There's an alternative to the AI-driven software apocalypse

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Keep your friends closer and your AI rivals closer.

Software companies aren't feeling chummy with AI companies these days. After a decade of software eating the world, AI is building up an appetite of its own.

My colleague Alistair Barr, author of the fantastic Tech Memo newsletter, wrote about what's led to this market meltdown and why software companies (and their investors) are so rattled.

But it doesn't have to be that way. At least, not according to OpenAI. The AI giant is rolling out Frontier, a new enterprise platform designed to deliver more tailored AI solutions.

It's an alternative to the idea that AI will allow everyone to ditch their software products.

"We're not going to build every single AI agent that companies need — absolutely not," Fidji Simo, OpenAI's CEO of Applications, told reporters. "And that's why we have built a platform in a way where the third-party software companies can deploy their agents on top of us."

Why eat each other when we can eat together?

OpenAI's friend-not-foe pitch makes sense when you think of the alternative.

Let's say AI truly does gobble up software companies. Do companies just use AI to build and manage their own version of Workday, Salesforce, and every other software tool they need?

"It feels like an illogical leap to extrapolate Claude Cowork Plugins, or any similar personal productivity tools, to an expectation that every company will hereby write and maintain a bespoke product to replace every layer of mission-critical enterprise software they have ever deployed," JPMorgan analysts wrote in a note this week.

Maintaining those tools (even if they are AI-powered) also likely means adding more head count, which is the opposite direction most companies want to go.

The beauty of AI (and the risk it poses to software companies) is how almost anyone can spin up their own tools. That accessibility can quickly spiral out of control, posing security risks. Godspeed to the tech teams responsible for tracking thousands of custom-built CRMs.

And then there's the AI companies. Anthropic's latest AI tool jolted the legal-software industry, but some still saw it as pretty raw. Fine-tuning it would require more investment and work, and that's just one specific industry.

In the meantime, AI companies keep spending big, putting them under pressure to turn a profit. Partnering with somebody who's already there is a lot easier than building from the ground up.

I'm not suggesting software companies are perfect or untouchable. Their business models will certainly change due to AI, and consolidation feels inevitable. But an extinction-level event seems like a no-win situation for anybody.

Instead, allowing software companies and AI giants to focus on what they do best could be more palatable for everyone.

But those partnerships won't come cheap … and it'll likely be the rest of us footing the bill in higher subscription fees.