deal architect

The Infor reboot

I had a chance to listen to Kevin Samuelson, the new CEO at Infor, along with his executives on what he calls Phase 3 of Infor's evolution, focused now on Customer Centricity and Execution.  Phase 1 was Build and Acquire. Phase 2 was SaaS transformation.

To me, this is more of a continuing reboot of Phase 2. I had been very excited at the start of Phase 2 and then saw Infor under-deliver over the next few years. 

As I have written:

"Infor had once been called an “ERP graveyard,” as it had accumulated a wide portfolio of ERP brands including Baan, Lawson, MAPICS, SSA Global Technologies and Systems Union. Those in turn had made acquisitions of their own (such as Lawson buying Intentia). Since they arrived in late 2010, Infor CEO Charles Phillips and his team have been reinvigorating the company. Phillips had called Infor “the world’s largest start- up.” The differentiation Infor promised was CloudSuite for 15 verticals (such as automotive, fashion, and food and beverage) and three horizontals (including corporate and human capital management). Since then, in spite of sizable investments from Koch and others, Infor has not delivered on its promise of vertical functionality."

Without the industry-specific operational functionality, Infor was forced to compete more on horizontal finance, hcm, crm and analytical functionality and its investments in UX with an in-house design agency against Workday, Salesforce and other cloud vendors. In spite of initiatives like UpgradeX, Infor struggled to migrate its on-premise customer base to the cloud without the vertical functionality.

Infor had benefited from the emergence of Infrastructure-as-a-Service. Previous CEO Charles Phillips used to say "Friends don't let friends build data centers". They took some of the capital that would have put towards the infrastructure and applied it into application functionality. Except that they did not architect the product to be multi-tenant like many competing cloud products. I have seen several of my analyst friends heatedly dissect Infor's architecture. Infor has been gradually rolling out specific products in multi-tenancy.

Rod Johnson, Head of Americas touched on their go to market, implementation accelerators and value points. The goal is to encourage legacy customer moves to the cloud. That to me, again, is part of the reboot if customers on such a vast array of products can be consolidated to a smaller, newer portfolio of products.

Kevin and team are modest in what they are promising this time. They are concentrating on 4 core ERP engines - LN for discrete manufacturing, M3 for process manufacturing and distribution, S3 for service industries and back office, and CSI for midmarket. Unbelievably, the competition there has not evolved much, so even after a decade Infor believes it can still do well with these engines. And they are breathing new life into what they call Edge Applications like EAM and CPQ. Especially in areas like EAM, Infor has never had much competition.

What's negative from their point of view is that competitors are starting to focus on verticals. At Dreamforce last month, I saw 7 very well put together industry sessions each with big brand customers on stage (I wrote about some of them here). Workday has been doing well in healthcare and the government sector and with its Prism Analytics and increasingly with its Cloud Platform partners will do even better. Plex has moved into MES for the auto industry. Plenty of startups and SIs are targeting other verticals.

However, we are entering a new decade. Every one of its competitors has had recent changes at the top and Infor similarly deserves a fresh look. In that spirit, I am looking forward to Phase 3 of their evolution.

The Evolution of SAP Analytics

I had been invited to an SAP Analytics influencer summit earlier in the year. Many of the sessions were under NDA, so I had not written about it. However, my notes showed:

• Ambitious, exciting vision, but fragmented execution across portfolio of  tools. Presentations did not appear well connected.
• SAP should be drawing on the operational data and scenarios it has access to across so many industries and geographies. Many of its presentations focused on financials and hcm data.
• The Qualtrics acquisition is still new, but should give SAP a chance to blend X and O metrics - that could be a significant differentiator
• SAP has a partnership with Cloud Elements to access 150 cloud data sources
• 3 customers who presented got into operational metrics, integration with other SAP tools like IBP.
• Lots of Microsoft product mentions across the sessions - O365, Power BI, Surface Hub, HoloLens etc.
• Microsoft with all its tools, Workday with Prism Analytics and Adaptive Insights, and Salesforce with Tableau, MuleSoft and Einstein scenarios, appear to be doing a better job presenting their analytical credentials in the field

This week I heard an update webinar and the messaging was much tighter (with not as much focus on HANA, the database and related services in this webinar). BTW - click on each slide to enlarge.

