Monday.com CEO on Is SaaS Dead: Will Everything Be Vibe Coded | Eran Zinman

Nobody will want to buy software that's not doing the majority of the work for them. We're changing everything. It's the biggest pivot moment for us in the history of the company. The TAM of software, how much companies are going to spend on software, is going to be 100x from what it is today.

Thanks for having me, Harry. It's great to be here again.

Yeah. So first of all, I want to acknowledge it's a kind of a crazy period, I think, for all of us, especially, you know, us as founders going through this massive change in the market. So it's definitely not easy. I'll give you that. Definitely it feels like a roller coaster almost every day. You know, some days are extremely difficult, but it's definitely quite a journey. I think fundamentally we need to distinguish between what happens in businesses, which is one thing, and the sentiment change that happened, I would say, in the last year and a half, but more precisely in the last six months, which from my perspective it felt very aggressive, very powerful. On one hand, like if you look at the earning calls and how business operate, everything is kind of normal. Some companies are even exceeding expectations and businesses are working great. But at the same time, the sentiment has shifted drastically, like I've never seen before, at least from my perspective. And the negativity that now is being attached to software companies, and it seems like every day there's a new doomsday scenario, a new tweet. So the sentiment definitely changed. By the way, there's a lot of truth to that, and a lot of things I do understand from the investor perspective, so I'm not dismissing it. But we definitely need to distinguish between the operation of businesses and the sentiment change that happened in the market.

Yeah. So first of all, I think there's like five doomsday scenarios I'm familiar with. So that's one of them. But you know, I'll just take you back a little bit in time. But first of all, it was everything about people will vibe code their own apps. That was one of them. Another option for a doomsday scenario was that some players like, you know, Anthropic or OpenAI or Gemini will capture, you know, all the value from enterprise software. I think that's another scenario people are talking about. And the third one is maybe what you refer to as, you know, a platform becoming essentially a system of records, and then other companies capturing the entire value that those companies offer. So I don't mind going through each one of them if you want. I can address each one of them.

Well, I can come up with additional three ones if you want.

Yeah. So first of all, from my personal perspective, I was after a long day of work. I was about to go to sleep. Suddenly I got a lot of messages on my phone saying that we were broadcasted live on CNBC. And you know, from all the software in the world, that journalist picked Monday to show that you can vibe code the software. Obviously she could pick any software on the planet, but you know, initially I said, you know, it's a compliment. Monday is beautiful software. So I felt it was a compliment she's done it to Monday. But you know, she could have done it for Salesforce or ServiceNow, or she could even create like a search engine or a social network at the same time. So again, like it's a matter of perspective, I guess, going back to the vibe coding theory in general. Look, first of all, I have to say vibe coding is amazing. I've been coding all my life since I was a kid, and seeing this amazing technology become real is unbelievable. But I think there's a big difference between vibe coding a user interface and building an actual software that works across an organization with all the depth and functionality that's built into that. There's a big difference. You know, I've been coding all my life and I know how, you know, relatively easy it is to create an interface and how hard it is to build the software. So I think there's a big difference, and I think some people might get confused by that.

Yeah, look, I said each one of those theories, I think it has some truth to that, but I think it's marginal. I think it's a very small impact, if any. I think, you know, going back to the topic itself, I think people underestimate how hard it is to maintain software over time. I think it's very easy to create the first increment of a software, but to change it, adopt it over time, it takes a lot of effort and a lot of dedication to do that. And at the end of the day, from my perspective, businesses have a core business operation they need to focus on. If you think about it, software today is a very small expense for most companies, and you know, having a dedicated person or a team vibe coding some apps is a huge cost. So I think in the end of the day, vibe coding is amazing technology, but I don't think it's going to disrupt software companies. I'll give you another point of data which I think is relevant. You know, you can see amazing VCs like yourself and other people in the industry and amazing founders building companies. If you could vibe code, you know, any company in any startup, no company will have value. Not in history and not today. And still people invest billions into new companies, new startups, entrepreneurs build new startups. You know, I've read amazing news about Ramp raising at 30 billion. Harvey, Legora, companies you talked about. You know, you can argue you can vibe code them as well, but still the smartest people...

