How AI is Disrupting the Enterprise Software Space

The recent release of our Enterprise Software market report revealed that 2023 has, so far, been a very strong period for M&A deals in this sector. In fact, the first six months of the year saw one of the biggest transaction volumes on record, representing a significant gain in momentum after the dip that affected the whole tech industry in 2022.

A number of factors are propelling Enterprise Software deals, one of the most notable being the mass digitalisation of workplaces around the world across every imaginable vertical. The subsequent skyrocketing demand for software solutions has made purveyors of such solutions highly attractive to acquirers and investors. This interest has been further stimulated by the emergence of AI within the sector, and the seemingly limitless use cases for AI-powered Enterprise Software tools.

Indeed, just a few months ago, one of the world’s preeminent VC firms, Sapphire Ventures, committed more than $1 billion to “AI-powered enterprise technology startups”, with CEO Nino Marakovic anticipating “a massive, AI-driven productivity boom that will benefit workers at every level”.

It’s a sentiment echoed by Salesforce CEO Marc Benioff, who declared at a recent Dreamforce event that “the reality is every company will undergo an AI transformation to increase productivity, drive efficiency, and deliver incredible customer and employee experiences.”

Speaking of Salesforce, the tech giant has introduced one of the most significant examples of AI-powered assistants – namely, the Einstein Copilot, built into the user experience of every Salesforce application. This provides real-time guidance and insights, so that users can get instant help on whatever tasks they might be carrying out.

Like the Microsoft 365 Copilot which goes live for enterprise users in November, it can be thought of as a super-charged, near-omniscient descendant of Microsoft’s classic Clippy assistant. Impressive and set to be ubiquitous, these kinds of bots are merely the most visible aspect of workplace AI. The full ramifications of this technology will fundamentally transform how we all perform tasks and interact with colleagues.

Document automation is another particularly seismic development. As leading venture capitalist Andreas Weiskam recently discussed, AI can now automate all kinds of important forms and content, from “invoices in large organisations that get thousands of invoices that come in”, to marketing copy “in any language, on message and on brand.”

AI Enterprise Software is allowing businesses to automatically:

• Generate job descriptions, drawing on data in the company cloud relating to what the roles and responsibilities are, thereby alleviating the burden on People and Culture managers.
• Generate highly specific knowledge management articles, removing the need to manually and painstakingly sift through reams of research and guidelines when writing articles on, say, company products and services, new company policies, and company conferences.
• Generate statements of work, massively speeding up the process of instructing service providers in the nature of projects, their timelines, deliverables and payment terms and conditions.
• Generate code to not only optimise the creation of apps attuned to the requirements of particular companies, but also foster closer collaborations between the IT teams and other departments, so that all kinds of needs are more actively met.

The new Hampleton Partners Enterprise Software report (read it here) highlights a number of AI Enterprise Software firms which have been the subject of major deals this year alone. 

One – the $40 million acquisition of Toronto-based Cyclica by TechBio company Recursion – is a stark reminder of the incredible feats machine learning is capable of. Cyclica’s platform, which rests on “ever-evolving” AI engines, can literally help create new medications.

Its “MatchMaker” is a prime example of a highly vertical-specific AI Enterprise Software tool, being able to predict the polypharmacology of small molecules and thereby optimise small molecule drug discovery. The strategic acquisition of Cyclica is therefore a major milestone in Recursion’s mission to ‘decode biology’ and ‘industrialise drug discovery’.

Another key transaction of 2023 so far is McKinsey’s purchase of Tel Aviv-based Iguazio for $50 million. Taking place on the very day on which Microsoft poured billions into AI trailblazers OpenAI, the purchase reflected McKinsey’s desire to bolster its QuantumBlack data analytics service by folding in industry-specific AI solutions.

Iguazio’s MLOps (Machine Learning Operations) platform is able to ingest datasets from any source so that companies can easily create and maintain AI applications at scale. The acquisition is a testament to Iguazio’s functionality, given that McKinsey had carefully assessed the pros and cons of more than 1,000 AI firms around the world before identifying Iguazio as “the best fit to significantly accelerate our AI offering.”

Meanwhile, one of the year’s biggest deals in the AI Enterprise Software space has seen Databricks snap up MosaicML for a cool $1.3 billion. The gigantic pricetag reflects the fact that the San Francisco startup is regarded as a key competitor of OpenAI, and has been making vast strides in the enterprise space.

Its platform allows organisations to more easily build their own AI infrastructure by training large language models on their own data. Databricks now aims to provide its clients with a unified platform for managing data assets and leveraging this information to create secure, bespoke generative AI models.

“As one might have thought based on all the headlines that AI is making, there have been a prevalence of transactions motivated by larger vendors looking to add artificial intelligence capabilities to their portfolios.”

That’s how our Founding Partner Miro Parizek sums up the M&A mood in our new report, and these are undoubtedly exciting and potentially very lucrative times for founders making their mark in Enterprise Software. If you’re one of them and would like to speak with Miro directly, please get in touch.