For decades, Harris Williams has been a trusted advisor and thought partner to owners, management teams, and buyers within the software sector. Through our industry relationships, we learn of the latest trends creating growth opportunities for our clients.
“Many tailwinds driving software industry growth gained strength in the past 12 months as companies navigated the pandemic,” says Thierry Monjauze, managing director and head of Harris Williams Technology Group. “From retail to financial services to industrial manufacturing, companies scrambled to accelerate their digital transformations,” he adds.
“Some technology trends span industries, such as the rise in cloud and software as a service (SaaS), end-to-end platforms, artificial intelligence, machine learning, and predictive analytics,” says Sam Hendler, a managing director in the Harris Williams Technology Group. “Other themes are very industry specific, driven by the nuances of business and industry needs.”
Here, we draw from recent conversations with software company CEOs to highlight some of the key technology trends in the government, healthcare, compliance, and supply chain areas. Each trend signals opportunities for technology companies and investors alike.
1. Government Tech
Government represents an enormous opportunity, with billions spent annually on state and local software. “After decades of government entities choosing to build custom software and leveraging legacy systems developed in the ’80s and ’90s, we’re finally in an environment where the value proposition of modern technology is front and center,” says Monjauze. “And there’s excitement from investors and software companies in driving modern innovation for government. It’s happening across courts, criminal justice, transportation, first responders, parks and recreation, human services, and other areas.”
Digital transformation of government services.
The pandemic accelerated the channel shift from walk-in, call-in, or mail-in to digital transactions. Broad goals include making government more digital, transparent, and accessible to constituents, and moving toward smarter, more connected platforms. People are used to more data-informed and smarter connected experiences in their interactions with companies, and this is driving both pressure on governments to create digital experiences and a high adoption rate once they are launched.
Business models that drive increased revenue and higher citizen satisfaction.
Governments are experiencing the tension between the incredible need for government services in the last 12 months and the pressure on budgets as a result of the pandemic. They seek nimble software partners that can move quickly, and fee-for-service solutions (such as transaction fees or payment processing margins) that don’t require substantial upfront investment and can help them drive higher revenues and lower delinquencies. As a result, SaaS, payment processing, and other innovative business models that are already prevalent in other sectors are appearing more often in the public sector.
Mobile payment technologies.
Innovations in transportation modes, such as ridesharing, scooter and bike rentals, and their accompanying mobile payments, are changing the way people use transportation and parking, creating new traffic and congestion patterns, and redefining urban environments. This is driving new ways of thinking about which government services, interactions, and fees are in citizens’ best interest.
Growing use of data and analytics.
A fundamental barrier to improving agency efficiency and effectiveness is lack of accessible data, and technology companies are working to empower agencies to shift from data as a burden to data as an enabler. One CEO mentioned her company was connecting fragmented information to create a 360-degree view of citizens and families in need of services, link them to all relevant service options in their service geography, and then track outcomes to those services being delivered. Some tech companies are also looking at how the data they collect through their applications could serve broader purposes. For example, vehicle registration data could be used to predict the rate of electric vehicle adoption, and guide when and where to build out electric infrastructure. The possibilities are still nascent but moving aggressively.
2. Healthcare Tech
Technology played a critical role in the pandemic response, as healthcare systems faced extreme capacity and resource challenges, stood up temporary care, and moved to virtual service wherever possible. While COVID-19 represented a unique challenge for the healthcare ecosystem, it has ultimately accelerated the adoption of technology-driven solutions to help achieve the quadruple aim of healthcare: better clinical outcomes, lower costs, higher patient satisfaction, and enhanced clinician experience.
“Electronic Medical Records (EMRs) are only one tool in the technology arsenal,” says Hendler. “There’s great interest in technologies that help to streamline complex clinical workflows and schedules, effectively manage risk, and reduce patient leakage, as providers compete for consumer loyalty and respond to rapidly changing business models. Effective utilization of technology has become a strategic imperative for the healthcare industry.”
Four enduring trends were accelerated by the pandemic, according to our recent CEO conversations:
Mobile digital care.
The pandemic sparked a rapid and enduring shift toward telehealth and mobile digital care. Initially, healthcare systems used technology platforms to provide patient education and care plans and actively monitor symptoms from home. Now, as patient comfort with receiving all types of health services from their mobile device is rising, clinical communications platforms continue to connect the dots across the continuum of care and provide a more holistic view of patients.
Improved patient experience.
As healthcare systems continue to invest in providing the best digital or virtual care, making the experience easier for patients is a top priority. With more data-informed views of patients, healthcare systems can improve patient outcomes and help the patient and family navigate a healthcare landscape that is increasingly complicated and expensive.
Shift from reactive staffing to proactive workforce management.
Staff was the pivotal resource in delivering care during the height of the pandemic, which gave rise to a much greater focus on workforce management. Objectives have shifted away from scheduling to maximize productivity toward developing more flexible staffing and rostering models that help to retain resources and minimize burnout.
Growing use of data and analytics.
Active management of supply chain risk garnered significant attention in 2020 as providers simply couldn’t tolerate shortages of mission-critical items. Healthcare systems needed the real-time data to view supply availability and the analytics to find the best logistical path to ensure the availability of the requisite resources. Providers are increasingly turning to analytics and AI-driven solutions and the use of device IoT data for more proactive and preventive asset maintenance within the hospital.
