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Original article
Does AI Remove the Incumbent Data Gravity Advantage?
Key takeaway
- For entrepreneurs: AI is weakening the traditional data gravity advantage, creating opportunities to challenge incumbent systems of record without conforming to their data models.
- For investors: The shift from data ownership to data orchestration and actionable intelligence is opening new frontiers in enterprise software, potentially disrupting established market leaders.
Summary
This article explores how generative AI is changing the power dynamics of data gravity in enterprise software. Traditionally, systems of record benefited from data gravity, giving them a strong competitive advantage. However, AI's ability to integrate and harmonize data from various sources is weakening this advantage. The piece discusses the concept of an "Operational Data Layer" powered by AI, which can make data more accessible and actionable across different systems. This shift has significant implications for both incumbent software providers and challengers in the market.
Insights
- AI serves as a bundling layer to structure data across different software applications, focusing on integration and orchestration.
- Generative AI can effectively handle the Extract, Transform, and Load (ETL) components of data integration.
- The "Operational Data Layer" concept allows for harmonizing disparate tools and data sources without requiring companies to abandon their existing systems.
- AI enables software to be effective without conforming to the incumbent system of record's data model.
- Data interoperability is becoming more critical than data ownership in the AI era.
- Companies like Cordial demonstrate how AI can be leveraged to offer superior products by combining multiple data sources.
- The combination of generative and predictive AI techniques is crucial for making automated predictions based on unstructured and unique data.
Implications
- Incumbent software providers may face increased competition as their data gravity advantage weakens.
- New startups have an opportunity to rapidly gain market share by leveraging AI for data integration and orchestration.
- The focus is shifting from being a system of record to being a system of engagement.