Carpentry, CapEx, and continuing disruption - Salesforce CDO Joe Inzerillo on the real impact of AI on SaaS providers

The so-called ‘SaaSpocalypse’ theory and its supposedly disruptive impact of AI on traditional software firm business models have not been far beneath the surface of conversations this week at the Morgan Stanley Technology, Media & Telecom conference in San Francisco.

But this is not our first rodeo as the enterprise sector, Joe Inzerillo, Chief Digital Officer at Salesforce, reminded the event, saying of the disruptive nature of emerging tech:

The way I think about it is I'm old enough that I've lived through these technological revolutions. Back in the '90s, when you wanted to run a computer program, you went to a very specific computer and clicked a very specific binary and did a very specific thing.  And then [Marc Benioff] and Salesforce were the ones who invented, [the idea that] oh, no, no, no, you could just do that SaaS, it could be in the cloud. And there was a whole bunch of people who had these binaries who were going to be dis-intermediated.

Salesforce grew out of that with a new company, Oracle and a lot of these other companies are still around. They adapted to it. Same thing with mobile....you need an app and then all of these companies have apps. AI is going to fundamentally change the way we interact with the computer and that's cool, but it doesn't just change it in a super narrow way. It changes it in a general case way.

AI carpentry

AI should be looked at as an enabler, not a destroyer, he suggests:

I can see how people would think about it that way because they'd say, ‘Oh, well, look, you have these amazing tools.’ But I think about it more like a master carpenter. Back in the day, when you had to cut with a hand saw, you really had to be a good carpenter in all parts of it. Now you can cut on a table saw and it's probably going to be a pretty good cut. So the tools are raising the boats for everybody.

Continuing the analogy, that means that the DIY market is getting more sophisticated and efficient, he argued, but so are the likes of Salesforce:

We have a backlog of data and features and things we've always wanted to deliver to our customers, but it sort of sits in a queue based upon what capacity you can afford for meaningful and disciplined growth. Now all of a sudden, we're seeing that good engineers and our teams are going 20x, and they can really sprint ahead of this.

That raises an important question for all enterprises:

Why would I want to waste time trying to build something that I could buy [something] that’s fit for purpose?... I just can't imagine there's a lot of people that are going to want to go backwards and say, ‘Well, let me build a better Salesforce”. I don't understand where the ROI is in that.

Paradigms go upside down

But there is disruption underway, he admits, noting that “the whole paradigm is sort of like upside down from where it was before”. Expanding on this point, Inzerillo said:

The way in which you build code was like very like, ‘Let's take this thing we want to do, break it down into steps, do all these steps very iteratively, figure out how we get there and all sorts of stuff like that’. We're now starting to go the other way. Now the imagination is starting at the user level where you can put tools in the hands of users and then observe how you can continue to make them faster and faster and faster. F

That’s incredibly important, according to Inzerillo:

It's not just the models. The models themselves are incredible, miraculous, frustrating creatures that exist now, and they've completely shifted the paradigm and they keep making improvements, but they're not delivering like a results-based system that you can depend on for a business.

You need  to sort out a solid data foundation, a familiar Salesforce theme, he went on:

It's not just the data in a database that sits there at rest. That data is now kinematic because of these models. It's always being introspected and moved and things like that. So when you look at us, we start [the] data layer where we have all of this amalgamated knowledge, but we can represent it to the upper layers of the stack. You start working your way into the activation layer, the apps themselves, the facilities that the apps provide, and then you have the agents orchestrating that whole thing and then back to Slack.

Continuous improvement loops also feature highly:

It's not just, ‘Does it work today?’; It’s, ‘How does it get better tomorrow? How does it react to the change in human behavior? How does it react to more data becoming available?’. That's how these things are just going to go. There is going to be no steady state, done, ship the software we're done. It's always going to be at this frenetic user level as opposed to the sort of architectural level.

Scream if you want to go faster...or slower?

Still on the subject of disruption, the rise of the hyperscalers is another example of an exemplary revolution, he suggests:

It was a very different model. People were used to the CapEx model - I do this, I get a data center, and all that kind of stuff. I used to be really good at building data centers. I thought that was an awesome skill set. I haven't built a data center in 12 years, that all of a sudden became less interesting to me. But I think when you think about that transition, we think about it as if it was this square wave transition that just happened. And everybody was like, ‘Yes, well, of course, it's how you pay for a cloud’. But the reality is it took a long time. In retrospect, it seems short, but it took a pretty long time, it took a decade really to get that into the full mainstream.

The same thing is happening as far as the pricing models go with agentic AI right now, he argues, the only difference being that agentics are moving more quickly from a disruption standpoint so the entire time line is compacted:

We're trying to be reactive to the market, trying to be reactive to our customers, meet them where they are. If you actually slowed down time and kind of expanded that to a decade thing, it wouldn't seem as frenetic. It’s just because there's so much opportunity and so much disruption right now that it feels like they're stacking. It does confuse customers, but we think inaction is much worse than that, so we really want to try to get some stability, really trying to mature it and get to a point where we're meeting everybody where they're at. But I think what people don't really appreciate is the fact that this is all just happening really fast for the whole industry.

My take

No ‘SaaSpocalypse’ here.