Let’s explore what the moats are left to Software providers in the era of AI, where potentially anyone can build software.
Attacks on Software
· Vibe Coding: Vibe coding is reviving Citizen Coders. If I have domain knowledge, I can develop software, at least for personal use or an MVP. This vibe-coded software is customized as per need, and features can be added almost on demand.
· Reverse Engineer Anything: REA is latest arsenal in hands of experienced software developers to gain sight in design and coding practices of well-established software systems.
- Dying Moats: Many classic moats, like unique features, simple SEO-owned traffic, and basic UX, are becoming less effective as AI reduces barriers to entry.
Surviving Moats
- Buyer Trust: Building an ecosystem where partners and experts recommend (QuickBooks, Shopify).
- System of Record: Becoming source of truth / the central data hub where daily operations are anchored (Jira, GymDesk).
- Authority to Act: Not just advising but having permission to perform actions like moving money (Stripe Connect, Reimb).
- No-check Trust: Earning the permission where customers stop verifying your work because of a long track record (Gusto, Avalara).
- Regulatory Approvals: Holding specific licenses or certifications that create high barriers for newcomers (Vanta).
- Network Effects: When software requires entire groups or teams to coordinate, making it painful to switch (Slack).
- Networked Learning Loops: Product gets smarter with every additional customer. Data from one user improves the system's predictive power for all other users, creating a defensible advantage that a new competitor cannot replicate alone (e.g., Stripe Radar, Mailchimp).
- Operational Burdens: Handling infrastructure that you 'resent' but is extremely difficult for competitors to maintain (ScrapingBee, Cloudflare).
What are the Moats of your Software?
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