Software is Booming

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Software is the fastest growing category of business investment. The rapid rate of money flooding into software supports technologies such as artificial intelligence, big data systems and machine learning. Adjusted for inflation, investments in software grew 11% over the four quarters ended 1Q19. In this same timeframe, investments in equipment and structures have grown less than 4% and 1%, respectively. A reason for this software dominance is cloud computing, a set of technologies for sharing server resources. This relatively new technology allows businesses to outsource data storage, better analyze firm data and protect proprietary information.

Customizing and designing software in-house proves to be difficult for other companies to replicate. Thus, the quicker companies invest in proprietary information systems, the sooner they are able to realize profits. As a result, businesses are competing to procure the most talented programmers and data scientists. Companies investing early in software are gaining competitive advantage, and trending towards the success that hardware found nearly two decades ago.

Please see our May 16, blog, “The Risk of Missing out of Rising Markets.”

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