Software companies fight back against fears that AI will kill them

Nearly a dozen tech analysts and investors surveyed by ​Reuters ​said the owners of years of exclusive financial, legal, design, or technical data likely have the best defense.

"Proprietary data is the ​deepest moat by far," said James St. Aubin, chief investment officer at Ocean Park Asset ‌Management.

In the case of Salesforce, while startups are nibbling away at the company's dominance in the customer-relationship software sector, its software remains deeply embedded in corporate systems, with its real-time data platform managing more than 50 trillion records. It is also trying to reinvent itself as an AI‑agent company through its Agentforce service - still a small business.

Some analysts said Salesforce is also hard to replace because businesses have spent years building their day‑to‑day operations around the company's products and the cost of switching away is high.

But AI is beginning to erode that barrier, making it easier to generate code and build applications with far less human effort and expense.

While businesses experiment with isolated AI tools, Salesforce has built a comprehensive system that helps it stand out, said Madhav Thattai, executive vice president of Salesforce AI, adding that the company benefits from decades of enterprise experience.

Oracle did not return emails seeking comment.

NOT ALL ‌IS DOOM AND GLOOM

But concerns about the demise of traditional software companies have lingered, and analysts said not all data is ​equal.

Employee data and payroll company Workday has plenty of data, but analysts said its core products run on HR and payroll data, ​which tend to follow uniform, industry‑standard formats. That means an AI company can more easily learn from ​or replicate tools built on that kind of data.

Workday brought back its founder, Aneel Bhusri, as CEO last month to lead the company "in the rapidly evolving AI era." But ‌the company's shares have declined by more than a third this year, hitting more than ​a five-year low last month after a sluggish sales ​forecast. Bhusri said last month that Workday systems embed two decades of business processes that AI cannot replicate.

"AI, for all of its incredible capabilities, is probabilistic by nature," he told analysts on the post-earnings conference call. "It reasons, predicts and recommends based on patterns and likelihoods. Maybe it will eventually become a state machine - a system that follows the same steps and gets the same result, every time - but it ​is not there today."

Asked for a comment for this story, a Workday spokesperson ‌referred Reuters to Bhusri's comments on the call.

Some analysts believe the enterprise software industry will prove more resilient than valuations currently indicate, arguing that higher productivity brought by AI could spur hiring ​and growth.

"I would not write the obituary for some of these companies just yet because there is an opportunity for them to reinvent themselves with AI," Ocean Park's Aubin said.

(Reporting by ​Aditya Soni in Bengaluru; Additional reporting by Stephen Nellis in San Francisco; Editing by Sayantani Ghosh and Matthew Lewis)