Risk rumble: The software industry must act before it’s swept by a tsunami

Something has changed in software. The proof is visible in the timeline. In the past, a software idea could give you a five- or 10-year head-start. Salesforce, Spotify, Facebook and even Dropbox—these were products that enjoyed long uninterrupted stretches without serious rivals. But in today’s AI-led world, major innovations get copied in days or weeks, not years. A glance at the timeline—from ChatGPT to Bard, from DALL-E to Midjourney—is enough to show that the pace has fundamentally shifted.

But this piece is not about timelines. It’s not even about the speed. It’s about the response.

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If there’s a tsunami warning, check if there has been an earthquake: The first step in assessing tsunami risk is not to discuss wave height or coastline curves, it is to ask if a quake has struck. The software sector has had one. The core dynamic that drove product-led growth for three decades—new ideas staying technologically unique for years—no longer holds. Even the best new features are replicated in weeks. The accompanying table is not an edge case. It is now the norm.

And yet, much of the industry seems to think it’s business as usual. There is a kind of intellectual defensiveness at play: a habit of dismissing change by referring to history. We hear talk of a past when software revenues always grew. We hear of the potential of artificial intelligence (AI). We are told to look at nuances, which invariably mean those who suffer will be someone else. Yes, nuances matter, but the first need is to truly acknowledge that something has drastically changed.

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If a tsunami is headed your way, run: There’s always a chance that the great wave misses you. But when a warning goes off, the smart response is not debate—it is motion. The equivalent in software is this: reassess the mental models by which we evaluate, invest in and build software. Ask this question: have your frameworks changed at all?

If you are still evaluating software companies based purely on the features they ship, or how many AI announcements they make, then nothing in your analysis has evolved to reflect the new reality. If your core pitch as a company is ‘look at what we’ve just added’ or ‘the agents we’re building’ and you assume that will lead to durable value, you’re on the beach with binoculars.

This isn’t just about startups or tech giants. It’s about anyone connected to the software economy—venture investors, corporate strategists, public market analysts, developers, etc. If your process has not shifted since the pre-AI years, you are not preparing for the future.

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Corporate paralysis is common. Many assume that distribution strength or customer relationships will act as natural barriers. Some are blinded by the near-term development work in AI implementation. They believe that adding AI to existing workflows will be enough. They hope that their historic strengths—installed base, brand, trust—will see them through. But in a world where features are copied instantly, even the best distribution networks and product road-maps are not safe. For the software world, replicability is far worse than rampant piracy seen in the past.

Once you begin to run, think of how far you need to go: Only once you’ve started running is it time to engage with nuance. Yes, machines can’t do everything; relationships and proprietary data matter; and trust and security still count. But nuance without motion is a distraction. Take a software firm that believes it will retain users because of historical habits. It adds AI features and assumes that layering innovation onto legacy strength will work. But the number of viable alternatives is exploding. The inertia that once protected incumbents is fast losing its protective power.

The same mistake happens on an individual level. Developers, when confronted by AI coding tools, often comfort themselves with what AI cannot do. But that misses the point, as it is only a matter of time before AI will do much more. Senior developers are the most indifferent, focusing on the corrections or objective-level identifications only a small fraction can participate in, ignoring the impact on the bulk of software professionals.

Macro-level exposure also needs closer attention. India’s economy is reliant on software exports, so the risk isn’t theoretical. The idea that ‘everyone will just move up the value chain’ is not a plan. It’s a prayer. Not everyone will move up. A vast majority cannot, especially since the last-mile work that machines cannot do is a small fraction of the work currently done by everyone.

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Once you spot the wave, decide how to survive: I write this not just as a commentator on software, but as a long-only fund manager in an industry facing its own structural challenges for decades. When people point out the headwinds our business faces, the instinct is to argue back and focus on whatever positives we can line up for why we will not be as impacted as the rest of the industry.

Being optimistic is good, but not when it prevents us from recognizing the obvious until it begins to hurt. The change we confront is obvious from what assets are counted as strategically important by leaders of the largest countries. If our top policymakers still cite India’s three-decade history of software development as a reason for sustained success, it is worse than ignoring the equivalent of a 1970s’ style oil shock.

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We have to rethink everything—from product design and strategic partnerships to how we add value. Doing what worked in the past and hoping for different results is not a strategy.

So yes, let’s discuss the nuances. But only after you’ve accepted the facts. The quake has happened. The wave may not hit everyone equally. But it is coming. And it’s time to move.

The author is a Singapore-based innovation investor for LC GenInnov Fund.