Emmet Keeffe of Insight Venture Partners’ sits down to discuss what’s different about the digital transformation we’re seeing in the enterprise today, vs. what was going on a decade ago. Learn why the race to digital transformation has so many executives worried, why “doing nothing” is no longer an option, and where Continuous Testing fits into today’s modernization initiatives.
Wayne: Hello, this is Wayne Ariola with Tricentis. I’m here with Emmet Keeffe of Insight Venture Partners. Emmett, thank you for being here.
Emmet: You’re very welcome. Thanks for the invitation.
Wayne: I’m excited to talk to you because I just got one burning question for you. And I think this conversation could last for about an hour. We’ll try to keep it to a tight fifteen minutes. Digital transformation. I mean, I’m going to be a skeptic for a second, right? Haven’t we been digitally transforming for decades now? Hasn’t software been the enabler to digitally transform? And all of the sudden in 2017/2018, Boom! It’s here again. What’s different this time?
Emmet: Well, I’ve been producing roundtables and thought leadership sessions on digital, going all the way back to 2005. And you’re exactly right. We’ve been talking about digital transformation since then. And there’s been many, many topics along the way that we’ve been exploring. I think what’s different now, is the board of directors in these large, global companies are extremely focused on digital.
Emmet: They’ve heard about it everywhere. They’re reading about it everywhere. They’re concerned about it. They feel extreme risk associated with it.
Emmet: So, I think what’s changing right now is, every single one of the global 2000, the boards are extremely concerned about digital. They’re afraid of it. They’re scared to death, really.
Emmet: I mean it’s one of the biggest risks-
Wayne: As business disrupture, or disruptors, or …?
Emmet: It’s as big of a risk as cybersecurity.
Emmet: It’s a risk, it’s also a massive opportunity.
Emmet: But literally … We’ve bought a company recently called Diligence. Which is for securing board communications and board materials. So, I’m spending more and more time with board directors, and digital is one of the top three issues that boards are concerned about.
Wayne: That’s really interesting. But now, I’m envisioning a board, right? A bunch of really smart men and women sitting around a table. And I just don’t envision these guys as digital transformers. What are they? Savvy tech people all of the sudden?
Emmet: No, they’re not. They want to know what it is. So, I’m starting to spend time with them to provide education on what it is. What does business model transformation mean from a digital standpoint? What does business process transformation mean from a digital standpoint? What are the technologies you need in order to accelerate digital transformation? I think they are in the early days of understanding what it is and how to do it. But, I think what’s changed, is that it’s on the radar of every board. And therefore, every CEO is under extreme pressure and therefore every CIO is under extreme pressure.
Wayne: Got it.
Emmet: I think what’s different is that digital has been a topic and a discussion point, and it’s been on everyone’s radar. But, I think now what’s different is the pressure is coming top down. I think what’s also happened, is in every industry we’ve had a massive disruptor. So, if you look at Tesla for example. It has turned the automotive industry upside down.
Wayne: Absolutely, yeah.
Emmet: And Fintech has turned that world upside down. Amazon has obviously turned retail upside down. So, I think in every industry there are cases where there’s been digital disruption.
Wayne: Got it.
Emmet: And so that’s sort of fueling the fire from the top down standpoint.
Wayne: So I’m counting Amazon and Tesla as kind of a net-new disruptor, and Fintech I think we’re seeing the combination of both, some people who realized really early that they need to straighten things out and others who have entered into the race. Can these large organizations with boards of directors and tons of people, turn the tanker?
Emmet: So, it’s fascinating just because I think back over twenty years, what were we talking about along the way? In the early days, everyone thought digital was an app. They thought it was like a web app or a mobile app.
Wayne: A thing, yeah.
Emmet: And then as time went on, I think everyone started to realize, “I need new business models, I need new business process.” I think where it’s all landing now, is everyone’s realizing it’s actually data. That’s fundamentally what digital is all about.
Emmet: The more data you have, the stronger position you are to sort of dominate from a digital transformation standpoint.
Wayne: Very interesting.