No, actually I don't think so because at the end of the day, those companies, it's true that over time they accumulate data and information, but I can argue you can probably get the vast majority of the value even without that specific training. So I think at the end of the day, you can argue you can vibe code any company. What I'm trying to say basically is that as much as I think the technology is awesome, we have our own vibe coding capability within the product. From all the theories of how software is going to be disrupted, this is my least favorite one. I don't think it's going to happen. And I think, you know, most investors that I speak with and people within the industry don't think that's what's actually behind what's impacting stocks and software companies today. So again, it can marginally have some impact, but I don't think that's the majority of what we've seen in the market.

Yeah. So again, I think there's obviously some truth to that and they might capture some of the value, but I think people overestimate how much they're going to capture. I want to take you back in history. You know, I'm old enough to remember when AWS built, when Amazon built AWS, and everybody back then said that Amazon is going to capture all enterprise software value because before that, the hardest part about building a company was actually getting the servers up and running, the website working, storage, having like 24/7 availability. That was the hard part. That was the heavy lifting. I remember how people got excited when you got a website online. And when AWS came out and it was so easy now to build a website, everybody said Amazon is going to capture all the enterprise value because it's just so close to the value they offer. What really happened is the exact opposite. We saw a boom of companies building on top of Amazon and software became, you know, was growing exponentially because at the end of the day, I'm not saying Anthropic or OpenAI are not capable of building enterprise software. I'm saying the opportunity they have as being the infrastructure of, you know, the LLMs of the future is so massive, and going after enterprise offering is a whole different business to build because at the end of the day, when you sell to companies, it's a different sales process. It's a different mechanism. Nobody's going to buy software for the entire organization based on purely a PLG play, and the way they're going to adopt, they want to be handheld, especially if you want to use a software across the organization. So I'm not saying people will not use Anthropic and OpenAI, for sure they will, but I don't think they're going to capture all the enterprise value because they have a much bigger opportunity ahead of them and it's not their focus. And no company on earth, with AI or without, can do everything. I don't believe in one player being the one software to run everything in the organization or at all. So I don't see this playing out.

So it's a tough one because it's true. That's why it's tough, because it's true. That's, I believe that with all my heart. Basically the way I look at it is that if you think about it very broadly, software as we know it hasn't changed for 25 years. Even before the web, I was building software for DOS, you know, without interface. Same thing, you would build a database, you will create dashboards and analytics on top of it. You might have some automations and workflows, but essentially the value is the same from day one. And it's true that interfaces changed. People initially built for, you know, desktop applications on Windows. It moved to the cloud, so there was a major benefit because it became real time, everybody was seeing the same thing at the same time. Mobile came into our life, but if you judge by value, basically the same for 25 years. And if you think about it, it doesn't matter if you built a CRM software, IT software, work management software, 90% of the work was done outside of the tool. So, you know, if you're a salesperson, you would make the call outside of the CRM, you build the deck outside the CRM. You will prepare for the call outside the CRM. Eventually, yes, you will track the data into a CRM and your VP of sales will be able to see what's going on. Same goes for IT. Same goes for Monday. You would track your workflows and projects and you will do everything within Monday. But the work itself was done outside of the tool. So if you think about it, software was extremely beneficial. I cannot imagine the world before software because we take so many things for granted, like everything is centralized, real time, one place, everything is tracked. So we might take it for granted, but it was a major step. But not going back to your question, AI changed everything because now with AI, I think we flipped the equation. I think AI can potentially do 70, 80% of the work and not 10, 20% like it used to be before AI was brought into our lives. And I think that changes everything in what companies need to do for their customers, what customers expect from software. It will only grow over time. Nobody will want to buy software that's not doing the majority of the work for them, because otherwise you're just buying legacy software.

Well, I think this is, in my opinion, where investors in the public market get it wrong. I think, you know, if you judge by what software is doing today, you're right. You know, if we don't change, eventually we'll become a database and nobody will buy Monday to track their work because you will buy software from other vendors that fulfill that promise. But that's not the way it's going to play out. I think, you know, I can talk about specifically if you want, but we're changing everything basically. I think that, you know, going back to what I've said, I think some of the investors or the public market, you know, I totally understand the way it reacted because I think what the public market is saying essentially is we understand that the value is changing and software will be different going forward, but we don't know who will be able to change. And I get it because it's hard. Change is extremely hard, especially for an existing company. And the public market is saying we don't know which company will be able to change. There's so many parameters to that and we're out until we get that confidence. But if I take a step back, I think that, you know, software going forward, the TAM of software and how much companies are going to spend on software is going to be 100x from what it is today. Software going forward will be much more valuable going forward. Software TAM is going to grow exponentially. And if you combine this with the fact that companies are going to change and going to capture this value, I think the opportunity in the software market today is like we've never seen before in our lives.

