The low code opportunity

I’ve been thinking about Low Code and No Code (LCNC) platforms lately. If you’re looking for a primer on this topic Shawn Xu has a good two part blog post on the overall market and opportunity.

I’ve mostly been thinking about how the market plays out over the 5-10 years. It’s obvious there’s been a lot of money chasing by both large incumbents and disruptors alike and ZDNet has a good snapshot of the current market environment.

The LCNC platform market will likely get way more disciplined and consolidated over the next 5 years and we are at inflection point for these kinds of companies. It is super important to intersect the current market with a few critical trends that should materialize over the near-to-mid-term.

Increasing demand

The demand for low-complexity process automation and lightweight “apps” seems to be increasing as businesses face increasing demand for better quality of service and lower cost. Simultaneously bespoke software costs face increasing pressure. This might be an opportunity for LCNC platforms as a result of their primary benefits:

1. Ease of use
2. Integrations (Data, Services, Workflows, Identity, etc)
3. Controls (IT, Compliance, etc)
4. Cheap(er?)

Cost pressures and differentiation

Over the last year I’ve spoken with a few LowCode/NoCode companies, and my current employer has a successful LCNC platform. I’ve come to the following conclusions:

• Benefit #1 (ease of use) and #2 (integrations) is not a differentiating advantage and is likely to be commoditized over time.
• Benefit #1 (ease) is really the only capability a disruptor can enter the market with, but needs to be fast-followed with a differentiated capability.
• Benefit #3 (controls) is about trust, which is earned. Large incumbents are generally trusted partners with integrated identity, compliance, etc tools and these control workflows are very sticky. Many large enterprises also have existing identity/directory and authorization systems (Active Directory, Okta, etc) which are incredibly difficult to displace.
• Benefit #4 is a cyclical pressure that will likely churn many LCNC businesses. Large incumbnent players can simply bundle at lower cost to pull forward demand and lower acquisition cost, and then increase prices over time to captive customers. This will likely displace smaller LCNC businesses.

A smaller LCNC company might tout their network effects and net revenue retention metrics as critical indicators that churn risk is low and that growth is coming. However, in my conversations with customers it’s clear that LCNC (especially in the Enterprise space) is not a wild west of random apps/workflows.

LCNC apps and workflows are just as tightly controlled as “ProCode” systems. There is a discipline to this as well. The convention I see is that unless LCNC systems can within <5-10 steps quickly solve a business problem, then it’s likely to be deprioritized or escalated to a bespoke software development project.

This is a threat to smaller LCNC players. If all the existing workflows/apps are simple to reproduce, then it’s feasible that manual migration is simple or simple migration tools can be written to another destination platform. There may even be an ISV/Partner ecosystem that facilitates this demand as we have seen in MSP space for datacenter to cloud migrations.

AI and Large Models

You will likely see funding announcements with quotes from executives and their investors at LCNC business touting their profitability, or highlight their growing SaaS metrics. It’s likely there’s a more fundamental problem at play inhibiting their growth. To compete with larger players the business has to invest in two major expensive initiatives: acquire large customers and spend significant R&D dollars on differentiated capabilities (either proprietary or sourced from a vendor).

A critical differentiated capability will come from Large Language Models (LLMs). The open question is whether the increasing efficiacy of the models that power systems like ChatGPT, Stable Diffusion, etc can be integrated into existing LowCode/NoCode tools at very low marginal cost for the purposes of reducing complexity and improving velocity.

Imagine a world in which you provide the LCNC platform a simple prompt to generate a marketing out reach workflow:

Please send an email to all the email addresses in the spreadsheet below with the following template:

Hello {first_name}, thank you for signing up for webinar last week! We invite you for a free consultation with our expert for 30-minutes. Please sign up at bitly.com/december-webinar-followup?code={engagement_code}

Or even a prompt that generates a bespoke inbound marketing form:

Please generate a form that enables me to capture a customer’s name, email address, and the best time to contact them (AM, Noon, PM)

Here’s an example of the output HTML ChatGPT outputs for the prompt above:

The opportunity

LowCode NoCode companies were built on the vision of democratizing access to software development. It’s a trend as old as products like Microsoft FrontPage (1995) or MacroMedia Dreamweaver (1997). The destiny of these analgous products might play out for the LCNC market and bundling, aggregation and bolt-on acquisitions might be an eventuality.

What’s different this time?

• It’s likely the capabilities of current enabling technologies (like Large Language Models) might accelerate the trend towards consolidation and ultimately starve these companies of marginal customers or the ability to go up-market and acquire Enterprise customers.
• Cylcical cost pressures and reduced hiring might inhibit growth metrics for smaller players

I think this competition is both healthy and normal. One question I might explore in an upcoming post is how this effects the consumers, otherwise known as “developers” across the spectrum of LowCode/NoCode and ProCode. Charles Lamanna makes a healthy case that this is a “tide that lifts all boats” in his hype video the Low Code Revolution —