Will agents shrink enterprise-software profit pools?

There's a slide that I just sent to Nick that Goldman's out with this week that really makes the point that David Sacks just made, which is the profit pools in the future, right? It's not that, the idea that software is dead is ridiculous, right? Nobody's intelligently, I think, making that argument, but the argument they are making, which is causing radical devaluation of these companies, is that the profit pool available to software is decreasing and the profit pool available to the agentic layer is increasing. And when that happens, the discount rate, that terminal value of those software companies plummets. And so you can have things that are true. It could be true that you're not going to replace CRM, but it can also be true that it's never going to trade at 30 times free cash flow again, and it's going to trade 17 times free cash flow because it's available, Tam, in the future is now dramatically and permanently changed. Now, what could change that? There's only one thing that could change that. They have to accelerate their revenue growth in their core business and prove that they are AI beneficiaries, right? And they're not going to get eaten away by AI. And I'll tell you a company that is doing this, Databricks. Databricks just reaccelerated the last three quarters. They're growing over 60 percent at scale. Snowflake, reaccelerating. Clickhouse, reaccelerating. There are beneficiaries in the software space.

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Somebody that says, I'm going to collect a lot of data for you and analyze it for you. I don't need you to analyze it for me. I can run models against data and analyze them myself. So if you think about, every SaaS company has a marketplace. You can buy Salesforce marketplace. What does it say? You have Salesforce data. I'm a marketplace app. Take me and I'll help you analyze the data. I don't need you.

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Well, this narrative of the Sass apocalypse was totally overdone. I mean, this whole Sass is dead narrative is just getting shredded today with Salesforce being up over 20 percent. You could go back and look at some of the clips I've been saying now for months. I do not believe that core systems of record like CRM are going to get ripped and replaced with something vibe-coded. I've been saying that for a long time. Enterprises want certainty, they have compliance, they want professionally managed software that's been running and debugged for years. I mean, just think about all the bug reports that have been filed against Salesforce for over 20 years, right? And that's the hard part to get right. I mean, when I play with all these agents and AI, you're dealing with something that's probabilistic and there's so many edge cases. When you're dealing with a core system of record, you just want to know that it works. And the expense of it is low enough that you just don't want to basically jeopardize one of your core systems by ripping it out and replacing it with something built in-house in a kind of DIY way. So I just think this whole SaaS apocalypse narrative was overplayed. Now, at the same time, to your point, Jason, I think Benioff is doing all the right things here. And you could kind of say it's a, if you can't beat him, join him type approach, which is he made this deal with Anthropic. What is that deal? I mean, first of all, he's going to be offering Anthropics models inside of Salesforce. More importantly, I think this is really the critical thing. He is integrating Salesforce into Claude. He's willing to allow Claude to be the front end, to have the sort of the primary user relationship. And Claude is now getting able to access all of the data in Salesforce, and all of the workflows, all the actions that a user can take. So in other words, Benioff here is willing to risk disintermediation in order to ride this AI wave, because he knows it's what the customer ultimately wants. You know, you don't want to go into Salesforce or any SaaS application to write your agents. You want to create agents in the AI program that you're using. And you want those agents to be able to run across all of your SaaS platforms. So he's willing to, again, to give up a big piece of the user relationship in order to make himself more relevant. Now, why is this ultimately good for his business and not bad? Is because, like I said, I still think that you need systems of record, you need the AI agents to basically go to those systems, get the data from a canonical source of truth. You just don't want there to be any probabilistic variability around that. And you want AI agents to be able to write back to those systems, and you want to be able to write back to those workflows. So what's happening here is that it's not a rip and replace, their layers are getting built, right? You've got the database layer, then you've got applications and workflows, and then you've got agents, and then you've got the AI user interface. And Benioff is saying that the AI is now the user interface. He's basically acknowledging that he's leaning into it. Now, here's the thing. I talked to him this morning, actually, and a point he brought up with me that I think is underestimated is that he says there's a lot of trap value in Salesforce, meaning we know it's got this incredibly broad, rich platform with tons of functionality. The average user is never going to find all those things. But the agent will. Think about all the cases where now the agent is going to go to the user and say, hey, I just saw that there are these actions you could take in Salesforce that seem to line up with what you're telling me to do. Do you want me to do this? The user is going to say yes.

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It is also a new capability that allows these models to tool use. The tools that we've created over time, web browsers and Excel spreadsheets, and in the case of chip design, Synopsys and Cadence and Omniverse and Blender and Autodesk, and all of these tools are going to continue to be used. Some people say that the enterprise IT software industry is going to get destroyed. Let me give you the alternative view. The enterprise software industry is limited by butts and seeds. It's about to get a hundred times more agents banging on those tools. There are going to be agents banging on SQL, there are going to be agents banging on vector databases, agents banging on Blender, agents banging on Photoshop, and the reason for that is because those tools, first of all, do a very good job. Second, those tools are the conduit between us. In the final analysis, when the work is done, it has to be represented back to me in a way that I can control. And I know how to control those tools. And so I need everything to be put back into Synopsys. I want everything to be put back into Cadence because that's how I control it, that's how I've ground truth.

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Deep specialization, deep specialization. I believe that these models, they're going to have general models that are connected into the software company's agentic system. Many of those models are cloud models and proprietary models, but many of those models are specialized sub-agents that they've trained on their own.

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That's right. And the sooner you connect your agent, the sooner you connect your agent with customers, that flywheel is going to cause your agent to get hyper...

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In fact, exactly right. We create a horizontal, but notice there are all these GSIs and all of these consultants who are specialists, who then take your horizontal platform and specializes it into.

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That's right. So I think that these platform companies have an opportunity to become that specialist, to become that vertical. Right.

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