AI and the Rise of Service-as-a-Service: Why Products Are Becoming Invisible

The software world is undergoing a fundamental shift. Thanks to AI, product development has become faster, easier, and more scalable than ever before. Tools like Cursor and Lovable—along with countless “co-pilot” clones—have turned coding into prompt engineering, dramatically reducing development time and enhancing productivity. 

This boom has naturally caught the attention of venture capitalists. Funding for software companies hit $80 billion in Q1 2025, with investors eager to back niche SaaS solutions that follow the familiar playbook: identify a pain point, build a narrow tool, and scale aggressively. Y Combinator’s recent cohort was full of “Cursor for X” startups, reflecting the prevailing appetite for micro-products. 

But beneath this surge of point solutions lies a deeper transformation: the shift from product-led growth to outcome-driven service delivery. This evolution isn’t just about branding—it’s a structural redefinition of how software creates and delivers value.

Historically, the SaaS revolution gave rise to subscription-based models, but the tools themselves remained hands-on. For example, when Adobe moved Creative Suite to the cloud, the billing changed—not the user experience. Users still needed to operate the software. SaaS, in that sense, was product-heavy and service-light. 

Now, AI is dissolving the product layer itself. The software is still there, but it’s receding into the background. The real valu

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