Why software companies can add $1.5 trillion to their market by embracing Services-as-Software

For most of the last two decades, the software industry has been fixated on providing essentially meaningless drip-by-drip enhancements: Hungarian language support, improved UX, and better data and interface management—nothing revolutionary, nothing that enhances clients’ ROI. In fact, every renewal season erodes enterprise ROI with higher prices, sometimes exorbitantly higher. Yet, senior business executives have an enormous appetite to transform their operations completely and aren’t receiving the capabilities they need. In our view, the major software companies are the boat anchors slowing business progress toward a wholesale replacement of operations and analytics with autonomous agents and GenAI automation.

There’s nothing new here

Game-changing capabilities are rare among the major players. SAP, Oracle, and JDE are enterprise backbones for finance, procurement, human resources, and supply chain operations. Still, the worlds of the CFOs, CPOs, CHROs, and CSCOs remain underserved by these applications’ upgrades. Take SAP users upgrading from ECC to S/4HANA for instance, they get a better data model, faster processing, Fiori UX, improved analytics, and various minor functional upgrades, such as real-time stock and financial reporting. Yet, while these may reduce IT costs, none will transform a company’s business operations. Enterprises are expected to process work like they’ve done for decades: sending customer invoices, matching supplier invoices against POs, and consolidating quarterly financial reporting.

What’s changing?

There’s a clear shift in enterprises’ desire for change. Traditionally, enterprises have avoided big system changes due to implementation timeframes and cost. Instead, they favored labor-arbitrage-fueled outsourcing solutions to find short-term efficiencies which were eroded by inflation and attrition issues, frustrating clients who soon realized that labor-based solutions weren’t the panacea they once were. Then came GenAI and agentic AI solutions, delivering greater automation upsides and adaptability. Clients now want to ditch full-time employees (FTEs) for technology-driven process transformation.

In this lies the great opportunity for software companies to provide never-before-seen operational capabilities. This real prize can replace the larger $1.5 trillion consulting, IT, and outsourcing services market, plus trillions more being spent on employees and technology within companies’ internal operations (see Exhibit 1). Autonomous agents—powered by advanced automation, generative AI, and advanced analytics—will redefine finance, HR, procurement, IT, sales, marketing, customer service, and supply chain, potentially eliminating the manual work of half of a company’s operations. These technical capabilities will gut the services industry, which HFS Research estimates to be 30-60% of a company’s vendor-related expenses, as well as internal operations teams that represent ~47% of total expenses (varying by industry from 20-75%).

Exhibit 1: The opportunity to replace global technology services with Services-as-Software

Source: HFS Research, 2025

Case in point: The future of finance

From 100,000 feet, that looks significant, but let’s take a deep dive into the world of the CFO, a function every company has, to see the details (see Exhibit 2). How could a CFO transform finance operations if he or she had the right technology? At a high level:

• High automation potential: Procure-to-pay (P2P) and order-to-cash (O2C) processes show the greatest potential for agentic automation and cost savings (up to 75%), thanks to their transactional and repetitive nature.
• Risk and compliance as real-time domains: Risk, audit, and compliance could shift from reactive functions to real-time, continuous processes reshaping the control framework of the enterprise.
• From insight to action: Financial planning and analysis (FP&A) and treasury functions are no longer just insight-generators. GenAI enables real-time, data-driven strategic actions—fundamentally transforming the role of the CFO’s office.
• Reduction in expensive external services: Tax and investor relations functions, traditionally reliant on consultants and advisors, can increasingly be internalized with GenAI agents, improving speed, consistency, and cost-efficiency. Some of these services, such as tax and external audit, are deploying new capabilities to reduce client fees, too.

Here’s our detailed analysis of each area:

Exhibit 2: Agentic opportunities in finance processes

Source: HFS Research, 2025

Most importantly, the finance organization of the future would operate dramatically differently, with substantially better outcomes. From a purely cost savings perspective, HFS Research estimates the total savings potential for a
$30 million finance organization to be
$12-17 million (40-60%), before additional systems costs to achieve this outcome. Organizationally, a finance team could develop new, leaner organizational models and develop the strategic consultative thinking that CFOs have always wanted to provide stakeholders. This will likely develop a slightly more robust controls team focused on platform governance among single and hybrid agent ecosystems.

From a technology provider perspective, if a typical $30 million finance organization historically spends up to an estimated 12% of costs ($3.6 million) on technology, the opportunity is obvious: there’s a substantial opportunity to increase, maybe even double, license fees, if developers could release capabilities that could unlock this level of savings.

The size of the prize

Let’s make this clear: a CFO, COO, or other executive that can eliminate half of his or her organizational expenses through technology innovation would be a boardroom hero. If you’re a business leader today, you need the capabilities that will deliver these new service capabilities. The problem is that your legacy technology provider is wed to the old-school operating models mired in what would have been considered modern technology until the rise of GenAI and agentic solutions. The questions are where can you get the necessary capabilities, and what would the technology cost?

