Tim McAdam, general partner at TCV, speaks with CXOTalk about digital transformation in the new services economy. McAdam describes it as the “instant-on” economy, where everyone can subscribe to anything they want in apps or online, changing the way businesses think about end-user consumers.

TCV, a private equity firm focused on IT businesses in the growth stage, is an investor in FinancialForce. McAdam says more analytics is driving decisions in the enterprise as an investment in customer relationships.

“It’s a mindset challenge. I think given how many infrastructure software companies are making it easier, I think FinancialForce is a great example of that, to connecting the front office to the back office, using the Salesforce or CRM customer record and tying that customer record to back-office processes like invoicing the service contract, billing, and down into the weeds of the general ledger are transforming the way people think about the service economy and managing that relationship with consumers,” he says. “Trust the data.”

Transcript

Michael Krigsman: I’m Michael Krigsman, an industry analyst and the host of CxOTalk. And, we’re here in Las Vegas at the FinancialForce conference, Community Live 2017. I am speaking with Tim McAdam, who is a general partner at TCV. Hey Tim, how are you doing?

Tim McAdam: Hi Michael, pretty good! How are you?

Michael Krigsman: Great! Tell us about TCV.

Tim McAdam: Yeah, so TCV is a private equity firm, and we are focused exclusively on IT businesses that are in their growth stage, so they are pretty mature. We've been around for 22 years. We're investing out of our ninth fund and currently manage about twelve billion dollars.

Michael Krigsman: And you are an investor in FinancialForce.

Tim McAdam: I am. So, I’m on the board of FinancialForce, which is a very typical TCV investment. We invested about two years ago in the company.

Michael Krigsman: And there was a lot of talks today about the new services economy. And so, when we talk about that, what are we referring to?

Tim McAdam: Yeah, I think Todd did a nice job on stage earlier talking about how the world across many sectors of the GDP is kind of moving to a services economy. I thought the example he gave with Boeing actually renting their planes to the United's of the world as opposed to selling them is a really interesting tidbit about how deep it’s actually affecting the manufacturing sector. But the services economy, as I think about it, is almost the “instant-on” economy. You can pretty much subscribe to anything right now, either in app format or online and not have to physically go to a store in the case of the enterprise. Crunch the data that you used to crunch manually… We have an investment in our portfolio called Avolara that allows you to calculate your sales and use tax automatically as a service, on-demand. So, it’s far-reaching across multiple sectors of the economy, but I think it’s transforming the way businesses think about their end-user consumers, for sure.

Michael Krigsman: So, if Boeing, such a large, established company, can transition at least part of its business model, and an important part, to being a service economy component, any business can do it but it’s hard, though. It’s a challenge for a big company.

Tim McAdam: It’s a mindset challenge. I think given how many infrastructure software companies are making it easier, I think FinancialForce is a great example of that, to connecting the front office to the back office, using the Salesforce or CRM customer record and tying that customer record to back-office processes like invoicing the service contract, billing, and down into the weeds of the general ledger are transforming the way people think about the service economy and managing that relationship with consumers.

Michael Krigsman: And there’s a very important data component as well.

Tim McAdam: Yeah, I think more and more analytics is becoming the key to driving decisions in the enterprise, and the great thing about building on the […] stack is you get the utility and use of everything that Salesforce is developing for their ISV partners. In the case of analytics, it's the Wave platform, which gives you a graphical representation of what's happening at the data level, and now, with the release of Einstein, you really get AI and machine learning wrapped around Wave in order to allow business analysts to make better decisions.

Michael Krigsman: You mentioned mindset, and if you talk about mindset, that’s not the technology. And so, what’s the role of the non-technology components in all of this?

Tim McAdam: Well, what we're seeing in most of our customers, and not just FinancialForce customers, but other customers, is that it's a mindset shift more than it is a technology shift. So, that customer journey of contract-to-renewal is one where you have to have multiple touchpoints in order to keep that customer happy, whether it's an enterprise customer or a consumer so they will renew when their subscription is up in a year, or two, or three years.

Michael Krigsman: Because if they don’t renew, if they’re not happy, they won’t renew, and of course, there goes your revenue.

Tim McAdam: Yeah, I mean, so much is tied to renewal rates in these subscription businesses, whether it’s a subscription SaaS company, or subscribing to coffee beans, which I do from multiple roasteries all over the place. Customer loyalty is king and what it costs to attract and retain a customer is the crux of your economic model. So, you have to be able to keep that customer happy during that period leading up to the point where it’s time for them to renew.

Michael Krigsman: So, that economic model, then, becomes a driver for providing the right type of experience for your customers.

Tim McAdam: I think that’s right. I mean, I think that when you think about investing in your technology in order to manage that customer relationship, having the ability to have signals into that customer relationship to know when things aren’t going right, or how often that consumer or end-user customer is interacting with your service, is critically important, I think, to ultimately the renewal rate that you enjoy as a company, and your net promoter score. I mean, so much of not just technology, but every sector of the economy turns on the net promoter score and customer loyalty. And if you have a high-end PS, and you have a very low churn rate, that ties directly into creating equity value.

Michael Krigsman: And, all these things you’re describing also require the breaking down of siloes inside the company so there’s sharing of information, sharing of that data, and presenting a unified face to the customer.

Tim McAdam: I think that’s right. You ultimately used to be, over time, this data was all siloed. There were multiple data stores, multiple customer records, and FinancialForce’s reason for being is streamlining that entire customer journey and not having multiple stores, but having multiple applications and processes tied to one data record.

Michael Krigsman: This is much easier said than done. And so, what advice do you have for existing businesses that are looking at this and saying, “We need to do this, but how do we do it?”