The SAP Analytics Cloud continues to evolve as a "one-stop shop" for BI, broad enterprise planning and augmented analytics (use of machine learning for pattern recognition, insights etc)

 

SAC is being gradually embedded into various SAP cloud properties. Slow integration (not just with SAC) across SAP cloud applications is a sore subject with many customers so it is good to see this progress

 

BusinessObjects lives on and will continue to be supported till (at least) 2027, (see SAP statement of direction here) and as customers adopt SAC will call for various hybrid management strategies.

I would like to see SAP Analytics continue to evolve so it stands out in the competitive landscape - here's where I will be looking for progress

• Embedding SAC into each SAP cloud app is a good start, but ideally should allow for bi-directional navigation across the properties
• Plenty of sophisticated customer data is in SAP tools like Qualtrics, IBP, AIN, Leonardo ML. Be nice to see them show up in SAC demos.
• Be nice to see more real life customer scenarios in demos, especially those with operational data.
• As it tightens its relationship with Microsoft around Azure, clarify how will that impact the "frenemy" status when it comes to analytics
• We should hear more about automated migration and hybrid management tools SAP is developing to help customers move from the on-premise to the SAC world
• Similarly be nice to hear how license conversion credits will work for customers looking to adopt SAC.

Look forward to the continued evolution.

Trailblazer by Marc Benioff - a review

I have been reading Marc Benioff's new book and also factoring what I heard at the latest Dreamforce, Salesforce's annual conference.

At times, I felt like I was re-reading Frederic Laloux's "Reinventing Organizations" and his points about companies like Patagonia and their deep "sense of purpose". At times, it sounded like Benioff's memoir - he introduces us to his late father, Russell; his mother, Joelle; her father, Marvin and many others and the influences they had on him.

Most times though I felt like he was talking to me. The first person tone of the book brings out plenty of authenticity and comments like "Vulnerability is scary. But it also makes you stronger." I have known Marc as a technology analyst for a while and watched Salesforce take off like a rocket. He has been generous with forewords to my books and invitations to plenty of events where I have found anecdotes for my books and blogs. I chuckled even as I winced when I read how a fall had convinced him to give up on an acquisition bid for Twitter. I had a fall in a restaurant in downtown San Francisco a few days prior. No Twitter bid for me - just reminded me people over 6 feet like him and me just are a bit clumsy and have farther to fall! So, yes, I enjoyed the personal tone in the book.

What's interesting about the first person tone is over 400 Salesforce executives helped shape the book. I understand there was an elaborate process involving coded copies and NDAs. And it shows in the rich set of anecdotes in the book. Which to me was the most enjoyable part. I liked the section he calls the "Merrill Stumble" - if they had not been able to salvage that customer, it would have likely had a significant impact on thee financial services vertical Salesforce has done so well in. I liked how they creatively sold Toyota with an early IoT network called Friend, how they worked with Home Depot to think digitally about a community not just brick and mortar stores.

I also like that the book is generous by citing a wide range of his mid-level executives like Simon Mulcahy, Cindy Robbins, Srini Tallapragada, Molly Ford, Tony Prophet and many others.  

You have to admire Marc for his bravery and the stands he has publicly taken on LGBTQ issues, gender pay equality, homelessness in San Francisco and many other issues. He certainly lives up to a moniker he uses in the book - Activist CEO. He was initially uncomfortable with the term, but with so many causes he has been associated with, the tag fits.

What I would have liked more of is around the other moniker he uses - Chief Answerer of Questions. I ended with many questions reading the book

a) By now, he must be a magnet for all kinds of causes. At Dreamforce his keynote was interrupted by protesters. What filtering process does he use to prioritize which causes should get his attention?

b) A question I have asked a couple of his execs and did not get a good answer. Technology is bought based on functionality, architecture, economics. As an right-brained analyst, I doggedly tell customers not to assign more than 5% of scoring to "intangibles". Should we break that paradigm and give Salesforce a lot more credit for its being a good corporate citizen?

c) As a customer advocate, my biggest "cause" is value and innovation for customers. In the last few years, I have heard from several customer execs they could use a better internal advocate for their R&D priorities especially when it comes to vertical functionality, their quest for productivity over the multi-year contracts they sign, their concern about the cost of all the SIs and other "Trailblazers" in the Salesforce talent market economy. I would love to hear more about that.

