15 Companies Set to Soar Through the Digital Transformation
The future of business is data analytics and artificially intelligent software. This is true regardless of whether a company makes breakfast cereal, designs semiconductors or flies a fleet of jetliners.
Digital transformation could add $13 trillion to global GDP by 2030, according to analysts at McKinsey and Co., a global management consulting firm.
They expect that a better understanding of data will enrich customer experiences and create vibrant new business models.
Understanding digital transformation is the first step. And certain pieces are foundational.
Cloud computing, for example, allows businesses to virtualize their computer processing needs by running workflows on remote, specialized data centers.
Tech giants with data centers all over the world, such as Amazon.com (AMZN)’s Amazon Web Services, Microsoft (MSFT)’s Azure and Alphabet (GOOGL)’s Google Cloud are logical winners. And they should continue to benefit from their scale.
At last count, cloud infrastructure services were a $208 billion business, growing at 30% annually, according to data from Statista.
The other foundational element is payments. Long before the cloud companies virtualized computer processing, Mastercard (MA) and Visa (V) were building epic capacity and security into their digital payment platforms. Today, VisaNet safely processes 150 million transactions per day, with plenty of excess capacity for future growth.
Mastercard CEO Ajaypal Banga expects much of that capacity will be sucked up by machine-to-machine payments. Within a decade, he expects our cars will be making payments with gas pumps and our refrigerators will be ordering and paying for food from the local supermarket. Cryptographic authentication and a lot of AI software running in the cloud will take care of the details.
Related post: Why Mastercard Is Now Set to Dominate Business Transactions
Supplying those data centers, and the enterprises looking to better manage workflows in the cloud, is already a lucrative business. As these companies are finding.
Nvidia (NVDA) makes best-in-class graphics processing unit chips. GPUs are critical hardware for deep learning, a form of AI capable of quickly processing vast amounts of unstructured data. As the deluge of data swells, this business is certain to grow.
Alteryx (AYX) is in the business of making sense of all types of data. The company is part of an important trend the research firm Gartner calls the democratization of expertise. Jargon aside, the Irvine, Calif., company makes low/no code software tools to help companies quickly turn the gusher of their data into actionable insights.
Related post: Keep Buying Alteryx on Pullbacks
Ease of use is also the cornerstone of ServiceNow (NOW). Its cloud-based Now platform brings employees, customers and every networked device into a single, real-time system. It connects customer service, human resources, IT, security and gives company developers the tools to integrate custom applications.
For many enterprise clients, those applications will include Salesforce.com (CRM). The iconic San Francisco company is the leading customer relationship management company in the world. Its products command 30% of the fast-growing market to drive sales growth and retain and improve relations with existing and potential customers.
In the era of AI and data analytics, CRM is often the first big step many enterprises will take toward digital transformation.
Further down the stack, other companies are focused on reimagining experiences. Sanjay Srivastava, chief technology officer at Genpact (G), explains the need for new business models by pointing to Amazon.com.
The online giant transformed the shopping experience. We now expect fast delivery, personalized recommendations and a super-simple ordering process. If businesses can’t remove friction and enhance customer experience, sooner or later they will fail in the new digital reality.
Providing a pathway is the mission statement for Globant (GLOB). From its home base tucked away in La Plata, Argentina, the software and IT developer works inside large companies like Disney and Coca-Cola. Designers tweak social media channels. Product managers build interactive consumer-facing campaigns. And software engineers help with payment gateways and big data projects.
In America’s heartland, Jack Henry & Associates (JKHY) is helping regional banks and credit unions reimagine banking. Its software allows customers to, pay bills and move money between accounts — either on their computer or with a smartphone — and deposit checks by snapping a photo.
Soon, patrons will be able to ditch their devices and simply bank through commands to Alexa, Amazon’s voice enabled digital assistant.
Digital transformation is the biggest and most important trend in a generation. As McKinsey notes, a massive amount of money is going to be spent during the next 10 years, across a wide swath of sectors. Getting it right is not going to be easy.
Businesses are going to need trusted advisors to help build new digital strategies, test them, scale up and then decide how best to integrate the new models into the existing business.
For government work, the best play for investors is Booz Allen Hamilton (BAH). Managers at the Virginia management and IT company understand the crosscurrents of the public world. The U.S. government is undergoing the same digital transformation corporate managers face. The amount of public dollars up for grabs is in the tens of billions.
Accenture (ACN) is the management consultant best positioned to win all the rest. With offices in 200 cities in 51 countries, Accenture had consulting relationships with 91 of the Fortune 100 companies through November 2019. Sales were $43.2 billion.
Related post: Accenture Flourishes in the Digital Transformation Boom
The bottom line is digital transformation is everything it is hyped up to be. It’s coming fast and the time to invest is now.
Weakness in any of these companies should be seen as an opportunity.
Best wishes,
Jon D. Markman
