In 2011 legendary tech investor Marc Andreessen wrote in the WSJ that ‘software is eating the world’. Little could we know how true those words would turn out to be almost a decade later, and on so many different metrics. Microsoft’s valuation for example is close to eclipsing Germany’s entire Dax index. Amazon currently trades on a p/e ratio of 75. Global e-commerce sales are expected to hit $3.5 trillion this year. By 2022 there will be 29 billion connected devices. It is estimated that companies globally will spend a combined $4 trillion on IT. We may soon run out of zeros!
That enormous IT investment by corporates large and small, whether “traditional” technology businesses or organisations in other sectors such as business services, consumer, healthcare and so on, requires careful planning and execution. And this is pushing more and more non-tech businesses to hire or promote (in some cases to board level) expert professionals who can act as a driver and custodian for this process: the CTO or Chief Technology officer.
You may well ask, how is a Chief Technology Officer different to a Chief Digital Officer? High-growth, dynamic, digitally underpinned businesses tend to have a CTO at the core of their growth strategy, precisely because technology is at the core of their service or product proposal. That’s whether they’re offering SaaS solutions to the hospitality industry, whether they help SMEs to find cheaper utilities online, or whether they crunch big data to help companies to better target their marketing spend. By contrast, a company that’s forced to hire a Chief Digital Officer is typically one that needs to help its clients or itself digitalise their business and needs to catch up fast.
So what makes a good CTO? Successful candidates need to have the necessary technical expertise but they must also be ‘boardroom ready’. That means being able to contribute to the strategic direction of the business and also being able to argue the case for necessary investment in the product/service, and/or technology before the CEO and the wider board. Can they see how technology can drive their own business or their clients’ forward at pace? ECI’s focus on partnering with tech-enabled business means that you will find a CTO at the heart of most of our portfolio companies and their business strategies.
Take MiQ for example, which provides clients with data-driven marketing intelligence. MiQ’s CTO Prabhu Prakash Ganesh heads up a 200-strong team in Bangalore working on software engineering, analytics and data science. One crucial trend that the team has focused on is the consumerisation of enterprise IT. As we have grown accustomed to using consumer tech platforms such as Facebook and Amazon, we expect the business tech platforms to offer an equally seamless customer experience and user interface. That includes the internal business software we use at work, as well as the external software we ask our clients to use. MiQ has invested significantly in this area, lead by Prabhu.
Another ECI company, ATG, began life as a publication for the antiques industry. Today ATG manages the world’s leading digital marketplaces for collectibles and secondary goods. That market leading position is due in no small amount to the company’s decision to build out its technology team headed by the company’s first ever board-level CTO Badr Khan, hired in 2018. Badr’s leveraging of management best practices, and roadmap prioritisation helped to speed up delivery times for new technology projects, reduced platform downtime and helped to increase conversions and the number of bids.
Avantia is an online-only insurance provider for high risk properties. ECI invested in the business back in 2014. As Avantia’s CTO, Dan Huddart has focused on building the company’s ability to crunch big data using in-house developed algorithms. The result is better and faster decision making that can produce an online quote within four seconds.
So where can you find good Chief Technology Officers? We are currently in a very competitive market for hiring so recruits are spoilt for choice, especially in international cities such as London which serve as headquarters for large tech companies as well as providing a base for ambitious start-ups. However, many CTOs will balk at working for these businesses, either because the risk profile of a start-up is too high for them, or because they fear they will have less influence at a larger corporation.
Instead, many tech CTOs may choose to work at the sort of high-growth business that offers them a seat at the top table, with access to senior management and influence over technology investment. That’s especially the case for private equity-backed companies that can offer equity incentives for senior employees ahead of an expected liquidity event further down the road.
If you would like to talk to someone about scaling your software business, please get in touch with tom.wrenn@ecipartners.com
