Migrating Complex Enterprise Workloads – A Webinar

I recently participated in a webinar with Velocity Technology Solutions and AWS focused on best practices and lessons learned around migrating complex enterprise workloads to the Cloud. I thought readers might enjoy a listen. Its roughly 30 minutes long.

Here’s a link: https://info.velocitycloud.com/webinar/data-center-migration


Adaptive Live 2019: All Systems Go

Source: Adaptive Insights

Last week, I spent several days at Adaptive Live 2019 in Las Vegas. Overall, I was very impressed with Adaptive Insights evolution and focus, post-acquisition, as it continues to support existing customers while quickly aligning to Workday’s broader technology and go-to-market strategy.

Even though Adaptive launched its’ Sales Planning and Workforce Planning offerings this past year, not surprisingly ninety percent of the 1,600+ conference attendees were there to celebrate the firm’s well-respected Financial Planning heritage and tools.

The event had a number of useful customer panels, and guest-speaker keynotes. For me, however, the highlight of the event was spending time with the leadership team in a series of small group analyst briefings, as well as hearing what’s coming next.

For some time now, I’ve been very impressed with the team that Tom Bogan assembled after becoming CEO in early 2015. This includes, but is not limited to, Bhaskar Himatsingka, Adaptive’s Chief Product Officer, who has done a great job laying the groundwork over the past couple of years for what could potentially be some game changing analytic offerings.

In July 2018, just prior to its aborted IPO, Adaptive announced that it had fundamentally rearchitected its planning, reporting and analytics engine, leveraging what it called “Elastic Hypercube Technology.” Essentially, this new approach provides for unlimited dimensions, dimension values and versions – and does so in a manner that is highly efficient (especially in sparse data scenarios).

A year later, Bhaskar shared that virtually all customers are now on this platform – with many leveraging the new hypercubes at significant scale. While the new platform provides a significant improvement in performance, it also sets the stage for Adaptive to layer in a range of artificial intelligence (AI) and advanced machine learning (ML) technologies, both of which will likely help transform the Finance function over the next decade.

AI and ML Initiatives

Bhaskar highlighted several key initiatives in what Adaptive is calling its “Intelligent Planning Roadmap.” In the short-run, the focus appears to be around automating often mundane processes – such as its soon to be released “Anomaly Detection” offering. Mid-term, the firm emphasized that it will also focus on more strategic initiatives such as the development of “Augmented Analytics” – which, I would presume, could be a basket of capabilities that harnesses data and predictive analytics, supporting and enhancing, rather than replacing, work activity.

It will be interesting to see how the new Data Access Layer that Workday has been developing will not only connect all three of its engines (Workday’s core in-memory database, Prism and the Adaptive hypercube) – but also support its broader ML plans (see Workday Innovation Summit: Key Takeaways).

Based on a series of one-on-one side discussions with nearly a dozen attendees (both existing customers and some prospects), it appears that Adaptive is poised for continued growth – not only organically within its own suite of offerings, but some cross-sell into the broader HCM and Financial Management offerings of its parent Workday.

Emerging Skills Crisis in Finance Real

I walked away from the event even more convinced that Finance is in for a significant restructuring – and we are not talking decades away. While yesteryear’s layering of new, more strategic roles and responsibilities will no doubt continue to have a transformative impact – AI-driven process automation and the emergence of ML-led workflow augmentations will demand a new, more analytics-focused workforce. The coming skills crisis in Finance is real.


ML and AI Signposts

Source; McNee Associates, 2018, N=265

I’ve been attending a number of industry events recently that squarely position machine learning (ML) and artificial intelligence on the forefront of change. Last year, McNee Associates conducted original research with 265 senior business and IT executives in the US, Europe and Asia, to get their sense of the shifts that are occurring.

As the graphic highlights, the use of AI and ML is projected to grow rapidly and broadly over the next couple of years. Our research indicates that 52 percent of executives believe that that their firms will be “gaining scale” or “fully scaled” in their use of AI and ML by 2021, up from only 13 percent last year. Having conducted similar research on next-gen technologies over the years, the slope of change here is significant.

Across the entire spectrum of cloud infrastructure and apps — from vendors such as SAP, Service Now, AWS, Workday, IBM and others — what is clear is that ML and AI are no longer futuristic technologies, but in the here and now. The range and ways that AI and ML are being imbedded into solutions is vast, and often times largely invisible to the ultimate end-user.

Additional insights from the research:

  • 60 percent of execs believe that AI and ML will fundamentally change their industries.
  • Almost 34 percent of execs believe that AI and ML will result in significant job losses. Interestingly, US-based IT and business leaders are more optimistic than their colleagues in Europe and Asia (20 vs. 46 percent). This may suggest that they believe these technologies will play more of a supportive role, augmenting existing skills, or that significant retraining can occur for those displaced vs. wholesale layoffs.
  • RPA led our list of AI technologies in use, followed by Chat Bots, Expert (knowledge-based) Systems, Machine Learning, and Virtual Assistants, among others.
  • Predictive Analytics led the list of top technologies / trends / capabilities that will have the biggest business impact through 2021, followed by Cyber Security and Digitization of Products and Services.
  • As expected (based on previous research conducted in this space), Company Culture and Organizational Willingness to Change topped the list of obstacles / challenges IT organization’s face to successfully navigate the emerging technology-enabled business landscape.


