Microsoft CEO Satya Nadella has recently talked about SaaS becoming obsolete. It sounds very ominous—but there’s more to what he’s saying that’s important to understand.
SaaS as a concept is not the issue at hand. It’s the back-end applications. He’s predicting a future where standalone business apps lose value as AI agents unify and handle most of the complex logic from a central “brain.”
Here’s what he said:
“I think the notion that business applications exist—that’s probably where they’ll all collapse: in the agent era. Because if you think about it, they are essentially CRUD databases with a bunch of business logic. The business logic is all going to these agents, and these agents are going to be multi repo CRUD, right? So they’re not going to discriminate between what the back end is. They’re going to update multiple databases, and all the logic will be in the AI tier, so to speak. And once the AI tier becomes the place where all the logic is, then people will start replacing the back ends, right?”
You can hear more in the podcast around the 46:40 mark.
Today, most applications are CRUD (create, read, update, delete) systems attached to a database. These four functions form the backbone of most business apps. Business logic is added on top of these databases to manage workflows (think Salesforce, Workday, etc.).
In the future, we might rely on AI agents to handle the logic and orchestrate data from multiple backends rather than each app doing so in isolation. These agents wouldn’t care whether they’re talking to Salesforce, a custom database, or other SaaS tool. They’d just update and retrieve data as needed.
If the AI layer becomes smart enough to do all the business logic, the unique function of each SaaS app becomes less important. Those apps start to act more like commodity data storage, not full-fledged business solutions. Why? Because the logic is now in the AI tier rather than in each app.
Nadella goes on to say:
“People want more AI native biz apps. That means the logic tier can be orchestrated by AI and AI agents. So in other words, Copilot to agent to business application should be very seamless.”
While still in its early stages, artificial intelligence is poised to disrupt the ERP market in ways we are only beginning to understand. Our interpretation of the “back ends” Nadella mentions includes core ERP applications hosted in SaaS ecosystems.
Considering where AI is headed, here's how we predict it will affect the ERP world:
True AI in ERP is on the horizon. While current ERP systems boast "AI-powered" features, most rely on traditional analytics and automation. However, the development of true AI capabilities within ERP is inevitable.
AI will challenge traditional ERP. As AI matures, it will likely replace or significantly augment core ERP functions like Advanced Planning and Scheduling (APS) and Customer Relationship Management (CRM). This could lead to standalone AI solutions that outperform traditional ERP modules.
Composable ERP and AI will become increasingly intertwined. The rise of composable ERP, where businesses select best-of-breed solutions, will accelerate as AI-powered tools offer specialized capabilities. Integration will be crucial to enable seamless communication between disparate systems.
Companies will prioritize AI over monolithic ERP. We predict a shift away from all-in-one ERP suites as businesses seek more agile and innovative solutions. AI will be central to this transformation, driving efficiency and enabling new possibilities.
In essence, AI is not just a technological advancement, but a disruptive force that will redefine ERP. Businesses that embrace and prioritize AI integration will be best positioned to thrive and see long-term success.
While ERP vendors are quick to tout the "AI capabilities" of their solutions, approach these claims with a healthy dose of skepticism. True AI-powered ERP is still emerging, and many current offerings rely on repackaged analytics and automation.
Therefore, companies must adopt a broader perspective when evaluating ERP solutions. Don't just focus on the features listed in a vendor's brochure. Instead, consider your overall digital transformation strategy and how AI can play a role in achieving your business goals.
Key Recommendations:
Taking a holistic approach to ERP evaluation and considering the broader AI ecosystem helps companies make informed decisions that position them for success. An ERP transformation is coming. And legacy SaaS solutions as a whole will be reshaped by AI. What’s important is to understand the implications and start developing an AI strategy to guide your organization moving forward.
At Trenegy, we help organizations develop a fit-for-purpose AI strategy and the processes and policies that go with it. To chat more, email us at info@trenegy.com.
Trenegy is a non-traditional consulting firm based in Houston, Texas.