Marc is a remarkable human with a heart as big as his hug. His conferences break the mold  - musicians, philosophers, politicians walk the corridors. So, anything he writes draws on his optimistic point of view and his fascinatingly rich network. This book definitely does. Highly recommend it - with the recommendation that you should let the left side of your brain savor it more than an analyst can allow.   

A much better Day 2 at Dreamforce. A fantastic one, actually

Updated for the CPG keynote on Day 3

Day 2 was much, much better than Day 1. It was a day for apps - not causes. Especially vertical apps. Readers know I have been screaming for those.

I watched four sessions on Manufacturing, Auto and Energy; Financial Services and Health/Life Sciences and Consumer Products sectors

While the verticals are vastly different (and Salesforce's groupings are unwieldy in size and coverage), some common threads apply:

Salesforce has big brands working with it in each of the industries - Kawasaki Motors, BMW, Engie Energy, State Farm, Barclays, Johnson and Johnson, NYU Langone Health Frito Lay and Shiseido (cosmetics) among others.

Salesforce is helping modernize some really antique/complex corners of these industries - you have healthcare which is single-handedly keeping fax machines in business, you have equipment dealers who continue with some of the oldest printers in the world, insurance agents who cannot afford tech staff and cramped retail store space

Salesforce is not doing the vertical heavy lifting - yet. The operational systems of record are still the Epics, SAPs, proprietary claims and dealer management systems. However, Mulesoft is freeing up and helping share data locked up in those systems. In the next wave, Salesforce and its AppExchange partners may be able to gradually move into these operational areas.

Salesforce is bringing mobile apps, voice interfaces, machine vision (to help with the CPG store planogram), Einstein AI and Tableau to each of these markets. The end result is pleasing, consumer grade technology that users lap up   

Its sophisticated clients are doing neat stuff of their own. State Farm described drone initiated claims processing. Johnson and Johnson talked about how it personalizes its contact lenses with fitting calculators and other tools (and has dramatically improved doctor visits to conversion ratios). Engie is at the leading edge of renewable energy generation, smart grids and digital energy technology. Frito-Lay says it is actually "embracing complexity" with exploding choices in snacks, go to market channels and yet need to drive sustainability in products.

The customers and Salesforce are feeding off each other. They are building a new generation of vertical functionality. It's exciting for their industries and for the enterprise applications sector. We have had way too much focus on horizontal apps.

A disappointing start to Dreamforce

I wrote last week I am excited about Salesforce's verticals and that I planned to watch many of the industry sessions scheduled at Dreamforce today. However, last year's CEO Marc Benioff's keynote did a really nice job showcasing customer case studies - I shared this post with several other vendors asking them to use as a guide for their own customer stories. So, I was hoping for a redux and set aside a couple of hours to listen to this year's opening keynote - here is a replay.

Marc and his team did profile a couple of customers - State Farm Insurance and Louis Vuitton. However, the focus was more product-centric and rushed. Just did not have, at least for me,  the same impact last year's format did.

Worse, there was a protest which interrupted the session. I have been reading Marc's new book, Trailblazer, and while I admire the positions he has taken on LGBTQ issues, gender pay equality and homelessness among others I have been wondering if that just attracts more causes which clamor for his and the company's attention. I got my answer during his keynote. CNBC reports

"A man standing near the stage started reading from a piece of paper, criticizing Salesforce’s contract with U.S. Customs and Border Protection.

 “Okay, we’re going to let you talk for 30 seconds,” Benioff said to the man. “But, however, at the end of the 30 seconds, you have to agree that you’re going to leave. Do you agree?”"

A giant digital timer on the screen then began ticking down. “We’re going to put the clock up. You have 28 seconds left,” Benioff said."

"Minutes later, another protester started shouting, but the comments were inaudible.

“We’ve heard from your group, and we will [be] happy to have a further conversation with you,” Benioff said. “We gave you your time. We will continue to give you other opportunities to speak. Thank you very much.”

I thought Marc handled the protesters very well and even scored points when he said he supported free speech. But with the timer and a security lady in the picture you got the distinct sense that Salesforce was prepared for this and even bigger protests outside Moscone. Honestly, I was filled with dread - what next?

