Category Archives: Host Analytics

The Board View: Slides From My Presentation at Host Perform 2019

The folks at Host Analytics kindly asked me to speak at their annual conference, Host Perform 2019, today in Las Vegas and I had a wonderful time speaking about one of my favorite topics:  the board view of enterprise performance management (EPM) and, to some extent, companies and management teams in general.

Embedded below are the slides from the presentation.

Highlights from Host Perform 2019 General Session

I’m here in Vegas at the amazing Aria Hotel at Host Perform 2019, having been asked to come out and speak about one of my favorite topics – how boards see the work of finance and EPM.  That speech is tomorrow at 9:00 AM and I look forward to seeing you there.

Today started with a music video, a great re-interpretation of Joan Jett’s I Love Rock N Roll.  Here is my favorite lyric from the song:

I love EBITDA,

Who cares about stock-based compensation?

I love EBITDA,

So come and take the time and plan with me.

 

Ron Baden was subtly wearing a Life is Good cap (presumably as a tip of the proverbial hat to last year’s keynote, Burt Jacobs) as he did an introduction that covered his background – now 10 years with the company in almost as many different jobs, an introduction of the executive staff (along with 1980s photos of them), a history of EPM, and some discussion of Vector Capital’s acquisition of Host Analytics in December of last year.

He also discussed this year’s keynote speaker, Doc Hendley, founder of Wine to Water.

Ron discussed highlights of the go-forward plan, including:

  • International, goal to get 25% of sales from international
  • Channel development, goal to 33% of sales from channels
  • Vertical market solutions and specialist sales teams
  • Accelerated new product introduction
  • Office-of-CFO tuck-in acquisitions

He also discussed key trends that Host is seeing in EPM:

  • Digital capabilities (e.g., robotic process automation)
  • Next-wave EPM professionals
  • Mobile workforce support
  • Connected planning, getting models talking to each other
  • Integration of best-of-breed solutions
  • Hybrid cloud

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Ron had some fun demonstrating the granularity and context problems via a Netflix example (“who’s watching”) and a quick demonstration of Alexa’s non-fluency in finance. On the former point, the key idea is that AI/ML, for example in sales forecasting, will benefit greatly by knowing “who’s watching” (i.e., who’s selling) because much as different people like different genres of films, different sales reps have different patterns of forecasting (e.g., Sammy sandbag, Ollie optimist).

Ron also discussed the notion of the chief performance officer, as opposed to the chief financial officer – to focus the mission on improving performance, not on finance per se.  In my humble opinion most of the time when people talk about creating a new “O” it’s about trying to get a seat at the table (e.g., chief information officer back in the day, the chief information security officer in recent times, and the chief data officer today).

Since the CFO already has a seat at the table, I think Ron’s more talking about reframing the role and the vision of the CFO.  I agree – particularly when it comes to being able to answer questions that help improve business performance.  And, I believe, that if the CFO can’t migrate to being the CAO (chief answers officer) then the chief data officer (CDO) might well do it instead via data science and operations teams.  To be a bit paranoid, it’s a threat — not an existential threat, but a threat nevertheless — to the power of the office of the CFO.

Ron then showed a presumably future version of MyPlan which shows how to build task- and action-oriented EPM and how that can easily fit into a mobile device.  Ron’s a big believer that while spreadsheets and grid interfaces are great, that end-users fundamentally want to accomplish tasks that are best done not via a grid, but via an end-user-optimized, task-oriented interface like MyPlan.

They then performed the usual, multi-player, slice-of-life skit-demonstration (aka, “skidemo”) which is always fun, and always a challenge to execute with so many moving parts (i.e., people, real software, prototype software, videos, scene changes, characters, and costumes).  Despite a brief early wardrobe failure, the six-person team pulled it off just fine, taking the crowd “back to the future” of finance – with easy rolling forecasts that take just a minute to run and prescriptive analytics to help drive the planning process.  My favorite line:

“Where we’re going, we don’t need spreadsheets!”

