Software Companies Counter AI Demise Fears

Software companies are pushing back against concerns that artificial intelligence (AI) tools will lead to their demise. Oracle Chief Executive Mike Sicilia rejected the idea that AI would kill the software-as-a-service (SaaS) industry. He stated that adopting AI tools rapidly mitigates any threat from new companies coding quickly with AI.

Credit: UNSPLASH

Sicilia's comments addressed Wall Street concerns about AI tools replicating tasks traditionally handled by software products. These tasks include organising customer information and guiding business processes. Such worries contributed to a USD 1 trillion rout in software stocks last month. This occurred after AI startup Anthropic introduced AI plugins for its Claude Cowork agent, a digital assistant automating similar functions.

Other software chief executives have also used earnings calls to defend their organisations. Sicilia contended Oracle was ahead of smaller rival Salesforce, using AI to build new products and automate full business processes. This contrasts with merely adding AI features to existing tools.

Salesforce Chief Executive Marc Benioff offered a different defence. He stated his company would outlast the "SaaS-pocalypse," a term for the share rout that affected software-as-a-service companies. Benioff presented customers who positioned Salesforce as an enterprise platform for building, deploying, and governing AI agents. This system uses the company's extensive proprietary customer and sales-process data.

Even Jensen Huang, an AI pioneer and Nvidia Chief Executive, last month dismissed fears that AI would replace software and related tools. He described the idea as "illogical." Oracle predicted on Tuesday that the AI boom would boost its revenue for several quarters, causing its shares to rise 10% on Wednesday. The company possesses deep enterprise data across finance, supply chain, and human resources, which AI finds difficult to replicate.

Rebecca Wettemann, CEO of technology research firm Valoir, noted Oracle offers cheaper, efficient cloud systems and a database that can run on any major cloud. This database can run on any major cloud platform. Wettemann added this flexibility provides customers choice, a powerful position as the AI ecosystem evolves. Nearly a dozen tech analysts and investors surveyed by Reuters said the owners of years of exclusive financial, legal, design, or technical data likely have the best defense.

James St. Aubin, Ocean Park Asset Management chief investment officer, called proprietary data "the deepest moat by far." While startups challenge Salesforce's dominance in customer-relationship software, its products remain deeply embedded in corporate systems. Its real-time data platform manages over 50 trillion records.

Salesforce also aims to reinvent itself as an AI-agent company through its Agentforce service – still a small business. Analysts suggest Salesforce is difficult to replace because businesses have spent years integrating its products into daily operations. The cost of switching away is high.

However, AI is beginning to erode this barrier. It makes generating code and building applications easier, requiring less human effort and expense. Madhav Thattai, Salesforce AI executive vice president, stated that Salesforce's comprehensive system helps it stand out as businesses experiment with isolated AI tools. He added the company benefits from decades of enterprise experience.

Concerns about traditional software companies' future persist, with analysts noting not all data is equal. Workday, an employee data and payroll company, holds much data. However, its core products rely on human resources and payroll data, which often follow uniform, industry-standard formats.

This standardisation means an AI company can more easily learn from or replicate tools built on such data. Workday brought back its founder, Aneel Bhusri, as CEO last month to lead the company "in the rapidly evolving AI era." The company's shares declined by more than a third this year, hitting more than a five-year low last month after a sluggish sales forecast.

Bhusri said last month that Workday systems embed two decades of business processes that AI cannot replicate. He explained AI is "probabilistic by nature," reasoning, predicting, and recommending based on patterns and likelihoods. Bhusri explained that AI might eventually become a "state machine – a system that follows the same steps and gets the same result, every time – but it is not there today."

Some analysts believe the enterprise software industry will prove more resilient than current valuations suggest. They argue higher productivity from AI could stimulate hiring and growth. Aubin remarked that he would not "write the obituary for some of these companies just yet because there is an opportunity for them to reinvent themselves with AI." He noted an opportunity for them to reinvent themselves with AI.

---

• Software companies, including Oracle and Salesforce, are actively countering fears that AI will lead to their demise.

• Chief executives argue that rapid AI adoption, unique proprietary data, and deeply embedded systems provide resilience against new AI tools.

• Concerns persist for companies like Workday, whose data formats may be more easily replicated by AI.

Source: REUTERS