software licensing. “At the end of the day, no one made money because they licensed software; they made money because they used that software to drive business outcomes for them.”

Startups writing applications on Snowflake do not need to pay unless they start deriving revenue from the services.

The former co-founder of AI-powered search engine Neeva also pointed to the role of data in giving shape to these changes. Unlike legacy systems that had siloed data in proprietary "boxes," modern platforms such as Snowflake can be used for the integration of data from multiple sources.

"For example, I want to know what my sales team is doing—that's in Salesforce. I also want to know how my customers are doing—that’s in Snowflake. But traditionally, these are in silos, making it hard to bring them together for actionable insights," he explained.

AI makes analytics more accessible and plugs the gap between separate data systems.

Also read: GCCs in India driving decision-making for global firms, no longer just back offices: Snowflake CEO

“This is the real threat; what AI is going to do is it's going to make analytics a lot easier because it's easier to compose queries. It's easier for business users to get answers that go across ERP (enterprise resource planning) and CRM (customer relationship management),” Ramaswamy said.

In fact, in November, many SaaS founders shared at the Moneycontrol Global AI Conclave that the Gen AI revolution isn't merely on the cards for SaaS companies – it has already reshaped their businesses, and transformed areas such as customer support, and specialised functions like workflow automation.

Digital adoption platform Whatfix, MediaTech SaaS unicorn Amagi, and IT services automation and remote management startup SuperOps, told Moneycontrol that they are gearing up for the Gen AI wave through talent training, AI Labs, and working on monetisation plans.

"Right now, it’s next to impossible to write an application that shows information from Salesforce and Workday on the same screen and lets you update it. The SaaS model makes that very hard," the IIT-Madras alumnus said, adding that AI-driven solutions powered by open data platforms could solve this issue.

Having said that incumbents like SAP and Salesforce are responding through their analytics capabilities, however, Ramaswamy cautioned that such shifts could trigger an "innovator's dilemma".

This means companies will rely on subscription revenues, forcing them to transition to less profitable but more agile consumption-based models.

“I think these are absolutely things to watch out for,” Ramaswamy said, who has worked at Google for over 15 years in various capacities.

Also read: Great product, quick to innovate: Snowflake CEO Sridhar Ramaswamy praises Aravind Srinivas for Perplexity's success