Orlando Bravo: Firms Need to Get Better at Monetizing AI
Orlando Bravo: Firms Need to Get Better at Monetizing AI Orlando Bravo, a prominent investor in software, has stated that firms need to improve their ability to monetize the use of AI in their products. He highlighted that many software companies are not charging for these solutions, but include them in their product bundle. This shift is seen as a good development overall, as $25 billion of revenue from our software companies is coming from these companies. However, 75% of these companies have released generic solutions to their enterprise customers. Bravo argues that the future of AI is in the hands of companies that charge by the user, rather than companies that use other forms of price. He also notes that companies with a portfolio of private portfolio companies need to have a game plan for all of their AI game plans.
Опубликовано : 4 недели назад от bn в Tech
I can give you the enterprise view of how I write the business view, not the consumer view. Now, if you look at the software landscape, $10 trillion of market cap in software publicly traded companies today, about 1000 companies, some of those software companies have been providing solutions to their customers for decades. In fact, some of those companies are pure air companies. Now, let's differentiate that. When you talk about Jini, I write a new form of technology, and I this is what's going on today. Many software companies have produced and deliver and introduced generate solutions to their customers, but they're not charging for them. They're including that in the bundle of their products. Is that a problem? We saw that in Salesforce. That stock sold off because margins are not essentially zero two. Companies need to get better about finding a way to monetize this. Yes, they do. But at the same time, the software business has become you have to continuously add value to your product, not only to fend off competition, but to upsell your customers. So this is a good development overall. Today, we have $25 billion of revenue coming from our software companies, and 75% of those companies have released generic solutions to those enterprise customers. But what you're talking about is not necessarily extra profit because they're not charging for it. So that promise of huge, outsized profit. Is that a little bit misguided because it sounds like you're saying it's just a continuation of value offering, but you should be able to monetize it later. The key is if you run if you really run an efficient operation, you take all your engineering talent and your product management vision for that engineering talent. You don't have to move resources around. How patient should we be for that? Because these public markets aren't being patient. What should be the timeline we give companies to figure this out? The investors and we as a big investor in software, a private investor in software, we always look at the panel and is the company achieving the level of earnings that we set out to achieve. And if we are within that, the company can create and innovate and move around resources to fit what they need. Okay. And software in general, Orlando, I mentioned Salesforce having a bit of a tough time, not just the issues with AI, but some concerns there that maybe sales weren't as good. Workday had something similar in the private markets. You see Vista taking a huge writedown, three and a half billion dollars on one of their online learning platforms. It's these pockets of software stress. What's going on? What happened was, you know, when this happened, Q2 of 2022, that's when we first saw a big drop in new business generation by these companies and drop in bookings. Now, always as an owner, you think about what can you do about it? What we do about it is we protect the piano. We have to come in and cut cost again to protect the level of earnings that we set out to achieve in these companies. Now, those pockets of weakness are also related to the business model of these companies. You look at AI and you look at a technological shift in the enterprise software world, but also in business model transition. And people don't talk enough about that. Companies that charge by the user are going to be more challenged, that companies that use other forms of price are. Are you still in cost cutting mode now? We always are protecting the PNL. Not right now. We have to do that again in 2022 and it's much better to be early so you don't have to chase your earnings that way. The environment improves. You can come back and invest in it in private and if the environment stays the same. You can basically run your business profitably. I have to be honest, Rolando, when I've talked to a lot of folks here about AI, a lot of people have said it's not not as big of a topic this year. Maybe it was last year. We're not really thinking about it that much. Is this industry behind and having an AI game plan? Do you think? All of these various private equity companies with portfolio companies, do they need to have a plan for all of them? You need to have any AI game plan. In fact, in the SAS era, which really got started in 2010, a bit before that, we used to say that every company needs to think about becoming a software company or their digital side of their business. Now we say that every company needs to become an intelligent software company. And if you look at the buyers of our companies, all the access we've had over the last 18 months, many of them are industry buyers that are looking to transform their companies through software. There's some of it that's a gimmick. Orlando Like, I don't I don't need my refrigerator, for example, to have. I do. I mean, isn't some of this we're selling a dream that's not really there? Sometimes you are. That's where I see. That's why there's so much value in the software incumbents. There are two reasons for that. The software incumbents are working with our customers, thousands of them, sometimes the entire Fortune 500 customers on solving an important business problem today that they have in a given use case management, horizontal in cybersecurity or in a vertical. Those are the companies that are in the pole position as a trusted advisor to develop Jini solutions that actually add value to those customers. And secondly, a really important something became very valuable in software enterprise, and that is data. Proprietary data. Many of the companies you mentioned are sitting on proprietary data that they can use from their customers that can be used to develop solutions and train these models. Well, that huge, vast treasure trove of data, it's no secret. It's something that regulators have looked at with consolidation in this industry. An investigation is opening up now. We heard this today with Microsoft and Open Air. It's been a lot of concern about antitrust. How big of a head one is it to you? How have you had to approach investing differently given what's happening down in D.C.? Very differently. And we take a practical view towards antitrust and the regulatory environment. This is the thing. It's a fact based approach. If you're a centre and you believe you can get a lot of value by selling that company at the right price, and if you're a buyer and you think you can get a lot of value by buying that company, you just have to appreciate that that there is a public policy underpinning environment towards this and you have to live with it. So are there deals you haven't done because of this? Most of the time, no, because if the facts are right, you have to go forward with that. And being willing to be creative, collaborative with the regulators and the regulators are smart. Now, they may look at your deal. It may take nine months to close a deal. Instead of three months, it may take a year to close the deal. But for something that has values, you have to just look forward to that and put out the facts. Do you think this regulatory environment is a problem, that it's problematic, that it's gotten this much more scrutiny, this many more deals blocked? I don't think the regulatory environment itself is actually a problem because software is a highly, highly competitive industry and the regulators are experienced in doing deals. Is the regulators actually understand this industry really well? So in our field of enterprise software, it's not a problem. The problem is when buyers and sellers want to completely shy away from doing the work that it takes to explain it so they can move forward in there with their transactions. We know of a number of very large strategic buyers that from a management perspective, just don't want to deal with that environment or want to give us some names, although I can't, you know, I can't because many of those our partners and buyers of our companies. But but look, once again, we get paid to undergo these processes and to adapt to these processes. And it's really important to the buyers and sellers know that.
Темы: AI