Workday Innovation Summit: Key Takeaways

A little over a week ago, I traveled west to participate in Workday’s annual industry analyst event – now appropriately rebranded the Workday Innovation Summit. As has been the tradition now for several years, the event was held at the beautiful Cavallo Point Lodge, in Sausalito, CA, just below the Golden Gate Bridge.

Source: Workday

While much of the day was spent focusing on Workday’s continued innovation across its HCM and Finance application suites, growing analytics and Cloud Platform capabilities, and AWS support – the theme of extracting greater and greater value for customers, and augmenting executive decision making through machine learning was central to the day. To this end, Aneel Bhusri, Workday’s CEO helped kick-off and frame the day by emphasizing that “machine learning is the fundamental technology of the future.

The good news is that Workday already has a powerful and unified platform that supports many of the key threads of 21st century architecture. Importantly, I came away with a sense that Workday is taking a very realistic approach to their machine learning (ML) investments – focusing on augmenting the user experience, rather than as a replacement – as it builds out a portfolio of algorithm’s that can be applied to a range of business use cases. I’ve just loved the Phil Mickelson “Business Caddy” ads Workday has been running for the past 6-9 months that emphasize, in a non-technical way, machine learning as supportive to executive decision making.

Fundamental to the successful execution of this strategy has been a focus on extracting more and more value from the data that Workday already manages, as well as helping it increasingly become a hub that leverages a broad range of enterprise and external data.

I really liked what I saw in regard to the emergence of a single data access layer and analytics engine (see chart) that will help coordinate all of the data (and machine learning services) across its now extended family of products. While the initial use-case will no doubt bring Adaptive Insights into the “Power of One,” the longer-term implications of Workday’s vision for a single reporting architecture could help the company more quickly integrate potential future (functional) acquisitions as well.

I look forward to learning more about this initiative at the Adaptive Insights event in Las Vegas later this month. In closing, I’d like to share how impressed I always am by how well-run this event is, and how open and frank the entire Workday team is in both sharing and receiving feedback about its future plans. This year was no exception. Well done.


Fresh Beginnings

After a little more than a year on the sidelines, I’m pleased to share that McNee Associates will be much more active on a go-forward basis now that we’ve turned the corner into 2019 – as I am now beyond any constraints in regard to non-competes. I’m especially excited about re-engaging with friends and colleagues throughout our industry, as we are in the midst of so many important disruptive trends and emerging technologies, many of which are driving fantastic business innovation.

In addition to continuing to publish the blog (see topics / themes below), I’m delighted to share that McNee Associates will be providing a range of consulting services for clients. For technology providers, this will focus primarily around Market Strategy and Go-to-Market consulting services, as well as custom research programs that support both internal planning and strategy development, as well as external thought-leadership that can be used to drive business development / awareness with senior business and IT execs. For technology buyers, this will focus primarily around leadership workshops and technology strategy development.

I am excited about participating in a number of industry conferences, events and analyst briefings this year, across the target segments that I’ll be covering. First up is Salesforce’s Analyst Summit late next week in San Fran, to be followed by a number of additional events this Spring. If you are a provider who would like to invite me to your annual conference, or Analyst Summit – just reach out via email or phone (listed on Contact Us), or via LinkedIn.

As noted, I’ll be ramping up my blogging, with a plan to publish a couple of times per month, although we may invite some guest bloggers as well. My blogging will primarily focus on the continued evolution of enterprise applications and infrastructure, and how enterprise data is increasingly becoming a key weapon framing business strategy. This includes the range of emerging analytic tools and technologies that are reshaping how we engage with customers, plan and target new offerings, optimize operations as well as develop new monetization strategies.

Find below a slightly updated list of some of the key trends that I will be tracking and writing about (alpha order only):

  • Advanced Analytics / Data Science
  • Artificial Intelligence (AI)
  • Business and Technology Architecture
  • Business / IT Platforms
  • Business Model Evolution
  • CIO / CFO / CMO Spending
  • Cloud Analytics / Planning / Budgeting
  • Cloud ERP / Financials
  • Cloud HCM
  • Digital Strategy / Enablement / Transformation
  • Digital Marketing / Digital Customer Engagement
  • Driving Innovation / Innovation Management
  • Emerging Technology Trends
  • Future of Work
  • Internet-of-Things (IoT)
  • IT Economics
  • Machine Learning
  • Next-Gen Technology-Enabled Products / Services
  • The New Finance

I very much look forward to the adventures ahead, and encourage everyone who visits the website to subscribe to the blog, and to join me in the coming weeks and months ahead as we explore the future of Business IT!

