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Adobe and Figma: The What Would Taylor Swift Say Edition

Liz Miller
Vice President & Principal Analyst Constellation Research

About Liz Miller: Liz Miller is Vice President and Principal Analyst at Constellation, focused on the org-wide team sport known as customer experience. While covering CX as an enterprise strategy, Miller spends time zeroing in on the functional demands of Marketing and Service and the evolving role of the Chief Marketing Officer, the rise of the Chief Experience Officer, the evolution of customer engagement and the rising requirement for a new security posture that accounts for the threat to brand trust in this age of AI.  With over 30 years of marketing, Miller offers strategic guidance on the leadership, business transformation and technology requirements to deliver on today’s CX strategies. She has worked with global marketing organizations to transform…...

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In this, the year of Taylor Swift, it feels oddly fitting that Adobe and Figma have just announced their breakup. Like all good angsty love stories immortalized in an Era’s Tour set, we had the Figma indie-cool-kid rebel agreeing to roll with the digital class President in the established and voted Most Likely to Succeed Adobe. Torn apart by well-intentioned but out-of-touch outsiders, the two have closed this chapter of their idyllic yet improbably love affair. And while nobody is shouting that they will never, ever, E-V-E-R—like seriously never ever—get back together, for the near future their paths will be distinctly separate.

When the acquisition was announced in September 2022, my thoughts immediately went to where and how this merged vision of creativity and collaboration would materialize. Yet almost as soon as the headline ink was dried, I started to realize not everyone understood what Figma or Adobe actually DID for a living. Design was a loosely defined word being reinterpreted with almost every audience. Adobe critics lambasted my enthusiasm for the deal by insisting that this was Adobe attempting to push out the competition, running scared of another design tool hitting the market. Figma devotees feared the worst and believed the rumor mill that Adobe was out to crush independence and would immediately assimilate all digital innovators into the collective. The memes were glorious to behold, albeit totally off base.

Adobe, Figma call off $20 billion merger

In the end, regulators in Europe, very specifically the UK Competition and Markets Authority (CMA), publicly stated they believed the merger would lessen competition to a degree that it would remove incentive for Adobe/Figma to develop and improve the quality of its products. The CMA believed that the merger “would eliminate an important dynamic competitive threat to Adobe’s Illustrator and Photoshop” in a market they believed Adobe had already become the entrenched leader. Honestly, I’ve struggled to make any sense of these arguments. From what I could tell, the regulatory focus was more about the misunderstanding of design, creation and digital product than about attempting to understand the needs and evolution of the market.

So much has happened since the announced intention to acquire that I can’t help but chuckle that the regulators may have done Adobe a solid by dragging their heels and bungling these inquiries. Let’s, for argument’s sake, imagine a world in which the deal swam forward smoothly and realized a close date of mid-2023. This would have been in the THICK of the earth-shaking shift to generativeAI. Would the world be a bit different if Adobe had been pushed into deciding between the investment into Figma and the investment into bringing the Firefly portfolio of AI models to market? Would the same decisions around talent, focus, investments and roadmaps be made had the Figma closing also demanded attention and consideration?

Instead, through the lens of future-forward AI development, the Figma acquisition became a smaller distraction at just the right time, allowing Adobe to focus on what this new era of generativeAI would mean for creators and creatives. While regulators were lamenting that Adobe would use their posture in the marketplace to miss out on improvements and innovations, tools like Generative Fill and Firefly Image models have radically changed the work of creation in ways we couldn’t have truly envisioned when the headlines first broke about Adobe and Figma. The time free from the chaos of acquisition allowed Adobe’s roadmap leading us deeper into an AI-enriched creative future to truly unfold.

Don’t cry for Figma either. In fact, Adobe may have just handed over a billion-dollar budget boost that Figma needs to further power innovations and bring on the next evolution of digital product design and digital collaboration. During this vetting period, Figma has continued to grow in all the right places. The honest truth is that while Figma has been a start-up darling and a personal favorite of mine, they were quickly racing towards that danger zone every fast growing start up reaches…that point when the next evolution must occur to continue that meteoric rise up market…or stagnation takes hold and the bloom starts to quickly fall from the rose. Figma had not reached that point…but arguably they could have been about 6-months from that decision point of choosing between disrupting or being disrupted. Now, there will be an infusion of $1 billion dollars to pour gasoline on that promise of innovation-driven disruption.

These ex’es haven’t seen the last of one another. The teams have gotten to know one another, leaders have come to trust and respect one another and even the most ardent Anti-Adobe Figma fanatic has likely downloaded the new Adobe Express toolset and started to realize that perhaps, Adobe isn’t the evil overlord controlling creativity after all.

Thus ends the September to December romance known as Adobe + Figma. The future is truly bright for both Adobe and Figma to embrace what this new age of AI will bring to creativity, digital, product and design. But who knows what the tomorrow holds. Afterall, isn’t it Taylor Swift that sang, “Turns out freedom ain’t nothing but missing you, wishing I’d realized what I had when you were mine…I go back to December, turn around and make it alright. I go back to December all the time.” Just sayin…stranger things have happened.

