AI agents to transform SaaS market rather than replace it

The rise of AI agents has sparked debate regarding the potential end of Software as a Service (SaaS), a concept sometimes called the ‘SaaSpocalypse.’ However, analysis from IDC suggests this view is a fundamental misunderstanding of enterprise software. Rather than replacing SaaS, AI agents are expected to expand the data models that serve as systems of record (SoR).

IDC reports that the value of enterprise applications lies in their underlying data models, compliance settings, and organizational logic, which provide the necessary structure for AI to operate. Major vendors are already integrating AI into their platforms, including SAP with ‘Joule,’ Workday with ‘Illuminate,’ Salesforce with ‘Agentforce,’ and Oracle with ‘Fusion.’

Significant structural shifts are anticipated over the next decade. Business models are expected to move from seat-based subscriptions to outcome-based pricing, with the proportion of such models projected to rise from 13% to 63%. Additionally, while the boundaries between different applications may blur as agents pull data across multiple systems, the core foundational software remains essential.