Ten years in business! We are a dinosaur in terms of tech years but we are
running strong and planning for the next ten. As AI has disrupted the industry
we have been pushed to figure out how opsZero lives in this new world. While
there has been messaging that the recent layoffs are due to AI, we don’t ascribe
to that. The period of low interest rates caused a spike in hiring for a growth
that never materialized and the layoffs are the culmination of a failure of that
bet. The CapEx on AI doesn’t help but AI is becoming a convenient reason to
perform layoffs.
While we are bullish on AI in the long run, the AI currently is still in the 90s
dotcom phase. Who the winners will be are still up in the air and there is a
massive amount of investment money sloshing around so the eventual winner may
come out of left field. However, the recent Iran war will push energy prices up
leading to the unit economics of AI being disrupted. This is not to say AI will
not be used, it just means that it will be used within specific fields: defense
and healthcare being the two primary areas. With energy prices going up due to
the Iran War, datacenters and their consequential increase in energy prices will
not sit well with citizens.
Further, the SaaSocolypse, attributed to the increased effectiveness of AI, has
pushed down the value of SaaS companies which are also loaded up with an immense
amount of debt due to Private Credit. We will see if this leads to a crash in
the market, but this does fundamentally changes the nature of American SaaS. The
gulf countries are a massive investor in the technology industry in the US
investing heavily into AI through private equity, private credit, and the public
markets. With these countries now questioning the value of the petrodollar, the
future of investments from these countries is looking wobbly especially when
these countries can invest in other countries with a potential for higher
returns. This is also based on a notion that these countries will return back to
normal once the war is completed.
It is this economic environment that opsZero finds itself trying to plan for its
second decade. It is when the World Order changes that one can find immense
opportunities. As the structures of the old order cease, new ones are formulated
with new rules in play. And the place we find ourselves in at this particular
moment is the collapse of the dollar.
All signs point to the American dollar losing value, scarcity of resources, and
stagflation. While we have seen the first order effects of the Iran War which
are higher gas and diesel prices we haven’t seen the second and third order
effects. From an American standpoint, food prices will go up, medicine prices
will go up because nearly 40% of medicine in America comes from India, there
will be metal and aluminum shortages, if Hormutz stays closed and Helium doesn’t
get through there will be microchip shortages. These shortages can be temporary,
a year or two, or can be extended. It all depends on the extent of the damage
that results from an eventual ground invasion.
opsZero never became a SaaS company preferring the path of services. While this
limited our upside in terms of revenue, it has made us nimble and able to change
directions as the winds of the economy change. We believe that many SaaS
companies will convert to being services companies in the future. With AI, SaaS
will need to customize for a particular customer, not just sell a one size fits
all. This will be, ironically, a return to the traditional business model of
Oracle, IBM, or SAP that focus heavily on customizing their offerings for their
Fortune 500 customers.
As AI changes the nature of the game on how quickly companies can be formed, we
have moved to a world where small efficient companies will be the norm.
Companies with fewer customers as there will be more competition, but customers
with deeper focus. In a sense, future SaaS companies are going to become
traditional businesses with a large service components, they will not be
traditional VC hypergrowth companies. We can say that this is caused completely
by AI, but with less capital to go around this will become more the norm in
terms of business.
So opsZero is going to double down on our services model as it is the model for
the next decade. We are doubling down on our investment in India. As the cost of
capital goes up, the inevitable outcome is a lowering of costs and
India provides a better cost structure compared to the West. The recent
layoffs in America have not lead to any mass layoffs in India, for example.
Lastly, we believe that services will be accelerated with technology being in
support. So whether there is a Human or AI being the frontend there will still
be technology in the backend.
The outcome of this is that organizations will want Human, AI, and Software as
part of their expected interaction while being provided that value at a lower
cost. How we deliver this will be a blog post a decade from now.