New C-Suite Marketing Transformation Chief Marketing Officer Chief Digital Officer

WalkMe in 2023: Adoption as Table Stakes in Digital Experience

Dion Hinchcliffe
Dion Hinchcliffe
Vice President and Principal Analyst Constellation Research

Title: About Dion Hinchcliffe Dion Hinchcliffe is an internationally recognized business strategist, bestselling author, enterprise architect, industry analyst, and noted keynote speaker. He is widely regarded as one of the most influential figures in digital strategy, the future of work, and enterprise IT. He works with the leadership teams of large enterprises as well as software vendors to raise the bar for the art-of-the-possible in their digital capabilities. He is currently Vice President and Principal Analyst at Constellation Research. Dion is also currently an executive fellow at the Tuck School of Business Center for Digital Strategies. He is a globally recognized industry expert on the topics of digital transformation, digital workplace, enterprise collaboration, API…...

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In London last week, WalkMe Analyst Day 2023 — an exploration of their progress so far with their digital adoption platform — began in the morning with a company overview by their CMO, Adriel Sanchez. Digital adoption is a vital new digital experience category that makes it significantly easier to increase impactful results for users with existing and new IT systems. WalkMe is arguably the leading player in the category and has long been an 'anchor tenant' on my digital adoption platform ShortList.

Adriel began the day by highlighting the paradox of digital transformation, noting that there will be $3.4 trillion in investment in this strategic activity by 2026, which WalkMe very much seeks to be a major part of. The paradox: Despite the abundance of technology, most projects fail and productivity often decreases. It's an unfortunate stat that hasn't changed much in 30 years, I'd note. This, he argues, is due to the ever-increasing complexity of workflows, tech overload, and the need for more effective change management. And really, he noted, there are three major obstacles:

  • Tech overload
  • Resistance to change
  • Risk and compliance regimes are growing

Adriel also explores generative AI, a powerful new technology that has the potential to revolutionize the way organizations work. However, he cautions that generative AI also requires careful change management to ensure its safe and responsible adoption.

WalkMe CMO Adriel Sanchez

WalkMe CMO, Adriel Sanchez, starts of WalkMe Analyst Day 2023 in London. Photo Credit: Dion Hinchcliffe

WalkMe's approach to digital adoption and change management is based on three key principles:

  • Data visibility: WalkMe provides organizations with insights into their friction points, allowing them to identify where and how to improve the user experience.
  • Personalized user experiences: WalkMe delivers personalized guidance to users in the context of their daily workflow, helping them to navigate new applications and processes more effectively.
  • AI-powered guidance: WalkMe leverages AI to understand user intent and provide contextually relevant assistance, reducing the need for manual support.

Adriel wrapped up by noting that WalkMe's actually has deep roots in AI and its ability to help organizations navigate the tsunami of change that is coming with the advent of generative AI.

WalkMe's approach to digital adoption and change management offers a powerful solution to the challenges faced by organizations in today's complex technology landscape. By providing organizations with visibility, personalization, and AI-powered guidance, WalkMe seeks to help them achieve the full potential of their digital transformation initiatives.

Then Leon Ashley provided a demo of the state of the art of WalkMe as a product. He also very cogenty summarizes the value proposition of digital adoption platforms like WalkMe, namely that they "allow you as an organization to take these massive platforms that have been built for global implementation and customize them not only to your organization's requirements, but your department requirements, your user requirements and really make it work for you."

Now digital adoption platforms typically provide real time guidance in-app, but it has traditionallly required that the user has launched the app. Leon notes that WalkMe Workstation can provide notifications on the desktop and even search the available guidance tree. Leon also provided a demo that shows how much WalkMe actually does for the user: "Let's remove the wasted clicks. Let's remove the waste of navigation. Let's remove training users how to use the application and just get the job done." He shows an expense request being almost completely filled out by WalkMe, with very little work done by the user, which merely directed it to happen. This is what digital adoption can do to systematically reduce friction, overcome usability hurdles, and eliminate training shortfalls. 

Leon then switched over to generative AI, talking about how WalkMe can form a powerful front end for AI marketing tools like Jasper or software development AI tools, GitHub Copilot. They actually rolled out WalkMe internally on their own engineering team which had low adoption of Copilot.

Adrien returned and talks about the WalkMe business, noting that the company is now profitable and has over 1,000 employees. They are also working on getting customers to more systematically adoption the product, a profile they call a "DAP customer." He says, "This is how we define a digital adoption or adapt customer, as someone who has deployed us on four or more applications. to us, that is the bar that we've set that shows that organization has a commitment to digital adoption as a methodology for implementing technology through managing the change that's required at these technologies. Walkme has over 180 of this more strategic DAP customers, with the majority being earlier in the adoption curve.

