Video transcript

Bhavan Suri: Today I’m here to talk a little bit about some of the trends we’re seeing in software and the idea of convergence. While the idea that software will eat the world has been broadly accepted, what we’re really seeing is convergence of technology and industry-specific use cases or applications now running at massive scale.

The last couple of years have clearly illustrated the need for technology, and more importantly, a modern technology stack for every single type of process and industry. With employees working from home or in a hybrid fashion, legacy companies have needed to update or digitally transform to deliver this flexibility. As such, we saw a tremendous investment in technology in 2020, 2021, ’22. While it may slow in 2023, we still expect IT budgets to still grow 2% to 3%. More importantly, cloud budgets growing north of 20% in the coming year.

There are three kind of key takeaways I’d like to leave you with here.

One, it’s really early in terms of where we are as a market. We’re in the very early innings of automation for many of these industries. So much is still manual or email or Excel, which is not automation. Just think of construction. You’ve all had a home project probably, you know how much is paper-based, the back and forth between a general contractor, the subcontractor, their subs, the owner. This market is probably less than 10% penetrated from an automation perspective for just the subset of workflows that are addressed today. That’s what’s amazing about software. Despite current stock prices and valuations, the secular tailwinds to growth are so strong and durable over the long term.

Two, while it is still early in these markets, we’re seeing companies at scale, both from a revenue perspective and increasingly now, from a margin perspective. We see private companies that are in the 50 million to 300 million range in annual recurring revenue with margins in high teens or better, which is great technology that is allowing us to drive tremendous gains in productivity, automating these manual processes, and driving value both in the top line and now the bottom line.

Three, we’re seeing the traditional industry players start to think about acquiring software assets, driving that consolidation as they see the same convergence. We expect to continue to see more software companies converge, address these industries, automate processes.

We expect these companies to continue to expand their product sets, largely driven by the fact that cloud application companies are built on a single stack. It’s the ability to add capabilities onto that consolidated stack. Lots more convergence to come across every industry. Lots more consolidation to come as these companies scale and address larger and larger markets. Thank you.