Will ChatGPT Kill Systems Of Record?

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Klarna recently announced that it is shutting down Salesforce, Workday and other SAAS applications that it has been using for years. All of the reports that I could lay my hands on only state that the Swede BNPL major will replace the SAAS giants’ software with an inhouse “AI system”. (see update at the end of the post).

In the absence of details of the said AI system, people have been speculating about what it will comprise.

Some people posit that SaaS will continue to be the System of Record, just that it will be developed with AI e.g. this post on LinkedIn by Aditya Anand, CoFounder of ZenAdmin.ai, presumably an AI-built SAAS product.

Traditional SaaS is dead. AI will deliver “Outcome as a service”. AI and bundling have changed the game forever. Aim for where the world is headed, not where it is right now. Are you building SaaS the old way or the new way? (The old way of building SAAS is with humans. The new way of building SAAS is with AI.)

Others claim that AI will be used to develop another SoR from scratch.

I’m not so sure that there will be any System of Record at all. (see update at the end of the post)

Unlike any other technology I’ve come across in my four decades in the IT industry, GenAI has some unique capabilities. One of them is the ability to ingest unstructured data and produce structured output.

Therefore, I can imagine a world where AI can replace a system of record.

Picture the following scenario:

A company receives a customer purchase order as a PDF file. It ships the goods against a delivery note in DOC format typed in Microsoft Word. Between these two files, all the inputs required to generate the invoice – product code, product description, rate, quantity, amount, and billing address – are available (see footnote 1). What’s to stop a company from uploading the purchase order PDF and the delivery note DOC file to a GenAI platform and have it generate an invoice without a System of Record like an accounting software or ERP? (see update at the end of the post).

It’s not only me. In Every White-Collar Role Will Have An AI Copilot. Then An AI Agent, Angela Strange and James da Costa of VC firm Andreessen Horowitz speculate a SoR-less world enabled by inserting AI Agents at the data collection stage upstream of the SoR:

Data for loans or insurance policies is still often collected via email and PDFs. A startup could “AI-ify” this workflow and own the data before it gets to the incumbent SOR. For example, an AI virtual sales development representative (SDR) like 11x.ai can gather all the information about a potential customer and own the initial correspondence before a record is even created in the incumbent SOR.

If these thought experiments seem too fancy for the current state of art of GenAI, let me share my firsthand experience of using ChatGPT to process unstructured information and produce high quality output.

Of late, we’ve been hearing a lot of buzz about the “decline of West” and the “rise of East”. While this narrative is supported by the moribund state of the economy of Germany, the largest economy of EU, it’s challenged by the healthy state of the economy of USA, the largest economy of the world.

This got me thinking if the concept of “West” has stopped reflecting the current world order. To check if my gut feeling had any substance, I decided to see how the GDP of G7 countries fared against the global economy. In order to isolate the impact of USA, I defined a new variable called “G7 Minus USA”. I then asked ChatGPT to plot the contribution of USA and G7 Minus USA to the global GDP. Chat’s response is given in the following exhibit (see footnote 2).

As you can see, ChatGPT didn’t just look up the readily available data of G7. It discerned my new variable G7 Minus USA and computed the GDP figures accordingly.

According to this chart, the share of G7 Minus USA in the Global GDP has fallen from nearly 32% in 2014 to 26% in 2024 whereas that of USA has risen from 22% to 26% during the same period. This means that USA is rising but other western countries are falling. This vindicates my gut feeling that the concept of “West” is economically obsolete (see footnote 3).

Going by my above experience, I’m quite bullish that enterprises can use GenAI to process unstructured data and produce structured output without using a System of Record. Ergo it’s conceivable that GenAI can replace SoR in the forseeable future.

There’s already a name for the Wannabe AI SoR Killer: System of Agent.


UPDATE DATED 7 MARCH 2025:

Klarna’s Founder CEO recently posted this on X fka Twitter.


Let me take a few extracts from this post that clarify the points I’d made in the original post:

“No, I don’t think it is the end of Salesforce; might be the opposite.” AI might not kill systems of record.

“”this tool allows you to feed all your PDFs, all your data sources to a LLM!” However, the old universal truth of data scientists still holds true, even in AI: “shit in, shit out.” Feeding an LLM the fractioned, fragmented, and dispersed world of corporate data will result in a very confused LLM.” Ingesting PDFs into LLM without going through an SoR might not be a good idea.

“Key to our explorations became the conclusion that the utilization of SaaS to store all forms of knowledge of what Klarna is, why it exists (docs), what it tries to accomplish (slides, tickets, kanban boards), how it is doing (sheets, analytics), who is it dealing with (CRM, supplier management), who works here (ERP, HR).” System of Record does have its place in the AI world.

“we did not replace SaaS with an LLM, and storing CRM data in an LLM would have its limitations. But we developed an internal tech stack, using Neo4j and other things, to start bringing data=knowledge together.” Klarna built a new SoR using AI, it did not do away with the concept of SoR.

FOOTNOTES:

  1. I’ve assumed that the amount is mentioned in the purchase order. If not, GenAI can easily compute it from the unit price and quantity figures, which will definitely be mentioned in the purchase order and delivery note respectively.
  2. For a month or two, ChatGPT has been informally called Chat. This just became official with OpenAI buying up the chat.com domain name (for $15M). As of this writing, www.chat.com goes to the ChatGPT website.
  3. Due to affinity on the basis of race, religion and other historical factors, G7 will continue to be relevant socially and geopolitically for the forseeable future.