Software Leaders Maintain Moats But Face New Limits

SaaStr reports that many B2B software leaders still show substantial customer stickiness, with median Gross Revenue Retention (GRR) around 90% and top performers above 95%. According to Morningstar, the firm reviewed 132 tech companies and downgraded 40, cutting six former wide-moat ratings to narrow, Adobe, Salesforce, ServiceNow, Shopify, Descartes, and Manhattan Associates, and reducing Adobe's fair value estimate by 32% and ServiceNow's by 18%. The Saastr article also cites Goldman Sachs identifying Snowflake, MongoDB, Shopify, and CrowdStrike as having "architectural moats," and references a Bain report that GRR is roughly 90% while customers are generally not leaving but are also not expanding.

Industry reporting frames GRR as a measurable manifestation of traditional moats: long implementations, deep integrations, and data-driven workflows that raise switching costs. For practitioners, high GRR typically corresponds to entrenched usage patterns and integration depth, which complicate outright displacement. Observed patterns in similar transitions: however, historical retention metrics do not capture demand-side shifts driven by new capabilities such as AI-enabled automation, which can change buyers' expansion behavior even without triggering churn.

multiple independent assessments from Morningstar, Goldman Sachs, and Bain appearing in the Saastr piece indicate a broader re-evaluation of moat durability in the Age of AI. Morningstar shortened moat duration (as reported by Morningstar analyst Eric Compton) and cut valuations for select incumbents. Public coverage frames some infrastructure and data-platform vendors as relatively better insulated because they control system-of-record data that AI consumes.

observers should track leading indicators beyond GRR - net revenue expansion, usage-driven contract changes, and procurement decisions influenced by AI features. Also watch whether buyers shift budget toward firms that provide integrated AI tooling or toward specialists that layer intelligence on top of existing records, as these allocation choices will affect growth more than retention alone.