Tech valuations have been whipsawed by rising rates of interest, steep inflation and financial uncertainty—however not a lot in enterprise software program. Demand is holding regular as companies proceed to reorient themselves round cloud computing and knowledge, CIOs say.
Information-technology firms together with International Business Machines Corp.,
Hewlett Packard Enterprise Co.
and
Oracle Corp.
have proven resilience amid a rout in expertise shares. All three have up to now outperformed declining market benchmarks for the reason that begin of the yr.
As of Wednesday, the tech-heavy Nasdaq Composite Index had fallen greater than 23% since January. Over the identical interval, share costs for IBM, which sells cloud-based enterprise software program and providers, rose 4.3%.
Prices for HPE, a enterprise software program agency spun off laptop maker Hewlett Packard, have held roughly regular. On Wednesday, the corporate reported $6.7 billion in gross sales for the quarter ended April 30, up 1.5% year-over-year, with on-line software program orders roughly doubling from the earlier yr.
Shares of software program firm Oracle haven’t fared as effectively, falling roughly 17% this yr by Wednesday. But its costs have persistently remained above sliding tech-market benchmarks. In March, the corporate reported double-digit progress in cloud income for the quarter led to February.
“Enterprise IT is considered safer and less fickle than consumer tech by investors,” mentioned
Karena Man,
marketing consultant at administration consulting agency Egon Zehnder. When the dotcom bubble burst within the early 2000s, shopper digital valuations have been worn out. “But enterprise tech was still where investors were putting their money,” she mentioned.
Demand for enterprise expertise was evident final week when semiconductor big
Broadcom Inc.
mentioned it could purchase
VMware Inc.
in a deal valued at $61 billion. VMware is understood for virtualization expertise, wherein software program is used to exchange costlier bodily tools.
“There’s more demand for technology than there ever was before,” mentioned
Jim Swanson,
government vp and enterprise chief data officer at New Brunswick, N.J.-based healthcare and consumer-goods big
Johnson & Johnson.
The Covid-19 pandemic laid naked the significance of capabilities like cloud-based enterprise instruments for adapting to sudden adjustments available in the market and weathering unsure occasions, he mentioned.
In the identical method companies turned to cloud computing within the pandemic—for distant work, buyer providers and productiveness—they might be sensible to proceed, Ms. Man mentioned. “Companies hoping to minimize risk exposure and anticipate future volatility challenges should be thinking about this now,” she mentioned.
Demand for cloud computing providers, wherein customers hire computing sources, is robust. Global spending on public cloud providers this yr is predicted to hit $494.7 billion, up 20.4% from final yr, IT analysis and consulting agency
Gartner Inc.
estimates. Many firms make use of a number of clouds, which creates a variety of choices for storing knowledge or operating functions.
“The ability to easily choose where to place a workload based on cost efficiency is a key capability,” mentioned
Brennan Sullivan,
chief data officer at Quest Software Inc. “It’s such a basic necessity within any enterprise technology environment that at this point, I don’t see much correlation with the market’s moves.”
Enterprise tech firms are benefiting from the continuing demand for cloud computing.
Salesforce Inc.,
the cloud market’s largest pure-play vendor of subscription-based enterprise software program, on Tuesday reported quarterly income of $7.4 billion, up 24% from the identical interval a yr earlier. The firm, whose core product is customer-relationship administration software program, is on observe to surpass $30 billion in annual income this yr.
The cloud-computing models of tech titans like
Microsoft Corp.
and
Amazon.com Inc.
have additionally continued to generate progress. In April, Microsoft reported $23.4 billion in cloud income for the quarter by March, up 32% from a yr earlier, the corporate mentioned.
For Amazon, the cloud was an island of power in April, when the corporate posted its first quarterly loss in seven years. Amazon Web Services, the corporate’s cloud-computing service, reported $18.4 billion in first-quarter gross sales, up 37% from a yr earlier. Companywide, gross sales rose 7% to $116.4 billion.
Increasingly giant shops of information are additionally changing into important to the best way most companies function, mentioned
Erik Bradley,
chief strategist at Enterprise Technology Research, a analysis agency. Mr. Bradley mentioned he expects demand for enterprise-tech platforms providing knowledge governance, knowledge administration and different analytic instruments to proceed rising no matter financial circumstances.
Last yr, data-analytics firm Databricks Inc. raised $1.6 billion in a single fundraising spherical, lifting its private-market valuation to $38 billion. In February, the corporate reported $800 million in gross sales for 2021, an 80% enhance from the earlier yr.
CIOs are nonetheless eager on expertise that helps their firms chase income progress, so there may be “no real opportunity to retract spending,” mentioned
John-David Lovelock,
a analysis vp and distinguished analyst at Gartner.
—Isabelle Bousquette contributed to this text.
Write to Angus Loten at [email protected]
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