Research | Technology

Digital Transformation Spurs Evolution for Software and Cybersecurity

At our Technology Private Company Conference, executives gathered to discuss the impact of software’s inexorable growth on cybersecurity, fintech, adtech, martech and more.

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By Brad Erickson, Matthew Hedberg, Rishi Jaluria, Daniel Perlin and Matthew Swanson
Published July 13, 2022 | 2 min read
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Key Points

  • Software continues to eat the world, requiring new layers of security and faster migration of workloads into the cloud.
  • Labor shortages and skill gaps across industries and roles continue to drive inefficiencies.
  • Private companies across verticals are exploring a platform thesis rather than a single point solution or product.
  • As digital marketing becomes more accountable for value, cost-per-click is evolving into cost-per-action (CPA).

This year’s conference focused on the seemingly infinite ways that software can improve the lives of both customers and consumers. Consequently, there are few limits on how entrepreneurs can develop new software to make lives more efficient through vertical SaaS applications or online marketplaces. Software continues to expand beyond places previously underserved by technology, including supply chain compliance and ESG reporting.

This proliferation of software (which means that every company can be a tech firm) will accelerate the migration to cloud resources and the ability to leverage large cloud datasets. Meanwhile, cybersecurity is evolving, creating new layers of emerging security solutions that provide a layered defense strategy for companies. Chief Information Security Officers (CISOs) within every business need to focus on security transformation to support increased hybrid-cloud usage, including zero-trust architectures, cloud workload protection, network segmentation, insider threat management and advanced identity solutions.

All of this is occurring against the backdrop of ongoing skills shortages that show no signs of letting up. Without people to fill open positions, companies are looking for new ways to do more with less. Efficient technologies and solutions, such as accounting workflow automation software and corporate e-learning solutions, are expected to benefit from that trend.  

AdTech will have new marketing measurements

The key trend for AdTech will be loss of key sources of signal, first from Apple with the Idenifier for Advertisers (IDFA) and then with Google removing cookies by 2023. At times, this seemed like a negative trend, but companies today are moving into the space created by this signal loss and offering differentiated value propositions. These include integrating unique third-party data sources, using machine learning and AI to get more value out of less data, and helping customers and partners unlock first-party data to create value for themselves and the ecosystem.

Digital marketing is also evolving, as newer models tie revenue to cost-per-action (CPA) instead of just a click. Legacy lead generation models sought to maximize audience size, but the quality of leads was generally compromised by failure to get to know the customer, leading to diminishing advertiser returns and pricing power over time. Audience size still does matter, but CPA is a natural evolution as digital marketing becomes more accountable for the value it provides to advertisers.

Coinciding with this evolution is the shift in marketing technologies to a more strategic revenue-generating role within organizations. The line between sales and marketing is becoming more undefined as martech focuses on collaboration and shared goals between sales and marketing, which should lead to greater efficiency and results within organizations.

Fintech focuses on the underbanked and real-time payroll solutions

Across diverse verticals such as manufacturing, healthcare, real estate/rentals, and niche e-commerce, we believe that private company strategies are more proactively contemplating a platform thesis than a single solution or product. Obviously, the zero marginal customer acquisition costs for these platform narratives allows for highly profitable optionality around adjacent revenue streams, so public investors tend to gravitate towards them.

Fintech is taking aim at the more than $2 trillion in purchasing power of the underbanked community (which traditional financial service organizations have largely mishandled). Firms are creating unique customer acquisition models, which enable early stage and lower cost data capture to create consumer-facing technologies that are built around “creating” rather than “extracting” value.

Fintech will also focus on providing “continuous money” or real-time payroll to the estimated 63% of Americans who live paycheck to paycheck—41% of whom earn well over $100K annually.

This content is based on commentary and analysis from RBC Capital Markets’ Technology Private Company Conference hosted in Santa Monica, CA on May 5, 2022. For more information about the conference, please contact your RBC representative.

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