Emmet: So, I think you know … We had a session last year in Abu Dhabi and what came out of it was, “data is the new oil.” I think that’s what organizations are figuring out now. “I really need to get my arms around my data. I need to have a chief data officer. I need to understand AI and machine learning, cognitive, quantum, etc.” So that’s where I think it’s all going. And that’s really the asset. And if you look ten, or twenty, or thirty years down the road, if many of these large global organizations are still standing, it will be because they figured out what to do with this data.
Wayne: Interesting. I don’t know if you’ve seen the graphic before, but there’s a fantastic graphic that’s been circulating around LinkedIn and the internet, that shows the growth of Amazon and how they’ve replaced the brick and mortar retailers, right? This conversation comes up time and time again, “Where’s the new Uber? Where’s the new iTunes?” I’m a huge music fan, I used to love going to Tower Records. There’s no record store anymore.
Emmet: Right, right.
Wayne: It’s pretty interesting to see the disruptor model.
One more question Emmett, Let me back up just a second. Emmett and I are at a conference called, Accelerate 2017. And I’m lucky enough to have you in front of me to have this conversation, because of this conference. We had a keynote speaker, Todd Pierce. He gave just a great keynote. I thought it was fantastic. It’s up on our Tricentis website.
The one thing Todd saw, was the waves of digital transformation. And he showed four waves. The internet, the mobile internet, IoT, and this fourth wave, which is kind of AI, augmented reality. He talked about blockchain, he talked about voice. Where do you think we are in that wave? Have we gotten through the IoT layer yet?
Emmet: No. I work for one of the world’s leading private equity firms and we’re a late-stage investor. So what we look for globally are businesses where the revenue has already been doubling multiple years in a row. And if we think it’s going to keep doubling into the future, we’ll make a growth acceleration investment. We invested 165 million in Tricentis because you’ve already put up massive growth and we think there’s a potential to put up more growth like that. So, it’s really interesting to look at what have we invested in but what also have we not invested in.
Emmet: We’re not in blockchain yet, we’re not in IoT yet. We’re not really even in AI yet. I mean we’ve got two investments in the AI world. Actually, three.
Emmet: Two of them are cybersecurity-related. One is fraud-related. But, AI is very, very early. And like I said, blockchain, and IoT – we haven’t made an investment there yet. So I think those things are very new and very young. And there’s still lots to be done around the web, around mobile. And, fundamentally, around even defining, “What is digital transformation and how are we going to go execute with digital?
Last weekend we had a leadership event in Italy. And we had a Chief Digital Officer from one of the world’s largest makers of elevators and escalators. That is probably on the forefront of an IoT transformation.
Wayne: Wait, wait, wait. Elevators, escalators? Hold on.
Emmet: That’s right.
Wayne: Digitally transformed?
Emmet: That’s right.
Wayne: Okay. I’m a little lost. You’ve got to add some color to this.
Emmet: Well, I mean, they have three million devices around the world, elevators, and escalators. And they have a billion people that ride on those devices every day. They have thousands of service engineers that are servicing that equipment around the world. So there’s a big opportunity for them to have a network. To have these three million devices communicating. And have all the services and parts distribution, and all that really automated from a digital standpoint, leveraging IoT. And there’s also an opportunity for them to communicate with those billion consumers that are riding their equipment every day.
Emmet: The thing that really stood out from the presentation that they gave … And this is a German company, you won’t be surprised.
Emmet: The execution was absolutely phenomenal. So, the first step for them was, rationalize the current IT infrastructure and IT application. So they had a very disciplined process. First, rationalize. Second, was streamline the operations of the business, to make sure that there was nothing else we could do from an operational efficiency standpoint.
Emmet: Then, it was stand up the IoT implementation, put hardware on every device around the world, and really build that IoT infrastructure. Then it was, “Okay how are we going to communicate with these consumers?” I think many people have the wrong opinion, that digital is sort of a creative exercise. And is some ways, yes it is. I mean, you have to be innovative, and you have to unlock creativity. But, the thing that I walked away with, from that presentation was that you have to be extremely disciplined.
Wayne: Yeah, very.
Emmet: And I think that’s what many organizations, frankly, are lacking right now.
