Is Software Losing Its Head?

Bullish

• $CRM— Salesforce remains deeply embedded in enterprise workflows with significant stickiness from organizational dependencies, muscle memory, and compliance requirements. Despite headless/agent trends, the underlying data and business logic in Salesforce is where the real value lies and cannot be easily replaced.

  • “A CRM may be sticky because a sales rep needs to go in and out of it all the time. They're used to interacting with Salesforce. A lot of times when new VPs of sales come into our companies, they mandate that Salesforce is there because they're used to using it, their teams are used to using it. And then there's, you know, finance may rely on the Salesforce output for billing, and upstream marketing is gonna rely on it as well. And so there's these dependencies.”

    Seema·10:07Hear it

  • “the most sticky thing you could do is actually collect money from a customer. And if you're collecting money, it turns out it's really, really hard for them to stop sending you money, and it's really hard for them to figure out what to do if they stop sending you money.”

    Steven·11:31Hear it

  • “misconception right now is that SAP. Okay. Well, you can just have, you know, postcast database and APIs and then bam, like you can replace API replace SAP. And that's, like, absolutely not true. I think partly I mean, Steven, I don't know if you wanna elaborate it or not. I'm happy to, but I think it's that piece around the logic and everything else that is hand like, that is encaptured in SAP is way, way more important than the fact that, like, oh, this data just happens to be in this database.”

    Seema·0:34Hear it
• $SAP— SAP is extremely sticky because it codifies company-specific business processes and logic that took years to implement. The customization and business rules embedded in SAP make it nearly impossible to replace, as companies are effectively run by people looking at SAP screens.

  • “If you take SAP out of a large automobile manufacturer, there's no automobile manufacturer left or a Walmart. The company just evaporates because the company is defined not just by purchasing the software, not even by just using it, but by how they codify the business rules into that product.”

    Steven·17:06Hear it

  • “SAP, like, takes, you know, multiple years to implement and get it's not because, like, oh, you know, yes, system integrators are slow and part of it, but it's it's customized to the way that business actually operates. And I think that's like an important part about why you can't just obscure away the software completely from and and turn it into a data database plus APIs.”

    Seema·18:04Hear it

  • “those companies are effectively run by people sitting in conference rooms looking at SAP screens. And the difference between Ford and Toyota and General Motors and Daimler not just that they're looking at the same screen. It's that they chose which screens to look at, which customizations to make in those screens”

    Steven·20:48Hear it
• $AIAGENTS— AI agents represent a major opportunity in enterprise software by creating agentic loops that collect intelligence, take action, and gather benchmark data. The biggest opportunities are in doing what incumbents aren't doing - moving from data collection to action and intelligence.

  • “it's it's doing the things that the incumbents are not doing right now, which is which is going from a layer of collection of data and into how do we take action on top of it. Right? And so take the CRM example. Right? It's like, we're not just logging all of the, like, call information, but then now I'm providing the intelligence background. Okay. How do I prioritize leads? Which, accounts should we work on? What have what has risk of churn? Flagging all of that. And then, like, sending the outbound.”

    Seema·51:59Hear it

  • “as the agent sends the outbound, sees the response, you're understanding, okay, a, what works, what didn't, what how did people respond? And then b, you're also collecting, like, benchmark data too. I'm like, Okay, this type of response is most effective in these cases. And in Asia, we should be using this language type of opening versus in Europe, etcetera. That sort of stuff, you're now agentically collecting all of that. And that's like an interesting data exhaust.”

    Seema·52:34Hear it
• $FIGMA— Figma successfully bridged communication between design and product development functions within organizations, creating network effects. This represents a model for new enterprise software that enables cross-functional collaboration.

  • “if you have products that bridge this and Figma did a bunch of this with design and product development. And so if you can develop software that leverages AI in order to bring together parts of an organization that don't normally communicate, that's new category.”

    Steven·59:34Hear it
• $ENTERPRISEAI— Enterprise AI software that bridges gaps between organizational functions and builds on top of existing systems represents the biggest opportunity. Startups should position between established players rather than competing head-on, as incumbents will only bolt AI onto existing products.

  • “The biggest opportunity right now is always, always to look at the existing mental map of enterprise categories and be in between two established players. Because the thing that you know right now during a massive technology shift is the one thing that established players won't do is disturb their existing product line and go to market. So they absolutely will just be bolting AI on top of their existing product.”

    Steven·0:59Hear it

  • “your opportunity in a startup is to just look at two big players who are bolting AI onto the side and exposing some existing API as an agent or whatever, and just aim for the middle and do things in the new in the new way”

    Steven·54:40Hear it

Bearish

• $MIDDLEWARE— Middleware layers like MCP are inherently unstable because no software company wants to be disintermediated and reduced to just a data layer. Companies will resist being abstracted by middleware and customers don't want to assemble scenarios from multiple unstable providers.

  • “the reality is that no software wants to be disintermediated by some other layer above it. Nobody wants to to just be put in a corner and say, Your job is to just store this SQL format for expense reports and do nothing more. And then we're going to use you only for that. And then by the way, we're piping you through to some other tool to analyze expense reports because that's not a growing business. That's a decaying business.”

    Steven·46:37Hear it

  • “this whole notion of everybody is going to be perfectly content to be abstracted by some benign layer in the middle, it just doesn't really work that way. And it's because customers actually do not want to assemble their scenario from a bunch of different providers because all it takes is your system will only be as stable as the most unstable part of that.”

    Steven·47:10Hear it

  • “this middleware layer, it's always, always very unstable. It looks great in a network hierarchy diagram of the OSI levels of networking, but it's just never that stable.”

    Steven·48:37Hear it
• $HEADONCOMPETITORS— Startups attempting to compete head-on with established enterprise software categories face the hardest path. They must meet 8,000 requirements from day one while incumbents have decades of embedded business logic and customer relationships.

  • “universal truth for enterprise software is the most difficult thing to do that happens to be the dumbest is to attempt to just compete head on with an existing category. And by head on, mean not just the same category, but doing it the same way.”

    Steven·53:37Hear it

  • “by not attacking head on, you don't show up at every single customer and have them go, Well, you need to do these 8,000 things before you even enter the door.”

    Steven·54:56Hear it

Not investment advice.