SaaStr 842: The 90/10 Rule for AI Agents: What to Build vs Buy with SaaStr's CEO and CAIO - The Official SaaStr Podcast: SaaS | Founders | Investors Recap

Podcast: The Official SaaStr Podcast: SaaS | Founders | Investors

Published: 2026-02-18

Duration: 1 hr 1 min

Summary

In this episode, the hosts explore the critical balance for SaaS companies between building and buying AI solutions, emphasizing the 90/10 rule where 90% of needs should be met by off-the-shelf products, reserving 10% for unique cases. They highlight the urgency for businesses to innovate or risk obsolescence in today's fast-paced AI landscape.

What Happened

The episode opens with a stark warning for SaaS founders: the landscape has shifted so dramatically that companies now face a clear divide—either they adapt to AI advancements or risk being left behind. The hosts stress that reliance on long-term contracts can provide a temporary shield from competition, but this is no longer a sustainable strategy. The discussion pivots to the importance of product excellence, urging founders to evaluate their offerings critically. They ask, 'Is your jaw dropping?' suggesting that true innovation is what drives customer loyalty and success.

The conversation then introduces the 90/10 rule, a guideline for SaaS companies regarding the development of AI agents. The hosts advocate for purchasing 90% of necessary tools from existing solutions, rather than attempting to build everything in-house. They emphasize the complexity and resource drain of maintaining custom-built solutions, citing real-world examples where they opted for third-party tools due to their reliability and functionality. This practical approach allows companies to focus on the 10% of unique needs that truly require bespoke solutions, thereby optimizing resource allocation and ensuring operational efficiency.

Moreover, the hosts share insights from their own experience with AI applications, particularly highlighting a recent shift where they replaced an existing tool that was insufficient for their needs. This decision underscores the balance between buying and building, as they navigate the evolving landscape of AI tools and applications, learning that sometimes it’s necessary to innovate out of frustration with the limitations of available products. They also discuss the risks associated with building niche applications, suggesting that the market may not always support such investments.

Key Insights

• The AI landscape is rapidly evolving, and businesses must adapt or face displacement.
• The 90/10 rule emphasizes buying 90% of solutions off-the-shelf and building only 10% for unique needs.
• Maintaining custom-built tools can consume significant resources and time.
• Frustration with existing solutions can drive the decision to innovate and create tailored applications.

Key Questions Answered

What is the 90/10 rule in SaaS?

The 90/10 rule suggests that SaaS companies should aim to purchase 90% of their software needs from existing solutions rather than attempting to build everything from scratch. This approach allows companies to leverage proven tools and minimize the complexities involved with custom software development.

How can SaaS companies avoid obsolescence in AI?

SaaS companies can avoid obsolescence by continuously innovating and adapting to the rapidly changing AI landscape. Founders should critically assess their products to ensure they are not only meeting current needs but also providing significant improvements over competitors, fostering customer loyalty.

What are the risks of building niche applications?

Building niche applications can be risky due to the potential lack of market demand and investment to justify development costs. The hosts caution that companies should consider the existing solutions available before committing resources to build a custom tool, as many niche markets may not support robust products.

Why is product excellence vital for SaaS success?

Product excellence is vital because it differentiates a company from competitors. The hosts highlight that customers do not choose products that are merely slightly better; they seek solutions that are 'jaw-droppingly better.' This level of innovation is essential for retaining customers and driving growth.

How do companies balance building and buying software solutions?

Companies can balance building and buying software solutions by evaluating their specific needs and the availability of existing tools. They should aim to purchase off-the-shelf solutions for common needs while reserving in-house development for unique challenges that cannot be met by available products.