ai-is-scaring-off-traditional-software-buyers
AI is scaring off traditional software buyers

There are increasing reports that buyers are pausing major software purchases as they are trying to understand how AI will impact their business before making significant investments in traditional IT.

We have seen this in UiPath and Salesforce’s earnings reports but also in investors’ behavior related to similar companies, writes eToro analyst for Romania, Bogdan Maioreanu. Stocks sold off in the past week included Salesforce (-14%), ServiceNow (-10%), Adobe (-9%), Oracle (-3%), SAP (-3%), and DELL (-22%), as well cybersecurity names like Crowdstrike (-12%), Cloudflare (-9%) and Okta (-8%).

Daniel Dines, UiPath’s new CEO, however is positive about their company prospects. But during last week’s earnings call Dines mentioned that around six, seven weeks ago, the company started to see some shrinkage and postponement, especially the large multi year deals. Dines believes it is a combination of factors, including the macro-economic environment and customers being a bit more cautious and doing more scrutiny into the deals before committing.

UiPath is not the only one experiencing this. Investors got scared by Salesforce (CRM) earnings report that sent the stock 20% down. It was a combination of the company’s first revenue miss since 2006, a relatively weak outlook for the next quarter and, perhaps most important, the company’s remark in its quarterly report that ”they have seen elongated deal cycles, and high levels of budget scrutiny” from software buyers. That comment was re-iterated by CEO Marc Benioff on CNBC stating ‘we can’t influence buyer’s behavior’.

Software buyers seem to be overwhelmed by all “incredible” AI opportunities thrown at them by a wide range of suppliers. Being afraid to invest sub-optimally they rightfully take time to evaluate needs and offers. Although few doubt that AI could bring productivity gains to many organisations, investors are also taking a break from the far-above market average valuation of the software sector, looking at the prospect of lower growth in the near future.

But some companies are already taking steps in implementing AI into their business processes. One recent example of this productivity growth is the company Klarna, which recently began using an AI assistant powered by OpenAI. In the first month, the AI assistant had 2.3 million conversations, or two-thirds of Klarna’s customer service chats. This is the equivalent work of 700 full-time agents. It also improved the customer’s experience allowing them to resolve their problem in two minutes on average than 11 minutes before and also decreasing repeated inquiries by 25%.

Generative AI has shown it can operate computer user interfaces like a human, without guidance. That is why the analysts believe that additional questions will come up regarding what place traditional robotic process automation may have within enterprises. Moreover, there are a lot of questions on how to intertwine AI with existing systems.

Despite the current uncertainty, the prospects of spending in bringing AI into the business environment are good, consulting company IDC is expecting those to exceed $300 billion in 2026.  While this is a positive for AI, it might be one of the reasons for which investments in traditional IT software might get re-thinked by companies.

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Articolul AI is scaring off traditional software buyers apare prima dată în Universul.net.

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