How Software is Replacing Jobs: The Era of 'Employed AI'
This is the Colinomics editor. In 2011, Marc Andreessen declared that "Software is Eating the World."
Wall Street Journal: Why Software Is Eating The World
Now, over a decade later, Alex Rampell from a16z has introduced a broader and sharper discussion with "Software Eats Labor." His message is clear: While the global SaaS market size is around $300 billion, the total wage bill of the U.S. labor market reaches $13 trillion.
Until now, the competition for software was other software. However, the emergence of AI is changing this game. Software is now directly competing with human labor and has begun targeting the massive labor cost budget, rather than just corporate IT budgets.
I would like to call this phenomenon the 'API-ization of Labor.' We are entering an era where tasks once done by humans are now handled with a single API call by software. This is not merely a technological progression; it signifies a fundamental redefinition of business models and market boundaries.
Table of Contents
From Tool to Colleague: The End of the 'Digital File Cabinet'
Don't 'Buy' Software, 'Hire' It
New Markets Opened by AI 'Replacing' Labor
What Makes an Organization that Sells Outcomes Different?
1. From Tool to Teammate: The End of the 'Digital Filing Cabinet'
We have all thought of software simply as a 'tool.'
Consider the massive filing cabinets of the analog era. Airline employees sifted through paper tickets, and accountants flipped through ledgers. First-generation software digitized this process. Alex Rampell accurately described it as "essentially every software company taking a filing cabinet and turning it into a database."
Most of the SaaS we know, like airline reservation systems (Sabre), CRM systems (Salesforce), and ERP systems (SAP), were essentially 'digital filing cabinets.' People input data, and people read that data to make decisions. Software was merely a tool that 'assisted' human labor but didn’t 'perform' the labor itself. However, AI overturns this assumption.
2. Don't 'Buy' Software, 'Hire' It
Have you ever wondered if the SaaS license fee you pay is truly 'valuable'?
Alex Rampell suggests a fundamental shift in business models: transitioning from 'Buy my software' to 'Hire my software.' In the past, companies paid a 'per agent license' fee when adopting tools like Zendesk. But what if AI directly performs the tasks of an agent?
"We are not giving you software. We are doing the work for you."
— Alex Rampell Original Lecture
This is where stunning cost comparisons emerge. In certain scenarios, if a human agent costs $37.50 to handle one customer inquiry, AI-driven software can resolve it for just $0.69. The moment companies start paying for 'the number of processed customer inquiries' rather than 'software licenses,' the value of software starts being directly compared to the $13 trillion labor market wages, instead of the $300 billion IT market.
3. The New Market Emerging as AI 'Replaces' Labor
There are tasks that are too tedious, unprofitable, or arduous for anyone to want to undertake.
AI-driven automation goes beyond merely reducing the cost of existing manpower; it creates new markets that were previously nonexistent due to economic impracticality. This is because AI makes it economically feasible to perform many tasks that were too expensive for humans to carry out.
Intermittent Demand: It's not feasible to employ someone 24/7 for tasks that occur only twice a year or at odd hours like 3 AM. AI can be summoned on-demand, like a 'freelancer living in the cloud.'
Boring Tasks: Reviewing thousands of pages of legal documents or performing endlessly repetitive data entry tasks is extremely tedious. AI doesn't get tired or make mistakes.
Language Barriers: To provide customer support in 20 languages, you'd traditionally need to hire speakers of each language. For AI, it's merely a matter of scaling the model.
These characteristics are particularly significant in markets like South Korea. The demographic cliff caused by a decreasing working-age population creates structural limits on the labor supply. This situation is similar to Japan's proactive adoption of robotics in response to an aging society. Just as Naver's 'CLOVA CareCall' is used to support the elderly living alone in Korea, the AI workforce holds potential beyond just being a tool for efficiency; it aligns with societal needs.
4. What Sets Apart Organizations that Sell Results
Ultimately, we are all working for 'results.'
This is why I referred to this change as the 'API-ization of labor' at the beginning. Customers no longer want fancy dashboards or extensive feature lists. They want 'resolved problems' and 'achieved outcomes.' Hiring software implies that our approach to creating and selling products must completely change.
Product teams need to plan roadmaps based on 'outcomes' rather than 'features.' Sales teams should meet the CFO of client companies with 'performance contracts' instead of 'licenses.' Of course, it is challenging to clearly measure the outcomes of complex knowledge work. However, the shift to this 'Outcome-based Economy' has already begun.
This is the core of the 'Outcome-based Economy,' and the reason why we need to redesign our products, teams, and contracts around portfolios of solved problems, not just lists of tools.
TL;DR
In the past, software was akin to a 'digital filing cabinet,' transferring paperwork handled by humans into digital files. Humans entered the information, and humans read and made decisions based on that information. However, in the AI era, software is evolving into agents that independently read, decide, and perform tasks without human intervention, effectively replacing the labor itself.
Alex Rampell of a16z argues that software in the AI era should aim at the $13 trillion labor market, rather than the $300 billion SaaS market. If past software remained in the role of 'digital filing cabinets,' then AI now 'performs' the labor itself.
Key Change: Transition from 'Buying' software to 'Hiring' software.
Pricing: Shifting from user licenses to being based on the 'Outcome' generated by the software.
New Opportunities: AI is opening new markets by handling tasks that were previously impossible due to cost issues, such as sporadic, repetitive, and multilingual tasks.
People Also Ask (FAQ):
Q: What jobs is AI likely to replace in the future?
A: AI is likely to replace structured tasks in specialized fields, ranging from simple repetitive office work to customer service, legal research, and accounting.
Q: What does the phrase 'Software is eating the world' mean?
A: It refers to the shift where the core competitiveness of all industries is being restructured around technology and software, a term first used by Marc Andreessen in 2011.
Q: What are promising business models in the AI era?
A: Instead of charging based on the number of users, the 'outcome-based pricing model,' where fees are based on business results generated by AI (such as the number of contracts closed), is promising.
Q: What is SaaS?
A: SaaS stands for Software as a Service, a service where software is not purchased outright but is subscribed to and used over the internet on a monthly or yearly basis.
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