Independent Thinking^®

Scott Kamran on Technology Software

Technology And GDP Growth

Technology has become detached from the broad economy, as it reaches into every aspect of our lives. As a whole, it should outstrip GDP by about four percentage points, at almost seven percent a year. (See John Apruzzese’s cover article.) Software, which is the largest and fastest growing technology sector – an approximately $400 billion industry worldwide – should grow at about 10% to 12% a year in the United States.
 
Between 60% and 70% of the value of our cars, for example, is now in the software; soon it will be 90%. Whole industries are being disrupted, especially by Internet digital media companies, and that pace of change is only going to increase. Companies like Splunk and Blackbaud, to pick just two, are changing the way corporations and even nonprofits manage their work and engage with their customers and donors, respectively. Consumers and corporations together spend $1.3 trillion a year on software, not just on the new products that we all know about, but those that make earlier corporate investments in technology run better and quicker.
 

Consumerization

We are just beginning to see developments in software that will enable information technology to work the way it should. Employees need to be able to access their corporate systems from anywhere in the world, from a wide range of devices. Young, well-educated people, who grew up with consumer technology, are used to working that way and have expectations for the same level of access in the workplace. IT departments are going to have to make significant changes to their core infrastructure to adapt to these expectations.
 

Customization

Ten years ago, only big corporations could really invest in software, paying vendors massive fees and then paying consultants even more to spend a year or so customizing the product, which wouldn’t otherwise work with the company’s other software. Everyone at the company hated the software and hated the vendor. Today, even a small company can almost immediately download software that is specific to its industry and needs very little customization or integration. Software is much cheaper, more flexible and adaptable now, and becoming more so every year.
 

Virtualization

Servers used to do a few things at one time. Through virtualization, in which a virtual, rather than actual, version of a hardware platform, operation system, storage device or computer network resource is created, that server has effectively been divided into 10, 50 and, now, 500 servers, that can accomplish exponentially ever more. That’s not great for the legacy hardware companies, but it is very meaningful for the software companies that support this surge in productivity.
 

Security

Security is now top of mind for everybody, especially in the corporate sector. There are thousands of data breaches every day, and often the companies and consumers affected don’t even realize that they were exposed until months later. At this juncture, just about everyone in the United States has had his or her credit card information stolen at some point. It’s still early days in combating fraud, but we are starting to see the corporate security budgets being pulled out of the IT departments, as senior management executives consider the increasing risk and potential liabilities. There is great potential here for software companies.
 

From the U.S. Navy to Investment Banking

I served in the first Gulf War, in 1990, and my worst day here is never anything like it was there. The Navy taught me how to deal productively with a wide range of personalities and how to work in a team. The investment banking business is hypercompetitive and if we didn’t work as a motivated team, we would lose every time. Evercore has a great team in Menlo Park, and we are really growing the practice.
 
Editor’s note: Scott Kamran is a Senior Managing Director in Evercore’s growing technology advisory practice in Menlo Park, California. He joined the firm in 2013 from Bank of America Merrill Lynch, where he was co-head of global software investment banking. He has since worked with leading software, technology, private equity and venture leaders including SingTel, Vista Equity Partners, Insight Venture Partners, Blackbaud, Fleet Complete, and Francisco Partners. Here, he speaks with Independent Thinking about his perspectives on the software business, some potential winners in their sector, and how six years of U.S. Navy experience translates in Silicon Valley.