Note, this article is continued from a previous post, entitled ‘Software AG cites deals with AT&T, AWS, Dell in pursuit of €24bn IoT opportunity’. Click here to go to the previous article.
New Software AG chief Sanjay Brahmawar has been seven months in the job. He spent the first 100 days on road, he says, visiting staff and customers. His line of questioning was always the same: what to keep, what to chuck out, and what advice on taking the business forward?
“A new CEO is a moment in time, and a reason to look at strategy and see a way forward,” he says, at a small press gathering at its headquarters in Darmstadt, in Germany, to reveal the results of his 100-day reassessment. Besides, the company turns 50 this year, he points out. “It’s not legacy, but heritage – it’s experience and battle scars.”
The company’s new stewardship and its half-century are being marked by a drive for renewal. The resulting change-programme, called Helix, sets out a game of stick-and-twist. Its products are good, says Brahmawar – they rate highly, every one, in analyst-houses’ league tables. He runs through them: five are ‘leaders’ in Gartner’s latest magic quadrants, and nine show up in the top right of Forrester’s equivalents.
But there are too many of them. “We are very broad. Instead of trying to be all things to all people, we need to be more focused on the products and markets we are going for, and not just [be there to] participate, but be there to win.”
The company has suffered by its lack of focus, he implies. “There is graveyard of companies that go after growth, but can’t monetise it and deliver proper returns.” Software AG remains “consistently” profitable, he says. The company’s earnings (before interest and tax) grew to €231.6 million in 2018, at a margin of 26.8 per cent.
Its growth is broadly flat, however, in a market that finds growth rather easy. The company booked sales of €865.7 million in 2018, up two per cent on 2017, with license revenues (€249.4 million) and maintenance revenues (€415.4 million) showing the same kinds of hard-won rises (two and three per cent).
Cumulocity, ranked top of the pile among IoT platforms by Mach Nation for five years on the spin, ahead of the likes Azure, AWS and IBM, has buoyed overall performance, with revenues climbing 106 per cent to €30.3 million – albeit from a lower base, of €14.9 million in 2017.
“We intend to grow another 100 per cent this year – so hopefully [to] €60 million plus. We are driving to create a €100 million business, which will contribute significantly to our overall business.”
Excluding the IoT activity wrapped up in Cumulocity, its DBP portfolio, covering IT and cloud integration, saw license revenues slip in the period to come out about level, at €434.4 million. Including Cumulocity, it grew five per cent.
As previously discussed, Software AG has reconfigured its DBP line into three new “go-to-market identities”, geared towards integration and optimisation of data across IT and OT functions. It is changing-up its business model, alongside, to sign and migrate customers onto subscriptions, and away from software licences.
It is the way; Adobe, Microsoft, PTC, Sage have already pivoted, notes Brahmawar. For customers, it improves flexibility, and reduces shelf-wear and redundancy; for Software AG, it settles the “horrible heartbeat” of quarterly reporting tied to big sales and renewals.
He wants 80-90 per cent of business to be booked as recurring revenue. “Financial market values consistency and predictability more,” he says.
But this is one aspect of a compelling strategic shift for the business. There is some brand repositioning in there; something about ”freedom as a service”, as customers move between cloud landscapes. “We are probably the only company left that is independent,” says Brahmawar.
More intriguing is the revision of its go-to-market strategy. Its sales mix is not properly optimised, acknowledges Brahmawar. “We are in the market of digital transformation, and the market is growing, whereas we have not grown for the last eight years. In software, no growth is not good place to be – because [it makes it] hard to attract talent, and customers want to see a company growing.”
He adds: “The market is growing, and we should be able to get a fair share.”
Software AG has been ploughing its own furrow, providing integration tools to IT teams, while the field has expanded with the crossover of OT and the rise of IoT. Its experience and techniques, including an expanded toolset, offer value.
On the wider market’s efforts to develop platforms for IoT devices and applications, Software AG is in a league of its own, it reckons, or of just a few, anyway. “There are about 1,500 companies that claim to know IoT platforms; only a handful really know what they are doing. The numbers will whittle down.”
The problem is the company’s reputation is rather limited, and new opportunities are so varied. Brahmawar recounts a conversation with a client in the Middle East, used to being “promised a palm tree and delivered a leaf”, according to the retelling. “They said to me: ‘You promise a tree, and deliver a tree.’ The message from customers is that we have great technology, but no one knows us – like we’re the best kept secret,” he explains.
“But in our our world, you can’t be the best kept secret; you need to be best known secret.” Helix defines a strategy to make good on this – a way for it to make a noise and choose a groove, as the industrial market hops to a new rhythm. “Software is a simple formula – excellent products, brilliant marketing, higher-performing go-to-market. That equals good performance in software,” says Brahmawar.
Software AG cites deals with AT&T, AWS, Dell in pursuit of €24bn IoT opportunity
“There are 1,500 IoT platforms; few know what they’re doing” – Software AG talks IoT tactics