Profile of WalkMe DAP Customers by Type

So, where do digital adoption platforms get used the most?

“The two most popular departments that we're solving problems for HR and sales, by far, like there's no not even like a distant second distant third” said Adriel. He also noted that WalkMe is used both for legacy applications as well as new software deployment, as it can help just as much with both application profiles. Big system integrators also are large users of WalkMe in their own or customers projects, to speed deployment. "Deloitte deployed on hundreds of applications across over 100,000 employees."

Then Adriel talked about what it takes for AI transformation, which WalkMe is positioning its product as directly enabling:

  • Data: Train LLMs to work for your business
  • Training and education: Educate employees and drive adoption of AI in the flow of work
  • Guardrails: Mitigate risk by deflecting certain behaviors
  • Utilization: Monitor utilization of embedded and native AI tools

Next up comes Ofir Bloch, a long-time executive at WalkMe who has been there since early in the company's journey through digital adoption. He reviews the latest State of DIgital Adoption report, which will be out in a couple of weeks.

Ofir Bloch, long-time WalkMe exec

Ofir Bloch, VP of Corporate Marketing, WalkMe explores the State of Digital Adoption 2024. Image Credit: Dion Hinchcliffe

He noted that "digital adoption is becoming a KPI in its own right." Not just the DAP software category.

“It’s becoming a priority for companies as they understand that they can no longer go buy technology and just hope that it works.”

On the adoption of WalkMe itself, Ofir explored fascinating hard data on the growth of Centers of Excellence for digital adoption, presenting data, a 42% growth in the number of digital adoption CoEs in the last two years.

The growth of digital adoption CoEs.

He also explores what the data shows are the key pillars of digital ddoption maturity:

- Evaluating tech use
- Process automation
- Outcome alignment
- User engagement measurement
- Unified user experience
- Engagement-boosting content

The Key Pillars of Digital Adoption Maturity

This is one of the first detailed views of maturity of digital adoption in the industry and is worthy of study, as the productivity boosts and cost savings represented by focusing on these are very considerable for the average organization that seeks them.

Benchmarking the typical results of digital adoption using WalkMe

Then KJ Kusch came up to explore their updated strategy and and value framework. As part of this, she has some very insightful data on the benchmarks for digital adoption, specifically:

  • 41% fewer business errors
  • 30% faster change adoption
  • 20% faster time to market
  • 60% faster user adoption
  • 25% increased user satisfaction
  • 35% faster onboarding
  • 51% faster user adoption

WalkMe says this results in an average 494% 3 year ROI and 6  month payback in initial investment. These are remarkable numbers, and because WalkMe can actually measure all this in the platform based on how its customers actually behave, these numbers are relatively rigorous collective analytics.

DeepUI: Adapting to the Continuous Change of Apps

Liya Spiegel, Director of Product Experience, then took us through the DeepUI technology that they use to map content to the fields and control fo underlying applications. Acquired in 2018, DeepUI is instrumental in keep WalkMe content matched with the fields in the apps, including high Web responsive applications and even localized apps with fields in entirely different languages. Based an underlying AI technology, DeepUI ensures when applications like Salesforce or Workday change across releases, the WalkMe digital adoption content continues to function as expected. It has 8 granted patents and is a key competitive differentiator for their digital adoption platform.

DeepUI, the framework WalkMe uses to keep digital adoption working across underlying software releases

Customer Success at WalkMe

Next up was Sunil Nagdev, the new Chief Customer Officer of WalkMe, talked about improving customer success. "It's an important piece for me and when I came to WalkMe, it was really important for me was to understand how we do our land and expand because that's the most critical piece of our business itself" in terms of strong organic growth.

Sunil summarized the main areas of challenge in doing this:

  • Implementation cycles
  • Responsiveness
  • Scale and sustain
  • Underutilization

I also sat with Sunil at the dinner the night before analyst day and he came across to me as quite thoughtful and very much concerned about growing deeper customer intimacy while turning the relationship with them into one where WalkMe becomes a trusted advisor.

Time to value is also a area Sunil is focused on, getting WalkMe implementations down to 4-6 weeks, at least for initial deployment. My analysis is that Sunil is going to be instrumental growing customer lifetime value and increasing the average number of  apps per customer that are accelerated by the WalkMe platform.

He is also bringing the concept of what he calls "scaled adoption" to the table at WalkMe, so that just-in-time microlearning and a revamped certification program will ensure customers are able to "hold their weight" in helping deliver the success of the solution. He will round this out with a customer advocacy program as well.

