Written by: Techub News

In the latest deep dialogue from a16z, its general partner Joe Schmidt had an impressive conversation with Peter Doyle, the co-founder and CEO of Treeline. Treeline is a company aimed at reshaping the IT management services (MSP) model with modern technology and AI. The significance of this dialogue lies in its focus on a massive yet often misunderstood "invisible" market—an IT and security services industry worth hundreds of billions of dollars that supports the operation of the U.S. and global economy—and explores the fundamental changes in software business models and technology service delivery that are about to happen under the wave of AI.

1. The Overlooked Trillion-Dollar Market: IT Services as the "Dark Matter" of the Digital Economy

At the beginning of the interview, Joe Schmidt highlighted the enormous scale and contradictions of the IT services market: it is a vast industry with an annual scale exceeding $250 billion, considered the "backbone" of the U.S. software and technology economy, providing critical technical support especially to a large number of small and medium-sized enterprises. However, in stark contrast to its economic importance, it is viewed from Silicon Valley as one of the most misunderstood and least innovative fields.

Peter Doyle fully agrees with this sentiment. He explained that traditional managed service providers (MSPs) have an incredibly broad range of services, covering everything from employee and device lifecycle management, onboarding and offboarding users, internal service desk support, to endpoint security, internal threat management, and the lengthy processes of helping clients navigate various compliance audits like SOC 2, HIPAA, CMMC. The service scenarios are complex, highly customized, and involve a large number of critical production systems.

"You cannot simply apply the SaaS (Software as a Service) model to all of this," Peter emphasized, "This field inherently needs 'humans in the loop'; it requires technicians and expertise to work alongside software." The core issue is that while this industry has introduced software tools over the past few decades, its underlying operational model has not fundamentally changed. A typical MSP averages around 30 to 35 different SaaS and software tools to piece together workflows, leading to chaotic systems, data silos, and inefficiencies.

Peter pointed out that many service processes exist simply because "we have been doing it this way for 15 years." This entrenched inertia, along with complex legacy systems, makes it quite ineffective to sell a new software platform solely to MSPs. Software companies may think product deployment only takes a few weeks, but the reality is that to truly change how these enterprises operate, a deep dive into the "core" of their business processes is necessary, requiring systemic reshaping.

2. "Is SaaS Dead"? A Debate on the Future of Business Models

During the conversation, Peter Doyle raised a thought-provoking point when he told Joe Schmidt: "SaaS is dead." Of course, this doesn’t mean literal extinction but is a sharp critique of the limitations of the current software delivery model.

Peter explained that the SaaS model has long been the dominant business model for software delivery due to its repeatability, high margins, and nearly limitless scalability. However, the problem is that in complex fields like IT services, the market is flooded with "too many SaaS options." When companies attempt to manage core business operations with dozens of improperly configured or overlapping software tools, efficiency actually decreases. Treeline initially considered developing a SaaS tool to sell to MSPs but quickly realized that becoming the "36th software tool" in their clients’ hands would not truly resolve issues.

Therefore, Treeline chose a different path: starting as a service company and gradually pulling itself "toward" being a software company through carefully constructed software, automation, and AI agents. Peter believes that fully transitioning into a pure SaaS company may not be reasonable, as the involvement of human technical experts remains indispensable. However, getting as close to this goal as possible could achieve both scalability in service and extreme enhancement in customer experience.

This "software + service" hybrid model is especially crucial in the AI era. Peter observed that even cutting-edge AI labs like OpenAI and Anthropic must deploy large numbers of "forward engineers" and specialized service teams when addressing large enterprise clients. This underscores that regardless of how powerful AI is, the professional knowledge and support of humans are still an indispensable part of effectively integrating it into key systems within enterprises and ensuring reliable operation. Treeline's model starts with this point, rather than being a reluctant supplement.

3. The Real Battlefield of AI: Integrating Trillions of Dollars in Legacy Systems, Not Creating New Applications

Regarding the impact of AI, Peter Doyle offered an insight that goes beyond the current mainstream narrative. He believes that AI's biggest influence thus far has been on two levels: one is the emergence of entirely new applications (such as AI-native tools), and the other is the enhancement of productivity for individuals or small teams.

However, the largest yet underexplored value gap lies in the software infrastructure worth tens of trillions of dollars that has supported the U.S. and global economies for decades. The integration and modernization of AI with these critical systems and production environments will be a long process, requiring new business models to drive it.

The IT and security services market, worth over $250 billion, is a perfect entry point to initiate this journey. This field itself is positioned at the "frontline" of technology applications, directly managing clients' core IT assets. Through Treeline's hybrid model, AI can first empower technicians in the background: when client issues, tickets, or security alerts come into the system, AI agents can at least enhance, and ideally even replace, human workflows, shifting the service from "reactive response" to "proactive prediction."

For example, the system could identify and resolve issues before customers submit tickets, or compress tasks that originally took 30 minutes down to just 1 minute. This enhancement in experience is immediately apparent to clients. More importantly, after calming the everyday "noise" of IT and security, Treeline can foster deeper relationships with clients, exploring how to help them leverage AI themselves to provide additional value-added products and services.

4. Looking Ahead: The Lasting Competitiveness of the Hybrid Model and Market Evolution

Faced with the question of whether "AI will replace everything," Peter Doyle displayed a pragmatic optimism. He believes that complexity will persist in the fields of IT, security, and compliance services, and in the foreseeable future, AI is more likely to be a powerful enabling tool rather than a complete replacement. This builds a lasting competitive barrier for the hybrid model that combines human expertise with advanced software that Treeline represents.

When asked if traditional MSPs would disappear in 10-15 years, Peter answered negatively. He predicts that industry consolidation will intensify, creating larger winners, but the long tail will always remain. The speed of change will be much slower than the perception within Silicon Valley, and many localized, relationship-based MSP services will continue.

Regarding Treeline's own vision, Peter is reluctant to limit it to the labels of "MSP" or "IT service provider." His vision is to become the "most influential and trusted third-party partner" for businesses. With deep trust and data insights established in the core IT and security sectors, the company may eventually expand this "high-trust partnership" model to broader operational support.

Finally, returning to the assertion "SaaS is dead," Peter Doyle's ultimate conclusion is: The power of AI is undeniable, but the gradual pace at which the world (especially traditional industries) adopts this change will be the biggest limiting factor. This process will be much longer than what those at the center of technological whirlwinds may imagine. Thus, the SaaS model is not immediately dying but is gradually evolving into new forms amid a slow yet profound paradigm shift. For entrepreneurs aspiring to transform traditional industries with AI, delving into the "core" of the industry and embracing the "software + service" hybrid model may be a broader path than simply building the next SaaS product.

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