Look, I can give you an example from Monday. You know, I've actually done this. I've checked it myself. So I think a company like Monday, let's say we have like 1 billion in expenses. A company like Monday will probably spend, you know, 60, 70% of the budget on headcount and then 7, 8% on software. But if we can flip the equation and scale businesses not on headcount going forward, you know, every CEO will be gladly increasing the expense on software because it's going to be marginal compared to the headcount growth that you plan for your business going forward. And I think this will play out more and more into the future. As AI becomes more dominant, companies will spend much more in software and much less on headcount going forward because they'll just become more efficient and they'll gladly spend that software.

Yeah.

Yeah. No, I agree. And I think we need to differentiate between the transition and where we're going. So for us, you know, actually we brought it down a little bit. In the last earnings call we said it's going to be mid-teens. And I think there's also potential, you know, we might even take it lower. I don't know, we'll see. But I don't want to, you know, press the brakes violently. I think we need to do this responsibly because there's a transition period. But if you look at the horizon, you know, two, three years...

Look, first of all, you know, it's discussions we have in the leadership team and maybe we'll make other decisions, but I don't think that's the point. I don't think that, you know, if we reduce headcount dramatically, it will change, you know, investor perception about Monday. I just don't think that's the essence of what we're seeing in the market. Going back to what I've said, I think investors don't know which company is going to change. And you know, we just had the earnings call two weeks ago. You know, a lot of fun. You know, obviously I'm being sarcastic. But you know, going back to investors, and I've talked with, you know, all of our major investors and everybody's saying the same thing. Eventually what they want to see is business revenue accelerate. And I totally get it because I think what people are saying is there's huge demand for AI products and people want to buy AI. And we're going to have a few years now that companies are going to look for AI solutions given that we're going to see infinite demand for AI products. There shouldn't be a demand problem, so you need to show us or prove to us that you can supply that demand to your customers and new customers. And because of that, we want to see acceleration of revenue going forward. And they're right. I think that's the best way to prove it because if there's infinite demand and you're able to capture that, no reason for your business not to accelerate. And I think that's our role. This is exactly what we need to do and prove to ourselves and to our investors going forward that we are able to accelerate the business and we are able to capture that AI demand that exists now in the market. And this is, you know, Roy and my responsibility going forward.

Yeah, so look, the way I look at this is this. I'm not arguing that companies need to become more efficient. So I'm not dismissing it and we will become more efficient. I'll give you some examples of things we're already doing. First of all, we had a team of about 100 SDRs and we're now doing it with agents. 100% is being done with agents. We moved those SDRs to do outbound. All of our support is being done with AI. All of our developers are using Claude Code and Cursor. So, you know, I don't think there's any company that's pushing AI efficiency more than we do. We want to be at the forefront of that and we're pushing that with all cylinders and we are becoming more efficient.

So basically a customer today that goes into Monday, when they leave their details on the website, let's say they leave a contact sales form. The way we used to do it before AI was that we had a team that would call back those customers, try to figure out, to qualify them, to check the opportunity, and basically qualify them and help them schedule a meeting with the AE, account executive on our team. So this is all done by AI today. So I'll give you some stats. It used to take on average 24 hours to get back to a customer. Now it takes 3 minutes. We used to miss a lot of the calls. People would not answer the calls. Now everything went up. Conversion rate went up. People answering the call went up. Opportunity to book went up. So all parameters went up. AI speaks all languages, available 24/7. So it's been quite an amazing transition.

So when it comes to the SDR part, we've done it our own. We built our own solution. And support, we use some third party, but a lot we do our own as well. I think you still need to highly customize tools today in order to properly enjoy them, and things are moving so fast that we just felt building our own is probably the right path to take at this point.

I've seen some of it. I think right now it's a sense of flavor, but essentially we're in a transition period and definitely we see increase in output for engineers, by the way. I think part of it is that you find new bottlenecks that are not attached to writing code. I think on one hand we see increase in personal productivity, but again there's new bottlenecks you find each time you increase one of those productivities. And basically we're on a journey to increase more and more the output of our R&D team.