3. Risk and Compliance Tech
Risk management is now a strategic imperative across many organizations. More intense focus by boards and executives on risk and sustainability is triggering increased adoption of software tools to automate compliance and risk mitigation functions.
“The desire to better understand the various elements of risk within an enterprise, to both seize additional growth opportunities as well as mitigate potential negative impacts, is driving demand,” notes Erik Szyndlar, a managing director in the Harris Williams Technology Group. “Companies are embracing compliance and risk solutions to better interpret risk both within the organization and with counterparts. Not having transparency into current and future risks can not only result in serious operational risk, fines, penalties, and reputational damage, but also in significant missed opportunities for business expansion.”
Szyndlar says the top trends include:
Integrated risk management.
The pandemic shone a light on weaknesses in business resiliency and accelerated a trend toward organizations trying to expand and harmonize broader dimensions of risk. This is accelerating the trend toward a much more holistic, integrated risk management approach. As businesses change, their compliance, regulatory, security, and risk postures need to change to meet new business dynamics. Flexibility and configurability of the risk management platform is needed to mirror the organization as it rises in risk management maturity. Local and risk-specific applications are giving way to enterprise-wide programs established to monitor and track progress in a uniform way across the globe.
Insights-driven decision-making.
Data is crucial to be able to identify and mitigate risks across business operations in real time. Harnessing the tremendous amount of data across the organization starts with having the right data architecture, data capture processes, and platform to be able to link data points to the organization’s strategic priorities. The focus in 2021 and beyond will be on how to aggregate and make sense of data to drive strategic risk-based business decisions that drive growth.
Automation and predictive analytics.
Automation, AI, and ML can change the face of risk management. Automating processes frees risk and compliance teams to spend more time on more strategic activities. Automation also fuels continuous controls monitoring and continuous evidence collection. AI, ML, natural language processing, semantic fingerprinting, and data entity recognition are all key enablers and tools to improve risk and compliance efficiency and effectiveness and, importantly, to predict future risk. Mining both structured and unstructured data, and using AI and predictive analytics, can help to detect early warnings and unusual patterns, strengthen risk identification and mitigation, and provide companies with a much more comprehensive view of risk.
4. Supply Chain Tech
Supply chain management initiatives are wide-ranging and ever evolving. COVID-19, for example, has greatly shifted consumer behavior in favor of e-commerce, driving companies to rapidly enhance their omnichannel and fulfillment capabilities. The pandemic also exposed many blind spots and supply chain challenges for manufacturers, retailers, and service providers.
“E-commerce is just one of many industry trends causing companies to re-envision their supply chains and associated technologies,” says Andy Leed, a director in Harris Williams Technology Group. “A paradigm shift is underway in supply chain management from being a traditionally siloed function focused on cost containment, to a strategic imperative that is integral to driving growth and managing risk.”
Supply chain tech trends include:
High volumes of digital commerce fulfillment.
In response to the pandemic, both B2B and B2C companies accelerated their digital commerce capabilities. However, many did not reconfigure complex back-end processes in parallel and are now in need of addressing order management, pricing, credit handling, fulfillment, and other support processes to accommodate the changed order profile and scale. One key shift relates to delivery expectations. The majority of online shoppers want goods delivered to their destination in less than five days. This requires greater visibility and agility on the part of the shipper to try to meet customer expectations. Being able to provide real-time data and insights into supply chain processes is critical.
Increased focus on transportation management and freight spend visibility.
In part because of digital commerce and customer delivery expectations, transportation expense is very quickly becoming one of the top three areas of enterprise spending. This is motivating organizations to proactively rethink how they manage their transportation dollars and to build capabilities to optimize transportation spend, negotiate effectively with carriers, and model the optimal distribution of goods.
End-to-end, fully integrated platforms.
There is increased focus on moving supply chain applications into end-to-end platforms that can integrate well with other platforms. Integrated platforms are well positioned to use comprehensive data to look at market constraints, to help design better product, to help source better and more cost-effectively, and to help buyers better allocate goods to the right markets around the world.
Artificial intelligence and better use of data.
The opportunity to use data and AI for real-time supply chain insights is significant. This includes taking into consideration factors that are less visible but highly impactful on supply chain performance, such as weather, traffic pattern changes, hazards, and congestion at loading docks. AI and better use of data can also help companies create more sustainable supply chains, reduce their overall carbon footprint, and create greater transparency with trading partners—all of which are top business priorities.
Conclusion
Our recent CEO conversations affirm that software companies are moving quickly to deliver the innovations their customers want and need. For many, their strategies include M&A, whether their goal is to expand their geographic footprint, add more comprehensive capabilities, or acquire data to advance their business intelligence offerings.
“There are many ways to participate in this dynamic sector,” concludes Monjauze. “As a result, we expect deal activity to be robust in 2021 and beyond.”
About Our Technology Group
The Harris Williams Technology Group advises leading private and public companies, founders, and private equity, growth equity and venture capital firms on mergers and acquisitions and capital-raising transactions worldwide. The Technology Group has deep domain expertise in software and technology-enabled services and dedicated focus areas across a variety of vertical software applications and end markets. Learn more here.
Published April 2021