How much can AI expand enterprise technology spend as a share of company revenue?

Harry Stebbings · Apr 4, 2025

The future of agents is hyper-verticalised businesses in markets that looked too small to be interesting, which become large because you are replacing labour rather than software

Replacing a broker in something like freight load coordination turns an unattractive niche into a multi-billion dollar market

53:20 20VC: Why To Win in AI, Investors Need to Change Their Approach | Why VC is Run by Principals and Associates and is a Broken System | The Bull Case for Anthropic & Whether Deepseek Changes Their Strategy with Nabeel Hyatt @ Spark Capital

Amit Bendov · Sep 12, 2025

Revenue AI for sellers is a multi-trillion-dollar opportunity, an order of magnitude bigger than AI for engineers or lawyers

~9-10M sellers at ~$150k each is ~$1.5T of cost (three quarters of it spent on admin), but at ~$700k revenue per seller they generate ~$14T — so the prize is the revenue they produce, not just their headcount cost

Scope: Per-seller quota and headcount figures are rough thrown-out numbers

19:14 20VC: Why AI SDRs are BS and Do Not Work | How to Use AI in Your Sales Team and Process to Win Today | What Skills Do All New Reps Need to Have in an AI First World with Amit Bendov, CEO @ Gong

Everett Randle · Nov 10, 2025

A single AI app just out of beta can already command as much customer spend as an entire system-of-record SaaS suite, because it displaces labor and unlocks new revenue rather than just improving workflow

Home services customers told them they spend as much on a 24/7 voice AI receptionist as on their seven ServiceTitan products, because they cut staffed receptionists and can now book appointments around the clock

Scope: based on customer calls for one home services AI company

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Alex Rampell · Jan 12, 2026

Software that does the job of labor is what hyperscales today, because it is sold against a labor budget rather than a software budget

A firm that could not hire an $80k employee will pay $20k for software doing that job, where previously it spent $0 on software; it also unlocks work that was uneconomic for humans, like small contingency cases for plaintiff attorneys

Scope: works best in verticals with no incumbent software at all

51:51 20VC: a16z's $15BN Fundraise with Alex Rampell | The Best Companies Have Hostages Not Customers | The Best Founders Materialise Capital, Customers and Labour | Mid-Sized Funds with Die and The Future of Venture Capital

Eran Zinman · Mar 2, 2026

The total addressable market for software — how much companies spend on software — will be roughly 100x what it is today

Agents will do the majority of the work, which changes what software is and how much of it companies buy

0:00 20VC: Monday.com CEO on Is SaaS Dead: Will Everything Be Vibe Coded | Will Systems of Record Become Valueless Databases in an Agentic World | Will LLMs Own the Value in the Application Layer with Eran Zinman

Eran Zinman · Mar 2, 2026

Companies will spend dramatically more on software and much less on headcount as AI lets them scale without hiring

A company like Monday spends ~70% of budget on headcount versus ~8% on software, so any CEO would gladly increase software spend if it substitutes for headcount growth — the software cost is marginal by comparison

Scope: will play out increasingly as AI becomes more dominant

18:32 20VC: Monday.com CEO on Is SaaS Dead: Will Everything Be Vibe Coded | Will Systems of Record Become Valueless Databases in an Agentic World | Will LLMs Own the Value in the Application Layer with Eran Zinman

Gokul Rajaram · Mar 16, 2026

The shift of spend from software budgets to human labor budgets is already happening, and it follows a sequence: BPO spend gets cut first, then departing employees aren't replaced, and layoffs come last.

Most businesses don't want to lay people off, and BPO spend is the easiest to cut because AI services can deliver the same work at higher quality, faster and 20-30% cheaper; many verticals like doctors' offices already have call-center budget allocated offshore.

Scope: layoffs still some way off

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Saam Motamedi · Jul 15, 2024 · hedged

It is too early to say whether AI lets software companies monetize more from existing customers

A year ago public companies told analysts customers would pay a lot more, and then software had a correction after Salesforce's earnings

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Harry Stebbings · Mar 10, 2025 · hedged

Many buyers will struggle to justify paying software vendors for labor rather than for software

It is psychologically hard for buyers to mentally reclassify labor budget as software spend

Scope: stated while explicitly not taking a side on Sarah Tavel's thesis

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Harry Stebbings · Jul 11, 2025

Whether AI tooling spend shifts from software budgets to labor budgets is the decisive question for venture returns in the category

If software eats into labor budgets it is fantastic news for venture investors; if not, the opportunity is less exciting than assumed

Scope: framed from an investor's perspective

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Harry Stebbings · Jul 11, 2025

The core question in AI is whether spending transitions from software budgets to labor budgets for AI tools

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Harry Stebbings · Aug 15, 2025

The decisive question for all AI software is whether it can transition from technology budgets to human labor budgets

If it can, the future is very exciting for founders and VCs; if not, it is far less exciting

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Harry Stebbings · Sep 12, 2025

Whether AI tools migrate from software budgets into human labour budgets is the core underexplored assumption in AI investing today

20:50 20VC: Why AI SDRs are BS and Do Not Work | How to Use AI in Your Sales Team and Process to Win Today | What Skills Do All New Reps Need to Have in an AI First World with Amit Bendov, CEO @ Gong

Jake Saper · Mar 10, 2025

In the AI era a wedge that looks narrow in software-spend terms may be large in total-spend terms, because these businesses can capture labor spend as well as software spend

AI products absorb work previously done by people, so the addressable budget includes labor, not just software

Scope: particularly where the pain point is large and customers are willing to pay

56:24 20VC: Lessons from Investing $2BN and Returning $8BN in Cash | Why Most Venture Partnerships are Broken | We Sold Salesforce Early and Lost Out on Billions | Are The Best Deals Always Expensive and Competitive with Jake Saper @ Emergence Capital