Best,

Bill McNee
Managing Principal


Sage Intacct: Acquisition On Track

Now more than a year post acquisition, Sage Intacct remains on a solid growth trajectory with accelerating product / technology investments and evolving distribution capabilities. Earlier in October, I had a chance to catch up with the leadership team in San Jose, CA, prior to their annual user and partner event just completed in Nashville.

Business Update

Early on in the Analyst Day meeting, it became clear that virtually the entire leadership team has remained on board, and are committed to its future – and the Intacct “get-it-done” and people-centric culture has been maintained, with the business unit intentionally left alone for the first year. Having been involved in a number of acquisitions / mergers myself, maintaining a low attrition rate across the board is a sign that things are going well.

CEO Rob Reid emphasized that the business unit continues to achieve strong 30-40% top-line growth – with Sage corporate significantly investing in marketing and product management capabilities, and helping expand Sage Intacct’s VAR distribution channel internationally (especially in Europe). Given the $850 million (8.5X trailing 12 month) valuation associated with the acquisition just prior to its planned IPO – we estimate that the unit will likely reach a $130+ million run-rate before year-end, which is a real win for Sage.

While its AICPA channel remains important to its future, the business unit has increasingly targeted a range of micro-verticals (and channel partners) since the acquisition – including SaaS and Software firms, NFPs and Professional Services firms, with plans to expand into Financial Services, Healthcare, Hospitals and Wholesale Distribution.

This evolved go-to-market strategy is apparently working well, as seventy five percent of its new opportunities are now focused around the micro-verticals versus more traditional horizontal marketing campaigns. No doubt, leveraging Sage’s traditional partners has helped grow its VAR channel – however, it is also aggressively building new micro-vertical targeted relationships as well, as it attempts to evolve its Direct / VAR deal mix from 55% / 45% to 40% / 60% going forward.

New Initiatives

While Sage Intacct made a number of new announcements at its annual Advantage 2018 conference in Nashville, TN last week (3,000+ attendees – up more than 50% from last year), the two big initiatives that I’d like to highlight are its launch of the new Sage Intacct Budgeting and Planning Solution, and its investments to embed a range of AI / ML capabilities into the product.

New SMB Budgeting / Planning Tool

While Sage Intacct continues to primarily target companies with 100-500 employees – the unit has a significant number of customers both above and below these thresholds. In fact, its new budgeting and planning offering is especially well suited for companies with 50-200 employees, a segment not very well served by the range of FP&A competitors in the marketplace (including Adaptive Insights, Host Analytics and others).

This past Spring, Sage Intacct acquired a small Tel Aviv-based software developer, Budgeta, that brought the initial version of the cloud-based financial planning and analysis application to market two years ago. Since its acquisition six months ago, Sage Intacct has been harmonizing the data models between its core Financial Management database and the acquired offering, as well as implementing “dimensions” (before launching at Advantage). Based on the demo that was provided during the Analyst Day, the product is clearly very easy to use, has bi-directional data synchronization with the core Sage Intacct data engine, and offers collaborative and what-if scenarios that make it very powerful. The offering is highly customizable, with the ability to add widgets, KPIs and dashboards.

We think this is a very smart line-extension for Sage Intacct. We anticipate rapid product adoption, well beyond the 30 or so accounts that participated in the BETA program – as this is a terrific cross-sell opportunity to expand the footprint into important market adjacencies that are under served (especially for small but complex orgs, with multiple departments outgrowing Excel). Sage Intacct believes that only 5-10 percent of its 12,000 customers have a planning tool. If it can sell even 10 percent of its customer base over the next two years, this would create a significant recurring revenue stream at $10-15K per customer per year. In fact, we would not be surprised to see the new FP&A solution potentially lead a product sale over time, with the ability to up-sell the core Sage Intacct accounting solution when the customer is ready. Everybody does budgeting and planning.

Finance 3.0 and AI

During the Analyst Day event, Sage Intacct emphasized that it believed we are entering a new era of Finance – what it is calling Finance 3.0. It framed Finance 1.0 as representing yesteryear’s focus on financial statements, compliance and the like, with Finance 2.0 helping CFOs move from GAAP accounting to a focus on real-time analytics. In its scenario, CFOs and their teams are increasingly freed up from repetitive tasks in Finance 3.0, to focus on strategic, future-focused issues, including evolving opportunities and threats.

Source: Sage Intacct, October 2018

As the chart highlights, at the heart of Finance 3.0 are three key aspirations: 1) eliminating the close; 2) continuous audit; and 3) predictive analytics. In this regard, Sage Intacct made a number of product announcements that begin to support its vision (e.g., Dynamic Allocations).

However, much of its investment going forward will focus on leveraging powerful (embedded / integrated) AI and Machine Learning (ML) capabilities to automate a number of routine financial tasks being performed today – where a huge chunk of staff time is devoted. In this regard, we wholeheartedly agree with Sage Intacct, as the Office of the CFO is especially ripe for the AI and Automation / bot revolution we are in the middle of.

