Competing with giants, the end of SaaS & other listener questions

Welcome to Rework, a podcast by 37signals about the better way to work and run your business. I'm your host, Kimberly Rhodes, joined by the co-founders of 37signals, Jason Fried and David Heinemeier-Hansen. This week, we're going to knock out a couple of listener questions. I'm going to start with this one, which was an email from Dan. Jason, you emailed Dan directly with your response, but I thought we would tell our Rework listeners what you have to say. So Dan said, my name is Dan. I'm an avid listener to Rework as well as a big fan of Basecamp, Hay, and Omachi. I'm at the early stages of building my own business and would love your thoughts on building a product in a competitive market. In my space, there are competitors, but I'm confident I can build something better. I wonder how much better does it need to be? As 37signals have built products competing with giants like Jira, Gmail, and Apple, I'm curious if that scares you. Do you worry about the big players? That's from Dan. Sure. I mean, look, you're not going to beat Apple or Gmail. They're a game because they have massive market share. They're massive companies, and they're in a different category. I think if you're Dan, like, you're not really competing against them. What you're trying to find are your own customers and carve out a business that's sustainable for you. So you're competing against your costs. You're competing against the ability to find some customers and enough customers to build a great product for them and for yourself. Like, you got to start there. You can't be like, I'm going to take down Google. I mean, I guess you could, but it's probably. It's probably a bad idea. I mean, in general, my sense is like, for Dan, what I basically said is like, focus on your own thing. Like, this idea that I'm going to. What do I need to do to take them down? You got to build something first. Whatever happens, happens after that. But don't think about what they're doing. Think about what you want to do, why you need to exist, why customers can't find the thing that you want to make, and how to differentiate yourself and stand apart and build something that's tight, good, and just right for them and for you. That's all you can do to start. Whatever happens. Whatever happens on the road happens. Day one, day two, year one, year two. If you do take down Google, it's not going to happen on day one or day two or year one or year two anyway. Maybe in 10 years, you've got something for that. Right now, just nail it. Get something good out there. Put something out there in the world. Get a customer. Get a second customer. Get a third customer who's willing to pay for what you've made. That's the real challenge you're up against. It's not how do you take down the big guys. I think you got to start also with developing something, making something that you would pick. You have to pick over these other alternatives because, as Jason says, they have a lot of advantages. So what you're coming up with has to be distinct enough that at least you would pick and there's a good reason why you would pick it because it's a different spin on it. Now, it doesn't have to be 180 degrees different, but it has to be different enough that someone is going to see a reason to pick you because on a level playing field, if it's just Red Ocean, you're selling something. That's identical what they're coming out with. Like, yeah, you're going to have an uphill battle, right? So you got to have some differentiation and that differentiation has to be the reason why you at least would pick this if someone else had made it, not yourself. Now, it's pretty hard to put yourself out of your own bubble in that regard, but I find it's actually a really good exercise to do. You're just like, would I use my own credit card for this? Would I pick this option over whatever the big established players have? And then once you have something that is distinctive enough, you have to carve out the distribution. Like, how are people going to find you? What are you going to say that sounds different, that is different than those setups? The worst thing you can do is falling into the trap of trying to puff yourself up and like, I'm also kind of Google. I'm also kind of a big software company that's going to do everything for you in all the ways. Now, you have to veer in the other direction and double down. And everything that they can't do, as we've talked about so often, even at 60 people at 37 signals, we can do a lot of things that a Google could never do. Like, Jason, replying directly to you on a question like this, that's not something that's accessible to CEO of a 60,000 person company, right? So you have to lean into all of those aspects of being small that people are going to resonate with. Because there are plenty of folks out there who actually, if given a reasonable, proper, distinctive, alternative, would prefer not to buy from Google or Apple or any of the others. So being there for them, even if it's a niche, is a great place to be. Okay. I'm going to go to this question, AI-related question from Arun. He says, hello, Jason and David. I've been a regular listener of the show for the last couple of years, and I have a question with regards to AI and the buzz around the whole shift from SaaS to AI agents. Is this really the end of SaaS business as we know it? Okay. Can we first talk about that? Are people thinking that agents are replacing SaaS? I think there are certainly people thinking that they will replace SaaS. And there are businesses that are replacing SaaS with