Originally posted on forbes.
Modern enterprises are continually trying to bridge the gap between two of their key employee groups: those who write code and those who write emails.
Enter Low-Code Automation Tools
Today, many users submit a request to an IT queue to make a change, pull a report, launch a product, etc., and then wait for the results to come back—often a lengthy process, with no feedback loop, and a backlog to hire the engineers to perform the task. Low-code automation tools are software programs that require very little (or no) coding knowledge, with the ability to create enterprise-grade, high-fidelity applications. Low-code tools, slated to become a ~$20B industry on its own by 2021 according to Forrester, solve the problem for enterprises by bringing far more people (and more types of people) into the drivers’ seat.
While many companies are now exploring the future of work, low-code tools aren’t really new solutions. Developed back in the late 90s and early 00s, companies like Outsystems and Appian built up big businesses on the shoulders of fixed infrastructure investment. These first-generation low-code tools looked more like professional services firms, requiring hand-holding and months of customized software builds.
Cloud computing has brought in a proliferation of easy to deploy, general tools
But as cloud computing has matured, and major providers like Amazon, IBM, Microsoft and Google have launched public cloud offerings, the pendulum has swung the other way. Without relying on heavy-duty infrastructure costs, many new competitors have popped up and eroded the competitive advantages of a once-attractive business model.
Without enough developers, enterprises are looking to technology solutions to help transform into lean, efficient, modern organizations…
The adoption of low-code, cloud-based software is accelerating thanks to a few secular trends
Enterprises are facing a serious hiring shortage—software engineers that can help companies transform don’t just grow on trees. Not only is hiring and retaining engineers expensive as labor costs rise, but the bigger problem for many firms is also that there simply isn’t enough talent out there to help companies navigate new technologies. This scarcity means that the biggest and best-capitalized companies are winning the talent war, since they can pay above market pricing for top engineering talent.
Without enough developers, enterprises are looking to technology solutions to help transform into lean, efficient, modern organizations—buoyed by Moore’s Law, increased data availability within the enterprise and cheaper (nearly unlimited) computing power. Broadly speaking, Enterprise Software spend is growing to reflect this interest. As the fastest category of enterprise IT spend growth, it clocks in at $507B per year globally with a growth rate of 10.9%.
Who will the winners be? It depends who’s in the driver’s seat
On one end of the spectrum are developers with particular needs. Low-code abstraction layers targeting software engineers like Dark and Looker (acquired by Google in January for $2.6B) have seen successes, but generally, this target customer is hard to reach. Seasoned developers are hesitant to outsource their work to surface-level tools, especially if that means introducing a black-box of abstraction that can get in the way of debugging code.
Investments to serve developers should (and will) flow to open-source tools, which largely exist outside of a vendor-based SaaS business model. Look to this space for exciting, scaled technologies, but not for proprietary, investable options.
On the opposite end of the spectrum are non-technical users, with simpler, more generic front-end development needs—for this group, no-code tools provide a compelling alternative. This space is admittedly more crowded, with big players like SquareSpace and Wix dominating the basic web-generation category. Think of the end-user as a founder testing a few hypotheses without hiring a full dev team, or a design or marketing function quickly spinning up a prototype for testing. But as lower fixed infrastructures costs have reduced barriers to access this market, there has been an explosion of start-ups vying for this spend. Webflow, Bubble and Strikingly are new entrants to watch, but without the historical “moat” of infrastructure costs, these start-ups may not have the staying power to carve out a defensible niche.
Investments to serve developers should (and will) flow to open-source tools, which largely exist outside of a vendor-based SaaS business model.
For both users and investors, winning means weaving between the extremes
For enterprise “decision-makers,” think of business intelligence employees: marketing, business analytics, product management, anyone who works at an enterprise but doesn’t build the software product themselves. For this group, there are plenty of applications. Any way to bring more efficiency further up the stack has the potential to save money on software hires and efficiency costs, and drive revenue from better insights. Winners here will need a few critical ingredients for success: a simple interface between technical and non-technical business units, easy integration with the existing breadth of data sources and a focus on self-service and speed.
The best-known example in this space has been Zapier, but others like Metabase have entered as well. However, these generic offerings will soon run into competition from tech behemoths like Google Cloud (which acquired AppSheet in 2020) that provide a flexible and developer-friendly tech stack. More specialized entrants include Tray.io, a platform focused on API automation, and Cloudability, a narrower offering focused on showcasing cost savings for product managers moving to the cloud (acquired last year by Apptio).
Even in a pre-COVID-19 world, distributed work teams are on the rise, and many technologies are emerging to help support virtual forms of teamwork.
A final segment of low-code users is remote workers, seeking tools for collaboration across disparate teams. Even in a pre-COVID-19 world, distributed work teams are on the rise, and many technologies are emerging to help support virtual forms of teamwork. Airtable extends the humble spreadsheet to a mega collaboration tool for teams of all types and sophistication levels and achieved unicorn status back in 2018 with a $1.1B valuation. Notion, another collaboration platform built on a low-code database, recently hit $2B in valuation. Hive, an earlier-stage competitor, offers process automation and intuitive collaboration tooling for distributed teams.
Focusing on functional needs and specific verticals within enterprises is the key to standing out in this crowd. Business intelligence tools and collaboration management software are two areas where venture investment has the power to spark meaningful growth.
Note: Valuation and fundraising figures are sourced from Pitchbook, as of April, 2020.