Since last September, Dennis Woodside has been in situ as President of Freshworks, an appointment that was seen as further evidence of the firm’s intent to drive upwards into the enterprise space. Woodside’s track record, including time as Chief Operating Officer at Dropbox and CEO of Motorola Mobility, as well as serving on the board of ServiceNow for four years, promised a gear shift in Freshworks go-to-market thinking.
Nine months on, I caught up with Woodside in London to get some insight into what brought him to a company with strong SMB roots and what changes he’s been spearheading since coming on board. The answer to the first point:
I had familiarity with the space. I had been on board of ServiceNow, and I certainly had familiarity with product-led growth through Dropbox, where we started out really with a consumer product, and then eventually that product was adopted more and more by professionals and brought in more and more businesses. We at Freshworks have been on a similar path. That was interesting to me - that Freshworks has been able to do that in some big spaces. IT is a very big space. Customer Support is a big space. Sales and Marketing is a big space.
Surprisingly, I was not familiar with the company, and that was definitely a surprise because living in [Silicon] Valley, I know most tech companies. But as I dug into it, it actually became more of an opportunity because the company had done very well, has done very well, on the strength of the product. Increasingly as we move into larger and larger accounts, the go-to-market effort has to catch up and has to be mature and be able to deliver on a global basis, and that's what I have done a couple of times and know how to do.
Woodside was also impressed by the mindset of Freshworks founder and CEO Girish Mathrubootham - that software is unnecessarily complex and expensive:
Freshworks really exists to provide a sophisticated solution, but one that's right-sized and also at the right price, when you consider all the things you need to do to actually get up-and-running. I thought that that was a compelling value proposition. Most of the larger [IT] companies are focused on the top 2000 companies in the world. But there's a lot of other companies out there that have the same issues, the same problems. They have IT teams or customer support teams, they have to support their customers. There's no reason we can't build products that are suitable for them. So all that was convincing to me.
So, nine months in, I asked Woodside what the elevator pitch for Freshworks is? He told me:
Firstly, we provide software that is absolutely mission-critical. If you think about powering an IT department, powering a Customer Support department or Sales and Marketing, this is not 'nice to have' software, this is 'must have' software. Secondly, every company in the world needs that software. So long as you have a Customer Support team or you have an IT team, you need to empower them with a digital solution that makes their workflow easier and increasingly takes work off their plate that they don't need to do.
A lot of companies are focusing on digitally-enabling the biggest companies in the world; we are focused on digitally-enabling everybody. That's the fundamental distinguishing factor. That means we need to build software that's easier to deploy and faster to deploy, requires fewer external resources or experts, whatever you want to call them, to deploy. That's where our roots as an SMB player actually help us, because we've had to work through very hard problems about how to make something complex come across as simple? How do you make a very sophisticated workflow engine work for a smaller business that might have three people in it? That's what we do - we provide a very sophisticated tool that's essential for every business in the world at the right price.
Landing and expanding
Today, some 40% of Freshworks revenue comes from small businesses with 250 or fewer employees. That means, as Woodside was quick to point out, that 60% is coming from larger sized customers:
I would say we've had quite a bit of success in the last couple of years of attracting and scaling those customers. So, a couple examples in Europe. Veissman is a very solid, mid-market German industrial company with 20,000 plus employees. They migrated last year to us for all their IT needs. Carrefour's Belgian division, which is also a large organization, they also migrated over for all their IT needs. These are big, important customers with very sophisticated decision-making processes, and they're seeing how our product has matured quite rapidly.
There’s a clear ‘land and expand’ strategy at work within Freshworks. Woodside cites Customer Support and IT as two most common ‘land’ functions that get the firm’s products through an organization’s doors:
As an example, one customer brought us on three years ago as their IT solution. Then their Salesforce contract was coming up for renewal and they wanted to look at other solutions. Our product had gotten much better during the course of the last three years. They decided to migrate from Salesforce onto ours, partly for value, partly for feature functionality, the richness of the experience that it creates. That's a good example of ‘land’ three years ago and now ‘expand’ in the last year to a different product entirely.
