A decisive advantage for established players
For Bravo, the big software companies have a major competitive advantage in the race for artificial intelligence:
1. proprietary data: these companies hold massive volumes of proprietary data, essential for training artificial intelligence models. These databases, collected over many years in very specific business contexts, offer an unrivalled advantage over new entrants.
"Without proprietary data and its precise use case, artificial intelligence simply can't work," Bravo points out.
2. pre-existing customer relationships: software companies already have solid relationships with their customers, who trust them to solve complex problems. They understand the specific needs of each sector, whether cybersecurity, infrastructure management or financial services.
This anchoring in business processes enables software publishers to integrate AI functionalities directly into their existing products, creating added value for their customers quickly and efficiently.
A transformation as important as the move to SaaS
Bravo compares the impact of artificial intelligence to a revolution similar to that of the transition from licensed software to Software as a Service (SaaS), a transition that is still underway today.
"The next step is to become a smart company," he says.
In his view, this evolution towards intelligent software solutions is the inevitable future of the sector. While SaaS has transformed the business model of software companies by introducing recurring subscription-based revenues, AI promises to take these same companies to a new level of value by automating processes, optimizing operations and offering personalized services on a massive scale.
Growth opportunities for private equity managers
For private equity firms, this transition represents a unique opportunity. By investing in market-leading software companies, they can leverage the rise of AI to:
1 Increase margins: the integration of artificial intelligence helps optimize operating costs, while offering new value-added functionalities for customers.
2 Strengthen customer loyalty: intelligent software can respond more precisely to customer needs, improving customer satisfaction and loyalty over the long term.
3 Create industry champions: by consolidating companies around AI, private equity managers can create global leaders in key market segments, such as cybersecurity, finance or infrastructure management.
A transversal impact on all sectors
Artificial intelligence is not just a transformation within the software industry. It will have a transversal impact on all industries, from healthcare and finance to education and logistics. The role of private equity managers will therefore be to support companies in this transition, providing them with the financial and strategic resources they need to integrate AI into their processes.
"Artificial intelligence is the next step in business evolution. And established players in the software sector are best placed to take advantage of it."
Orlando Bravo, founder and Managing Partner of Thoma Bravo, tells us more in this interview with Louis Flamand, Chief Investment Officer at Altaroc.
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