Winston Weinberg · Jan 19, 2026

The shift of spend from human labor budgets into technology budgets is already happening in legal

Several customers pay for Harvey out of their professional services spend rather than their tech budget, and professional services budgets run into the billions a year versus a far smaller tech budget for that group

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Anish Acharya · Feb 9, 2026 · hedged

Software will no longer be capped at the traditional 8–12% attach rate to an industry's spend; for legal the addressable number lands between $50B and $500B, closer to $500B

Scope: calls it an open question

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Jason Lemkin · Jan 4, 2024

For AI to meaningfully expand software spend, budgets outside of IT have to be unlocked, because the CIO/IT budget is capped and already inflated then deflated

IT is only going to get so much budget; it inflated the last couple of years and deflated last year, so the extra money has to come from functional groups instead

Scope: contact center is where new AI budget is most visible today

36:11 20VC: Predictions for 2024: What Happens to Early Stage VC Funding, Do a Load of Venture Funds Die, What do LPs Do in 2024, Does Figma Kill the M&A Market, Will IPOs Comeback & What Does a Trump Administration do for Startups with Jason Lemkin @ SaaStr

Aaron Levie · Apr 20, 2026

Moving AI spend from IT budgets into line-of-business OpEx roughly doubles the addressable technology spend, though it does not 10x it

Historically enterprise technology sales were capped by the corporate IT budget; for the first time you can sell an agent directly to a line of business as a productivity augmentation and claim a share of their OpEx

Scope: doubling, not 10x

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Harry Stebbings · Apr 20, 2026 · hedged

Enterprise technology spend rising from roughly 10-12% to about 20% of revenue is relatively feasible

Scope: 'relatively feasible'

27:41 20VC: Everyone is Wrong; We Will Have More Developers in Five Years | Why Frontier Labs Will Be Way More Valuable Than They Are Today | Are SaaS Companies Cooked: Which Thrive & Which Die with Aaron Levie, Founder at Box

Harry Stebbings · Jul 11, 2026

The largest companies will roughly double technology spend from 8–12% to 16–20%, with headcount falling, and the best people will go where the best tools are.

Talent follows the best technology and equipment.

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Immad Akhund · May 12, 2025

Labor-replacement AI revenue is the most suspect kind of revenue because margins will compress massively toward a tenth or twentieth of the labor cost being replaced.

Three or four competitors sell the same thing off the same foundation models with a software cost basis far below a third of labor cost, so buyers will push price down; there is very little moat or network effect to resist it.

Scope: applies to AI labor-replacement pricing models specifically

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Harry Stebbings · Sep 12, 2025

Coding AI tools like Cursor and Windsurf cannot move into the labour budget because commoditisation leaves them with no pricing leverage

Switching between them is easy, so there is very little leverage and they can't charge labour-replacement prices

22:10 20VC: Why AI SDRs are BS and Do Not Work | How to Use AI in Your Sales Team and Process to Win Today | What Skills Do All New Reps Need to Have in an AI First World with Amit Bendov, CEO @ Gong

Harry Stebbings · Nov 3, 2025 · hedged

The venture thesis that AI returns depend on a transition from human labor budgets to AI spend may be the wrong barometer if AI instead makes existing workers 10x more efficient

If human labor budgets are not replaced, the TAM expansion that thesis relies on may not materialize in the way assumed

17:53 Labor budget capture may not happen if ai only multiplies existing workers

Anish Acharya · Feb 9, 2026

Software will asymptote to 80–90% of both enterprise spend and consumer discretionary spend, up from ~8–12% of enterprise spend and a few hundred dollars a month for consumers today

Software is expanding into companionship, friendship, entertainment, therapy, healthcare, professional improvement and education — huge areas of discretionary spend

63:16 Software asymptotes to most of enterprise and consumer discretionary spend

David George · Dec 15, 2025

The labor-to-technology spend shift will happen, but it does not mean every SaaS company is doomed

Green shoots are visible (even Microsoft has cut headcount ~6% over the last year), but that's not the same as broad SaaS obsolescence

28:47 Shift is real but does not imply broad saas obsolescence

Hemant Taneja · Sep 22, 2025

The multi-trillion-dollar labor market is genuinely addressable by AI because technology will do most of the work done in companies better than humans

It will be cheaper, faster and better and give businesses more leverage, so market forces will drive the substitution

42:33 Labor market is genuinely addressable because ai outperforms humans on cost speed quality

Mamoon Hamid · Oct 21, 2024

AI companies are selling labor rather than software, which justifies roughly 10x higher per-seat pricing and explains the unprecedented speed of revenue scaling

The product multiplies a worker's output 5-10x or reduces real labor costs, so pricing moves from $30-40 per seat per month to $300-500, and simple seat math takes a company to tens of millions of revenue very quickly

10:46 Selling labor not software justifies 10x per seat pricing and fast scaling

Byron Deeter · Aug 25, 2025

The question of whether AI moves from the technology budget into the labor budget is already settled — AI solutions are comprehensively addressing software, hardware and services budgets

Adoption is already happening in categories full of frontline humans doing busy work and paperwork — accounting, legal, medical — where the tech takes away manual transcription, summarization and error-prone processes

18:18 Labor budget migration is already happening not hypothetical

Jesse Zhang · Sep 19, 2025 · hedged

Human labor spend is roughly an order of magnitude larger than software spend, so delivering 3-5x ROI translates to capturing roughly 3x the previous software value

You can't capture all of the labor budget, but a 3-5x ROI pitch is compelling enough to justify multiples of prior software spend

21:43 3 5x roi pitch justifies capturing roughly 3x prior software spend