I think Satya Nadella might be wrong about the death of SaaS

I will start with the usual – what I post here is strictly my personal opinions. It has nothing to do with my present or past employers

I watched this fascinating interview with Satya Nadella where he predicted SaaS will be dead and Agentic AI will take over.

I am a huge fan of Satya – and I listen to him closely every time I get a chance. He is one of the most grounded technologists of our generation. But this time – I felt his prediction of the death of SaaS is exaggerated

I do think that AI agents are the next generation of innovation in software and it will be disruptive to how SaaS has historically worked. But if anything I think the actual impact to the SaaS business is that it will grow massively in near future itself

Let me explain my thinking and maybe someone who reads this can correct me

The big disruption essentially is the co-existence of human labor and digital labor in future. As digital labor – or AI agents – become more common place, it will become a necessity for the current HCM SaaS apps to put them into scope. Think about it – those agents are going to do types of work that humans have done in the past – and they probably will be a mix of owned and rented entities, much like employees and contract labor today. Their work needs training, performance management, security and so on. I would expect workday, oracle, sap etc to evolve to cater to that reality in short order

Or think about trading partners for a business like customers and vendors. A simple example would be me as a consumer offloading my grocery shopping to an AI agent (sat next generation of Alexa). If the agent is the one in charge – there is no reason for the vendor to market to me via emails and snail mail and phone calls – they need an agent on their side to pitch to my agent through a digital protocol. Think about the changes needed in Adobe and Marketo and so on to cater to that new world.

So just from added complexity of the scope itself – SaaS would grow, not die

Now let me poke at the other assertion by Satya that the business logic will be taken over by the multi repo agents, and then the backend systems collapsing

If you look at how the major SaaS apps treat common “objects” like customer, purchase order etc – you will notice that there is literally no standardization across the vendors today. That is why integrating SaaS systems is a big cost and a painful thing in most client landscapes even when vendors claim their API’s allow seamless integration. On top of that – every client has nuances built via additional configurations and customizations. So even if every vendor agrees to use their metadata and data to train an AI model – it still takes a lot of effort for an AI agent to understand the system that is in place for a given customer

The problem gets worse when the process logic is not held in all in SaaS but it an external system like an RPA or BPM system – which is a very common pattern in enterprise context. In most cases – these are not even documented anywhere and is just in the brains of a few people. There are discovery tools that use multiple techniques to analyze the landscape to make sense of such information – but so far I haven’t seen even 50% of a complex landscape being auto discovered without massive human intervention

Business logic for most applications is quite deterministic and stateful – for good reasons like the need for consistency, auditability, security, compliance, performance and so on. There is barely any room in that set up for even a tiny amount of hallucinations. Even rock solid deterministic systems still need a lot of work and have errors that need human effort to reconcile and fix.

Satya abstracted SaaS to CRUD operations on top of a database. That’s not wrong – but obviously it’s not that simple either. When you pay an employee their salary – it is not just the HR system that needs to be updated, it is also the ledger. Not all those integrations are clean interfaces and many are not even externally exposed. So the ability of an Agent to function in the multi repo way that Satya explains it is not an easy one to pull off in practice

While I don’t agree with Satya that SaaS is on its deathbed for all the reasons above – I absolutely think Agentic AI will be a great addition to it and will add tremendous value. Since there is already plenty of hype on what all Agentic AI can do – I don’t think it’s useful for me to pontificate on that here 🙂

Pls let me know what you think. It’s such an exciting time to be a part of the tech ecosystem – I am sure there are counterpoints to what I said above and I look forward to learning from you if you share your thoughts in the comments