I had hoped Benioff would do his fireside chat with Tim Cook of Apple as part of the keynote. It was actually later in the day when I had a conflict. Instead, the stream had a fireside chat with Anand Giridharadas, Editor-at-Large for TIME. His focus was what he calls "Voluntary Virtue" - the faux concern he thinks the wealthy show in solving societal issues like inequality. He talked about his book Winners Take All: The Elite Charade of Changing the World. He was particularly tough on Jamie Dimon, CEO of JPMorganChase. (btw I am a Chase customer and personally think their customer service sucks but I thought Anand was unfair to Jamie). More than anything as an editor of a leading magazine I wish he had been balanced. Instead he focused on the two ends of the wealth bell curve and ignored our still-substantial middle class. I tweeted him after the session

By now, I was distracted with calls and had the Dreamforce feed in background. I did see bits of pieces of two sessions which both focused on AI and ethical issues. 

I am approaching the decade milestone of The New Polymath. In that book, I had laid out many thorny technology-led ethical issues. I had interviewed lawyers, academics and analysts on these issues including Dr. Herman Tavani, professor of computer ethics at Rivier College. I had observed

"Clearly, this walking encyclopedia on cyberethics is not being leveraged enough by technology practitioners and future business leaders. (Professor James Moor at Dartmouth also confirmed he is not often consulted by technology vendors.)

In the last few years I have seen it flip. We are proactively worrying about potential ethical issues around AI and autonomous cars when they are years from becoming mainstream. As one panelist observed " AI is like teenage sex: everyone says they’re doing it, but no one actually knows what it is." Exactly, but we still seem to spend hours fretting about potentially biased algorithms, not about the productivity and payback from these new technologies. In contrast, long festering ethical issues I had laid out in my book are still being ignored.  

Look, Dreamforce has always been a "different' conference. It is a Tony Robbins type rah -rah, scream your throat hoarse event. You run into will.i.am and Deepak Chopra and Colin Powell and Richard Branson and who knows who else here.

But at the end of the day, I shuddered that a certain line may have been crossed at Dreamforce. I go out of my way to avoid political media, and in this sanctuary of a tech and innovation event, I should feel sheltered from that.    

I just hope today's vertical sessions focus much more on innovative customers and products. Yes, feel free to call me boring.  

Salesforce's vertical journey

As part of my series of posts on vertical solutions, I had an excellent briefing this week from Neeracha Taychakhoonavudh, EVP of Industries at Salesforce. I am also impressed at the wide range of sessions by industry that are being offered at Dreamforce next week. Here, for example, is the "trail map" of sessions for the financial services sector. They have similar for travel and hospitality, retail and consumer goods, public sector, media and communications, manufacturing, health and life sciences.

It would be fair to say that Salesforce's vertical journey to date has come in fits and starts. In his new book, Trailblazer, CEO Marc Benioff describes the "Merrill Lynch Mutiny". Merrill (and parent Bank of America) in 2013 was at the time Salesforce’s biggest customer and nearly threw the vendor out. As Marc describes they creatively worked out the issues, but as you can imagine a failure there would have significantly slowed down its financial services drive. Similarly, he describes a brilliant piece of marketing to get them to position the Toyota Friend IoT platform and then leverage that to other manufacturing customers. But these were opportunistic moves, not well thought out industry strategies.

Also, after a decade of AppExchange there still aren't many partners that offer detailed operational books of record - like insurance claims processing or retail merchandising or clinical coverage in healthcare on the Force platform. While Veeva which sells in the pharma sector has a annual billion dollar revenue run rate, most of the others are sub-$ 100 million - so somewhat modest after a decade, compared to Salesforce's own rocketship growth selling more horizontally.

The Merrill hiccup seven years ago is a distant memory and its the pace of industry focus has accelerated.  Salesforce's own vertical functionality tends to be in its wheelhouse - in customer-centric, front-office areas like mortgage borrower apps in financial services and local government licensing and permitting in the public sector. 

Given the massive size of the verticals they are targeting, the Salesforce/partner coverage is still limited. But one slide in particular Neeracha presented shows their momentum. They are showing up in more industry specific events like HIMSS and not only attracting more prospects from those verticals (who in turn clamor for more industry functionality) but also getting a chance to understand and potentially recruit the operational vendors who present at those events.

