Why these ASX 200 tech shares could beat the market over the next decade

The ASX 200 is not packed with technology shares like the Nasdaq, but I think there are still some high-quality options for investors willing to take a long-term view.

The key, in my opinion, is focusing on businesses that solve important problems, have strong customer relationships, and can keep scaling over time.

Two ASX 200 tech shares I think could beat the market over the next decade are named in this article.

TechnologyOne Ltd (ASX: TNE)

TechnologyOne is one of the quieter compounders on the ASX.

The enterprise software company serves customers in areas such as government, education, and large organisations. These customers often need dependable software for essential functions, which can make revenue relatively sticky.

I think the attraction is the repeatability of the model.

TechnologyOne has spent years moving toward software-as-a-service, which can provide more predictable revenue and better scalability over time. It is also expanding in the UK, giving the company another potential growth engine.

That overseas opportunity is important.

Australia has already been a strong market for TechnologyOne, but the UK gives it a chance to prove that its software model can travel. If it can keep winning customers there, the company may have a much larger growth runway than investors assume.

This is the kind of business that may not always grab headlines, but it can be very useful in a long-term portfolio.

NextDC Ltd (ASX: NXT)

NextDC is a very different ASX 200 tech share.

It does not sell software. It develops and operates data centres, which are becoming increasingly important infrastructure for the digital economy.

I think this makes NextDC one of the more interesting tech shares for the next decade.

The world is using more data every year. Cloud computing, artificial intelligence, streaming, cybersecurity, online platforms, and enterprise software all require secure, reliable, high-performance data centre capacity.

NextDC is positioned right in the middle of that demand. The company has been investing heavily to expand its footprint across Australia and into Asia. That can weigh on short-term earnings because data centres require significant upfront capital. But I think the long-term prize could be substantial if demand keeps growing.

What I like about NextDC is that it gives investors exposure to technology infrastructure rather than trying to pick the winning software application.

If more businesses shift workloads to the cloud, if AI adoption increases, and if data intensity keeps rising, high-quality data centre capacity should remain valuable.

Foolish takeaway

Beating the market over 10 years is never guaranteed.

But I think TechnologyOne and NextDC both have qualities that give them a real chance.

TechnologyOne has a repeatable software model, a strong track record, and an overseas growth opportunity. NextDC has exposure to the rising demand for data centre capacity as the digital economy expands.

For investors looking for ASX 200 tech shares to buy and hold, I think both deserve a close look.

The post Why these ASX 200 tech shares could beat the market over the next decade appeared first on The Motley Fool Australia.

More reading

• Buy, hold, sell: TechnologyOne, Telstra, and Woodside shares
• Top brokers name 3 ASX shares to buy next week
• 3 super ASX tech stocks I’d buy in May with $3,000
• $10,000 invested in these ASX 200 shares 10 years ago is worth…
• Here are the top 10 ASX 200 shares today

Motley Fool contributor Grace Alvino has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Technology One. The Motley Fool Australia has recommended Technology One. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.