Ep. 359: The Secrets to Vertical Growth, What it Really Takes to Build a $1B SaaS Company with Matt Garratt, SVP, Managing Partner @ Salesforce Ventures, Trisha Price, Chief Product Officer @ nCino and David Schmaier, CEO & Founder @ Vlocity. From strategies in recruitment and team building to sales tactics, these leaders from Salesforce, nCino, and Vlocity, will discuss the top tips for moving beyond horizontal SaaS and building a billion-dollar SaaS company.

 

This episode is sponsored by Linode.

 

SaaStr’s Founder’s Favorites Series features one of SaaStr’s best of the best sessions that you might have missed.

This episode is an excerpt from a session at SaaStr Summit: Enterprise. You can see the full video here, and read the podcast transcript below.

 

Ep. 360: Digital transformation marks a radical rethinking of how companies use tech, people, and operations to fundamentally change their business performance. Coupa CEO, Rob Bernshteyn, and SaaStr CEO, Jason Lemkin, will discuss how the Cloud has changed in 2020.

This episode is sponsored by Guideline.

 

This episode is an excerpt from Jason and Rob’s session at SaaStr Summit: Enterprise. You can see the full video here, and read the podcast transcript below.

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Matt Garratt
Trisha Price
David Schmaier
Rob Bernshteyn

We’ve shared the transcript of episode 359 below. You can also jump down to the transcript of episode 360.

Transcript of Episode 359:

Matt Garratt:

Thank you. I’m really excited to be here today. I am Matt Garratt, Managing Partner of Salesforce Ventures, and we will be talking about the secrets to building a $1 billion vertical SaaS company, and we’re very fortunate to have two executives from leading enterprise software companies who have done this.

So first, Trisha Price, who is the Chief Product Officer of nCino, who recently had an amazing IPO, and also David Schmaier, who’s the founding CEO of Vlocity, and CEO now of Salesforce Industries, as they were recently acquired by Salesforce for over a $1 billion, as well. So, very excited to have both of you with us today, and thank you so much for making the time.

Before we go into our stories [inaudible] a bit more, provide a bit of context. I’ve had the fortune of working with both of you over the last few years and seeing, really, the change in the vertical SaaS industry change over a number of years. We’ve invested in over 300 companies at Salesforce Ventures and have partnered with both of you closely and it’s been amazing to see this story up close and personal over the years.

Matt Garratt:

I remember a few years ago when companies were out fundraising, vertical SaaS was not as popular as it was today, and part of that is, the adage would go that, “Well, these are smaller TAMs and these are going to be lower gross margin businesses, and if you look at the chart we’re showing, the gross margin in the early days can be as low as 30% and maybe getting above 50%. There’s a lot of services. Are these really product companies? There’s heavy services, at least 30 to 45% versus best-in-class that want to be less than 10%.”

Matt Garratt:

But then when you start to grow and you start to get these customers, you see some really nice benefits. These companies can scale really efficiently. They need fewer sales as a percentage of overall employees. When you look at sales efficiency as measured by magic number, it’s quite good. Retention is much better than most businesses and then the upsell opportunities are quite good, so it’s not surprising that while maybe not so popular a few years ago, you’ve seen quite a few successful exits in this space. A few of the leading companies in the Cloud 100 list, as put together by Forbes, of leading enterprise software companies are in industry verticals and just on the Salesforce platform, the three most valuable companies built on the platform were industry-vertical companies, including nCino, Vlocity, and Veeva.

Matt Garratt:

If you just look at Vlocity and nCino, amazing businesses. Grew to over a hundred million dollars in revenue in five years. As I mentioned, acquired by Salesforce for over a billion dollars and nCino, amazing business. Had a fantastic IPO recently valued depending on stock price around $6 billion, so we wanted to hear firsthand: How did you do this? We have, again, David Schmaier of Salesforce Industries. David, maybe would you give us a quick background about you and what gave you the idea to start this company?

David Schmaier:

Yeah. Thank you, Matt, and it’s great to be here. Thanks for inviting me and welcome to all the folks from SaaStry. I’ve been working in the front office space for 34 years, so I’ve been doing this a long time and when I started, the worldwide market for what we now call CRM software was $50 million globally and so I worked back out of graduate school at a small company called Oracle in the ’80s and I met a guy named Tom Siebel there and I went off and founded a company called Siebel Systems with him and I met another guy named Marc Benioff who went off to found Salesforce, so I was either smart or lucky, and either answer’s okay by me, but maybe a little bit of both.

David Schmaier:

But I had built CRM and then I had built industry-specific verticals, actually over 20 in my prior life, and a few of my colleagues worked with Salesforce right when the app exchange started to found a company called Veeva Systems and Veeva became, I think, it’s still the biggest company ever built on the Salesforce platform and as the worldwide leader in life sciences CRM, and so I saw how successful Veeva was and I went to my first Dreamforce in 2013 to find the next Veeva and what I found was incredible. I was amazed by how big Salesforce was in the ecosystem. I was amazed by the app exchange. I think back then there was 2,800 companies. Now, there’s 5,000 and 2,799 of them were horizontal software companies and one was Veeva. Actually, two. I think nCino had been already started, but I didn’t see nCino there, I didn’t know of them then, so maybe there’s a couple of vertical SaaS companies, but Veeva was a big one and it became clear to me that this was a huge opportunity.

David Schmaier:

I’d built verticals before, so I called up my old friends from Oracle and Siebel who founded Veeva and I got together the next morning with the three Veeva founders, and of course it wouldn’t be a great software company without a cocktail napkin, so on a cocktail napkin, we drew out the strategy for what became Vlocity, so that’s how we got started.

Matt Garratt:

Fantastic. Trisha, I’d love to get a bit more of your background for everyone and then talk about the founding story of nCino, which is certainly a little bit different than Vlocity.

Trisha Price:

Sure, Matt, and David, the reason you didn’t know about the other industry vertical is because that stage, we probably had like two customers or something like that, so we were just too small to be on your radar back then, but I appreciate the chance to talk to everybody today, Matt.

Trisha Price:

nCino is a little bit different in its background. We were actually built out of a bank called Live Oak Bank and Live Oak Bank was founded in 2009 and they had a need for a completely digital bank. Well, to most of you, that may not seem crazy today. You may even engage with a bank that is completely digital today, but at that time, it was pretty much unheard of to have branchless institutions, and so they started looking around for the right software to help digitize their processes and Cloud was important to them for scalability and they couldn’t find anything, so they started working on this concept of digital banking in the Cloud, and from there, very early on, we spun out and created nCino, which is Spanish for Live Oak, and we created nCino.

Trisha Price:

Our roots from the very beginning were built by bankers for bankers and from the very beginning, we made the choice to build the application on the Salesforce platform and since then, we’ve scaled quite a bit. We have over 1100 customers across the globe. We have offices in Tokyo, Sydney, Melbourne, Toronto, Salt Lake City, and then our headquarters here at the beach in Wilmington, North Carolina, and we have over 900 employees.

Matt Garratt:

Super. We went to the idea, so let’s talk about the different phases of building a $1 billion vertical SaaS company. David was kind enough to share this framework that he uses. David, you talked a bit about the team and the founders. Can you talk about maybe a little bit broader than the initial founding team and when you were first hiring people, how did you think about hiring people who had SaaS and software experience versus people that had industry-specific experience?

David Schmaier:

Sure. I think the team is probably the most fundamental step, maybe even more important than the idea, so I’m a big believer in Jim Collins’s book, Good to Great, where “You want to get the right people on the bus and then figure out where you want to drive the bus to,” and luckily from my prior experience, I was able to call a few of my old colleagues who were like-minded, and I think that’s the key is if you’re starting a company, it sounds glamorous, but it’s 24 by seven and it’s a lot of work, it’s exciting, it’s thrilling. There’s amazing highs, but there’s low lows, too, and you have to do everything. You have to plug in the computers, you have to set up the network, you have to figure out how to pay people, you have to find office space, all that stuff.

David Schmaier:

But we found a team of people who are really passionate about building software and building a company and so I went through my Rolodex of top people that I knew from my prior networks of companies and there was a founding six and ultimately 10 of us that banded together in a little low-cost office to figure out how to build a bunch of industry Cloud verticals, and then the key part, which I think we’ll get to later, is we figured out that we had to do it with a partner and so there was no other choice in our mind, we were all aligned at doing it with Salesforce. That was maybe the other most fundamental decision besides the team is the partnership with Salesforce.

Matt Garratt:

Thank you. Trisha, similar question: When you were starting to hire and scale out the team in Wilmington, were you focused on people who had experience in financial services or software experience or a little bit of both and how did you balance that?

Trisha Price:

Yeah, I mean, I couldn’t agree more with David. At nCino, it all comes down to the people and execution, right? Ideas are a dime a dozen, lots of people have lots of them, but to make a company successful, it takes grit, it takes determination, it takes a certain attitude, it takes relentless focus on customers, and that is just a level of execution that you need to get to the kind of success that David’s company and we at nCino have had, and so we’ve always been one to hire for attitude and aptitude more than a specific skill set.

Trisha Price:

Now, in an industry vertical like financial services, you absolutely have to have a deep banking experience and the built by bankers for bankers has been a part of our core DNA, so we absolutely have hired lots of folks with a banking background, but the problem you get if you only focus on folks with a banking background is the faster horse’s problem and what I mean by faster horses is they know how to automate the processes that already exist at a bank, but that’s not really going to disrupt an industry, that’s not really going to get people to get off of their current systems and processes, and so it’s not about faster horses, it was about inventing a car, right?

Trisha Price:

So, how do you get people who are innovative, who can think outside the box? It does require, certainly, people with technical background. For us that didn’t necessarily mean Salesforce. We’ve tended to hire just the best attitude and aptitude full-stack developers we can find and Salesforce has such a plethora of trailheads and training that that’s not really an issue, and so it has been a combo, I would say, of three types of people: the best technical talent we could find with the best attitude, certainly people with deep domain experience, which is needed in vertical SaaS, and then those out-of-the-box thinkers, those inventors, those creative folks who can really cause you to think about things in a different way.

Matt Garratt:

Well, I can attest to the commitment to hire for aptitude versus specific skills. I don’t know if you recall, but we were at dinner one time and there was a waiter that she just blew us away. We were really impressed with her and she ended up becoming one of your… I kept saying, “You need to hire her,” and she became one of your customer success managers, if I recall.

Trisha Price:

Yes.

Matt Garratt:

A full testament to you never know where great talent is going to come from.

Trisha Price:

That’s right.

Matt Garratt:

Let’s move on to the initial product. David, can you talk about the initial product that you took to market? Maybe to provide some framework, I generally think of industry-vertical solutions of having to be sort of full-stack and a bit broader than a horizontal app, and so there’s generally a higher build upfront. Can you talk about the first product and how did you know it was done or at least ready to take to market in the first place?