Sunil Nagdev, Chief Customer Officer, WalkMe

WalkMe's Trajectory Heading into 2024

Here's my analysis of where the company sits today and where it's going next year:

  • The company's growth and financials are strong and the firm is healthy, with revenue up year-over-year, including net income up an impressive 62%.
  • WalkMe's technologies, such as Deep, UI and various digital adoption patents ensure it has very good competitive differentiation for the time being.
  • The company is poised to move much more from single-app, single use case deployments to multiple-app, multiple use case rollouts next year with their new customer success focus.
  • This is vital for WalkMe to grow as it gains size, given that most customer organizations are still leaving considerable productivity and value creation on the table due to limited digital adoption deployments, the data presented at analyst day clearly showed.
  • Where the company remains challenged is systematically moving beyond departments like sales and HR, and their new partner program, the Propel program may be instrumental in making that happen. I also think the company has to not just sell to the CIO, but also to executives in charge of employee experience overall, which have a vested interest in long-term post-rollout success.
  • The company has also assembled new frameworks, education, tools, and a more strategic advisory approach that should foster broader deployments across more apps and departments within customers in 2024 and beyond.
  • Digital adoption stubbornly remains a category with limited industry awareness, but this is changing, and the data showing the double digit rise of centers of excellence for digital adoption is a very good sign for the company.
  • Enabling AI transformation directly as a digital adoption strategy as generative AI rolls out across enterprises around the world should add to the growth story as WalkMe matures their offerings for this in 2024 and beyond.
  • Digital adoption as a category is getting closer to breaking out, and WalkMe still stands to be the company that leads this given their product and go-to-market maturity, but will like be 2-3 more year still before it becomes a "household name" in IT.

Additional Reading

How Leading Digital Workplace Vendors Are Enabling Hybrid Work

WalkMe in 2022: An Update on the Digital Adoption Journey

How Generative AI Has Supercharged the Future of Work

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Alteryx goes private in $4.4 billion deal: What to watch next

Larry Dignan
Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.  Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and…...

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Alteryx is going private in a $4.4 billion deal including debt. Clearlake Capital and Insight Partners will pay $48.25 a share in cash for each Alteryx share.

The price is a 59% premium to Alteryx's closing price Sept. 5 when reports surfaced about the potential buyout.

Mark Anderson, CEO of Alteryx, said going private via the Clearlake and Insight transaction will give the company more flexibility to implement its long-term strategy. "Over the past several years, we've executed a comprehensive transformation strategy to enhance our go-to-market capabilities and establish a strong cloud and AI innovation roadmap," said Anderson.

Constellation ShortListâ„¢ Self-Service Data Science & Machine Learning

Alteryx has been trying to consolidate analytics customers on its self-service data science and machine learning platform. Alteryx is looking to be one platform for data discovery, preparation, diagnostic and predictive and prescriptive analytics and has oriented its go-to-market strategy around targeting personas.

Constellation Research analyst Doug Henschen said:

"Privatization and private equity backing will help to stabilize Alteryx. Alteryx provides a mix of data prep, analytics and AI/ML with a dose of data pipeline/analytic automation capabilities.

Competition has intensified from cloud vendors, like AWS with its SageMaker Suite and Google with Vertex AI, and from best-of-breed rivals like Dataiku and Data Robot. In addition, analytics and BI vendors, like Tableau and Microsoft with Power BI have also been pushing into data prep and advanced analytics. For its own part, Alteryx was late to the cloud, and it has also had a fair amount of executive turnover in recent years, all of which have intensified the headwinds of tougher economic conditions.

Nonetheless the company has a big installed base, and private-equity ownership should ease concerns about the company's future even if there may be short-term concerns about layoffs and continued investment in R&D. Customers should watch for signs of continued investment and commitment to product roadmaps."

As a private company, Alteryx is looking for air cover to accelerate its transformation currently underway. Here's the to-do list for Alteryx going into its buyout.

Expand the enterprise customer base. Alteryx has 49% of the global 2000 and big names including Chevron, Amazon, Procter & Gamble, DHL, Salesforce, IBM, Visa and others.

Uplevel its sales strategy to target personas including business customers, and analysts as well as chief data officers.

Optimize its enterprise license agreements and convince customers that it can be the analytics automation platform of choice. 

Scale its revenue base. Alteryx said it will have fiscal 2023 revenue between $942 million to $948 million. In 2022, Alteryx revenue was $855.35 million, up from $536.13 billion, largely due to its Trifacta acquisition and purchases of Hyper Anna and Lore IO. In 2022, Alteryx also launched its Analytics Cloud Platform.

Data to Decisions Innovation & Product-led Growth Future of Work Tech Optimization Next-Generation Customer Experience Digital Safety, Privacy & Cybersecurity Big Data ML Machine Learning LLMs Agentic AI Generative AI AI Analytics Automation business Marketing SaaS PaaS IaaS Digital Transformation Disruptive Technology Enterprise IT Enterprise Acceleration Enterprise Software Next Gen Apps IoT Blockchain CRM ERP finance Healthcare Customer Service Content Management Collaboration Chief Information Officer Chief Technology Officer Chief Information Security Officer Chief Data Officer Chief Executive Officer Chief AI Officer Chief Analytics Officer Chief Product Officer

ServiceNow acquires UltimateSuite, adds task mining

Larry Dignan
Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.  Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and…...

