Cutting Out the Business Partner?

These days, big organizations often rely on a slew of software vendors to handle critical business processes. If they want to track a potential customer’s buying habits, that’s one big vendor. To monitor where raw materials are in the supply chain? That’s another. To parse any legal issues in a contract? That’s yet another big software firm.

But should companies embrace new AI tools and skills that can do all of those things, and probably more—potentially for a lot less money? Some investors seem to think so. Earlier this month, share prices fell dramatically for business-software companies serving certain markets and processes—legal, sales, supply-chain, and others—after several big AI models released updates in the same areas. The sell-off has expanded even further, with stocks of asset managers and tax-software providers taking a hit following the release of another new AI tool.

Indeed, analysts say the technology threatens to completely upend the $600 billion global business-services market. “Software, as an enabling tool, is becoming commoditized,” says Matt Bohn, a Korn Ferry senior client partner in the firm’s Technology practice. But when it comes down to an individual company’s decision to whether they should go it alone the consideration goes far beyond what the new technology can do. “It’s a decision about risk, accountability, and control,” says Wolfgang Bauriedel, a Korn Ferry senior client partner who works with chief information officers in multiple industries.

Indeed, many experts say many large organizations may not rush to replace their existing business process software with AI. For one thing, an AI firm’s claim that its product can do the work doesn’t mean that it can do it well. And even under the best of circumstances, there’s no track record to assure a company the tech can securely handle its data. Plus, a legacy business-software product often has a built-in advantage: thousands of experts—whether in-house, at the software provider, or third-party consultants—who can fix any bugs that may arise. AI lacks that infrastructure, at least for the moment. “It’s not going to replace software any time soon,” says Bryan Ackermann, Korn Ferry’s head of AI strategy and transformation.

Many leaders recognize how perilous a technological changeover can be. Overhauling systems can take years. Employees need retraining in order to properly use and maintain the tool. All that also assumes things go perfectly. Bauriedel recalls a utility that so thoroughly botched its payroll-software transformation that it had to pay employees with gift cards for a while. “Are the benefits of AI three to five times more than the current system, to justify the risk and pain?” he asks.

Leaders will likely wait for the big software providers implement or introduce their own AI tools into existing products. “Agentic AI will be something that business-software customers will come to expect,” Ackermann says.

Still, AI’s allure could be powerful for smaller firms that haven’t haven’t invested years of human and financial capital in building relationships and systems with outside software firms. Business technology can make up 5% or more of total expenses. That means that companies that adopt AI could significantly reduce costs without having to trim much payroll (or personnel, if they rely entirely on outside tech support). In many cases, they’d also cut the expenses both of the software’s annual subscription fee, which can be hefty, and also of on-demand troubleshooting specialists.

Experts say that AI will impact, one way or another, how companies handle their business processes. A bigger question is what will companies do with any time and money it saves by using AI. “Will those resources be redeployed to enable humans to produce greater innovation, higher quality products, and more services to offer customers?” asks Doug Maxfield, a Korn Ferry senior client partner in the firm’s Global Technology practice.

Learn more about Korn Ferry’s AI in the Workplace capabilities.  

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