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# Software's Margin Story Ends; What Replaces It?
- URL: https://adjacent.media/signals/softwares-margin-story-ends-what-replaces-it/
- Published: 2026-10-27T23:18:10.000Z
- Updated: 2026-10-27T23:18:10.000Z
- Description: The fundamental economics of software—where incremental customers cost almost nothing to serve—have been arbitraged away by cloud commoditization and consolidation, forcing SaaS companies to compete on operational efficiency rather than pricing power.
- Author: Jonathan Greene
- Tags: #signal, theme-commerce, pricing, monetization, business models

Source: [The Pomp Letter](https://open.substack.com/pub/pomp/p/without-software-premiums-where-does)

The fundamental economics of software—where incremental customers cost almost nothing to serve—have been arbitraged away by cloud commoditization and consolidation, forcing SaaS companies to compete on operational efficiency rather than pricing power. This collapse in unit economics explains why the "software premium" (the multiple investors paid for recurring revenue) has compressed from 10-15x revenue in 2021 to 3-5x today. Funded businesses now need genuine differentiation or defensible switching costs; undifferentiated feature sets do not attract capital. The growth-at-any-cost playbook that defined venture capital for twenty years is no longer viable at current unit economics.