U.S. enterprise IT procurement is undergoing a structural shift: budgets are moving from traditional SaaS software to AI agents. Companies such as Sanofi, Mixology, and Utila have successively reduced their usage of software like ServiceNow and Salesforce, with some firms cutting their software budgets by up to 50%. The rationale for retaining traditional software is also changing—HubSpot, for example, is now explicitly positioned as a tool "used only for data storage."

Article author and source: Wall Street Journal

Enterprise IT budgets are being reallocated—more money is flowing toward AI, and traditional SaaS software is losing its once-assumed dominance.

According to recent reports from The Information, as companies increase their investments in AI providers such as Anthropic and OpenAI, traditional enterprise software and IT service providers are facing pressure to reduce their budgets. This trend is evident among both large multinational corporations and small-to-medium-sized businesses, and is reshaping how enterprises fundamentally view software.

The logic behind this shift is not complicated: AI agents can automatically perform tasks that previously required specialized software, prompting companies to reevaluate their long-standing software subscriptions and ask themselves—do we still need this?

Large enterprises: Some have been slashed, others have been deeply integrated.

The French biopharmaceutical giant Sanofi provides a prime example.

Sanofi is using an AI agent built on Anthropic’s Claude Code and Elementum, an AI startup’s software, to replace certain ServiceNow IT management functions—a leading SaaS platform in enterprise IT management.

At the same time, Sanofi’s reliance on the German software giant SAP has deepened. Sanofi has integrated its AI agent with SAP’s AI agent to automate the auditing of purchase orders—a task previously handled by an Indian outsourcing firm. The result: reduced outsourcing costs and an elevated position for SAP.

This indicates that the AI wave is not simply about "replacing traditional software," but rather about redefining which software is worth keeping and which can be replaced.

Julie Teigland, Global Vice Chair of consulting firm EY, said her clients are using AI to integrate enterprise applications. She said AI customers “are taking a hard look at the technical debt they’ve accumulated over the years and asking themselves: How can we make all of this simpler and easier to migrate?”

Small and medium-sized enterprises: Faster replacement speed, with Salesforce leading the way.

Small and medium-sized companies act more decisively in replacements compared to large enterprises.

The family-owned clothing company Mixology, with 500 employees and 16 physical stores, began using Palantir software last year to develop custom AI applications for generating social media ads, forecasting demand, and managing schedules, while planning to reduce its reliance on Salesforce.

Mixology CEO Jordan Edwards said directly: "Before engaging with Palantir, my entire business ran on Salesforce. But I'm not sure if it will still be necessary going forward." "Theoretically, anything we do in Salesforce can be done in Palantir."

For large clients, completely abandoning Salesforce remains extremely difficult. However, for smaller clients, the feasibility of replacing it with AI-based alternatives is increasing.

Bloomberg also reported on Thursday that Starbucks is the latest major software client seeking to replace core applications from companies like Microsoft and IBM with AI.

The new role of traditional software: transitioning from "functional tool" to "data repository"

The case of Utila, an Israeli cryptocurrency management software startup, reveals a deeper trend.

According to The Information, Utila removed apps from 10 small software providers, including Clay and Vendelux, which previously handled various functions such as customer data tracking, email marketing, event management, and sales preparation. These functions are now fully managed by Swan AI’s sales and marketing software and AI agent.

Din Arbel, Head of Utila Market, said this adjustment directly reduced the company’s software budget by 50%.

But HubSpot was retained—one reason alone: data.

“We’re still using HubSpot, but we’re only using it to store data,” Arbel said. Swan AI’s agents need to access customer data stored in HubSpot to complete tasks. Although HubSpot previously told investors it planned to charge external agents for accessing its data, Arbel said he would continue using it regardless.

This case clearly illustrates the evolving role of traditional SaaS software: transitioning from a functional executor to a mere data storage layer.

GitHub under siege: Code repository business faces pressure from multiple fronts

Meanwhile, GitHub, a core business under Microsoft, is also facing competition from multiple sources.

GitHub once held a leading position in AI-powered programming with GitHub Copilot, but its advantage has gradually narrowed. Now, even its most basic service—the platform for developers to store and collaboratively edit code—is beginning to face erosion.

According to The Information, the AI programming tool Cursor recently announced the launch of a competing code repository product. On Wednesday, OpenAI President Greg Brockman stated that the company has recruited former GitHub Senior Director Taylor Blau to lead “planning for the future of Git,” suggesting that OpenAI is advancing developer tools that directly compete with GitHub.

The latest entrant is the startup Entire, founded by former GitHub CEO Thomas Dohmke, which raised $60 million earlier this year. On Wednesday, Entire announced the launch of its own Git code repository product, supporting code storage and collaboration with an emphasis on greater stability.

Dohmke said that Entire improves speed and reliability by simultaneously renting servers from the world’s three major cloud providers and distributing them across multiple regions. He said, “One way to address downtime is to increase redundancy and distribute it globally, which will support the scalable use of AI agents and human users.”

On Wednesday, GitHub acknowledged in a blog post that it experienced six outages last month and stated that it is migrating more systems from its own servers to Microsoft Azure cloud to reduce the frequency of outages.

As enterprise IT budgets rapidly shift from traditional SaaS to AI, legacy enterprise software is under increasing pressure to be replaced. Sanofi has replaced certain ServiceNow functions with AI agents while deepening its integration with SAP; small and medium-sized businesses are adopting replacements even faster—Mixology has replaced Salesforce with Palantir. Israeli company Utila cut 10 software vendors and reduced its budget by 50%, retaining HubSpot only as a data storage layer. GitHub’s code repository business is also facing competition from multiple players, including Cursor, OpenAI, and startup Entire, all of which are eroding its market share. Enterprises are reevaluating the value proposition of software, as traditional SaaS transitions from a functional executor to a mere data storage layer.

The market carries risks; invest with caution. This article does not constitute personal investment advice and has not taken into account the individual investment objectives, financial situations, or needs of any specific user. Users should consider whether any opinions, views, or conclusions presented herein are suitable for their particular circumstances. Investment decisions based on this content are made at your own risk.