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ServiceNow said it will acquire UltimateSuite, a task mining company, in a move that brings the company more in line with automating processes and tasks as well as workflows.

UltimateSuite's flagship product revolves around task mining, but it also offers robotics process automation (RPA). In recent years, ServiceNow has acquired parts that put it more in competition with Celonis and UiPath on multiple fronts.

ServiceNow said the purchase of UltimateSuite bolsters its ability to identify process bottlenecks as it uses AI to automate work. UltimateSuite will be integrated into ServiceNow's Now Platform.

ServiceNow CEO McDermott talks business transformation, generative AI, processes

According to Eric Schroeder, vice president of NowX product management at ServiceNow, task mining can reveal "a more accurate picture of how people work."

ServiceNow has acquired G2K and Element AI for AI automation tools, Intellibot for RPA, and has built process mining into its Now Platform. ServiceNow also announced a partnership with Celonis in 2021 and reportedly has tried to acquire the process mining company.

Related:

 

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Adobe, Figma call off $20 billion merger

Larry Dignan
Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.  Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and…...

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Adobe and Figma are calling off their $20 billion merger since the deal was unlikely to get regulatory approval from the European Commission and UK Competition and Markets Authority.

In a statement, the companies said they both "continue to believe in the merits and procompetitive benefits of the combination" but there was no clear path to approval. Adobe and Figma announced plans to merge in 2022. 

Adobe will pay Figma a $1 billion breakup fee, according to an SEC filing. CEO Shantanu Narayen said:

"While Adobe and Figma shared a vision to jointly redefine the future of creativity and productivity, we continue to be well positioned to capitalize on our massive market opportunity and mission to change the world through personalized digital experiences."

Constellation Research CEO Ray Wang said Adobe will likely build a competing product to take on Figma.

“The UK's CMA ultimately played a key role in stopping Adobe's acquisition of Figma. From a competitive point of view, this move makes no sense as the products are tangential. Adobe builds creative tools and Figma enables work coordination among creatives. This type of regulatory overreach stifles innovation across sectors. Adobe will now have to pay Figma $1B and then build a competitive offering to challenge Figma."

Constellation Research analyst Liz Miller said:

"I'm not sure the regulators could have misunderstood markets, solutions or categories more than in this case. But then again, considering how many times marketers and creatives must explain their jobs as NOT being advertising it shouldn’t really shock anyone. The reality is that this is a bit of a melancholy decision: the opportunity to truly shake up the product development space was considerable with this deal and for many mutual customers who got a taste of what could be when the teams would informally brainstorm pre-deal-closure.

So now what? Adobe will power forward with tools already announced in 2023 that focused on the intersection points of analytics and product design. We will likely see more focus on how insights from product performance can be automated into workflows and actions. The goal is to create more self-driving, self-healing and self-advancing digital products that understand when unintended points of user friction and frustration derail experience and engagement. The backbone of a solid solution in AdobeXD still exists, but only time will tell if Adobe has the appetite to truly take on that market. As we have seen throughout the regulatory questioning, there is plenty of market and customer appetite for a Figma alternative. But Adobe may not want to derail focus that has been advancing revenue.

This DOES open the door to some interesting options specific to where that cashflow may go. Is another acquisition already in Adobe’s view? Based on the earnings call last week, the digital media and document sides of the business are growing, but it seems that while digital experience is growing that growth is sluggish in comparison to competitors in the marketing and customer engagement/experience spaces. Perhaps a shake up on that side of the cloud is next."

Marketing Transformation Future of Work Next-Generation Customer Experience adobe B2C CX Chief Information Officer

Why vendors are talking RPOs, pipelines, pilots instead of generative AI revenue

Larry Dignan
Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.  Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and…...

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This post first appeared in the Constellation Insight newsletter, which features bespoke content weekly.

Enterprise technology vendors see strong revenue growth ahead due to generative AI, but they're clearly stuck in the hurry up and wait phase when it comes to recognizing sales. In other words, technology vendors are increasingly talking about generative AI pilots, remaining performance obligations (RPOs) and pipeline in lieu of actual revenue.

This focus on future revenue instead of actual revenue has picked up in recent earnings conference calls. Oracle highlighted RPO in its recent second quarter earnings results, which were mixed. Oracle CEO Safra Catz said the company's RPO topped $65 billion with about 48% of that sum expected to be recognized as revenue over the next 12 months. In an SEC filing, Oracle noted that 35% of the $65.5 billion will be recognized as revenue in 13 months to 36 months and 17% recognized more than 3 years from now.

At the very least, 17% of Oracle's RPO should be heavily discounted. Revenue more than three years from now is worth less than if it were collected today.

Catz said that Oracle is building data center capacity to meet demand. Oracle CTO Larry Ellison said: "We have to build 100 additional cloud data centers because there are billions of dollars more in contracted demand than we currently can supply. Oracle Cloud Infrastructure (OCI) demand is huge and growing at an unprecedented rate. In the next few weeks, we expect to sign a couple more billion-dollar Cloud Infrastructure contracts."

