Your Software Vendors Are About to Make a Big Decision. Here's What It Means for You.

Andreessen Horowitz just told software companies to pick one of two paths: sprint into AI-native products or slash costs to hit 40% margins. Both paths mean changes for small businesses that depend on SaaS tools. Expect pricing model shifts, rapid feature churn, potential price increases, and reduced support. Audit your vendor lock-in now and budget for disruption.

Andreessen Horowitz, one of the most influential venture capital firms in tech, published a piece this week that every small business owner should read. Not because it's written for you. It isn't. It's written for the CEOs and boards of the software companies you depend on every day.

That's exactly why it matters.

The argument, from a16z partner David George, is simple: software companies have two credible paths left. Sprint into AI-native products to accelerate growth, or gut the organization to hit 40%+ profit margins. The comfortable middle, where most of them have been sitting, is over.

If you run a business on HubSpot, Salesforce, QuickBooks, Monday.com, or any of the hundreds of SaaS tools that keep operations moving, this isn't abstract strategy talk. It's a preview of what's about to change in your vendor relationships, your bills, and the tools you rely on.

Here's what to watch for.

Path 1 Vendors: The Ones Sprinting Into AI

Some of your vendors are going to bet big on new AI products. George's advice to these companies is aggressive: put 50% of R&D on net-new AI products, reorganize around small pods, and rebuild the executive team around people willing to run a "12-month death march."

What that means for you as a customer:

Your tools are going to change fast. Expect new AI features showing up constantly. Some will be genuinely useful. Some will be half-baked experiments that got shipped because the company is in sprint mode. The pace of change in your daily software is about to accelerate, whether you asked for it or not.

Pricing models will shift. George is explicit that the new revenue model is tokens and consumption, not seats. That means the flat per-user fee you've been paying could start looking more like a utility bill. You'll pay for how much you use, how many AI queries you run, how many automations fire. For some businesses, that's cheaper. For others, especially heavy users, it's a surprise cost increase.

Support and stability may take a hit. When a company is reorganizing its entire leadership team and moving half its engineering to new products, the existing product you depend on is not getting their best attention. Bug fixes slow down. Familiar features get deprecated to make room for the new thing. The product you signed up for starts feeling like a different product.

Path 2 Vendors: The Ones Cutting to the Bone

Other vendors will look at their options and decide they don't have a credible AI play. Their path is to become a cash machine: flatten management, automate everything possible, raise prices where they have control, and move low-tier customers to higher floor pricing or let them churn.

What that means for you:

Prices are going up. If your vendor decides you're in a segment where switching costs are high, and they often are, expect a price increase. George's framing is blunt: "raise price where you own the workflow or the switching cost." If your business lives inside a tool and migration would be painful, you're the customer they're going to charge more.

Small customers may get pushed out. The path to 40% margins includes "moving long-tail customers to higher floor pricing or letting them churn." If you're on a small plan paying $50 a month, you may find that plan discontinued. The new floor might be $150. Or $300. The vendor has decided that serving you at the old price isn't worth it.

Less customization, more standardization. Part of the margin play is eliminating bespoke work. If you've been getting custom implementations, dedicated support, or flexible terms, those may disappear. The product becomes more rigid, more self-serve, and the humans you used to call are gone.

What to Do About It

You can't control which path your vendors pick. But you can stop being caught off guard.

Audit your vendor lock-in. For every critical tool in your stack, ask: how painful would it be to switch? If the answer is "extremely," that's where your pricing risk is highest. Start exploring alternatives now, not because you're switching tomorrow, but because having options is the only thing that gives you any say in what happens next.

Watch for pricing model changes. If a vendor announces a shift from per-seat to usage-based pricing, don't assume it's neutral. Model the math for your actual usage. Sometimes consumption pricing saves money. Sometimes it doubles the bill. You won't know until you run the numbers for your specific situation.

Budget for vendor disruption. Whether it's rapid product changes from a Path 1 vendor or price increases from a Path 2 vendor, something is going to shift in the next 12 to 18 months. Build some flexibility into your technology budget now.

Get your own AI house in order. The reason software companies are being forced to pick a path is that AI is fundamentally changing what's possible. That same force applies to your business. If your vendors are going to be in flux, this is a good time to think about which of your own processes could benefit from AI, independent of whatever your SaaS tools decide to do. Own your own transformation instead of waiting for your vendors to hand it to you.

The Bottom Line

The a16z piece is a letter to software CEOs. But every letter has a second audience: the people affected by the decisions it's urging. That's you.

Your software vendors are about to make hard choices. The best thing you can do is understand what's coming, so the changes show up as decisions you anticipated rather than surprises you absorbed.

Frequently Asked Questions

Will my SaaS tools get more expensive because of AI?

Likely yes, through one of two paths. Vendors sprinting into AI may shift from flat per-seat pricing to usage-based billing, which could increase costs for heavy users. Vendors cutting costs may simply raise floor prices or eliminate lower-tier plans. Either way, model the math for your actual usage before assuming a pricing change is neutral.

What does usage-based pricing mean for small businesses?

It means you pay based on how much you use the tool rather than a flat monthly fee per user. This includes AI queries, automations, and processing volume. For some businesses it's cheaper. For others, especially those running frequent automations or AI features, it can double the bill. Run the numbers for your specific situation before the switch happens.

How do I reduce my risk if a software vendor makes major changes?

Audit your vendor lock-in now. For every critical tool, ask how painful it would be to switch. Where switching costs are high, your pricing risk is highest. Start exploring alternatives, not because you're switching tomorrow, but because having options gives you negotiating power. Budget 10-15% flexibility into your technology spending for the next 12 to 18 months.

Should small businesses in Las Cruces and El Paso worry about this?

Yes. If you run your business on HubSpot, Salesforce, QuickBooks, Monday.com, or any other SaaS tool, these changes will affect you. The a16z memo is directed at software CEOs, but the decisions those CEOs make will show up in your bills, your feature set, and your support experience. The businesses that prepare now will absorb these changes more easily.

If you want help figuring out where your business is exposed and what to do about it, that's what I do.