6 months ago, Satya Nadella predicted that agentic AI would collapse most SaaS applications. He was right.
Based on what I’ve seen companies building, in the next 18-36 months we will see enterprise SaaS fundamentally transform. The new normal for employees will likely be a handful of master apps with AI agents that pull from various databases to drive work and workflows in ways previously impossible.
What does that mean for the HR tech industry?
It means that HCM, as we know it, is dead. We are rapidly entering the era of employee gateway management (EGM). The exciting news for the HR world is that HR platforms are well poised to lead this transition to gateways.
What are Gateways and Why Do They Matter?
To understand why HCM is on the brink of transformation, we first need to understand the role gateways have played in society and technology. Throughout history, gateways have served as points for exchange, translation, and intermingling of ideas and data.
Gateways can be locations - like 7th to 14th century India and Silk Road trading hubs where the east and west exchanged goods and transferred and translated knowledge about religion, gunpowder, printing, papermaking, glassmaking, and so much more.
Gateways can be hardware - like the telecom switches of the 1990s (Class 4 and 5), which connected local and long-distance calls and laid the foundation for modern voice networks. Pre-dating the official use of the term ‘gateway’ by a century, the Strowger switch automatically connected calls, making calls private, faster, and available 24/7.
Gateways can be software - like the LLM Gateway Darwinbox built to connect our SaaS application to various AI models. Depending on the task at hand, this gateway transforms the syntax, anonymizes PII, transfers permissions, and selects the appropriate model for the task (e.g. Mistral, Llama, ChatGPT, etc.).
In the world of agentic AI, employees won’t bounce across 11+ applications (normal for a knowledge worker according to a 2023 Gartner study), they’ll live in one super app. This app will serve as their personal gateway: fetching data, completing tasks, and replicating most CRUD functionality by interacting with the databases the work depends on.
Because the super app will be the gateway between the employee and almost everything, they need to do their job - HR, sales, finance IT - it goes beyond verticalization and becomes the employee gateway.
Welcome to the era of Employee Gateway Management (EGM).
But why is HCM most likely to bring in the era of EGM?
Data Entry Surface Area
One reason HCM is well positioned to lead the shift to EGM is its Data Entry Surface Area. Data Entry Surface Area (DESA) is the amount of human effort needed to get and maintain accurate data in a system.
For most enterprise software, it’s humans who create, read, update, and delete data. The more users you have logged in to collect or verify data, the higher the DESA.
Considerations:
Financial Data - Can be collected and verified by a relatively small team, typically less than 10% of the organization.
Sales Data - Because of all the stakeholders involved (sales, RevOps, marketing) and potential inputs for data, it’s common for 20-35%+ of an organization to have an individual login.
HR or Employee Data - The highest DESA. Nearly every employee interacts with HR tools on a weekly basis even if it is just verifying information, logging time, or completing a review or interview. It’s not uncommon for 50-100% of an organization to have an individual login.
Ask your teams which systems have the most logins, and you’ll see the hierarchy of DESA firsthand.
Each dataset is critical but the surface area to maintain them varies widely. Because HR technology already has the highest DESA and most individual users logging in, there’s a decent case that HCM deserves to transition to EGM. It’s where users already are.
But in the age of agentic AI, usage isn’t enough. Beyond users or access, AI agents need authorization. They need to understand what each person is allowed to do, see, and change.
That’s where permissions come in as the strongest reason why HCM will lead the transition to EGM.
Permissions, Org Charts, and Agentic AI
Permissions are the control layer for agentic AI, and permissions are built on organizational structures.
Every AI agent needs two things to act:
Access to Required Tools - Can I access the system or data I need?
Level of Available Permissions - Does the user have the right to do what they are asking?
Even if a tool is available (e.g. Jira), the agent won’t be successful unless the user has the right permissions. I’ve tested this myself. Our Darwinbox agent could access Jira, but it refused my request because I didn’t have access to the ticket type I was trying to view. This is a good example of why permissions are important. With so much information available we need boundaries. Defined swim lanes ensure people only see or do what they are authorized to do. A robust and transferable permission framework is one of the most important features of an EGM.
So why does the importance of permissions in Agentic AI mean HR is poised to take the lead?
It’s because permissions are tied to an organization’s structure.
HR Owns the Org Structure…
For now, every permission (be it an approval, access level, action) depends on an employee’s position in the organizational structure - team, level, geography, role type, seniority, etc. And that structure changes constantly.
Someone joins → Permissions update
Someone is promoted or transferred → Permissions update
Someone is terminated → Permissions update (must be revoked)
Even at an SME with a few hundred people, the permutations are endless.
All of this runs through the org structure. And the org structure lives in the HCM. Further, the HR team is involved in every transaction that impacts permissions. Someone joining an organization, leaving voluntarily or involuntarily, or changing their role somehow will always interact with HR.
DESA is helpful, but it’s permissions as the backbone for AI agents that makes HCM best positioned to transition into EGM.
So, if HCM is going to be the super app of the future, what does this mean for HR?
Growing HR Influence
Over the past 10 years, the role of the HR function has started to evolve. Traditionally viewed as just a cost center, organizations have started to realize that human capital can be a strategic advantage. Accordingly, the CHRO/CPO role has started to gain more power and have an equal seat at the table to roles like COO and CFO. (The role of the legal function and General Counsel was the last function and role to go through a similar shift).
The shift to EGM can catalyze this evolution, catapulting the CHRO/CPO up the ladder of influence. But it won’t come easily. HR will need to defend its ownership of the org chart from other C-suite functions.
As the shift to EGM occurs, an enterprising (or cutthroat) CFO or COO could try to wrest control of the org chart - arguing that they should own the birthplace of permissions since every employee change has a financial or operational impact, respectively.
Today HR is involved in every decision about who joins and who leaves organizations so they own the org structures. Because HR owns the org structures they are in the lead to usher in this transition, but HR must be strategic, defend their ownership of the org structure, and lean into EGM.
HCM is dead, long live EGM.
What Next?
If rebuilding enterprise software, ask yourself: Are you a gateway or just a database?
If you’re a CPO, the next decade of influence is yours to lose. Own the org chart. Lead the shift.
If you want to nerd out about tech or see how Darwinbox is building the world’s first true EGM, drop me a line at eli.k@darwinbox.com