The keynote speaker (coincidentally named “Doc” given the skit), founder of Wine to Water, Doc Hendley then took the stage to tell his story.  I won’t summarize it here, but it was genuine, moving, at times funny, and deeply compelling.

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Wine to Water focuses on providing clean water and sanitation to people around the world – while awareness of this is not as high as it should be, water-borne illness is the leading cause of death for children in many countries in the undeveloped world and directly and indirectly kills over 2M children a year and incapacitates another 10M people atop that. Preventing water-borne illness not only saves lives, but it also helps increase family income, reduces school absences, and generally strengthens the local developing economy.  Per the WHO, every one dollar invested yields $8 in benefits — a great cause and a great ROI.

If you’re interested in donating to Doc’s organization, Wine to Water, please go here.  If you’re at the conference, remember to stop by the Wine to Water booth and build some water filters.

It’s great to be here, I look forward to seeing everyone, and hope to see you at my speech bright and early tomorrow.

Speaking at Host Perform 2019

hostperform

Just a quick post to plug the fact that the kind folks at Host Analytics have invited me to speak at Host Perform 2019 in Las Vegas on May 20-22nd, and I’ll be looking forward to seeing many old friends, colleagues, customers, and partners on my trip out.

I’ll be speaking on the “mega-track” on Wednesday, May 22nd at 9:00 AM on one of my favorite topics:  how EPM, planning, and metrics all look from the board and C-level perspectives.  My official session description follows:

session

The Perform 2019 conference website is here and the overall conference agenda is here.  If you’re interested in coming and you’ve not yet registered yet, it’s not too late!  You can do so here.

I look forward to another great Perform conference this year and should be both tweeting (hashtag #HostPerform) and blogging from the conference.  I look forward to seeing everyone there.  And attend my session if you want to get more insight into how boards and C-level executives view reporting, planning, EPM, KPIs, benchmarks, and metrics.

The Next Chapter

This morning we announced that Vector Capital has closed the acquisition of Host Analytics.  As part of that transaction I have stepped down from my position of CEO at Host Analytics.  To borrow a line from The Lone Ranger, “my work is done here.”  I’ll consult a bit to help with the transition and will remain a friend of and investor in the company.

A Word of Thanks
Before talking about what’s next, let me again thank the folks who made it possible for us to quintuple Host during my tenure all while cutting customer acquisition costs in half, driving a significant increase in dollar retention rates, and making a dramatic increase in net promoter score (NPS).  Thanks to:

  • Our employees, who drove major productivity improvements in virtually all areas and were always committed to our core values of customer success, trust, and teamwork.
  • Our customers, who placed their faith in us, who entrusted us with their overall success and the secure handling of their enormously important data and who, in many cases, helped us develop the business through references and testimonials.
  • Our partners, who worked alongside us to develop the market and make customers successful – and often the most challenging ones at that.
  • Our board of directors, who consistently worked positively and constructively with the team, regardless of whether we were sailing in fair or foul weather.

We Laid the Groundwork for a Bright Future
When Vector’s very talented PR guy did his edits on the closing press release, he decided to conclude it with the following quote:

Mr. Kellogg added, “Host Analytics is a terrific company and it has been an honor lead this dynamic organization.  I firmly believe the company’s best days are ahead.”

When I first read it I thought, “what an odd thing for a departing CEO to say!”  But before jumping to change it, I thought for a bit.  In reality, I do believe it’s true.  Why do Host’s best days lie ahead?  Two reasons.

First, we did an enormous amount of groundwork during my tenure at Host.  The biggest slug of that was on product and specifically on non-functional requirements.  As a fan of Greek mythology, the technical debt I inherited felt like the fifth labor of Hercules, cleaning the Augean stables.  But, like Hercules, we got it done, and in so doing shored up the internals of a functionally excellent product and transformed our Hyderabad operation into a world-class product development center.  The rest of the groundwork was in areas like focusing the organization on the right metrics, building an amazing demand generation machine, creating our Customers for Life organization, running a world-class analyst relations program, creating a culture based on learning and development, and building a team of strong players, all curious about and focused on solving problems for customers.

