"It seems more intentional" - Zendesk CEO Mikkel Svane sees buying patterns become less "hectic" in the Vaccine Economy

Profile picture for user slauchlan By Stuart Lauchlan July 30, 2021 Audio mode
Summary:
Zendesk's enterprise journey continues as the 'hectic' response to the COVID crisis gives way to more prescriptive behavior.

mikkel svane
Mikkel Svane

Buying intentions are stabilising as the Vaccine Economy takes shape, reckons Zendesk CEO Mikkel Svane. As the customer service firm reported chalking up 50 deals over $250,000 ARR in its second quarter, Svane said:

I'm really, really positive about the demand that we've seen this quarter. And it has been broad-based, but our Enterprise business has been doing really, really well and you can see that throughout our metrics. We see, in general, just everything coming back. People are really gearing up for solidifying their plans. It's less hectic. It seems more balanced, it seems more prescriptive, it seems more intentional, the plans now. Last year was a lot of hectic activities, I would say. We feel a lot of confidence after Q1, increasing confidence after Q2, and we see that continuing.

Talking as the firm yesterday turned in Q2 numbers that saw revenue up 29% year-on-year to $318.2 million, with a loss of $58.4 million, Svane added:

Our Enterprise wins are very broad. A lot of them are very traditional industries, other than very digital-first industries. We talk about the gaming industry, no doubt that the world of gaming is definitely exploding…But also we're working with breweries and electrical companies. Everybody has to embrace these newer channels that we now take for given when we engage with businesses. So it's very broad, our appetite, and it's very broad, the kind of demand we see in the market, also in the Enterprise.

And it’s still early days at the upper end of the market, he emphasized:

The enterprise journey is long and interesting and never-ending. We definitely feel like we're still in the early innings of our Enterprise business here. We still have more people to invest in, more teams to build out. Our partner business is thriving, but we can still do a lot more with partners, [to] introduce them early into the relationships with our customers and so on.

I think we all feel that it's very exciting to work on because there's just so tremendous opportunity there, and we're getting more and more comfortable in our suits…It’s been a long journey for us, going Enterprise, and it's going to continue for a while as we invest in all of these things. But we believe it's super-interesting and we learn a lot from it. There's a lot of investments we're bringing back to the product and making available for everyone and democratizing and making it simple for everyone to use these capabilities.

Coming back

Importantly, industries that were impacted badly by COVID and pulled back from spend are now coming back. Meanwhile the aforementioned gaming sector is proving particularly fruitful, added Svane:

Zendesk continues to win because we deliver best-in-class solutions without a long, complicated IT deployment. We've seen this hold true, particularly for leading gaming platforms that are experiencing unprecedented surges in users and support interactions. Our products enable the interactive, immediate help that gamers expect and gamers demand. This quarter we added new logos, including the world's largest video game retailer, and we expanded our relationships with existing customers, such as our good friends from Roblox. So now we support over 50 large online and mobile gaming platforms that serve nearly 3 billion gamers worldwide.

The Suite play is also paying off, he said, with some 75% of new business relating to that offering:

In what is now a digital-first economy, our customers have to deliver the real-time experiences that are expected in an online on-demand world. That means an increasing number of people are trying to reach customer service through new channels, like social messaging chat. That is one of the reasons why over now 8,000 customers are using the Zendesk Suite. It's our messaging-centric, radically simple, customer service solution. And what's more, Suite is a significant driver of our increase in average deal size, all while giving customers more relevant and more powerful capabilities.

He added:

We are definitely making a lot of channels available for our customers with the Suite. And we are having a big push to getting them to use these messaging channels that are getting increasingly important, democratizing these things, making it super-easy for customers to engage with their customers over WhatsApp and chat and Facebook Messenger and all these other different channels. And our customers are realizing how convenient that is, both for their organization, but also the end customers, [with] the consumers realizing how convenient that is. So we do see a lot of customers thinking messaging first versus voice first, if you will.

My take

Svane’s point about the intentionality of buying decisions is well-made. As we emerge from COVID crisis, where necessarily many organizations went into reactive mode, and into a Vaccine Economy, purposeful procurement and deployment decisions will increasingly be made, informed by the ‘silver lining’ learnings from the pandemic response. The CEO talks of the journey that Zendesk is on. Many existing and prospective customers are running parallel to that.