Difference Between AI and Traditional Software Products: Part II

Profit margins

We’ve discussed the costs associated with building out an AI organization, which we’ll have to do if we’re building applied AI products. These costs are some of the biggest differentiators between traditional software products and applied AI products. Because these costs can be so high, they will impact our margins. KeyBanc Capital Markets’ 2021 survey of 354 private SaaS companies found that the profit margins for most companies were seeing gross profit margins of 80%, and those margins fell to between 68% and 75% when accounting for customer support/success.