Software and SaaS: players, trends, regulation, and how to crack the cases
Examples of software and cloud companies by region, what changed from 2024 to 2026, regulation basics, and typical case prompts.
Industry brief, with a one-minute summary: Software and SaaSFirm processes and online tests change from year to year and differ by office. Use this to prepare, and confirm the exact current steps on the firm's own careers page.
Key takeaways
- In software, the customer who stays is the profit. Most software cases come down to winning customers efficiently, keeping them, and charging for the value they get.
- Common traps: Treating bookings or one-time services revenue as recurring.
- AI shook software valuations.
- Pricing is moving. Many vendors are adding usage-based or outcome-based pricing for AI features, alongside or instead of per-seat prices.
Key idea
In software, the customer who stays is the profit. Most software cases come down to winning customers efficiently, keeping them, and charging for the value they get.
| Region | Examples |
|---|---|
| US | Microsoft, Oracle, Salesforce, Adobe, ServiceNow, Workday, Intuit |
| Europe | SAP (Germany), Dassault Systemes (France), Sage (UK) |
| India | Zoho (privately owned), Freshworks (listed in the US), and large IT services firms such as TCS and Infosys that build and run software for clients |
| Israel and Australia | Wix and Monday.com (Israel); Atlassian and Canva (Australia) |
| Asia and the Gulf | Alibaba Cloud and Tencent Cloud (China); regional cloud data centers built by global firms and local partners in the Gulf |
| Cloud infrastructure (hosting) | Amazon Web Services, Microsoft Azure, Google Cloud |
So-what
Synergy Research estimated cloud infrastructure market shares in the first quarter of 2026 at about 28 percent for Amazon, 21 percent for Microsoft, and 14 percent for Google.
Trends from 2024 to 2026 (checked 28 September 2026)
- AI shook software valuations. In early 2026, software shares fell sharply on fears that AI agents would reduce the number of human users, and so the number of seats, that many SaaS companies charge for. By early February the S&P 500 software and services index was down about 20 percent for the year (CNBC, February 2026). Analysts are divided on whether this will last.
- Pricing is moving. Many vendors are adding usage-based or outcome-based pricing for AI features, alongside or instead of per-seat prices. In one survey, SaaS firms that mainly price by usage grew at a median of 44 percent in 2024, against 25 percent for classic subscription pricing, though fast-growing AI firms lift that figure (Benchmarkit).
- Cloud demand is surging. Synergy Research reports cloud infrastructure spending of about USD 129 billion in the first quarter of 2026, up 35 percent from a year earlier, an annual run rate above half a trillion dollars.
- Huge investment in AI data centers. Alphabet raised its 2026 capital spending forecast to as much as USD 205 billion, Amazon guided to about USD 200 billion for 2026, and Microsoft projected about USD 190 billion for the year including finance leases, and investors are asking when this spending will pay back (CNBC, July 2026). See the semiconductors and data centers module.
- The rule of 40 is harder to reach. McKinsey found only about one third of software companies achieve it, and fewer sustain it.
Software companies that hold customer data must follow data protection laws, such as the GDPR in the EU, India's Digital Personal Data Protection Act 2023, Saudi Arabia's Personal Data Protection Law, and Singapore's PDPA. Some governments and banks require data to stay in the country (data residency), which affects where software is hosted. The EU AI Act sets rules for AI systems by risk level. It entered into force in August 2024, its rules for general-purpose AI models apply from August 2025, and after a 2026 amendment the strict rules for high-risk uses (such as hiring or credit scoring) apply from 2 December 2027, or 2 August 2028 for AI built into regulated products such as toys or lifts (European Commission). Large software firms also face competition law scrutiny, for example over bundling products together.
| Case prompt | Structure hint | First driver to check |
|---|---|---|
| Our SaaS growth has slowed | ARR bridge: new, expansion, churn; by segment and channel | Which bar of the bridge moved: new ARR or churn |
| Should we move from per-seat to usage-based pricing? | Customer value, revenue impact by segment, predictability, cost to serve | How usage is spread across customers: who would pay more, who less |
| PE due diligence on a SaaS target | Market, retention, unit economics, product and technology, plan | Net and gross revenue retention by customer group (cohort) |
| Our cloud bill is growing faster than revenue | Cost per customer or per transaction, architecture, contracts | Cost of revenue per unit of usage over time |
| Should we expand from India to the US or Europe? | Market size, product fit, sales model, local competitors, cost of entry | CAC in the new market versus expected lifetime value |
So-what
Start with the ARR bridge for growth cases and with retention for due diligence. Retention tells you whether customers get value.
Treating bookings or one-time services revenue as recurring. Looking at total growth without splitting new, expansion, and churn. Calling a company efficient because it grows fast while it burns cash. Forgetting that gross margin falls when hosting or AI costs rise with usage. Using logo churn when revenue churn tells a different story (losing many small customers may matter less than losing one large one).
A US SaaS company spends USD 12,000 to win a customer who pays USD 1,000 a month. Gross margin is 75 percent. How many months does it take to pay back the acquisition cost?
Related modules: "Unit economics and subscription businesses" (case type) is the main companion, with more churn and lifetime value practice; "Pricing" helps with pricing model changes; "Digital and AI transformation" covers AI adoption cases; "Mergers, acquisitions, and due diligence" covers software deals. See also the private equity and venture capital module and the semiconductors and data centers module.
Why do investors value SaaS revenue highly?
Why might AI features lower a SaaS company's gross margin?
SaaS growth slowed from 35 to 20 percent. What is the best first step?
Sources for this lesson (7)
- McKinsey: SaaS and the Rule of 40, keys to the critical value creation metric
- Synergy Research Group: cloud market annual run rate tops half a trillion dollars in Q1 2026 (April 2026)
- CNBC: AI fears pummel software stocks, illogical panic or a SaaS apocalypse? (February 2026)
- CNBC: hyperscalers face capex scrutiny after the Alphabet report (July 2026)
- Benchmarkit: 2025 B2B SaaS Performance Metrics Benchmarks (2024 data, survey report)
- European Commission: AI Act, regulatory framework and application timeline (official)
- Recognized public explanations of case-interview concepts and frameworks
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