We have other customers who ‘land’ with IT and then they expand that IT workflow engine into other departments. So a number of customers are using Freshservice for HR, for the Finance team, for the Legal team, to route workflow and so forth. Most of our big customers are both CX and IT - half of our top 20 are buying both products at this point. Many of those started out in CX, they found the experience was working, and then migrated over and added Freshservice, added our IT product.
So you get you get a bunch of different ‘land and expand’ motions. Historically, the expansion was mostly within the product of the company that the customer originally bought. It was just adding seats. But increasingly there's us actively moving customers from one product to multi-product. That's a big growth lever for us.
How that expansion works and the direction it takes varies on a case-by-case basis, he added:
If we're talking about IT to non-IT departments, usually the IT team is very involved in what solutions HR or Finance or Legal buys, and usually they're very aware of what the needs are. From IT to CX, it's more of a reference, I would say. Those are two independent decision-making bodies, and it's the same with CX to IT. In smaller organizations, Customer Support and Sales and Marketing can be under one roof, and there it's more of a case that you already know the customer and you're just expanding into another team.
So it really depends on the situation, the complexity of the organization, the size, the scale. Carrefour is a good example of a departmental buy, where Carrefour Belgium has independent authority to make their IT decisions. But that could result in us going to other Carrefour divisions and continuously winning them. In the US, we have Toyota's US division, but we don't have Toyota globally. So there's also a departmental buy that can lead to additional wins down the road.
As Freshworks does push up into larger customers, Woodside has introduced changes to the company’s go-to-market strategy. At present, 30% of large account business comes in via the same mechanism as small accounts, namely someone in IT decides to start a trial. This is how the engagement with Carrefour began. But others do get underway via a more formal RFP-led field sales engagement, said Woodside, and that’s led to some shifts in practice:
One was making sure that we have a team that's dedicated to new business, because acquiring a new customer is a different skill. It requires building trust very rapidly, explaining who the company is - we're a newer company, so a lot of people aren't familiar with us - and then separating that from account management, which is a lot about making sure that customers that we have are very successful on the products that we have, so that when they are thinking about expanding or they have another need that we could service, they believe in us because they've seen the results.
So we've separated those two roles - you're either an account exec, looking for new business, or an account manager, managing an existing business. That's been a pretty meaningful change that allows us to develop more of the art of those two things.
We've also moved a good number of accounts from our field teams back to our inbound, small business team. So our line between field and what we call inbound used to be a 250 employees. We've moved that up to 500. So if you're a company with 499 employees, you're going to go through that self-service motion. We will reach out to you and talk to you, but it's going to be a remote team. We're going to use things like chat and webinars, you're not going to have someone in-person. We find for a lot of our customers, that's the way they want to buy. They'll buy and they'll convert and they'll be very satisfied with that motion, whereas we want people in the field to talk to larger customers, who have much more complex needs.
The company has also been bolstering its enterprise experience internally, he added, with the recent lay-offs and headcount consolidation in the tech sector seemingly well-timed:
We have made a number of hires across the business who are coming from places like Salesforce and Zendesk and so forth, who've seen this movie before, to help us scale. It's been pretty interesting to see that the number of applicants we are getting now per role has nearly tripled since this time last year. The job market has gone, completely intact, in a circle in less than 12 months and that's benefited us for sure.
And those people are coming back into the office. Woodside argues that Sales still benefits from having in-person capabilities:
What we find is a lot of the earlier stage, more information exchange-style meetings are still on Zoom. If I'm in a first pitch, and the purpose of the call for us is to establish our credentials and give them a high level overview of our products, that's happening online. What's important though, is trust, because at the end of the day, our customers are relying on us to serve their customers, and they want to know that they can trust us that the solution is going to be there. They have gone through multiple migrations to different technologies and they've seen what can go wrong. They know that at the end of the day they're going to need to rely on somebody on the other end of the phone to actually get something done.
So what we find is, when we actually are getting down to having the kind of discussions about, 'Are we going to move forward or not?', having those in-person is invaluable. And then when we get into architecting how the migrations are going to happen, that is way more effective when you can be in a room and be at a whiteboard and really understand what's going on at the customer. What's the technical landscape inside the customer? What systems are they relying on? Who's their partner in integration? All of that, we find being in-person is super-important.
In part two of this interview, the future of customer support in an age of generative AI comes into focus.