AI could consolidate hundreds of enterprise software vendors

Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

1. 35:23

   In the context of cyber, I have always maintained over the last eight years that it's silly that our customers have to buy 40 different solutions and stitch them together. We barely understand our s**t. You think you understand our s**t and 10 other vendors worth of s**t? You can stitch it. God bless your soul, right? So we're working as fast as we can to take disparate parts of our industry and find the way to stitch them together to have the data work together.

2. 35:52

   I think that's a journey. And if you want parallels, when I started my first job was at Fidelity Investments many years. We have 23 systems which collectively would be called CRM today. We have master tables. We have tables that are concatenated with them. We have 23 different applications that do 20 different things. Today, you go buy it off the shelf and you cringe at the cost of Salesforce or the cost of Microsoft Dynamics or Oracle or whatever you choose to do. So in 30 years, what's happened is that's consolidated into a singular platform. The customers don't stitch the solutions anymore. Because what happens is these software solutions become consistent. They all become like each other. They all roughly do the same thing.

3. 36:29

   and there's no differentiation so I think same thing is gonna happen in cyber that's what we tried to do we've tried to find things that are best in their category stitch and make them work so our customers don't have to do the stitching take that's kind of the answer on cyber for some reason you know cyber is enjoying much better valuations lately because of the the AI mythos event which is fine which will rationalize over time because all these guys are gonna go spend unlimited amounts of money on cyber outside of cyber i think it goes back to the conversation chamatin we were having earlier about it's very hard to understand the terminal value of software it's not clear what software is going to survive the next five to eight years with where we are from an ai perspective and the notion that product

4. 37:15

   market fit is getting disrupted for many of these companies we all know with if ai was applied well how our current software should behave in an ideal scenario. I know what I want from half the packet software that I buy. I know if I could have my magic wand and make it do things, I know exactly how it should work in an AI-first world, which means somebody's going to do it. So I think there's going to be huge disruption in the SaaS space over the next few years.

5. 37:43

   Harvind, are you looking at anything thinking, hmm, juicy multiples? So over the year, it was very attractive at the beginning, not so attractive a month ago. We'll wait and see how it goes over the next few. But actually, I want to build on Nikesh's thought. This is not just unique to cyber. The average enterprise uses anywhere from 500 to 5,000 distinct software vendors. In a world when you have to protect against it all, it's not just the cyber threat, that's a massive attack surface.

6. 38:13

   So you have to ask yourself, could I replace 490 of them with minor AI capabilities? And do I need to go back and leverage five to 10 main platforms? That implies massive consolidation because that's where the spend goes. That's what I believe is going to play out. So there's going to be consolidation because if you want to keep your cost of distribution low, then they can distribute all of it. And if the value of that software is falling, then you cannot afford independent distribution for each of those.

7. 38:45

   I believe that's going to play out whether it takes six months or six years. it's somewhere inside that equation I do think also software should be distinguished there is software where there is a lot of interaction value which as we have seen clearly can be replaced with a lot of AI both examples you used for things which were interaction rich right but if in the end you go down to I need you to be reliable at 10 to the minus 15 right which is a database lookup for somebody doing retail banking or closing the books, I think that's going to be hard to replace that easily with AI generated software.

8. 39:22

   So I think there is going to be a distinction on how easy it is. You're going to run that digital twin for years before you cut over. Correct. And then there's no cost advantage to do that. Yeah. Guys, thank you very much. Harvind Krishnan, Nikesh Arora, thank you. Thank you. Thanks everybody, all of you.