homegrown solutions. But I don't think it is in any way, shape, or form a majority thing right now, or even barely early adopter. This is pioneer-level stuff on the adoption curve for anyone to take something that they're already using and going, oh, I'm going to buy from Google. Like, no, I want to save some money here, so I'm going to build my own. Trivially so at the low end. Almost all of the SaaS replacement I've seen has been from folks who have an intrinsic interest in doing agent exploration work, and therefore they go like, oh, here's a piece of software I use. I should try to build my own version of that. But you're not doing it really because you're going to save on your bill if you're a small company. You're doing it just because you want to play with agents. And I think that's totally fine. That's totally great. And then what's happening is that there is some early inklings at the top end, the kind of companies who might pay Salesforce $600,000 a year for a system that they hate. Like, that is absolutely a danger zone, I think, right now in enterprise SaaS. And I've seen that play out in a number of large companies, Shopify being one of the examples I've talked about before, where they literally took that function, the CRM part of how their Salesforce was interacting with their leads, and they just built their own. Was it because they were going to save some money? I don't think that was the motivating reason. The motivating reason was that what they were using was crap. And I do think if you have a crap piece of software that's just there because it's entrenched, because it feels too hard to take it out, yeah, you're going to be first in line for the danger zone here if those two things can conspire. Like, why are we paying someone? Let's say, again, $600,000 a year for a piece of software everyone loathes to use. Could we do something better? At our end of the market, I'm not seeing a lot of evidence. And I think that end of the market goes quite high. It's not only the small team, it's also the mid-sized team. And I know Jason has a whole spiel on the fact that most people actually don't want to build their own stuff. And I think with SaaS, it's not just that they don't want to build it, it's also that they don't want to run it. And we got an. We got an uptick less than that with once. We sold SaaS software for a single fee where someone could save a lot of money on, let's say, a Slack installation by replacing it with Campfire. And the uptick was not enormous. And I think one of the reasons why that was, was that they don't want the obligation. They don't want the responsibility of having to care for and tend to a service and manage the data and worry about backups and all that other stuff. And has that changed? I don't think so. Will it change? I think you're foolish if you don't think that the AI wave is going to drastically rearrange the software landscape. And I don't think there's any part of that landscape that is safe, that's never going to be touched, that's never going to have challenges from agents building things. I think that's silly to think that. But what's the curve? Are we talking six months from now? Are we talking two years from now? Are we talking five years from now? I think we're closer to the long end of that tail when it comes to what most people would traditionally think about a SaaS, not these huge honking enterprise installations, which by the way, are already slob code, right? The thing with a Salesforce installation is, it's not off-the-shelf software. That's part of the pitch, is we're going to take this product and then we're going to send in some consultants or forward engineers to really tailor it to your specific setup and make it work. That's one of the reasons why these products often just aren't that nice to use because they're kind of built in a bit of a sloppy way. So if you're going to build slop like that, yeah, just go straight to the source and get it from an agent. I have like a bunch of unrelated things to say, and David hit on most of them, but a couple of things. First of all, there's already risk that people are going to leave your product for another product that exists. So the idea that there's been no competition and there's no alternatives, that's what I hear a lot when people are like, well, is AI going to like take my customers? Well, like, yeah. Your competitors might take your customers. Your product may be bad and they may leave anyway. There's a million reasons people might leave or might come to see you. So let's start there. It's not like there is no risk currently. We have customers who leave every day. We have customers who come back. We have customers who leave other products and come to us. There's a constant churn of people moving around anyway, regardless of AI. AI is another option. If someone wants to build their own tools, that's another way for someone to leave your product. But the other reasons are already there. Second, like David mentioned, I wrote a book called The World of AI. to put this piece on. don't think people are going to want to build bespoke software most businesses are not going to want to build bespoke software building software takes a lot of work even if it's become way easier someone still has to maintain it someone has to think about it someone has to think about the workflows someone has to adjust things if that person leaves then what happens and people are busy already with their own things it's understandable that like online on x on places like that where everyone's talking about software people think everyone in the world is talking about software most