We’ve been seeing a fair amount of investable ideas around the next generation of software Systems Of Record and have been spending a fair amount of time thinking about where the greatest swapping opportunities in Systems Of Record are. For those that don’t know what I am talking about, Ajay Agrawal at Bain Capital Ventures has a great definition of the term: “System of record (SOR) is software that serves as the backbone for a particular business process. […] The power of systems of record is that they are the ultimate source and therefore “record” of critical business data. Your general ledger is stored in Quickbooks or Oracle Financials. Your pipeline data is in Salesforce. And your compensation and payroll information is in Workday. Once you are the “store” for critical business data, other applications, by definition, have to integrate into you in order for their solutions to work.” Leaving aside that there are a number of ways to think about the System Of Record concept and it’s advancement (see System Of Intelligence or System Of Engagement) here are three areas we think will see software a swap in the coming years.
1. Back Of House eCommerce Systems Of Record. There has been an intense focus on what we would call “front of house” systems of record for eCommerce. Some great companies have been created here including Shopify, Magento, and Wix. Something we have been thinking a lot about is that some of the first generation “back of house” eCommerce systems that are probably due for a rip and replace. Looking at companies like Sterling OMS (acquired by IBM), Commerce Hub (acquired by GTCR), and seeing the lack the flexibility and speed we believe they can’t truly continue owning the customer base in back of house. This piece is way more complex and where the action really happens. They’re probably coming due for a replacement.
2. Price & Promo Planning Systems Of Record. Unless you sit in this day to day it is tough to understand how legacy and manual the processes and systems are for promotion and pricing planning. We see this primarily in CPG and Retail however it takes forms in many other industries. Much of this continues to be dominated by professional services and what we would consider more “offline” processes and systems. Our hope is that the systems integrators and managed service providers that handle this will likely be replaced by more intelligent systems of record and the old customized software that exists in this category goes away.
3. Vendor Management System Systems Of Record. The business spend management space has seen a number of large companies like Coupa build successful moats and go public over the past couple of years. However, there is still a huge amount of runway within the F500 and specifically the other areas of spend (i.e. workforce & labor spend) that matter to large companies. Anyone that has spent time in SAP Fieldglass, Beeline, IQNavigator and others knows that this is also one of the greatest swapping opportunities in systems of record that we can see.
We’re sure there are many more out there but these are three that are front of mind to us.
If you liked “Where Are the Greatest Swapping Opportunities In Systems of Records?” and want to read more content from the Bowery Capital Team, check out other relevant posts from the Bowery Capital Blog. Thanks to Clement Vouillon for the image.