Software companies are poised to be the big winners—if they can just beat out nimble start-ups and DIY CIOs cobbling together LLMs in their garages. In our view, legacy providers such as Oracle or SAP, with the stigma of having more lawyers than developers, are light years behind the smaller tech providers and have the most to lose. The new operating models still require APIs, but the automated nature of agentic processing essentially eliminates traditional UX and workflow design that ERPs are built upon. To remain competitive, the big companies must focus on agentically automating business processes. Otherwise, small companies will grab market share and force the big firms to compete or acquire them. We doubt the big firms will have the industry and operational wherewithal to provide the robust features leaders truly need. Therefore, enterprises must reduce exposure to ERPs and rapidly expand their ecosystems to obtain their needed capabilities.

The five rules for success for enterprises

1. Explore your ecosystem: Your best bets are likely not with your ERP player. Rather, pursue a wide ecosystem and build traditional and agentic integration capabilities, naturally creating cross-functional collaboration and integrated workflows.
2. Watch for acquisitions: Big companies such as ServiceNow and Salesforce are highly acquisitive. If you strike a deal with a small company, you may eventually become a customer of a bigger firm, and those integrations take time.
3. Cut costs dramatically: Autonomous agents scale better and cheaper than human teams. Make investments that reduce your overall costs. Autonomous solutions respond rapidly, adapting faster than traditional operations.
4. Unleash human creativity: Don’t focus only on transactions. Arm your teams, internal stakeholders, and customers with self-service technologies that drive strategic and creative outcomes.
5. Autonomous but responsible: Full autonomy sounds great, but human judgment remains crucial in strategic decisions, high-risk scenarios, customer interactions, ethical oversight, and regulatory compliance. Humans must lead innovation, branding, ecosystem building, and relationship management.

Direction for software companies

1. Focus on operations: Get savvy about the operational details and build configurable solutions that supercharge operations teams.
2. Prioritize agentic capability: Invest aggressively in AI-driven autonomous solutions, developing competent agents with minimal human oversight. This will require deep industry and operational capabilities that are best developed by working with the most advanced clients.
3. Move beyond licensing: Capture the value, but not with traditional licensing metrics. Shift from traditional licenses and subscription models to transaction and outcome-based pricing, aligning closely with customer success. For example, charging by invoice-matched purchased order (PO) is better than issuing a PO.
4. Build for integration: Design your technology to operate seamlessly within complex agentic ecosystems, ensuring your agents provide tangible outcomes across business functions.
5. Redefine partnerships: Move beyond traditional vendor-client dynamics and position your offerings as strategic, transformational partnerships driving measurable business impact.
6. Commit to customer success: Measure your solutions by customer outcomes, reducing their total cost of ownership (TCO) while improving their operational results.
7. Collaborate with industry experts: Partner with experienced processes and industry specialists to help clients adopt new technologies and co-develop accelerators specific to industry and process needs.

Service providers: Software companies want your lunchbox

It should be abundantly clear to service providers that their traditional butts-in-seats operating models could be quickly displaced by technology solutions built by technology companies. Not all is lost, here’s your playbook:

1. Accelerate GenAI and autonomous agent capabilities. Aggressively invest in developing and scaling agentic and Generative AI capabilities tailored to specific industry processes and client needs. Your technology must deliver tangible outcomes that exceed buyer expectations rather than provide incremental improvements to win your clients’ business.
2. Develop process and industry-specific accelerators. Work closely with your internal industry and domain experts to create specialized accelerators that significantly reduce the adoption cycle, ensuring that your solutions are quickly operational and deliver immediate business value. Process expertise is your niche—all technology companies lack industry-specific expertise.
3. Shift to new pricing models. Move away from traditional, people-based, input-focused billing methods to models that focus on the value you deliver, such as more fixed-fee licensing, transaction-based, and outcome-driven pricing. Align your commercial models directly with measurable client successes and TCO.
4. Establish strategic technology and industry ecosystems. Forge and expand partnerships with technology providers, platforms, and industry experts. Collaborative ecosystems will enable seamless integration, enhance solution agility, and amplify the value delivered to clients who operate in
   diverse ways.

The Bottom Line: Don’t sleepwalk through another renewal without a plan.

This serves as a wake-up call for enterprise leaders who have, for decades, sleepwalked through software and outsourcing deals that diminish ROI with every renewal. Autonomous agents are not merely upgrades but substitutes for bloated, outdated operating models and services. Challenge your technology providers. Demand outcome-based pricing and agentic capabilities rather than just flashy UX upgrades. Create an autonomous ecosystem that reduces your dependence on FTEs and consulting expenses. Prepare your teams for a new era where creativity, oversight, and strategic innovation shape tomorrow’s workforce. For technology providers, the future is promising if you can automate operations. Build or acquire and integrate the systems your clients need and decrease the focus on trivial issues.