David Schmaier:

Sure. Yeah, I’m a product person by training and so we had had a lot of experience building SaaS and vertical products. The key for us was we were building not one industry Cloud, but four, and then at Vlocity, we later added two more and expanded to six, so the secret of building one vertical SaaS product is going deep. The secret to building more than one is reusing components so that you don’t have six engines that do the same thing, that you reuse that engine and you get to use what we call metadata to reimagine it for each one of these industries.

David Schmaier:

Luckily, we had had experience doing that, so I couldn’t agree more with what Trisha said: If you do industries, you got to have domain experts, so I had originally four domain experts, now six, leading each one of our industry teams. Then we also hired full-stack developers, so like you said, Trisha, not Salesforce experts, but just great developers and they all learned Salesforce. We immediately standardized on Salesforce and did the full training course, I think this was pre-trailhead, but did whatever the training was back then, can’t even remember what it’s called now.

David Schmaier:

We were amazed how fast we were able to build on top of the platform. So my prior life, I had built the platform and the core apps and the industry apps, but to build the platform can actually be several years of work and cost hundreds of millions of dollars depending on how you do it, and so we got incredible leverage, incredible. It’s hard to overstate this from the Salesforce platform and so we actually created our company in March of 2014 and at Dreamforce, we showed the four vertical apps, which is about six months later, and they were beta releases and then we shipped them soon after Dreamforce, so maybe in seven or eight months, we were able to ship for industry Clouds, and then we were off to the races. But the key again in industry-specific SaaS is understanding the business processes, understanding the critical problems and the issues, and really going deep in each one of these industries.

Matt Garratt:

Now, I want to pick up on that in a second with you, Trisha, but David, I guess when you were building this out and you had such a big vision, can you talk about the fundraising? Did you need to raise more money to build such a big product platform and were there specific VCs that you sought out or that were going to be more attracted to this solution? How did you manage that?

David Schmaier:

Sure. Yeah, I think on the fundraising, maybe our experience was a little unique, which was we knew a lot of people in the industry, so because we wanted to partner with Salesforce, our first call was with Salesforce and John Somorjai and Marc Benioff wanted to immediately invest in our company, which was great. If you’re going to build a company with Salesforce, who better to invest than Salesforce? I think if that’s the question, the answer to that should be yes.

David Schmaier:

Salesforce became our lead investor and then in our second round, there was room for a second investor, and so we went with Sutter Hill Ventures was a VC partner of ours and I had known a bunch of the partners there. It’s a great tier one firm on Sand Hill Road, but I think what they’re looking at when they’re trying to fund you is this wheel of: Is there a great idea? Is there a strong team that’s done it before? What is the product, or what will the product be, or where is the product? Do you have customers? And then, how repeatable is the model? And so, because we had done this before, we were able to very quickly do the fundraising, so we literally had like two meetings with each one of the investors and were able to close on the financing, so I don’t think that’s normal. I wouldn’t expect that to be the typical process, but it was pretty straightforward for us

Matt Garratt:

And Trisha, maybe back to the product and building the platform: How do you compare this building a more vertical industry solution versus a horizontal application and how challenging is that initial build?

Trisha Price:

Yeah, I mean, certainly when you’re in a vertical build, the depth you have to go to for customer success is deep, right? There has to be value that you’re delivering beyond a surface level set of features. It’s got to solve end-to-end problems at a financial institution or whatever your vertical may be. It may be that they’re on spreadsheets or word documents or things of that nature and so maybe your barrier to entry in those type of processes can be a little bit lighter, but if you’re doing a rip-and-replace of a legacy solution, that requires an end-to-end set of features that really solve that end-to-end business problem, and that typically means deep integrations, right?

Trisha Price:

Most of these vertical industries that we’re talking about, you’re not the only shop in town, right? It’s an ecosystem of applications and so having a very strong approach to integrations, whether it’s one like Salesforce took with having your own app exchange type concept and ecosystem or whether you’re building direct productized integrations or a combination of both, that takes quite a bit of time, not just to solve your end-to-end set of workflows and feature sets, but to get those integrations right for customer success.

Trisha Price:

I do think that takes time, but I completely agree with David: Building on top of Salesforce dramatically decreased our time to market. From my background, I’ve been building banking software for my entire 20-plus year career. It’s really the only thing I’ve ever done, pretty much, and so for me, this was the first time I’ve worked for a product company built on top of Salesforce. It was a tremendous difference for me to come in, certainly a learning curve of different ways of doing things that takes some getting used to, but the benefit that we received from it from a company perspective was tremendous.

Trisha Price:

It wasn’t just in the early days to get that product out quicker. Think about the scalability as you go global. I talked about our offices in all these different countries across the world, data centers. I mean, have you thought about data centers in Japan? Have you thought about data centers in Australia? These are not simple things to solve. And then you layer on top of that platform features like multicurrency, multi language, you layer on top of that things like entitlements in security and investment in security and so that certainly did impact our ability to get to market, even with the kind of complexity and depth that our product and our vertical requires.

Matt Garratt:

You hit on something pretty interesting there, Trisha. When you said you’re talking about ripping out incumbent players. Even if it’s a bad solution, as long as people aren’t miserable, they’re not going to rip those out if it’s part of your banking platform. What was the core value proposition or the thing that you focused on most that was the most convincing thing or that really was compelling for banks, particularly the larger banks, to move off of their incumbent solution to you?

Trisha Price:

Yeah, I mean, for us, it has changed over the years and it has changed as we’ve launched new solutions, right? When we first started, we primarily focused in the commercial lending space and since then, we’ve launched retail banking solutions as well, and retail banking solutions tend to be more fully banked than the commercial lending space was when we first started, which was a lot of spreadsheets and Word documents in the early days. Changed a little bit now, but primarily, that’s still true.

Trisha Price:

But from the beginning, we’ve had core value that we’ve been able to deliver to our customers, right, faster. As a customer, what do you care about when you’re applying for a loan? Am I approved? When do I get my money, right? Whether you’re a business or you’re a consumer. And so, how do you help banks do that quicker? How do you help them do that at scalability and how do you as a software company do that for the smallest community and regional institution in the US to the largest, most sophisticated global institutions in the world on one code base, right? Cloud, definite differentiator, right? Because if you look at these financial institutions, they have growth aspirations, right? They get acquired, they acquire other institutions, so having immediate scalability of the Cloud, definite differentiator, and then having a set of features and solutions that drive value of regulatory compliance, supporting their growth strategies, doing it in a cost-efficient way are really our core values in how we think about building software and why I think so many customers have jumped on the nCino product.

Matt Garratt:

Maybe a follow onto that: When you’re building an industry-vertical solution, how do you avoid a lot of the customization work? Is that a challenge from company to company? You have presumably a somewhat smaller TAM and if a large bank is coming knocking and they want something, how do you balance that in making something that’s reusable without too much customization and services?

Trisha Price:

Relentless focus, relentless focus. It is very easy in vertical and these kind of depth of applications, and I know David’s been faced with this, I’m sure, many times, to get off course from the industry product that you’re building and say yes to a customer. But if you have those creative people that I talked about earlier, you can figure out how to solve a customer problem, but do it in an industry way. I think, yes, that requires the customer to be able to apply configurations on top of your base product to meet their needs and it requires some ingenuity in how you code and create a product, but it certainly can be done, and I think coming back to the Salesforce platform, Salesforce has done this phenomenally as a platform, and so you can learn from what they’ve done and take advantage of a lot of their configurations to handle that in a similar way that they have.

Matt Garratt:

Well, we are at the bottom of the hour, so, David, Trisha, thank you so much for taking the time, walking us through your experiences at Vlocity and nCino. It’s been a pleasure working with you, and a pleasure talking here, so thank you both so much.

Trisha Price:

Thank you, Matt.

David Schmaier: 

Matt, thanks so much.

*****

Transcript of Episode 360:

Jason Lemkin:

Good morning everybody. I’m super excited for the next session at SaaStr Enterprise with one of my favorite CEOs in one of, I think, one of the most interesting cloud companies, Coupa, and I’m glad to have Rob back at SaaStr in general. He was kind enough to come a couple of years ago when Coupa was still on fire, maybe had recently IPOed, I don’t know the timing. But I’m super glad to have Rob back now because Coupa, to me, in the crazy world we’re in, is at a very interesting intersection. And there are what we’ve talked about as COVID beneficiaries. Folks that have benefited from these crazy times and Coupa is one of them. Coupa’s growing quickly and its stock price has done fine and it has benefited.

Jason Lemkin:

But at the same time Coupa is the market leader in spend management, and managing procurement, and managing supply chains and those are areas that are deeply impacted by the economy, deeply impacted. It’s hard not to walk downtown through [inaudible 00:01:05] it to see what’s happening in healthcare all over the place, in financial services. And so Coupa is super interesting because it’s benefiting as a software player but yet it has this insight into the economy of software and the economy of the real world that I can’t think of another vendor that has. I’m super excited to talk with Rob and down at the bottom on the Zoom, hit Q&A, we will save time for questions. We had a few already come in but click there and I’ll remind you at the end so we can chat and I can let Rob talk a little bit about Coupa and then we can chat about it but managing almost 2 trillion of spend across basically all segments of our economy. Which we’ll chat about.

Jason Lemkin:

Coming up on 500 million in revenue, whatever the exact number is, no forward looking statements in this presentation but what’s super interesting that I’ll make sure we talk about even here is that Coupa has redefined the category and now has more revenue in this category than ever existed. What does that mean for the cloud? How do you change a category? And again, we’ve been talking about digital transformation for 20 years, probably, Rob, since you and I started in software but so much has changed. I want to dig into a bunch of things on the slide but what are you seeing? What’s changed the most since March 15th? What’s unexpected? What’s expected? What are the number one things that have shocked you, or have been pulled forward years that you weren’t expecting?

Rob Bernshyten:

Well, I think as everyone is saying, Jason, and again thank you for having me on, there has been a greater energy and focus in what was already happening, which is the move to digital. I think in our case it’s even more interesting because when you’re in times of hyper growth folks tend to focus a little bit more on revenue than they do on profitability. And they do on operational efficiency frankly and our value proposition at Coupa has always been to help companies become more operationally efficient. To help them unlock all of their potential so they can pursue all of their missions and visions.

Rob Bernshyten:

Obviously we’re doing that now for hundreds and hundreds of companies around the world. It’s an opportunity to engage in the same dialogue we’ve been having now for well over a decade but the ears are perking up even more because they know that they need to move to a digital method of driving their operational efficiency, understanding how they’re managing their spending as it pertains to everything they need for their business, how they’re thinking about supplier risk, how they’re thinking about their inventory levels, their sourcing activities, and so much more. It’s really, really exciting for us to have a greater emphasis into an area that we know is so important anyhow.

Jason Lemkin:

It’s interesting because it’s different for different vendors. Since March 15th, was there a trigger point where maybe I had a project that I was talking to Coupa, it might be a 2021, 2022, 2023 long term deployment because you have many enterprise customers. Was there a particular drama issue, shelter issue, a wedge issue that got projects pulled forward years?

