Editorial | China could benefit from AI disruption to software-as-a-service sector
It seems likely the AI industry will simply swallow up the SaaS sector in China without too much financial or employment damage
People have long fretted about how artificial intelligence (AI) will eliminate human jobs. Now it seems AI could just be as devastating to computer software. The recent “SaaSpocalypse” is a case in point. It saw roughly US$300 billion vaporised in a matter of days from the value of software and data stocks in the United States.
The bloodbath was triggered by the release of new AI versions by US pioneers Anthropic and OpenAI, which promise to deploy autonomous AI agents to replace enterprise software by performing tasks at the same level or better. That poses a direct existential threat to the software-as-a-service (SaaS) sector.
The SaaS sector in the US developed early and is huge. That is why the AI impact has been so devastating. By comparison, China’s software service sector has been much less developed, with slower adoption of cloud services and a weaker appetite for recurrent subscription fees. Overall information technology spending accounts for just 3 per cent of China’s GDP, compared with roughly 9 per cent in the US, according to S&P Global Ratings’ estimates.
Platform giants such as Alibaba (which owns the South China Morning Post), Tencent and ByteDance increasingly dominate cloud infrastructure, large language models – the basis of many AI models – and software development. These companies are also among the biggest players in Chinese AI. Moreover, an increasing number of innovative mainland start-ups are focusing on AI capacities and applications.
It seems likely the AI industry will just swallow up the SaaS sector in China without too much financial or employment damage. The AI disruption could prove more beneficial than disruptive.