Software stocks were big winners during the pandemic as businesses large and small realized the need to accelerate their digital transformation. In the process, many embraced low-code software, which allows for applications to be quickly deployed with little or no code.
In this episode of "Beat & Raise," recorded on Oct. 8, Fool contributors Jeremy Bowman and Nicholas Rossolillo discuss why low-code is at an inflection point and which companies are poised to benefit.
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Jeremy Bowman: Appian (APPN 4.89%) for those who don't know, it is a low-code cloud software platform. What that basically means is it allows companies to easily deploy apps with little or no code. Sometimes it's called no-code, low-code. The company, they use the terms interchangeably though. Low-code implies that there is a little bit of code in use. To tell you a few things about the company. They are founded in 1999. They had their IPO in 2017. They grew as a bootstrap. They are a little older than most of the cloud companies that are around now, but they were self-funded through customer revenue. That's a big part of their culture and they don't have much debt because of that. That's a good sign. As software shifted to the cloud, so have they. Their revenue is a balance between cloud subscriptions or mostly cloud subscription, and then they still have some on-premise business and then services, like app development, consulting things, and helping company with the nuts and bolts of that stuff. They also rely on partner relationships for that.
Nick, you want to start off with the presentation and talk about the first few slides there with the TAM and the low-code stuff?
Nick Rossolillo: Yeah, Let's get into it. I got my coffee here. I will try to not make this too dense of a discussion here. If you're on the West Coast, and had a heavy lunch [laughs] grab an energy drink, grab a coffee. Let's do this.
Bowman: Sounds good.
Rossolillo: Jeremy, you were talking about the low-code. Actually, on the last show, it was interesting. They were talking about Wix versus Squarespace. That's why I couldn't resist just dropping a comment about Wix because it is a no-code platform as well. Really got to start billing itself as just a super easy-to-use way to get a website started. They've added so many other tools in addition to that. You can know nothing about software development and coding and be OK on one of these low-code, no-code platforms. Appian has this slide in their beginning of their investor day, which oddly enough is the first one since they went public. Is that right, Jeremy?
Bowman: Yeah. The first one in four years. I meant to mention too, the stock is up 500% since their IPO in 2017. I think that's important for people to know.
Rossolillo: It's been an awesome story so far. This low-code, no-code movement. Probably heard it a lot, talked about how it's the future. I think this slide is just they just show the headlines just because it's just such an important movement with something like over 20 million developers around the world. More probably a little bit more than that. But there's this estimate that there's going to be as many as 50 million by the end of this decade. The world is going to need twice as many software developers over the next decade. But as we all know, there's a shortage of labor out there. We all see it when we walk into a retail store or a restaurant or something like that and help wanted signs. But it's actually happening in the tech world. There's not enough software developers. There's too many projects, businesses need to get done, not enough people to work on those projects. Low-code and no-code platforms are helping solve that problem. If you are a developer, Appian is an incredibly powerful tool. Or if you're not a software developer, you can actually still use it and might be part of the creation process. If anyone's ever used Wix before or some no-code platform like that, pretty intuitive user interface. If you know how to doodle, you can figure out how to use a low-code platform. That's in a nutshell what Appian does.
Bowman: Just wanted to say that one of those headlines, too, I think really stuck out to me. This is Gartner, which is the tech research company, saying 65% of app development will be low-code by 2024. You can see the shift happening in the market. I don't know what percent of app development is right now, but it's substantially smaller than that. We've seen that acceleration happen. Really, it's taken off during the pandemic.