Microsoft CEO Satya Nadella has been making some bold predictions about artificial intelligence (AI) and Software-as-a-Solution lately. “How AI agents will impact SaaS solutions moving ahead,” explained Nadella in an interview with Bill Gurley and Brad Gernster on their B2G podcast. According to the tech giant, the notion that business applications exist could “collapse” in the agentic AI era.
Even in a conversation with technology veteran and Infosys cofounder Nandan Nilekani in Bengaluru earlier this week, Nadella had said artificial intelligence agents will disrupt SaaS models with a lot of back-end business logics being automated by agents. “2025 will be the year of abundance of large language models (LLMs) and their capabilities,” he added as quoted by The Economic Times.
“The agent will orchestrate across multiple SaaS applications. It will be kind of like humans are the swarm of agents. This is the next frontier, and that’s where a lot of the productivity will come from. Just like I can build a spreadsheet, I will build thousands and hundreds of agents that will streamline my own work…India will be the use case capital of AI,” he said.
Before making these remarks, Nadella met Prime Minister Narendra Modi to discuss various topics, including technology and artificial intelligence. Soon after the meeting, the American tech giant addressed a keynote session at Microsoft AI tour in Bengaluru and announced the company’s $3 billion investment to accelerate India’s AI and cloud ecosystem.
How AI Will Consume SaaS
During the B2G podcast, Nadella explained how artificial intelligence can consume SaaS in the coming days. His explanation came in response to a question concerning Microsoft’s copilot-first approach and if the company will render some of its existing infrastructure obsolete.
“The approach we are taking acknowledged that traditional business or SaaS applications may fundamentally change in the agent era. These applications are essentially CRUD (create, read, update and delete) databases with business logic. But in future, this logic will migrate to AI agents,” he said.
These agents will further operate across multiple apps or databases, independent of the back-end systems, this is what we might call the ‘AI tier’, said Nadella. Once this takes place, companies may start replacing back-ends with AI agents. With Microsoft’s Dynamics, the CEO plans to aggressively collapse back-ends and make SaaS applications less important --- whether it’s customer service, finance, or operations.
He noted that there is a growing demand for AI-native business applications, which can effortlessly transition from co-pilot to agent to business app. For instance, the integration of Python with Excel is like GitHub with co-pilot because it transforms Excel into a powerful data analysis tool. “Python in Excel not only analyse, but it also creates, plans, and executes them using visualisation capabilities as a scratchpad for analysis.
Microsoft is also building co-pilot as the organising layer for AI across M365 --- a product family of productivity software, collaboration and cloud-based services owned by the American tech giant.
“Now, the co-pilot can connect with agents, including those embedded in applications like Excel, Word, etc. You might use Word for drafting legal documents, Excel for data analysis, and Teams for collaboration. Co-pilot seamlessly transitions across these tools, enabling a unified workflow."
Microsoft's AI Strategy
When asked about parallels to NVIDIA’s AI-driven growth, Microsoft highlighted its focus on reducing costs, scaling output, and enhancing value per employee through intelligent automation. Nadella said AI represents the lean methodology (a way to optimise an organisation’s resources, people, and energy to create value for customers) for knowledge work.
“Just like lean manufacturing helped industrial companies grow by increasing value and reducing waste, AI can do the same for knowledge work. For us, AI is already driving significant savings in customer service segment. We spend about $4 billion annually on support from Xbox and Azure. It is improving front-end deflection rates and enhancing agent efficiency, leading to happier customers and lower costs,” explained Nadella.
Similarly, co-piloting across M365 is no longer only about preparing reports, it’s about real-time collaboration and reasoning with the artificial intelligence. With the long life cycles of data centres, Microsoft has learned to optimise utilisation through software. The tech giant applies the same approach to AI infrastructure.
“What we are seeing now is a catch-up phase where AI accelerators are being built out to support the new demands of AI workloads. This will normalise over the time, and growth will align with the broader cloud trajectory. Our ultimate goal is to create operating leverage through AI. As headcount stabilises, total personnel costs will decrease and productivity will increase with the help of artificial intelligence,” he added.
