Is Agentic AI the End for Traditional SaaS?

Agentic AI addresses the operational risks of traditional SaaS lock-in and rising costs

October 15, 2024

The enterprise technology world has always been on the move. Now, a new trend threatens to challenge the $1 trillion Software as a Service (SaaS) industry: agentic artificial intelligence. At Oraczen, we are directly involved in building AI agents for enterprises and have seen firsthand how these conversations are starting to shape the market. The big question is: will agentic AI mean the end for SaaS as we know it?

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Does your SaaS stack make the organization vulnerable?

The SaaS model has had a phenomenal run. Over the past two decades, companies like Salesforce, Workday, and many others have transformed how businesses operate. The allure was clear: purpose-built workflows, predictable costs, and cloud convenience. The market is expected to grow to over $1.2 trillion by 2032⁵. SaaS providers have built massive empires, but there are vulnerabilities baked into the model.

Vendor lock-in is a major challenge, with customers becoming increasingly dependent on a single provider. For instance, cloud customers often face significant cost inflation as their usage grows, making it difficult to migrate to alternative cloud providers due to the complexity and expense involved⁴. VMware customers experienced major price hikes after Broadcom's acquisition, with some organizations reporting increases as high as 1200% for new contracts⁶.

Additionally, data privacy and compliance risks are often overlooked by many SaaS providers. For example, Slack faced scrutiny for inadequate data protection measures, resulting in concerns about compliance with regulations like GDPR². Switching is often costly, leading to a steady increase in ongoing operational expenses for businesses. A Flexera study found that up to 30% of SaaS spend goes to waste, with unused or underutilized subscriptions being common culprits. This waste opens the door to alternatives like agentic AI that can offer both flexibility and cost control.

Agentic AI changes the way software is experienced!

Agentic AI brings a more intuitive way of interacting with digital tools. Instead of learning complex interfaces, users can state their intention, and an AI agent does the rest. The learning curve reduces significantly, and productivity gains can be substantial.

Early adoption trends support this view—72% of companies have adopted AI in some form, signaling an openness to this kind of technological shift³. A notable example came recently when Klarna, a major player in the "buy now, pay later" space, decided to replace Salesforce and Workday systems with their own AI solution built with OpenAI tools⁸. Klarna is the first company to publicly share such a move, but more enterprises are starting to rethink their reliance on SaaS. This shift is just the beginning and the agentic AI movement has begun.

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What does this mean for SaaS procurement?

Replacing highly customized software like Salesforce is no simple task. The complexity of such a transition cannot be understated, and implementing Gen AI solutions requires an intelligent, well-planned approach to ensure that business outcomes are protected. For example, customer service quality should not be compromised just because AI has been integrated to handle customer inquiries. This is where specialists like Oraczen come in—ensuring the transition is smooth and meets all organizational needs for security, safety, and operational integrity.

The reality is that many companies are willing to take that leap, especially as the capabilities of AI continue to grow. Agentic AI solutions like Agentforce can help bridge the gap, but intellectual property can be a challenge, and from an organizational perspective, it often results in piece-meal AI implementations rather than a cohesive transformation.

Wiley, for instance, reported a 40% boost in case resolution during peak times using Agentforce, without fully moving away from Salesforce yet⁷. But the writing is on the wall. SaaS providers themselves are scrambling to stay relevant. Data from Q3 2023 shows that 85% of SaaS companies increased investments in AI tools to adapt to this new reality².

How to best approach this transition?

At Oraczen, we recommend a phased approach. Companies don't need to overhaul everything overnight. Start small—pilot agentic AI for specific use cases and replace, depending on the complexity, either all or few modules of the redundant SaaS platforms at a time. For the SaaS platforms you choose to retain, integrations can be built to overcome their limitations, increase efficiency and create even bigger, innovative workflows.

For operational stability, a parallel operation can be run - as the AI agents prove themselves, the SaaS workflows can be phased out. This way, AI adoption can be explored without risking core functionalities.

What are the benefits of an AI-first approach?

They are many significant ones. Moving to "AI-first" can give businesses more control, greater intelligence, and the ability to adapt quickly.

Enterprises can create competitive advantages by implementing non-standard workflows that go beyond the limitations of individual SaaS products. They can create features and experiences tailored directly to their business and customers, rather than fitting into a one-size-fits-all solution.
They can rise above limitations such as the lack of interoperability between different SaaS tools. For example, automated tools for LinkedIn outreach may not be easy to integrate with that for email outreach, making sales activities painful. Better processes and new products can be built without having to hire armies of consultants and undertake additional overheads.
By deploying the AI systems in-house, intellectual property can be retained and safeguarded.
Opex will reduce over time, avoiding the waste associated with underutilized SaaS subscriptions.
AI-first approaches allow for enhanced security measures through greater control such as addressing industry-specific compliance requirements.

So, what's the verdict? Coexistance or replacement?

SaaS tools that adapt and prove their value may continue to thrive, but those that cannot, can be expected to fade away. There will be coexistence between SaaS products that add justified dollar value and agentic AI that is integrated internally by companies.

Moving forward with Agentic AI

For those leading enterprises today, it's clear where things are headed. Companies are moving towards AI-driven solutions because they want better control, security, and cost efficiency. The question is not whether to embrace AI, but how quickly and strategically it can be done.

At Oraczen, we're here to help businesses navigate these changes—whether they want to enhance existing SaaS deployments with AI or make more radical shifts. SaaS, as we know it, is evolving. Enterprises that take decisive steps towards AI-first operations will be the ones that remain leaders in this evolving landscape.

Sources:

[1] The Future of SaaS: 6 Trends Reshaping the Industry - StartHawk

https://www.starthawk.io/blog/post/the-future-of-saas-6-trends-reshaping-the-industry

[2] 7 SaaS Trends to Watch in September 26, 2024 https://adamfard.com/blog/saas-trends

[3] 51 Artificial Intelligence Statistics to Know in 2024 | DigitalOcean https://www.digitalocean.com/resources/articles/artificial-intelligence-statistics

[4] What Is Vendor Lock In and How to avoid It - DashDevs https://dashdevs.com/blog/how-to-avoid-vendor-lock-in-traps/

[5] 61 Eye-opening SaaS Statistics to Know in 2024 - Persuasion Nation https://persuasion-nation.com/saas-statistics/

[6] 57 NEW Artificial Intelligence Statistics (Oct 2024) - Exploding Topics https://explodingtopics.com/blog/ai-statistics

[7] Salesforce’s agentic AI platform to transform business automation | Computer Weekly https://www.computerweekly.com/news/366610853/Salesforces-agentic-AI-platform-to-transform-business-automation

[8] Is AI Killing The $1 Trillion SaaS Industry? https://thetechoasis.beehiiv.com/p/is-ai-killing-the-1-trillion-saas-industry

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