Your regular host Adam Lashinsky is on assignment. Heather Clancy is a contributing editor at Fortune.
Here’s a pop quiz to get your work week started. What cloud business software company reported net income for its most recent fiscal year (a rare feat), is on pace to top a projected $500 million in revenue (profitably) for its current one ending in January 2017, and hopes to cross the $1 billion mark by 2020? Unless you’re involved with the life sciences or pharmaceutical sector you probably guessed wrong.
Meet Veeva Systems, one of several fast-growing software concerns laser-focused on selling into a single industry. The company started with sales and marketing automation applications but has since expanded its menu to cloud-hosted data and document management systems that cater to the healthcare sector’s strict compliance and privacy concerns. Veeva exited its 2016 fiscal year ended Jan. 31 with 400 customers, up dramatically from 276 in the previous year. Its client list includes Fortune 500 drugmakers AstraZeneca, Merck and Pfizer.
There have long been software specialists for certain industrial sectors, but their influence is probably way larger than you realize. Research firm Gartner figures they collectively generated $114.8 billion in revenue for 2014, an annual growth rate of about 6%. Considered in aggregate, that’s approximately 27% of all software sales.
Co-founder and CEO Peter Gassner, who started his career at IBM writing database software for mainframes, told me earlier this year that the business world’s willingness to invest in cloud services has made delivering industry-specific applications much more economical. “In the cloud, you can be very specific, you know exactly what your customers are doing. You can solve a problem once, watch what happens, and create software that maps to their needs really well,” he said.
Veeva has parallels in other sectors. Guidewire Software, which like Veeva is public, will generate a projected $410 million for its current fiscal year. It sells operations and data management applications for insurance companies (200 customers and counting). The retail, hospitality, and transportation sectors are particularly aggressive adopters of cloud services and many early stage companies hope to cash in. Some examples: Alice App (hotel guest management systems), Tulip Retail (inventory management that bridges “real” store and e-commerce systems), and Fleetmatics (fleet management systems).
Emergence Capital co-founder and general partner Gordon Ritter believes the “era of horizontal software companies is over,” as organizations seek to adapt cloud services from the likes of Salesforce to their specific processes and needs. “What these industry cloud companies need to do is layer the cake. They need to be in multiple functional areas across a single sector,” Ritter said.
That’s likely to inspire a consolidation wave in the months to come, as specialists seek scale and as software giants including IBM, Oracle, and SAP reconsider their own cloud-relevant pitches for specific industries. Watch this space.
BITS AND BYTES
Hewlett Packard Enterprise unloads stake in Indian outsourcer. Private equity firm Blackstone Group will pay a reported $1.1 billion for the tech giant's interest in MphasiS. Hewlett-Packard inherited MphasiS eight years ago when it bought Electronic Data Systems to extend the reach of its technology services team. The company wants the money for other acquisitions post-breakup but hasn't hinted about its intentions. (Reuters)
Dell-owned cybersecurity firm could end tech IPO drought. SecureWorks plans an initial public offering sometime in April and could begin its road show next week, reports The Wall Street Journal. Because of the uncertain market, the plan is to sell a relatively small stake that values the company at less than $2 billion. The money could be used for "complementary acquisitions." (Wall Street Journal)
Will HP Inc.'s latest laptop be even thinner than Apple's? That's the early buzz surrounding the PC and printer specialist's new high-end notebook computer line, scheduled for introduction on Tuesday. The standard to beat? Apple's 12-inch MacBook, circa March 2015, measures barely a half-inch at its thickest point. (Wall Street Journal, New York Times)
Parts shortage delays Oculus Rift shipments. Many people who preordered Facebook's much-anticipated virtual reality headset may have to wait until next week for their deliveries. The company blamed an "unexpected component shortage," which is odd considering the months it had to plan for the launch. (Fortune)
Microsoft snags Oracle's main man on Linux. Wim Coekaerts, a long-time Oracle veteran who helped transform that company into a Linux power, is now a corporate vice president at Microsoft. It’s the latest indication that Microsoft CEO Satya Nadella is serious about embracing open-source software. (Fortune)
$10 billion and counting. Tesla recorded more than 253,000 early orders for its new electric vehicle, the Model 3, within 36 hours of the car's introduction. That was far more than even the company's optimistic CEO Elon Musk had anticipated. (Reuters)
Race is on to hire foreign tech experts. The annual window for companies to request H-1B visas opened last Friday. This year's quota is 85,000, a number likely to be surpassed early this week. If that happens—as it did in both 2015 and 2014—the visas will be awarded to applicants at random. (Fortune)
Why IBM is buying one of Salesforce's biggest consulting partners. There’s still no end in sight to IBM’s recent acquisition spree centered on digital services firms. The tech giant’s Interactive Experience group disclosed its intention last week to snap up Bluewolf Group, one of the biggest independent consulting firms specializing in Salesforce’s cloud services with more than 9,500 projects under its belt over the past 15 years. The motive: scale its expertise in systems for digital marketing, sales analytics, and customer service. (Fortune)
IN CASE YOU MISSED IT
Bezos' Blue Origin successfully lands rocket for the third time
by David Z. Morris
Slack is now valued at $3.8 billion by Dan Primack
OpenTable's new CEO talks mobile payments, and more by Leena Rao
What it's like to ride in a Tesla Model 3 by Katie Fehrenbacher
Who can succeed Barack Obama as digitizer in chief?
by Thomas H. Davenport
Incredibly shrinking Blackberry misses phone sales targets by Aaron Pressman
This man just raised $120 million for a fancy home juicer by Dan Mitchell
Developer takes on AT&T and Comcast in rural broadband battle
by David Z. Morris
ONE MORE THING
San Francisco: You can't use our bus stops. A private company that shuttles workers for Cisco, Zynga, and other tech firms between San Francisco and Silicon Valley was barred from using municipal bus stops or public curbs for pickups and drop-offs. (San Francisco Examiner)