Second, the market has moved in Host’s direction.  Since I have an affinity for numbers, I’ll explain the market with one single number:  three.  Anaplan’s average sales price is three times Host’s.  Host’s is three times Adaptive’s.  Despite considerable vendor marketing, posturing, positioning, haze, and confusion to the contrary, there are three clear segments in today’s EPM market.

  • Anaplan is expensive, up-market, and focused primarily on operational planning.
  • Adaptive is cheap, down-market, and focused primarily on financial planning.
  • Host is reasonably priced, mid-market, focused primarily on financial planning, with some operational modeling capabilities.

Host serves the vast middle where people don’t want (1) to pay $250K/year in subscription and build a $500K/year center of excellence to support the system or (2) to pay $25K/year only to be nickeled and dimed on downstream services and end up with a tool they outgrow in a few years.

Now, some people don’t like mid-layer strategies and would argue that Host risks getting caught in a squeeze between the other two competitors.  That never bothered me – I can name a dozen other successful SaaS vendors who grew off a mid-market base, including within the finance department where NetSuite created a hugely successful business that eventually sold for $9.3B.

But all that’s about the past.  What’s making things even better going forward?  Two things.

  • Host has significantly improved access to capital under Vector, including the ability to better fund both organic and inorganic growth. Funding?  Check.
  • If Workday is to succeed with its goals in acquiring Adaptive, all rhetoric notwithstanding, Adaptive will have to become a vendor able to deliver high-end, financial-focused EPM for Workday customers.  I believe Workday will succeed at that.  But you can’t be all things to all people; or, to paraphrase SNL, you can’t be a dessert topping and a floor wax.  Similarly, Adaptive can’t be what it will become and what it once was at the same time – the gap is too wide.  As Adaptive undergoes its Workday transformation, the market will switch from three to two layers, leaving both a fertile opening for Host in mid-market and a dramatically reduced risk of any squeeze play.  Relatively uncontested market space?  Check.

Don’t underestimate these developments.  Both these changes are huge.  I have a lot of respect for Vector in seeing them.  They say that Michelangelo could see the statue within the block of marble and unleash it.  I think Vector has clearly seen the potential within Host and will unleash it in the years to come.

What’s Next?
I don’t have any specific plans at this time.  I’m happily working on two fantastic boards already – data catalog pioneer Alation and next-generation content services platform Nuxeo.   I’ll finally have time to write literally scores of blog posts currently stalled on my to-do list.  Over the next few quarters I expect to meet a lot of interesting people, do some consulting, do some angel investing, and perhaps join another board or two.  I’ll surely do another CEO gig at some point.  But I’m not in a rush.

So, if you want to have a coffee at Coupa, a beer at the Old Pro, or – dare I date myself – breakfast at Buck’s, let me know.

Host Analytics + Vector Capital = Growth

I’m delighted to say that Host Analytics has signed a definitive agreement to be acquired by Vector Capital, a San Francisco private equity (PE) firm with over $4B in capital under management.  Before diving into some brief analysis of the deal, I want to thank Host Analytics customers, employees, partners, investors, and board of directors for everything they’ve done to help make this happen.

Going forward, I expect the company’s top three priorities to be growth, growth, and growth.  Why?  Given a large market opportunity and a company that’s executing well, it’s the right time to add fuel to the tanks.

Large Market Opportunity
To wit:

  • The total available market (TAM) for Host’s enterprise performance management (EPM) products is $12B.
  • The market, somewhat amazingly, remains less than 10% penetrated by cloud solutions, which means there is an enormous on-premises replacement opportunity.
  • The market, equally amazingly, still over-relies on Microsoft Excel for planning, budgeting, reporting – even sometimes stunningly consolidation – which represents an enormous greenfield opportunity.
  • Recent consolidation in the market (e.g., Workday’s acquisition and, in my opinion, up-market hijacking of Adaptive Insights) creates new space in various market segments

Executing Well
Host is wrapping up an excellent 2018 with strong sales growth (e.g., new subscriptions up 50%+ this quarter), record ending annual recurring revenue (ARR), historically high customer satisfaction (i.e., net promoter score), above-benchmark employee satisfaction — and we’ve been doing all that while transitioning to positive cashflow.  On the product front, we’ve been pumping out innovations (e.g., Host MyPlan, Host Dashboards) and have an exciting product roadmap.