Rob Bernshyten:

Well, interestingly enough it was actually a bit of the opposite in the first month or so, and I mentioned that on the last earnings call. There was almost a deer in headlights moment amongst all the vast majority I would say of our prospects around the world whereas we don’t know what’s going to happen so we actually need your help. We need to get PPE equipment. We need to get things to sort it out so then I’m back in two, three weeks. You can do that. It was really rewarding for us here at Coupa. We have this robust community of existing customers and they came together on our platform to source personal protective equipment for their organization. We were less oriented to how do we close more business during that first month, to more oriented towards how do we help this community make sure that they are going concern which was very real in some industries for sure.

Jason Lemkin:

Yeah, we’ve all been through four phases since March. I hadn’t fully… I did hear that when you said it before but didn’t think through it. There were vendors where the end of March into April were crazy even Zoom the next day exploded. But even Slack it took a while for folks to figure out we needed to Slack more. Then Slack took off. You had the chief procurement officers, CIOs and others needed to survive for that first month. Then what was… Has there been four waves? What are the next couple of waves that you’ve seen across your partners and customers?

Rob Bernshyten:

Well, the most interesting thing for us is that we’ve taken dozens of customers live since this hit. Because it’s one thing to sell new prospects, and of course we’re focused on that, and we’re doing just fine there but when you think about the existing inflight projects when suddenly these people are operating from home and they’ve never operated in a virtual environment, and to take large global deployments live and have see them start running massive amounts of spend through our system.

Rob Bernshyten:

Ceding them control spend. We have a whole bunch of customers who didn’t have control over their spend. They couldn’t stop the company from spending money in certain places. We’re able to help them do that on their mobile phone through our integrated email capabilities offered via Coupa. That was very, very rewarding and powerful. And then of course we reemerged and we started looking at how we can drive our global reach and expansion, obviously we’re well into that now months after the crisis started.

Jason Lemkin:

For a big Coupa customer, pick one if you want or don’t or an example, but before March 15th what was a typical deployment to be fully into production? Not an agile kind but maybe an old school type. Would it be a year? Would it take a year from really signing and fully going live? If it was or whatever it was, how do you compress that into weeks? How do you manage the team? How do you do the internal change management and the external because we’re not necessarily wired that way until March, were we?

Rob Bernshyten:

That’s right. Well the average is roughly six to nine months for our enterprise customers. Our mid-market customers, four, maybe five, weeks, so it’s not bad. But you know what happened is that we gained a lot of efficiency ourselves in working while our customers remotely, you don’t have the time. “Well we’ll meet you on Thursday we’re going to fly in. Were all going to get into a room.” “Well, it’s Monday let’s just do it right now.”

Rob Bernshyten:

You’d get the systems integrator on the Zoom session, you have the existing customer on the Zoom session, you have my Coupa colleague on the Zoom session. We’re sharing as you’re sharing this slide the configuration set up and literally walking through it. In many ways we stand to gain an advantage in the efficiency with which we can work together as long as we can overcome the change management required for some folks, as you say, to be a little bit more tech savvy and be willing to work in this way. We’re seeing that happening without a doubt.

Jason Lemkin:

Where do you think… It’s hard… There’s so much change it’s hard to even predict but in some ways it’s great that you can now deploy customers over Zoom, right? It’s so much more efficient. You don’t have to get on an airplane. You don’t have to book the hotel and all this but some things are lost and some things are different. Has enterprise buying changed? Do you think it will swing back into the middle? Can we live this dream where we never have to get on jets again? Where do you think we’ll be on the other side of COVID?

Rob Bernshyten:

You know it’s hard to predict that, Jason, of course, and probably it’s somewhere in the middle. I don’t think it’d be an extreme one way, or the other if I had to predict. But what I will tell you that will be consistent is that enterprise software is really about driving change management. Driving the change. One of our core values at Coupa is focused on results. In other words, identify exactly what it is that you’re attempting to achieve after you’re live, a year after you’re live and then focus everything in and around that. Limitations like the inability to travel, or advantages like the ability to get on a virtual session like this are the methods of getting to have that result. As long as we keep people oriented toward that outcome I think we’re in fine shape, and that’s how we think about this approach.

Jason Lemkin:

That’s good. I want to talk about this because you have some great data in this. I worry about supply chains. I try not to worry in the world but there’s a lot going on. You want to remain positive, but I look back at some of the first SaaStr blog posts in 2012. I wrote one in 2012 as I was walking Downtown University in Palo Alto when the last retail store reopened, but it was four years. Downtown Palo Alto, it’s a fairly gentrified community.

Jason Lemkin:

There’s a lot of money in Palo Alto–tech money, but it took four years for the last retail, what’s now West Elm to reopen for four years. I’m worried about this. What are you seeing? And this one is interesting, 43% of companies were worried about the ability to fulfill orders. At the beginning of COVID you still can’t get a webcam. You couldn’t get a monitor. We were worried there were some groceries you couldn’t get at the beginning of this. Tell us what you’ve learned being at the center of this.

Rob Bernshyten:

Well, first of all brick and mortar retail absolutely is in trouble, and frankly brick and mortar retail to some extent has been in trouble well before this pandemic. We were looking at our business spend index, if your viewers go to spendindex.com they can see the data on that. We’ve been looking at retail for three, four quarters and it’s been trending down. When we’ve seen a lot of very interesting data I could share with you around the downward trend. But when you think about global supply chains and this massive globalization dynamic we’ve had in the world for the last six, seven, eight years. We’re getting into, let’s call it globalization 2.0, which begins to balance global with local. As this slide says is there some fragility in our supply chain? Yes. But I would argue that fragility is really in the area of information technology, information access rather than in physical access because the goods and services exist.

Rob Bernshyten:

And as soon as there’s demand, supply gets there. You look at PPE there was a massive demand and within three, four weeks, there was massive supply. The challenge wasn’t there. The challenge was having the information at your fingertips to hot swap suppliers, get access to things you needed at the right time, make commitments contractually to people to know that you will fulfill your obligations. That’s the world in which we play in at Coupa. That was what makes it so interesting. We’ve got customers literally hot swapping suppliers, moving them into certain areas where they never even thought they’d be buying from, creating contingency plans for categories of spend. You need information technology for that and that’s what’s exciting about many of the things we’re doing and seeing in our customer community.

Jason Lemkin:

Well, that’s interesting. I was following after right when we got into this wonderful pandemic, how Coupa was at the center of getting PPE and identifying this but I didn’t fully understand why. Other than it’s a great thing to do but I guess it took a while for me but the supply got there within a relatively short period of time relatively speaking but it needed help, it needed liquidity, it needed connection. And I guess Amazon works again, right? We can still get Amazon products to our home. I guess we don’t need to worry as much that–the market will solve this, no matter what global turmoil there is in the short term as long as technology can connect us, I guess is the learning.

Rob Bernshyten:

Yeah. Absolutely information technology. Access to the right data at the right time to make the right decisions and collaborate amongst the supply chain. It’s very exciting to see some of the largest companies in the world really reorienting themselves to fully modernizing their supply chain, their business spend management approach. It couldn’t be more exciting for us obviously.

Jason Lemkin:

I want to get some of the data next but on this last point in the slide. This is something I think about a lot. Did we know that the cloud would be this strong after March, that there would be this boost? It’s crazy, right? Coupa is on fire but you talk about retail, look at Shopify. Shopify is a $120 billion company today. It’s crazy and the growth factor is insane. It’s the maximum output of this trend that we’ve seen but can’t… If we’re in shelter, if we’re in this world through the end of next year, can we have this divergence? Can we have a cloud on… Can cloud remain on fire when one out of three people are essentially unemployed in the country? How long can we remain divergent? Do you have any insights here?

Rob Bernshyten:

Well, it’s a tough question. It’s interestingly Shopify and Amazon, and these are our customers. Amazon runs in tens of billions they manage through Coupa so we’re close to these customers but the same value proposition that existed before this crisis exists now, it’s just seen as a higher priority. The ability to get greater speed, the ability to have information at your fingertips, the ability to embed, Jason, best practices into your deployments. Just about every CIO I talk to tells me, “Hey we’re going to go with Coupa, but hey promise me you’re going to deploy this in a way that’s going to be quote unquote, vanilla or best practice so that my team doesn’t start doing a whole bunch of end rounds that are going to make us on upgradable and slow us down.”

Rob Bernshyten:

They want agility. They want access to community information, hopefully we’ll talk about. I think there are a lot of dynamics that are really tailwinds for us in pushing cloud faster into the world at large and obviously these are big, big markets we’re all playing in and I’m sure many of your viewers are playing in. The opportunity is now, really, to accelerate our efforts, no doubt.

Jason Lemkin:

It’s usually the CIOs wanting these best practices, right? They don’t want custom made. They have this sort of on-prem scars of some hack. Some bit of corner code written that–or weird workflow. I should have known Amazon was a customer. I didn’t know it, but my mistake. But boy you must learn a lot from Amazon. Amazon must be the like the Walmart of today, where they’re an amazing customer, but they school you a bit. What is like for an Amazon? What do all your other customers benefit from? What are some… That vanillaism? What are some things you’ve learned from really those mega customers like Amazon that–and how does that benefit the others? How have they leveled you up?

Rob Bernshyten:

The beauty of enterprise software, as I think every one of you viewers knows is, is can you have minimal code that supports the massive amount of use cases, as many use cases as possible?

Jason Lemkin:

That’s the dream.

Rob Bernshyten:

That’s the dream. What we learn from our largest customers, Amazon being one and others, is how to support massive complexity in the simplest way possible. And what we learned from some of our smaller customers is how to keep things very intuitive and user centric but at the same time abstract them from some of the complexity that they may never need to use and make everything configurable. We’re constantly learning about scale and stretching our platform from the larger enterprise and we’re consistently staying very, very true to usability and user centricity that we’re picking up from the smaller growing companies. And that’s a beautiful marriage to have on one platform.

Jason Lemkin:

Yeah. Relate to this. This is something I wanted to learn from you in the enterprise is brands. You and I chatted right before we went live, I asked you about competition. I had some fun talking about Ariba which we’re in 2020, Coupa isn’t really an Ariba 2.0 but maybe in the early days there was some truth to that. I had a lot of experience there and you said I don’t spend some… Now that we’re big enough, now that we’re actually larger than this category used to be, I don’t spend as much time thinking about competition. I think one reason is you have this trusted brand. You’ve become… Every deal is hard. You have to prove yourself to Amazon and Shopify but you are this brand. There’s suites and there’s best-of-breed which we thought about. But do folks want even more from trusted brands now in 2020, and even more after March 15th? And what does that mean, versus going more horizontal? And where do we want to invest more in trusted brands?

Rob Bernshyten:

Well, it’s interesting. I’m looking at this slide and saying do enterprises want more from vendors? In some sense I would push back on the term vendors because I don’t consider our company, any one of my colleagues working here, anything that we offer, we’re not a vendor. When I think of vendors I think of a hotdogs at a baseball park-

Jason Lemkin:

I would have hated it myself as the CEO. You’re right. But-

Rob Bernshyten:

Well so, but-

Jason Lemkin:

But CIOs might still use the term.

