CAPITAL MARKETS DAY - Software AG/media/Files/S/... · 2019. 2. 26. · Customer Driven Customer...

© 2019 Software AG. All rights reserved.

CAPITAL MARKETS DAY LONDONFEBRUARY 5, 2019

2 | © 2019 Software AG. All rights reserved. For internal use only

This presentation includes forward-looking statements based on the beliefs of Software AG management.Such statements reflect current views of Software AG with respect to future events and results and aresubject to risks and uncertainties. Actual results may vary materially from those projected here, due tofactors including changes in general economic and business conditions, changes in currency exchange,the introduction of competing products, lack of market acceptance of new products, services or techno-logies and changes in business strategy. Software AG does not intend or assume any obligation to updatethese forward-looking statements.

This presentation constitutes neither an offer nor recommendation to subscribe or buy in any other waysecurities of Software AG or any of the companies that are members of the Group at present or in thefuture, nor does it form part of such an offer and it should not be understood as such. This presentationdoes not constitute an offer of sale of securities in the United States of America. Securities may not beoffered or sold in the United States of America without registration or exemption from registration inaccordance with the U.S. Securities‘ Act of 1933 in its currently valid form.

SAFE-HARBOR-STATEMENT

SANJAY BRAHMAWAR

CHIEF EXECUTIVEOFFICER


4 | © 2019 Software AG. All rights reserved.

H E L I X

Our pathway to sustainable, profitable growth


THE RIGHT MOMENT TO ASSESS WHERE WE STAND

50YEARS


WHAT WORKS

Product Strength

Financial Strength

Cultural Strength

Best in Class

Solid Balance Sheet

Creativity &

Flexibility

Integral & Trusted

Strong Cashflow

50YEARS

Diversity & Opportunity


WHAT WE MUST WORK ON

Growth

GTM and Operations

No growth in growth markets

Product focus too

broad

Partner focus too narrow

Ecosystem

Siloes & complexity

Essence & identity

50YEARS


HELIX: A MULTI-YEAR TRANSFORMATION

FOCUS

EXECUTION

TEAM

• Targeting sustainable, profitable growth

• Committing ~€50m in investment

• Committing to medium term milestones, metrics and pathway

• Three levers will enable our success:

• FOCUS• Right products• Right markets• Right resources and capabilities

• EXECUTION• Simpler, sharper, disciplined GTM• Improved operating model and accountability• Drive necessary shift to subscription

• TEAM• Harnessing our talent• Expanding and empowering our ecosystem

GENERATING SUSTAINABLE, PROFITABLE GROWTH


RE-IMAGINING INTEGRATION

€24bn

TAM2018

DIGITAL TRANSFORMATION

REAL-TIMEDATA

€7.9 bn

IoT& Analytics

€2.4bn

BusinessTransformation

€10.2bn

€3.4 bn

A&NIntegration

49%

Of CIOs say their business model has changed or is changing

- Gartner CIO Survey 2019

$1.37bn

The total digital transformation market in 2022

- IDC forecast

Annual total potential economic impact of IoT by 2025

- McKinsey

$3.9tr -$11.1tr pa


EVOLVING SO THAT WE START WITH THE CUSTOMER

Real-life time sensitive problems

Intuitive UI and instant results

Plain-speaking support and responsiveness

Scale over time based on results

Experiment, test and probe capabilities

Facilitate, not sell

Value-based engagement

SaaS/Subscription 1st


TEAMEXECUTIONFOCUS

THREE LEVERSWE CAN CONTROL


FOCUSSHAPING OUR OFFER AND ORGANISATION FOR SUCCESS

PRIORITIZE INVESTMENTWHERE WE SEE:

• Growth > market

• Potential to take share

• Low barriers to success

CLARIFY VALUEPROPOSITION BY:

• Realigning DBP portfolio:Integration, IoT, Business Transformation

• Focus on areas where there is clear marketgrowth

• Refocus R&D spending where it matters most

LEVERAGE STRATEGIC M&A TO:

