SAP and the 'SaaSpocalypse' - damaging AI displacement won't get past the defensive moats, argues Chief AI Strategy Officer Sean Kask

Is SaaS dead - that's more or less the question, right?

No it isn’t, is the answer, but as the wretched ‘SaaSpocalypse’ meme continues to undermine software sector share prices as Wall Street gets its red braces in a knot panicking about their returns, it’s a question that SaaS leaders need to be tackling head on to challenge.

Yesterday saw Workday CEO Aneel Bhusri eloquently state his case on that front and later today Salesforce CEO Marc Benioff will surely weigh in with his views when he announces the firm’s latest quarterly earnings. (Check back tomorrow to see what occurs.)

Today it was SAP’s turn at the stump with Sean Kask, the firm’s Chief AI Strategy Officer, telling the Goldman Sachs European Technology Conference just why AI isn’t going to rip the heart out of his company’s business - or see customers ripping out their SAP systems in favor of a Large Language Model, for that matter!

Disruption, yes

From SAP's perspective, Kask doesn’t deny that AI is a disruptive technology, but argues that the firm is leaning into that, and going on the offense in certain area:

AI will certainly disrupt the user interface, how you interact with computers, so you can have intent-driven ERP systems where you ask the system to do something. You’re giving the intent, the prompt, in and then it's going to go and execute and do something, so you may not need to click in a UI anymore,

Also, user interfaces will increasingly contain elements that are generative, he suggests, noting that there are elements of such generative UIs in SAP’s Joule AI offering:

If you're pulling up a chart or something like that, it's actually generated on the fly by the application. In the future, instead of humans talking to SaaS, you may have agents talking to SaaS as well, where the human is merely notified. So the UI will be disrupted to some extent.

It's worth noting that despite this, Kask does think UIs are “somewhat sticky”  though, citing the example of a friend of his wife who works for a trading company in Zurich:

She was complaining to me because they've moved off their ECC (ERP Central Component) system that she's been working in for 10 years, and she just knew where to click and just loved it. I mean these things will always co-exist, right? So you always have a UI. Again, the logic of that can still be accessed by agents and generative UIs and all those kind of things, so we're leaning into that.

Kask also concedes that AI will disrupt how software is built and maintained, pointing to how quickly vibe coding and AI pair programming is progressing. This is driving some of the ‘SaaSpocalypse’ disruption fears, he reckons, even though:

We also use vibe coding. We've rolled that out to all the developers in the company, and we've seen significant magnificent improvements in productivity to using that. Now for us to vibe code something, it goes through our 388 product standards and testing before it goes into production. So it's enterprise-grade software, but we can vibe code. We can also offer that to our customers to quickly build extensions...As a user, you can go in and actually vibe code little extensions to SAP systems, which in our point of view, just increases the value of our systems.

And of course AI can disrupt the traditional commercial model for firms like SAP, he admits, with a big debate around what's going to happen with seat-based subscriptions in the future and licensing. SAP’s current commercial model for AI is actually based on consumption, he argues, and it’s not new:

We talked about that a couple of years ago. There was a lot of heavy lifting internally. We built out a capability to actually meter every single one of those agents or use cases that is being run in the system. So if someone goes in and processes an invoice using AI or a delivery note in the shipping yard or something like this, that's metered and charged against these AI units. 

We basically have a 'commit-to-consume' type model for that. So you subscribe to a certain number of AI units, and then that's pooled and then you consume that. Every AI unit is tied to a business outcome somewhere...So we actually have that already there, that's actually already in place for us.

Into the moat

That’s a good example of SAP being on the offense, he argues. But there are also defensive moats around the company, he says, starting with the data stored in SAP systems around the world. But he adds:

It's not just the data, it's owning in the data model itself, and the contextual meaning around all that data. Again, we're exploiting that. We've built the Knowledge Graph. We have Business Data Cloud now, where we can expose the semantically-rich data in SAP and non-SAP systems to be consumed by agents, for example.

And customers trust SAP with their data which Kask pitches as a significant defensive moat in the company’s arsenal:

Probably the biggest argument I've heard against vibe coding is it's Friday night at 8:00pm and you have to close the books and your General Ledger doesn't add up. Who do you call? Is it your SaaS provider to fix that? Or is it the guy who vibe-coded something and tries to figure out what's happening there? There's a lot of customer trust that we have with our systems.

My take

I mean, I'm biased, but obviously, I think we're in a good position to emerge as a winner out of this whole thing.

Yes.

Onwards!

Mr Benioff - you’re up next...