Rob Bernshyten:

It plays into your question. It’s a term that’s grounded in business they used to be a products business, it smells of commoditization. The reality is what customers really want is they want trusted advisors, they want partners, they want people to bring best in class technology, embedded best practices, and they want folks that are focused on value creation with them and measurable success. That’s what they want more than ever and that’s what they deserve. They’ve always deserved. They just didn’t have the chance to get that on the first run of this thing, and enterprise software in the 90s and maybe a well into the new millennium.

Rob Bernshyten:

When you develop trust, and I believe trust is built on transparency. You have to actually see measurably that we’re delivering value for you. If a third party came in and said, “Okay, there’s a relationship between Coupa and one of their customers and here’s what’s happening.” They will be able to point to measurable value X amount saved, or X user adoption, or X spend categories and a management, or X improvement in operational efficiency, whatever that may be.

Rob Bernshyten:

Once that’s established, of course those customers are inclined to want to tap into subscribing to more what we call value as a service from those partners of theirs, and we consider ourselves to be that type of partner for them. We’ve benefited from that and I hope we’ll continue to benefit from that because we take every one of our customers very seriously. We want to keep them forever. We want to continue to drive more and more value for them.

Jason Lemkin:

Yeah, it’s interesting. I think at Salesforce, depending on how you look at it, CRM is either their fourth or third largest category now. It’s pretty crazy, isn’t it?

Rob Bernshyten:

Sure is, sure is. Well look, understanding every component of your customer, how you market to them, how you sell to them, how you service them, how you interact along on the web it’s super important. But I argue it’s just as important to understand your entire supply base and how you buy from them, how much you spend with them, how you can collaborate with them, whether or not you can mitigate risk when they have risks. We’re really operating on the exact opposite side of the equation. We’re helping people, companies who spend money do it in the most operationally efficient and thoughtful way.

Jason Lemkin:

And related to this and at the bottom point, when I listened to the last earnings call, you said inbound demand is up from your base. Your customers want more and more from you, from a trusted vendor. A related question because it seems like–so you’re coming up on 500 million in revenue, whenever it exactly, I don’t know exactly what ARR, it doesn’t really matter for this, but how far can you see? Can you see… You obviously can see to a billion. You can see it right behind you going across the bridge but can you see 10 X? Can you see to 5 billion now as crazy as that might have sounded a couple of years ago? How far can you see in… What do you see? What do customers want? How should the product and things like… What do you see? What’s the furthest you can see, and what do you see?

Rob Bernshyten:

Well, I appreciate that question, Jason. What I see is a $50 billion plus total adjustable market, and what I typically ask are two very, very simple questions of any prospect I interact with, frankly anyone I interact with whether it’s over Zoom, or before in the physical world. Do you think, number one, your company is doing a great job in managing the spending that it’s involved in for all the things and services that you need, or you think it’s done really, really well? I’ve rarely, rarely gotten an answer that says, “Oh yeah we’re great. We know everything about how we spend money. We have control over it. It’s complex.” Okay.

Rob Bernshyten:

Then I ask the second question, “Do you think you’re employing information technology in a way that’s comprehensive, and fully integrated, and user centric, and deployed quickly that addresses some of the challenges described?” And the answer is always no. Just about every company in the world can really stand to improve the way that they do their business spending and the way they manage their business spending. I see a huge, huge opportunity and I think this is in many ways early innings for this category. We’re proud to do our part in trying to lead a focus into this area and then fulfill that leadership with a real brand promise and real measurable outcomes for every one of our customers. I think that is why we’ve seen more inbound interest and more capabilities, and additional features and functions of modules that we can deliver for our customer base of course.

Jason Lemkin:

A couple things, this is more a tactical point and I want to make sure we get a couple of things on the data you have but this is a bit of a mystery to me. I should know the answer to this, but I don’t. Why are payments so hot now? I understand the innovation of Stripe of two lines of code back in the day, but why–you’re seeing this? Why is this all coming together now, and why couldn’t payments be as hot five years ago? I put hot in quotes. What’s so much more valuable today than it was, or what’s changed in technology because I’m missing a bit of, why now.

Rob Bernshyten:

Well first of all, it’s saying that the value proposition has been there for a long time. It’s been there for a long time. The question is, has the value proposition been fulfilled? I’m not sure [crosstalk 00:22:45]-

Jason Lemkin:

Why now?

Rob Bernshyten:

Well look at what’s happening in the consumer world. The value proposition has been there a long time too, but it’s only now starting to be fulfilled with Square, and Apple Pay, and Google Pay. Now if you look at B2B payments, my gosh. First of all it’s much bigger. There’s a lot more money flowing there but secondarily the technology, the capabilities there are really archaic. Old school technology, a lot of manual–a lot of paper. In the United States, nearly half is paper-based checks. What are we kidding ourselves? These systems are rigid, you have monthly batch jobs running out of incumbent solutions. There’s no ability to collaborate with your supply base around payment rails, around dynamic discounting, around virtual credit card payments and transfers, yet cross border is still super old school and complex.

Jason Lemkin:

Super old school.

Rob Bernshyten:

There’s is so much we can do here. You got third parties enter to do supply chain finance. We’re in the very early innings of a huge market and it requires leadership, and it requires incredible tech. Some of the approaches that been taken in the past year have largely been driven by banks. The approach we’re taking is partnering with banks where we’re bringing what we’re really good at to the equation. A highly scalable, robust, transactional platform. What we know about usability and how important user centricity is to that problem, and we’re starting to really get somewhere. We have, as I mentioned in the last earnings call, nearly 100 customers leveraging components of Coupa Pay and that’s growing. It’s really exciting for us.

Jason Lemkin:

If you look at what’s happened with Shopify, how big payments have gone there. If you look the very low end adjacent to like bill.com that used to have any payments revenue and then it became one of their key drivers of growth. What do you see a few years out here in the enterprise? How core is this? It’s obviously core to Coupa but how big… Is this flip around and become one of the most essential parts of what we’re doing in terms of managing this business commerce? Or are we… In five years will this be massive?

Rob Bernshyten:

It’s hard to make a detailed prediction. The way we like to do our business is do it very organically. Our customers are asking for these capabilities of us. We didn’t wake up and say we’re going to do payments. Our customers said we’re doing procure to okay to pay through your platform. How about we do procure to pay? [crosstalk 00:25:03]

Jason Lemkin:

Got to do the last mile, right?

Rob Bernshyten:

Yeah, let’s do the last mile and pick off a bunch of use cases that we’re struggling with. We see a big opportunity here. We’re going to co-develop with our customer community. We want to take the same approach we’ve taken with every other set of modules we’ve deployed and we’ll see where it goes. But the likelihood of us being able to capture a real meaningful portion of this market, based on what everyone is saying, I think, that’s objectively looking at this appears to be quite high.

Jason Lemkin:

Yep. Now this next slide is something I picked out of your investor report because it’s interesting to me as a founder, how do you… Fiscal discipline is super interesting. You turn around you probably can’t believe all the unicorns you read about on tech crunch each day that are raising 400 million and you don’t even want to know what the bottom line looks like because it doesn’t matter. Coupa is a generation… We’re generations ago in terms of thinking about this, and then you look at weird things like Zoom. You know what Zoom’s burn rate was the year before it’s IPO? You know what it was?

Rob Bernshyten:

I don’t, I don’t remember.

Jason Lemkin:

Zero. It wasn’t minus $1 or like Eric literally said to the marketing team, “You can spend every dollar we have, but it’s the funniest thing, it’s like 414 million in revenue and like 414 million of losses.” And it’s literally a zero. It’s the fun you can get it. You can imagine that conversation. Here’s your allowance. But what is this? What’s 50 is the new 40 and when should software be profitable? It’s supposed to… Shouldn’t it be really profitable? You need X number of engineers and everyone can buy it but what does this all mean? What are you saying about this 50 is the new 40?

Rob Bernshyten:

Well, first off let me say I love how Eric thinks and I think similarly in the sense that there need to be guardrails on your business. The idea of spending at all costs, and by the way we’ve had some pressure as a public company certain quarters where people say, “Well why don’t you just press further in sales and marketing and grow-“

Jason Lemkin:

Press on the gas.

Rob Bernshyten:

And then you’d have the other side as soon as there’s a little bit of backwards says “Hey, why don’t you accelerate the pace to profitability?” Look, we all know in software as a service what really matters is cash flow. Cash flow is what matters. That’s what fuels the business. We have put guardrails on the business now for 45 quarters. We’ve had guardrails on the business. Very, very careful and thoughtful growth not overextending ourselves, but at the same time, careful management of sales and marketing efficiency, and then getting scale into a model on the bottom line.

Rob Bernshyten:

Those are the guardrails we’ve had every quarter for 45 quarters, and just as Eric does it, here’s what it’s going to be for the next quarter. We’ve got 12 weeks, go, and we see what exactly what happens. We distill that, we look at all the metrics by business unit, by geography, by product line, and then we unlock the investment we’re going to have for the next quarter, go and do it over and over again. When you do that for as many quarters that we’ve done you get into this situation where you can have this rule 50 dynamic that my colleague and CFO came up with, I think when he became 50 years old. But we are operating at this level now and it’s exciting.

Jason Lemkin:

There’s a benefit at 50? Is 50 too much? Obviously you’re a proponent of it because you put it out, but where we’re at… How do you set that guardrail? What is too efficient versus too inefficient when you’re able to be efficient? I can think about it [crosstalk 00:28:26].

Rob Bernshyten:

I think you have to combine backwards looking metrics. When you complete a quarter, you look at all your backwards looking metrics and then you combine them with all your leading indicators as an executive which is what does the pipeline look like? What does our talent look like? Where are we in terms of stage of pipeline? Where would we want to make investments geographically? When are we launching the next product release, and then use your gut to fine tune exactly how you’re going to run out at the following quarter. You have the guardrails but you also don’t hamstrung yourself as an executive. Otherwise you could automate the job of the CEO in that area and that’s probably not the best way to do it.

Jason Lemkin:

Good. Let me skip… Oh, oops we had this slide. Maybe we lost one on the different segments. I want to talk about some of these points, but we might’ve taken some of this out, but tell me what you’re seeing across different industries because you do have some data on this. One of the most interesting things from some Coupa data I’ve seen is I read The Wall Street Journal, I read the New York Times. It seems like many banks are doing very well in this crazy environment. But like Coupa shows financial services under a lot of pressure, healthcare. It’s hard to get a handle on what’s happening in healthcare. Some hospitals are all at the edge of bankruptcy. On the other hand, other segments of healthcare are on fire. They’re literally on fire. Walk me through some of the data you see of different segments and maybe some things that are counterintuitive that you’re seeing in different parts of the economy.

