Next Generation Of ProgressScottish Mortgage Investment Trust. Fourth Quarter 2019
The value of shares in Scottish Mortgage, and any income from them, can fall as well as rise and investors may not get back the amount invested.
In this series of articles, we highlight companies in the Scottish Mortgage portfolio that are taking technological advances to the next level, a new generation of companies who will reshape our world and what is possible in the years to come.
Advances in artificial intelligence (AI) means that the world of work as we know it – along with generally linear career paths – will one day be a distant memory. As we see more AI in the workplace, the shape and nature of our working lives will inevitably evolve, as traditional siloed business structures do not sit well with AI experimentation and innovation.
The most powerful benefits of AI come from the augmentation, rather than replacement, of human capabilities. That’s why many companies are already investigating how to encourage employees to utilise such tools effectively. By doing so, they hope to get the best out of both human and machine. We believe that machine intelligence will become a valued resource, improving business profitability through better forecasting, by optimising existing workflows and automating mundane tasks. Although this might seem straight out of a science-fiction movie, it is already a reality in many organisations and a consistent driver of many of these improvements is software. Venture capitalist Marc Andreessen proclaimed in 2011, “software is eating the world” and, sure enough, since then it has been rapidly chomping its way into the workplace.
The Scottish Mortgage portfolio includes holdings in a number of software companies driving productivity and efficiency in our working lives for the next generation and beyond. The largest of these holdings is currently in Workday, which uses a cloud-based platform to focus on human resources. Today, many organisations access machine learning tools through the cloud, and Workday is no different. It offers applications that use data to predict a variety of outcomes and provide new ways to analyse important issues, as well as the skills that are crucial to a company’s workforce. Workday also uses machine learning to help organisations easily recognise, identify, and organise job skills of current and potential employees.
Many businesses create large amounts of digital data but find it a real challenge to capture and translate this into a meaningful form. Anaplan develops software for business planning. Customers appreciate that it was designed and built for today's digitally connected businesses, with an emphasis on collaboration across teams and departments. Crucially, it is also optimised for use on multiple devices, making it reflective of the future workspace. Anaplan’s software allows customers to make better informed decisions in a much shorter space of time than possible with legacy technology.
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As companies expand, maintaining effective team collaboration through good communication is critical to maintaining a business’s efficiency. Portfolio holding Slack is a cloud-based software tool for collaboration and communication across the workplace. It allows teams to send messages, share files and access analytical tools that helps teams work more productively. Conversations within its app are easy to navigate and also searchable, which is why many businesses prefer it to the traditional communication tool of email. The company already has a rapidly growing user base of more than 12 million people.
Zoom Communications’ products are spreading virally through the workplace too, built on the growing reputation of its effective tools that ‘just work’. It is a leader in modern video communications, with easy, reliable cloud-based applications for video and audio conferencing, chat and webinars. Its software subscription business model removes the need for significant investment in legacy systems, driving customer adoption and enabling the company to rapidly grow its market share.
In the cloud based, data-driven world we now inhabit, where employees work across multiple connected devices, digital security is becoming increasingly important. As information expands exponentially, it is ever more important to protect that data. Tanium is a cybersecurity platform. Its powerful software provides near real-time control of computer networks. Initially deployed by the US armed forces, today around half of Fortune 100 companies use it. Tanium continues to develop solutions that work for a diverse range of industries, expanding its product portfolio and addressable markets.
We expect this shared evolution between human and AI to continue, with such innovative businesses playing an integral part in evolving the future workspace. Some established companies will understand the impending threats and will take the necessary steps, but many will find themselves entrenched in their existing legacy business models. That is why we continually challenge the investment cases for all companies in the Scottish Mortgage portfolio. No company can afford to stand still.
IMPORTANT INFORMATION AND RISK FACTORS
Investment markets and conditions can change rapidly.
The views expressed in this article are those of Scottish Mortgage and should not be considered as advice or a recommendation to buy, sell or hold a particular investment. They reflect personal opinion and should not be taken as statements of fact nor should any reliance be placed on them when making investment decisions.
This article contains information on investments which does not constitute independent research. Accordingly, it is not subject to the protections afforded to independent research and Baillie Gifford and its staff may have dealt in the investments concerned.
Baillie Gifford & Co Limited is authorised and regulated by the Financial Conduct Authority (FCA). The investment trusts managed by Baillie Gifford & Co Limited are listed UK companies. Scottish Mortgage Investment Trust PLC (Scottish Mortgage) is listed on the London Stock Exchange and is not authorised or regulated by the FCA.
A key information document is available here.
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