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.
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
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.
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.
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:
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.
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.
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.
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
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
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.
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!
I’m Dave Kellogg, advisor, director, consultant, angel investor, and blogger focused on enterprise software startups. I am an executive-in-residence (EIR) at Balderton Capital and principal of my own eponymous consulting business.
I bring an uncommon perspective to startup challenges having 10 years’ experience at each of the CEO, CMO, and independent director levels across 10+ companies ranging in size from zero to over $1B in revenues.
From 2012 to 2018, I was CEO of cloud EPM vendor Host Analytics, where we quintupled ARR while halving customer acquisition costs in a competitive market, ultimately selling the company in a private equity transaction.
Previously, I was SVP/GM of the $500M Service Cloud business at Salesforce; CEO of NoSQL database provider MarkLogic, which we grew from zero to $80M over 6 years; and CMO at Business Objects for nearly a decade as we grew from $30M to over $1B in revenues. I started my career in technical and product marketing positions at Ingres and Versant.
I love disruption, startups, and Silicon Valley and have had the pleasure of working in varied capacities with companies including Bluecore, Cyral, FloQast, GainSight, MongoDB, Recorded Future, and Tableau.
I previously sat on the boards of Granular (agtech, acquired by DuPont), Aster Data (big data, acquired by Teradata), and Nuxeo (content services, acquired by Hyland), and Profisee (MDM, exited to Pamlico).
I periodically speak to strategy and entrepreneurship classes at the Haas School of Business (UC Berkeley) and Hautes Études Commerciales de Paris (HEC).