Great examples of initiatives already underway include performing banking reconciliations, anomaly detection, continuous trend monitoring, and the like. While a number of other financial management players are likewise moving toward a “continuous accounting” or “continuous close” model (see Workday and Adaptive Insights: Summary Notes from Rising 18) – it is clear that Sage Intacct is right there with them for their SMB-targeted market segments.

Lastly, in regards to Predictive Analytics, Sage Intacct highlighted two key initiatives – a new interactive custom report writer and embedded financial analytics (coming in 2019). Importantly, Sage Intacct is now working more broadly with Sage corporate on a range of AI-based initiatives including cash flow forecasting, and real-time performance insights. Leveraging these core technology assets will be critically important to the business units success longer term.

Net / Net

I first started tracking Intacct more than 10 years ago. To see where they have journeyed is truly impressive. I walked away from the meeting firmly believing that the acquisition of Intacct by Sage is working – and will continue to work – so long as Sage continues to give the business unit some breathing room, and foster its people-centric “intrapreneural” culture.

The business unit has remained highly customer-focused – with Sage corporate investing for the future both in terms of enabling technologies (especially around AI), as well as innovative line-extensions such as its Budgeting and Planning solution. With no deflections thus far, Sage Intacct should be in for continued growth over the next 12-24 months. Stay tuned.


Workday and Adaptive Insights: Summary Notes from Rising 18

Earlier this month, I traveled west to the City of Lights (Las Vegas) to attend Workday Rising 2018. No doubt, we all missed CEO Aneel Bhusri’s charismatic presence. But the show went on without a hitch for the 10,000+ who attended. This blog post summarizes some of the broader key themes, but primarily focuses on the key takeaways relative to the acquisition and integration of Adaptive Insights.

Key Growth Themes

It is very clear that Workday is pumping on all cylinders right now – with multiple growth levers driving ever higher performance across all segments of Workday’s main marketing mantra of “Plan, Execute and Analyze.” On the Execute front, this includes continuing to grow its core HCM and Financial Management solutions domestically, as well as a major push to expand its international presence. With 95% retention rates, its 2,300+ customer base is fueling the expansion of a broad cross-sell strategy, with a major emphasis to further round out the “Planning” and “Analytics” segments (focused on below). Rounding out its announcements, Workday introduced what could be a significant initiative it is calling the “Skills Cloud”, as well as further investments its data-as-a-service and benchmarking offerings, its emerging set of Cloud Platform services (both native and on AWS) and future products – all of which will be additive like Lego blocks stacked on top of each other.

Throughout the event, company leaders emphasized the emergence of Workday as the “Predictive Machine.” As we have seen with other significant cloud apps players (see Salesforce 18: And the Beat Goes On), Workday is now several years into its journey to add a machine learning (ML) fabric into the core of its solutions / platform to bring a new level of intelligence and predictive power for its users.

Workday’s Leighanne Levensaler shared in her opening keynote remarks that Workday is “taking a very pragmatic approach to making predictions” – at the same time that developing predictive models in HR and Finance are “more difficult than we initially thought.” This has driven a new hiring profile for the firm that emphasizes next-gen skills, and a better pairing of its growing army of data scientists with subject-matter (business) experts to make sure that they are targeting and solving the right problems. The net of it is that the new ML / predictive layer is clearly becoming table stakes for virtually all major Cloud apps players going forward – which will no doubt only increase customer value and customer stickiness.

Adaptive Insights

With its recent $1.55B acquisition only months behind it (see Workday And Adaptive Insights: A Strong Pairing), it wasn’t surprising that Workday’s plans for Adaptive Insights were front and center at the event.

First, and foremost, it was clear from the get-go that Workday wanted to calm any fears that Adaptive Insight’s existing customers may have – as it repeatedly emphasized that the product line would not be re-platformed, and Adaptive Insights would be managed as a totally separate business unit that leverages a common Workday back-office. The Adaptive Insights product and marketing teams stay intact, which will operate under the Adaptive Insights brand.

The BU is getting beefed up immediately, as the entire Workday Planning team heads over there. Best of breed capabilities and next-gen technology initiatives will be shared (both directions). It is clear that Adaptive Insights will remain a very viable, strong and independent offering for its 4,000+ customers which should help minimize deflections from its large customer base (including NetSuite customers).

As noted, Workday has multiple routes to market with Adaptive. Cross-selling Workday’s HCM and Financial Management solutions into Adaptive Insights upper-mid and large enterprise customer base should yield some quick and sustainable wins. In fact, almost half within Workday’s upper-mid and large-enterprise target zone (1,900 of 4,000) – and only 326 have Workday. While Workday’s direct sales force will focus on these larger accounts, Adaptive Insights highly tuned digital and inside sales driven go-to-market model will continue to target small-to-medium accounts.

No doubt, Workday will begin to aggressively market the Adaptive Insights Financial Planning and Analysis (FP&A) solution to its installed base of 2,300 upper-mid and large enterprise customers. While we anticipate high long-term penetration rates, at issue, however, is how rapidly customers will adopt – as several that we talked to indicated that they will move forward, but only after a wait of at least a year (until Workday fully works out its integration plans).

