Last year, quote-to-cash vendor Apttus surprised many when it revealed that it had ported its originally Salesforce-native application to Microsoft Azure. Previously, everyone had assumed that vendors who had built their apps on the Salesforce platform were forever locked in to that single destiny. But here was Apttus, proposing to continue to promote its Salesforce-native application while simultaneously making the same functionality available on an arch-rival's platform.
There's a saying in the tech industry that when a small vendor partners with one of the giants, it's akin to dancing with an elephant — you should always be careful of getting trodden on. Dancing with two elephants at the same time is unprecedented. I caught up with Apttus CEO Kirk Krappe on a visit to London last week to find out how it's all going.
On partnering with Microsoft
Under its multi-cloud strategy, Apttus not only offers two separate versions of its quote-to-cash application, one on each platform. It is also adding new capabilities from the Microsoft platform that it uses in its Salesforce application — such as machine learning, where Apttus has chosen to use Microsoft's AzureML.
Apttus has benefitted from a lot of engineering support from Microsoft, says Krappe, because of the current battle going on between leading cloud platforms to win over ISV partners.
We caught their attention strongly when we made that decision because we were a very strong, big Salesforce partner, so obviously that generated interest. But secondly, Microsoft is marketing very heavily into ISVs.
The whole platform wars that are going on right now are really incredible, between AWS, Azure and actually IBM's Bluemix SoftLayer. They are really very aggressively trying to get market share.
So they're doing obviously a lot of things with end-user customers, but with ISVs like us, they are doing all sorts of things to entice us.
On using Azure to boost Salesforce performance
Not only is Apttus using AzureML to bring new functionality to its Salesforce application, it's also using its own technology hosted on Azure to bring some extra muscle to the Salesforce platform — which is kind of ironic, when you think about it.
Krappe says that there's a new concept of hybrid cloud gaining ground in Silicon Valley at the moment. Not in the old sense of mixing public cloud with private and on-premise IT, but in the sense of leveraging different public cloud resources in different ways within the same infrastructure. That's what Apttus is now doing with its Apttus Intelligent Cloud (AIC), which powers a feature called Snap Performance introduced at its recent Accelerate annual user conference in San Francisco.
Apttus is using this hybrid approach to boost the native performance of its applications, whether they're running on Salesforce Force.com or on Microsoft Dynamics, by sending some of the processing out to AIC, a proprietary platform built by Apttus that runs on Azure. Krappe explains:
Our apps, which are compute-heavy, vis-à-vis a sales force automation app for instance, were bumping into limitations on platform. Most of our clients are very large companies, Fortune 500, who will have, let's say, 5,000 salespeople trying to do quotes and contracts, and it would be taking a long time because the platform wasn't designed for compute-heavy.
So we created a completely new performance module called Snap Performance, which basically took the compute component out, put it on another platform where we would have virtually instant, ultra high-performance processing, and then present it back to the user in our application.
It's not that we wanted to have things off different platforms. But actually, it's turning out to be fantastic, because what we've discovered is not only Snap Performance makes our performance substantially better, but there's a whole suite of other things in this platform that we can now introduce into our app, too, that can make other things go better. Document generation [for example] can be much more sophisticated than it was in our old apps.
Using AI to streamline the NDA process
Another product innovation arising out of the Microsoft partnership has been Max, an intelligent assistant that uses machine learning powered by Azure ML to help simplify processes in the Apttus quote-to-cash application suite. Some of the most popular use cases are very simple processes that have always been very hard to automate in the past. Many customers, for example, are using Max to handle NDA requests, says Krappe, which are often a prerequisite at these organisations before any interaction with a prospective customer or partner.
The way it happens today for most companies is, they either call a legal department or they go to a portal that's a corporate website and they click in. Just a basic request can take days if not weeks for somebody who just wants to go and engage with the customer.
Max is a conversational interface. You can have everybody in your company, wherever they are, they'll text Max and say, 'I want an NDA,' and she'll ask a few questions, like, 'Who's the customer?' So that really simple use case [of] contract request, specifically NDA, is very, very hot. It dynamically assembles this document, and then gives it to you there and then. Or emails it to you.
Another popular use case is updating an opportunity record in Salesforce, which companies often have difficulty persuading salespeople to do — even Krappe admits his own sales team don't always do it. Using the intelligent assistant, it becomes something the salesperson can do just by speaking or typing into their phone, citing the customer name.