people just don't care about software they care about the plumbing business they run the electric business they run the whatever business they run and yeah could they build their own thing they probably could but why would they now this also gets back to david's point about price so like david said most of the stories i've been hearing are when people are trying to like potentially save a million bucks a year or whatever on something they didn't like to begin with so when i look at our business you know a lot of people pay us 50 bucks a month that's 600 bucks a year okay if you look at how much it would take to build base camp even if you're using ai and you took one or two or three employees to kind of do it and mess around with it whatever it's going to cost you thousands and thousands and thousands of dollars anyway and opportunity cost and things they could have been doing otherwise to save 600 bucks a year and then like you don't have something that's quite right and then you've got to keep maintaining it and things might break and then who do you blame a lot of buying products is about actually ultimately going to be able to blame someone and put someone else on the hook to take care of you that's why you pay them money so you know there's all these reasons why it doesn't make sense especially in the low end but again as david said like we'd be foolish to think that everything is safe and nothing's going to change of course things are going to change but also we're going to change and we are changing we're able to build things faster and better and we have 25 plus years of experience understanding what software is about it's not just about compiling code and having software do things it's about what do people actually want to do why do they want to do it how do they want to do it how do these things all work together how do these pieces fit together you can dream up all sorts of things but that's not what software has ever been about great software i should say great software is still about a cohesive concept an idea a product borders boundaries that's what this is all about so no are we all immune no are things going to change yes absolutely but you got to think about where you are this is not a monolithic thing software is not a monolithic thing there's different levels or different prices and the kinds of companies and customers you have may or may not be interested in getting involved in doing their own stuff at all we all hire contractors we all hire vendors we all hire people to do things for us that we could do ourselves but we don't want to because it makes more sense to hire them to do those things i have a housekeeper that comes once a week to clean our house i could clean my house that day too but like what does it cost me to take a day off of work from not or whatever like we keep the house kind of clean but we also have someone who comes by and cleans the house like it just makes sense to do that right so if you just pile up all the things in your world that you do or you kind of have other people do or whatever it just makes sense sometimes to buy something off the shelf or from a company that you like that makes a great product that supports what you do so you don't have to do it yourself these things remain true will always remain true but yes of course things are changing i think a great illustration of this is the episode of the simpsons where homer is given the opportunity by gm to design his own car and individually all his little ideas for oh there should be extra cup holders here there and everywhere they're probably fine and that's what a lot of customer feedback we get too is individually everything makes sense in that moment narrowly for that person at that time but you take it all together and you end up with homer's car an absolute abomination of lack of vision lack of cohesion lack of something people want to use most people have just not thought that carefully about the problems that they have and may not be blessed with the competencies or even the talent to come up with solutions to those problems they know their problems i think this is what you'd always have to respect as a product builder is that the customer knows their problems they do not know the best solutions that's why they're coming to you that's why they're hiring you so if they are in charge of coming up with solutions to their own problems they're going to develop a better horse or a faster horse not the model t now i think the tipping point is actually not ai doing what a customer tells the ai it should do and makes the software that they want to make i think the real tipping point is once the ai tells you the kind of software that you should have it looks at your and places itself in the world that we have as problem solvers and product developers we're not there yet or i haven't seen that at least be very successful in any shape all the best use cases right now that exist in the world for ai aiding development is someone with taste vision problem space knowledge feeding all that in and steering a bunch of agents to build that for them if you know what i want i've not seen good things come out of that and i've tried quite a few times where i'm like let's just see where it goes with this if i just let it drive and uh as of yet it's not but that's the part where give it another five minutes six months two years five years who the hell knows when this whole thing is going to tip in that direction where it's ai telling us what the world should look like i also think it's interesting that i've seen so many unattractive products unattractive apps and yes it could