The Commoditization of Software in the Age of AI

Here’s a thought that’s been sitting with me:

In a world where AI has commoditized the core technology, the software companies that win won’t win on what their software does. They’ll win on how it feels to use it.

Think about the sneaker industry.

Nike, Adidas, New Balance, Under Armour. All of them make shoes. All of them use similar materials. All of them employ similar manufacturing techniques. The underlying technology is roughly equivalent.

But they’re not competing on technology. They’re competing on experience, identity, and brand.

Nike owns aspiration and sport. Their drops (limited releases) create scarcity and desire. A Jordan release generates hype weeks in advance. People line up for products that cost $20 to manufacture.

Under Armour owns the fitness enthusiast. They’ve built a community of people who see Under Armour as the brand for serious athletes and training.

New Balance owns comfort and accessibility. They’re the practical choice.

Adidas oscillates between heritage and trend.

Each brand makes fundamentally similar products. The same feet go in them. The materials are comparable. The manufacturing is similar.

The companies don’t compete on the shoe. They compete on what wearing the shoe means.

Thanks for reading! Subscribe for free to receive new posts and support my work.

The Software Parallel

The software industry is about to experience the same shift.

For decades, software companies competed on features. More features, better features, deeper integrations. The company with the most capability won.

But we’re at an inflection point.

As AI capabilities become increasingly standardized, increasingly accessible, increasingly commodity-like, the differentiation shifts. Every software company can now access the same foundational models. GPT-4, Claude, Gemini. The same APIs. The same capabilities.

Two restaurant management platforms can now both have AI-driven menu optimization. Both can have labor forecasting. Both can have customer intelligence. The underlying AI is essentially the same.

The question shifts from “what can your software do” to “how does it feel to use your software?”

Not in the superficial sense of nice buttons and smooth animations. In the deeper sense of: how does this software help me think? How does it reduce cognitive load? How does it align with my values? How does it make me feel like I’m part of something?

The Two Futures Taking Shape

You’re starting to see this play out.

Some companies are racing into the “hyper-information” model. Maximum data density. Colorful dashboards. Overwhelming breadth of insights. Everything optimized for the person who wants to see everything, understand every nuance, and be fully in control.

Others are moving in the opposite direction. Simplification. Clarity. Reduction of cognitive load. Focusing on the one or two insights that matter. Everything optimized for the person who wants guidance without information overload.

Neither approach is wrong. They’re solving for different user psychologies.

The first approach says: “You’re sophisticated. You want full visibility. You want to make nuanced decisions with all available data.”

The second says: “You’re busy. You want clarity. You want to know what to do, not what to look at.”

These aren’t really software differences. They’re philosophy differences. They’re brand differences.

The Shoe Brand Comparison Gets Deeper

A Nike customer and an Under Armour customer aren’t really making a functional choice. They’re making an identity choice.

Similarly, in the next 5-10 years, a restaurant operator will choose between software platforms not primarily on capability (all the major platforms will have similar AI features), but on the experience and philosophy the platform represents.

Do I want a platform that gives me maximum visibility and control? (The Nike of restaurant software—aspirational, comprehensive, for the operator who wants it all)

Or do I want a platform that curates insights and tells me what to focus on? (The quiet luxury play—reduced cognitive load, refined, for the operator who wants clarity without complexity)

The differentiation becomes about brand, philosophy, and the emotional relationship you have with the software.

Just like you’re not just buying shoes. You’re buying into a lifestyle, a community, an identity.

The Experience Layer Is Where Value Accrues

This is important for founders and software companies building in the AI era.

You can’t outbuild the incumbents on capability. The cost of matching features is too low. AI has made that competition futile.

But you can own the experience. You can own how it feels. You can own the philosophy.

This is why design, UX, brand positioning, and company culture matter more in the AI era than they ever did.

Your software’s value isn’t in what it computes. It’s in how it makes the user feel when they use it.

A platform that makes a restaurant operator feel in control and empowered, even if both platforms surface the same insights, will be chosen over one that drowns them in information.

