Will Enterprise Software Stay Sticky in an AI World?

https://www.nerdoutonbusiness.com/p/will-enterprise-software-stay-sticky-in-an-ai-world

OpenText is a useful case study for this question. The company runs on long-term contracts and deep switching costs, but AI is making it easier for companies to build internal tools.

The business is built on recurring revenue, with ~81% of FY2025 revenue coming from cloud subscriptions and customer support contracts.

Will their 94% renewal rate hold up?

I think the answer is no. Customers are constantly upgrading and given all of OpenText’s products are long in the tooth and the AI tools are unproven (without customer references) renewal rates will go down and the focus will be on organic growth which is an impossible task given the lack of innovation.

If the SMB unit is sold, the SMB Renewal Teams: Likely transferred to the buyer. These teams are high-volume and automated, making them an attractive "turnkey" operations piece for a Private Equity firm.
• Legacy Enterprise Renewals: Would remain at OpenText but continue to face the AI-driven workforce reductions.

If the "20% divestiture" goal is met by selling the SMB unit, these are the rumored frontrunners:
• Thoma Bravo: Rumored to be looking at Carbonite to fold into their ConnectWise or Sophos portfolios.
• Kaseya: Known for aggressive acquisitions in the MSP space, they are frequently mentioned as a potential home for Webroot's threat intelligence data.
• Gen Digital (Norton/LifeLock/Avast): Since OpenText has refocused Webroot on "Digital Life Protection" for families, it has become a "strategic fit" for Gen's consumer-focused empire.

In regards to a new CEO The board is looking for an "Operator" rather than a "Visionary Dealmaker." They want someone who can make the remaining "Core" business highly profitable after the non-core units (like SMB) are potentially sold off.

However this “Operator” will be in charge of getting all of OpenText remaining core acquired by a big tech company that can do something with the IP.

#Divestiture #Acquisition #AI

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@a1 agreed and shallow IT companies like OpenText will be the first to be wiped out. Only the huge IT companies will survive and eventually achieve Artificial General Intelligence (AGI) which no one is anywhere near achieving. There will be a push to get AGI by the end of 2028 (under the current US government leadership) but thinking that is highly unlikely. Rather it will probably be the mid to late 2030s anyone thinking else wise is hallucinating just like Gen AI does today.

AI is a bo-b, not a bubble. It will blow up and cause mass casualties, it won't go pop and people lose money. There will be entire companies wiped out.

AI isn't AI. It's a series of enormous if-then-else statements. That's it. It cannot do what is being promised.

When Nvidia's circular economy of fabricating money out of thin air is finally exposed, it will cause a seismic event. They were first propelled by the bitcoin mining grift, and now AI. The thing is, AI isn't producing. It isn't generating revenue more than it generates costs and that bill is coming due.

Thread regarding Open Text Corp. layoffs

Will Enterprise Software Stay Sticky in an AI World?

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