How Workday and other SaaS providers plan to survive AI
▼ Summary
– Agentic AI is predicted to disrupt enterprise software revenue models, with up to $234 billion in application spending exposed to agentic arbitrage by 2030.
– The “SaaS apocalypse” is considered overrated, but disintermediation is real, as AI agents may become the primary interface for business tasks, bypassing traditional software interfaces.
– Software providers must focus on durable capabilities, such as unique thinking or mathematical functions, to stay relevant as AI encroaches on their territories.
– Workday emphasizes trust and privacy-by-design as its durable capability, building a platform for cross-business workflows where employees use agents for natural-language queries.
– Freshworks and Snowflake argue that AI specialists like OpenAI or Anthropic are unlikely to replace specialized systems, as they lack deep expertise in areas like service management and data platforms.
Agentic AI is poised to reshape the enterprise software landscape, but it’s more likely to trigger a metamorphosis than a full-blown SaaS apocalypse. While the threat of disintermediation is real,where AI agents become the primary interface for business tasks,established providers are doubling down on their core strengths to survive and thrive.
Technology analyst Gartner warns that agentic AI could expose up to $234 billion in application spending to agentic arbitrage by 2030. In this scenario, AI agents complete tasks across multiple systems, reducing the need for users to interact with traditional software interfaces. By the end of the decade, roughly 20% of enterprise SaaS spending will involve this kind of AI interaction. These projections have fueled fears of a “SaaS apocalypse,” with some estimates showing a $300 billion drop in SaaS valuations over the past 18 months.
However, the reality is more nuanced. Shannon Kalvar, research director at IDC, told ZDNET that the SaaS apocalypse is “overrated,” but disintermediation is a genuine concern. He explained that users might bypass traditional applications entirely, using AI models like Claude or ChatGPT to generate code and pull capabilities on demand. “That ephemeral application becomes your new work surface,” he said, forcing vendors to ask what durable capabilities they offer that AI cannot easily replicate.
For Workday, the answer lies in trust and governance. Clare Hickie, the company’s CTO for EMEA, emphasized that digital leaders are hesitant to adopt AI due to concerns about security and privacy. “Privacy by design and security frameworks are built into absolutely everything that we do,” she said. Workday is building what it calls the “front door to work,” where employees use natural-language queries to access enterprise data through agentic services. Hickie believes Workday’s durable capability is its ability to provide a trusted platform for risk-averse organizations.
Similarly, Freshworks CTO Murali Swaminathan argued that while AI giants like OpenAI and Anthropic are moving fast, they are unlikely to target specialized areas like service management support. “These AI specialists don’t want to build everything,” he said. “They want to be that layer where you engage, but the underlying layer will still be systems like ours.” He noted that building an app that handles workflows, SLAs, and business rules requires deep domain knowledge,something AI firms lack.
Snowflake co-founder Benoît Dageville echoed this sentiment, drawing lessons from the past. When cloud giants like Amazon emerged, some predicted Snowflake would be usurped. Instead, Snowflake built a strong partnership with AWS. “What is their magic advantage?” Dageville asked of potential AI competitors. “We are specialists in our technology, so I’m still not convinced they can build another Snowflake. And, what’s more, I don’t think they want to.”
Ultimately, the message from industry leaders is clear: AI will change how users interact with software, but governance, security, and domain expertise remain irreplaceable. Vendors that focus on these durable capabilities,rather than just interface logic,will navigate the shift and emerge stronger.
(Source: ZDNet)