Adaptive Insights Integration Plans

Source: Workday Presentations, Rising 18

In a small group meeting with the Adaptive Insights CMO, Connie DeWitt emphasized that they have already begun work on a unified UI, and within 12-18 months, will have deployed a unified data model and security model that is consistent with the “Power of 1.” Just to be clear, the two offerings already had some level of data integration.

As the chart illustrates, in Workday 32 (due out in Spring 2019), the company will provide meta data integration that understands the Power of 1, and provides drill through to the data. In Workday 33 (due out next fall), it will provide drill through to objects, as well as Workday Prism Analytics data sharing and a unified look and feel.

I reached out to Ms. DeWitt after the conference to see if she could provide even greater clarity in regards to the integration plans. She emphasized that the goal is for “Workday customers [to be able to] seamlessly share data across Workday applications including Adaptive Insights, have a single security model, and a common user experience. We will not be doing this by re-writing or re-platforming Adaptive Insights, but rather by creating the right software services connections between Adaptive Insights and Workday.”

She went on to explain: “Fortunately Workday and Adaptive Insights share similar cloud-first in-memory architectures that make this transformation easier. We currently have data integration with Workday using a professional services-led approach. As we realize our Power of One roadmap, this will become a product-led unification that is seamless for Workday customers and will not disrupt our non-Workday customers in any way.”

It was clear from the various presentations and off-line discussions that technologies will be leveraged between the development teams, and where applicable they will bring together various capabilities such as their two report writers, leveraging the best of both worlds. Look for significant cross-“pollenization” of its machine learning investments, with PRISM Analytics heavily leveraged going forward.

Workday Planning and Financial Management

Adaptive Insights is now the de facto Planning engine for the company. In fact, Workday quickly launched an Adaptive Insights version of Workday Planning (to complement what it already does around Finance) as a firm declaration of its emerging strategy going forward, although it will keep the existing Workday Planning customer whole by continue to support the product for some time to come. We would anticipate a continued aggressive expansion of Adaptive Insights land-and-expand push into other functional markets (e.g., Sales, Marketing), as it positions itself as the primary competitor to Anaplan – in what otherwise is a highly competitive market (including SAP, Oracle, IBM et al).

In regards to Workday’s Financial Management suite, we gathered that it now has more than 500 customers, 60 of which are public companies that are live on the solution. Workday is likewise embedding machine learning capabilities directly into the product. They already offer solutions around expense reporting, account reconciliation and anomaly detection (in regards to payments), with plans to roll out many more in the coming months.

Lots of talk about moving toward “continuous accounting” or “continuous close” – with the advent of the Workday Accounting Center (to launch in 2020), with its ability to bring non-Workday operational data in through as journal entries, and the ability to trace all the way back to source transactions even if not originally on Workday. We just hope that there is some meat behind the slides in these regards.

Other odds and ends:

  • They made a big deal about the launch of Workday Assistant, but I didn’t see a lot different than what Salesforce is doing with Einstein.
  • Launched “Stories” which looked interesting.
  • Last year launched Worksheets – this year adding “Live Sheets” which provides a potentially powerful real-time presentation tool.

Wrap

While Workday is still very much focused on its core “Execute” offerings in the HCM and Financial Management segments – it is clear that it has expanded its vision significantly into “Plan” and “Analysis.” This provides a much bigger set of add-on opportunities into the base, but also brings with it the many sales challenges associated with a “big-bag”.

With “game-on” in the competitive race to add value from emerging ML fabrics across the broad Cloud apps pantheon, we hope that Workday stays focused on providing very specific / narrow predictive solutions across its primary functional targets, rather than general purpose capabilities.

Longer-term, we would not be surprised by additional strategic acquisitions that help accelerate market growth (especially around Supply Chain) – assuming they can find opportunities with the right cultural and architectural fit. But most we see a period of consolidation over the next 12-24 month (other than tuck-in technology acquisitions), as Workday works hard to make the most of its new go-to-market weapon to expand and grow the company.


Dreamforce 18: And the Beat Goes On

Source: Salesforce / Dreamforce

Last week, I spent several days in San Fran at Dreamforce 18, Salesforce’s annual customer and partner party / gathering. While there were a total of 2,700 sessions, with many, many announcements made, two big takeaways clearly were center stage – Customer 360 and the Einstein Voice initiatives – with a broad range of 2nd tier announcements including partnerships with Apple and AWS. For me, however, the biggest takeaway was a deeper appreciation for the amazing business model that Salesforce has built, and a richer understanding of its sustainable foundations.

