After the Plex Systems analyst day in early November, I ran into Plex Systems CFO and interim CEO Don Clarke at the airport. "We found our guy," Clarke told me confidentially. Quickly followed by disclaimers, of the "I don't want to jinx it" variety.
It's no secret that Plex's search for a new CEO has had its share of twists and turns. At the Plex analyst event, the sense I got from executives was: if their current candidate comes on board, the hiring adventure will have been worth it.
New CEO appointments are always newsworthy, but this one stands out a bit. Why? Because it turns the corner on my biggest concerns about Plex Systems going forward. When industry watchers ask me what I think about Plex, I tell them I like the vigorous customer focus, the emphasis on industrial analytics and IoT spurred by their DATTUS acquisition, and, most of all, the revitalized platform strategy under the leadership of CPO Richard Murray's team.
But Plex's CEO uncertainty hovered over that. Who would they hire? Would that CEO opt for changes in the leadership team or product direction? Last Friday, I had a frank conversation on these matters with the newly-minted CEO Bill Berutti.
Berutti's background certainly checks a couple of obvious boxes. Most recently, Berutti served as the President of Enterprise and Cloud Solutions at BMC Software, a multi-cloud management software firm. Prior to BMC, he spent 17 years at PTC, an established manufacturing software player. But I wanted to hear it from Berutti: what motivated him to join Plex Systems?
I really wanted to get back to my roots in manufacturing. I just love working with companies that build things. Making something is a tangible sensory outcome. If you can help people make something innovative and disruptive and cool, it just feels really important. The second thing is: I really wanted to get back to a high-growth, disruptive platform based in the cloud, based in the SaaS model.
Then, Berutti had a timely chat with Plex Systems investors Francisco Partners:
I've known the Francisco guys for a long time. They're great investors, and I ran across them in my process. I had never heard of Plex. I just went, "Holy smokes. You're telling me there a hundred-plus million dollar revenue company, growing double digits, investing like crazy but still cashflow and even top line positive with a great balance sheet, and I can help them do better?" That's pretty much what I was looking for.
Berutti is aware that manufacturing has been comparatively slow to adopt SaaS. He's ready for that challenge:
Manufacturing, while starting to adopt SaaS and cloud, has been a laggard. Every company has lots to work on, and certainly Plex does too. But they're doing well. To be out in front of a big opportunity, that felt really good too. Those are the things that drew me here.
I laid out my concerns to Berutti. My position is that disrupting Plex's data platform push under Murray would be a mistake. Former DATTUS CEO Anurag Garg seems to have found his groove building into Plex's industrial analytics and IoT capabilities. "Supporting the platform" might sound like an obvious thing to do, but it's not. Many SaaS vendors are struggling with how much to focus on building verticals/micro-verticals, versus enabling partners to build them (I believe the latter strategy is the real win). Berutti's response?
I've been really impressed with Richard and the team that he's hired. Secondly, I agree with the premise. The Plex platform has some of the most incredible uptime and performance response time metrics I've ever seen in a SaaS platform, but at the same time, it's not flexible enough.
We can keep building our way into these new verticals no problem, and I'm happy to spend the money, but if we really want to blow this thing wide open, then we need people to help us do that... To do that, we've got to have a more modern front end that makes it easier for us to expand.
The biggest thing a new CEO can do for Plex is to take what's working and expand the go-to-market, particularly international. Berutti's response:
I don't know how much we've talked to you about the investments we're making in infrastructure and people in Europe. While I agree with everything you just said, part of my job is to figure out how to manage all these competing essential opportunities - because the company is not lacking potential in the market.
Fair enough - managing growth is about priorities and tough calls, and Berutti will have to make some tough ones there. The other fun aspect of a CEO's job in a growth company? Managing investor expectations - and outside perceptions of that agenda.
My view is that Plex needs to focus on growth, while maintaining the caliber of customer relationships it's had to date (no simple trick to pull off). That means the pressure to go public, or pressure from investors in search of a lucrative exit, would be a big distraction. Berutti:
I'm interested in building and growing things that are important, so I want to be here to do that. I don't want to be here to flip a company, or whatever it is. Going public's fine if that's the right outcome for everybody, but again, that's not success in itself. Success is growing a company that's doing important things and creating value for customers and employees, and that's what I want to do.
Some analysts believe that Francisco Partners, a long time Plex investor, must be eager for an exit payoff at this point. But Berutti echoed what Plex leadership has been telling us. Francisco is in it for the long game, and there are specific reasons why:
Yes, Francisco has been [a Plex investor] for a few years, but Plex is in a top performance return fund for them where they've already returned almost 3X to capital to their investors. Francisco has no urgency for Plex, no pressure. It's just like, "Let's go make as much money and do as big of an outcome on Plex as we can. However long that takes, who cares. If, a few years from now, that means going public, great. Nobody can control those kinds of outcomes." The best you can do is just run a company well - and that's what I'm going to try to do.
The wrap - IoT for the win, but not for the hype
Attempts to go further into Berutti's Plex plans were understandably rebuffed, countered by the point that he's only been on the job for a few days. Overall, I liked what I heard, though with any move like this we are ultimately judged by customer results - and rightly so. Nevertheless, I find that transparent conversations are a good sign. The rest will have to wait.
We've reached a turning point for manufacturers. Though many Plex customers must overcome labor and talent concerns to grow, the promise of automation and robotics is to minimize those issues. That gives nimble manufacturers like Plex customer Coastal Automotive the chance to punch above their weight, and compete with big players. It's not about firing humans, but maximizing their value alongside machines. Granted, roles and skills will have to shift. But for manufacturers, the future finally has promise beyond offshoring to low-cost providers.
However, I agree with Berutti that manufacturers aren't knocking on vendors' doors asking for a heaping helping of IoT. Solve real world problems, or go away. The ability to anticipate when ultra-expensive equipment is going to break down is a good start. Berutti:
Customers would blow you off if you said, "I want to spend hours talking about IoT." But if you said, "I want to come and talk about how can we predict and reduce downtime," they'd say, "Yeah. Come on over." Start with things that are pragmatic, that we can do quickly and customers will love and get value from. Then we'll go do the whole thing.
Sounds like a pretty good plan to me.