Klarna, the Swedish Buy Now Pay Later (BNPL) company, recently made headlines with a surprising announcement: they are significantly reshaping their organisation by embracing AI to eliminate costly software-as-a-service (SaaS) solutions from their portfolio, leading to substantial financial savings. This move not only highlights a major transformation for Klarna but also serves as a broader lesson for the business world, aligning with predictions made by industry experts about the disruptive potential of AI.
Klarna has already started shutting down key SaaS tools. They began with Salesforce at the end of August, to be followed by HR software Workday. According to Klarna, their internal initiatives are focused on AI-driven standardisation and simplification, allowing them to replace SaaS providers with more agile and cost-effective AI solutions. The company's CEO, Sebastian Siemiatkowski, projects that AI could halve Klarna's workforce, and early results are already promising. Their recent earnings report indicated an 11% reduction in sales and marketing expenses, alongside a 10% drop in customer service costs.
The broader implications of Klarna's shift are profound: it marks a transition from traditional SaaS to a new model that industry leaders are calling "Service as a Software." This evolution aligns with predictions made by respected experts such as Sangeet Paul Choudary and NFX's James Currier and Pete Flint, who have long argued that AI is reshaping the nature of enterprise services.
The concept of "Service as a Software" is gaining traction as advancements in AI allow organisations to move away from generalised software offerings towards highly personalised, AI-driven services. This shift challenges the established economics of traditional SaaS businesses like Salesforce and Workday, and Klarna's recent decision is a prime example of this trend in action.
Sangeet Paul Choudary, a well-known authority on platform economics, has often spoken about how AI will fundamentally transform workflows by unbundling and rebundling tasks. The key to success in this emerging landscape is capturing complex workflows and integrating AI to reduce or eliminate the need for human intervention. Klarna's AI-driven approach exemplifies this shift, as they replace external software tools with internal AI solutions that offer greater efficiency and customisation.
Klarna's AI transformation provides several key insights for the broader business community. AI works fundamentally differently from traditional software: it is not a fixed product but a constantly evolving process. Unlike traditional SaaS, which relies on periodic updates, AI solutions improve continuously through data-driven learning and customer feedback. This ongoing development means that the value of AI is not delivered in one-off software deployments, but through an adaptive service that evolves to meet customer needs.
Here are some key differences that distinguish AI-based "Service as a Software" from traditional SaaS:
1. Continuous Learning: AI systems continuously improve over time, unlike traditional software that remains static between updates. This continuous evolution allows organisations to stay ahead of the curve and respond more dynamically to emerging challenges and opportunities.
2. Data-Driven Value: The value of AI grows with more data and usage, making it a service that enhances over time. The more data that AI systems are exposed to, the better they become at predicting trends, identifying customer needs, and optimising processes. This data-driven approach is what makes AI an incredibly powerful tool for organisations seeking to maximise efficiency and customer satisfaction.
3. Outcome-Focused Pricing: AI services can be priced based on the results or improvements they deliver, rather than just access to software features. This outcome-focused model ensures that clients are paying for tangible benefits, which aligns incentives between the service provider and the customer. As AI solutions continue to learn and improve, the value delivered to customers also grows, creating a win-win situation.
4. Adaptive Solutions: AI solutions can automatically adapt to changing customer requirements without requiring manual, industry-level updates. This adaptability is key in a fast-paced business environment where needs can change rapidly. AI-driven services can quickly adjust to new conditions, providing organisations with a level of flexibility that is difficult to achieve with traditional software.
For Olympic33, the implications of Klarna's move are clear. As we develop our Olympic33 AI framework, we must recognise the shift from subscribing to software features to subscribing to outcomes. This approach encourages long-term partnerships, as the value of AI increases with time. Our focus on personalised integration platforms, such as DX2, and AXE, Trader for eCommerce, and GO for operations coordination and activity management, aligns well with this model—offering customised AI solutions at scale.
Furthermore, this AI-driven "Service as a Software" model emphasises continuous development and value delivery, reinforcing our commitment to flexibility and ongoing improvement for our clients. By adopting an outcome-based approach, we can foster deeper relationships with our clients, ensuring that our solutions evolve in tandem with their needs and deliver sustained value over the long term.
Klarna's AI initiative aims to break free from the constraints of SaaS tools, allowing them to regain control over how they serve their customers. Their AI assistant, powered by OpenAI, enhances the shopping and payment experience for 150 million consumers worldwide. It manages tasks ranging from multilingual customer service to managing returns and fostering healthy financial habits. Within the first few months of implementation:
These outcomes demonstrate the power of AI to transform not only operational efficiency but also customer experience. By leveraging AI, Klarna has been able to provide faster, more effective service while simultaneously reducing costs. The ability to operate around the clock in multiple languages has also expanded their reach and improved accessibility for customers around the globe. This level of service would be difficult, if not impossible, to achieve with traditional SaaS tools, highlighting the transformative potential of AI in customer service and beyond.
Klarna's shift to an AI-driven model underscores a broader trend in the business world: AI is not just an enhancement, it's a fundamental transformation of how services are delivered. As organisations move from traditional SaaS models to AI-based "Service as a Software," they unlock new levels of efficiency, personalisation, and value.
At Olympic33, we are excited to be at the forefront of this transformation, helping our clients embrace AI and adapt to the future of service delivery. Our commitment to providing adaptive, outcome-focused agentic AI solutions positions us well to support our clients as they navigate this shift. In an upcoming blog post, we will delve deeper into the economics of SaaS versus "Service as a Software" and explore how companies can successfully navigate this shift.
The future of business lies in intelligent, responsive, and adaptive services that evolve with customer needs. Klarna's success story is just the beginning, and we are eager to help our clients achieve similar outcomes by leveraging the power of AI. As we continue to innovate and refine our Olympic33 AI framework, we are confident that our clients will reap the benefits of this new era of service delivery—one where AI is at the core of every interaction, driving efficiency, personalisation, and growth.
*As a footnote: On 21 August, Klarna acquired the assets of Laybuy in New Zealand.*
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