Tim McAdam: I think the biggest hurdle for most enterprises is the mindset shift of changing a process. So, changing the way they've done it forever. And, the reality is that a lot of their business can be instrumented now with analytics, with AI, with machine learning to allow them to make intelligent decisions using the data. So, I guess my advice would be to trust the data, use the tools that are out there in Software Land to make better decisions.

Michael Krigsman: Trust the data. Tim McAdam, thank you so much!

Tim McAdam: Alright, Michael! Thanks.

Michael Krigsman: I’m Michael Krigsman, an industry analyst and the host of CxOTalk. And, we’re here in Las Vegas at the FinancialForce conference, Community Live 2017. I am speaking with Tim McAdam, who is a general partner at TCV. Hey Tim, how are you doing?

Tim McAdam: Hi Michael, pretty good! How are you?

Michael Krigsman: Great! Tell us about TCV.

Tim McAdam: Yeah, so TCV is a private equity firm, and we are focused exclusively on IT businesses that are in their growth stage, so they are pretty mature. We've been around for 22 years. We're investing out of our ninth fund and currently manage about twelve billion dollars.

Michael Krigsman: And you are an investor in FinancialForce.

Tim McAdam: I am. So, I’m on the board of FinancialForce, which is a very typical TCV investment. We invested about two years ago in the company.

Michael Krigsman: And there was a lot of talks today about the new services economy. And so, when we talk about that, what are we referring to?

Tim McAdam: Yeah, I think Todd did a nice job on stage earlier talking about how the world across many sectors of the GDP is kind of moving to a services economy. I thought the example he gave with Boeing actually renting their planes to the United's of the world as opposed to selling them is a really interesting tidbit about how deep it’s actually affecting the manufacturing sector. But the services economy, as I think about it, is almost the “instant-on” economy. You can pretty much subscribe to anything right now, either in app format or online and not have to physically go to a store in the case of the enterprise. Crunch the data that you used to crunch manually… We have an investment in our portfolio called Avolara that allows you to calculate your sales and use tax automatically as a service, on-demand. So, it’s far-reaching across multiple sectors of the economy, but I think it’s transforming the way businesses think about their end-user consumers, for sure.

Michael Krigsman: So, if Boeing, such a large, established company, can transition at least part of its business model, and an important part, to being a service economy component, any business can do it but it’s hard, though. It’s a challenge for a big company.

Tim McAdam: It’s a mindset challenge. I think given how many infrastructure software companies are making it easier, I think FinancialForce is a great example of that, to connecting the front office to the back office, using the Salesforce or CRM customer record and tying that customer record to back-office processes like invoicing the service contract, billing, and down into the weeds of the general ledger are transforming the way people think about the service economy and managing that relationship with consumers.

Michael Krigsman: And there’s a very important data component as well.

Tim McAdam: Yeah, I think more and more analytics is becoming the key to driving decisions in the enterprise, and the great thing about building on the […] stack is you get the utility and use of everything that Salesforce is developing for their ISV partners. In the case of analytics, it's the Wave platform, which gives you a graphical representation of what's happening at the data level, and now, with the release of Einstein, you really get AI and machine learning wrapped around Wave in order to allow business analysts to make better decisions.

Michael Krigsman: You mentioned mindset, and if you talk about mindset, that’s not the technology. And so, what’s the role of the non-technology components in all of this?

Tim McAdam: Well, what we're seeing in most of our customers, and not just FinancialForce customers, but other customers, is that it's a mindset shift more than it is a technology shift. So, that customer journey of contract-to-renewal is one where you have to have multiple touchpoints in order to keep that customer happy, whether it's an enterprise customer or a consumer so they will renew when their subscription is up in a year, or two, or three years.

Michael Krigsman: Because if they don’t renew, if they’re not happy, they won’t renew, and of course, there goes your revenue.

Tim McAdam: Yeah, I mean, so much is tied to renewal rates in these subscription businesses, whether it’s a subscription SaaS company, or subscribing to coffee beans, which I do from multiple roasteries all over the place. Customer loyalty is king and what it costs to attract and retain a customer is the crux of your economic model. So, you have to be able to keep that customer happy during that period leading up to the point where it’s time for them to renew.

Michael Krigsman: So, that economic model, then, becomes a driver for providing the right type of experience for your customers.

Tim McAdam: I think that’s right. I mean, I think that when you think about investing in your technology in order to manage that customer relationship, having the ability to have signals into that customer relationship to know when things aren’t going right, or how often that consumer or end-user customer is interacting with your service, is critically important, I think, to ultimately the renewal rate that you enjoy as a company, and your net promoter score. I mean, so much of not just technology, but every sector of the economy turns on the net promoter score and customer loyalty. And if you have a high-end PS, and you have a very low churn rate, that ties directly into creating equity value.

Michael Krigsman: And, all these things you’re describing also require the breaking down of siloes inside the company so there’s sharing of information, sharing of that data, and presenting a unified face to the customer.

Tim McAdam: I think that’s right. You ultimately used to be, over time, this data was all siloed. There were multiple data stores, multiple customer records, and FinancialForce’s reason for being is streamlining that entire customer journey and not having multiple stores, but having multiple applications and processes tied to one data record.

Michael Krigsman: This is much easier said than done. And so, what advice do you have for existing businesses that are looking at this and saying, “We need to do this, but how do we do it?”

Tim McAdam: I think the biggest hurdle for most enterprises is the mindset shift of changing a process. So, changing the way they've done it forever. And, the reality is that a lot of their business can be instrumented now with analytics, with AI, with machine learning to allow them to make intelligent decisions using the data. So, I guess my advice would be to trust the data, use the tools that are out there in Software Land to make better decisions.

Michael Krigsman: Trust the data. Tim McAdam, thank you so much!

Tim McAdam: Alright, Michael! Thanks.