OpenCloud 2023: Software’s AI-Driven Watershed Moment

AI is Driving the Next Wave of Cloud Growth

Rising interest rates and a pullback in software spending have continued to drive valuation multiple compression
Growth accelerated through 2021, but budget compression has resulted in a slowdown in IT spend and a growth reset for software companies.
Vendors are consolidating spend by launching new products and expanding into adjacent markets
Companies are adjusting their spend profile to match new growth expectations.
Companies that show a balance of growth and profitability trade at a~60% premium to those that don’t.
Software IPOs are now larger while showing growth durability of 30%+ and greater profitability.
$1B is the new $100M when it comes to ARR. Despite a high bar to go public, 10 years of software company IPOs have paved the way for private unicorns.
The return to fundamentals creates long-term healthy companies.
Companies must continue to innovate and consistently re-prove product market fit or risk disruption.
Cloud providers are investing ahead of the curve as the demand for AI accelerates.
Cloud adoption is rapidly expanding with AI, and the stakes have never been higher. There is $100B+ of incremental revenue that is up for grabs by 2027.

Operational best practices

Growth is not enough. Companies must also track logo velocity, OpEx efficiency and the path to profitability from the earliest phases of a company's life.
Consumption and outcome-based pricing is key to aligning customers and vendors.
Expansion cycles are not durable without sufficient new logo volume.