News Analysis
Salesforce chose the opening day of ServiceNow’s Knowledge conference to launch Agentforce for HR Service, a self-service tool to assist employees with common HR requests.
ServiceNow returned the favor by introducing AI Agents for CRM on the same day, an update to its as-of-January new CRM offering.
The timing is no coincidence.
Sprinkled throughout the HR Service preview call were teasers about Salesforce’s forthcoming IT service management product — a category ServiceNow has dominated for almost 20 years. Salesforce CEO Marc Benioff first mentioned plans to enter the IT service management market during the company’s quarterly earnings call in February.
For his part, ServiceNow CEO Bill McDermott set his sights on the customer relationship management (CRM) market during the company’s Q4 2023 earnings call in January 2024: “There's a tremendous opportunity to really take ServiceNow and squarely place it in the customer relationship management category. When you think about front, mid and back office and the fact that we can align all three of those things, nobody has to lose for us to win.”
While the two take swipes at each other’s core offerings, their eyes are on a bigger prize: becoming the center of agentic AI activity in the enterprise.
A Bid to Become the Center of AI Agent Gravity
Salesforce and ServiceNow aren’t the only companies competing for this future.
In January, Microsoft CEO Satya Nadella told BG2 podcast hosts Bill Gurley and Brad Gerstner that business applications will “collapse in the agent era.” Notably, the example Gurley used for his question was CRMs, which are particularly vulnerable to AI, with their clear business logic and structured fields.
“Once the AI tier becomes the place where all the logic is, then people will start replacing the back ends, right?” said Nadella.
Deep Analysis lead analyst Matt Mullen sees Salesforce and ServiceNow’s announcements last week as a continuation of Nadella’s argument. “I think that hypothesis is being tested in public by Salesforce and ServiceNow here. [They’re] taking a big swing at their competitors’ core propositions, on the basis that if they land anything, they can probably AI their way into something tangible,” he told Reworked.
Mullen notes this is part of a broader trend, as companies scramble to stake a claim in a promising new revenue source. “We're at the stage of realizing that AI agents require orchestration and everybody wants to be the conductor, as that's likely to be the primary point of revenue,” he said.
McDermott's day one keynote had an echo of Nadella's argument when he said, “21st century problems cannot be solved with 20th century architectures.”
AI agents replacing SaaS is the “promise and potential of agents,” said Constellation Research VP and principal analyst Holger Mueller. “But it is early days.”
The move to become the hub of AI agent activity isn’t only about establishing a new revenue flow, however. It’s also a matter of long-term survival, continued Mueller.
“Agents form a threat both for traditional enterprise vendors (like Salesforce) as well as for process enablers like ServiceNow,” Mueller said.
From Systems of Record to Systems of Engagement to Systems of Action
Another dynamic is at play here. The technology giants view AI agents as the means to update their legacy CRUD (create, read, update, delete) applications into more dynamic systems of action.
“It’s about bringing dated enterprise business applications into the modern age,” Deep Analysis founder Alan Pelz-Sharpe told Reworked. “Old legacy platforms, whether they be ERP, CRM, HR or whatever, are garbage, in the sense that rather than being true systems of engagement, they are in fact systems of record. Agentic AI promises to change that and breathe new life into them.”
Amalgam Insights CEO and founder Hyoun Park agrees, saying ServiceNow’s moves show the company taking on traditional enterprise apps with a more workflow-based approach that leads to direct action.
“ServiceNow, Salesforce and many other enterprise software vendors see agents as a new user interface that provides access not only to data, but to a company’s workflows, integrations and analytics,” Park told Reworked. “And rather than having to build and define all of these capabilities in a technical and painstaking way, customers can simply ask for the information and guidance they are looking for and receive it.”
What Salesforce and Service Need to Do Next
A lot needs to happen before any tech vendor can centralize AI agent operations in one place, in the case of Salesforce in its Agentforce platform and the ServiceNow AI platform on the other.
