Jul. 7 at 3:55 PM
Bernstein: "Even if tomorrow you could snap your fingers and build an enterprise-class application, fully feature-rich, and it costs you zero — all the other costs and ramp times are still there, closing the clients, bringing the software on to market. That creates an opportunity, and time, for the incumbents to fight back. And I don’t think [Wall Street] is giving them enough credit."
The S&P 500 software & services index remains down -21% from a year ago
The counter-counter-argument is that the incumbents are not innovating fast enough. Some analysts think they’ve been incumbents for too long, are saddled w/ legacy technical debt & products built for a different age — and some of them have simply got lazy
Start-ups can move at a pace that the incumbents can’t match. That leads to “value abstraction”: AI-native start-ups building new user interfaces, relegating the incumbents to the role of database managers
Rothschild & Co Redburn expects the frontier AI labs such as Anthropic and OpenAI to develop the “intelligence layer”, the new interfaces and assistants thru which companies will interact w/ their enterprise data. But, argues, the AI labs won’t be able to replicate the business logic — the compliance requirements & knowledge of customer behaviour — that the incumbents have built up. So, they’ll need access to the software companies’ APIs & the SaaS business model will evolve to generate significant revs from API tolls
While systems of record providers remain relatively well protected, more peripheral, “low or no code” companies that provide reporting tools & dashboards will face a “war for relevance”
$SPGI $SAP vs
$MNDY $ASAN -
$IGV