I look forward to next week's industry sessions at Dreamforce and also tracking Salesforce's partner ecosystem growth. After two decades of cloud and in-memory applications, only about 20% of a grid across countries and industry processes has a decent choice in contemporary architecture. So many white spaces beckon. I am truly excited about Salesforce's accelerating commitment to verticals.

 

A perspective on the SAP Capital Markets Day

I am a customer and market analyst and tend to not attend too many earnings calls or Wall Street presentations. But I made time to listen to the SAP presentation yesterday. It was a coming out event for the 2 new co-CEOs, Jen Morgan and Christian Klein and there has been much speculation (with a capital S in my opinion, not fact based) about the activist investor impact on SAP trajectory. The full set of presentations is in the video here - without the breaks its about 3 hours long. The theme was "Growth and Operational Excellence" and I liked quite a bit of what I saw and heard.

To me, growth comes from market differentiation and here are key areas where SAP executives scored well

Momentum in Asia

Both Jen and Adaire Fox-Martin made repeated points about Asia/Pac. SAP is very well positioned in that region as I wrote a couple of months ago "SAP has been in Asia over 30 years and now has over 9,000 employees spread across 31 office in the region. The event in Bangkok showed me just how far the competition has to go to catch up."

Cross-selling

I always shake my head at how little cross-selling has taken place across SAP's product portfolio (listen to Jen starting around 0.16 and Christian around 0.34 about inter-dependence and synergy across SAP products). Most of their competitors can only play in one or two categories.  I am seeing many customers look at application rationalization, and reverse a decade of "ring fencing" their ERP with best of breed cloud applications. As SAP better breaks down its many siloes, starts to show more coherent road maps and delivers better integration, its broad suite should open up many new opportunities within its incumbent customers. 

S/4 adoption

SAP is associated with large, multi-national customers, but the CIO of Chobani, the yogurt company, Parag Agrawal (starting 1:29) was a good representative for the mid-sized, fast growing market that S/4 is doing well in. 40% of S/4 adopters are net new to SAP. The ECC to S/4 conversion market is also gathering steam. As Adaire says, the question for most customers is not 'if" but "when" "why" and "how". As I described in SAP Nation 3.0 - "tilting its bell curve of customers" is its largest single opportunity.

XM and CX

Qualtrics is still a missionary sell to many operationally focused ERP buyers but Ryan Smith humorously reminded the audience that precisely a year ago, he was presenting in a road show which valued the company at nearly $ 5 billion, and that now, as part of SAP, the deal size and customer growth has accelerated. It is another differentiation for SAP. Similarly, SAP has had fits and starts when it comes to the CRM market. But with all the musical chairs in the executive suite at many CRM vendors in the last few weeks you get the sense that market is poised for disruption. SAP's CX portfolio, especially the Commerce piece, and with new leadership under Bob Stutz, will get another shot.    

The Microsoft "embrace"

Microsoft and SAP have been 'frenemies" for decades. At Gartner and since I have written about many joint initiatives like Mondecino and Duet (nearly 15 years ago). The collaboration around Azure opens up support of the vast Microsoft channel, and also simplifies the hyperscaler choice for many undecided customers (while keeping open support for customer loads on AWS, Google and Alibaba clouds). The cloud version of S/4 and SCP should in particular benefit.   

Turning to Operational Excellence, there was quite a bit of focus on margin and cash flow improvement.

Christian has led a digital transformation within SAP for a couple of years and it is accelerating. It's the tagline of "Best Run Business" applied to SAP itself. His points, starting around 0.38, lay out the high level agenda.  Adaire described some of the digital and AI impact on the sales function around 1:26. Thomas Saueressig, starting at 1:09 talks about changes in the development organization. He also addressed the thorny issue of integration, especially across the slew of acquisitions in the last decade,  that customers constantly complain about. In his previous role as global CIO at SAP, he is acutely aware of the pain points (It's also something Bob Stutz in the CX area will have to accelerate). He also touched on centralization of infrastructure. which CFO Luka Mucic quantified (starting at 1:40) as they move from 25 mostly acquired technology stacks to a converged one, and also shifting many cloud loads to the 4 hyperscaler partners.

