Tag: software economics

Giles Edwards-Alexander gives refactoring an unusually concrete AI-era price tag. In a roughly 150,000-line, agent-written Rust application, a representative change initially pulled 159,564 input tokens into context. After breaking a 17,155-line Firestore module into coherent responsibilities, the same task used 27,360 tokens, an 83 percent reduction. The useful mechanism is not small files for their own sake. Better boundaries let an agent find and load less irrelevant code.

The number is evidence, not a universal exchange rate. This was one greenfield codebase, the token counts were estimated from characters, and the agent needed sustained human direction to recognize and execute the refactoring. Correctness, review time, testability, and human comprehension still matter more than a cheap prompt. The durable lesson is that technical debt now charges two readers: people and machines. Good structure can lower both bills, but deciding what belongs together remains design work.

Nicolo argues that AI weakens one of SaaS's favorite properties: near-zero marginal cost. A conventional feature can be copied endlessly once built; an AI feature keeps consuming inference for each user and request. At the same time, cheaper software creation gives buyers and competitors more credible alternatives, putting pressure on prices while compute costs push from below. That is a real squeeze, especially for products whose value is little more than a model call behind a polished interface.

Inference is only one line in the ledger, though. Support, security, compliance, integrations, distribution, and the cost of earning trust often dominate the code itself, while model prices may eventually behave more like ordinary hosting. The deeper threat to undifferentiated SaaS is not merely a worse gross margin; it is that a customer can assemble a sufficiently tailored substitute. Durable value moves toward proprietary workflows and data, reliable operations, distribution, and outcomes that remain difficult after implementation gets cheap.