So today we have about 3,000 people and going to be when...

Wow. My gut feeling is probably not going to grow substantially. But look, I think efficiency is important, but I think what's even more important is the opportunity that we have. And I think this is where people are missing the point from my perspective because it's true that we can focus 100% on efficiency and, you know, reduce headcount, reduce expenses. But going back to my point, this is the biggest opportunity in software ever in our lifetime. The biggest opportunity that we ever had as a company and as an industry. Okay, this is like the beginning of the most amazing journey for all of us. So what I want to do is to capture as much as I can out of this opportunity because it's out there and we can do it. And I think this is where people are getting it wrong. Like, you know, on one hand I see people excited about private companies because they build tools in the AI era that kind of capture what I've referred to as doing the work. But I'll tell you a secret, you know, public companies will do it as well. We're going to do it. We are already doing that. The challenge I have is like bolt-on AI strategies, which I'm not delineating between public or private. I'm delineating between scale companies and non-scale companies or AI-native companies. And I think the bolt-on AI strategy, sorry I'm being blunt, could be a U, it could be an Airtable, it could be a you-name-that-ilk era of company versus an AI-native built from the ground up with AI. It's just very different in how you build, integrate and adopt or approach AI as a fundamental platform.

Yeah, so look, going back to the transition, like I said, initially it was the AI dust that we sprinkled in product. But then we realized, you know, what I've said is that the value we need to give to our customers, not just us, every software is completely different. So what we've done internally is to rethink what we are doing as a company, what's the value we try to provide to our customers with Monday work management platform and also with CRM and service, and rethink our whole product. Part of it is pricing, like you said, that's going to change dramatically. Our go-to-market is going to change, our homepage is going to change, the ads are going to change. And the most important part, what our product is giving, the value it gives to our customers, is now going through the biggest transformation since we launched the company back in 2013. It's the biggest moment for us in the history of the company.

Well, eventually I think it's going to be more consumption and then entirely consumption going forward. So I think this will also be a transition, but now it's going to be hybrid and eventually it's going to be 100% consumption.

First of all, maybe I'll just explain the transition that we're doing just to make it more concrete. So basically companies want to adopt AI and they're going to adopt vertical tools to do that, like the, you know, the SDR example I gave you, maybe another example for support, for legal. There's a lot of vertical solutions people are going to adopt, but I think there's big room for horizontal plays, and this is exactly what we're going to do with Monday. So basically we want to be a place that orchestrates between agents and humans because at the end of the day, you know, maybe in the far future agents will do 100% of the work. I don't think it's going to happen, but maybe it will happen to some extent. But we're going to have a, you know, a huge transition period where humans and agents need to work together, and we want to make Monday the default place for people to build agents and to collaborate between agents and people. So essentially you'll build Monday, you'll build agents on top of Monday, those agents will output tables, docs, files, people will go over it, they'll build their own agents, and essentially we want to become the default place to do horizontal agents across the company.

So first of all, I don't think that ChatGPT or Gemini or Anthropic are going to do it because going back to my second theory that we discussed, you know, of course, you know, people are buying Anthropic, Claude, they're buying ChatGPT, but it's not a tool where you work with another thousand people and share information. It's a personal tool that people use. There's a big difference between selling a tool that can be used personally and building a tool for people to collaborate with agents. It's a very different product.

Yeah, I'll explain again. I think, you know, a company today that wants to adopt AI, they have no idea what they need to do. No idea. It's a new technology. You know, I think we live in an echo chamber of tech, but the world out there is very different. And I think essentially companies will want to buy AI. They will do whatever they need in order to buy AI capabilities because it's going to be a competitive market, and if they won't do it, they won't survive. But I think...