Time Tells a Story

Last weekend, prior to traveling to Dreamforce, I revisited my first Dreamforce in 2006, some twelve years ago. How thing have changed, heh? (both for the company, and the enterprise software industry in general.) Luckily, I was able to find a summary research piece I co-authored back then – that highlighted that 5,000 users attended that event, with the vast majority enthusiastic Type A sales execs and leadership. One can’t forget that at that time, Salesforce was exclusively a Sales Cloud provider, with a powerful yet still emerging CRM solution in the midst of its battle with Siebel Systems for CRM market leadership (although Siebel had been acquired by Oracle roughly 12 months prior).  The big news out of Dreamforce that year focused around Salesforce’s upcoming Winter ’07 release that promised expanded functionality, ease of customization and embedded mashup capabilities, AppExchange and the first release of the Apex programming language and platform. All-in-all, a lot of “stuff” – some of it very strategic long-term.

March forward a dozen years to 2018, and one can only be astounded by Salesforce’s significant and consistent growth, as well as the astounding evolution of the Dreamforce event itself. During this span, Salesforce revenues have grown from $497 million in FY07 (end of January Fiscal Year) to projected FY19 company guidance of $13.175 billion. Registered attendance at Dreamforce this year topped 170,000 (with titles ranging from Sys Admins to F100 CEOs), with an estimated 10 million + viewing the various keynotes online. Where there was once one cloud (and a narrower portfolio of development tools and associated integration capabilities), Salesforce now focuses across four major ones (plus several minor ones), each of which are at significant scale: Sales ($4.0B+), Service ($3.6B+), Platform ($2.5B+), and Marketing / Commerce ($1.8B+).

Customer 360

While Salesforce does not like to think of itself as a “legacy” company per se – in many respects the leadership is not given its due in regards to the amazing story of adaptation and evolution that has occurred over the past 20 years (since its founding). The company has transformed itself from a niche cloud-based CRM pioneer into an formidable enterprise-wide application and platform behemoth for all things related to the “customer.” Change is good, but change is hard. Keeping everybody on board with the expanding vision I am sure has not been trivial. Recruitment of additional leadership has been critical – and in this regard, I was quite impressed with the next-generation that is increasingly taking the reins.

The very success that it has had in launching all of its various clouds cuts to the very heart of why Customer 360 is so critically important. Customer 360 is Salesforce’s answer to the long sought after “holy grail” of creating a single-view-of-the-customer – connecting the various “islands of automation” that have grown up – whether it be separate systems and data repositories for sales, marketing or service. What Customer 360 provides is immediate, real-time access to data across these systems, with the ability to create a single view of the customer.

The way that it works is that Customer 360 leaves the data in its original data repository, and connects and manages all relevant customer data and profiles across Salesforce apps using a common Customer 360 ID. In this sense, Customer 360 reinforces Salesforce’s increasingly federated view of data to help create a single view of the customer through Customer 360. No doubt, creating a 360 view should help drive significant add-on business for Salesforce (see below), as who wouldn’t want to 1) better understand their customers and customer behaviors, and 2) drive more personalized sales and marketing campaigns, and connected shopping experiences. The challenge for Salesforce is that from a marketing and branding perspective, this is well worn territory, which will only heighten the need for flawless execution.

Einstein Voice and the Emergence of an AI Platform Layer

In reviewing my notes, I absolutely agreed with Bret Taylor, President and Chief Product Officer, who shared in a special Analyst Visionary session early Tuesday morning that “the platform shift to AI is one of the biggest in 10-15 years.”  Einstein Voice was front and center as Salesforce’s next volley in the race to the 4th Industrial Revolution. My take on it is that while Salesforce demonstrated some advanced voice recognition capabilities, the bigger impact was its ability to impact a range of business workflows, which makes it appear to be a visible winner.

More importantly however, the broader incorporation of Einstein (AI) analytic capabilities across the full range of the Salesforce portfolio of products suggests that a new embedded AI platform layer may be emerging, and this applies not only to Salesforce but to other enterprise apps vendors as well. Rather than general purpose AI engines, these new AI platform layers will need to be very functional specific so that they truly understand the dynamics of the domain that they are supporting. I’ll be pursuing this line of thinking further in future research. Stay tuned.

Resilient Revenue Model

One of the great treats of the conference was joining the Investor (Wall Street Analyst) sessions on Wednesday afternoon – as I walked away better understanding why the Salesforce train stays so mightily on its tracks, year after year. Having worked in subscription businesses for most of my professional career, I was truly impressed by how well Salesforce leverages its highly recurring subscription business model, which drives amazing P&L visibility and predictability. In fact, 80 percent of next year’s revenue is already in the can, with 60 percent already visible two years out.

Source: Salesforce / Dreamforce

More importantly, the presentations helped demonstrate why Salesforce has significant upside potential on a go-forward basis. No doubt the trend toward digital enablement is part of the answer. But a big part also has to do with its strong retention model, and how it generates incremental new revenue from the base. While new logos have long contributed approximately 27 percent of new incremental growth each year, the revenue mix coming from the installed base is evolving significantly over time, and to Salesforce’s benefit.

