Microsoft CEO Satya Nadella raised some eyebrows recently when he predicted that traditional business applications will “collapse” in the agentic AI era.
Investor concerns that agentic AI could disrupt the enterprise software market came to a head in early February when Anthropic’s release of Cowork — a clear shot across the bow at Microsoft Copilot — triggered a massive selloff in U. S. software company stocks.
But is the “SaaS-pocalypse” simply a Wall Street phenomenon or does it impact enterprise CIOs who have invested millions into enterprise software systems that run mission-critical business processes? Is the “SaaS is dead” rhetoric real or overblown?
There’s no question that agentic AI is a game changer, but maybe in unexpected ways. Here’s what expert industry observers are saying.
Enterprise incumbents will gain early advantages
Industry outlook: Incumbent market leaders will likely retain much of their dominance for the foreseeable future by embedding agents into their platforms.
In terms of the fate of the software market, Forrester analyst Kate Leggett says, “There’s investor and company valuations and then there’s the reality of what happens in large enterprises, as well as the timeline that these changes will happen.”
“Core applications are not going to go away anytime soon,” she tells CIO, although there will be erosion around the edges. In terms of timeline, Leggett says, “It could take decades for these workloads to be completely taken over by AI agents.”
Industry consultant William Flaiz adds, “Executive-level decisions are not being made to rip out CRM systems.” However, enterprise CIOs are highly incentivized to add agentic AI to existing platforms to squeeze more value from their current multimillion-dollar investments. “They’re looking to see what they can do better using the tools they have available,” he says.
“There’s a lot of black-and-white thinking about the level of disruption that these incumbents are facing,” says Alex Demeule, senior analyst at Technology Business Review Inc. (TBRI). “Obviously AI is going to have a big impact on software vendors. But when we look at what the future holds, framing it in a 5- to 10-year span, they’re positioned a lot better to make the pivot into the AI era compared to what we’re seeing in the stock price.”
Demeule adds, “When talking about large enterprises, I still think the risk of handing off autonomy to an agentic system is not really there yet.” His prediction is that agentic AI will be rolled out slowly and that humans will remain in the loop for many years to come.
Agentic AI will transform pricing models
Industry outlook: Agentic AI will trigger a seismic shift from subscription-based pricing to consumption- or outcome-based pricing.
Dana Gardner, president and principal analyst at Interarbor Solutions, says, “The short to medium-term concern is less about ripping and replacing systems of record, and more about the end of the current level of pricing power from these vendors.”
He adds, “Savvy CIOs will be leveraging AI to reduce the total cost of IT.” AI agents have the capacity to understand consumption and usage patterns of business applications and CIOs will be able to turn those insights into more favorable contracts, says Gardner.
Bain & Co., in a report on the impact of AI on the SaaS market, says, “If an agent replaces a human task, customers will expect to pay based on outcomes, not log-ons. Leaders, such as Intercom and Salesforce, are already shifting in this direction. The fundamental shift is to stop charging for access and start charging for work done.”
And IDC, in its FutureScape: Worldwide Agentic AI 2026 Predictions report, says that by 2028, pure seat-based pricing will be obsolete, with 70% of software vendors refactoring their pricing strategies around new value metrics, such as consumption, outcomes, or organizational capability.
Forrester’s Leggett says this shift away from subscription pricing could play out in a number of ways. For example, a CIO with a subscription for 100 seats could swap 10 or 20 of those seats for consumption-based or outcome-based pricing. Vendors will likely offer different licensing tiers or flex options that include some type of agentic-based pricing. Or consultants could come in and offer to manage agentic AI implementations and charge a percentage of the outcomes.
Software platforms will merge, creating new rivalries
Industry outlook: Because AI agents don’t care where data comes from, the lines between traditional enterprise software categories like CRM and ERP will blur.
To be effective, AI agents need access to data no matter where it resides. SaaS vendors recognize this imperative and are breaking down the lines of demarcation between CRM, ERP, IT service management, and other categories.
Leggett points out that vendors such as Oracle and Microsoft are building unified data platforms that integrate with the open-source Model Context Protocol (MCP) to support complex AI-based workflows.
