The SaaS Hourglass: Why Mid-Market Software Is Getting Hollowed Out
The New Software Stack reveals a structural pattern: value is concentrating at two extremes of the stack while the middle gets cannibalized. We call this The SaaS โ as explored in the shift from SaaS to agentic service models โ Hourglass .
Key Components
What Gets Hollowed Out
The middle layer โ UI-dependent workflow applications, dashboard tools, manual process software โ faces structural cannibalization.
The Practical Test
Ask this question about any SaaSproduct: "If an AI agent could do this job, would it need to see the interface?"
Key Insight
Why? Because agents bypass interfaces entirely. A projectmanagement tool's value was in the dashboard humans navigated. When an agent orchestrates tasks directly through APIs, the dashboard becomes irrelevant. The data underneath and the orchestration above capture all the value.
The New Software Stack reveals a structural pattern: value is concentrating at two extremes of the stack while the middle gets cannibalized. We call this The SaaS Hourglass.
Where Value Concentrates
Top of the stack (orchestration): Platforms that control how agents coordinate, execute, and deliver outcomes. The Conductor, The Platform State, and The Bounty Model from the SaaS Value Migration Map.
Bottom of the stack (data): Companies with proprietary data assets, knowledge graphs, and semantic infrastructure. The Memory and The Substrate.
What Gets Hollowed Out
The middle layer — UI-dependent workflow applications, dashboard tools, manual process software — faces structural cannibalization. These are the companies that the Value Migration Map places in the Seat Tax and Modular Factory quadrants.
Why? Because agents bypass interfaces entirely. A projectmanagement tool’s value was in the dashboard humans navigated. When an agent orchestrates tasks directly through APIs, the dashboard becomes irrelevant. The data underneath and the orchestration above capture all the value.
The Practical Test
Ask this question about any SaaSproduct: “If an AI agent could do this job, would it need to see the interface?”
If yes — value is in the data or orchestration layer. The interface is just a window.
If no — the interface IS the product, and it’s vulnerable to displacement.
Most mid-market SaaS fails this test. The MongoDB case study shows even database companies aren’t immune — the question is whether your data layer has proprietary advantages or is interchangeable commodity infrastructure.
What is The SaaS Hourglass: Why Mid-Market Software Is Getting Hollowed Out?
The New Software Stack reveals a structural pattern: value is concentrating at two extremes of the stack while the middle gets cannibalized. We call this The SaaS Hourglass .
Where Value Concentrates?
Top of the stack (orchestration): Platforms that control how agents coordinate, execute, and deliver outcomes. The Conductor, The Platform State, and The Bounty Model from the SaaS Value Migration Map .. Bottom of the stack (data): Companies with proprietary data assets, knowledge graphs, and semantic infrastructure. The Memory and The Substrate.
What is the practical test?
Ask this question about any SaaSproduct: "If an AI agent could do this job, would it need to see the interface?"
Gennaro Cuofano is a CRO and tech executive who has worked in AI since late 2015, starting with bringing NLP, natural-language generation, voice and chatbot products to the marketing industry. His background is in law and finance: he holds a Master's degree in Law and an International MBA with an emphasis on corporate finance (LUISS Business School and the University of San Diego, 2012), and worked as a financial analyst at a real-estate investment firm in San Diego and as an assistant controller. His work focuses on business model strategy, business engineering and, more broadly, structural analysis: how companies make money, read from their own filings. He created FourWeekMBA and leads research there and at The Business Engineer, his newsletter on AI and business strategy, with over 95,000 subscribers and more than 1,000 published analyses. His writing has also appeared on Entrepreneur (for example, How to Digitize a Family Business in Europe) and HackerNoon. Find him on LinkedIn and Substack. See how we source.
