Mark Leonard, founder and president of Constellation Software, warned against attempting to predict the future of artificial intelligence.Ryan Remiors/Canada report
Constellation Software Inc. CSU-T held a rare conference call on Monday to ease investors' concerns about the impact of artificial intelligence on their businesses. Judging from the market reaction, there is more work to do for the company.
Founder and President Mark Leonard set up the phone after one of Constellation's biggest shareholders requested a Q&A session on AI. Toronto-based Constellation, a serial acquirer of software companies targeting the niche sector, has a great track record, but concerns about the impact of AI have recently taken stock prices and sent it more. 18% from the May high.
Constellation's stock price fell 4.9%.
In calls with investors and analysts that have grown over an hour and a half, Leonard warned against trying to predict the future of AI. Even Jeffrey Hinton, who played a vital role in technology development, could not do so. “You and I will never know a small part of AI,” he said, comparing it to Dr. Hinton.
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Leonard declined to predict, but he emphasized that the company is closely monitoring development and integrating AI. He joined four constellations AI experts who identified only by name to prevent him from being “overwhelmed by outreach from shareholders and competitors.” (Leonard himself has a reputation for avoiding media attention.)
Generic AI tools are much more proficient at writing and testing software code, and can even create a prototype that works. This represents a potentially significant opportunity for Constellation, allowing software to be developed faster and at a lower cost. But that also means that rivals can do the same thing. Constellation's own customers can also use these tools to develop software.
“AI can make customization more exciting, but it's much more likely that clients will do it themselves,” Leonard said.
Other Cole executives curtailed the possibility, highlighting that the sign has a close relationship with its customers, encouraging AI to work even closer. It says that software development requires advanced skills even using AI, and constellations are good for doing so.
While AI coding tools today are useful, there are also limitations, especially when working with the types of software developed by Constellation's business units. These programs can span tens of millions of code, one executive said.
When it comes to the future of software development, Leonard also made no predictions. “It's hard to say whether programming is facing a renaissance or a recession,” he said. A significant improvement in efficiency could lead to more demand for programmers, he said, or could lead to an oversupply of talent.
“If 10 times more efficiency doesn't occur, if it's a 10% more efficiency increase, then I can imagine there's a very conservative change in the current situation,” he said.
The market may not appreciate such uncertainty, but some analysts weren't too concerned. “The company is taking a practical approach to AI, as it did with all the other things that AI has succeeded,” said Richard TSE, technology analyst at National Bank Capital Markets. “That means there's nothing definitive about the topic of AI at this point that it's interpreted by the market as neutral to negative.”
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Analyst Sonos Moschopoulos, BMO Capital Markets, wrote in a note after a call that Constellation is poised to benefit from AI. The company's expertise means it can identify areas of automation. This “will ultimately make the software more convenient for clients and reduce the risk of them leaving,” he writes.
Leonard advised those calling for people to think critically about claims related to improving the efficiency of generator AI. “It's really important to be an anthropologist and try to dig deeper and understand in order to observe and test the claims you've heard,” he said.
Constellation also highlighted several examples of internal use cases across the portfolio, including three separate initiatives using AI. “They are all relatively modest efforts and are extremely successful,” he said. The company also deploys AI for coding, sales, marketing and customer service.
Approximately 3% of Constellation's business units reported replacing employees with AI tools. “This is lower than I thought, and I think it's probably a good thing,” Leonard said.