Oracle offers an integrated suite of cloud-based ERP and CRM applications along with a fully managed agentic platform. Microsoft offers both ERP and CRM functionality under its Dynamics365 umbrella, as well as industry-specific agentic offerings based on small language models (SLMs), which are more lightweight and cost-effective than LLMs.
SAP is integrating its Signavio business process management suite, its LeanIX SaaS tool for enterprise architecture management, and its Joule AI agent into one cohesive system.
Salesforce is merging its Mulesoft integration and automation platform-as-a-service offering with its Data360 customer data platform and its Agentforce AI platform.
IT service management powerhouse (ITSM) ServiceNow recently completed its acquisition of agentic AI platform vendor Moveworks and is challenging Salesforce in CRM.
Winners and losers
Industry outlook: Agentic AI will have a major impact on point product vendors; those with a generic app will struggle; those with a domain-specific tool are better positioned to survive.
Forrester’s Leggett divides the enterprise software market into three segments. She says that simple point products such as workflow, spreadsheet, or lightweight project management apps “are going to go away in fairly short order,” because they are easy to replicate and don’t offer differentiation.
Highly verticalized apps are more insulated from disruption because they deliver deep domain expertise and integrations with adjacent systems such as CAD or medical imaging. Examples include Epic and Cerner for electronic healthcare record (EHR) management, IQVIA for pharmaceuticals and life sciences, or Procore in construction.
The major CRM platform players have built-in advantages, including a moat around their data, industry-specific knowledge and workflows, deep partner networks, industry best practices as well as expertise in areas such as regulatory compliance, according to Leggett.
TBRI’s Demeule also points out that these incumbent vendors have survived precisely because they have been able to successfully pivot each time a potential disruption occurred, whether that’s moving from on-prem to the cloud, or shifting from perpetual licenses to subscriptions.
Vibe coding to disrupt certain segments
Industry outlook: Vibe coding could disrupt SaaS vendor dominance, empowering end users to spin up their own agents.
Vibe coding, the use of AI agents to write software based on simple natural language prompts, takes the low-code, no-code movement to another level.
With vibe coding, end users can ask OpenAI ChatGPT, Google Gemini, Anthropic Claude, Cursor Chat, GitHub Copilot, or others to build a productivity app outside the boundaries of a traditional CRM or ERP platform, for example.
Leggett says vibe coding is a legitimate threat because it can potentially enable workers to be more productive, while sidestepping traditional enterprise software platforms, which for many end users are seen as bloated and overly complicated.
On the other hand, organizations that are not technologically sophisticated might not have the skills or the confidence to build and deploy their own agents that impact mission-critical workflows.
“Vibe coding in terms of a point solution is something we see as being disruptive,” says Demeule. “But it’s the ability to build point solutions that’s more at risk of being disrupted versus something managing an entire customer database or supply chain database.”
The agentic orchestration layer emerges
Industry outlook: Traditional SaaS applications will still exist, but they will likely be hidden behind an agentic orchestration layer.
Analysts agree that the user interface of the future will not be the traditional SaaS platform; it will be agentic. That doesn’t mean the underlying CRM or ERP will go away, but it will be hidden.
IDC analyst Bo Lykkegaard says, “Complexity is the Achilles’ heel of the SaaS model. Each SaaS application demands its own learning curve and user interface, often used sporadically and inefficiently. AI offers a compelling remedy. Instead of navigating multiple dashboards, users could interact with agent-driven, conversational interfaces that perform tasks across systems. The result? AI as the new interface layer, which is one that abstracts away complexity, automates repetitive processes, and redefines how enterprises consume software.”
TBRI’s Demeule envisions an orchestration agent that assigns tasks to an LLM, an SLM, or a robotic process automation (RPA) tool, based on which approach is more appropriate in terms of efficiency, as well as other considerations such as cost and energy usage.
The question that will play out over the next several years is whether enterprise CIOs obtain that functionality from their current providers or from disruptors like OpenAI, Anthropic, Palantir, UiPath, or others.