In recent weeks, a number of major “software as a service” companies, including Sales force, ServiceNow And Oraclesaw their stock prices fall.
Even if you’ve never used these companies’ software tools, chances are your employer has. These tools manage key data about customers, employees, suppliers and products, supporting everything from payroll to purchasing to customer service.
Now, new “agentic” artificial intelligence (AI) tools for businesses are expected to reduce reliance on traditional software for everyday work. These include Anthropic CoworkingOpenAI Border and open source agent platforms such as Open Claw.
But how big are these software-as-a-service companies today? How quickly could AI replace them – and is the work of the people using the software safe?
The digital plumbing of the business world
Software-as-a-Service systems operate in the cloud, reducing the need for in-house hardware and IT staff. They also facilitate business growth.
Software-as-a-service providers earn stable, recurring revenue when companies “rent” the software, typically paying per user (often called “seat”).
Austin Distel/Unsplash
And because these systems are deeply rooted in the functioning of these companies, changing suppliers can be costly and risky.
Sometimes companies are forced to use them for a decade or more.
Digital Collaborators
Agentic AI Systems act like digital colleagues or “robots”. Robots or software agents are not new. Robotic process automation is used in many businesses to manage routine, rules-based tasks.
The most recent developments in agentic AI combine this automation with generative AI technology to achieve more complex goals.
This can include selecting tools, making decisions, and performing tasks in multiple steps. These agents can replace human effort in everything from managing expense reports to managing social media and customer correspondence.
What AI can now do
Recent advances, however, are even more ambitious. These tools are would be writing usable software code. The surge in productivity in software development has been attributed to the use of AI agents like Anthropic’s.Claude Code“. Anthropic’s Cowork tool extends this from coding to other knowledge work tasks.
Basically, a user describes a business problem in simple language. Agentic AI then provides a code solution that works with existing organizational systems.
If it becomes reliable, AI agents will look like young software engineers and process designers. AI agents like Cowork are extending this to other entry-level work.
These advances are what has recently scared the market (although many affected stocks have since recovered slightly). To what extent this fall is a temporary overreaction versus real long-term change, time will tell.
Don Feria/AP Content Services for Anthropic
What impact will this have on jobs and costs?
Since the arrival of OpenAI’s ChatGPT in November 2022, AI tools have raised profound questions about the future of work. Some predict many white-collar roles, including software engineers and lawyers, will be transformed or even replaced.
Agentic AI appears to be accelerating this trend. It promises to enable many knowledge workers to create workflows and tools without knowing how to code.
Software-as-a-service providers will also feel pressure to change their pricing models. The traditional model of charging per human user may make less sense when much of the work is done by AI agents. Suppliers may need to adopt pricing based on actual usage or value created.
Hype, reality and limits
Several forces have the potential to moderate or limit the pace of change.
First, the promised potential of AI has not yet been fully realized. For certain tasks, the use of AI can even deteriorate performance. The biggest gains will likely be in routine work that can be easily automated, not work that requires complex judgment.
Where AI replaces, rather than augments, human labor is where working practices will change the most. The almost 20% drop in junior software engineering jobs over three years highlights the effects of AI automation. As AI agents improve to a higher level of reasoning, higher roles will also be at risk.
Second, to benefit from AI, companies must invest in redesigning jobs, processes and control systems. We have long known that organizational change is slower and more complicated as technological change.
Third, we must consider risks and regulation. Heavy reliance on AI can erode human knowledge and skills. Short-term efficiency gains could be offset by a long-term loss of expertise and creativity.
Ironically, the loss of knowledge and expertise could make it more difficult for companies to ensure that AI systems comply with company policies and government regulations. The checks and balances that help an organization operate safely and honestly do not disappear with the arrival of AI. In many ways, they become more complex.
Technology is evolving rapidly
What is clear is that significant change is already underway. Technology is evolving rapidly. Working practices and business models are starting to adapt. Laws and social norms will change more slowly.
Software companies will not disappear overnight, nor will the jobs of users of this software. But agentic AI will change what they sell, how they charge, and their visibility to end users.