Enterprise software will be volatile in 2025 as customers increasingly question value, complain about upsells and added charges and assess whether agentic AI provides an abstraction layer to their existing applications.
Here's a look at three trends to watch in 2025 as customers question the value provided by enterprise software vendors.
Marketplaces: A boon to procurement departments?
At CCE 2024, I moderated a panel on the future of marketplaces in the enterprise software purchasing. Marketplaces have real benefits in that they can reduce friction from buying, enable an enterprise to try more applications, AI tools and data on one bill, and diversify and consolidate vendors at the same time.
The marketplace trend is likely to be one of the big things to watch in 2025 and AWS Marketplace has made a series of interesting moves that are worth noting. For starters, big deals are closed on AWS Marketplace from the likes of Salesforce, CrowdStrike and Databricks. In addition, AWS Marketplace now supports four new currencies in non-US bank disbursements. AWS Marketplace is leveraging Amazon's commerce knowhow in enterprise software.
2025 in preview: What Constellation Research’s analysts say
Ashwin Rangan, Managing Partner, Insightful Group and a long-time CIO, laid out the enterprise buying pain.
"We can all relate to on-prem software that was priced in such a way that the complexity of the contract oftentimes was too much even for my chief legal officer. There was a salesperson telling me that I needed all these pieces even before we used the first little bit. And that little bit of usage would occur a year to 18 months after you bought the software. In the meantime, the meter was running and you were paying.
Fast forward and the CIO role became more in front of the office, there was a little bit more visibility when we were building more than we were buying. Now fast forward another 10 years and a lot was offered in the cloud. Cloud contracts are poorly written with so much obfuscation with little visibility and control between what you pay for and what's being offered.
Today it's starting to become very confusing all over again. It was painful back then and it's getting really painful again."
Chirag Mehta, Constellation Research analyst, said enterprise buyers have three types of marketplaces. The most high profile are from hyperscale cloud providers. Business application marketplaces are also prominent. Data and AI marketplaces are also emerging for enterprises.
"Buyers are consolidating their spend and some are reducing spend. We've seen enterprises look at marketplaces as an extension of their own platform strategy today and in the future," explained Mehta. "Customers are also thinking about marketplaces because they are frustrated with their own procurement systems. It's incredibly difficult to discover, try and buy so customers are looking to reduce friction, enable employees to use tools and have governance."
Phil Potlaff, GM of AWS Software Marketplace, said the company is focusing on the buyer experience. "Customers have moved more of their IT infrastructure to the cloud and that's where they're running third-party software," said Potlaff. "We look at upfront discovery. Buyers want to evaluate software without a sales pitch. We focus on time to value. We look at IT buyer and procurement friction. We're a way to control spend with standardized contracts."
Bottom line: Rangan said marketplaces appear to be useful to CIOs, which are challenged to navigate the proliferation of software. CIOs need to get some joy back since contracts mean they're spending most of their time with legal teams, CFOs, finance committees and risk teams.
"The CIO is becoming the chief cat herder," said Rangan.
Marketplaces have the potential to enable CIOs to better manage the IT vendor portfolio and exponential growth in the diversity of options, said Potlaff.
Mehta said the risks to marketplaces are that you can be locked into a platform and ecosystem even as you escape your enterprise software lock-in.
Agentic AI: The new UI for software?
Not surprisingly, agentic AI was a big theme at CCE 2024. One common theme from the thought leaders and CxOs was that agents are likely to relegate many of the common platforms to plumbing. The functionality in enterprise software will remain critical, but the actual usage from employees will be handled through an AI agent.
This genAI as UI theme has been prevalent among vendors. Google Cloud has talked agents. Amazon has Amazon Q. Microsoft has its Copilot-agent handoff. Salesforce plans to unify its various clouds with Agentforce. ServiceNow and SAP also hit similar agentic AI notes. The list of agentic AI visions is endless, but it is clear that orchestration will be critical.
What few of these vendors tell you is that agentic AI also can collapse the status quo of cross-selling clouds, multiple seats, applications and complicated contracts.
Agentic AI without process optimization, orchestration will flop
In 2025, the enterprise software status quo will remain--at least for customers that aren't going to build agents themselves. But this writing is on the wall. The big question: If there's no UI to your common enterprise applications what exactly are you paying for?
"The big use case is going to be the automation of workflows. In the next year or two, we're going to see more transformational use cases and it's going to change corporate structures," said Sunitha Ray, Field Operations CTO at Shopify.
Phil Komarny, Chief Courage Officer LifeTrek / Maryville U, may be ahead of this enterprise software theme. "We really focused more on homegrown at Maryville. With our data strategy we didn't make any big bets on vendors," he said. "There's no reason. We can build a very small AI team that can use our data in different ways. We'll get to personalization of assistants quite quickly because of the way we're positioning data with our students."
Komarny's approach is to have a data strategy and then deploy the technology as needed. Komarny said that approach eliminates the need for multi-year platform strategies and the pain that goes with it.
Nabil Bukhari, Chief Technology & Product Officer at Extreme Networks said AI is going to break down application silos. "As long as we stay in the world of my existing application--whether it's a chatbot that's useful or not--we are not fundamentally changing the equation," he said.
Why won't the equation change in 2025? Agentic AI isn't going to be able to traverse multiple enterprise systems and unify them without a big focus on processes.
Vendor growth vs. customer budgets: Conflict ahead?
Enterprise software vendors are going to be squeezed as generative and agentic AI upends traditional models. Customers of enterprise vendors have been disgruntled throughout 2024.
Among the moving parts:
- Enterprises have been cutting workers in part due to AI productivity gains. These enterprises are going to need fewer seats.
- Companies leading in genAI adoption build more than buy. These enterprises are using AI to traverse multiple systems. In a nutshell, genAI and agentic AI will be the user interface for most applications. What's enterprise software worth if the user interface is redundant?
- Enterprise software vendors need to show growth and the great cross-selling of clouds won't work much longer. BT150 zeitgeist: Dear SaaS vendors: Your customers are pissed
- Vendors are eyeing consumption-based models that revolve around paying per agentic AI conversations. SAP CEO Christian Klein has said that as the company shows it can deliver value for customers it will have more upsell ability.
- Enterprise software vendors are also pondering value-based models where they get a cut in returns and value created. Customers aren't likely to go for that approach, but vendors will try. UiPath CEO Daniel Dines said during the company's second quarter earnings call that it is looking "quite a different model that should tie into pricing to the value that we deliver. He noted it's very early.
Many vendors will aim to innovate and add new SKUs to raise prices. This approach seems to be working well for ServiceNow, which also happens to be a platform that is abstracting away enterprise systems.
"We've integrated with all the systems of record, and it's an opportunity for customers to think about using AI across our platform to improve business results not just on productivity, take cost out, but also on a growth level," said ServiceNow CEO Bill McDermott.
It's unclear how these enterprise software models play out, but CxOs at CCE 2024 are expecting changes. Amid platformization and AI integration, vendors will need to demonstrate value over features. For too long, value has taken a back seat.