First is making sure AI agents can deliver on their promise.
Customers Need to do the Process Analysis and Automation Leg Work
Vendors claim AI agents will orchestrate complex processes across an organization with little to no human oversight.
The premise rests on a few assumptions, however. One is that companies already have a high level of existing automation maturity, as Mullen wrote last year, which in most businesses, isn’t the case.
He sees the latest salvos by Salesforce and ServiceNow as making promises they aren’t currently in a position to meet. Rather, it is up to customers to invest a ton of effort in advance.
“AI is being used in this sense as no more that a mechanical turk, in that to make it operate in the way in which they'd like you to see it, there's a vast amount of underlying effort — process analysis, unstructured data management to name just a couple — that you cannot bypass,” said Mullen. Vendors set customers up for frustration and disappointment if they continue to hide the hard work needed to implement AI, he warned.
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Clean Up Unstructured Data
Pelz-Sharpe also called out the data question as a big challenge, and in particular, unstructured data, an area that has been largely ignored by enterprise tech players. “Agentic AI requires super high-quality and relevant data. That’s relatively easy to do with structured data, but when you add unstructured data to the mix, the wheels come off.”
Worth noting here is ServiceNow’s acquisition of data.world on May 7, provider of a centralized data catalogue to support data discovery and data governance. As ServiceNow SVP and GM Gaurav Rewari told Frederic Lardinois: “It’s not sufficient to just have this agentic AI layer and orchestration, etc. We’ve got to help [our customers] with the plumbing underneath.”
Win Over CIOs
Another step on the path to become the center of enterprise AI agent gravity is winning over CIOs.
Park sees this step as unavoidable, as the activities that drive success with AI agents — agent orchestration, data integration and access, agent and model testing, agent to agent communication, etc. — fall firmly in IT’s wheelhouse.
“Agentic vendors selling IT need to build credibility with CIO offices when enterprise applications have often been seen as burdens with massive technical debt and customization requirements rather than flexible solutions,” said Park.
He believes the companies jockeying for a spot need to make an argument for why systems of record need to be replaced by systems of action. He also said vendors need to provide more proof points of agents’ value, something that has not yet been proven at the executive or line-level.
ServiceNow might have an advantage here, according to Mueller. “ServiceNow has a good in with the CIO / IT function, but that was more out of the necessity to integrate the Enterprise,” he said.
Deliver on AI Agent's Promises
Customers will be willing to continue with their existing providers, Mueller continued, provided the vendors deliver on the AI powered applications they’ve been promising, namely agents, insight apps and new types of transactional apps.
The challenge isn’t just for ServiceNow or Salesforce, it’s for every company competing to be the AI agentic center.
“Where … all face a big risk is if agentic AI fails to deliver on its promises. The hype is huge, but actually deploying anything much more complex than an assistant or bot and simply relabeling it as an ‘Agent’ is turning out to be really difficult to do,” said Pelz-Sharpe.
The Salesforce — ServiceNow competition is only one vignette at a time when legacy enterprise tech vendors are investing big money into a vision of an AI-powered future while striving to protect the revenue from their core platforms. Chances are, they won’t be the last.
“We are in a major era of enterprise chess,” said Mueller.
Editor's Note: Read about how other tech vendors are building their AI futures:
- Google Opens Workspace to Claude, Part of Open Ecosystem Approach to AI — Google is unleashing third-party AIs like Anthropic’s Claude into Workspace to challenge Microsoft’s AI power grab. Could this be the future of work
- Salesforce Brings an End to the 'Work of Work' — With Agentforce 2.0, Salesforce envisions a future of work where thousands of agents pick up the slack in Slack and beyond.
- Hyland Pivots From ECM Pioneer to AI-Driven Enterprise Automation — A dramatic rebrand at Hyland found the 30+ year old ECM leader switching gears to become an AI-powered automation powerhouse. What's behind the move?