Simply put, the company is executing on eight cylinders.  Strong execution plus large opportunity usually calls for one thing:  more fuel.

Shareholder Rotation
Host was well ahead of the market with its vision of cloud-based EPM and raised its first venture capital in 2008.  As some of our early investors are thinking about how to wrap up those funds, it’s the right time for a shareholder rotation where our last-phase investors are able to get liquidity and the company can get new investors who are focused on the next phase, i.e., the next five years of growth and scale.

That’s why I think “shareholder rotation” is the right way to think about this transaction — the old shareholders rotate out and Vector rotates in.  And I should note that our largest shareholder, StarVest Partners, is not rotating entirely out — they will remain a significant shareholder in the company going forward.

In many respects, things won’t change.  Host will remain focused on:

  • Delivering a complete EPM suite
  • Providing solutions for the Office of Finance
  • World-class professional services and support, and our desire to create Customers for Life
  • Partnership, working with other leaders to provide our customers with complete solutions
  • Product innovation, finding novel ways to help finance better partner with the business
  • Core values: trust, customer success, and teamwork

Other things will change.  We’ll see some new faces as we evolve and grow the company.  We’ll get the benefit of Vector’s internal management consultancy (i.e., the value creation team) to help drive best practices.  You should expect to see us accelerate growth through both organic means (e.g., scaling up sales, launching in new geographies) and inorganic means (e.g., follow-on acquisitions).

Thanks to our founder, serial entrepreneur Jim Eberlin, for creating the company.  Thanks to everyone who helped us get here.  Thanks to our board for its foresight and support.  Thanks to Vector for taking us forward.  And thanks to StarVest for coming along for the ride.  Onward, full speed ahead!

# # #

Kellblog’s 2017 Predictions  

New Year’s means three things in my world:  (1) time to thank our customers and team at Host Analytics for another great year, (2) time to finish up all the 2017 planning items and approvals that we need to get done before the sales kickoff (including the one most important thing to do before kickoff), and time to make some predictions for the coming year.

Before looking at 2017, let’s see how I did with my 2016 predictions.

2016 Predictions Review

  1. The great reckoning begins. Correct/nailed.  As predicted, since most of the bubble was tied up in private companies owned by private funds, the unwind would happen in slow motion.  But it’s happening.
  2. Silicon Valley cools off a bit. Partial.  While IPOs were down, you couldn’t see the cooling in anecdotal data, like my favorite metric, traffic on highway101.
  3. Porter’s five forces analysis makes a comeback. Partial.  So-called “momentum investing” did cool off, implying more rational situation analysis, but you didn’t hear people talking about Porter per se.
  4. Cyber-cash makes a rise. CorrectBitcoin more doubled on the year (and Ethereum was up 8x) which perversely reinforced my view that these crypto-currencies are too volatile — people want the anonymity of cash without a highly variable exchange rate.  The underlying technology for Bitcoin, blockchain, took off big time.
  5. Internet of Things goes into trough of disillusionment. Partial.  I think I may have been a little early on this one.  Seems like it’s still hovering at the peak of inflated expectations.
  6. Data science rises as profession. Correct/easy.  This continues inexorably.
  7. SAP realizes they are a complex enterprise application company. Incorrect.  They’re still “running simple” and talking too much about enabling technology.  The stock was up 9% on the year in line with revenues up around 8% thus far.
  8. Oracle’s cloud strategy gets revealed – “we’ll sell you any deployment model you want as long as your annual bill goes up.”  Partial.  I should have said “we’ll sell you any deployment model you want as long as we can call it cloud to Wall St.”
  9. Accounting irregularities discovered at one or more unicorns. Correct/nailed.  During these bubbles the pattern always repeats itself – some people always start breaking the rules in order to stand out, get famous, or get rich.  Fortune just ran an amazing story that talks about the “fake it till you make it” culture of some diseased startups.
  10. Startup workers get disappointed on exits. Partial.  I’m not aware of any lawsuits here but workers at many high flyers have been disappointed and there is a new awareness that the “unicorn party” may be a good thing for founders and VCs, but maybe not such a good thing for rank-and-file employees (and executive management).
  11. The first cloud EPM S-1 gets filed. Incorrect.  Not yet, at least.  While it’s always possible someone did the private filing process with the SEC, I’m guessing that didn’t happen either.
  12. 2016 will be a great year for Host Analytics. Correct.  We had a strong finish to the year and emerged stronger than we started with over 600 great customers, great partners, and a great team.