Rob Bernshyten:

Well, I think one of the biggest things that I think most people now understand is that given the amount of liquidity in the market it’s very hard to gauge the extent to which financial services firms are doing well and healthcare et cetera. You have to have that context in mind. It’s very difficult to answer that question in two sound bites, I really do urge your audience to go to spendindex.com. Here’s what we’ve done there Jason-

Jason Lemkin:

We have a slide on it here. I think I just lost it but yes it was a great one.

Rob Bernshyten:

Let me tell you what we’ve done there because we have created an index that is a real leading indicator. Let me tell you why. We’re looking at things like what are the approval cycle times in the current quarter. In other words it didn’t take longer for people to prove something before they even bought it, before they even ordered it, before anything happened. We have a leading indicator in terms of how long, by industry, folks are thinking through purchases. That’s never been seen before, in an aggregate level with nearly $2 trillion worth of data. We’re looking at rejection levels. What percent of things are getting rejected? You never see that in the GDP. Now if there’s an increase in rejection levels, of course there’s a likelihood that that industry has concerns.

Rob Bernshyten:

We’re looking at average spend per employee and companies and we’ve put that into an index to give leading indicators that we launched this every quarter and when we backwards tested this to 2016 against the GDP, we saw a very real and meaningful correlation. We think this could be a real enabler for people to get a sense for things. But if you look at the last one, what we shared at the last earnings call of course significant retail slow down, slow down across the board frankly but what’s more so on pronouncing retail. When you look at a financial services slow down there as well whether that’s seen or not in stock prices. I’d urge people to go to spendindex.com. We’re sharing this openly. We want to be a good corporate citizen. We’re not gaining anything from sharing this other than maybe a little bit more awareness about Coupa. I’d urge your folks to check it out.

Jason Lemkin:

Yeah. Everyone go to that because it’s pretty awesome, spendindex.com and I’m on it on my iPad. I had a screenshot in here but I think maybe we took it out because it was backwards looking but let me ask you one or two questions because it is great. Everyone should check this out. It is great to see this data and granted there’s a little bit of a lot. It’s not up to the minute, right? It takes you… You’ve got to get that data so it’s through Q1. But one that that surprise to me is high tech was down. How you define high tech, right? That was down in Q1. When the cloud’s on fire but in spend index high tech’s down, what are we seeing there? What should I see something? Is there a story behind the story there?

Rob Bernshyten:

Well, you see what you see which is [crosstalk 00:32:27] Q1 when you look at the index purchases for hardware and software in the first quarter of the year, when you look at time to approve, when you look at number of rejections, we look at average spend per employee was down and that’s a reality of what happened there. Now whether or not that’s measured it in the stock prices of many of these companies, probably not. But again you could argue that the current liquidity environment and the longer term opportunity in the digitization area is very, very real. Look investors are looking for places where they going to get yield. They’re not going to get it U.S treasuries. They’ll look at placing a yield. They’re looking for longer term bets and there’s no question. Many things… My colleagues and I like Eric and others are doing have the opportunity to really stand the test of time and develop into very, very meaningful longterm businesses. That’s what we’re doing here.

Jason Lemkin:

I want to chat about your book next but on the spend index, the Q1 just remind me. Q1 is calendar Q1, right?

Rob Bernshyten:

That’s right.

Jason Lemkin:

So Q1 is through March. This retail one plummets dramatic even through Q1. That trend you can see it in Q4. Retail was already off deeply in Q4 then Q1 is down. Boy it’s just epic. It’s almost a step function. It’s almost a step function here, right?

Rob Bernshyten:

Absolutely step function. And look, if we have to make predictions I think they’re pretty obvious We’re going to see real backward seasoned retail, we’re going to see a lot of consolidation, we’re going to see brands get rolled up. It’s going to happen. It’s already beginning to happen because look, folks aren’t going to the mall and not buying in those stores. The retailers that are quick enough and nimble enough to get to consumers directly to figure out different innovative ways to manage their supply chain will stand the test of time but it’s a real struggle in retail. No question about it.

Jason Lemkin:

Yeah. I would literally encourage everyone listening now, or the thousands that will watch this later go to spendindex.com. It’s fascinating. Coupa has a massive… It has almost 2 trillion of spend thrown through the platform. If nothing else, this is a fascinating data point that you can segment across financial services, healthcare, high tech, manufacturing, retail, and it’s a slice but you may see right now a story that is worrisome of our economy. There is some optimism in this.

Jason Lemkin:

Actually health and life sciences out-performs more than I would expect from the press because our hospital’s not taking ordinary patients and our dentists at a lay level. I felt like that’s under more pressure than the spend index suggests. But outside of that, it’s a worrisome. It’s a bunch of more worrisome trends and maybe we’re all ballooned by the massive liquidity injections, the trillions of dollars in the economy, the planes fly nowhere and the extra unemployment checks but the real signals underneath our economy are very worrisome on these charts.

Rob Bernshyten:

Yes perhaps. I’m looking forward to the next quarters release. We’re actually going to start slicing by category of spend. What are the categories folks are spending on? Were they increasing, decreasing as part of the blocking enterprises? We’ll have more robust data. Greater fidelity of data as we go, and hopefully it’ll help folks understand what’s going on in the world frankly.

Jason Lemkin:

Yeah. All right. I’m going to post this on SaaStr after the next one’s out because it’s super fascinating. Okay so book. You got a book. Is it out? I should know I’m going to buy 100 copies, 50 copies are… Tell us about the book.

Rob Bernshyten:

Well, this is really a book that is the next step from values of service. A book that I did about three years ago. And this is really about breaking the silos of traditional enterprise software which was always deployed one customer time with one set of data and never being able to see anything across. Never able to take anonymized, sanitized, aggregated data. We’re beginning to take that data, distill insights from it, and push that back into individual customer environments so that we could be smarter together as a customer community.

Rob Bernshyten:

I look at this book as really… I don’t have a PhD, Jason, I ended at my MBA. This is kind of my hypothesis, or thesis, or dissertation if you’d like, and it’s really a position paper on where we see enterprise software going, which is the breakdown of those silos so that we could be smarter together as enterprises and customers for the use of information technology. We’re on the very bleeding edge of that with what we’re doing here at Coupa and every day we discover more and more interesting use cases that we can employ for our customers to take advantage of, and I’m happy to share anything you’d like about that.

Jason Lemkin:

It’s interesting in these communities. SaaStr is a community. I never knew much about community before this. I’m still learning. There’s a lot of talk about communities and how that customer, vendors, technology solution. People will be communities, communities are out there. What do you mean by communities? What are you seeing? What have you learned at Coupa in general? What does this mean?

Rob Bernshyten:

There’s so much but I would give you the metaphor that I love which is waves. I was very proud that Noma endorsed this book after having thought through our concept committee intelligence here-

Jason Lemkin:

Yeah, that’s a space you didn’t imagine community would exist on maps but it sure does.

Rob Bernshyten:

Exactly. And with waves we’re truly smarter together as we traveled from destination, from A to B because we’re leveraging immediate access to data and that data requires almost no friction, in some cases zero friction to collect, aggregate and distill insights that could be pushed back to the individual driver they could find their way through. The exact same concept applies to everything happening in business processes. Best practices for how many people you should have in your workflow Jason. There’s companies out there 60 people in their workflow to approve something that’s $200. If they knew how far outlier they are in real time they could fine tune that.

Rob Bernshyten:

They’re overpaying for categories of spend all over the place. They’re exposing themselves to risky suppliers and not leveraging community insights to figure out which suppliers they should be considering working with. The list goes on and on of all of these use cases where we can truly be smarter together, and proudly as a platform we’re enabling that for our customers. With every release of our product we’re turning on more and more of these community intelligence capabilities that allow them to be smarter together.

Jason Lemkin:

The book in large part, is it share a lot of learnings about how to build this community among your customer and partner base?

Rob Bernshyten:

Well, first of all it frames what it actually means to have a community intelligence environment. What are the components of that? It explains why the time is now to strike. Particularly if you have early stage companies that are watching us, right now is the time to really build up a platform that can have the stand the test of time in leveraging cross company committee insights, and then it shows a whole host of use cases and case studies of what we’ve experienced so far, and asks the reader as I did with values of service to comment on what they’re seeing, pushback on some of the hypotheses in the book so that we can learn together as a community of readers, frankly, of the book as well.

Jason Lemkin:

Okay. That’s great. Well let’s… Everyone let’s… I’m going to do a deep dive. I think community for business software is super powerful. It’s so important and it’s something we’re learning today. Just like payments, maybe. Everything in enterprise sometimes it’s four to five years later than consumer. Maybe payments is there, and maybe community is there too. Waze to hit this five years ago but we need to learn this as leaders. Let’s all read this and, Rob, if you want, maybe whenever you want we could do a deep dive on community on the podcast to 130,000 people because I think this is a great topic on its own.

Jason Lemkin:

How to building this community thing because… Otherwise this is a great book. Let’s all read it and I will share some learnings on it on SaaStr in a bit. There’s more I want to talk about, let’s make sure we have a few minutes of questions before we end. Actually hold on. How are we doing that? Let me make sure I grab… Apologies for one second. There was one very specific I wanted to hit and then we’ll go into the Zoom. These are specific to procurement but I think these are good ones to hit for Rob. What are the three pain points for chief procurement officers, excluding generating savings and reducing supply chain. What are the top pain points in 2020 for CPOs?

Rob Bernshyten:

One of the biggest pain points is ensuring that the CFO, the CEO, and the CIO become their truly connected colleagues in solving many of the challenges that they’ve been thinking about for a number of decades. If you go to a CPO conference of any kind, the conversation is typically, how do we get a seat at the table? How is it that the whole organization doesn’t understand all the value that we can offer? Now is the time to strike to showcase that value, and that value is in every possible way of course from savings, which is very obvious, but it extends to supplier risk mitigation, which is obvious, and all the way through managing the entire integrated way with which a business manages its spend through information technology. Now’s the time to strike.

Rob Bernshyten:

Look if we have a phenomenal CPO and we use our own platform but if my CPO ping me on Zoom, email or walked into my office and said, “Look, hey I need a budget of X because I’m going to make sure that we’re going to mitigate our supplier risk. I’m going to save us this much money. I’m going to give us a platform that’s going to help us be modern and scale into the future.” Why in the world would I not support them if they were a trusted advisor? That’s the opportunity.

Jason Lemkin:

Yup. The next one it’s a bit of a lay up, or even a commercial but I always love to hear what a CEO has to say which is, which new Coupa product or feature are you most excited about?

Rob Bernshyten:

Well, the most exciting one for me is community intelligence, which is a set of capabilities that we discuss in the book, but in the entire fabric of the product set. They appear for example in expense management, which we don’t talk about as often but we have hundreds of customers using Coupa’s expense management. We are mitigating fraud in spend management. We’re using the data set of our aggregated customer base and serving up individuals that are highest likely to be doing fraudulent activities so you can investigate rather than rigid policies, or a free for all. We found a way to use technology to be prescriptive, which is the P in Coupa. Prescriptive to individual controllers and people responsible for spending in a company leveraging community intelligence. And that’s just one example of many capabilities leveraging community intelligence within Coupa.