• Enter adjacent markets

• Bolster existing strengths

• Gain a technology edge

M A R K E T S P R O D U C T S C A P A B I L I T Y


FOCUS IN ACTION – INTEGRATION

Customer integration opportunity

Legacy stack and existing architecture

• Integration: a big problem for enterprise

• It’s only getting bigger

• A business-level, front-line problem

$12bn

$18bn

Source: Gartner

2017

2022

50%

Integration PlatformMarket TAM

API iPaaS IoT & Analytics


FOCUS IN ACTION – IOT & ANALYTICS

Industrial IoT

Telecommunications

Insurance/Financial Services

2018 -2023

Create replicable solutions

Scale OEM parterships

Cumulocity and System Integrators

$9.5bn

$25.6bn

2017

2023

18% CAGR

IoT PlatformTAM

Source: McKinsey


EXECUTION – DELIVERY AS OUR WATCHWORD

Drive accountability

Create right leadership group

Reward success appropriately

Specialization

Geography

Sales coverage

Capitalize on major industry trend

Respond to customer preferences

Capture economic upside

1. New operating model 2. Refined go-to-market 3. Subscription sales

sustainable, profitable growth over the medium term


Sanjay BrahmawarChief Executive Officer

Arnd ZinnhardtChief Financial Officer

John SchweitzerChief Customer Officer

Dr. Stefan SiggChief Product Officer

Paz MacdonaldChief Marketing Officer

Bernd GrossChief Technology Officer

TEAMEXPERIENCE & ENERGY


TEAM – NURTURING AN ECOSYSTEM TO SUPPORT OUR GROWTH

Partners

People

- Launch comprehensive new program

- Embrace co-petition

- Grow partner revenue to substantial% of mix

- New employee value proposition

- Agile talent and performance framework

- Incentive structures to match

Scalable

Durable

Profitable


COMMITMENT. INVESTMENT. MEASUREMENT.

Op Free Cash Flow

Bookings / ACV

ARR


HELIX: THE RIGHT PATHWAY

GENERATING SUSTAINABLE, PROFITABLE GROWTH

Unlock our greatest strengths

Convert a significant opportunity

Committed investment, strong team


EVOLVING OUR FINANCIAL PLATFORM FOR GROWTH

ARND ZINNHARDTCHIEF FINANCIAL OFFICER


30%+Operating

Margin

Strong Free Cash Flow

Digital Business

10%+ CAGR

85% - 90% Recurring Revenue

Mediumterm

Accelerated growth, higher quality and higher visibility of revenues, good margin and cash generation

OUR AMBITION


ROUTES TO OUR AMBITION

Accelerated growth, higher quality and higher visibility of

revenues, good margin and cash generation

Sales Execution

R&D

OEM

Geographic Focus

Subscription

Operating Model

Our Ambition


Customer Value Team Increase deal value Upscale into existing customer base

Cross-sell into A&N base Sales efficiency New business / new logos

Sales Execution

Operating Model

Customer driven innovation Deepen sales knowledge Strengthen entrepreneurial ownership More customer touchpoints

Subscription

Customer Success Team Realise upsell potential Higher retention rate Higher visibility, reduced volatility

GeographicFocus

Focus on Tier 1 countries Focused sales investments Increased productivity

R&D

OEM

Re-allocation of resources Focus on key products that

drive revenue model

IoT Partnerships & White Labelling Scaling through partnerships,

penetrating the relevant IoT platforms

ROUTES TO OUR AMBITION


Rel

ativ

e Im

pact

2019 2021 2022 20232020

high

erlo

wer

Sales Execution

Subscription OEM

R&DOperating Model

Geographic Focus

FIRST FINANCIAL IMPACT AND PHASING PER ROUTE


Customer Driven

Customer Benefit

Software AG Benefit

Fastest updates,

latest capabilities

Lower upfront cost

Higher contract values

Higher retention and lifetime value

Lower cost to serve

Lower customer

acquisition cost

By 2020, all new entrants and 80% of historical vendors will offer subscription-based business models