She says, 'Great. What do you want me to do?' I say, 'I want to update the record.' And then you have the conversation, updating Salesforce. Done. Just that simplicity like that. They could be at the airport, or they could be driving if they're on Bluetooth. The CRM version, we're seeing a huge amount of interest.
Competing with Salesforce on quote-to-cash
While Apttus shocked people with its Microsoft partnership, Salesforce had previously shocked a lot of ecosystem players when it bought partner ISV Steelbrick at the end of 2015, whose product has become Salesforce Quote-to-Cash. This pits Salesforce directly against Apttus in many deals, although Krappe says that Apttus still wins out when the customer is looking for a high-end feature set.
Their product truly doesn't compete with us. If we are competing, one of us is in the wrong deal.
Their product is simpler. Obviously each generation is going to have more and more functionality. Sooner or later they'll have an enterprise-class product, but right now they do not. We don't envisage that anytime soon. I'm talking about a couple of years at the earliest.
He concedes that Salesforce is winning in deals where customers are happy with the feature set that Salesforce offers and want to stay with an all-Salesforce solution. He also reflects on a common tactic among other enterprise vendors, such as Oracle, to throw in ancillary products such as configure-price-quote to protect a renewal price — but having done so, won't speculate whether Salesforce is doing this. But in the end, this is an expanding marketplace and he believes there's room for both:
The marketplace is easily big enough to have two viable solutions.
The shift to services and subscriptions
One of the big drivers for Apttus is the current shift by enterprises away from straightforward product sales to a mix of products and services. This makes quoting even more complex and demands more sophisticated billing systems that can cope with different pricing models, as well as being able to sync up to revenue recognition. It also puts more focus on contracts, so automation of contract lifecycle management (CLM) becomes more important. And finally, customers often find it easier to self-serve their needs in this kind of relationship, which demands a B2B digital commerce portal. Apttus provides all of these capabilities as a single platform, explains Krappe.
What we're finding, our customers need a CPQ tool. They need a CLM tool. They need a billing tool to do the subscription, and they need a B2B e-commerce tool. That's what we offer out-the-box from our platform.
Customers need the full footprint. It's not just billing and it's not just rev rec. They need the quoting tool, they need the CLM tool. We're prevailing in these very large deals because we come in with the full footprint that a customer can now truly re-engineer to a subscription-based setting with our tool.
On living with two partners
Salesforce's acquisition of Steelbrick along with Apttus' own partnership with Microsoft puts the company in an odd position of being both a competitor of and a partner with Salesforce, which also has a significant investment in Apttus.
We're in an ironic situation where, infield on the ground, it is a battle. Outside that, we have tremendous relationships with Salesforce. Still. We're their biggest investment.
During my keynote in Accelerate, I stood there and emphatically said to the market, 'Salesforce is our biggest partner still. We're 100% committed. We have a longterm relationship. We renewed our contract last year for a long-term contract, which will be disclosed in our S-1.'
At the same time, the company has a lot of opportunity with Microsoft, he says.
Microsoft's equivalent of AppExchange, App Source ... is 10 times the size of App Exchange from a user standpoint. It is far less mature, it's new. But it's got a huge reach, and they are investing more and more in that.
There's all these other customers that need our stuff, and Salesforce can't sell SteelBrick to a non-Salesforce customer. We can. So there's a whole marketplace there for us.
From a customer's point of view, the underlying platform is rarely the important issue, Krappe points out. The decision to buy a CPQ solution is a business issue.
On that forthcoming IPO
For the past several years, Krappe has spoken openly about Apttus' ambitions to file for an IPO. But he's suddenly become coy when directly asked about IPO timing — which suggests the wheels are already turning.
Unfortunately, we can't talk about that because we are in a special period. So you'll see no communication out of the company in any capacity.
The decision to partner with Microsoft at the same time as continuing its Salesforce relationship could pay off for Apttus, but it's a big gamble. Other ecosystem partners on both platforms are watching with interest how it pans out. Customers and prospects will want to keep a watchful eye too.
The proof that it has worked will come when Apttus can show that it is signing big deals with Microsoft accounts as well as continuing to do the same with Salesforce accounts. Its deal sizes tend to be in the seven-figure range, so they take a while to close and then just as long to roll out. So the impact of that Microsoft port will only now be starting to show up as revenue. Which perhaps explains the apparent timing of that IPO.
All will become clear when (and if) Apttus files its S-1 to commence the IPO process. There may not be long to wait now.