Is low-code still the future?
Not too long ago, investors and big companies were plowing money into low-code products, which aimed to drastically reduce the need for developers and unlock a digital upside for business users. 2022 was the peak for low-code space. Amazon and Google were commissioning huge teams to develop new low-code platforms. At the same time, private equity firms announced fresh investments or M&A deals every other week to avoid getting left behind in the low-code revolution. Not as prevalent as the mention of AI in recent announcements, “low-code development” was still trendy in earnings reports and marketing resources in 20’, 21’, and 22’. Based on Google Trends, we can also see how the term “low-code development” has fallen off from its highs over time.
During its peak, Product, and Marketing Managers were racing to mention low-code and no-code in marketing launch materials. However, this has changed in the last year. Companies are no longer highlighting low-code as their primary value prop. Instead, the focus has been shifted to showcasing a product’s core use case to solve end users’ pain points. Low code is now advertised as a means to an end, just like it always should have been.
The low-code development market has cooled down, affecting companies once highly valued to slash their valuation. For example, OutSystems is one of the top low-code development platforms, valued at $9.5B in 2020. However, in 2022, KKR led another financing round that valued the company at $4.5B — a 55% shaving in valuation. This valuation discount must have been catalyzed by OutSystem’s growth falling from 40% YoY to 15% YoY between 2020 and 2021. Pega Systems, another household name in the low-code automation space, saw its revenues decline in Q1 2023 to US$325.5m (down 14% from 1Q 2022), while net loss widened by US$20.4m from 1Q 2022.
This does not mean that everything in the low-code space is going south. Monday.com is an excellent example of how the company is growing and erasing its losses. For instance, Monday.com’s revenue was $162.3 million, an increase of 50% YoY, and its operating loss was $22.8 million compared to $67.5 million in the first quarter of 2022. While its revenue growth slowed (it reported 81% YoY growth in revenue in Q1 22), its loss also narrowed — a promising sign for sustainable development. Still,
broader macroeconomic factors can weigh heavily on Monday.com’s future trajectory.
Pour one out for big tech’s investments in low-code space. Nothing’s wrong with making big bets and failing, but there is a lesson in the failed experiment. Do not chase new shiny things just because everyone around you is. This should be a cautionary tale for investors and companies spending money on AI. Remember Amazon Honeycode? Honeycode aims to solve business users’ pain points by removing the need to write any code or script. Instead, it offers a GUI-based tool to create lightweight apps. However, it never took off based on my conversations with customers. I have yet to meet someone who uses it for a critical workload. Similarly, Google killed Google App Maker in 2021. App Maker enabled developers to quickly deploy web apps without writing much code. The fact that these experiments failed does not mean that these companies will not continue to invest in this space. I expect Big Tech companies with many engineering resources will iterate on the current products and create some fantastic ones. However, these redefined products will likely involve AI. New offerings must at least be 2x better than the existing solutions to drive customer demand.
The Enterprise Automation market has been another beneficiary of the low-code revolution. Any typical enterprise has many departments running siloed processes that need to be connected to achieve a common business goal. Business users are the core customers of integrating these processes. So, it makes perfect sense to inject no-code/low-code products in this space to 1) remove the need to engage developers to write code to make disparate systems talk and 2) unlock productivity by cutting down the time required to hack the systems. Lots of players in this market and some of them are very well-funded and poised for long-term growth. Workato, which provides low-code orchestration features, among other things, raised $200M in 2022, signaling investors’ confidence in the enterprise automation market. Zapier is a household name for low-code process integration and is currently valued at $4B. Low-code enterprise integration has also attracted companies targeting industry verticals like e-commerce, healthcare, etc. For example, Alloy Automation is a low-code/no-code app integration platform for e-commerce businesses. All this to say that low-code has a strong value proposition when it comes to automating disparate business processes as long as the products can solve core customer pain points, such as ease of use, time spent on getting the procedure done, and reusability.
Interesting trends to watch out for
While products such as Zapier and Airtable work great for primary use cases such as creating a collaborative table, a form, integrating chats, etc., the mass adoption of the low-code tools will come from developers. Non-technical users whose incentives are not aligned with learnings new devices will not spend hours on a new system. It’s hard to context switch and even more challenging when mechanisms involve modifying any scripts or code. For example, you are a Program Manager at an Advertising company responsible for compiling a revenue forecast in collaboration with Finance. You will likely not spend hours setting up a new tool, not to mention time spent on additional troubleshooting and watching training videos.
In the fullness of time, all low-code platforms will have to be converted to pure no-code platforms where business users can drag and drop modules to make applications that solve their pressing needs.
An alternative scenario is that low-code platforms will start marketing their products to developers and technical users instead of business users. I sense that by providing low-code platforms, we can make technical users’ lives much better. We are significantly shaving off hours from developers’ work, which can ultimately benefit business users because tools are now shipped faster than ever because of freed-up dev capacity.
I think the best thing that could have happened to low-code/no-code is the recent push in AI. For example, virtually every customer-facing business will eventually integrate a chatbot into its customer offerings. How do we think companies are going to start integrating those? Are they going to develop their model? Are they going to create these chatbots in-house? The answer is No. Businesses will turn to plug-and-play chatbots that can provide conversational interfaces trained on the business’s customized data. Adding a low-code chatbot is just a start. Things can be interesting once chatbots integrate with your existing applications, for example, Slack, Zendesk, etc., and route customer requests to internal ticketing queue systems.
I expect that low code will continue to dominate data ingestion products and processes. Companies rely on accessing and integrating information from various sources to power their business applications in today's data-driven business environment. Companies deploy engineering resources to access and clean the data used in applications. With the proliferation of enterprise integration companies, I sense that more low-code applications will be spun up to remove the heavy lifting from developers, freeing engineering resources to focus on more critical workloads important to core business.