Apttus CEO Kirk Krappe on selling outcomes not products

Fast-growing quote-to-cash vendor Apttus has a track record of breaking down traditional product boundaries as it expands its functional footprint in the space between enterprise CRM and ERP. According to CEO Kirk Krappe, who I caught up with earlier this month on a visit to London, this is because technology solutions alone don't necessarily deliver the intended results:

The first thing we do today, which can sound really obvious too, but most sales orgs don't do this, is say, "Why are trying to do this? What is the business outcome you're looking for?" Not what functionality do you need or how much faster do you want your sales guys to quote, or how accurate, but what is the business outcome?

If the outcome is revenue leakage, just having a quoting tool in place doesn't necessarily address all of that. Just automating a process doesn't necessarily change an outcome.

Krappe gives the example of a sales person who needs to go above a 50% discount level to close a deal, and there's workflow in place where he has to submit a request which gets routed to the CFO for approval. Although the process appears sound in principle, in practice this common scenario often doesn't achieve the intended result.

He's done his best deal, but if he needs more than 50%, he's got to [submit for approval]. 80% of the time the downstream people approve. [In] all the studies, 50% of the time there's a debate, but they usually end up approving, so the outcome hasn't changed.

The downstream person either doesn't have enough data or context, because workflow can't give that to you, so you're going to have a meeting or a phone call. Most people are busy today, so a lot of times, they just don't, so they click submit — or they are in the line of getting in the way of a deal, so they approve. There's human reasons why that happens. It's nothing wrong.

You think you've got a process and control, maybe you have. Have you affected the outcome? Probably not. The outcome you've affected is, you've probably slowed down your revenue.

Influencing behavior

The Apttus antidote to this scenario is what Krappe calls behavior-based apps — which, because the technology uses incentives to influence behavior, brings the company into the sales performance management space, knocking up against a new set of specialist competitors such as Callidus and Xactly. Rather than getting trapped in product categories, Krappe says the point is to join functions together in a way that achieves the outcome you want.

The point [at which] the sales guy is going to submit that approve request of 50%, the Commission Calculator comes up and says, 'If you do, you are going to get comped less, but, by the way, if you don't, you're going to get comped more.'

Is the outcome behavior likely to change, more than just a workflow engine? Maybe a little bit, maybe a lot, but it's more likely to change. We've wrapped these behavior-based apps around the process-based apps, and no one is doing that today.

This is a new category that cuts across earlier product demarcations, he says, and which brings real differentiation for Apttus.

Take the word CPQ out, take compensation out, just {say], here's the set of things if you do put together, you will get that outcome.

Add on machine intelligence and this approach is finding favor with enterprise buyers, says Krappe.

If you have a 1,000 person sales team, your top 200 typically sell 80%. That's just the way sales works.

Could you imagine at a point you're one of the 800 sales guys. As you're giving your customer a quote, the machine is looking at the similar profile customer for what one of the top 200 agents would have done. Then it works out what the deal would have been if they'd done it and then presents it to that salesperson.

If you do it, beep, your comp calculator comes up. You're going to get comped more. Are you likely to have a better outcome for your business doing that?

It's all about outcomes. There's a big potential customer, they're infatuated with that combo. They think it's going to change revenue in their business.

Differentiation against Salesforce

That will stand Apttus in good stead in its battle for differentiation against Salesforce, which unexpectedly became a competitor when it bought quote-to-cash vendor Steelbrick late last year. Krappe says he understands that Salesforce wanted to bolster flagging growth in its Sales Cloud revenues, especially among SMBs, and says the relationship with Salesforce remains strong.

They want and need us for the big-ticket accounts, which is where they want to go, because to get to $20 billion in revenue, they need that. You can't just do that with SMB. We play very well with them today.

In an equally unexpected move this spring, Apttus revealed that it has ported its originally Salesforce-native applications to the Microsoft cloud, and now runs on both. That helps maintain the differentiation, says Krappe, who doesn't rule out adding other cloud platform partners in the future.

I think this footprint is going to be unique. I think we're going to be a standalone software company that is running on this thing called the intelligent cloud. We don't care if it's Azure, Salesforce, or anything. The customer is getting this functional footprint, they shouldn't care about which platform it's on.

With 1300 people in the company and revenues of $91 million set to grow to $153 million this fiscal year, Apttus remains on track for an IPO that had originally been touted for this year but is now in the frame for early next. The company wants to give its recently hired CFO time to get her feet under the table, says Krappe, and also wants to avoid any investor skittishness later this year when US presidential elections take place. The extra time also allows Apttus to show it can become cash profitable, despite a near-70% year-on-year growth rate. Krappe says:

That's high for a SaaS company and especially a SaaS company at scale. Scale meaning above $100 million. It's very difficult for SaaS companies to grow like that because you have to sell so much net-new, because it's trickled down into a GAAP basis. We can do it with the resources that we have and the capital we have.

Honestly, the good news about where we are is, we don't have to IPO. It's not like we were funded by a VC and we're ten years into the fund, and they need a liquidity event. We don't need any more capital. We're funded through profitability.

My take

Krappe's focus on outcomes reminds me of the "value as a service" message promoted by Rob Bernshteyn, CEO of Coupa, another high-flying enterprise SaaS vendor. It's a perspective we share at diginomica — technology not for its own sake, but for the business outcomes it can deliver.