Luka also touched on improvement of cloud gross margins and marketing and SG&A efficiencies - consolidation of many sponsorships, supplier base among others.

Three areas I would like to understand more:

Margins at the expense of customers?

There is plenty of fat to be removed from within SAP and that should deliver the improved margins SAP is promising to investors. But the temptation in our industry is also to milk the customer (Oracle and the fast growing SaaS vendors are not much better). In the last few years, we have seen quite a backlash to Indirect Access and other SAP audits. I am also seeing SAP propose license conversion fees to move from on-prem to cloud versions. Customers are willing to pay for new functionality, not so much for what they have already paid years in maintenance. So, trying to extract more from older function points, which frankly have been commoditized over the last couple of decades, will only slow down incumbent customer traction.

Focus on total cost to customers?

Historically, SAP has not been very good at benchmarking and managing its partners. That led to my quantifying the huge "GDP" of SAP Nation. As we look at moves from ECC to S/4, I am starting to again see scary SI proposals. Labor intensive and not much automation, with the suspect quality and economics those threaten. Now with the 4 hyperscalers customers could face significant additional exposure. SAP likes to brag it has 000s of partners - without pointing out that cost is borne by customers. I would like to see more SAP detail on how it will better manage its ecosystem, and accelerate its automation and application of ML to its many of the routine conversion, testing, training and other tasks - see more ideas here. Adaire did mention conversion factories - like to hear more about that.

Not enough R&D or Capex to grow the functional footprint?

There was surprisingly little on industry functionality. SAP keeps promising its partners are working on it. For the next few years, it appears there will be little excess R&D or capex for acquisitions. While SAP needs that discipline in the short term, markets don't wait for ever. Beyond verticals, as I wrote earlier this week "the definition of the "enterprise" continues to rapidly expand and morph, and I see a very fragmented market for the next few years". SAP says it has a shot at a TAM of $ 500 billion by 2023. In my opinion, they could already be aiming for a trillion.

Overall, there was much to like in the 3 hours. As an analyst, it is my job to keep pushing vendors to do more for customers, but realize the new executives already have a very full plate to tackle. Should be a very exciting next few years. It is a great way to kick off a new decade!

I will see Josh's five and raise him ten!

Josh Greenbaum has a fascinating post - how Microsoft and SAP plan to take over the enterprise software market. There is much in there I agree with. All the recent executive changes - Jen, Christian, Bill, Bob - are exciting for the industry. Microsoft's infrastructure cloud is on a roll - the SAP "Embrace" and the DoD JEDI contract only add to the momentum. But I see much bigger changes in the enterprise software market beyond what SAP and Microsoft will touch.

To me, Google, Facebook, Amazon and agencies like Accenture with their share of digital advertising and CMO access will continue to significantly influence and morph the CRM space

The customer service segment will be significantly reshaped as IoT, satellite, drone based concepts mature. I expect industrial asset makers like Siemens and Caterpillar and logistics providers like UPS and Amazon to also be major players.

Contract manufacturers like Foxconn and Flex and boutique design firms will have more than their fair share of influence in the product engineering and manufacturing areas.

Amazon, Alibaba and other big commerce sites will continue to commoditize fulfillment functionality for countless SMEs and set a bar for broader supply chain and logistics functionality.

Robotics and other automation vendors will reshape many a business process. Similarly, Google will help many an enterprises rethink processes with machine learning.

A whole bunch of customers are themselves reshaping their industry specific operational systems with custom development and specialist startups - they are tired of waiting for modernized vertical packaged software.

Major economies like China, Japan, Brazil and others have seen so far only modest traction with modern enterprise applications. I have a feeling regional players will have a bigger role in the next few years.  

Josh has a lot of ink about activist investors. To me, they play a vital role in shaking up status quo, but smart as they are, I dont see them as significantly reshaping technology markets. In later, more mature markets, private equity investors have more influence in consolidations and other seismic changes. But we are not at the stage in the current iteration of enterprise software.

Net-net to me : SAP and Microsoft will continue to do well in traditional transactional areas. But the definition of the "enterprise" continues to rapidly expand, and I see a very fragmented market for the next few years.     

