August 9, 2026
Artificial intelligence is changing how enterprise software creates value rather than eliminating the need for enterprise software itself. The most investible software companies will increasingly be distinguished by durable competitive advantages that AI cannot easily replicate. These include ownership of mission-critical operational data, deep workflow integration, regulatory positioning, proprietary transaction infrastructure, scarce datasets, hardware integration and strong network effects. For StepChange Capital, the framework provides a practical lens for separating software businesses that merely automate workflows from those that become indispensable operational infrastructure. The framework also is an enhancement to traditional investment diligence rather than a replacement for evaluating management quality, market size, product market fit, customer concentration, customer traction, unit economics, management quality and valuation.
The research supported the following conclusions regarding the sustainability of technology solutions:
System of Record (SoR): Does the software capture, develop or contain the authoritative operational source of truth? Examples would be regulatory, compliance or key operating parameter data. Non-Software Complements (NSC): Does the technology solution possess proprietary assets beyond software? Examples would be IOT sensors or equipment integration components. User & Usage (U&U): Does the software materially influence high-value decisions or transactions? Also, at what level is the purchasing decision for the solution made? This again influences the criticality to the business and its perceived ROI.
Why this matters for Founders - Implications for Financing
Founders in attracting capital will have to demonstrate that their technology solution cannot be replicated by AI-enabled user interfaces without differentiated data assets, otherwise they will be viewed as higher competitive-risk opportunities. They will have to show that their competitive moat includes AI defensibility answers including:
Generative AI lowers software development costs and accelerates feature replication. Consequently, long-term enterprise value migrates from user interfaces toward proprietary assets that AI cannot easily reproduce.
SaaS Capital's analysis of public SaaS companies found positive relationships between higher framework scores and valuation multiples, revenue growth and profitability. While not predictive on their own, these characteristics appear associated with stronger long-term competitive positioning.
The framework aligns closely with StepChange's investment philosophy of backing companies that solve difficult operational problems in industrial technology, automation and enterprise infrastructure. Companies that merely wrap AI around common workflows are unlikely to sustain premium valuations. Greater emphasis should instead be placed on businesses that own unique operational data, embedded workflows, industrial integrations or regulatory trust.
This paper is an independent summary and commentary prepared by StepChange Capital. It is based upon 'Introducing the SaaS Capital AI Assessment Framework' by Randall Lucas, Managing Director, SaaS Capital (published February 17, 2026). The original framework, definitions, methodology and supporting analysis remain the intellectual property of SaaS Capital. Any StepChange commentary, observations and investment observations should not be attributed to SaaS Capital.
