SaaS Boohoo

Days of coding sweatshops are numbered. India needs to rethink education and employment urgently 

Wednesday felt like the dot-com bust all over again as SaaS – software as a service – firms lost $300bn in market cap. What triggered this ‘SaaSpocalypse’ was a Jan 30 announcement from AI firm Anthropic regarding new capabilities of its Claude Cowork agent. Claude has been the darling of coders for months, but with its new tools it can supposedly automate tasks like reviewing contracts, and data crunching. Although Anthropic cautioned that Claude’s analyses shouldn’t be taken as legal advice without human vetting, markets panicked. And that’s a larger story.

By now, there’s broad agreement that 2026 could be the year of a big AI shakeout. Investments in tech firms – even those that aren’t at the forefront of the LLM or ‘large language model’ race – boomed over the past three years because investors saw dark horses everywhere. Valuations are so stretched now that those same investors are edgy. And along comes Claude, claiming it can do what SaaS firms – our own TCS, Infosys, Wipro included – charge billions for every year. The market reads it as curtains for the SaaS sector, and everyone runs for the exit.

We’ve been through this before. In Jan 2025, Chinese LLM DeepSeek knocked $600bn off chip maker Nvidia’s valuation with the claim that it had been built cheaply on second-rung chips. Where’s DeepSeek today? Nvidia remains the world’s most valuable firm, however. Does this mean the market is wrong about Claude and SaaS firms this time? Long-term, we don’t know, but short-term, yes. It’s not like order books of SaaS firms have dried up. Even if 100% of their clients switch to Claude and other AI agents, they won’t do so in a day, or even a year. Last year, a study in UK showed that 55% of firms that had replaced humans with AI regretted it, because the shift caused confusion and reduced productivity.

What is equally certain, though, is that LLMs will eventually automate drudge work – basic coding, data entry, ticket booking, etc. US firm Palantir’s new AI tool is said to automatically migrate data from legacy systems – the kind of low-end work that’s been the bread and butter of Indian IT firms. And that – not the stock rout – should alarm India. Unless our IT services sector moves up the value chain fast, its days are numbered. In any case, the world won’t need armies of coders. It’s time for a rethink on education and employment.

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