Of course, Josh may well be right. My little bet is my ticket to what will be a wild ride. Cannot wait for the 2020s!

A vertical that is growing...well, like a weed

I have been imploring software vendors to globalize and verticalize their applications for a while now - after two decades of cloud apps, less than 20% of the grid of applications across countries and operational processes is filled. I have been increasingly writing about fintech, shop floor, healthcare and other industry functionality. But I wasn't sure when Tom Brennan, CMO of the Salesforce platform-based ERP vendor, Rootstock wanted to discuss what he calls the "Cannabusiness" vertical. I have known Tom for over three decades going back to Coda and more recently, Financial Force. He is a straight shooter, but all kinds of word associations crossed my mind as I thought about roots and weeds.

As background, cannabis legalization has been spreading across North America – 10 states plus Washington, D.C., have legalized recreational marijuana over the last few years, and full legalization came to Canada in October 2018. That made Canada the first G7 nation to do so.  Tom adds "Then you have the hemp side of the market – such as CBD (cannabidiol) oils, which claim to have many health benefits." In many other parts of the world, irrespective of the legal status, enforcement of cannabis and hemp is increasingly lax. While this inconsistency causes nightmares for HR groups in terms of employee drug testing and compliance and for law enforcement, the industry itself is growing rapidly.

According to Rootstock "In just the past three years, industry employment has grown 110%. That’s faster than the ten-year projections for the trendy sectors of solar, wind power, and health care. And it’s why the industry was estimated at $10.4 billion in 2018, accounting for more than 250,000 jobs, and is slated to grow to $21 billion by 2021."

The challenge for the industry is less about selling, much more about quality and consistency. While there are clear exceptions like their professionally run customer, Aphria described later, for many companies in the vertical, the need is one of differentiation earned through reliability.

Tom says "many companies that have entered this market must consider state-by-state regulations. A lot of them implemented entry-level systems or used spreadsheets to manage orders and inventory. But with a booming market, they’re now facing significant challenges around operations, inventory management, compliance, and keeping up to date with changing regulations. Many found themselves in a tough spot."

Rootstock partners with another AppExchange vendor, ComplianceQuest. I had a chance to catch up with Prashanth Rajendran, CEO and Shalini Chowdhary, VP of Marketing and Strategic Alliances.  They have long offered quality, inspection, compliance and risk management to industries like life sciences, cpg, and aerospace. They recently raised a $36 Million Series A round led by Insight Partners. 

The combination with Rootstock offers "seed to sale to service" to the Cannabis industry as the schematic below shows (click on image to enlarge)

According to Tom, the flow is "companies take seeds and cultivate them. And then they have to perform testing and QA to measure potency and ensure consistency in their product. They want to process orders efficiently and compete on both the service and quality fronts."

"On the CBD and recreational fronts, after they’ve packaged their products, they’re fulfilling orders to retailers or selling it through their own store fronts or websites. And all cannabis companies – both recreational and medicinal – have to be able to track incidents, in which customers may have had an adverse reaction. This is a huge challenge, and lot and traceability features can help."

Recent scrutiny of the vaping market is drawing even more interest in quality management and traceability.

"We have track and trace capability where you can drill down from a CRM system. Companies will have the service case. They have the serial number or the lot number and can track it in the ERP system. They can see if it was tested in the ComplianceQuest system. Then figure out, do you need to pull the whole lot? "

Many states are deploying tools like Metrc to track and trace cannabis inventories and products to origin when there are health issues. Besides the compliance issues, there is the inventory shrinkage issue. As Tom says "Companies have cannabis products flying out of their warehouses at a fast pace. When issues arise, they need to be able to track back to where those products came from, from which suppliers and what type of testing was done."

Tom describes some of the customers in this vertical. "NuLeaf is based in Colorado. The company makes CBD oils from hemp. KIVA Connections makes gummies and chocolate bars with THC (tetrahydrocannabinol). Michigan Pure Med is going after the medicinal space and they consider themselves a pharma company"

But their most prominent customer is Aphria which is listed on both the Toronto and New York Stock Exchange, and is one of the largest cannabis companies in the world. In Canada, cannabis is legal for both recreational and medicinal purposes.

