More than 100 software companies are “pressed” by AI: study

A fundamental change is underway in corporate software, and it is motivated by a generative AI.

The rise of reasoning models and AI agents begins to erode the basic hypotheses that have defined the software commercial model as a service for decades, according to a new study published Monday by Alixpartners.

The consulting company warned that this underlies more than 100 intermediate market software companies, which are stuck in the middle of a powerful trend.

These companies are taken in “high pressure”, under pressure on one side by agile and native entrants who can reproduce applications at a fraction of the cost and on the other hand by technological giants, such as Microsoft and Salesforce, which pay billions of dollars in the AI ​​arms race, said Alixpartners.

“We believe that many medium -sized corporate software companies will face their survival in the next 24 months,” added the company in a disturbing manner. He refused to identify specific companies, given the sensitive nature of his results.

AI: the new foundation, not just a functionality

The most mature uses of AI in corporate software are today copilotes for software coding, such as Microsoft Github Copilot, and support chatbots like Zendesk’s response bot. But it could be just the start. The generative AI goes from narrow use cases to “logic and presentation layers” wider software, the very foundations on which traditional SaaS tools are constructed, explained Alixpartners in the study.

This means that AI agents are no longer just assistants in applications; They themselves become the applications. These agents are able to manage complex tasks, such as meeting meetings, report analysis and code creation, with little need for a graphical interface or a structured workflow. And because they can go through various types of data without the need for in -depth standardization of data, they could make certain traditional complaints redundant.

“This change could eliminate the need for many company software companies that have prospered in traditional SaaS architecture,” said Alixpartners.

A new threat on both sides

This places medium -sized SaaS suppliers in a delicate position, said the company, citing a recent analysis which it carried out of 122 listed company software companies with annual income less than $ 10 billion.

He found that sales growth has slowed considerably lately. For example, the percentage of strong growth companies of this group increased from 57% in 2023 to 39% in 2024. This year, industry analysts expect new decreases, indicating that only 27% of companies will be in the strong growth category.

Alixpartners also stressed that software customers move more than before. The median rate of net retention of corporate software companies increased from 120% in 2021 to 108% in the third quarter of 2024, noted the company, citing data from Bank of America. (NDR is a common way to measure customer grip. When more than 100%, this indicates that income from existing customers increases, while an NDR less than 100% suggest that income decreases these sources.)

Many of these companies are now undermined by the challengers fueled by AI with lower costs and faster iteration cycles. According to the consulting company.

Klarna’s recent decision to lower Salesforce and Workday in favor of small sellers and internal agents fueled by AI is a sign of the management of this trend, noted Alixpartners.

The SaaS model: ripe for reinvention

The traditional SaaS strongly depends on the user interface, structured data workflows and prices based on seats. But AI agents do not need dashboards, and they can work without rigid data hierarchies. This questions the relevance of the SaaS model itself, according to Alixpartners.

Some companies are already pivoting. Salesforce and ServiceNow began to experiment with the results based on the results for AI agents, where the costs are linked to the results, and not to the number of users.

Among these 122 medium -sized software companies, Alixpartners found that half expects significant changes to commercial models over the next year.

At the same time, the calculation costs associated with the management of AI agents can be significantly higher than for conventional SaaS tools, making the compression of beneficiary margins a potential threat. Software providers may need to rethink infrastructure strategies, possibly moving to more efficient inference architectures, have recently warned industry experts.

At the same time, higher interest rates and the tightening of capital markets in recent years have put the burden on the profitability of the Saas, not only growth. Software companies have responded by reducing costs, optimizing portfolios and rethinking pricing strategies.

According to the AlixPartners report, more than 60% of managers are now focused on AI as a growth engine. Unlocking this growth requires more than product adjustments, it may require a transformation between operations, marketing models and customer relations, suggested the consulting firm.

How to survive: a new game book

So what is the way to follow? The report deals with several strategic imperatives. Here are some:

• Build AI agents: not as bolted features, but as basic products.
• Transform the business model: go beyond a costs structure based on pricing seats based on use or results.
• Rationalize and concentrate: Losing low -growth products and realloring R&D to the development of AI.
• Press M&A: For some, the best route may be to be acquired or consolidated.

In a world where generative AI tools can fairly well write or reproduce software, differentiation must come from speed, relevance and efficiency, and not sets of design or inheritance functionalities.

The era of the software does not end. But the SaaS era, as we know it, evolves. The next generation of corporate tools may not be applications, this could be agents. And only the most adaptable companies will jump, according to Alixpartners.