Jason Lemkin:

This one from Nikko. You probably don’t know the answer although it’d be wonderful if you did. I know Coupa works with many hospitality companies and how many quarters do you think bars and restaurants, hotels, airports will rebound? If you knew that you could probably be on CNBC any night, everywhere any night anyway but do you have any insights, or do you have a model? Do have an operating model, when will these hyper impacted hospitality businesses recover?

Rob Bernshyten:

Well, I love the second part of the question because of course I’m not a fortune teller. In fact, the big unknown is when some of these things will happen but we have a very clear scenario based model for V, U, and L, and then we execute accordingly based on where things work out.

Jason Lemkin:

So V, E. V I get. Are we past V, or is there still a chance for V?

Rob Bernshyten:

Well, it depends on how far you step back and looking at your V-

Jason Lemkin:

How wide it is.

Rob Bernshyten:

But I think in many ways you’re right. We are pretty much past it. I think that’s a fair assessment of the market.

Jason Lemkin:

This one will take you back but let’s at least do one and have some fun because we did chat about this before we started. What were the biggest challenges early on when Coupa was a startup procurement folks hadn’t quite heard of. You didn’t have the brand and were replacing their competing with solutions like Ariba.

Rob Bernshyten:

Well I can give you a very long list of challenges but I think the biggest is to get folks to give us a chance. If you look at some articles that came out in 2009 when I was raising money, and our first raise that I was involved in it was 15 million and a half post. There was I think $7 million raise, 15 and a half post. It was getting folks to try. We did things like we said, “Look, give us a year annual subscription. If we don’t deliver this quantifiable value to you within 12 months, you could cancel and we’ll give you your money back.”

Rob Bernshyten:

That was a big, big risk to take in 2009 and 2010. But we delivered for these customers and they became fans, and they became highly referenceable and they gave us a chance to go to the next customer, next customer and grow our ACV, and grow our renewal rate. It was very, very hard to really early days of course but that built a foundation and the right culture I think in this company because we don’t take anything for granted.

Jason Lemkin:

Did any material number of customers really ask for their money back?

Rob Bernshyten:

No, not even inmaterial. None asked for their money back.

Jason Lemkin:

I personally love the money back guarantee hack. It’s always one that asks for their money back, and it doesn’t matter because if you don’t keep the customer for life, it doesn’t matter if you give one year of revenue back, even though it’s stressful, it doesn’t matter.

Rob Bernshyten:

Well, you know, Jason, the beauty of it is, even if let’s say they were to ask at the end of the year if you’re objectively looking at data that said on a mid-market customer you paid a $100,000 a year. Well we’ve saved you $700,000 this year. Isn’t a little egregious for you to ask for your money back and isn’t it obvious we delivered value for you? Are we not a valued service partner for you? So frankly, we didn’t have that but that doesn’t mean it wasn’t easy to get those deployments, to configure the product, to build new features, to do what it took to get it done, no question. It’s very hard.

Jason Lemkin:

Let me ask you one related early question, and then we can wrap up with a few more current questions. But one of the reasons in the early days that I got very… From afar, I was interested in Coupa as back at Adobe Sign, EchoSign I would meet with a lot of folks and mostly on the contract side we would deal with sales side of course in the early days, but there’d be a lot of buy-side conversations, a lot of them. And we would go in and we built an Ariba connector early. It was very hard to do because it wasn’t an open platform but, and I mean this is no disrespect to anyone at SVB, but I never heard so many complaints.

Jason Lemkin:

People would complain about Ariba and people complain, obviously you’re biased, but it lit up the hair on the back of my neck because I hadn’t heard this. When you’re selling those early days and you don’t have the brand, can you… Looking back on it without bias, how do you leverage those complaints? How do you turn those into an asset? Do you bash the competitor? Do you not? Does that create a bigger wedge then if they’re happy, and maybe you didn’t see it but I heard this again and again at so many global 2000 companies Ariba would be their least favorite vendor.

Rob Bernshyten:

Well, to be frank, we did some bashing early on. We didn’t know whether it was right or wrong but that bashing wasn’t grounded in logic. It was grounded in facts. When you’re talking to a customer that’s getting 4% of their spend running through an incumbent system, the bar is not that high to get them to eight, nine, 10, 50.

Jason Lemkin:

It’s not that high.

Rob Bernshyten:

It’s not that high but it’s a matter of bringing that to the forefront. Bringing facts to the forefront that everybody could look at so they can make the right choices. Those were early day things you have to do but obviously now thankfully we’re well beyond that.

Jason Lemkin:

All right. Maybe the last one, or the penultimate one. Maybe this will be the last one. In this… But this is probably more from a founder perspective if you thinking about. In these uncertain times some deals go more quickly but some go most slowly. Any tips you’ve learned to accelerate closing of deals in these shelter area?

Rob Bernshyten:

Yeah I think it’s in the shelter area but I think it’s more broadly. What I notice now we work with so many different… I’ve had the chance to work with so many hundreds of sales professionals in my career, certainly hundreds of Coupa as well over this time. What you find is folks tend to pivot a little bit more towards being a bit aggressive. In other words, look where great, where the best, nine out of 10 people use us. I don’t love that. Then you have the other extreme which is they’re a little bit overly passive. In other words they chase balls. Yeah, let me give you 50 references. 50 references. Let me show you a customer exactly like you. What else can I do for you? Our mindset at Coupa is we don’t want to be too aggressive, and you don’t want to be too passive. You want to be assertive.

Rob Bernshyten:

Focus on the facts, become a trusted advisor, get vision lock on what is you’re attempting to achieve in working with us, and if we agree to that vision lock, perhaps I’m the right player to help you achieve it. If I’m not, you can go find the other player to help you achieve it. We try to be very, very assertive in our dealings and always, Jason, always grounded in integrity. That’s very, very important to me. I never wanted an environment where the sales person would sell something and then they’d be afraid to interact with that prospect. That’s horrible. We want a lifetime relationship with this customer. They should be proud of what they’ve done and they should know they have now thousands of people behind them, they’re going to deliver for that customer. This is value of service. It’s a different way of thinking about the traditional product space business into the business that is today. I mean, SaaStr right? This is what it’s about.

Jason Lemkin:

Yeah. No turn and burn deals.

Rob Bernshyten:

No.

Jason Lemkin:

They’re the worst. Rob this was incredible, thanks for giving us the full 50 minutes. I love spendindex.com go to it. We’ll talk about more about it on SaaStr spending next [inaudible 00:50:01] you will. There’ll be another quarter of data coming out shortly I assume.

Rob Bernshyten:

That true, it will.

Jason Lemkin:

But you will see things that are fascinating that are data-driven, which I love. Check that out and also Smarter Together. This community in B2B, I think, is super powerful for the next five years. So hopefully we can continue the conversation there but grab your copy. Rob again, this was wonderful. Thanks for taking the time out.

Rob Bernshyten:

Don’t mention it, cheers.

 

The post SaaStr Podcasts for the Week with Matt Garratt, Trisha Price, David Schmaier, Rob Bernshteyn, and Jason Lemkin appeared first on SaaStr.

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Ep. 361: Lara Caimi is the Chief Customer and Partner Officer @ ServiceNow, the company that allows you the power to make work, work better. Prior to their IPO, ServiceNow raised funding from some of the best in the business, including Sequoia Capital and Greylock. As for Lara, she joined ServiceNow in 2017 and spent 3 years as Chief Strategy Officer before assuming her current role just this month. Before ServiceNow Lara spent an incredible 17 years at Bain & Co across a variety of different projects and roles.

In Today’s Episode We Discuss:

* How Lara made her way into the world of ServiceNow and SaaS having spent an incredible 17 years at Bain & Co.
* What does the role of Chief Strategy Officer really entail? How did the role change in Lara’s 3 years in the position? What is the optimal relationship between the Chief Strategy Officer and the CEO? How does Lara advise founders on when to hire their Chief Customer Officer?
* How does Lara see the 4 phases of startup growth? What are the most challenging elements within each? How does one instill process and discipline without losing agility and speed? How does one set targets that are a stretch but also not a stretch too far? What is the right balance?
* How does Lara think about what great change management looks like today? How does that change in a COVID world? How does Lara approach the right way to address enterprise customer communications? Why has that been made easier in COVID times?

 

If you would like to find out more about the show and the guests presented, you can follow us on Twitter here:

Jason Lemkin
SaaStr
Harry Stebbings
ServiceNow

Below, we’ve shared the transcript of Harry’s interview with Lara.

Harry Stebbings:

We are back. You are listening to the official SaaStr podcast, and you’re listening to Harry Stebbings. Now, joining me in the hot seat today, I’m thrilled to welcome Lara Caimi. Lara is the chief customer and partner officer at ServiceNow, the company that allows you the power to make work work better. Prior to their IPO, ServiceNow raised funding from some of the best in the business, including Sequoia Capital and Greylock.

Harry Stebbings:

As for Lara, she joined ServiceNow in 2017 and spent three years as chief strategy officer before assuming her current role just this month. And prior to ServiceNow, Lara spent an incredible 17 years at Bain and Company across a variety of different projects and roles.

Harry Stebbings:

But that’s quite enough for me, so now I’m very excited to hand over to Lara Caimi, chief partner and customer officer at ServiceNow.

Harry Stebbings:

Lara, it is so great to have you on the show today. I’ve heard so many good things from many former guests on the show, so thank you so much for joining me today, Lara.

Lara Caimi:

Thank you. I’m so excited to be here.

Harry Stebbings:

Well, that is very kind. But I do want to start with a little bit of context. Tell me, how did you make your way into the wonderful world of SaaS, which we both know it is, but especially come to be chief strategy officer at ServiceNow today?

Lara Caimi:

Yes. Well, it was, like many good career stories, not one that I had ever planned, but one I’m super happy to have landed in. I started my career at Bain and Company in consulting and unexpectedly spent over the course of 17 years staying at Bain mainly because when I would get comfortable, I would always have the next opportunity for the next promotion or the next client, et cetera, so I felt like I was always learning and growing.

Lara Caimi:

And like many good opportunities, I wasn’t looking, but in fact was busy, had my head down, was happy in my job and had a headhunter call come across my desk. And a lot of those, as you do, you glance at them and move on with your day. But this one was like, “Oh.” It’s reporting to John Donahoe, who, as you know, is an amazing leader and started his career, like me, 20 years at Bain, so was renowned in the halls of my Alma mater and then ServiceNow, and of course, knew about ServiceNow.

Lara Caimi:

And then the more I dug in and studied, the more intrigued I was about how amazing the opportunity for the company was. And so really, that’s where I landed in this role of chief strategy officer, which I held for two and a half years and actually a week ago just got promoted to chief customer and partner officer. And so that’s a bit about my history there.

