Revenue doesn't get created on the front end or the back end. It's in the middle where revenue actually gets created — it's when you make that commercial offer to your client. That's when the revenue of your company is decided.
Middle office encompasses everything that has to happen between getting in front of the customer and being able to go ahead with fulfilling an order. It's configuring, pricing and quoting a proposal (CPQ). It's contract lifecycle management (CLM) — drawing up a contract and then making sure the contract terms are respected. In regulated industries, it's compliance and risk management. In any B2B context, it's how you incentivize your sales and marketing teams to maximize sales and profitability — sales performance management (SPM) and revenue performance management (RPM) — and nowadays, how you automate B2B e-commerce to achieve similar goals.
Middle office is a term coined several years ago to describe these activities, particularly in the financial and banking sectors, but also in telecoms and media, healthcare and pharmaceutical, and other sectors where such business processes have always been significant and complex.
Middle office market
There's a cohort of specialist software developers that cater to these markets, along with systems integrators that help businesses build their own custom solutions. But that generation of mostly client-server applications is no longer fit for purpose in the faster-moving digital era. Most are highly bespoke, point solutions, and not amenable to integration or extension.
Meanwhile, cloud computing and digital platforms have sprung up that provide high-speed, flexible and intelligent digital automation of the middle office. Offering a more adaptable and economically attractive option than earlier generations of technology, they've expanded the market into industries and businesses with less complex needs.
Suddenly, the neglected middle office has become a land of opportunity that straddles large enterprise accounts eager to replace and update an ageing legacy IT estate, alongside a midmarket that's only now discovering end-to-end automation of previously disconnected point solutions and manual workarounds. And it's a realm that no single vendor has ever claimed, says Verma:
Automating the middle office is not something that any company has gotten started or gained any size around.
Leading players include Apttus, Oracle
Apttus is the leading proponent of this new, digitally adept middle office proposition, with almost 700 customers spread across midmarket and large enterprise. Its solutions are tightly integrated to both Salesforce and Microsoft's CRM platforms, and recently became IBM's preferred cloud solution in verticals such as financials and healthcare.
Oracle is another significant player, having acquired cloud CPQ provider BigMachines in 2013. Oracle also offers a cloud SPM solution, while its Siebel product line has a longstanding middle office presence in industries such as telecoms. Salesforce itself is also a player in the midmarket after its acquisition of CPQ vendor Steelbrick at the end of 2015. Finally, acquiring Callidus brings a strong cloud CPQ and SPM offering to SAP, although the full outcome won't be clear until after the acquisition closes.
One reason why IBM has become interested in the potential of cloud middle office is the scope for applying artifical intelligence, in particular machine learning, to business processes in this area. This is something Apttus has already been developing, for example to steer salespeople through the sales process to optimize revenue, or help optimize the selection of clauses in contracts. Verma believes its single data model gives Apttus a strong competitive advantage here:
The fact that we've grown organically has given us a single data plane, which allowed us to do machine learning and AI without having to normalize data. If you do not have one single data plane, it'll take substantial re-architecting of companies to be able to deliver that. We're getting a lot of traction through our AI offering.
BPM and the middle office
I caught up with Verma on a visit to London earlier this month to ask about his recent appointment as COO. Before joining Apttus, he was COO at Hortonworks and previously spent a dozen years at Tibco, which he joined as a result of its acquisition in 2004 of leading BPM vendor Staffware. He tells me there are parallels between the process integration and workflow automation that Staffware and Tibco did and what Apttus now offers.
Applications around workflow and collaborative applications have been something that I've done for over a decade now, because I ran the BPM business in Tibco for a while ...
We had middleware in the olden days, which connected the front office to the back office, and that was a toolkit. What Apttus offers is the modern generation of connecting the front office to the back office, through the middle office.
It's end-to-end, it's very configurable, it's easily provisioned, it's very targeted per industry and vertical — and you can use it on multiple cloud platforms. That's what makes this, I firmly believe, a once-in-a-lifetime opportunity.
Perhaps unsurprisingly as a new recruit, he's bullish about the company's prospects:
What Apttus does for its customers is very relevant and sticky, so once we get in and implement or pilot, which we do most of the time, it's almost impossible to peel us out. So that makes for a pretty rewarding financial model. We do feel that we have put a country mile between us and our nearest competitor, if any.
What I find intriguing here is the rebirth of what used to be called BPM — business process management — as enterprises discover new ways to stitch together and automate complex end-to-end business processes. This isn't your father's BPM though. Built on top of a flexible, API-driven cloud platform, and enriched by artifical intelligence, it's a completely new way of automating business operations.
What Apttus is doing within its own product is similar to what we find the likes of Dell Boomi doing with its new low-code workflow automation tool — perhaps it's no coincidence that this came out of a team that worked on BPM tools in the 2000s. Another next-generation workflow automation vendor is Workato, founded by a team that was involved in the early years of — guess who? — Tibco.
Reinventing middleware and BPM of course does more than solve the process automation challenges of the middle office — it aims to dissolve demarcations between different enterprise departments so that work gets done frictionlessly, a theme I revisit often.
There's a much bigger story, therefore, within which the limelight now falls on the middle office and those who play there. SAP's acquisition of Callidus introduces an intriguing new subplot, leaving us on the edge of our seats until we discover whether HANA can deliver the same flexibility and AI-powered analysis as cloud-native platforms. Meanwhile, Oracle's ongoing efforts to converge several different generations of its products onto its emerging cloud platform provides another storyline that still keeps us guessing.
The other big twist yet to come in this plot is Apttus' oft-discussed IPO trajectory. Now that SAP has made its move for Callidus, will IBM make a play for Apttus? Or will some other player stride on to purchase this highly valued unicorn? Personally, I think the story stays more interesting if Apttus gets to make its public debut. But either way, the drama's not over yet.