At the 2025 a16z LP Summit, General Partner Alex Rampell delivered a stark message: "What software is now going after, the prize that it's going after, is the labor market." This pronouncement served as the core insight of his compelling talk, dissecting the historical evolution of software and projecting its imminent, profound transformation of the global economy through artificial intelligence. Rampell articulated how AI agents are accelerating a long-standing trend, moving software beyond mere digitization to actively performing the work of human labor, thereby unlocking trillions of dollars in value.
Rampell began by framing the immense scale of this opportunity. He highlighted that while the global Software-as-a-Service (SaaS) market currently generates approximately $300 billion in annual revenue, the U.S. labor market alone dwarfs it at an astounding $13 trillion. This vast disparity underscores the unprecedented economic territory that AI-driven software is poised to conquer. This isn't just about incremental efficiency gains; it's about fundamentally reshaping how work is done and who (or what) performs it.
Historically, software’s primary function has been to digitize existing human-read systems. Rampell presented a compelling timeline, illustrating how industries from airline reservations (Sabre systems in the 1960s) to sales (Siebel and Salesforce in the 1990s) and even library card catalogs, essentially took "filing cabinets" and converted them into databases. This transition streamlined information access and management but largely maintained human roles in interpreting and acting upon that data. The power of these early software innovations lay in their ability to organize and present information, allowing humans to be more efficient, but the human element remained central to execution.
The advent of AI agents marks a critical inflection point, fundamentally altering this dynamic. Software is no longer a passive database read by humans; it is becoming an active agent capable of performing tasks end-to-end. As Rampell succinctly put it, "Out pops software that does the job of labor." This shift demands a radical rethinking of business models, particularly within the SaaS industry. Traditional seat-based pricing, where companies pay per human user, becomes obsolete when AI agents can perform the work of thousands. Zendesk, a customer support platform, exemplifies this challenge: if an AI agent can answer 9,000 questions per human agent, why pay for 1,000 seats? The entire revenue model must pivot from providing tools to delivering outcomes.
This paradigm shift goes beyond simple cost reduction.
AI addresses inherent limitations of human labor, such as intermittent demand, the performance of demoralizing jobs, the need for regulatory certainty, and overcoming language barriers. These factors create new market opportunities previously unfeasible. For instance, a small business can now access multilingual customer service or complex compliance checks at a fraction of the cost and with far greater consistency than hiring human staff.
Rampell provided vivid examples of AI agents in action. He showcased HappyRobot, an a16z portfolio company, demonstrating an AI negotiating freight loads over the phone with astonishingly human-like interaction. Similarly, Salient, another portfolio company focused on collections, uses AI that can speak dozens of languages, handling overdue payments with programmed regulatory certainty, a task often demoralizing for human agents. These capabilities expand the market for services by making them accessible and affordable for businesses that previously couldn't justify the human capital investment. AI not only optimizes existing processes but also unlocks entirely new categories of non-AI applications, making viable businesses that were once unprofitable due to prohibitive customer acquisition costs or high costs of goods sold. The infusion of AI effectively lowers the bar for market entry and expands the total addressable market across industries.
