AI does 'boring' really, really well

Ladies & gentlemen, today is 9th of October 2025, and I have seen the future of AI.

It was built and developed in Brisbane, Australia. How cool is that!

On Thursday last week, having attended TechnologyOne's (ASX: TNE) Showcase event in Melbourne, that was the message I sent to the FNArena team.

Australia is very much playing an active part in the 21st century industrial revolution and it should surprise no-one that one of the highest quality companies on the ASX has created a leading role for itself - globally.

So what does tomorrow's AI future look like?

It's nothing like your average futurist would have us believe. There's no imminent threat to humanity and there are no agile robots waiting to displace us all.

Tech1, as they like to call themselves, assists local councils and universities with rather boring daily back-office chores such as project management, budgeting, data analysis, hiring people and cleaning up graffiti.

All genuinely boring stuff for people like you and me who are not directly involved. Yet, on Thursday, the room packed with customers, staff and financial analysts became visibly excited about next year's AI-driven product upgrades.

The Big Leap forward is Plus, best described as the intelligent assistant we all wish for during busy days.

Key players in the international development of AI, including ChatGPT, Claude and Gemini, have started launching services and applications dedicated to corporate users.

Assuming Tech1's Plus is not that different from what is developed elsewhere, the future of AI, at this point, is very much tied in with making time-consuming tasks less onerous, with some added intelligence on top.

Imagine being part of management at a local council or business. While commuting on your way to the office, your mobile tells you two emails received overnight require your attention.

One is from a supplier who needs your signature, the second is from HR inquiring whether everything is in place to accommodate the new staff member joining on Monday.

Your dedicated assistant knows you haven't signed the contract yet, but it can sign off electronically and drop a copy in your folder?

It also has selected a new desk, chair and desktop equipment, in line with company preferences, and is waiting for your approval to send the orders to Procurement for immediate processing.

Your assistant also informs you the sales team is currently running -2% below target, but the leadership team had a meeting yesterday and has worked through multiple scenarios to get back on top.

Would you like to see a detailed overview of prospects and sales to date?

All this can be done by the time you arrive at the office by simply talking to your mobile phone.

None of the above suggests agentic AI is about to shift return on investment (ROI) for early adopters or cause mass replacement of human capital, but it's easy to see the attraction.

People will be able to do more in less time.

Tech1's agentic Plus only runs on its own platform of ERP software products. The portfolio currently consists of 19 other products that are being upgraded with embedded AI.

The official launch is scheduled for February/March next year.

One of the demonstrations given concerned online applications for modifications to existing properties.

Next year's software upgrade promises AI guidance and support during the application process, as well as faster processing for local council approvals.

Given the political focus on getting more houses built and renovated across Australia, one can but assume this latest upgrade enjoys all the support possible from elected politicians.

Spoiler alert: while Tech1 is the local market leader in this segment, with circa 73% of all Australian and New Zealand residents living in a council serviced by its software, there are plenty of councils yet that do not use its products.

To report that expectations and enthusiasm regarding Plus and AI-driven product upgrades internally at Tech1 are running high is without doubt an understatement.

For good measure: existing users won't be able to upgrade until the official launch in 2026 and they will do so at no extra cost on all existing products (not including Plus).

New onboarding clients will bear a 10% pricing increase.

Early signals from existing users have been positive with the University of Hertfordshire in the UK calling Plus "revolutionary for our industry".

Tech1 has already received a number of pre-launch sales, underpinning management's forecast this will be the best-selling new product in the company's 38-year history.

Tech1 was founded in 1987 by Adrian Di Marco who left the board in June 2022.

By this time next year, management is expecting an uptake of 10%-15% for Plus among customers, with that percentage to grow to 80% by FY29.

The first priority is broad adoption of Plus, through a relatively cheaper price tag, with management counting on the principle that 1 plus 1 becomes 3 through additional product sales.

Tech1's products are currently used by more than 1300 customers (organisations) but most subscribe to a limited suite only.

The expectation is Plus will stimulate demand for additional products as that delivers better service and more value (remember it only works with Tech1 software).

Additionally, the introduction of AI also introduces transaction-related income above standard allocations of AI enquiries.

Equally important: management has cautioned against too high expectations in the short term, emphasising its key target remains accumulating annual recurring revenues (ARR) to above $1bn by FY30.

The growth run rate since announcing this target in 2024 has been better-than-expected and most analysts covering the company would expect this target can be achieved sooner, possibly by FY29 already, if not in the second half of FY28.

At the half-yearly result in May, FY26 guidance for pre-tax profit growth had been upgraded to 13%-17%, including a softer outlook for the second half.

Traditionally, guidance was usually for 12%-16% growth.

Thursday's Q&A with financial analysts was well-attended, including by many a fund manager, and I'd be surprised if post event many are not toying with the idea this company should see growth accelerate in the years ahead, all else remaining equal.

Thus far, only UBS has updated post Showcase presentations among brokers monitored by FNArena. Its forecasts (unchanged) are for $1bn ARR to be achieved by FY29 and for pre-tax profit growth to accelerate to 18% this year (above guidance), 19% in FY26 and to 20% in FY27.

While valuation tends to screen as expensive (see also ongoing positive expectations), UBS views this as "defendable in the context of its long duration future growth and improving competitive advantage".

Certainly, management at the helm is convinced the addition of AI upgrades and Plus to the product suite will further increase the company's competitive moat.

Tech1 is scheduled to release its FY25 result on November 18. UBS expects it to be a positive catalyst for the share price.

Management's long-standing ambition is to double the size of Tech1 every five years. Since 2004, it has outperformed on that ambition, and so has the share price.

Tech1 has been a cornerstone holding for the FNArena/Vested Equities All-Weather Model Portfolio since inception in 2015, and continues to be exactly that.

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