AI won't kill software, SAP CEO says

Software's perceived demise due to AI is a recurring market narrative, according to SAP's CEO. He notes that while hundreds of billions in software market value recently evaporated, with SAP's share price dropping 30%, this pattern mirrors previous platform shifts. Initially, value concentrates in foundational technologies like AI models and infrastructure, often referred to as the 'shovels in the gold rush.' Over time, this value migrates to the application layer, where technology directly impacts business results.

SAP's own transition to cloud-based subscriptions six years ago faced skepticism, involving a shift from license revenue to recurring models with temporarily lower near-term margins. This required convincing enterprises to move critical processes, balancing flexibility promises against disruption risks. Today, cloud revenue forms the majority of SAP's income, demonstrating the long-term structural gains of such shifts.

AI's integration presents similar challenges. While some businesses use AI for automation, many struggle to achieve enterprise-wide, measurable outcomes due to fragmented data, siloed processes, and legacy systems. Reliable AI requires deep industry context, semantically rich data, and governance—elements encoded in enterprise software through extensive real-world deployment.

Software is not being replaced but is being tasked with more complex functions. The CEO advises that companies adapting to where technology is heading, rather than defending established models, will ultimately strengthen their market position and relationships.