Ellison also said OCI will have a growth rate topping 50% in the future due to generative AI and database demand.

RPO was also a topic for Adobe on its fourth quarter earnings call due to several large enterprise transformational deals that gained momentum due to generative AI. RPO for Adobe’s fourth quarter was $17.22 billion, up 13% from a year ago.

C3.ai CEO Tom Siebel recently talked more about pipeline and pilots over RPOs, but the theme was similar. There's revenue growth on the way, but we are not there just yet.

Siebel said:

"In Q2, we closed 62 agreements, including 36 pilots and trials. Our new pilot count is up 270% from a year ago. Notably, 20 of these were generative AI pilots, a 150% increase from Q1. With the lower entry price points of our pilots, we are more easily able to land new accounts. With our pilots, we are engaging customers across a diverse set of industries in this quarter. Our pilots came from manufacturing, federal, defense, aerospace, pharmaceuticals and other industries."

All those pilots sound promising, but so far, C3.ai's revenue has been between $72 million and $73 million for the last three quarters.

Dell Technologies Chief Operating Officer Jeff Clarke recently said on the company's third quarter earnings conference call:

"The pipeline for AI-optimized servers tripled quarter-over-quarter during Q3. Lead times remain 39 weeks, demand is ahead of supply. We continue to work to improve supply. And we're working now to convert that pipeline into real sales into orders, so we can continue to ship and benefit from this exciting time."

The problem with the focus on pipeline, total addressable market and future revenue potential is that it's hard to value. In some cases, this potential revenue may never hit the top line. For technology vendors, generative AI is at a promising yet unfulfilling stage in terms of actual revenue.

Enterprise buyers are interested in the generative AI use cases and may even be recognized as pipeline for many vendors. However, strategies are still being formulated along with budgets. There's also another reason to be a touch skeptical about the pipeline and RPO chatter: Enterprises may agree to spend over time but are also managing payments because they can earn interest income while the vendors wait for the checks.

It's likely that the next round of technology earnings in January and February will feature more RPO and pipeline talk. The key themes to watch are the following:

  • RPO increases for vendors as customers commit to longer-term contracts.
  • The time frames associated with those long-term contracts and how much is being stretched out beyond 24 months.
  • What is the value of revenue two years from now to Wall Street?
  • Payment terms. Are annual payments over because enterprise buyers are seeing better returns from interest rates relative to vendor discounts?
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IBM buys StreamSets, webMethods from SoftwareAG for €2.13 billion

Larry Dignan
Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.  Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and…...

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IBM will buy StreamSets and webMethods from SoftwareAG in a deal valued at €2.13 billion. IBM said the deal will bolster AI platform watsonx's ability to ingest data.

Silver Lake is Software AG's majority owner. At Software AG, webMethods and StreamSets served as the root of its integration platform-as-a-service play. IBM paid cash for StreamSets and webMethods. 

For IBM, StreamSets and webMethods will give it more API management and data integration tools. StreamSets will add to watsonx's ability to ingest data because it can access and deliver multiple data sources and types and design pipelines.

WebMethods, an API management platform, can be implemented on-premises and in the cloud.

Combined, StreamSets and webMethods have more than 1,500 customers. IBM also said the two platforms will be integrated into IBM's portfolio beyond  watsonx, including Red Hat and IBM Consulting.

Constellation Research analyst Doug Henschen said:

"IBM's purchase of webMethods and StreamSets will give it a modern integration platform as a service (iPaaS) spanning application and data integration, and, with the inclusion of StreamSets, real-time streaming use cases. Software AG had recently streamlined, modernized and integrated WebMethods and StreamSets assets into a next-generation platform it calls a Super IPaaS. The Super iPaaS also spans SAP, on-premises, hybrid and mainframe integration, so it’s a good fit for IBM." 

The deal is expected to close in the second quarter. Here’s a look at how webMethods and StreamSets ran as a pair at Software AG.

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Extend ramps as retailers eye extended warranty, shipping protection plans

Larry Dignan
Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.  Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and…...

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Tis the season for stolen and damaged packages, warranties and potentially a startup named Extend. Extend's platform, which merchandises and optimizes warranties and shipping protection, resolves claims with data, orchestration and artificial intelligence.

Extend is becoming a brand as it partners with multiple retailers to offer extended warranties and shipping protection. The company has more than 800 manufacturers and retail customers including Casper, Tonal, Oura and others. It also counts Shopify and BigCommerce as key partners. Extend said that 98% of its claims are approved in 90 seconds.

We caught up with Rohan Shah, Extend's Co-founder and Chief Revenue Officer, to talk about the extended warranty industry, processes and customer experiences. Here are the takeaways from our conversation.

The extended warranty business. Shah (right) said retailers, notably Best Buy, have developed profit centers from extended warranty sales. But other retailers did not have similar business opportunities. "Despite consumer demand and financial opportunity there was no access," said Shah. According to Shah, there was a distribution problem with extended warranties. As a result, Shah and CEO and Co-founder Woodrow Levin created Extend in 2019 to distribute warranties much like Stripe, Affirm and Klarna popularized after pay services.