Gartner, 2018Realign our model Extract the benefit over time

ENABLING THE SHIFT TO SUBSCRIPTION

Scale up with demand & experiment

Maintenance as a Service


OLD IFRS

To 2017 2018 – 2019 2020+

Perpetual Upfront Upfront Upfront

Subscription Pro-rata Upfront Quarterly / Annually

SaaS / Usage Pro-rata Pro-rata Pro-rata

Perpetual license & support

Subscription revenue

1 2 3 4 5

Subscription PathwayGreater Lifetime Revenues

Cash flow & revenue

both up+30 to40%

IFRS 15

NEW SUBSCRIPTION LICENSING MODEL


2018 as is as would beTotal Total Delta

PERPETUAL LICENSE 250 250

SUBSCRIPTION LICENSE 30 0 0 30 10 10 10 10 10 10 50 20

MAINTENANCE 400 400

CONSULTING 180 180

TOTAL REVENUE 860 840

COSTS 590 590

operating EBITA 270 250

MARGIN in % 31.5% ~29.5%

∆ ~200bp

MODEL CHANGE: IMPACT AND PHASING

2018 reimagined

2 3 2 3

4 5

As 2018 would have been


Product Revenue

Op EBITA Margin

Traditional KPIs

We will begin to introduce new metrics

that show our underlying progress in

creating a more valuable base

Bookings / ACV

Annual Recurring Revenue

From measuring simple up-front deal size to measuring long term customer value and increasing revenue predictability

Committed sales order in / annualized average revenue

per contract

Annual value of all recurring revenue components to a

contract

Op Free Cash Flow “Cash is King!”

KPIS TO TRACK OUR PROGRESS


Management KPI Development 2018 – 2023

Statutory KPI Development2018 – 2023

ARR OpCFBookingsProduct revenue (old licensing model)

Product revenue(new licensing model) Cost

12-17% CAGR

15- 20% CAGR

5 - 10% CAGR

MEDIUM TERM KPI DEVELOPMENT


2019

DBP

IoT

A&N

EBITAMargin

3 to 7 %

75 to 125 %

-5 to 0 %

28 to 30 % Non IFRS

Medium Term Capital Returns

DividendPay Out

ShareBuy Back

25 to 33 %FCF

Opportunity Based

Revenue

Non IFRS EBITA Margin

Bookings15 to 20% CAGR

ARR12 to 17% CAGR

Operating Cash Flow 5 to 10% CAGR

GROWTH AND CAPITAL RETURNS


Higher retention, contract and lifetime values

TOD

AYM

EDIU

MTE

RM

10%+

CAG

R85 - 90% recurring

~ 65% recurring

Lower cost to serve

Lower customer acquisition cost

Digital BusinessDriving Recurring Revenue

THIS TRANSITION BUILDS US A BETTER BUSINESS

30%+Operating

Margin

Strong Free Cash Flow

Digital Business

10%+ CAGR

85% - 90% Recurring Revenue

Medium term

AmbitionAccelerated growth, higher quality and higher visibility

of revenues, good margin and cash generation

OUR TECHNOLOGY VISION

BERND GROSSCHIEF TECHNOLOGY OFFICER


Cloud computing ‘Everything as a Service’ (XaaS)

Market TrendsSmart Products/ Smart Services

Convergence of IT & OT Data Security and Privacy

IoT Shortage of skilled employees 5G

Edge computing LP WANIndustry 4.0

AI/ ML Data AccessibilityGlobalization 4.0



A TRULY CONNECTED

WORLDThe revolution has already started…


WHAT DOES ‘A TRULY CONNECTED WORLD’ MEANFOR OUR CUSTOMERS & PARTNERS

A tsunami of Cloud applications is emergingCloud-based applications continue to eat up enterprise apps

Demand is moving from data acquisition to data integrationIntegration of Applications, Devices, Clouds and Data to drive operational excellence and superior customer experience

Innovations will be increasingly based on platformsOpenness and ‘freedom of choice’ is a key requirement


A TRULY CONNECTED WORLDIN ACTION


iPaaS: a fully connected sports arena

Business application integration is key

Software AG and Coca-Cola European Partners have entered into a strategic partnership around business application integration and transformation.

Together with SK we developed an application that unlocks their new state-of-the-art arena capabilities and integrates a range of connected services, including real-time game stats, ticket bookings as well as in-seat food ordering.


Next generation ofdigital offerings

Software AG’s platform is centrally deployed to enable the next generation of digitalization including Smart Products.

Location of goods and wagons on rail network is a real issue. If an item is delayed or misrouted, fast recovery is important. If refrigeration fails or product knocked in transit, immediate alerts are key (condition monitoring).

Condition monitoringand tracking


“With Cumulocity IoT Edge, the health of each of the 5,500 wind turbines can be monitored and analyzed locally using a variety of different sensors for vibration, power output, temperatures and wind conditions using a combination of low-cost edge devices and sensors.”