Harry Stebbings:

Congratulations on the promotion. I do have to ask, though, because, again, we mentioned [inaudible 00:04:29] getting on schedule. I do just have to ask, in terms of John, obviously, as you said, amazing leader. I’m really intrigued, from your perspective, though now having had the chance to work side by side with him, what makes him the amazing leader that he so clearly is, from your perspective, having had the chance to work with him?

Lara Caimi:

He’s an amazing strategist. I mean, he understands business. He’s a real student of leadership and understands how companies need to scale and evolve as they reach the next level of their growth. But also, he’s just a wonderful human and he’s a very down to earth, humble, thoughtful person who really cares about developing individuals. He’s the kind of person that when you read the review that he writes for you, you’re like, “Man, he nailed it.” He sees everything and the way he invests in helping you grow and develop and rise is really special. And so I learned so much from him. In the same way, I’m learning so much from Bill McDermott, who is a very different kind of leader in many dimensions, although shares a lot of the same core characteristics of John.

Harry Stebbings:

No, absolutely, and incredible to hear in terms of the commitment to people’s development. I do want to ask another one, which is 17 years at Bain enjoying that success, and I have a lot of university graduates coming into the workforce today and they always ask me, “Should I join a startup? Should I start a startup or should I join a large incumbent?” I’m always quite struck by the responsibility is suddenly placed on your advice, but then I’m mostly thinking especially for you with this incredible experience at Bain, and now in ServiceNow, how would you advise them and what would you say?

Lara Caimi:

Well, I think my career is unusual to spend as much time and then jump over to the senior role that I had. I’m not sure it’s the thing that everybody gets to do. As I think back of what would I do differently, I don’t think I would change much because I’m so happy with where I landed.

Lara Caimi:

But when I think about others starting their career, I do believe that the foundational training of strategy consulting or sometimes investment banking can provide is it gives you this baseline skillset around a general manager headset, foundational understanding of how to think about big problems and divide them up into meaningful chunks, focusing on the real pieces of value that’ll move the needle and then how to communicate very clearly to influence. And those are just, I think, core general business skillsets that get hammered into you formally through training, but then just through your experience with clients that at least a couple years getting that kind of skillset, if you haven’t already in your career, is a valuable thing to consider.

Lara Caimi:

And then in terms of where to go from there, to me, it so depends on the opportunity, the team, and the track record of growth that others have seen. I like places where you don’t get pigeonholed in a particular function or a particular silo, that people are looking for talent that can grow and expand perhaps in unconventional ways, but will give people a shot and then identify high potential people and put them in roles of responsibility. And I think those are real great opportunities when you see a management team or a leader or a company who tends to do that, that will be a place where you will learn and grow faster maybe than in a different environment.

Harry Stebbings:

Totally with you in searching for those opportunities for growth within roles. We mentioned your promotion and I’m really interested because we have seen the rise of chief strategy officers over the last decade or so and it means different things to different firms. Can I ask, what does it really entail and how did your role change over the time that you were chief strategy officer?

Lara Caimi:

Yeah, it’s interesting because when John brought me in, the company had never had strategy formally before or a chief strategy officer. And so in some ways I was defining it for the company and for my peers in the C suite. And it started by, of course, building a purpose-built function, often people that came from consulting or strategy backgrounds, but it was designed to be a feeder of talent into the organization, into other roles. It was never meant to be something that was permanent. It was always a source of talent.

Lara Caimi:

And the way I thought about it was when you think about some chief strategy roles, one spectrum could be like, “Hey, it’s a staff role that makes slides for the CEO for board meetings or something.” And at the other end, it’s a true partner in the C suite that’s partnering and guiding the strategic agenda for the company. And that’s the much more powerful and meaningful end, which is what I think we created at ServiceNow.

Lara Caimi:

And as I thought about that, it was definitely not to be John’s person or John’s team that would parachute into situations that the CEO wanted to fix, but rather it was to act as a true peer on the C suite with CJ Desai, who runs product, or Dave Schneider, who at the time was the president of customer operations, and really think about what we needed to do to make the company better.

Lara Caimi:

And in that way, that’s really how that role evolved. It started with just proving myself and building out a basic team and adding some value to really thinking about the longterm strategic agenda. And for us, it was painting our path to $10 billion in revenue, which is the aspiration that we laid out, which is super exciting. And that was done very much in collaboration with the business, with the management team, with the board.

Lara Caimi:

And so that for me is how it evolved as we built that, which it’s the most fun job I’ve ever had because I could think about the company, think about what we needed to do to get to the next level and improve and we would just go partner with the business and get that done. A lot of that has to do with the culture we had that we were true partners and we weren’t coming in to tell somebody what to do. But also I think the culture of the company, that one of our cultural values is hungry and humble and this notion that, “Hey, we all have a growth mindset and we can all get better and we all want to do a great job.” And that I think is conducive to partnering to solve problems and ultimately help individuals and the company be successful.

Harry Stebbings:

Can I ask, when I listen to this, it seems like such a foundational role that all companies should have really from day one in terms of the relationship with the CEO, the thought partner, how it expands throughout the different functions in the business. My question to you is I guess, how do you advise startups who are thinking about hiring a chief strategy officer? When’s the right time and how they should think about that from a strategic point-of-view?

Lara Caimi:

It’s interesting because I think about phases of a software company, and I think the first person to coin this was probably Frank Slootman, who was the CEO before John, and then we borrowed it and expanded upon it. But as I think about it, phase one for a software company is zero to 100 million dollars in revenue where you want to find that lightning in a bottle and you’re just looking for product market fit.

Lara Caimi:

And then phase two is when you go from 100 million to a billion and that’s when you found that product market fit and then you just have to scale the heck out of it while that window is open and scaling, building go to market, growing that revenue is the primary responsibility and thinking about growth and new customers is the main focus.

Lara Caimi:

And then phase three, which is where I came in, which is when we were transitioning into that phase with John was going from a billion to a multibillion dollar company. And to me, that’s an interesting inflection point where you might think about this because you think about the business I think even more holisticall.y expanding customers and renewing them becomes more important so you introduce customer success in a meaningful way.

Lara Caimi:

For us at ServiceNow, we were the best kept secret in Silicon Valley. And so we started to invest in brand that we’d never done before. And we had brand campaigns. That’s when we brought Pat Waters in as our CHRO, where we actually started to introduce a diversity and inclusion and belonging agenda and the company. It was really building the foundations for an enduring company.

Lara Caimi:

And oftentimes, as you think about those phases, you have founders or early stage CEOs who are doing a lot of that strategy work themselves in maybe phase one, phase two. And it’s really in phase three when the problem becomes multi-dimensional, but it’s often good to bring in additional thinking. That’s also sometimes when companies go from a single product to multiproduct, et cetera, when they start expanding geographically. And so I think it helps to bring in more structured thinking around that.

Lara Caimi:

And then of course, phase four is where we’re in now, which is where Bill’s really focused, which is where you go from four or five billion to a $10 billion company. And that’s where it’s even more complex because you start to think about the role of the ecosystem in a meaningful way, verticalization. You have to truly force multiply. That notion of customer success has to truly scale and deliver those customer value outcomes that you need. You have to expand not just to be known as your brand, but you actually have to be relevant to C suite buyers because you’ve started to have $10 million, $20 million, $30 million, $40 million customers. That is a C suite conversation at that point. There’s a lot of nuance, I think, as you think about those phases. And so I would say that phase three is when formal strategy might be important.

Harry Stebbings:

I think one thing that really strikes me in my thinking here listening to you is when you think about the scaling process that may be specifically in stage three and it’s like, how do you instill process and frameworks in this maturation stage without also creating barriers without creating a slowdown of process? How do you instill frameworks without slowing down activities so to speak?

Lara Caimi:

Yeah. I think that is such an important question. When I have studied companies that scale, a lot of what slows companies down is not having a good go to market engine or not having a good product. It is truly that they start to die under the weight of their own bureaucracy. And so that was something I was super cautious about.

Lara Caimi:

At the same time that we’re introducing a proper three year planning process and going through strategic product reviews once a year and actually having structure to how we think about our markets and our customers and our products and the product roadmap, all that stuff, we also started to think about talent and that was where we said, “Okay, of course diversity, inclusion, belonging is a super important conversation that we need to invest in and educate and build into the core culture of the company. But also, how do we really think about our cultural values and what are the things that we want to keep from the previous phase and what are the things frankly, that we want to evolve, which is a nice opportunity for a new CEO coming in to be able to do that?”

Lara Caimi:

And for us, it was about foundationally articulating the company’s purpose supported by those values, right, and creating a rallying cry around that, that inspired and motivated people. And then also we invested in a little bit of foundational operational excellence. And I would say that’s simple stuff sometimes, right? But it’s like, we needed a decision making framework. Who has the D? Who gets to make decisions? How do you ensure that you teach people really great meeting management skills in addition to educating people about program management or change management or getting work done cross-functionally? A lot of those were conversations that we had in more formal leadership development programs that I think were super important to ensure that that dying under the weight of your own bureaucracy thing didn’t happen.

Harry Stebbings:

I totally get you. And I love that also, because it goes back to what you said also about John in terms of the commitment to people development. Kind of tied to framework in a way is the element of planning just in terms of strategic thought-provoking activity. My question to you on planning today is given the transient state of the world and given the current flux that we live in, how do you think about appropriate planning and try and be as accurate as possible? What does that look like?

Lara Caimi:

Yeah. I mean, no one has a crystal ball and I think every quarter … We’ve now been through a couple in COVID, but it continues to be a question mark, how deep is it going to go? How long will it last? Et cetera. And so I find that there’s plan, plan and replan, and also build scenarios around that. So what is the worst case scenario that we could consider here?

Lara Caimi:

And a part of how we’ve thought about doing that is you start to get pretty granular in how you think about that, like segmenting your customer base, which industries and companies are most impacted, how exposed are we to those companies and how exposed is our revenue base to that? We’ve been very conscious about costs. I was just talking to a CFO of a pre-IPO company earlier this week. And he was saying how this has actually been a really good opportunity to reign in spending because there’s a huge opportunity with no T&E, no travel, not being an offices, et cetera, and really focus on that cash burn rate.

Lara Caimi:

For me, it’s about being super thoughtful about building multiple plans and the replanning as you learn more. And then I think inspecting is super important, so what pipeline do we need? For us with our go to market model, what kind of ramped reps will we need as we think about out quarters?

Lara Caimi:

And then I think when it gets really interesting is when you start to think about, okay, this is a new normal, and there are new problems now in the world that our customers are facing, so what problems can we solve that create opportunities for our business, right? And so the example that we went through is very quickly at the beginning of the pandemic, we mobilized to support our customers by delivering four emergency response apps that were totally free in March, right, that just helped them with crisis management, and then we pivoted in May to this thinking around safe workplace, returning to work.

