The Back Office AI Opportunity
Opportunities to build in AI according to Pat McGovern at Bowery Capital
Earlier this year, Pat McGovern, an investor at Bowery Capital, wrote a blog post on the opportunities he sees for AI automation and optimization of "back office" functions. I interviewed Pat to hear his perspective on which sectors have the most opportunity. You can read the full writeup on their blog, but we discussed four sectors where he sees the biggest opportunities: Healthcare, Transportation, Energy, and Financial Services.
“The buzz around application layer use cases of artificial intelligence in both horizontal and vertical contexts has never been louder. With companies increasingly accepting that AI will be part of their operations sooner rather than later, one big question that is still being answered is where within the mid-market and the enterprise will AI-native applications gain an initial foothold? Over the last 18 months, we have seen early examples of the adoption of vertical AI applications within medium and large companies and this trend will only continue.”
Vertical AI Opportunities
1. Healthcare
Current Challenge: Extensive paperwork between doctors and insurers, including prior authorizations and value-based care documentation
Opportunity: AI can automate repetitive documentation processes and claims management
Vision: The next Epic (leading healthcare EHR) could emerge from AI-first solutions targeting back-office operations
2. Energy
Focus Area: Regulatory reporting and compliance for power plants (nuclear, wind, brown power)
Use Case: Automating permit filings and environmental impact reports
Example: Klir, a company successfully implementing this approach for water utilities
3. Transportation
Primary Need: Managing extensive government reporting requirements for airlines, railroads, and trucking carriers
Applications: Automating pre-trip reports, post-trip reports, and incident reports
Future Potential: Expanding into maintenance scheduling, route planning, and fuel purchase optimization
4. Financial Services
Target Area: Compliance and reporting requirements
Specific Example: Automating Suspicious Activity Reports (SARs) for banks
Growth Path: Starting with compliance automation before expanding into broader operational systems
Back-office operations present an ideal entry point for vertical AI solutions, combining process-oriented tasks that align with current AI capabilities with lower-risk implementation opportunities. As cost centers with stable regulatory requirements, these functions provide both rich data sets and receptive executive audiences, creating a perfect foundation for companies to establish and expand their vertical AI capabilities.
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