Customer experience as the differentiator. Extend offers extended warranties and package projection but aims to differentiate with customer experience. Extend's processes have "a very strong lens on the most problematic aspect of the industry which was customer experience," said Shah.

Extend created an extended warranty distribution network and API-first integrations and paired it with a customer experience where retailers could enhance customer relationships.

Building out the shipping protection business. While extended warranties were driving incremental profits for retail partners, Shah said it's important to continually ask customers what other problems they needed to solve. The answer was quick: Support operations for shipping issues. "Customers said that 30% to 50% of support team call volume was around shipping issues," said Shah. "Orders not arriving on time, packages arriving damage and theft were issues merchants saw the most. Retailers can't control those issues but can't tell the customer sorry you're out of luck. Most retailers were replacing goods at their own costs."

Now shipping protection is added to the Extend network as an add-on during the purchase process.

The business today. Extend is seeing strong cash flow for extended warranties and the business continues to grow 75% to 100% year over year. In the future, shipping and theft protection could become a bigger chunk of revenue. "We see more merchants adopting shipping protetion and it touches 100% of ecommerce volume," said Shah. However, shipping protection requires more market education relative to extended warranties. "Over the next few years theft and shipping coverage will become table stakes for retailers," said Shah.

Price points for extended warranties and shipping protection. Individuals have their own internal price points when they consider an extended warranty, said Shah. Higher priced items have higher attach rates for extended warranties. That trend kicks in for prices above $100. However, there are exceptions. Extend's first warranty went for $1.99 on a $12 pair of headphones.

Shipping protection has lower price points. "I have anxiety about deliveries so I will buy shipping protection because it's a nominal fee. It's usually like 2% of the cart," said Shah. "We see serious adoption even at a $50 price point. At $1,500 you might want shipping protection because there's no guarantee you'll get a replacement."

The use of AI. Shah said Extend leverages artificial intelligence to optimize the merchandising and messaging to pitch extended warranties and shipping protection. "I would say AI is most relevant on the claims side where we handle most cases in under 90 seconds," said Shah. "It's a dramatic difference from a 7 to 10-day claim process. We're leveraging AI from a fraud perspective to see photo validation and whether a package was delivered or not. Other products are more complicated for repairs and things that have to be sent to a depot. AI helps us do the routing in that case or schedule a technician."

Data and orchestration. Extend's biggest value to legacy retailers is focus and the ability to share data.  Shah said:

"Retailers can have legacy infrastructure built on top of disparate systems that don't talk to each other today. There's not consistent middleware and we play that role where we integrate and orchestrate with our data model. Warranty is a space that has been seen from a profit perspective, but we can tell them what products are seeing complaints, where the delivery problems are and experience."

The data model also gives Extend good visibility into retail operations. Shah explained:

"We're integrated into the e-commerce system. We're integrated into the POS (point-of-sale) system, and we're integrated into any order management or ERP system they have on the back end. In many cases, these are not connected for retailers, especially large retailers with legacy systems. We also integrate with CRM systems. We're able to create a data model that touches sales, customer claims and operations and support, as well as all of our claims infrastructure. We understand down to the SKU level what products are breaking at an exorbitant rate or what products customers are having issues with. The data model is a side benefit of working with Extend."

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Intel's AI everywhere strategy rides on AI PCs, edge, Xeon CPUs for model training, Gaudi3 in 2024

Larry Dignan
Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.  Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and…...

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Intel's launch of its Core Ultra mobile processors and 5th Gen Intel Xeon chips rhymed with product rollouts of yesteryear, but this one had higher stakes. Intel had to prove that it can be an AI player along with Nvidia and AMD even though the company is playing catch-up with its Gaudi3 AI accelerator.

In New York, CEO Pat Gelsinger made it clear that AI is "in the early innings." In fact, AI may just be still in the preseason of the impact it'll have. There's a big opportunity to leverage AI everywhere across the computing stack to create augmented intelligence.

Gelsinger said AI will be more of a hybrid affair across cloud, data centers, edge, network and end-user devices. Gelsinger said Intel is positioned to bring AI across multiple levels of the stack. He also noted that Intel can infuse AI into existing infrastructure and save enterprises the hassle of a new buildout, which by the way has so far benefited Nvidia.

He said:

"You don't have to build new data centers. You don't have to stand up new networks, new management, new security. We're going to infuse AI into every data center that's built on Xeon and that's what we're announcing today. Same applications. You don't need a forklift, those applications now. We're just going to build it in and enhance what you already do with new AI capabilities.

"We're also seeing that the world is moving from high end training. A few people create weather models, lots of people use them. The same is going to happen with AI. A few people train and lots of people inference."

Gelsinger's argument--and Intel's pitch--is that inference will happen at the edge and increasingly PCs. Gelsinger's other mission was to highlight that Intel can execute. He reiterated that Intel is on track to deliver five new process technology nodes in four years.

