There is no shortage of the number of industries that are likely to be impacted by AI, and Microsoft CEO Satya Nadella has added another one to the list.
Microsoft CEO Satya Nadella believes that Software as a Service Applications “will collapse” in the AI agent era. “SaaS applications or biz apps — the notion that business applications exist, that will probably collapse in the agent era,” he said in an interview. “Because if you think about it, they are essentially CRUD databases with a bunch of business logic,” he added.
“(But) the business logic is all going to these AI agents, right? And these agents are going to be multi-repo CRUD, right? So they’re not going to discriminate between what the backend is. They’re going to update multiple databases, and all the logic will be in the AI tier, so to speak. And once the AI tier becomes the place where all the logic is, then people will start replacing the backends…that means the biz app, the logic tier can be orchestrated by AI and AI agents,” he added.
Nadella seemed to be saying that there were many large and valuable SaaS apps, but at their core what they did was pretty simple — most SaaS apps have a database, which stores data, and then they run CRUD (Create, Read, Update, and Delete) operations on them. So a SaaS app like say Notion is essentially a database, which allows users to store data, update it and display it in convenient formats. Nadella seemed to be saying that the “intelligence” part of interacting with databases could soon be handled by AI agents, which could make SaaS apps redundant. Also, these AI agents could simultaneously interact with multiple databases — so the same AI agent could read a note with a list of email addresses from your Notion database, and then use it to send emails through Mailgun. Since the AI agent will control the interaction with the databases, the value proposition of SaaS apps like Notion and Mailgun will collapse into simply maintaining a database, and the value will be captured by the AI layer of intelligence that’ll run on top of them.
This, however, isn’t the only threat that SaaS apps face. Thanks to advancements in AI, it’s become much simpler than before to code a simple application, and it’s not inconceivable that large SaaS apps are reconstructed by organizations or people themselves. Indeed, Chamath Palihapitiya has started a company named 80:20, that uses AI to create 80 percent of the functionality of SaaS applications at 20 percent of their price. And it appears that AI won’t only drive down the price of SaaS apps — it could affect their usage patterns through an AI layer that runs on top of them.
I think we’re seeing pretty high rates of wins on dynamics, backends, um, and the agent use. And we’re going to go pretty aggressively and try and collapse it all, right? Whether it’s in customer service, whether it is in, you know, uh, by the way, the other, Fascinating thing that’s increasing is just not CRM, but even our what we call finance and operations, uh, because people want more AI native biz apps, right?
That means the biz app, the logic tier can be orchestrated by AI and AI agents. So in other words, copilot to agent. to my business application should be very seamless. Now, in the same way, you could even say, Hey, why do I need Excel? Like, interestingly enough, one of the most exciting things for me is Excel with Python is like GitHub with Copilot, right?
That’s essentially, so what we have done is when you have Excel, like this, by the way, will be fun for you guys, right? Which is you should just bring up Excel, bring up Copilot and start playing with it because it’s no longer like, Oh. You know, it is like having a data analyst. Uh, and so it’s no longer just making sense of the numbers that you have.
It will do the plan for you, right? It’ll literally like how GitHub copilot workspace creates the plan, and then it executes the plan. It. This is like a data analyst who is using Excel as. a sort of row column visualization to do analysis scratchpad. So it’s kind of tools you so the copilot is using excel as a tool with all of its action space because it can generate and it has python interpreter that is in fact.
A great way to reconceptualize Excel. And at some point you could say, Hey, I’ll generate all of Excel. Uh, and that is also true. After all, there’s a code interpreter, right? So therefore you can generate anything. Um, and so, yes, I think there will be disruption, but so the way we are approaching at least our M365 stuff is one is, you know, Build Copilot as that organizing layer, UI for AI, get all agents, including our own agents.
You can say the Excel is an agent to my Copilot, Word is an agent. It’s kind of specialized canvases, which is I’m doing a legal document. Let me take it into Pages and then to Word and then have the Copilot go with it. Uh, go into Excel and have the Copilot go with it. And so that’s sort of a new way to think about the work in workflow.