This Is the Next Big Opportunity in Tech, and Microsoft Is Leading the Pack

The past several years for the technology market have overwhelmingly been about cloud computing, with a generous helping of artificial intelligence on the side. Both industries will remain big tech focal points for the foreseeable future, too.

The advent of the coronavirus pandemic, however, has rushed another major technological trend into the spotlight. That's work-at-home tools and video conferencing platforms. Enough employers liked them before, but COVID-19-related shutdowns have all but forced businesses to fall in love with them.

Likewise, some big businesses have fallen in love with the idea of being the go-to solutions provider. One only has to look at last week's developments on the work-at-home front to realize to what degree companies are suddenly taking this opportunity very seriously. Verizon (NYSE: VZ) -- which didn't have a particularly unique role to play in the business world -- announced the acquisition of video conferencing service BlueJeans. Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) requested a trademark for the term Google Meet at the same time it updated its virtual meeting platform Meet to integrate with Gmail and look more like the similar service offered by small rival Zoom Video Communications (NASDAQ: ZM).

That's more than a mere casual interest in the technology.

The sudden interest raises two important questions, however. The first is: Who's going to end up winning the new race? The second is: Just how big is this market anyway?

Compass pointing to the word opportunity

Image source: Getty Images.

Microsoft wins

It's not terribly difficult to figure out who's going to ultimately win in the end. While Google has the brand recognition and an existing base of 6 million paying customers of its so-called G suite of apps, this is a fight Microsoft (NASDAQ: MSFT) is positioned to win. Its operating systems and its office productivity software are the backbones of businesses all over the world, and within the workplace, its name carries a bigger cachet.

It's also already got an online collaboration tool in place, called Teams, which Microsoft said in mid-March was serving 44 million daily users, an increase of 12 million in just that one week. [Note that Microsoft's user measure isn't necessarily comparable to Google's total number of businesses plugged into G suite.] Microsoft added earlier this month that a record-breaking 2.7 billion minutes' worth of meeting time was reached this month, more than tripling from the March 16 figure of 900 million meeting minutes. For perspective, Microsoft reported last year that the number of commercial users tapping into Office 365 was in excess of 200 million.

A lot more people could easily be plugged into Teams.

Dealmaking ahead

Perhaps the most compelling argument that Microsoft will emerge from the melee as the market leader is a willingness to acquire any tools it may not have.

The 2016 acquisition of LinkedIn demonstrates the company's intent to dominate the business office, but Microsoft has made many more lower-profile deals in the meantime. In October, it bought Mover, which makes it easy to move files over to a Microsoft 365 account. In June, it acquired Flipgrid, which is a video-based teaching platform.

Microsoft and Alphabet are hardly the only names in the space, of course. Verizon has also tiptoed into the arena, and the aforementioned Zoom Video was a relatively popular option until last month, when a major security flaw in its software was discovered and then exploited. That may have ultimately proven to be a boon for the bigger names now doubling down on the business.

None have explicitly said as much, but Zoom's gaffe likely has most prospective users of online collaboration tools a bit leery of using similarly unknown platforms like Slack Technologies (NYSE: WORK) or RingCentral (NYSE: RNG). A well-established technology company shouldn't bring that risk to the table. Services may cost more, but security is worth the price. This dynamic more plausibly positions RingCentral or Slack or Zoom as potential acquisition targets that would bring one particular piece of technology into a bigger company's wheelhouse.

A multi-billion-dollar market

As for the size of this market, nobody really knows. Work-at-home tools and video conferencing were something of an afterthought until this year when the coronavirus contagion kept millions of people away from work for weeks on end; most remain at home.

There are some numbers that have been tossed around, though, just for perspective. Transparency Market Research estimates the video conferencing market alone was just a bit bigger than $6 billion last year but could swell to more than $11 billion by 2027. Global Market Insights pegs the number at more than $20 billion by 2024. Expanding the lookout to the cloud-based collaboration market in its entirety, Synergy Research Group says the world spent around $45 billion on these tools last year. Mordor Intelligence reports the industry was worth nearly $30 billion in 2019 and could grow at an annual pace of more than 13% for the next several years.

Take all of those numbers with a grain of salt. We're in uncharted waters, and everyone's just guessing. On the flip side, with all the outlooks in the same ballpark, there's a certain degree of credibility to them, at least in scope. Microsoft won't win all of that business either, and even if it does it's not exactly a game-changer. The software giant did $126 billion worth of business in fiscal 2019. Remote work is only a fraction of its total top line.

Still, any market that's worth a number that starts with a "b" is a respectable opportunity, and it's certainly going to be fun watching the world's biggest tech names chase those dollars now that the work-at-home market is fully gelled.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. James Brumley owns shares of Alphabet (A shares). The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Microsoft, Slack Technologies, and Zoom Video Communications. The Motley Fool recommends Verizon Communications and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, and short May 2020 $120 calls on Zoom Video Communications. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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