Host Analytics Perform 2019 answered questions on the state of financial transformation. I also got plenty on how Host Analytics sees its role in the cloud EPM market. But there was one big question that lingered.
That shoe dropped today with Host Analytics' appointment of Grant Halloran as Chief Executive Officer. A peep at Halloran's LinkedIn profile shows he's no stranger to the Financial Planning and Analysis space.
Does he buy into Host Analytics' midmarket EPM strategy? And what challenges does he foresee on his watch? I put those questions to Halloran today.
But why Halloran, and why Host? It can be awkward to explain why you've been hired, but Halloran obliged:
I've always been in growth companies. I have a very, very strong kind of growth mindset, and a lot of experience in growing and expanding companies. And global.
I think I've had a lot of experience in AsiaPac, Europe, and obviously the last eight years in the U.S. So I think I bring those two qualities above anything else. And really just an entrepreneurial attitude as well to the role over here.
Yep, Halloran hails from Australia. He moved to the Bay Area as a co-founder of Orbis, a SaaS marketing resource management business which sold to Infor in 2012. As for growth, when Halloran joined Anaplan as CMO in 2015, he was employee number 230. When he left two and a half years later, the employee count was 750: "It was a real rocket ship experience," says Halloran. Host Analytics, 800 customers and counting, also has a growth agenda. But why did Halloran pick Host?
I think Host has got a really great set of capabilities, and is kind of poised for much higher growth. The product is exceptionally mature and robust. Obviously the technology works really well; you've got 800 customers that will attest to that.
We've got folks in this organization that have been here for a decade. They've have gone through that journey, and continue to want to be part of the next phase of that journey.
That team includes CRO Ron Baden, who was serving as interim CEO during Perform 2019. Sounds like Halloran and Baden are ready to press on:
We've doubled the sales force just in the last 12 months under Ron's fantastic leadership. Ron's gone back to the CRO role. He and I are going to partner really closely.
Quantifying a midmarket EPM opportunity
Perhaps the most important question is: what is the market opportunity? And does Halloran see that opportunity differently? At Perform 2019, we weren't able to meet with Vector Capital, Host Analytics' investors. But we did discuss Host Analytics' market positioning with Host's executive team. The answer? Unapologetically and clearly midmarket. Halloran hit a similar note:
- If you look at just the US alone, there are 35,000 companies with revenues between $50 million and $2 billion.
- Halloran estimates the EPM planning software penetration level in that market at ten or fifteen percent.
And: the imperative of finance transformation is driving into the midmarket. Halloran:
Digital finance transformation is starting to come down into the midmarket. There's 5,500 companies above $2 billion in revenue. They're obviously doing more advanced things, but they're all still on this journey.
What's really driving finance transformation for customers?
I worry about this transformation narrative, however. Transformation is an undeniably terrific sales framework for enterprise software, but is it really a customer imperative? I dug into that at Perform 2019 in CFOs share their cloud technology stack advice, and why it matters. Why should midmarket companies care about finance transformation? Halloran sees three trends. First: democratization of software:
I think there's a few forces at play. Firstly, I would say that if you look at the software adoption inside sophisticated organizations that we're talking about here, I would say that software adoption has become quite ubiquitous and almost democratized.
Business leaders are now pushing tech:
Business leaders are driving technological change in their organizations, right? So if you talk to a lot of business unit leaders, their first go-to solution for improving their department, improving the way that they collaborate is technology.
Demand for consumable finance data is increasing, and not just within finance. That means new collaborations:
I hear this a lot from finance leaders: "We don't want to just get more productive and faster and more collaborative in the way that we do our planning and forecasting inside finance. We want to improve the financial planning and analysis capabilities of all the people in the company."
Halloran's third trend is, in my view, the most important: macro-economic pressures. Midmarket companies must function inside shifting global supply chains:
Globalization and geopolitical changes are very real for a lot of companies. If you're a midwest manufacturer, you look at the geopolitical stuff that goes on at the federal level, it affects supply chains.
It's so dynamic now, everything comes at you, and comes at you very quickly.
That includes lowered barriers to entry, and fears of being Amazoned, or perhaps Ubered:
There's so many competitors that can enter your market really quickly. The barriers to entry are dropping in so many different industries.
All of which fuels that motivation to change:
That's three major forces that are leading to finance leaders to say, "We need to be more agile. We need to be responsive."
I asked Halloran about his biggest challenge ahead. "Execution" was his immediate reply. And, in the era of mergers and acquisitions, you have to ask: what do your investors (Vector Capital) want? "It's a growth play for them," says Halloran. If anything, Halloran says, Host Analytics could acquire a company to further their platform. Nothing is pending, but it's an option he says Vector - and Host - will consider.
We debated the market obstacles ahead. I see Host's challenge as the doubling down of all types of ERP players on financial planning and analytics. Whether or not their functionality or user experience is equivalent to Host's, they'll be pushing hard. But: on Host Analytics side is the "back to best-of-breed" cloud shift, where customers are less willing to bend on the best product for their business users.
Another challenge for Host: they must see their customers' transformations through. Even the most advanced Host Analytics customers are not through their financial transformations, with rolling closes and practical use of predictive analytics mostly still on the horizon. Halloran spoke to the obstacles here, which are less about tech and more about change management.
If Host Analytics wants to achieve their growth ambitions, those customer testimonials will be vital. Halloran talks about "continuous financial optimization" - an exciting state for customers to push for, where collaborative financial planning is based on numbers that are continuously validated. To me, that's the best ambition. Get your customers there, and whatever growth you get should be plenty good enough.
Beyond the U.S. midmarket, Halloran plans to push Host's international growth, with a focus on Europe and Asia. As Halloran told me:
In 12 months time I think you'll look at Host Analytics as a company that is much more global in nature.
We're about to find out.