On Saturday, I watched the Berkshire Hathaway annual shareholder meeting. Warren Buffett was less than optimistic: “During the last six months or so, the “incredible period” for the US economy has been coming to an end”
Earlier in the week, in a welcome letter to analysts for the Zoho event in Austin, Vijay Sundaram , Chief Strategy Officer pointed out
‘The SaaS model, as validated during the pandemic, will stay and thrive. But many providers won't. We believe that the next 10 years will be influenced by the recessionary conditions that have begun. Venture capital will now chase AI—the new shiny object—leaving less capital on the table for SaaS. Valuations will drop for the vast majority of companies that remain unprofitable and cannot feed the growth-at-any-cost monster. The industry will restructure as value shifts back to customers.’
It's hard to argue with either, but I am sure Buffett will find diamonds in the rough even in a challenging economy, and Zoho is doing well with its very different business model especially in emerging economies that are growing even as Western economies are slowing down. As Peter Maier of SAP, who I am moderating in a session at Sapphire next week, would say as his recent book does – it’s time for Business as Unusual.
In the doom and gloom in tech these days – valuations are down significantly; layoffs are up significantly, there are at least four market segments which still show strong growth potential.
Vertical “edge” applications
A whole bunch of vertical edge applications became viable/necessary as a result of “shocks’ from COVID, Ukraine crisis, massive digital transformations and impact on every sector. They include servitization driven CPQ (to handle product, various services, spare parts, financing etc.) in industrials, smart insurance using new risk analytics, telemedicine in healthcare, curbside pickup and smarter ecommerce returns processing in retail, EV charging management and billing in auto etc. We are tracking over a hundred “edge” application areas. Most of them we could not have imagined 4-5 years ago – industries have been reshaped so rapidly in recent years by those shocks.
Emerging economies
On the recent trip to India I spent time in 7 states across the country. I saw a very different energy and pace. They are in a hurry to make up for lost time during COVID and to match China’s speed. We have long talked about “two-tier” ERP opportunities around subs of multinationals around the world. That opportunity is still wide open. The bigger opportunity now, though, is with fast growing, midsized local enterprises in not just BRICS countries, but also Indonesia, Nigeria, Chile and many others. However, they need different functionality, go to market and price points than selling in the West.
Generative AI
We are still in the first innings of what machines can dream up based on massive data we can train them on. And most vendors are still focused on the plumbing – should we use tools from Microsoft, Google, IBM and others or cobble together our LLMs using open source components. The winners. to me, will come from those who focus on differentiated use cases and gather mountains of relevant data. All the more reason to invest in industries and geographies which differentiate you.
Low code custom development
The vertical and geographical solutions I describe above are needed today. Many buyers are not willing to wait years. Others are tired of the cost and pace at which enterprise solutions are delivered. They have started to arm their domain experts with low code solutions to at least get version 1 of the functionality in place. Too many software vendors think the low code tools are their differentiator. This is a bigger opportunity for service providers – again, those with deep industry and geography credentials.
Each of these markets will require new investments, not spray painting of existing solutions. Does not mean existing ERP, CRM and other markets will go away. But repaving older cow paths does not generate adequate ROI, especially when so many analog processes are screaming for digital innovation.
Time for a pivot. Time to think Business as Unusual. New frontiers await.
