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What's 🔥 in Enterprise IT/VC #179
IT Spend, adjusting to the new normal - the good and the bad
Phew, Q1 is over and now on to Q2. 3 weeks ago, many enterprise founders did not think it would be too bad, perhaps 10% hit to Q1 revenue. 2 weeks ago it was 15% and 1 week ago it was 20%. Guess what, unless you are Zoom, most startups took 30%+ hits in Q1. Even deals that were in procurement for weeks did not close. So now what? Many who were optimistic a couple of weeks ago finally got the memo - this is going to last much longer than we thought.
Q2 is going to a be a rough quarter emotionally and economically. Jobs number just came out for the month of March and while it was at 701,000 lost jobs, some predict April numbers will be much higher.
“My sense is that when we get April data a month from now, we’ll see that the economy lost somewhere between 10 and 15 million jobs,” Mark Zandi, chief economist at Moody’s Analytics, said earlier this week. “That would be consistent with the initial claims for unemployment insurance data that we’re getting.”
And that V-shaped recovery many were hoping for could be more like a wide-U. However, some bright lights are that we are seeing an acceleration of digitization of economy.
Bill McDermott, CEO of ServiceNow, chimes in.
“We’re done with talking about if it is a good idea to digitally transform,” says ServiceNow CEO Bill McDermott. “Now the conversation has shifted to how quickly can you get me there. I have to get there really fast. My prediction is that companies that are digital, that can lead this digital transformation revolution, will prosper through this time because there are so many public sector and private sector entities that must change. I do believe we will be going into a totally new normal.”
And from Chetan at Benchmark - makes sense given most folks are wearing sweats all day every day but digital accelerating.
Larry Fink, CEO of Blackrock, one of the largest asset managers, spells out the importance of tech and the idea that they need to be as good as using tech as any tech firm.
While this is promising we must still remember that 💰is 👑 for both startups and large enterprises which means doing nothing is the default.
Keep your head up!
ARR is not really ARR in a pandemic. 🎩 to Grant Miller of @replicated for sharing GainSight survey on net retention.
Net retention will fall as churn rises: Just under 78% of SaaS executives who answered the survey said that they expect their net retention rate to "decrease by at least 3% and up to 20+%," according to Gainsight. Digging in a bit more on the topic, 40% of the companies surveyed saw a net retention reduction of at least 11%.
SaaS churn won't land equally: Companies with higher gross churn expect worse COVID-19 driven churn impacts; companies with better pre-COVID-19 churn anticipate less new churn. (This can be stated another way: SaaS companies selling to smaller companies anticipate higher COVID-19-driven churn; companies selling to enterprise customers expect to see less new churn.)
True and has always been the case which is why we fund mission oriented founders.
Sage advice from Ray Dalio, Bridgewater Associates
Semil has a great read on Enterprise Business Models and Distribution in a Pandemic World - thanks for the shoutout!
I don’t like to write about layoffs but this is a reminder that no company is immune to this unless, perhaps you are Zoom. Datarobot, an enterprise AI platform, just let go of a number of folks in its Boston office and I’d expect to see more enterprise startups doing the same, unfortunately, in the coming weeks.
Incident management and analysis is a team sport and getting engineers to participate is a huge help as companies try to learn from incidents and recover faster. This, however, gets more complicated in a WFH world.
What happens when an enterprise SaaS tool becomes a consumer one overnight? Security issues abound with Zoombombing and hackers entering virtual classrooms. This is a sad case of good intentions turned upside down. Eric Yuan is leading charge here and refocusing all development efforts on security and privacy.
In the new normal, collaboration as default needs to be built in. Notion just raised $50 million despite the current pandemic. And as I’ve always said when it comes to fundraising, “eat when dinner is served.”
The fund-raising was completed in 36 hours last week after the virus pushed Ivan Zhao, Notion’s founder and chief executive, and Akshay Kothari, Notion’s chief operating officer, to rethink their previous position of not relying too much on venture capital.
Will Azure continue its market share gains versus AWS? Morgan Stanley CIO survey seems to think so.
Microsoft's hybrid cloud — its mix of on-premise and public cloud resources – is the reason Morgan Stanley expects it to have the largest IT budget gain over the next three years, it said in earlier, similar surveys. While Amazon is making gains in the hybrid cloud, Microsoft still "maintains a wide delta against AWS," according to the survey.
The latest survey also found that companies expect to increase their 2020 spend for cloud computing, security, and collaboration tools, and Morgan Stanley expects that a longer-term shift to the cloud will likely accelerate after the crisis.
Microsoft’s RPA product, PowerAutomate, is GA. Goal is to democratize access to automation.
We’ve designed our RPA solution for both attended and unattended RPA scenarios so that citizen developers and pro developers alike can automate their work. They can start by recording manual tasks, such as mouse clicks, keyboard inputs, and data entry, and then automate the replay of these steps to integrate with more complex process automations.
Excited for portfolio co FortressIQ which is a launch partner.
Part of an organization’s success in driving their digital transformation is the ability to easily obtain data-driven insights about its current state tasks and processes, understand which of those processes present opportunities for automation, and quickly implement RPA at scale. FortressIQ’s Process Discovery platform delivers cognitive process intelligence, a powerful combination of AI-driven process discovery, detailed process modeling capabilities, process mining, and automatic generation of process documentation.
All you wanted to know about Service Meshes via New Stack.
For fun, live electronic music concert called Digital Mirage all streaming from living rooms and kitchens over YouTube - some of the best acts around so tune in over the weekend!
How long will it take for SaaS multiples to recover?
I like to say Every Fortune 500 is a Tech Company but the S&P 500 will be rapidly changing as Macy’s is the first of, I’m sure, many retailers that will drop out of the index. CNBC has more here in “Macy’s is the first of what could be a retail and energy purge from the S&P 500.”