Wayne: How would you rate this one company on the spectrum of IoT adoption?
Emmet: 10 out of 10.
Emmet: Yeah. It was the best presentation I’ve seen on IoT.
Wayne: Amazing. And from an elevator-
Emmet: That’s right.
Wayne: I’m still in shock by that one. Just to be clear. But I think it’s clearly amazing that IoT and digital transformation impacts every single industry and every single business.
Wayne: Hey, I’m going to shift our conversation just in one more direction-
Wayne: If I can keep you for a couple more minutes?
Wayne: And I want to talk about … This is going to be a shock … software testing.
Wayne: I’ve had the opportunity to sit in on some of the conversations that you’ve been talking about around these board members, and it’s been very eye-opening around “testing.” How would you characterize software testing in the whole array of activities that are necessary for digital transformation?
Emmet: CIOs, I think, have two problems that they need to solve when it comes to digital. One is they actually have to go find the budget. The budget’s not going to just come out of the sky. Somebody had to fund that digital transformation. So, a pattern that I’m seeing across various investments that we’re making is that automation is becoming a very hot topic. So the really sharp CIO’s are looking at their IT spend, and asking the question, “Where are all the places that I can do automation?” Testing is clearly a massive opportunity for automation, and I think CIO’s are beginning to see that. We’ve also made an investment recently in a business that’s automating incident diagnosis, and incident resolution. Which is another big opportunity. I think one thing we’re hearing from them is that they need to find the budget and they’re looking for opportunities to automate.
The other challenge that CIOs have around digital is actually accelerating the delivery of digital apps. It’s no longer acceptable to have a three, or six, or twelve-month delivery cycle. There looking for thirty-day delivery cycles. And obviously, I think what we know about manual testing, is it stands in the way of accelerated software delivery.
Emmet: And I think they’re realizing that they need to remove that roadblock.
Wayne: Interesting, interesting.
Let me guide the question from a risk perspective, a little bit too. What do you believe is at risk for these large organizations going through these digital transformation initiatives? And perhaps, not paying attention to testing from a risk perspective. Is the brand at risk with a software failure?
Emmet: I mean, from my point of view … this goes back to our discussion about boards … the two biggest risks that an organization faces is not executing on the digital transformation and not executing from a cybersecurity standpoint. Those are the two biggest risks in the boardroom. So I think, not finding the budget would create massive risk.
Emmet: And not being able to deliver software at speed, would also add risk. I mean if you look at the world of retail, for example. Clearly, Amazon has been extremely disruptive, and every retailer is trying to figure out what they’re going to do to compete. And I’ve met with many of the world’s largest retailers and everyone is going to be accelerating to try and maybe not surpass Amazon, but at least have a way more transformative consumer experience. Imagine if one of those retailers, just kind of sits at the starting line, never finds the budget, never is able to deliver digital apps at speed. They’re going to be extinct. They’re going to be in big trouble.
Wayne: Yeah. And I think we see that, right? I think we’ve seen the first and second wave of it, actually. And I think it’s going to be more and more.
Emmett, thank you very much-
Emmet: You’re very welcome.
Wayne: For spending time with us. I think it’s been very insightful. One of the things that Accelerate 2017 that we exposed to the Tricentis community, was really what the CXO’s opinion of software testing was. And it was enlightening, how the top down pressures beginning to mount, and this efficiency needs to catch up.
Wayne: If I was going to try to summarize, really what the CIO’s brought to us, would you agree that that was the message?
Emmet: I mean, they were loud and clear. The fact that five global 2000 CIO’s would come to our conference in itself-
Wayne: Yeah, that’s pretty amazing.
Emmet: It says a lot about how important this topic is. But, clearly as I mentioned earlier, they have to find the budget, and testing is a massive opportunity to find the budget. And they have to find the acceleration. And I think more and more that testing is going to hit the radar of CIO’s.
Wayne: Well, I couldn’t agree with you more. This is why I’m with Tricentis. Again this is Wayne Ariola with Tricentis. I am sitting with Emmet Keeffe with Insight Venture Partners. And thank you very much for your time.
Emmet: Thank you.