- Stefan Ewald, CIO of Nordex

THE NEW WAY TO GO: CLOUD + EDGE = SUCCESSOptimize power generation and prevent breakdowns - globally


“We have taken Software AG’s Cumulocity IoT platform and rebranded it ‘STW machines.cloud’. Big data can be used to detect patterns alerting problems in bus engines. This reduces the amount of data transmitted, and enables predictive maintenance which avoids unnecessary preventive actions and breakdowns.”

- Dr. Michael Schmitt, CEO, STW

REMOTE MONITORING OF 5,000 LONDON BUSESTo reduce emissions and prevent breakdowns


The speedway to the Industrial Internet of Things is just ahead! Cumulocity IoT Edge powered by Dell Technologies - a joint software appliance by Software AG and Dell EMC - offers plug-and-play entry onto the IIoT, literally the shortest time-to-market. The performance-optimized, industrial-grade appliance comes with preinstalled software, making it fully usable out of the box.

DELL SELECTED SOFTWARE AG’S CUMULOCITY EDGE


SIEMENS MINDSPHERE IS POWEREDBY SOFTWARE AG

MindConnect API

MindConnect Integration• Simplified integration of application data into

MindSphere• Combine machine data with data out of our

applications, on premise or in the cloud

MindConnect IoT Extensions• Extends range of IoT devices• Combines device identity, asset and software

management• Use other customizable software agents on custom

devices

Connect and integrate data into MindSphere


FROM MACHINE MANUFACTURERS FOR MACHINE MANUFACTURERS, THEIR SUPPLIERS AND CUSTOMERS


Application drivenCreate new apps

Integration DrivenIntegrate (Apps, Clouds, Devices, Data) to drive operational excellence

Innovation drivenNew Business Models, New Products, Predictive Analytics (AI/ ML)

Value

A typical agile project adoption based on ‘Land & Expand’

E.g. remote management &control, condition monitoring

Enterprise wide integration with e.g. ERP/ CRM systems

Predictive Maintenance,Everything-as-a-Service

SOFTWARE AG HAS A UNIQUE OFFERING IN AN EARLY MARKET- We combine integration, IoT and platform enabled innovations based on distributed architectures

A TRULY CONNECTED

WORLDThe revolution has already started…


Leapfrogging to Hybrid Integration & Distributed Architectures (Cloud & Edge)

Co-Innovations with Customers & Partners is key

We have a unique position -combine integration, IoT and platform enabled innovations

SUMMARY


OUR PRODUCT STRATEGY

DR STEFAN SIGGCHIEF PRODUCT OFFICER

Challengefor Operating & Manufacturing Companies

Improved efficiency, consistency, quality for construction processes

• Reduction of operating costs• Easiness of machine handling• Real-time analytics• Data mining to increase quality and machine

availability

CO-INNOVATION


Solutionfor Dürr and its customers

Streaming analytics powered by the ADAMOS IIoTPlatform

• Real-time streaming analytics• Real-time quality control during production• Intuitive UI for machine operators• Toolkit for self-service real-time data analytics

and algorithm

CO-INNOVATION


Applications – Databases – BI … “take it or leave it”

“IT DICTATORSHIP”

Product Manager Plant Manager Operations Manager Support Engineer Machine Operator

IT MANAGEDCONSISTENCY

BUSINESSAGILITY


“DEMOCRATIZATION”BYINTEGRATION

Easy & IntuitiveExperience

(Web/Mobile UI/App)

Cloud(Private or public)

DaaS

PaaSPaaS


SaaS

Contextual - Self service - Low Code – … “empower and serve”

IT MANAGEDCONSISTENCY

BUSINESSAGILITY


INTEGRATE TO INNOVATE

DataClouds DevicesApps

Easy & IntuitiveExperience

(Web/Mobile UI/App)

Cloud(Private or public)

