In the first week of February, the S&P 500 software and services index hit its lowest point in years, trading roughly 21 percent below its 200-day moving average. This is because artificial intelligence threatens to replace, rather than just enhance, software workflows, including those for customer operations. More than that, vibe coding will allow companies to replicate features of complex software-as-a-service (SaaS) platforms, eroding their moat.
Not so fast. Today, organizations spend tens of millions if not hundreds of millions of dollars on SaaS software for core operational workflows that span the front and back office and include customer service operations. These functions are not going to disappear overnight. There are two factors to consider: 1) What will happen to the ecosystem of SaaS that you use today? and 2) How should you react to the AI challenge?
Not all SaaS companies will fare badly in an AI-first world. Horizontal point solution SaaS vendors, especially those with low switching costs or whose core value proposition sits at the crosshairs of AI agents, will be challenged. Some will lose funding, and some will be consumed by more durable vendors (example NiCE's acquisition of conversational AI vendor Cognigy).
Yet, the dominant customer service vendors today are shifting to become AI-first companies in real time. These vendors are already offering AI agents complemented by deterministic processes for regulated industries. True, you will be able to buy your AI agents elsewhere, but customer service vendors offer advantages, like domain expertise, partner networks, and access to vast customer data for training and benchmarking, that are difficult to replicate.
Your core operations run on SaaS software (think cloud contact center platforms, CRM, workforce management). You also use a wide swath of point SaaS solutions. So you need to protect your investments and move carefully forward by doing the following:
- Reframe your SaaS investments. Don't purchase new SaaS without a clear understanding of the software's ROI and the vendors' AI roadmap. Instead, double down on efforts to clean up SaaS sprawl. Reduce tech debt, and inventory SaaS solutions to understand which solutions offer undifferentiated capabilities that can easily be replaced with AI.
- Prioritize an AI Agent roadmap. Identify workflows that you will offload to AI. This will erode the remit of your current customer service applications. Bring discipline to managing their ROI. Establish new roles to create and supervise AI agents so they meet quality-of-service targets.
- Renegotiate contracts with enterprise Saas vendors. Your vendor contracts are primarily based on seats. This will shift to consumption or outcome-based pricing as AI agents are deployed. Some vendors offer flex credits to use across seats and AI agents to encourage AI adoption. Others will offer models to shift current contracts to include AI agents. Do your homework carefully to understand cost implications.
- Involve consulting partners early and often. The shift from enterprise SaaS to agentic operations is in its infancy. Consulting partners are on the forefront of this wave. Lean on your partners to understand current best practices for success.
Kate Leggett is a vice president and principal analyst at Forrester Research.