So I think we need to differentiate what enterprise contract means. Okay, so the fact that ChatGPT or Gemini or Anthropic are selling a contract that a thousand people, let's say, within Monday can use Anthropic, it's great. But that's not the product I'm talking about. Okay? It's like comparing Microsoft Office with Monday. It's not the same thing. There's tools that people use individually, which is great, personal productivity tools, building agents, but then there's the actual work. It's like claiming that, you know, there's no need for SDR software because you bought Anthropic. It's a different problem to solve. So I think the problem of solving how people and agents are working together in one workspace, if it is a very different product, is a very different problem. I think companies will want guidance on how to do that. They're going to need help setting up agents, figuring out what they can automate with agents and what they can replace in terms of headcount. And this is not by buying off-the-shelf product that is a generic product. You will need a product that can help you collaborate between humans and agents. It's a very different product compared to just buying a license to an LLM. And I think eventually if you look at Anthropic, OpenAI, and Gemini, they have a much bigger opportunity they want to chase. They want to be the backbone of the LLM industry. They want to capture as much as they can in terms of that market share. And I get it, it's a huge opportunity. Again, going back to my AWS comparison, they are the infrastructure, but there's going to be a lot of products built on top of that. I think if anything, we're going to see an excess of software being built on top of the LLM, not less, exponentially more, because the opportunity is so massive and the TAM is so huge. Going back to Monday, we're going all in for that. We're changing the product, the value proposition, how people use the product, how people onboard, and what people should expect from the product. If you haven't built an agent on Monday, you're not using the product properly. And that's a major shift. The boards, the dashboards are going to be more in the background and the agents more in the forefront. And it's a huge change. It's a scary change, but I believe in that with all my heart because I think the opportunity is massive. We're at 0.001% done of where the world is going.

I think technology is moving fast. I think organizations are going to take more time. You know, what is AI adoption? There's so much nuance to that. There's so many things. Look, at the end of the day, I think what people are confusing is, you know, AI can get super smart and we've seen it growing exponentially. But no matter how smart you are, if you don't have context, you cannot perform your job. You know, even the most intelligent person on earth cannot do their job if they are not aware of the context. And if you think about any company, even Monday itself, 90% of the context is not documented anywhere. Nobody knows it.

You know, it's something that kind of floats in the air. You know, what's the idea? What's the strategy? Who's doing what, what's next month, what's next year, how are we going to do it, why are we doing what we're doing, what's the thought process behind it. So, I think we're going to see a transition period before all that information and knowledge and intelligence is going to be documented, which might happen in the future. I think we have a huge transition period of people working with agents. I think you can see some small companies and you know I've been following Jason Lkin and what he's doing on his own team. I'm a big fan of Jason.

I do a show with him every week and he is my mentor and he is aware of it. But he is so into it. It's insane.

Yeah. So I think going back to my original opening where I said that there's the sentiment change but businesses are unaffected. So we were affected by one thing, which is Google introducing AI mode in the search results. So Google used to be a significant acquisition channel for us and definitely it took a hit in terms of people clicking on sponsored links because people see the AI answers. So definitely...

It was about 10% of our acquisition in terms of new ARR. But again, Google is very transactional, so people usually when they're searching for something they're willing to buy at this point because the intent is very high. So we lost some of the more transactional deals, more SMB oriented, and we shifted that budget to other channels, but they're kind of longer sales cycle. So we definitely took a hit because of that. But apart from that, we have 70 other channels that we acquire customers from and we didn't see any impact on other channels. So it was a significant impact, but from my perspective it's isolated to that.

Well, we announced a buyback program of 870 million and we said we're going to spend it over the next two, three years. We already done some buyback in Q4 and you know we said that if we're going to see opportunities we're going to buy back our shares and definitely there's opportunities right now. So we are looking into that and we do have a buyback program.

Yeah. So, first of all, I'm on a 10b5 program. So basically I have to six months in advance make a six months plan ahead. So I'm not saying I won't. When the plans open up, I might buy more shares personally. Again, it's something I need to decide with my wife. You know, it's not a personal decision for me. But definitely it's an opportunity. But I can share another thing is that, you know, not myself or my partner Roy or the rest of the leadership team is selling shares. In my 10b5 I have, you know, a number I'm not willing to go below in terms of selling shares and I can say the price now is much, much lower than that number. So I'm not selling any shares personally. And maybe I'll share another thing because it's public information. You know, since the IPO, I still hold, again, I don't know the exact number, but probably 80-something percent of my shares. So I sold less than 20%. 14 years in this journey. So I don't think I need to prove more that I have like all my skin in the game, you know? I'm 100% in. I believe in the future of the company and I think, you know, as I said, it's one of the biggest opportunities that we ever had as a company.