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Legacy Giants Crushed: SAP, Oracle, and IBM’s Reign Ends with Cloud and AI


The AI-Driven Resurgence of Legacy Software Giants

As the tech world becomes increasingly enamored with the latest and greatest AI-powered startups, it’s easy to forget that the old guard – the legacy software companies that have been around for decades – are also thriving. In fact, they’re thriving like never before.

Take SAP, for example. Founded in 1972, SAP’s valuation has skyrocketed to a whopping $234 billion, with its market cap growing by over 50% in the past year alone. And it’s not just SAP – Oracle, IBM, Intuit, and Adobe are all enjoying a resurgence in popularity, with their valuations reaching all-time highs.

So, what’s behind this resurgence? Is it just a coincidence, or is there something more at play? According to Gartner chief forecaster John-David Lovelock, it’s all about the shift to cloud computing and AI. "There are a few tailwinds aiding growth – preferences for cloud over on-premises systems, upgrades and expansion requirements," Lovelock told TechCrunch. "But the primary effect is simply digital business transformation efforts that started in 2021 are ongoing."

But it’s not just about the technology itself – it’s also about the fact that these legacy companies have a market presence and stable customer base that startups can only dream of. They’ve got the resources to invest in AI research and development, and they’re using those resources to stay ahead of the curve.

And then there’s the private equity sphere, which has played a significant role in the resurgence of these legacy companies. "A lot of the acquisitions by the PE firms have destroyed the spirit of entrepreneurship and turned these companies into financial robots," Ray Wang, founder and principal analyst at Constellation Research, told TechCrunch.

So, is this the end of the road for startups, and the beginning of a new era of dominance for legacy software companies? Not necessarily. While it’s true that these companies have a significant advantage in terms of resources and market presence, startups can still thrive by focusing on innovation and disruption.

But for now, it’s clear that the old guard is back in a big way. And as the AI bubble continues to inflate, it’s likely that these legacy companies will continue to reap the benefits of their decades-long investments in technology and infrastructure.

The Hype Cycle

But don’t get too comfortable, folks. According to Gartner’s famous "hype cycle," interest in new technology wanes as all the early experiments and implementations fail to deliver on their promise. This is what it calls a "trough of disillusionment." And when that happens, many of those billion-dollar generative AI startups could have something to worry about.

"It’s easy to get lost in new and emerging software markets," Lovelock said. "It is also hard to compete for attention when new AI companies are boasting multi-billion dollars of revenue within a few years of launch. However, traditional software markets have a combined annual revenue over $1 trillion in 2024 – legacy software sales are growing strongly, and AI’s strong growth has obfuscated this fact for many."

So, will the AI bubble burst, and will the legacy software companies come crashing back down to earth? Only time will tell. But for now, it’s clear that the old guard is back in a big way, and they’re not going anywhere anytime soon.



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