In FY17, 57 percent of the incremental revenue that came from the installed base was from selling additional seats and upgrades (all highly profitable), with the remaining 43 percent coming from new products. In FY19 (that will conclude at the end of January), new product sales will reach 51 percent – as Salesforce is having greater and greater success cross-selling its growing arsenal of functional clouds and associated capabilities. So far, 38 percent of its customers are multi-cloud – but more importantly, they drive 92 percent of revenue, with these customers typically spending 10X what single cloud clients do. And clearly the longer-term trend is toward more and more customers having multi-clouds. This should translate into big bucks going forward.

What this all means is that Salesforce looks to have a continuing runway of at least 20-25 percent top-line growth ahead of itself (even with the diminishing impact of scale on growth), driven not only by adding new customer logos and selling add-on seats into the installed base, but cross-selling its multi-cloud portfolio. In this regard, Customer 360 should be a real winner that helps create significant upside demand.

In sum, there is growing competitive threats for Salesforce, especially in the CRM and marketing arenas, with SAP, Oracle, Microsoft and Adobe all on the march. Further, the breadth of the company’s portfolio is getting very wide, which only increases operational risk. In such an environment, I wouldn’t doubt some hiccups along the way, due to transitional issues – especially as senior leadership rotates to the next generation. However, the net of it is that Salesforce is a well-oiled machine – and appears well positioned to reach or exceed its FY22 goal of $21-23B in revenue.


Workday And Adaptive Insights: A Strong Pairing

Earlier today I opened my laptop for the first time in 10 days (after a glorious family vacation to Yellowstone) – to Workday’s announcement that it is acquiring Adaptive Insights for $1.55 billion (in cash), inclusive of $150 million in unvested equity issued to Adaptive Insights employees. At 13x (+) trailing 12-months revenue of $114 million (33 percent y/y growth, 3,800 customers), investors Bessemer, Norwest, Salesforce, JMI and others will no doubt be pleased with their return on the $176 million invested across several venture rounds.

While the price tag might appear to be high – more than double what Adaptive Insights impending IPO was valued at – what is less surprising is that these two companies came together in the first place. The Workday leadership team has long known that powerful cloud-based financial planning, budgeting, forecasting, consolidation and modeling software is the most important beachhead to successfully penetrate the Office of the CFO. And Adaptive Insights is a clear leader in this category.

In fact, rumors have long circulated that Workday danced with several companies – including Anaplan, Tidemark and Adaptive – prior to announcing its own Workday Planning offering in 2015. Today that product has more than 250 customers. However, all but a handful are squarely focused around Workforce Planning, as Workday has not yet delivered competitive feature / functionality in the financial planning and modeling arena.

Don’t Derail the Train

Given this, the acquisition should be a win-win for customers. As Workday CEO Aneel Bhusri explained in the investor call earlier this morning, Adaptive Insights will be largely left alone to run as a stand-alone business. The good news is that Adaptive Insights has been integrated with Workday since 2015 – although Workday will move quickly to “harmonize” the Adaptive Insights offering, leveraging Workday’s UI, security and meta-data models. How this ultimately plays out within the context of Workday’s core mantra of “the power of one” is still unknown – but it would not be surprising to see a highly coupled model emerge, given the architectures currently in place. Workday Planning will become the de facto offering for Workforce Planning, whereas Adaptive Insights will become the core offering for both Finance and Sales planning (and any other functional domain it may pursue).

While Adaptive Insights began as a channel-driven mid-market focused player, it has been investing significantly over the past several years to both better scale and support large-enterprise customers (see Adaptive Insights: Poised for Continued Growth, 13Feb2018). In fact, 23 percent of the business now comes from Enterprise customers – which is up substantially over the past three years. With an overlap of only 30-40 customers, the enterprise-focused Workday salesforce should be able to quickly monetize the acquisition by upselling the Adaptive Insights solution into the 450+ Financial Management customers it already has (60 percent of whom are now live) – let alone leveraging it as a lead value proposition to drive new customer acquisition with large enterprise Finance prospects, and cross-sell to Workday’s existing 2,000+ HCM clients.

Given Adaptive Insights heritage, the acquisition should also help Workday evolve its nascent plans to go down market with targeted / packaged HCM offerings that appeal to mid-market customers. What is less clear is how Adaptive Insights highly tuned channel strategy will play out in the new scenario, and how many of its mid-market customers will flee over time that are hooked to other cloud-based systems of record (e.g., NetSuite).

Change in M&A Strategy

While the acquisition is the largest Workday has undertaken to date, the announcement clearly reflects a fundamental change in Workday’s M&A strategy. What the announcement suggests is that unlike many of its previous acquisitions that have focused on enabling technologies / capabilities or to acquire talent / teams (e.g., Rallyteam, SkipFlag, Platfora, Gridcraft, CapeClear) – Workday is now beginning to look seriously at a broad range of adjacencies that can help it maintain its rapid growth clip.

While it would be surprising to see Workday pursue Manufacturing in the near-to-midterm, my bet is that Supply Chain and a deeper / broader view of Procurement could be on the table over the next 12-to-24 months – both sectors that play well in the cloud, and that are ripe for further consolidation. As Bhusri emphasized, however, acquisitions of this type need to highly strategic for the company, and bring with them complimentary company values and culture.

