Picking up where we left off last time, here is the promised second volume. Software pushes the limits of hardware advancements and makes lives easier. Exceptional software is at the core of machine learning and artificial intelligence application to create products and deliver services that are smart and are capable of disrupting industries as a whole. This has essentially already begun and there are several smaller industries within the software sector that are driving growth.
Software & services
Covid19 has accelerated the move towards a digital economy. Every business however small needs a store or a space to operate from. In the digital age, this real estate that is required is the cloud as every small business is being forced to move online. If you own a bakery that was forced to close or was impacted as people do not venture out with the risk of Covid19 at large, chances are you created a website where you list your products and customers can order online. Boom! You probably survived the crisis or at least have a much better chance to do so than stores that are not online. And then, with the click of a button you can import all your transactions on to Xero to take care of your accounting needs. Such is the power and integration that cloud services offer.
Every business that is offering services over the cloud and everybody who has a website needs that real-estate that we were talking about. That real estate is the new infrastructure that is being provided by Data Centre businesses such as NextDC or Infratil’s CDC. The entire space can be integrated and the growth of one industry in this sector, enables the other to grow.
These technology firms are not just making it easier for customers to use them, but they are also providing services that are cheaper than what the disrupted used to. The as-a-service business model that is being adopted by pretty much everybody who can these days has a lot of benefits – both for customers and service providers. They ensure that the customer makes small regular payments – thus enabling everybody to use the service as the financial burden is lesser than that of a contract. The provider of these services benefit from stable, more predictable revenues – leading to sustainability. They also have more room to fix errors or strategies that are not effective. Quite simply, it enables businesses to better know their customers and tailor products and services to their specific cohort.
Cloud services is a high growth industry which has been growing at 14% compounded annual growth rate. It is forecasted to grow at the same pace for the next few years as we move towards a much more digitised economy. By 2022, over 60% of organisations are expected to use external cloud services for their operations. The Australian cloud services market is forecasted to reach $11 billion by the end of 2022. These estimates show that Australia’s cloud service is still in its early stage and we believe the growth here would be mainly driven by the SaaS market.