Now, let’s move on to my predictions for 2017 which – as a sign of the times – will include more macro and political content than usual.

  1. The United States will see a level of divisiveness and social discord not seen since the 1960s. Social media echo chambers will reinforce divisions.  To combat this, I encourage everyone to sign up for two publications/blogs they agree with and two they don’t lest they never again hear both sides of an issue. (See map below, coutesy of Ninja Economics, for help in choosing.)  On an optimistic note, per UCSD professor Lane Kenworthy people aren’t getting more polarized, political parties are.

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  1. Social media companies finally step up and do something about fake news. While per a former Facebook designer, “it turns out that bullshit is highly engaging,” these sites will need to do something to filter, rate, or classify fake news (let alone stopping to recommend it).  Otherwise they will both lose credibility and readership – as well as fail to act in a responsible way commensurate with their information dissemination power.
  1. Gut feel makes a comeback. After a decade of Google-inspired heavily data-driven and A/B-tested management, the new US administration will increasingly be less data-driven and more gut-feel-driven in making decisions.  Riding against both common sense and the big data / analytics / data science trends, people will be increasingly skeptical of purely data-driven decisions and anti-data people will publicize data-driven failures to popularize their arguments.  This “war on data” will build during the year, fueled by Trump, and some of it will spill over into business.  Morale in the Intelligence Community will plummet.
  1. Under a volatile leader, who seems to exhibit all nine of the symptoms of narcissistic personality disorder, we can expect sharp reactions and knee-jerk decisions that rattle markets, drive a high rate of staff turnover in the Executive branch, and fuel an ongoing war with the media.  Whether you like his policies or not, Trump will bring a high level of volatility the country, to business, and to the markets.
  1. With the new administration’s promises of $1T in infrastructure spending, you can expect interest rates to raise and inflation to accelerate. Providing such a stimulus to already strong economy might well overheat it.  One smart move could be buying a house to lock in historic low interest rates for the next 30 years.  (See my FAQ for disclaimers, including that I am not a financial advisor.)
  1. Huge emphasis on security and privacy. Election-related hacking, including the spearfishing attack on John Podesta’s email, will serve as a major wake-up call to both government and the private sector to get their security act together.  Leaks will fuel major concerns about privacy.  Two-factor authentication using verification codes (e.g., Google Authenticator) will continue to take off as will encrypted communications.  Fear of leaks will also change how people use email and other written electronic communications; more people will follow the sage advice in this quip:

Dance like no one’s watching; E-mail like it will be read in a deposition

  1. In 2015, if you were flirting on Ashley Madison you were more likely talking to a fembot than a person.  In 2016, the same could be said of troll bots.  Bots are now capable of passing the Turing Test.  In 2017, we will see more bots for both good uses (e.g., customer service) and bad (e.g., trolling social media).  Left unchecked by the social media powerhouses, bots could damage social media usage.
  1. Artificial intelligence hits the peak of inflated expectations. If you view Salesforce as the bellwether for hyped enterprise technology (e.g., cloud, social), then the next few years are going to be dominated by artificial intelligence.  I’ve always believed that advanced analytics is not a standalone category, but instead fodder that vendors will build into smart applications.  They key is typically not the technology, but the problem to which to apply it.  As Infer founder Vik Singh said of Jim Gray, “he was really good at finding great problems,” the key is figuring out the best problems to solve with a given technology or modeling engine.  Application by application we will see people searching for the best problems to solve using AI technology.
  1. The IPO market comes back. After a year in which we saw only 13 VC-backed technology IPOs, I believe the window will open and 2017 will be a strong year for technology IPOs.  The usual big-name suspects include firms like Snap, Uber, AirBnB, and SpotifyCB Insights has identified 369 companies as strong 2017 IPO prospects.
  1. Megavendors mix up EPM and ERP or BI. Workday, which has had a confused history when it comes to planning, acquired struggling big data analytics vendor Platfora in July 2016, and seems to have combined analytics and EPM/planning into a single unit.  This is a mistake for several reasons:  (1) EPM and BI are sold to different buyers with different value propositions, (2) EPM is an applications sale, BI is a platform sale, and (3) Platfora’s technology stack, while appropriate for big data applications is not ideal for EPM/planning (ask Tidemark).  Combining the two together puts planning at risk.  Oracle combined their EPM and ERP go-to-market organizations and lost focus on EPM as a result.  While they will argue that they now have more EPM feet on the street, those feet know much less about EPM, leaving them exposed to specialist vendors who maintain a focus on EPM.  ERP is sold to the backward-looking part of finance; EPM is sold to the forward-looking part.  EPM is about 1/10th the market size of ERP.  ERP and EPM have different buyers and use different technologies.  In combining them, expect EPM to lose out.

And, as usual, I must add the bonus prediction that 2017 proves to be a strong year for Host Analytics.  We are entering the year with positive momentum, the category is strong, cloud adoption in finance continues to increase, and the megavendors generally lack sufficient focus on the category.  We continue to be the most customer-focused vendor in EPM, our new Modeling product gained strong momentum in 2016, and our strategy has worked very well for both our company and the customers who have chosen to put their faith in us.

I thank our customers, our partners, and our team and wish everyone a great 2017.

# # #

 

The New Split CPM Magic Quadrants from Gartner

This week Gartner research vice president John Van Decker and research director Chris Iervolino took the bold move of splitting the corporate performance management (CPM), also known as enterprise performance management (EPM), magic quadrant in two.

Instead of publishing a single magic quadrant (MQ) for all of CPM, they published two MQs, one for strategic CPM and one for financial CPM, which they define as follows:

  • Strategic Corporate Performance Management (SCPM) Solutions – this includes Corporate Planning and Modeling, Integrated Financial Planning, Strategy Management, Profitability Management, and Performance Reporting.
  • Financial Corporate Performance Management (FCPM) Solutions – this includes Financial Consolidation, Financial Reporting, Management Reporting/Costing/Forecasting, Reconciliations/Close Management, Intercompany Transactions, and Disclosure Management (including XBRL tagging)

You can download these new CPM magic quadrants here.

What do I think about this?

  • It’s bold.  It’s the first time to my recollection that an MQ has included product from different categories.  Put differently, normally MQs are full of substitute products — e.g., 15 different types of butter.  Here, we have butter next to olive oil on the same MQ.
  • It’s smart.  Their uber point is that while CPM solutions are now pretty varied, that you can pretty easily classify them into more tactical/financial uses and more strategic uses.  Highlighting this by splitting the MQs does customers a service because it reminds them to think both tactically and strategically.  That’s important — and often needed in many finance departments who are struggling simply to keep up with the ongoing tactical workload.
  • It’s potentially confusing.  You can find not just substitutes but complements on the same MQ.  For example, Host Analytics and our partner Blackline are both on the FCPM MQ.  That’s cool because we both serve core finance needs.  It’s potentially confusing because we do one thing and they do another.
  • We are stoked.  Among cloud pure-play EPM vendors, Host Analytics is the only supplier listed on both MQs.   We believe this supports our contention that we have the broadest pure-play cloud EPM product line in the business.  Only Host has both!
  • In a hype-filled world, I think Gartner does a great job of seeing through the hype-haze and focusing on customers and solutions.  They do a better job than most at not being over-influenced by Halo Effects, and I suspect that’s because they spend a lot of time talking to real customers about solving real problems.

For more, see the Future of Finance blog post on the new MQs or just go ahead and download them here.