While advanced analytics and data are clearly at the center of its evolving vision, it was very clear from the recent Analyst Summit I attended that Workday will continue to put the pedal to the metal around its core HCM and Finance offerings. At this point, HCM is highly profitable with an industry-leading position among enterprise customers. The acquisition of Adaptive Insights only strengthens and accelerates its market momentum in Finance – with a well-oiled solution that should provide significant cross-sell opportunity.

Net / Net: this acquisition will clearly help Workday accelerate its roadmap by 2+ years, and deliver significant value to customers. All-in-all, this should be exciting to see play out over the next 24 months. What will determine its ultimate success will be how well the go-to-market synergies are exploited / monetized, not only among large enterprise customers but in the mid-market as well.


Pitney Bowes – Transformation in Process

Last week, I traveled to San Diego to participate in Pitney Bowes Software’s annual Industry Analyst Summit. I thoroughly enjoyed getting an update on the company’s progress, as I first engaged with the business unit nearly 10 years ago, a few years prior to the start of the significant company-wide transformation that has occurred after the new leadership team came on board. What I learned is that Pitney Bowes is at an interesting inflection point, where the fruits of its digitally-focused and data-driven restructuring are beginning to overtake the remnants of its legacy SMB-focused mail business.

Transforming a 100 year old business is not easy, especially one that historically was based on a natural monopoly in slow decline – the mail meter. Yet today, it is clear that Pitney Bowes has evolved significantly – leveraging its strengths, while repositioning the portfolio to new growth markets that are now delivering positive (and sustainable) revenue and margin growth.

I must admit, in preparation for the Analyst Summit – I was a bit taken aback when I first read the most recent quarterly earnings call transcript (in Seeking Alpha), in which CEO Marc Lauterbach emphasized that  the “growth is centered broadly around shipping.”  What I didn’t fully understand then, and do now, is that the subtle shift in words – from “mailing” to “shipping” – has allowed Pitney Bowes to leverage its strengths and identity with customers, while significantly reorganizing itself to better monetize its core assets.

eCommerce On The Rise

At the heart of its transformation has been the growth of its eCommerce business, which collectively now makes up the largest share of revenue for the company. I look forward to learning more about this juggernaut when I attend the upcoming Retail (R)evolution conference it is hosting in Orlando in early May. But the net of it is that the company has built a powerful eCommerce and parcel management platform that provides end-to-end support for retailers – from customer engagement / experience all the way through to fulfillment. The recent acquisition of Newgistics – an innovative provider of package tracking / returns – is a big step forward for the company. While its eBay back-end fulfillment relationship was the early catalyst that helped kick-start the firm’s innovations a number of years ago, it now goes well beyond this – as it appears that Pitney Bowes can potentially become an important and cost effective logistics / fulfillment alternative to Amazon for a broad range of online retailers (especially in international delivery scenarios).

Bob Guidotti, head of the Software business unit, kicked off the Analyst Summit by emphasizing that  PBs data assets will clearly help drive the future growth of the company. While the Software business unit has been focused on three  key segments in the recent past – customer information, location intelligence and customer engagement – its emerging data-as-a-service initiative is a clear and visible reflection of its evolving growth strategy.

“Everything is Addressable”

Central to its data business are the 190 million addresses that it has in the US (which is substantially more than the 140 million that USPS has). When combined with its location intelligence data, and a variety of complimentary demographic and household data (as well as digital email addresses) that it has at its disposal, the firm now has an incredibly rich asset that can be exploited by customers – in what it is loosely calling its “Knowledge Fabric.”

In many ways, the broader business trend toward AI-driven decision making is clearly playing to PBs strengths. Interestingly, PBs  ability to uniquely cleanse address-driven data – gives clients an amazing level of accuracy across a number of important use-cases in insurance, financial services, retail, telco and public sector. I can only imagine the impact that this data is having on their businesses, as they better target and price opportunity, or conversely, let the competition take on bad business.

I especially like the new messaging around the Knowledge Fabric, as it uses terrifically vague but compelling language that should help the business unit start conversations and engage with customers around the things that PB does well. The downside is that the concept is much broader than what PB actually delivers, which may confuse some prospects.

All-in-all, I came away with a very positive sense that PB is on the uptick, after years of entrenchment. The combination of its evolving data business (that leverages its heritage around “addresses”) with its targeted software business provides some unique differentiation in the marketplace – all of which will help fuel the firm’s broader eCommerce play.

No doubt, important brand awareness and channel execution challenges exist. I recently talked to several eCommerce and supply chain execs in my network, and PB was just not yet on their radar. I would think that this awareness challenge would likewise apply to the marketing space, which will be critically important to PBs emerging channel-driven growth strategy. Building brand awareness that PB has evolved into a substantially different company will be critically important to their success.


Authored by on September 18, 2019 at http://mcneeassociates.com/author/billmcnee/


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