be programmed by ai but there is a design element of taste that i don't think we've gotten to quite yet i think that's actually the main charge against slob which is this framing for ai just producing a bunch of stuff no the slob is not coming for the agents it's coming from you it's coming from you the instructor of the agents that you don't have the vision and the eye for developing something good and why would it be otherwise right like this is why you have product designers sit down and think carefully about building things it's not just about making something happen that is the big change that has happened and i do think that that's perhaps also the other flank of this that's very interesting there are actually quite a few people in this world who are quite good at having some taste and some vision and an eye for where things should go but did not have the talent or competence to do implementation did not have the funds to do implementation so and i think that's the big change that has happened and i think that's at least for the foreseeable future i think that's the bigger threat to anyone running a software company is that someone else another human out there is suddenly capable of making their ideas come true i'm actually quite certain that if ai had been around in say uh 2000 when jason put the post out for a programming question that i answered and we started working together i'm not so sure i would have ended up moving to chicago because jason would have been able to build a lot of things by himself because at that time that was the constraint on his ability to create software he had all these ideas and the designs and how it should go but was lacking the mechanism of turning those into software now a lot of people have suddenly gotten a really good mechanism for that okay let's go to this question it's an email from alex hi jason and david it seems that the two of you promote your business through your own personal brands most notably on x although i'm sure you're also probably on linkedin i'm starting a business soon and i always thought that i wanted to get a job in a software company and i'm not sure i would have ended up getting a job in a social accounts like x instagram and tiktok completely separate from my business but seeing that you two are using your personal brands to promote your company makes me wonder if this is the right play would love to hear your thoughts from alex i mean i don't think there's such a thing as a personal brand by the way i've always been bugged by that whole thing it's just me talking on the internet where do i work i work here what do i talk about that is your brand like your style of writing your style of writing your style of writing your style of writing your personality the things you're saying do you know what let me just interject brand to me has the same slop like content it's one of those big wrapper boxes that just people talk about in the abstract and it's really fucking annoying no i'm not like you thank you right yeah it's just as in in a general sense this idea that we should be talking about people like brands or products even as products i i hate that too as soon as you get more and more generic and upstream from that you lose all the essence of what makes something interesting and certainly if you reduce a person to a brand now you've really cooked out all the nutrients sorry no i agree thank you for that i mean i just just like i talk about what we're doing primarily i don't share that much personal stuff on online like david and i run the company like this is our company is the kind of stuff we talk about david's talking about amachi a lot lately i'm talking about like we just talk about the stuff we're interested in and that just for the most part is business related not completely some of you know we talk about cars and watches and some political stuff and some other points of view whatever but we work here that's what we do that's what we talk about and i would encourage you to do the same i wouldn't think about like is this a personal brand post just what's on your mind share it however you want to share it people like or they won't like it and just don't overthink it that's just it just don't overthink it but have something to say and people will like or they won't like it it doesn't really matter at the And whatever you're attached to will get some exposure. And if it's a business, we'll get exposure. If it's your personal space, stuff, your personal stuff will get exposure. And that's that. I mean, I don't know what else to do there, frankly. That's my own little silly take on it. I will say the other problem I have with this notion of brand is it's very manufactured. Brand is something you make, is something you craft, is something you sit down and design. And that is the opposite ends of what I think actually is resonating and working is authenticity. Now, authenticity in itself has become a fucking brand word that barely means anything, right? But this notion of being yourself in a way that someone can tell isn't just all about the objective, right? As soon as you talk about personal brand in relation to promotion, you talk about playing this role. And I think if anything, folks online have gotten quite good at sniffing that out. Who's inauthentic? This is LinkedIn. The way you did because people fucking hate LinkedIn because LinkedIn is nothing but people trying to project this manufactured version of themselves onto other people don't give a fuck about what that is, right? LinkedIn is really the seventh ring of hell when it comes to this projection of fake personas. Now, the other part