Apttus is doing fine, SteelBrick acquisition notwithstanding

When Salesforce acquired CPQ vendor SteelBrick, many suggested it was a kiss of death for competitor Apttus. Not so, says the company.

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A Salesforce.com logo on the front of the Moscone Center in San Francisco.

Credit: Martyn Williams

After writing about Salesforce's acquisition of SteelBrick at the end of last year, I suggested that it was a good example of Salesforce causing pain for its ecosystem. This was particularly acute for Apttus, a company that not only competes with SteelBrick to an extent but is also built on top of the Salesforce platform. Add to that the fact that Salesforce is a major investor in Apttus, as well as the owner of SteelBrick, and you have a confusing and slightly concerning situation.

The fact that Apttus' public relations people reached out to me seeking a conversation only backed this contention up. The vehemence of Apttus' denial of any issue seemed a little too defensive and, counter to the intention, made me even more sure that something was up. Interestingly, I had emails from several other companies in the same space; it seems that everyone was scrambling to articulate some kind of spin about this deal.

In the case of Apttus, I spent some time talking with Kamal Ahluwalia, the company's executive vice president of sales and marketing. Ahluwalia has close to 20 years of experience in the contract management, quoting and billing space, and hence has seen these issues play out many times before. I started out by suggesting to Ahluwalia that Apttus' current defense against claims that the SteelBrick acquisition is problematic doesn't hold water. Apttus, pretty much as soon as the deal was announced, claimed that since SteelBrick was a product focused for small and midsize businesses, it doesn't really compete with Apttus' more enterprise-centric view of the world.

As I suggested previously, Salesforce doesn't spend big money on an acquisition unless it has a pretty good idea of how that company can be applied across a big cross section of its customer base. As such, I put it to Ahluwalia that Salesforce likely had clear intentions of having SteelBrick move up the food chain sooner rather than later. Ahluwalia's response was to detail the breadth of Apttus' platform:

"We started with contracts, added CPQ, billing and e-commerce. Apttus has close to 20 applications for the full quote-to-cash functionality. We think there is a huge market of companies who are facing all of their customer-facing apps into the cloud -- multichannel, omnicommerce."

Ahluwalia indicated that, in his view, companies want the full breadth of quote-to-cash functionality and not just a subset. He pointed to the fact that Salesforce has all of its channels running on Apttus as an indication of the company's broad applicability.

"As we have picked up momentum for quote-to-cash," he continued, "there are various players we compete against -- SteelBrick was one for quoting. The clear onus is on Apttus to have a superior product."

The obvious response to this assertion was to question why Salesforce didn't simply buy Apttus. Obviously, Ahluwalia wouldn't comment on the SteelBrick acquisition process and would neither confirm nor deny that Salesforce had been trying to buy Apttus at the same time. He indicated, however, that Apttus' preference is to build an independent company, and hence an IPO would be preferable to a trade sale.

I questioned Ahluwalia as to why he believes that quote-to-cash will remain a stand-alone product and not simply another part of broader back-office solutions. His response was an expected treatise on agility and velocity and the fact that a stand-alone solution will be the best way for organizations to achieve the flexibility they need. In an expected swipe at the large ERP vendors, he stated his opinion that "no company can move at the speed of Oracle and SAP upgrades, hence they are investing in cloud systems. It's not what can I do within the constraints of them [SAP and Oracle] but rather what do I need to do to be successful."

Ahluwalia pointed to Apttus customer GlobalFoundries, which used Apttus to modernize a time-consuming manual process related to quoting and supplying custom-made products to its customers. In a finding that concurs with Apttus' perspective on enabling business agility, the GlobalFoundries automation drove greater productivity, faster time-to-quote, less rework and more opportunities to win business. In real terms, the customer paid back the investment in Apttus in three months and saw a 419% ROI from the project.

MyPOV

Much of what Ahluwalia told me makes sense. I also suspect that Apttus is banking on the pace of innovation within SteelBrick to greatly drop post-acquisition. This seems to be the norm when a large enterprise vendor makes an acquisition -- often competitors are comforted by the fact that the tasks involved in integrating the discrete businesses mean that product development goes on the back burner for a period of time.

In the midterm, there are some real risks for Apttus: Its valuation (well over $1 billion) alongside the rapidly cooling capital markets means that the IPO CEO Kirk Krappe is confident will occur this year could be a hard thing to get away. True, the company is growing rapidly, but capital markets are never rational in the decisions they make. Apttus can, however, point to the fact that in a slowing economy organizations are actually more likely to sign up with a solution that delivers agility -- such as quote-to-cash.

Apttus' inextricable ties to the Salesforce ecosystem have been a huge benefit and have helped it to grow rapidly. But these ties also have a flip side, and I suspect that Apttus executives are spending a lot of time behind closed doors trying to position themselves and work out the best way to frame their current and future situation.

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