DaaS

PaaSPaaS


SaaS

Contextual - Self service - Low Code


Integration & API

IoT & Analytics

Business Transformation

Adabas & Natural

THE FOUR PRODUCT UNITS – FOCUS PER MARKET SEGMENT


EAIB2BETL

ESBSOAMessaging

iPaaSAPI MgmtHybrid / EdgeIoTAnalytics

AI/MLDaaSBlockchainIoT Solutions

1990s 2020s

we are here

Application-driven Integration

Services-driven Integration

Self-serviceIntegration

Securely Automated Integration of

Everything

MATURITY OF THE CONVERGENCE OF INTEGRATION AND IOT


INTERPLAY BETWEEN DEVICE INTEGRATION AND ANALYTICS

APAMA

CUMULOCITY

ZEMENTIS

Data Science

OperationsThe Analytics Flow

TRENDMINER

WEBMETHODSExternal data context

External models


KEY TAKE-AWAYS

FOCUS ON WELL-DEFINED MARKETS

CONVERGENCE OF INTEGRATION AND IOT

CLOUD AND EDGE SCALABILITY

ANALYTICS AND SOLUTIONS


SALES AND GTM

JOHN SCHWEITZERCHIEF CUSTOMER OFFICER


THE STRENGTH OF OUR FOUNDATION

TRUSTED BRAND

10KCUSTOMERS

FINANCIAL STRENGTH

20%+

PRODUCT INNOVATION

10+ANALYST

LEADERSHIPOP. CASH FLOW /

REVENUE


EVOLVING SALES AND GO-TO-MARKET

FOCUS EXECUTE

Specialization

Sales Coverage

Geographies MARKETIMPACT

Customer Experience

Alliances and Channels

Sales Operations


SPECIALIZED ACCOUNT EXECUTIVE: SALES BAG AND ROLE

SPECIALIST ROLES TO PERSONAS

TARGETED SALES BAGS

MARKET FOCUS

1

2

3

ProfessionalServices

Customer

AdabasNatural

Integration & API IoT & AnalyticsBusiness

Transformation

Personae

Markets

NAM

DACH

EMEA

LATAM

APJ

………iPaaS ………Process Mining ………IoT

Platform


FOCUSED GEOGRAPHY

Sweden

Switzerland

B+Lux Netherlands

ChinaCanada

JapanAustralia

KoreaBrazil

Italy South Africa

France

UK

Germany

USA

SpainUAE

Biggest market

opportunity

Best established

footprint

BIGGEST MARKET IMPACT


FOCUSED SALES COVERAGE

NEWLOGOS

GROWSHARE OF

WALLET

NEW CHANNELS

1

2

3

Strategic AccountManager

EnterpriseAccountManager

Territory Account Manager

TERRITORY ACCOUNTS

STRATEGIC ACCOUNTS

ENTERPRISE ACCOUNTSAlliances and

Channels


MODERN CUSTOMER EXPERIENCE

Evaluate

Adopt

OnboardExpand

BuyRenew

Evaluate and select

Upsell / Xsell

On-board and enableValue realizationreference

Secure renewal

Contract executionCustomer Life Cycle


ALLIANCES AND CHANNELS

ISV – extend reach G2000Application Partners

OEM – embedded solutionsWhite-labelling

ISVOEM Marketplace

Marketplace – extend reach SMBCloud, Public and Private

SI

SI – expand wallet-shareIncrease competitiveness


SALES OPERATIONS

SimplificationMetrics Sales Methodology

Quoting tools, approvals, contracts, revenue recognition

Leading and lagging indicators

Planning and continuous enablement

Simpler, faster quote to cash process

Increase accountability:

analyze, plan, adjust

Drive Alignment: resources and

efficiency

Demand Generation

Sales playbook and improved lead flow

Maximize Pipeline: volume, conversion


INCENTIVES: CORE AE COMPENSATION PRINCIPLES

DRIVE SUBSCRIPTIONS

OUTSIZED PERFORMANCE

RENEWALS: PROTECT & EXPAND

DRIVE SOLUTION PERFORMANCE

RIGHT-SIZED TERM LENGTHS

IMPROVE LINEARITY


SALES AND GTM TRANSFORMATION

Sales Operations

Geographies

2019 2020 2021 2022 2023

Rel

ativ

e Im

pact

Specialization

Sales Coverage

Customer Experience


TODAY


SUMMARY – DELIVERING MARKET IMPACT

FOCUS

EXECUTE

EXECUTE

EVALUATE

GROWTH

Specialization

Sales Coverage

Geographies

Customer Experience


Sales Operations


SANJAY BRAHMAWAR

CLOSING REMARKS


TEAMEXECUTIONFOCUS


!, soft1uareAG

CAPITAL MARKETS DAY - Software AG/media/Files/S/... · 2019. 2. 26. · Customer Driven Customer...

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Transcript of CAPITAL MARKETS DAY - Software AG/media/Files/S/... · 2019. 2. 26. · Customer Driven Customer...