Is AI killing enterprise software or forcing its evolution?
This week The Information highlighted a sharp selloff in enterprise software after new AI tools — including Anthropic’s automation products — spooked investors. Names like Salesforce, ServiceNow, Snowflake, and MongoDB dropped as much as 15% as the narrative took hold: if AI can build software and automate workflows, why keep paying millions for legacy SaaS?
Having lived through the dot-com era and the mobile transition, I’ve learned that moments like this rarely kill all incumbents. They expose which ones adapt fast enough to be even stronger.
Where the fear comes from
There are really two pressures hitting at once..
On one side, competition just got cheaper. AI compresses build time. Teams that once needed 1,000 engineers might need 50. Startups can ship credible alternatives without years of roadmap or heavy infrastructure. The old “complexity moat” shrinks fast.
On the other side, customers start questioning what they even need. If internal teams can spin up tools with AI, why keep every expensive contract? Why not build something yourself?
So incumbent SaaS players feel squeezed from both directions:
AI-native startups moving faster
Customers experimenting in-house
That’s enough to compress multiples. The market reaction isn’t irrational. But it’s also not new.
We’ve seen this pattern before
Every platform shift starts with “the incumbents are dead.” History usually proves otherwise. Let me give you two personal examples I lived through
Microsoft and the browser wars
When Netscape took off, it looked like the browser would commoditize Windows and Office. Microsoft didn’t fight the internet. They went internet-first and shipped Internet Explorer everywhere, using distribution as leverage.
As Jack Welch put it:
“There’s no advantage to being a big company if you can’t use your bigness as an advantage.”
Microsoft used its bigness and won. I recall this time fondly at Microsoft. We wanted to win and everyone felt energized to beat Netscape.
You know who did not adopt fast enough, incumbents like IBM. Facebook and mobile
Facebook faced the same moment when attention moved to phones. Desktop was dying. Mobile-first startups were native. Companies like SNAP were a real threat.
Zuckerberg reset the company overnight: everything mobile-first. If it didn’t work on mobile, it didn’t ship.
Then they doubled down: rebuilt the app, fixed ads, bought Instagram and WhatsApp.
Mobile didn’t shrink Facebook. It made it bigger.
In both cases, the winners didn’t defend the old model. They reorganized around the new one. Companies like MySpace, Friendster and Bebo failed to adapt to this new model of mobile first and they slowly died away.
AI is that kind of shift
AI isn’t just another feature. It’s a new interface layer. It changes how software gets built and customized. But it doesn’t eliminate systems of record.
Enterprises still want reliability, compliance, integrations, and support. They still want someone accountable when things break. A clever AI tool doesn’t replace that overnight.
If anything, it makes the core platforms more valuable.
The winners will go AI-first
The companies that survive won’t protect legacy contracts. They’ll do what Microsoft and Facebook did: commit fully.
They’ll say: we are AI-first.
Take Salesforce. If they embrace AI deeply, the product gets better, not worse: faster implementations, easier customization, automated workflows
Plus everything enterprises already trust: scale, security, support.
That combination is hard for a small startup to replicate.
The same logic applies to ServiceNow, Workday, and any platform already sitting at the center of mission-critical workflows. AI becomes an accelerant, not a replacement.
Systems of record still win
My bet is simple.
The winners of this cycle will be the companies that already own the data and the workflows — the systems of record — and then aggressively layer AI across everything.
Not the ones fighting the shift. The ones embracing it.
Every cycle starts with panic. Most end with the adaptable getting bigger. AI doesn’t look like the end of enterprise software. It looks like its next upgrade.