The SaaSpocalypse that wasn’t – how Salesforce, Booking and IBM are thriving with AI

The apocryphal Mark Twain quote about deaths being greatly exaggerated holds true for the software industry in the face of premature fears of AI obsolescence. Last year, roughly $2 trillion in software value was destroyed on the misguided belief that AI would render many software businesses obsolete, a notion dubbed the "SaaSpocalpyse."

Early concerns of a massive disruption in the software as a service (SaaS) sector have shifted to a less dire theme: software companies may face higher customer acquisition costs with reduced pricing power, compressing margins and hampering profitability. Just as the 1979 film "Apocalypse Now" was based on fictional delirium, the SaaSpocalpyse may also be a fictional phenomenon.

While high-flying technology winners will face increasing competition from autonomous AI agents, several software companies are actually well-positioned to become significant AI beneficiaries in the long term, with enhanced profitability and pricing power from AI-driven gains, not losses.

Salesforce, the leading customer relationship management (CRM) system, is one such company. Misinformed analysts predicted Salesforce would become obsolete as autonomous AI agents like those from OpenAI and Anthropic took over customer relationships. This led to a 20% stock price decline and a 40% drop from its high last year. However, the underlying assumption was flawed.

Salesforce isn't being commoditized; instead, LLMs make data the new moat, and Salesforce has the data. As Wells Fargo analysts noted, lower intelligence costs enhance the value of incumbent data. AI agents operate based on the data they use, and Salesforce, with over 216 trillion customer records, is the ultimate repository of customer data.

The exponential growth of data generated by AI agents further underscores Salesforce's position as an emerging AI winner. Salesforce's AI agent platform, Agentforce, has grown to $1.5 billion in annual recurring revenue within 18 months, with over 30,000 deals closed and a partnership with Anthropic's Claude. Additionally, Salesforce's acquisition of Slack, which has seen a record growth rate, enriches its AI future by providing context and human insights.

Faced with the shifting balance of power in favor of Salesforce, leading LLMs like Anthropic are rushing to partner with the company, with Anthropic's "Claudeforce" integration showcasing a mutually beneficial collaboration that will drive customers toward the higher-end Premier subscription tier.