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Opinion
SCMP Editorial
Editorial
SCMP 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

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Open AI and Anthropic have promised to deploy autonomous AI agents to replace enterprise software by performing tasks at the same level or better, causing a sharp fall in the stock prices of several software companies. Photo: Reuters
SCMP Editorial
Editorials represent the views of the South China Morning Post on the issues of the day.

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.

Now there are concerns over whether China’s own SaaS sector will face a potential contagion spilling over from the US and entering the mainland Chinese market. There might be a short-term impact. In reality, though, China is likely to leapfrog straight to a position of AI dominance without having to work through the SaaS phase. That could be similar to how the country and other developing economies skipped the intermittent stages to 5G networks in telecommunications.

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.

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