<ul>
<li>Proprietary data seen as key defense against AI threat</li>
<li>Salesforce and Oracle better positioned than Workday to face AI challenge</li>
<li>Salesforce adapts pricing model amid AI competition</li>
<li>Workday’s data is standardized and more replicable by AI</li>
</ul>
By Aditya Soni
March 12 (Reuters) - Oracle’s (ORCL.N) Mike Sicilia is the latest software CEO to wade in to the debate on whether artificial intelligence tools that heavily automate human tasks will mean the demise of his industry. His verdict was a resounding “no.”
“You’ve all heard … that new companies coding quickly using AI will spell the death of SaaS (software as a service),” he told analysts on a conference call on Tuesday. “I don’t agree with that at all. I do think that AI tools and their coding capabilities would be a threat if we weren’t adopting them, but we are, and very rapidly.”
Sicilia was responding to Wall Street concerns that new AI tools can now perform some of the tasks that traditional software companies’ products were built for, such as organizing customer information or guiding people through business processes. Those worries led to a nearly $1 trillion rout in software stocks last month after heavyweight AI startup Anthropic introduced AI plugins for its Claude Cowork agent, a digital assistant that can automate such tasks. CEOs of software companies have since used their post-earnings conference calls to fight back.
Sicilia also laid out a case that Oracle was ahead of its smaller rival Salesforce (CRM.N) , saying his company was using AI to actually build new products and automate full business processes, not just add AI features on top of existing tools.
Salesforce, for its part, has offered a different defense, with CEO Marc Benioff last month telling analysts that his company will outlast any so-called SaaS-pocalypse, a term for last month’s share rout that hit software-as-a-service companies.
Benioff brought in Salesforce customers who positioned Salesforce as a company that has transformed itself into an enterprise platform that builds, deploys and governs those AI agents, using the company’s mountains of proprietary customer and sales-process data. Even Jensen Huang, an AI pioneer and the CEO of chipmaker Nvidia (NVDA.O) , last month dismissed fears that AI would replace software and related tools, calling the idea “illogical.”
UNIQUE DATA IS THE BEST DEFENSE Oracle predicted on Tuesday that the AI boom would power its revenue for several quarters to come, sending its shares up 10% on Wednesday. The company owns deep enterprise data across finance, supply chain and human resources, which is hard for AI to replicate.
Oracle offers cheaper, efficient cloud systems and a database that can run on any major cloud, said Rebecca Wettemann, CEO of technology research firm Valoir. “That flexibility gives customers choice - and that’s a powerful position to be in as the AI ecosystem evolves,” she said.
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.
<h3>NOT ALL IS DOOM AND GLOOM</h3>
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 (WDAY.O) 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.
The software trade loses steam
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Software companies fight back against fears that AI will kill them