Intel's AI Everywhere Dec. 14 rhymed with AMD's Dec. 6 launch of its AI accelerators that are now in production. AMD has a similar vision of using its processors to power AI applications in the cloud, data centers and all the way to PCs. AMD CEO Lisa Su said:

"We are so well positioned to power that end-to-end infrastructure that defines this new AI era from massive cloud server installations to on-prem enterprise clusters to the next generation of AI and embedded in PCs."

Su added that AMD must deliver energy efficient GPUs, CPUs and adaptive computing systems for AI training and inference everywhere.

Sounds familiar, eh? Nevertheless, Intel vs. AMD hasn't been zero sum through the PC era and most likely won't in the AI era either. Directionally, AMD and Intel have similar visions. And Nvidia is the biggest risk to both companies.

Here's what Intel outlined for its AI everywhere stack.

Intel Core Ultra

Gelsinger said Intel Core Ultra represented the biggest PC transformation since the company launched Centrino chips to give laptops the ability to connect to Wi-Fi.

Intel Core Ultra is designed to launch a set of more than 230 AI capable PCs. Intel Core Ultra spreads AI acceleration chores across the CPU, GPU and neural processing unit (NPU) and can give PCs the ability to power multiple industry use cases and visual workloads.

The company's Intel Core Ultra is designed to counter Apple's silicon and upcoming efforts from ARM chipmakers. It can offer up to 16 cores and has Intel AI Boost, which is designed for AI workloads on Evo edition laptops.

5th Gen Intel Xeon

The 5th Gen Intel Xeon is set up to refresh previous Xeons in data centers with performance and efficiency gains over previous generations.

Xeon will also have built-in AI acceleration as Intel makes the case that CPUs can also be used to fine-tune models as large as 20 billion parameters.

IBM was cited as a customer that used the 5th Gen Intel Xeon for better query throughput on its watsonx.data platform. Google Cloud also verified performance gains over 4th Gen Xeon instances.

During the event, Intel positioned Core Ultra and 5th Gen Xeon processors as AI workhorses in edge computing use cases. Gelsinger argued that inference will be conducted at the edge instead of the data center.

Gaudi3

Gelsinger showed Intel Gaudi3, the company’s next-gen AI accelerator for deep learning and large-scale AI models.

Intel said it has seen the pipeline of Gaudi surge and it plans to gain share in 2024. Gaudi3 will compete with AMD, Nvidia and custom processors by AWS, Microsoft Azure and Google Cloud.

"Gaudi3 is out of the fab and into the lab being powered on and looking healthy," said Gelsinger. "We are executing like crazy."

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Salesforce launches Data Cloud Vector Database, Einstein Copilot Search

Larry Dignan
Editor in Chief of Constellation Insights Constellation Research

About Larry Dignan: Dignan was most recently Celonis Media’s Editor-in-Chief, where he sat at the intersection of media and marketing. He is the former Editor-in-Chief of ZDNet and has covered the technology industry and transformation trends for more than two decades, publishing articles in CNET, Knowledge@Wharton, Wall Street Week, Interactive Week, The New York Times, and Financial Planning. He is also an Adjunct Professor at Temple University and a member of the Advisory Board for The Fox Business School's Institute of Business and Information Technology.  Constellation Insights does the following: Cover the buy side and sell side of enterprise tech with news, analysis, profiles, interviews, and event coverage of vendors, as well as Constellation Research's community and…...

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Salesforce is adding a vector database and generative AI-powered search to Data Cloud as it aims to surface unstructured data and combine it with CRM data.

The updates, Data Cloud Vector Database and Einstein Copilot Search, were announced at Salesforce's New York World Tour stop.  Data Cloud Vector Database will be built into Salesforce's Einstein 1 Platform.

Overall, Salesforce is using its Data Cloud and generative AI to unify multiple enterprise data stores. Data Cloud Vector Database will be able to leverage data from PDFs, email, documents and transcripts and combine it with transactional data.

Vector databases are being announced by a bevy of data platform players as a way to bring data to generative AI applications without a lot of fine tuning for large language models (LLM). Vector database announcements have proliferated.

Salesforce's pitch with Data Cloud Vector Database is that it will bring unified business data into AI prompts and be integrated into its platform. Enterprise buyers, however, will have to ultimately determine what vector database and platform makes the most sense for their data. 

With Einstein Copilot Search, Salesforce will bring AI search tools to Einstein Copilot.

Data Cloud Vector Database and Einstein Copilot Search will be in pilot in February 2024. Einstein Copilot will be generally available in February.

Separately, Salesforce launched Unlimited Edition+, a pricing plan that includes the company's suite of data and AI tools with its various clouds. Unlimited Edition+ for Service Cloud will run you $500 per user per month billed annually. Unlimited is $330 per user per month and there are lower tiers available.

 

 

 

 

 

 

 

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