Cash in on the four collapsing costs of enterprise transformation

Artificial Intelligence (AI) is radically shifting the economics of enterprise operations. Four forces—the collapsing cost of code, knowledge work, organization, and compute—intersect across four operational layers: process, business architecture, applications, and tech architecture.

No leader can afford to ignore the cost shifts happening right now. They are making now the best time yet to tackle ‘the death spiral of legacy debts’ that HFS calls out in our 2030: Services-as-Software vision.

By understanding the impact of each force on each layer (see Exhibit 1), enterprise leaders can shape their own vision of the HFS Generative Enterprise and identify the post-AI operations that enable unprecedented efficiency, speed, agility, and strategic advantage.

Get ready to reap the rewards of your Generative Enterprise transformation

HFS’ Generative Enterprise articulates the pursuit of AI technologies based on large language models (LLMs) such as GPTs, and agentic AI, to reap huge business benefits for organizations by continuously generating new ideas, redefining how work gets done, and disrupting business models steeped in decades of antiquated process and technology.

Our framework offers leaders a way to explore the impact of the four collapsing costs across four operational enterprise enablers:

1. Process: The way the work of the enterprise gets done
2. Business Architecture: How the enterprise coordinates to deliver work
3. Applications: The applications that enable our coordination and our work
4. Tech Architecture: The tech underpinning layers 1,2 and 3

Exhibit 1: The four forces of collapsing cost impact every aspect of the enterprise

Source: HFS Research, 2025

The four forces of collapsing costs redefine enterprise economics

1. The collapsing cost of code

AI-driven tools—agents included—significantly reduce the time, effort, and expense of defining business requirements as well as developing, testing, maintaining, and modernizing software, empowering faster innovation and crushing the software development lifecycle.

2. The collapsing cost of knowledge work

AI dramatically lowers the cost of complex cognitive tasks—analysis, synthesis, and strategic decision-making—traditionally requiring highly skilled human resources, changing workforce dynamics and business processes.

3. The collapsing cost of organization

Agentic AI technologies and data modernization can streamline coordination and management, reducing organizational friction and overhead, simplifying structures, and enhancing responsiveness.

4. The collapsing cost of compute

The rapid decline in computational costs enables enterprises to modernize, enabling sophisticated AI-driven applications at scale, analytics, and simulations, turning new possibilities into commercial reality with each breakthrough.

Exhibit 2: As costs collapse, your access to capabilities spirals. Costs will continue to fall

Source: HFS Research, 2025—discrete examples are illustrative and certainly NOT exhaustive

What collapsing costs mean for process, how you organize, the apps you use, and your tech foundations

Let’s briefly explore how each of these collapsing costs impacts process, business architecture, applications, and tech architecture:

Impacts on your processes

• Collapsing cost of code: AI streamlines repetitive tasks, accelerating process improvement and enabling the spread of automation beyond processes we currently optimize for. Think of the universe of time-consuming routines that have never been codified or automated because they didn’t deliver enough bang for the buck. Or consider the quality of code documentation and testing—two things developers hate most. Now, the buck buys more bang with less friction.
• Collapsing cost of knowledge: Complex cognitive processes, such as financial forecasting and regulatory compliance, are shifting from human experts to AI systems, improving speed and accuracy.
• Collapsing cost of organization: AI orchestrates complex interdepartmental workflows with minimal overhead for seamless integration. Finally, your HFS OneOffice silo-busting dreams are within reach.
• Collapsing cost of compute: Real-time analytics and ongoing process improvements become standard practices, enabling continuous optimization.

Impacts on your business architecture

• Collapsing cost of code: Small, empowered teams rapidly iterate without having to wait on IT since IT can now go faster and cheaper and deliver more updates and new apps for the business.
• Collapsing cost of knowledge: AI-assisted roles enable broader capabilities with fewer specialists, redefining organizational hierarchies and establishing teams of both, AI agents and humans.
• Collapsing cost of organization: AI-driven coordination significantly reduces managerial layers, offering simplification of structures. Agents are likely to become the coordinators in many projects, while humans retain control of goals.
• Collapsing cost of compute: AI embedded in teams supports decentralized analytics and decisions, democratizing decision-making. Where once only the C-suite got to brief the data scientists on their requirements, now data can reach every decision point in the organization—with pace.

Impacts on your applications

• Collapsing cost of code: Accelerated development—and more of it! Agile, frequent updates, and rapid deployment become economically feasible. The cost of compliance ensures a more thorough privacy and security review.
• Collapsing cost of knowledge: Supercharge your knowledge workers! Applications become proactive decision assistants with enhanced cognitive capabilities, embedding advanced analytics and insights.
• Collapsing cost of organization: AI-driven interoperability will simplify software ecosystems cutting through complexity and reducing the tech estate.
• Collapsing cost of compute: Advanced analytics embedded in applications become routine, enhancing business responsiveness with real-time intelligence.

Impacts on your tech architecture

• Collapsing cost of code: We are rapidly heading for autonomous infrastructure management in which infrastructure-as-code becomes automated, error-free, and rapidly scalable.
• Collapsing cost of knowledge: AI-driven analysis simplifies the process of understanding our technical debts—even where legacy systems are undocumented. This is an important first step in modernizing legacy infrastructure and making better use of the data you already hold.
• Collapsing cost of organization: Infrastructure operations can become leaner and more responsive through AI orchestration and the rise of AIOps.
• Collapsing cost of compute: Enterprises can modernize through AI-intensive processes, automating the migration of legacy integration platforms such as Informatica, Tibco, and IBM DataStage—systems often left untouched due to poor documentation and lost institutional knowledge. With greater compute, we can analyze legacy pipelines, automatically generate new AI-ready integrations, and deliver automated documentation and testing—cutting migration costs to enable enterprises to break free from tech debt and legacy system drag.

What to do amid so much opportunity

Proactively modernize legacy systems: Prioritize modernization initiatives previously deferred due to complexity, using AI to dramatically lower costs and timelines. Tech debt is a drag on performance and innovation.

Rethink workforce strategies: Recalibrate workforce planning, emphasizing skill transformation to complement AI-driven cognitive capabilities. Consider the impact of agentic AI on team structures.

Embrace organizational agility: Flatten hierarchies, empower autonomous teams, and adopt AI-driven management to enhance agility.

Drive innovation through experimentation: Leverage collapsing compute costs to foster continuous experimentation and innovation at scale. Look out for our forthcoming guide to identifying the signal among the noise.

Establish robust AI governance: Implement oversight frameworks to manage AI-driven operational, ethical, and competitive risks effectively. Incorporate this into routines and applications as much as possible to avoid governance by committee.

The Bottom Line: AI transformation costs are falling through the floor. Your imagination is the only limit.

The convergence of AI-driven collapsing costs represents a historic opportunity for enterprise leaders. Embrace these shifts proactively and you will rapidly pay down your legacy debts to position your organization for sustained competitive advantage, unparalleled agility, and transformative innovation.

Access to capability and possibility is scaling by the day. So, keep a clear head as the opportunity for innovation explodes all around. HFS thinks this will demand a new approach to innovation pipelines—which we will publish shortly.