Brett Taylor, co-CEO and co-founder of Sierra, discusses the current state of enterprise software and AI transformation. Taylor brings extensive experience as former co-CEO of Salesforce and current board chair of OpenAI, alongside his role building one of the fastest-growing AI startups focused on customer service agents.

The conversation explores the "SaaS apocalypse" - the broad market anxiety about software durability in an AI-driven world. Taylor examines how traditional systems of record like CRM and ERP systems face disruption as AI agents potentially replace human workflows, while also creating new opportunities for companies that can successfully transform.

Taylor details Sierra's approach to serving Fortune 20 companies with AI agents that handle everything from customer support to mortgage negotiations, emphasizing outcome-based pricing models and the importance of combining AI expertise with deep business knowledge to serve regulated industries effectively.

The SaaS Apocalypse: Why Software Stocks Are Down

"Every software stock is down, but I don't think that means every software company is equally disadvantaged. It's just basically anxiety about the future" - Brett explains the market isn't indicting individual companies but reflecting broad uncertainty about AI's impact on software durability.

Traditional systems of record (ERP, CRM) derived value from being "the anchor tenant of your technology deployments" with high switching costs due to integrations and ecosystem effects, creating gravity like "the sun and the solar system."

AI agents threaten this model by potentially making systems invisible to users - "rather than people clicking around on an ERP system to onboard a vendor, if you just delegate to an AI agent to do it, all of that is sort of invisible to you."

Why Incumbents Struggle with Platform Shifts

"Strategy tax" explains why large companies with infinite resources can't quickly adapt - "what were your strengths can become weaknesses" as companies try to leverage existing assets rather than build pure-play solutions.

The pendulum swings from "best of platform" to "best of breed" during technology transitions because "it's much easier to get a 10x experience" with new platforms, giving upstarts temporary advantages over incumbents.

"It's a race" between best-of-breed upstarts gaining scale before incumbents master the new technology - "very few of the incumbents have any credible, like decent AI technology, but they will."

Sierra's Rapid Growth in Enterprise AI Agents

Sierra achieved remarkable growth milestones: "We closed $100 million in seven quarters, $150 million in eight quarters" while serving "over a quarter of our companies have 10 billion or more in revenues."

The market conversation shifted from explaining "what an agent was" to "we need this yesterday" with companies now issuing RFPs rather than requiring basic education about AI capabilities.

Sierra's differentiation comes from serving "more complex, more regulated industries" like healthcare insurance and banking, making "agents that can actually have complex conversations" rather than simple demos.

"We went live with Cigna in two months" demonstrates Sierra's ability to combine AI expertise with business knowledge to help Fortune 20 companies deploy quickly in regulated environments.

Outcome-Based Pricing vs Token-Based Models

Sierra pioneered "outcome-space pricing" where "if the outcome is measurable and trackable, what an interesting opportunity to actually charge for that" rather than charging for inputs like tokens.

"You really don't care how many tokens the model uses" for lead generation - "there's no correlation between used tokens and leads generated," similar to how SaaS product quality isn't correlated with cost to serve.

"The closer you get to the outcome, the more valuable it is for the company" - outcome-based pricing allows companies to invest more because they're paying for results, not inputs.

"Can you describe your value proposition without mentioning models?" - Brett defines applied AI as focusing on business outcomes rather than technical specifications like token utilization.

Beyond Support: Sierra's Expanding Agent Applications

Rocket Companies exemplifies end-to-end AI agent deployment: "You can go to redfin.com and use an AI agent to search for a house. You can go to rocket.com and finance that house with an AI agent" and service the mortgage with AI.

"Our AI agents are doing billions of dollars of negotiations for everything from satellite radio subscriptions to cable television subscriptions" - demonstrating agents handling complex transactional communications.

"Every company needed a website in 1997. Every company needs an agent in 2027" - Brett's thesis that agents will become the branded front door for customer interactions across industries.

The Coding Revolution and Its Implications

"The first time you one-shot something and it turns out like really good and not like slop, but like really good, it's an emotional experience" - Brett describes the visceral impact of advanced coding AI like Codex.

"In three years, we could talk about what are the best practices to set up a software team that's optimized for this technology, and we'll know what those best practices are. And right now, we're just figuring them out in real time."

"My hypothesis is the companies that figure it out first will move the fastest" while companies that don't adapt to AI-optimized development practices "will move much more slowly."

The future may involve "terraform your software from scratch" where "the prompts that led to it" become the durable asset rather than the code itself.

AI's Economic Impact: Beyond the 10-Person Company

"There probably will be a 10-person billion-dollar company, but I don't necessarily think it'll be the norm" due to competitive dynamics requiring continued investment in differentiation.

"In a competitive market, the second-order effect of the efficiencies of AI will be investment to compete, lower prices or customer acquisition" rather than just cost savings passed to shareholders.

"Most of the economy isn't digital, like exclusively" - while finance and software engineering may be "limited by intelligence," physical industries still require real-world operations like cargo ships and wet labs.

"Intelligence is clearly on the cusp of going up exponentially, but it doesn't mean adoption of like that can't be absorbed by the economy perfectly exponentially."

Resources Mentioned

Acquired Podcast

Brett Taylor mentioned listening to the Acquired podcast when discussing Google's AdWords business model, noting how it became 'literally the most profitable business ever created' despite initial skepticism about Google's monetization strategy.