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Tool calling

Also known as: function calling

Definition

The mechanism by which a language model invokes external software — querying a database, sending a message, reading a calendar — rather than only producing text. It is what separates a system that can act from one that can only advise.

Tool calling is the foundation of every agent. The model is given descriptions of available functions; it decides which to call and with what arguments; the result comes back and informs the next step.

For a buyer the relevant question is which tools a proposed system can call and what permissions those carry. A tool that can read your CRM is a very different risk from one that can write to it, and one that can send on your behalf is different again. Ask for the list.

More in AI

Agentic workflow

A process where an AI system is given a goal rather than a script, and chooses its own sequence of tool calls to reach it. Distinguished from automation by being non-deterministic: the same input can produce a different route each run.

AI agent

An AI agent is a system that pursues a goal across multiple steps using tools — reading data, calling APIs, updating records — rather than producing a single response to a single prompt.

AI automation ROI

The payback calculation for an automation: hours recovered multiplied by fully loaded hourly cost, against build plus running cost. Frequency dominates the result — the same build against a process running twice a month rarely pays back at all.

AI observability

Logging and monitoring for AI systems: what went in, what came out, which tools were called, what it cost, and how often a human overrode it. Without it, a misbehaving automation is undiagnosable.

AI readiness

Whether a business has the process documentation, data quality and decision ownership for AI to add value. Readiness is mostly organisational: the constraint is almost never model capability.

Automation debt

The accumulated cost of automations nobody owns: undocumented flows, forgotten triggers, and scripts that break silently when an upstream field is renamed. The AI-era version of technical debt.

All 87 terms
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