Cloud Software

Software delivered via the cloud rather than installed locally. The COVID pandemic produced three distinct effects on cloud software companies: fake TAM creation (users who would never have adopted without lockdowns), one-time pull-forward (adoption compressed from 1–2 years into months), and durable pull-forward (acceleration of a decade-long migration trend, as seen in AWS growing from 28% to 40% growth at $70B+ run rate). Distinguishing between these buckets is central to valuing cloud software businesses — per Capital Allocation frameworks, correctly identifying durable vs. one-time growth is “the driving function between who does and doesn’t generate returns.”

Where this appears

• Reflecting on Digital Transformations Vs… (tweet)