A platform that makes a user feel like they’re part of a community of forward-thinkers will generate loyalty that feature parity can’t disrupt.

A platform that respects the user’s cognitive bandwidth by presenting only what matters will win over one that maximizes visible metrics.

None of these are technical decisions. They’re all brand and experience decisions.

The Interoperability Challenge (And Why It’s Actually Opportunity)

There’s a complication that will emerge as the software landscape commoditizes: interoperability.

If all restaurant software platforms have access to the same underlying data and the same AI capabilities, it becomes technically easier to switch between them. Switching costs drop. Lock-in becomes impossible.

This is actually accelerating the shift from “compete on capability” to “compete on experience.”

When switching is easy, quality of experience becomes the primary lock-in mechanism. A user won’t leave a platform because of features. They’ll leave if the experience doesn’t align with their values or psychology.

Companies that understand this are quietly building out brand identity and community. They’re investing in design and philosophy. They’re being intentional about how their product makes people feel.

Companies that still think they can win on feature breadth are building yesterday’s strategy.

The Companies Quietly Positioning Themselves

Some interesting patterns are emerging.

You have companies building toward the “maximum intelligence” experience. Every number, every insight, every possible data point. For the operator who wants to see everything. The philosophy is “trust the user with all information.”

And you have companies building toward “intelligent clarity.” Curated insights. Reduced noise. Guidance with less complexity. The philosophy is “help the user focus on what matters.”

Both are valid. Both will have massive markets. The question is: which philosophy resonates with which user?

The winners over the next 10-15 years won’t be the companies that try to serve both. They’ll be the companies that ruthlessly commit to one philosophy and perfect it.

Just like Nike didn’t try to be New Balance. Adidas didn’t try to be Under Armour. Each company picked a lane and owned it completely.

How This Shapes the Next Decade

The software companies that will dominate the AI era will be the ones that:

1. Accept that capability is commodity

2. Invest ruthlessly in experience and brand

3. Pick a clear philosophy and stick to it

4. Build community around that philosophy

5. Make intentional design choices that reinforce the philosophy

The race to add more features will become a race to strip away the unnecessary.

The company with the most integrations will lose to the company with the most intentional integrations.

The company with the richest data visualization will lose to the company with the clearest one.

The company trying to serve every user will lose to the company that deeply serves one type of user.

This is how commoditization works in every industry. The initial phase is feature parity. The second phase is experience differentiation. The winners are the ones who nail the experience.

The Brand Advantage

Here’s what’s fascinating about this shift: it’s an enormous advantage for founders and smaller companies.

Large incumbents have years of technical debt. Thousands of features built for thousands of use cases. Simplifying is harder when you’ve built for everyone.

Startups can pick a philosophy and build purely from first principles. No legacy. No feature cruft. No trying to serve everyone.

A restaurant software company that says “we’re building for the operator who wants simplicity and clarity” can build a tighter, more cohesive product than a company trying to serve both the operator who wants complexity and the one who wants simplicity.

The same applies across every software category.

The companies that will own the AI era are the ones that are ruthlessly intentional about what they’re building for, who they’re building for, and how they want that user to feel.

The Long Game

In the short term, capability still matters. You need to have competitive AI features to be in the game at all.

But the long-term winner isn’t determined by capability. It’s determined by experience.

The software company that becomes a lifestyle choice—that becomes something people choose not just because it works, but because using it makes them feel a certain way—is the one that will command premium pricing, generate loyalty, and dominate its category.

Just like Nike commands a 2-3x premium over functionally equivalent shoes.

Just like people line up for drops and wait weeks for limited releases.

Just like users become brand advocates instead of customers who tolerate a product.

In a world where AI has commoditized software capability, experience becomes the moat.

Brand becomes the moat.

Philosophy becomes the moat.

The next 10-15 years will show which companies understood this shift early and positioned accordingly.

And which ones kept building yesterday’s strategy while the world moved on.

Thanks for reading! Subscribe for free to receive new posts and support my work.