of that is now literally fake because half of the posts are just AI slob being filtered through some prompt about how I need to position myself in the marketplace of ideas. I mean, Jesus, shut up, right? And I think it's actually one of the reasons I post on LinkedIn. And I just post the same stuff that I post anywhere else on LinkedIn. But I remember Joe Rogan had this wonderful imagery of how he used to use Twitter. And he called it, you just got to get in there, man, throw the grenade and then run as like, don't interact with it at all. And I kind of feel bad about that with with LinkedIn, but also not really, because the blast radius of that grenade in there is fucking 70% just filler nonsense. Now, again, I've actually in the past been surprised by the audience and individuals we've been able to reach on LinkedIn, it is just a different crowd. And I can also appreciate that. But you got to get away from this manufactured personality. It is just, it's just nasty to be trapped in this because it's just not who you are. And if who you are can't sell, then try to become a better person, not a better projection. That's great. The other thing I would just say is if you feel like you're building something, building a brand, like you're doing it wrong. When you talk to your friends, you don't feel like you're building your personal brand. You're just talking to your friends, you're sharing things with your friends, you're having a conversation. This idea of building something, that's the problem. When you think about building something, then it's mechanical. And you're trying to amass. It's like, that's just not how you are. That's not how people really are. Be who you are. Think about it as sharing with people you know, not building anything. So anyway, I think that's another way to think about it. But yeah, I mean, I'm with you, especially on the LinkedIn stuff. Every time I go there, I actually, I don't go there. I'm in and out really. And I just despise it. I fucking despise it. And the other thing is, it's very formulaic. That's the other thing. Like when you're talking to a real person, you never suspect there's a formula at play here. It's just a conversation. And someone might talk a certain way or act a certain way or be a certain way, because that's their personality. But it doesn't feel formulaic. It feels like them. But on LinkedIn and on Twitter, when someone's trying to like follow a formula, like now you'll see posts on X where like, they start a thought and they don't finish it because they want you to click through to the next thing. And it's like this link baby shit. And it's just all about engagement. It's just disinteresting. Like you, you've got to stay away from that kind of stuff. Like it might get you a follower or two, but it's just not real. And about the authenticity thing, just, just be as real as you can be who you are. Don't play the games. Don't try to hook anyone with some method. Just talk like you would normally talk and people follow you or they won't based on whether or not what you're saying is interesting or not. Now, the flip side of this, unfortunately, actually, in my opinion, is that the alternative has stopped working. Even for us, you cannot make a corporate brand be interesting to anyone unless you're literally a household name. Like Wendy's can hire one of Garavino Chuck's funny guys to write tweets and that can work, but you're not fucking Wendy's and no one gives a damn about what your just created corporate profile is like. And I do think that is a bit of a loss because I actually respect this idea that you should be able to separate your business and your personal life and having to mix it together feels like a regression of how we do business. It should be such that you could keep those things apart. I think, unfortunately, the fact is that if you're going to use today's mediums like social media, that doesn't work. I mean, the number of times I look at even medium-sized brands who are putting a lot of effort into their Instagram and into their Twitter and whatever, and it's just fucking crickets. And I look at it and I'm like, what is that here? It's not because you totally suck or you don't have any design or you don't have anything. It's just not interesting enough. And I think this is part of the viral fact of social media. Like it's been distilled now to such a, I was about to call it an art form. I think that's overstating things about most things that go viral, but the reality of it just sits that like everything is over salted. Everything is over sugared. So if you just come with a plain cookie, that's like, Hey, I have a new business that I'd like to sell a thing. It tastes like cardboard for the brain of most people. It just doesn't fire up the dopamine. And I think you can accept that and still go like, you know, it's not great, but what are you going to do? Yeah. It's interesting because I don't follow, I'm Instagram is kind of my social media of choice. I don't follow the Instagram account, but I do follow the guy who heads up Instagram. And like, he talks to the camera and explains what's going on in the product, but I'm not following the Instagram account. And I kind of think it's a similar situation to what you guys have going on. Okay. Well, what's that? We're going to wrap it up. If you have a listener question that you want to send to Jason or David, you can send us an email to rework at 37signals.com or leave us a video recording at 37signals.com slash podcast question. Rework is production 37signals. You can find show notes and transcripts on our website. Full video episodes are on YouTube.