Get closer to your friends and get closer to your AI rivals.
Software companies aren’t kind to AI companies these days. After a decade of software eating the world, AI is creating its own desires.
My colleague Alistair Barr, author of the excellent Tech Memo newsletter, wrote about what led to this market meltdown and why software companies (and their investors) are so upset.
But it doesn’t have to be that way. At least, not according to OpenAI. The AI giant is rolling out Frontier, a new enterprise platform designed to deliver more customized AI solutions.
This is an alternative to the idea that AI will allow anyone to retire software products.
“We’re not going to build every AI agent that enterprises need. Absolutely not,” Fidji Simo, CEO of applications at OpenAI, told reporters. “That’s why we built a platform that allows third-party software companies to deploy agents on top of us.”
Why do we eat each other when we can eat each other? together?
OpenAI’s “friend, not enemy” claim makes sense when you consider the alternatives.
Suppose AI really engulfs software companies. Will companies just use AI to build and manage their own versions of Workday, Salesforce, and all the other software tools they need?
“Expecting Claude Cowork Plugins and similar personal productivity tools to the expectation that every company will create and maintain a bespoke product to replace every layer of mission-critical enterprise software they have ever deployed feels like an illogical leap,” JPMorgan analysts wrote in a note this week.
Maintaining these tools (even when leveraging AI) may also require adding additional tools. more Employee numbers are going in the opposite direction of what most companies would like.
The benefit of AI (and the risk it poses for software companies) is that almost anyone can launch their own tools. Its accessibility can quickly get out of control and pose a security risk. Get lightning-fast response from a technical team responsible for tracking thousands of custom-built CRMs.
And then there are AI companies. Anthropic’s latest AI tool shocked the legal software industry, but some still thought it was pretty raw. Fine-tuning it will require more investment and effort, but that’s just one specific industry.
Meanwhile, AI companies continue to spend heavily and are under pressure to make profits. Partnering with someone who is already there is much easier than building from scratch.
I’m not saying that software companies are perfect or untouchable. AI will certainly change the business models of both companies, and integration seems inevitable. But an extinction-level event seems like a no-win situation for everyone.
In fact, everyone might be better off by allowing software companies and AI giants to focus on what they do best.
But these partnerships don’t come cheap…and it will likely be the rest of us who pay higher subscription fees.
