Greetings,

This week, we're taking a close look at a transformative shift in enterprise tech spending as businesses redirect budgets toward AI, potentially impacting software giants like Salesforce. In Corporate Spending on OpenAI Threatens Salesforce, Other Enterprise Apps, reporter Aaron Holmes explores how companies are increasingly funding conversational AI projects, which could reduce their reliance on high-cost enterprise applications.

Why it caught my eye:

• Companies like C1 are reallocating parts of their IT budgets toward AI-powered solutions—such as customer service chatbots—that they believe will cut long-term costs.
• Executives from companies like Amazon Web Services note a rise in AI budgets, but caution that it often comes at the expense of other cloud services and enterprise software.
• There's even skepticism from those within the software industry itself. As AI reshapes budgets, Salesforce and others are adding AI features to keep customers on their platforms.

As AI becomes central to business operations, enterprise software companies may feel the impact. But with established workflows and data integrations deeply embedded, replacing software like Salesforce isn't straightforward, as Toyota's director of automation highlights. Still, the shift is clear: companies are betting on AI to boost productivity and streamline operations, even as some hold onto legacy systems.

You can read the full story here.

Best,

Jessica Lessin
Founder & Editor-in-Chief

Corporate Spending on OpenAI Threatens Salesforce, Other Enterprise Apps

Artificial intelligence is supposed to transform the business world and boost the software industry that's selling it.

But as companies spend more money on chatbots and other conversational AI (see related chart), some say they plan to reduce spending on other types of software, such as expensive enterprise applications and non-AI cloud services. That could limit the upside from AI for providers of cloud services and enterprise software.

Take C1, a Bloomington, Minn.–based company that sells more than $1 billion a year worth of software for managing heating and cooling systems. Viral Tripathi, its chief information officer, says he is carving out 5% to 8% of his company's IT budget for conversational AI, including for a customer service chatbot it built over the past year to handle queries for hundreds of corporate customers. C1 is also developing its own customer relationship management software using AI models from OpenAI, and it is on pace to spend more than $24 million per year to power both products.