Society is currently in the midst of a generational shift in the way we operate, which has been dramatically accelerated by the COVID-19 pandemic. The double disruption scenario created by technological innovation and a global health pandemic, has catalysed the digitalisation of global economies and a large-scale shift to remote working, learning and training. Consequently, we have experienced a surge in operate-from-anywhere arrangements and increased awareness of the marketplace for the technologies that support this paradigm.
We call this paradigm the “Future of Work.” Historically, work and education was location-centric, the devices used were mostly stationary (desktop and laptop), and most workflows focused on teams and cohorts that were in the same location. In the “Future of Work” era, education, training and employment becomes location agnostic, powered by always-on, always-available cloud-based software that is both intuitive and data-rich, and enables employees and students to be as productive on a smartphone or tablet as they are at a PC. According to the Future Forum, only 12% of workers want to return to full-time office work, and 72% want a hybrid remote-office model moving forward1.
The “Future of Work” era will provide companies with more automation and improvements in data-driven, data-enriched workflows that will ultimately drive better business outcomes in the form of both cost savings and enhanced efficiency. Digital interaction with customers has accelerated the equivalent of many years in just months, according to a recent survey of business executives by the consultancy McKinsey2. Changes in digital and technology adoption are taking place about 25 times faster than before the pandemic, the survey found.
Similarly, Cloud-based technologies such as Microsoft’s Office 365, video conferencing tools such as Zoom and Microsoft Teams, as well as online learning platforms have become mission critical tools during the pandemic, providing a vast amount of resource to their users, while removing the financial and time related costs of travel.
The final element in this equation (and the one that has had the least amount of focus until recently) is the human angle of “The Future of Work,” namely ensuring the social, cultural, and emotional outcomes of work evolve in this era to support improvements in welfare and prosperity across wider swathes of the working population. In addition to the current disruption from the pandemic-induced lockdowns and economic contraction, technological adoption by companies is transforming tasks, jobs and skills. According the World Economic Forum, 43% of businesses are set to reduce their workforce due to technology integration over the next five years3.
And while certain technologies have displaced workforces in certain industries, disruptive technology could ultimately provide the opportunity for re-learning and up-skilling in those industries. The World Economic Forum estimates that by 2025, 85 million jobs may be displaced by a shift in the division of labour between humans and machines, while 97 million new roles may emerge that are more adapted to the new division of labour between humans, machines and algorithms. Similarly, over the next five years, Microsoft estimate that the global workforce can absorb around 149 million new technology-oriented jobs4. Software development accounts for the largest single share of this forecast, but roles in related fields like data analysis, cyber security, and privacy protection are also poised to grow substantially.
Total Addressable Market Opportunity
While society has been on the path towards the “Future of Work” for the last 5 years, COVID-19 has been a radical accelerant towards this operate from anywhere architecture. Longer-term, we believe that this paradigm supports several significant technological, demographic, and social tailwinds, which provide material opportunities for investors. For instance, DocuSign, a pioneer in electronic signature solutions believes that it is participating in a $25 billion total addressable market that is currently less than 10% penetrated by digital solutions5. Similarly, the total addressable market for digital meeting solutions market, currently serviced by companies such as Zoom, Cisco Systems (WebEx) and Microsoft (Teams) is estimated to have expanded to approximately $45 billion relative to a current annual industry spend of approximately $4 billion6. Meanwhile, Slack Technologies, the workplace collaboration software firm recently acquired by Salesforce, estimated that the workplace messaging and collaboration software market represented a total addressable market of $28 billion relative to a current annual industry spend of approximately $2 billion7.
As investors (and individuals), we tend to overestimate short-term and underestimate long-term impacts of technological application. Ultimately, we believe that the rise of the “Future of Work” creates a substantial market opportunity over the next decade, as technologies such as video conferencing, collaboration tools, project management software and e-signature all become mission critical tools.
The Future of Work Enabler: Salesforce
Salesforce is one of the world's leading software platforms, with a comprehensive suite of cloud-based tools that provides clients of all sizes with ubiquitous access to advanced computing technologies such as artificial intelligence and data analytics that enhance the efficiency, sustainability and productivity of their operations. According to IDC, through online tools such as Salesforce’s own “Trailhead” programme (which is a learning experience platform that provides users with an extensive library of educational content on subjects ranging from digital skills to project management), the Salesforce platform alone is expected to be responsible for the creation 4.2 million jobs, and generate ~$1.2 trillion in incremental annual economic value between now and 20248. Additionally, Salesforce is a significant enabler in improved resource efficiency. Salesforce’s cloud platform enables a higher utilisation of servers, delivering powerful technology to thousands of organisations with one set of shared infrastructure. As a result, a transaction on the Salesforce platform is on average 95% more carbon efficient than when processed on premise by a customer9.
Ultimately, the digitisation of humanity is unfolding at unprecedented speed and in our view, Salesforce's scale and technological breadth provides suitable ammunition for the company to continue to capture market share and expand its reach across the enterprise environment.
The Future of Work Enabler: Trimble
Trimble sits at the intersection of the physical and digital world, producing hardware and software solutions that increase safety, operational efficiency, asset productivity and regulatory compliance principally for companies in the construction, engineering, agricultural and transport industries. This group of industries remain some of the least digitalised in the wider economy and the deployment of technology within these environments has the potential to improve not only the economics but also the social benefits for its users. A good example of this is Trimble’s Earth Systems technology, which is used by national and regional governments and businesses to measure and predict adverse weather patterns (or even natural disasters) which have the potential to threaten the safety of workers and the progress of large construction projects. Similarly, Trimble is increasingly innovating the way its software is used within these environments. For instance, the company has collaborated with Microsoft’s mixed reality platform HoloLens to build a set of tools that bring Trimble’s tools on-site. Consequently, Trimble customers can see digital versions of a completed construction project, they can map out and change the layout of walls, positioning of windows and even the materials used in real time. Overall, we view Trimble as an enabler of digitalised world and a beneficiary of long-term structural trends within industrial environments.
The COVID-19 pandemic has highlighted, and in many cases accelerated these structural shifts that (in our view) will continue long after crisis. We therefore see a substantial investment opportunity emerging as a consequence of the “Future of Work” and we believe that the EdenTree Responsible & Sustainable Global Equity Fund remains well positioned to benefit from the long-term secular trends catalysed by disruptive innovation. Our investment framework gravitates towards the identification of high quality companies that positively impact the planet and society, while at the same time ensuring that we remain on the right side of disruptive forces that impact business models, sectors and global economies more broadly. Additionally, we remain consistent in applying our valuation discipline and maintaining the highest standard of liquidity controls.