The past decade has seen a period of extraordinary innovation in business software. During that time, three major waves of disruption have rolled through the marketplace in quick succession: cloud, mobile and big data. Their overlap has amplified the impact of any one of the individual trends. Each has changed every operational aspect of creating and scaling a software company. Specifically, they have driven requirements for new technology, development methodologies, people skills, pricing models, sales and marketing techniques, customer support, and even new approaches to partnering with other firms.
Previous waves of innovation, such as the rise of client-server computing or the web, happened largely in sequence, allowing existing market leaders, and their customers, more time to absorb the changes. By contrast, the three most recent disruptive trends overlapped and created a significant opportunity for new, nimble companies to disrupt existing players, while also allowing entirely new business models to be created.
At this point, cloud and mobile have reached maturity in terms of their impact on business software. Today, few new solutions are created without being cloud-based and fully enabled to support mobile. And there are already a number of examples of large and mature businesses that have exploited these trends, including Google, Salesforce and Twitter.
The trends have also resulted in the momentum we’re now seeing behind applied analytics. For the first time a solution provider could use cloud delivery to see what all of their customers were doing, use mobile to increase engagement, and use Big Data technologies to accelerate analytical optimization with new types and increased data.
Big data in particular created an explosion of data platform and analytic tool innovation, and companies have become serious about the applied analytics that this enables. Applied analytics as a trend is now in the fat part of the bell curve in terms of its impact on the marketplace. That is, it’s not quite ubiquitous yet, but the proven impact on sectors like ad tech, eCommerce and marketing automation is now being seen in fintech, edtech and healthcare. Like the impact of cloud and mobile before it, in every business software market, solution providers will either have to adopt applied analytics or risk their very existence.
Common Characteristics of These Trends
Software has become so foundational to every industry that this environment of overlapping disrupting trends is now likely permanent, and not just an aberration over the last ten years. In order to contemplate what the next major innovation trends might be, it is interesting to look at the previous three trends and see what commonalities they shared:
1. It was harder than it looked. Early on, companies embraced the cloud as largely a technical challenge. They didn’t realize that it would actually force them to transform their entire business, from their pricing and sales models to their partnerships and even how they raise money. Many on-premise software companies simply failed in their migration to SaaS, thinking it was a technical exercise and not a broad rebuild of their business.
2. It was mistakenly believed to have only niche appeal. When Salesforce first came to market it was initially seen as appealing only to small and mid-sized companies that would tolerate ‘one size fits all’ functionality. Banks and insurance companies, it was believed, would demand too much customization and would never entrust their data to the cloud. As we now know, today Salesforce is the most widely used CRM in the world.
3. It started out disrupting existing solutions, but then created entirely new ones. Early cloud solutions succeeded by providing similar (or not as good) functionality but that was dramatically cheaper. Think of Box’s disruption to the existing file management world. Many early mobile apps focused on allowing you to do what you already did, such as email, but with the convenience of a device that you had with you all the time wherever you were. Eventually, this was followed by entirely new solutions that never existed before. Uber didn’t disrupt an existing software solution; it disrupted an entire industry model and could only exist because of cloud, mobile and applied analytics.
Emerging Trends With The Potential to Similarly Disrupt
Over the past six months we’ve researched a number of important technology trends including artificial intelligence, biometrics, drones, cyber security, IoT, 3D printing, messaging-based interfaces, blockchain and many more. In each case we’ve looked at the trend in terms of the scope of impact on a company, its ability to impact across all or most sectors of the economy and whether or not there are early signs of disruption. And while all the trends have the potential to drive significant change in various parts of the economy, there are some that we believe will be more impactful than others. There are three trends that we believe have both big potential and that we are going to be focusing on going forward:
1. Security First. Security breaches cost companies billions of dollars every year. In the months and years ahead, companies are going to have to incorporate security into all aspects of their business. Security has historically been more about the walls you put around a solution, and less about how the solution itself is built, tested and managed. However we are already seeing examples of companies that are rethinking the entire architecture and design of a business system to be secure first. This has been occurring first within the large-scale Internet companies like Twitter and Facebook, and we are now seeing this starting to happen in earlier stage companies who are prioritizing security alongside functionality in their roadmaps. Some companies are approaching the problem by building their solutions on radically different architectures and deployment models.
2. Messaging-based interfaces. Texting has become a natural and ubiquitous form of communication. Going forward, people are going to expect to be able to interact with businesses through messaging-driven interfaces via text or voice. Whether it’s ordering a pizza, consulting with your doctor or rebooking a flight, we are about to witness a paradigm shift where automated business systems will have to be able to communicate and interact with customers via asynchronous messaging. And, like the impact of mobile on interface design, it won’t be as simple as slapping a new interface on existing process flows. Whether it is native messaging apps like Slack, new interaction technology platforms like Layer and consumer platforms such as Facebook Messenger. All are innovating quickly to take conversational messaging interfaces beyond person-to-person communications. Slack’s person-to-machine integration capabilities are a great example.
3. Artificial intelligence. The next evolution of applied analytics encompasses artificial intelligence. In the past people programmed rules to direct applied analytics where as today we are training models. In the future we expect the model to be feeding data to self-learning autonomous algorithms. With artificial intelligence machines will be creating enhanced business processes themselves. The implications of this are huge for a variety of reasons, not least because designing a business model around a self-generating capability is an entirely different proposition than anything we’ve experienced before. Having reached a point where predictive analytics and sophisticated algorithm creation is becoming commonplace, artificial intelligence is the natural next step. Already deep learning is showing up in a variety of applications such as virtual executive assistants with X.ai and Clara labs, information retrieval such as Google News Search, email through Google Inbox and medical diagnosis systems like Enlitic.
These three trends stand out to us as having the potential to impact all business software, across all industries. As with cloud, mobile and big data, the full impact of these trends will take many years to be realized. We are seeing some of those impacts already and will share more of our thoughts on each trend over the next few months.