Feature
Research Report
The ROI of Employee Experience
Generative AI will soon make the lives of HR tech vendors even more complicated.
This isn't about the technology as much as the business. Generative AI has gained increasing mindshare of those thinking about buying, building or governing software. The change is especially apparent in HR and workplace technology, where companies are looking for ways to streamline recruiting and administrative work.
One potential solution being explored is AI agents. Agents are applications that complete tasks with multiple steps after a plain-language “conversation” with users. Among other things, agents stitch workflows together, and can, in theory, reduce the number of SaaS subscriptions a company pays for.
Investors have taken note, believing agents may allow businesses to do their own coding with their internal apps.
The AI Agent vs. SaaS Subscription Argument
The idea has pressured share prices for a number of tech companies. Investors are more skeptical about providers of advanced tools for HR, data analysis and productivity, among other things, according to the Wall Street Journal.
This doesn’t mean employers are rushing to cancel their subscriptions to HR technology platforms, recruiting tools or workforce management systems. As analysts and software executives point out, many of those platforms work across the organization, and are tied into finance, compliance and security workflows. Simply dropping them for a new solution poses compliance risks.
With the traditional SaaS software model, customers usually pay per user per month. With AI agents, businesses could, and probably will, use fewer human users to finish the same amount of work. And, they’ll have a cost-effective method of building apps that replace the work their existing systems do.
Not surprisingly, then, customers want to see platform pricing adjusted to emphasize results rather than seats. While the software business is still growing, according to Gartner’s latest IT spending outlook, spending is shifting more toward AI-related capabilities.
All of this is leading companies to reconsider the idea of “buy vs. build.” In general, AI already makes creating internal tools cheaper, especially for simpler applications that connect to larger systems of record. In HR, those include screening solutions, internal mobility tools, dashboards, employee and candidate communications and interview scheduling — all of which work along with a company’s core platforms.
SaaS Isn’t Doomed Yet
None of this means SaaS is doomed. Certain solutions still need proprietary data, the integration of processes, audit trails and other capabilities that weather audits and litigation. The “dumb software,” as it’s often called, such as products with little embedded data, become the easiest to replace.
HR, in particular, has much to worry about here, especially as more jurisdictions enact measures around the development and use of AI. New York City’s Local Law 144, for example, requires employers and employment agencies to conduct bias audits for certain automated employment-decision tools and publicly provide disclosures before use. At the federal level, the Equal Employment Opportunity Commission has emphasized that existing anti-discrimination rules still apply when employers use algorithms and AI in the candidate selection process.
Some of these issues are already being debated in court. Mobley v. Workday, for one, contends Workday’s recruiting software discriminates against certain types of applicants in its screening, and also looks at whether vendors can be treated as an “agent” of employers for purposes of federal discrimination law.
All of this is happening as technology vendors in HR and elsewhere are cutting back. Layoffs and reorganizations at large software companies are seen in part as a result of AI, as firms reallocate budgets toward AI initiatives, sales efficiency and product consolidation.
Ability, Efficiency and Proof
Apps or plug-ins that review contracts, sift through documents or generate analysis feel like a substitute for vertical SaaS products and specialist point solutions. Some legal-tech observers call the introduction of AI contract-review plug-ins the "opening salvo" in a battle between AI providers and incumbents that have historically owned workflow-specific tools.
HR tech vendors face similar concerns. If a generative agent extracts structured data from resumes, compares it with job requirements, drafts an interview guide and schedules the interview, all while creating an audit trail, the opportunity for traditional recruiting solutions thins out.
Gartner and others have warned that many agentic AI initiatives are driven by hype more than anything else, and could be canceled because of low ROI, cost or compliance issues. HR may well be one of the first functions to require proof that agent-driven workflows can be consistently audited, secured and reproduced.
At the same time, buyers want proof that AI actually reduces time-to-hire, improves quality of hire or reduces payroll errors. Customers could also move toward building smaller solutions themselves using AI coding tools and agents. That dynamic alone could reduce vendor revenue.
Traditionally, HR platforms have been systems of record that store information such as employee data, job structures, pay, benefits and compliance data. AI agents promise to initiate workflows that address exceptions and coordinate across finance, IT, security and managers. That will favor platforms with clean data models, strong APIs, robust security and governance features that address concerns from auditors, regulators and attorneys.
The end of SaaS is far from assured, and certainly isn’t imminent. Currently, we’re navigating a shifting landscape where buyers experiment, vendors repackage and test out new pricing models. AI makes work happen faster, reduces administrative friction and it changes the economics of software creation. But the vendors that endure will be the ones that prove their agents are compliant, auditable and reliable.
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Editor's Note: What else is going on in the world of AI agents?
- 2025 Was Supposed to Be the Year of the Agent. It Never Arrived — Sam Altman proclaimed 2025 the year of the agent. In 2026, most still fail real work — but signs of the future are emerging.
- AI Agents Are Creating a Two-Tier Workforce — As AI agents make their way into workflows, open questions remain around how their presence is reshaping power, labor and responsibility inside the workplace.
- What Real AI Agents Are — and Aren’t — The rise of agent washing shows why AI fluency matters at the leadership level.