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Emerging Technology Trends Shifting Businesses

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The COVID-19 pandemic has accelerated innovation in the technology industry, and many trends that we believed would take ten years to achieve now could take just a year to emerge. At Carlyle, we build better businesses by helping companies focus on integrating technology into their business models. Insights from our Global Technology team highlight three trends in technology that are shifting businesses as a result of COVID-19.

Adoption of vertical application software

Businesses are using in-house or third-party developers to build vertical application software, or custom applications that meet a company’s specific needs. Instead of adapting internal systems to fit the parameters of existing software, companies can now customize applications to fit their existing processes. As the technology industry has matured, businesses have realized the importance of using vertical application software instead of more general applications. Vertical application software is designed to be specific to a business or industry and addresses industry needs in a way that general software cannot.

Vertical application software also helps a company uniquely understand its customers, creating a meaningful competitive advantage in our view. We believe integrating these applications is especially important in industries that have unique workflows and data requirements, such as financial services, government, energy and healthcare.

Michael Gozycki highlights the Carlyle portfolio company Unison, a leading software provider that helps federal agencies and government contractors navigate the complex requirements and compliance needs of spending and granting taxpayer dollars. We believe a key differentiator for Unison is their use of artificial intelligence, machine learning and robotic process automation to solve problems and increase efficiency.

Shift to digital business transformation

Digital business transformation is the fundamental reevaluation of how technology and related processes can be used to impact business performance. To embrace digital transformation, we believe a business must significantly invest in technology, platforms and operations. For some companies, this means replacing manual processes with digital processes; for others, digital transformation involves replacing older technology with upgraded technology and processes.

We believe that digital transformation will happen in the cloud, where businesses can benefit from low and scalable information technology costs and serve their customers more effectively. Many industries have been affected by the need to move to cloud-based software, such as construction, energy and government services. While these industries typically have legacy architectures, companies are realizing that they need to embrace software and the cloud-based world.

The increasing use of data both to drive better business decisions and to generate better insights from customers is another key trend in digital transformation. Historically, digital marketing and advertising activities have been centered on manual labor. But today, many of these functions can be automated by machine learning and artificial intelligence. We believe companies that embrace digital transformation benefit from the return on investment of a modern IT architecture, as well as better operating systems.

Embrace of disruptive technology

Our Global Technology team specializes in technology investment and focuses on companies that are fundamentally disrupting the way business is done in their respective industries. These companies often create, market and sell disruptive technology that significantly changes the way entire industries or markets function. We believe machine learning and artificial intelligence are two of the most important disruptive technologies today. Successful businesses are leveraging both to disrupt their markets and drive insight and value for their customers.

Ashley Evans, a Principal on our Global Technology team, highlights Carlyle portfolio company ZoomInfo, a disruptive technology business that uses its comprehensive B2B database to help companies identify, connect and engage with sales prospects. ZoomInfo identified a problem with limited information in the sales and marketing process and discovered how to automate the process after extensive research. The company became an expert in understanding how organizations are structured and used continuous learning to build a database of business professionals and companies around the world.

Carlyle has invested in technology for over twenty years and Technology & Business Services is our largest sector, with over $32 billion in transactions as of June 30, 2020. Our Global Technology team brings together more than 50 experts to evaluate and guide investments in the fields of technology and media. We aim to drive long-term value for our companies, investors, shareholders, communities and people.

Carlyle believes these selected case studies should be considered as a reflection of Carlyle’s investment process, and references to these particular portfolio companies should not be considered a recommendation of any particular security, investment, or portfolio company. The information provided about these portfolio companies is intended to be illustrative, and is not intended to be used as an indication of the current or future performance of Carlyle’s portfolio companies. The investments described in the selected case studies were not made by any single fund or other product and do not represent all of the investments purchased or sold by any fund or other product. The information provided in these case studies is for informational purposes only and may not be relied on in any manner as advice or as an offer to sell or a solicitation of an offer to buy interests in any fund or other product sponsored or managed by Carlyle or its affiliates. Any such offer or solicitation shall only be made pursuant to a final confidential private placement memorandum, which will be furnished to qualified investors on a confidential basis at their request.

Economic and market views and forecasts reflect our judgment as of the date of this presentation and are subject to change without notice. In particular, forecasts are estimated, based on assumptions, and may change materially as economic and market conditions change. The Carlyle Group has no obligation to provide updates or changes to these forecasts. Certain information contained herein has been obtained from sources prepared by other parties, which in certain cases have not been updated through the date hereof. While such information is believed to be reliable for the purpose used herein, The Carlyle Group and its affiliates assume no responsibility for the accuracy, completeness or fairness of such information. References to particular portfolio companies are not intended as, and should not be construed as, recommendations for any particular company, investment, or security. The investments described herein were not made by a single investment fund or other product and do not represent all of the investments purchased or sold by any fund or product. This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. We are not soliciting any action based on this material. It is for the general information of clients of The Carlyle Group. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual investors.