As generative AI hype continues to rattle the software sector, more specialized software companies may be the most resilient players and the most underrated.
RBC Capital Markets wrote Wednesday that vertical software, specifically designed for industries such as healthcare, insurance and industrial design, could survive AI disruptions in the near future and benefit from AI in the long run.
Analysts write to investors that these software vendors will benefit from deep domain expertise, regulatory knowledge, and difficult-to-reply workflows.
“Vertical software is one pocket of software that is likely to be considered “for now) (for now),” writes an RBC analyst led by Rishi Jaluria.
“Adjustable to your needs” software
Vertical software often supports important features and is usually considered not only “need to respect”, but also “need to have to have been.”
Due to high customer retention, it can take years before these companies are threatened by AI startups.
One such company, Clearwater Analytics, boasts a total revenue retention rate (GRR) of 98% to 99%, indicating customer loyalty to its products. Total revenue retention is a general metric for subscription-based and software companies, and measures how effectively they maintain their existing revenue base.
Furthermore, many of the industries these companies provide services are in the early stages of modernizing technology. This makes it less likely that customers will adopt AI-driven alternatives in the near future.
In the long run, RBC is looking at vertical software vendors that play a key role in shaping the next stage of AI adoption. Rather than simply providing data, it provides the context to train and fine-tune AI models, leading to industry-specific AI tools that drive real productivity gains.
Goldman Sachs' View
At the recent Goldman Sachs Tech Conference last month, I asked Kash Rangan, the company's software analyst, about which companies could survive the AI ​​challenge.
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He highlighted ServiceNow and praised CEO Bill McDermott's battle-tested leadership. He also pointed out Intuit for creating value for existing products by subtly adding AI to AI.
Salesforce received a more modest rating. Langan said CEO Mark Benioff is “in the fight,” while the company needs to prove that its new AgentForce AI products have gained traction with its customers and that they are willing to pay.
In an industry dominated by flashy AI bets, RBC emphasizes a quieter reality. Vertical software may not be immune to threats from AI companies, but the combination of industrial retention and domain-specific possibilities creates an unusual AI-proof niche. Anyway, for now.
RBC's AI Software Survivor
The vertical software companies recommended by RBC on Wednesday are: The RBC evaluates all of these “outperforms” and cites its ability and ability to innovate around AI.
- Autodesk: A design software company best known for AutoCAD and other tools used in architecture, engineering and manufacturing.
- Bentley Systems: Provides infrastructure engineering software for the design, construction and operation of roads, bridges, utilities and other large-scale projects.
- Clearwater Analytics: Provides cloud-based investment accounting and reporting software for asset managers, insurance companies, and businesses.
- Guidewire: Develops cloud and software products for property and victim insurance companies to manage underwriting, claims and claims.
- Hinge Health: A digital health company specializing in musculoskeletal care, offering virtual physiotherapy and pain management programs.
- SAMSARA: Provides an Internet of Things (IoT) platform that helps you manage physical operations such as fleet management, logistics and industrial surveillance.
- PTC: Provides software for product management, industrial IoT, and augmented reality to support product design and service manufacturers.
- VEEVA Systems: Supplies cloud-based software tailored for the life sciences industry, including clinical trials, regulatory compliance and customer engagement solutions.
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