Lara Caimi:

And so in the span of a quarter, we designed, developed, launched, took to market, and sold four different applications that were focused on employee readiness, employee health screening, workplace safety management, PPE and inventory management, contact tracing, which we had 500 customers that implemented. There were 2,500 app installations in that quarter alone. It was big names like Coca Cola, Uber, state of North Carolina, Sanford Health, Ascension Health, all of these different companies that we were really partnering with to help them think about the problem at hand, which was one that no one had ever imagined before, no one had ever planned for. And so I think that that’s a real opportunity too, in this pandemic, as you’re thinking about planning, also thinking about what are the new opportunities that we can help solve for customers that are new to the world that we may be well-suited to help with?

Harry Stebbings:

I totally agree with you there in terms of the product innovation and moving with the times, but I’m really interested. You mentioned some of the incredible customers that you have there with the product line that was created in the last couple of courses. My question to you is, customer communication is so key, especially in times like this. How do you think about the right customer communication process and how have you thought about that during the pandemic?

Lara Caimi:

Yeah. I actually think it’s easier to schedule meetings now with people because it’s so much less logistics and meetings are shorter, they’re more frequent. I actually think the meaningful customer communications, especially when I start to talk to more senior folks in the organization, it’s created an opportunity to, I think, connect more frequently.

Lara Caimi:

And in terms of how it’s changed, I think this should always be the case, but it’s even more acute during the pandemic, which is you have to lead with empathy and with understanding their business context. I’ll give an example. I had a conversation with Honor Health, and it was really important for me to dig into what was happening with COVID in Arizona, what was happening with the hospital system there, what was the context that they were dealing with? And it just creates opportunities to have curious conversations around their business problems and help them real time. And so it’s that frequency of conversation and the availability of senior people, as well as I think it’s raising the bar to help them in a time of need in a more thoughtful and nuanced and specific way to their specific needs.

Harry Stebbings:

A lot of customers in these challenging times are also adopting digital first tools, processes for the very first time, especially when you look at, as you said there, the life of COVID, thousands of employees around the world. And the big thing for me is change management and adoption. And it’s one that I think about far too much, I’m sure. But tell me, what does great change management mean to you from a starting point, I guess?

Lara Caimi:

Well, I mean, I think what’s so interesting about this time is the amount of change that this situation has forced us to go through is in such speed, it’s really mind-boggling, right? You would never in a million years plan to transition your workforce all remote overnight. That would be a change management nightmare, but yet the urgency of the situation has left the world with no other options. And so in that way, you’ve created one of the most foundational change management strategies, which is you need a burning platform, you need to be very clear about why you need to change and what you’re changing for. And I think obviously COVID created a huge burning platform that drove accelerated change.

Lara Caimi:

I think as we think about digital transformation, it’s a business imperative now. It’s not an optional thing to do. And frankly, the gap between those who are digitally transformed and those who aren’t will actually have meaningful business results and will accentuate the difference between winners and losers. I think the business imperative is incredibly clear, maybe more so than it’s ever been before. And so that creates an opportunity to have the burning platform, make a decisive decision about what you have to do, and then communicate that change over and over again until almost you feel like you’re babbling, you’ve said it so often, because I don’t think you can over-communicate enough about it.

Lara Caimi:

And then importantly, and this is what I think about, which is what can get screwed up as a result of this, right, which is I think too often when people are doing programs or change or whatever, they think about a project plan and a bunch of progress milestones. And it’s like, that’s the wrong thing to measure. You need to measure outcomes and outcomes have leading and lagging indicators that actually indicate whether you’re doing the right thing or not and whether you’re going to be successful at the speed you want to be. And those are the things you need to be measuring, not just the progress maps.

Harry Stebbings:

Can I ask, when you think about measurement of KPIs and when you think about targeting goal setting, one other thing that I’m always so stuck on is how do you think about setting super ambitious targets which inspire a team to achieve maybe more than they could [inaudible 00:22:38] but also not too ambitious where if they don’t hit them, they’re massively dejected and it creates negative morale within the workforce? How do you strike that balance?

Lara Caimi:

I mean, this is something that Bill McDermott is really amazing at. He’s a glass half full guy in a way that makes you realize that the glass was 10 times bigger than you ever imagined. He pushes you to think about not just what’s great, but what’s game changing. And he sets these big, audacious, big dream goals.

Lara Caimi:

That being said, I think it’s super important to not create something completely unrealistic, in which case you pretty quickly lose credibility and that whole big dream plan becomes just a pipe dream. And so that’s where I think timing plays a big role and making sure that goals are set in the context of reality that they’re actually achievable, but that they’re pushing people to go a little faster than maybe they would comfortably sign up for on their own. I think it is art as you think about it, marrying that, but that big dream narrative that might be a little bit off in the distance I think helps inspire and rally in a way that’s incredibly powerful.

Harry Stebbings:

Yeah. I think you have to have that driving north star visionary so I totally agree with you there. I’m pleased to hear that. And I also love to hear art over science any day of the week, so that makes me very happy. I do want to move, though, into my favorite, which is a quick fire round. I say a short statement line then you give me your immediate thoughts, and it’s about 60 seconds per round. Does that sound okay?

Lara Caimi:

Okay. That sounds fun.

Harry Stebbings:

Okay, so your biggest challenge with your role with ServiceNow today?

Lara Caimi:

Yeah. My new role is chief customer and partner officer, which I’ve now been in for a week, so I’ll give you my top of mind thoughts here, which is we’ve launched customer success a year or two ago, found good results, but now we need to scale it and I think focus on how do we get it much more embedded to ensure our customers are seeing value, getting to outcomes, et cetera, in a meaningful way is a big challenge that I’m very excited to think about different models. And I think there’s business models that we can innovate around, et cetera, to think about how to do this differently. And so that’s exciting.

Lara Caimi:

The second big piece of my job that I think about is the partner ecosystem. The partner ecosystem in SaaS, sometimes it’s underplayed. And the reality is that these guys have very deep, important relationships with big customers, right? They are helping drive their digital transformation agenda and recommending software platforms that can enable that. And so it’s really important to get to know these guys, go to market with them, help them build practices around you for at least the kind of software that we sell to the largest enterprises in the world. And I think there’s ways that their models can innovate, frankly, to accommodate a SaaS model. And so I think that partnership and really growing together is another piece of what I’m looking forward to impacting in my new role.

Harry Stebbings:

Tell me, what would you most like to change in the world of SaaS today?

Lara Caimi:

I think it goes back to what I was saying about customer success. In a world where SaaS can proliferate in such an amazing way with anybody in the company that has a credit card can swipe and download something, I think it has a potential to take away the focus of what SaaS can really do for you and that ultimately it will have this negative consequence of almost giving SaaS a bad name.

Lara Caimi:

And I think we can change the narrative where we really start to think about, what is the value or the outcome delivered from this software? And so to me, customer success in the past has always talked a lot about NPS and customer advocacy and stuff like that, which is important. But I think we can almost innovate the narrative where we can think about customer success being defined as realized value. We’ve introduced this concept of now value at ServiceNow that we really think about embedding through the life cycle where we’re always focused on how the customer can get the most value and that narrative I think is really important for SaaS to broadly develop and adopt because that will avoid that nightmare scenario that I laid out in the beginning.

Harry Stebbings:

Tell me, what was the biggest surprise for you internally since COVID began?

Lara Caimi:

I just was really, I think, proud of our employees and how quickly we were able to pivot to remote work to stay productive and that people at the same time were dealing with unprecedented personal change and the amount of empathy and thoughtfulness that was applied and we ramped up our communications to employees. We treated them with care and respect. We cared about them and their families. That is a major pivot. And I think as a result, our employees are more loyal. And I think we’ve created a situation that obviously you have to keep evolving. This is a long trying time. People get Zoom fatigue, whatever, but I was surprised and I think proud of both our employees and just the way it was managed.

Harry Stebbings:

Yeah, absolutely. I think it’s been incredible to see. Tell me, what moment in your life has changed the way that you think? Very, very hard question to ask.

Lara Caimi:

I mean, I guess I have to go back and credit Bill McDermott. It was a big transition where I started working for one CEO and within a couple of years had a very different and wonderful CEO to work with and learn from. And the biggest thing that he has done for me and for this company is instilled the power of the big audacious goals. He wants us to not just be a good company or a great company or just hit the quarter or whatever. Of course, he wants all that. But his goal for us is we want to be the defining enterprise software company of the 21st century. And when you set goals like that, it’s such a powerful unlock that lets people think about, I don’t just need to do what for us, what Salesforce did … I don’t need to just follow that model or think about other big software companies. I can think about how do we reinvent this? What are the problems that no one has figured out yet?

Lara Caimi:

And that bandwidth for thought and that inspiration that he puts out, I see it trickle down in the organization in all sorts of ways that we’re doing things and thinking about things differently for the first time ever and moving faster and I think with more enthusiasm than I’ve seen, and that’s incredibly inspiring. That’s an incredible leadership lesson that I’ve taken from him that I’m really grateful for.

Harry Stebbings:

It’s amazing to hear that about Bill, but Lara, listen, I’ve so enjoyed today. I so appreciate you putting up with me getting off schedule quite so frequently, but thank you so much for joining me.

Lara Caimi:

Thank you. This has been so fun. I really, really appreciate this conversation. Thank you for your time.

Harry Stebbings:

So enjoyed having Lara on the show there and such exciting times ahead for ServiceNow as they scale through phase four. And if you’d like to see more from us behind the scenes, you can on Instagram. 

Harry Stebbings:

As always, I so appreciate all your support and I can’t wait to bring you a fantastic, fantastic episode next week with Kyle Parrish, head of sales at Figma.

 

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Q: What are the typical discounts SaaS companies offer for a multi-year contract paid upfront for a 2, 3 & 5 year contract? (Five is a stretch.)

You need to back into what you are solving for:

• Is your churn material? If it’s close to zero by logo, and negative based on cohort revenue (i.e. you have net negative churn), multi-year contracts are worth less.
• Are your renewals a lot of work? Renewals do have hard and soft costs. If so, multi-year are much better. If renewals cost money, and if you pay commissions on renewal especially … it’s fast, easier and simpler to pay the next cost of that renewal commission up front in essence via a discount.
• Are you getting the cash up-front? This is a big, big deal in the early days. Less so later, once you are cash-flow positive.
• Can you lock out competitors? One advantage to 3+ year contracts is they discourage your customers from looking for other solutions, at least, for quite a long time.

The bottom line is most companies end up giving an additional 10–20% discount for multi-year contracts.

Once you go past 20% or so, you are giving up a material amount of downstream revenue in Years 2–10, if your churn rate is low. You’re locking yourself into a decade of discounts not just for the users you close today, but also the ones you add later.

Large discounts for multi-year deals may be worth it in the early days for the cash (it usually is). It may be worth it later if your churn is high.

But if you have net negative churn, bet on your app and yourself, vs. lock-ins. You’ll make more money, with less friction, in the long run.

A bit more on a related point here: Annual Contracts: Maybe Not All They Are Cracked Up To Be | SaaStr

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