In the tumultuous tech-industry debate over whether AI agents will complement and enhance enterprise apps or overtake most of their high-value functionality, ServiceNow CEO Bill McDermott is echoing Microsoft CEO Satya Nadella’s gloom-and-doom forecast for enterprise apps.
Before sharing McDermott’s comments from last week regarding the future role of enterprise apps, I want to caution both McDermott and Nadella about the timing and tone of their highly provocative comments that are likely to be very disturbing to many and probably most of their customers.
And for a moment, set aside the possibility that Nadella and McDermott will turn out to be mostly correct in their forecasts of a looming Apps Apocalypse, in which relentless waves of precocious AI agents hollow out the utility of most enterprise apps and relegate them to the hinterlands of IT relevance.
Instead, begin by putting yourselves in the shoes of a retail company CEO or a financial services CFO or a logistics company CIO who just championed a large-scale business transformation project, including $45 million for powerful new AI-enhanced enterprise applications.
And now, two of the most successful, visible, and articulate CEOs in the entire tech industry stand up and tell you, in essence, that you just blew $45 million bucks.
That you’ve bet on not just the wrong horse but on some mangy flea-bitten nag that should be put on an express truck to the glue factory.
That you don’t get it.
That you’re a sucker.
Think that’s too strong?
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Here’s Nadella from that December 2024 episode of the BG2 podcast at the 30:51 mark:
“It’s fascinating — when was the last time any of us really went to a business application? We license all these SaaS applications, we hardly use them, and somebody in the organization is sort of inputting data into it.”
Maybe I’m just simple-minded, but if I were that hypothetical CEO or CFO or CIO, I’d be pretty damn pissed. And if the immediately obsolete apps on which I’d just blown $45 million carried the brand name Microsoft Dynamics 365, I’d be demanding a full and immediate refund plus more than a few scalps from the Microsoft executives responsible for selling me all that snake oil.
Meanwhile, quarter after quarter after quarter, Nadella has used Microsoft earnings calls to tout the terrific customer uptake of Dynamics 365 and how it’s growing at about 20% again and again for a product that, to use a favorite phrase of Nadella’s, is “taking share.”
Wait — so you’re selling stuff that you yourself have proclaimed is going to “collapse”? Let’s hear the full context of that “collapse” in Nadella’s own words, again from that compelling BG2 podcast episode last December, starting at the 46:40 mark:
“It’s a very very important question. The SaaS applications, or biz apps — let me just speak of our own Dynamics there — the approach at least we are taking is I think the notion that business applications exist — that’s probably where they’ll all collapse, right, in the Agent Era because if you think about it they are essentially CRUD [create, read, update, delete] databases with a bunch of business logic.
“The business logic is all going to these agents. And these agents are all going to me multi-repo CRUDs, right, so they’re not going to discriminate between what the back-end is. They’re going to update multiple databases and all the logic will be in the AI tier, so to speak.
“And once the AI tier becomes the place where all the logic is, then people will start replacing the back-ends, right?
“That’s what — it’s interesting: as we speak, we’re seeing pretty high rates of wins on Dynamics back-ends and the agents’ use. And we’re going to go pretty aggressively and try to collapse it all.”
Or is Nadella saying that the apps made by all of his competitors will “collapse” and that only Microsoft’s will endure?
McDermott heartily endorses Nadella’s theory
Now, look at the language used by ServiceNow’s McDermott in his keynote presentation at his company’s big Knowledge25 event last week in Las Vegas. Please note: I could not find a verbatim transcript for McDermott’s comments, so I’m using my own notes here. But while I might not have captured full and complete sentences, I’m 100% confident that I’ve captured all of the key words and themes expressed on this subject by McDermott:
“So in the Era of Agentic AI, the traditional applications stack will collapse…the number of applications companies use will be drastically reduced…Traditional apps will become core databases and feed into the ServiceNow platform, where real innovation will happen.”
Now, I have to give McDermott some slack — in fact, a lot of slack — because in that same keynote speech, he also described the coming “collapse of the 20th-century software-industrial complex,” a concept that I’ve analyzed with fairly strong support here and here.
But when McDermott got into the almost-verbatim echo of Nadella’s vision (in italics several lines above this one) of hollowed-out apps that morph into CRUDs (!!) and are close candidates for the crowd scenes in Night of the Living Dead, well, I think that was a particularly tinny note in an otherwise excellent keynote.
Particularly when he followed that up by explaining that the one and only way out of that mess is — wait for it! — to spend a lot of money with ServiceNow.
Final Thought
Over the past few years, I’ve said on more than a few occasions that the future is coming at us faster than ever before. In that respect, business leaders should expect the CEOs of the Cloud Wars Top 10 companies to help those customers navigate this fast-changing and highly disruptive future.
Perhaps, in a charitable interpretation, that’s what Nadella and McDermott were doing or at least attempting to do.
Conversely, I would hate to think these two hugely successful and prominent CEOs are spinning their tales of the Apps Apocalypse to try to freeze the market for the big apps vendors — Salesforce, SAP, Oracle, and Workday — to give themselves a big advantage in the rapidly intensifying Agent Wars.
And I really hope Nadella and McDermott will be willing to take the “what the hell is going on here?!?” calls from all the CXOs who just spent $10 million or $50 million or $100 million on applications that Nadella and McDermott are telling us are the Edsels of this modern age.