Aphria hopes to benefit in a number of ways from the Rootstock/ComplianceQuest functionality and the Salesforce platform including:

• Competitive advantage over other cannabis producers. This gives Aphria an advantage in time-to-market, license approvals and external audit readiness.
• Fast and flexible compliance in a quickly changing, regulated Industry.
• Demonstrable compliance with Health Canada and GMP/GxP Regulations.

Aphria is bringing a professional image to the industry and as the video below shows their "manufacturing" process is increasingly automated. The more this industry matures, the more it should also help the vendors position for other process industry and other regulated verticals.   

Workfront - looking for work productivity in all the right places

Alex Shootman, CEO of Workfront, is versatile on many fronts. He has traveled more of the world than his tech peers. He has a family with adopted kids which deserves to be profiled in a movie. He is very good with financial numbers. But, to me, most impressively he knows the application landscape at many (most?) of his 3,000+ customers.

Workfront positions itself as the "operational book of record" for work. While many tools like Jira aim to provide visibility and productivity across IT programs and projects, Workfront aims much more broadly across the enterprise.

Alex proudly shows slides of customer application landscapes to investors and anyone else interested.  He told me one of his challenges is to keep scaling that customer intimacy culture. For now, the customer-centric gene runs through the organization. As he described in his book Done Right, one of his "laws of leadership” is "What the leader is interested in, people will be fascinated by".

His customers, in turn, say how much they like working with Workfront. Sue Fellows, Chief Customer Officer, interviewed a few of them during the Analyst Day this week that I was invited to. They had stayed on after their Customer Advisory Meeting earlier in the week and joined us for dinner and most of the day. (Next year, I have requested that they consider allowing a few analysts to observe and participate in the entire Advisory meeting.)

Brent Rudewick described how he started in Marketing Operations at Charles Schwab and since has had Risk Management added to his title, and how his group has steadily grown. His Workfront experience has attracted attention of his Investor Relations, Vendor Management and Training groups. Paul Tasker at Sage Software described the role of Workfront as they re-architected and launched a new web site across 25 countries. It involved global, regional and local coordination between Sage teams and those of external agencies.  Think of the coordination and quality assurance challenge. Angela Lapovsky of Lincoln Financial described how they go to market with their annuities, life insurance and other products almost entirely through channels like brokers. Workfront helps with that extended ecosystem and complying with the regulatory issues they are subject to. Since all these executives had marketing roles, I asked if that is Workfront's sweet spot. Alex told me if I had been in the Advisory meeting I would have met many more from other disciplines. When I was first introduced to Workfront they told me they had a "Land and Expand" strategy. Most vendors say that, but I have seen that now in many Workfront customers - they start in a pilot area and in a few years have been adopted widely. 

I had previously seen Steve ZoBell, the CTO present a case study on new product development. It wove together several creative groups in medical product design and product engineering . In the past, an idea for a bionic knee may have been noted but stayed invisible in the CRM system. Each product area would begin design anew. Workfront has changed that.

These buying centers - Marketing Operations, New Product Development, and various corporate shared services - all are increasingly digitized and tend to have a complex web of projects, and most have a high degree of quality and compliance activities to worry about. These buying centers also don't get much love from large technology vendors.

It's not coincidental that we are also seeing growing interest in categories like Robotic Process Automation (RPA) and investments like Salesforce has made in Mulesoft. There are plenty of inefficiencies in enterprise technology "junctions".  

Digital tools like email, instant messages and social media tend to distract workers even more in these hubs. In their annual State of Work survey, Workfront reports "Over the six years we have published the State of Work report, we’ve consistently found knowledge workers on average spend just 40% of their work week on the job they were hired to do." Get your own copy - it's well done.

As Alex says in our digital world "seamwork" is even more important than "teamwork". We heard the term "citizen integration' early and often during the day. They are facilitated by over 150 pre-built integrations Workfront delivers.

For now, Workfront has its hands full in white collar work centers to worry about shop floors, emergency rooms and other operational work areas. Plenty of productivity to deliver in white collar work.

I changed planes at Delta’s Atlanta hub 3 times this week (I love that place, not!). The crowds and the weather and other delays at such hubs are a good metaphor for similar work concentration and inefficiencies at the intersections of enterprise applications. Providing visibility and productivity at these hubs is what Workfront excels at.