The Disintegrating Moat - And Why That’s a Good Thing

I’ve heard a lot lately about the predicted fall of SaaS, and that the moat that companies have had for so long is currently being demolished by AI, leaving everyone quite nervous about the future of the software industry. If anyone can come along and code up your product in a weekend, what keeps any business afloat? What protects them from competition in a way that makes that business sustainable? What’s their moat?

I experienced these dynamics firsthand throughout my career: at NCR customers invested hardware, processes, training into their Restaurant Point of Sale products and cloud services, and it was difficult for them to move to anything else, because the costs to do so were enormous. During Covid, we laser focused on our customers, which formed a new moat around us.

At Splunk I was pleasantly surprised by the ecosystem of people who loved the product. I remember vividly one customer meeting we had at Splunk Conf where the customer was there to let off steam about a feature that wasn’t working for them, and they ended up spending the first ten minutes of the meeting apologizing for anything negative to say about it. Their careers were intertwined in this product that they legitimately loved and that is a form of a moat.

But here I am starting a software company, in a world in which the moat is being destroyed. And yet I still keep going. Why?

Let’s break down where that concept of a moat comes from. It’s the trench dug around a castle to keep enemies from coming in.

Who does the moat protect? It’s certainly not protecting the people. The blacksmith who is making swords for the army, or the baker making bread? They’re outside of the castle. The moat isn’t for them.

The moat is for the people that acquired the resources from others. The kings, the queens, the court, the aristocracy.

The moat protects the aristocracy from the invaders. Foreign armies would see the castle and think, “There’s a moat there, a high wall; we’ll all die before they stop shooting at us.” And so it was a deterrent to enemies, which served the aristocracy.

The moat exists to exclude those who think they’re actually protected by it. In reality, it’s protecting those in the castle from those people they’re supposed to be serving. But why would that be necessary? Well, maybe the baker starts thinking, ‘What the King is providing me is kind of a terrible deal; I think we need a new King.’ Then the baker looks at that moat and tall wall and just keeps baking, in a relatively enshittified situation.

In the US, this July we’ll celebrate our 250th anniversary of abandoning that idea. And much of the world has followed suit since then. I’m sure the first days of that were scary and revolutionary. If there’s no moat to protect the elites from the people, how will we not descend into chaos?

When the moat went away, what happened? New rules were written and history was made.

Moats keep the status quo. They make sure that the most powerful people succeed and no one else has the chance. When there is an aristocracy who knows that they don’t deserve the luxuries they enjoy, that they are, in essence, enforcing a bad deal on everyone else, they act in a way to hold onto that power, at all costs.

In software, with the moat destroyed and the access to resources democratized, we will now usher in a new era of progress. No more scammy software, run by scammy people who sell out to scammy companies that enshittify everything they touch.

Instead of the race to the bottom, with a confused chatbot running you in circles, you’ll get real humans who really care about solving your problems.

Instead of something that looks too good to be true, and it is because they’re selling your attention and data to their real customers, you’ll get honest, straightforward people who help you solve an honest, straightforward problem.

Instead of spending hours and hours on something only to leave it feeling frustrated and scammed, we’ll now have a clearer solution that gets out of your way in solving the problem.

People now have a choice. And they will choose human, honest, and clear outcomes. I celebrate and support this, and so should you. It’s time for a new day.