Episode 32 Transcript

Brent Trimble: Welcome to the Professional Services Pursuit, a podcast featuring expert advice and insights on the professional services industry. Again, I'm Brent Trimble, one of our hosts, and I'm really excited about today's episode with our guest, Michael Speranza. Michael is the CEO of Kantata, formerly Mavenlink and Kimble. And as we celebrate now the one-year anniversary, it's hard to believe it's been a year since the merger of these two great companies. It felt fitting to have him back on the show, to talk a little bit about his experience, both in the merger, his view of the industry, and some predictions for 2023. Michael, welcome back to the podcast. It's great to have you back.

Michael Speranza: Great Brent, great to talk to you today, and it's exciting to be back, and it's certainly been an action-packed year, and excited to talk to you about it.

Brent Trimble: No, it's great. It seems like we've blinked and the merger, of course, the brand has really flown by. We had you on the show in some previous episodes, and of course, listeners can go back in the archives and take a listen. So we won't go too deep into your professional background and focus a bit more on the present and where we're going. But tell us a bit about how you've settled into the role of becoming the leader of the firm as well as bringing these two brands together.

Michael Speranza: Yeah, so the journey started almost exactly a year ago for me at the completion of the merger of these two great businesses. And kind of the first year was really focused on moving quickly to unite these companies, to bring the brands together, to bring the cultures together and start to position ourselves so that we can unlock the value that's nestled within these two companies, even at a greater scale. You know, that really started with announcing the brand and rolling out a new brand for the organization which was completed in May. And then really aligning the teams, the products behind that new brand aggressively. And we've had a whole host of activities throughout the year to do that. And we've also really rolled out a new galvanizing vision associated with our products for our company, and really made sure that we were evangelizing that to our customers in every form that we had, all the various interactions that we had throughout the year. And for myself, it was really about building those personal relationships with as many customers as I possibly could.

So for me, the first hundred days was trying to get out to as many clients and informing my perspective, and that really has not stopped. I've been doing that all year and really making sure that I'm building a 360 degree view of not just how they're receiving our products today, but where they think the vision is for the industry, what their pain points are. And then making sure that all of that is factored back into our strategies, our product roadmaps, and how we're building this company for the future. So for me, it's really been a profound privilege to sit in this seat and to unite these great organizations together. And I feel a profound privilege to carry the torch forward and to build a business that continues to solve customer pains and reaches a level of mission criticality in terms of how they're operating its services business.

Brent Trimble: You know, that's great, and most of our listeners would be comprised of some existing clients of either the platforms and now the new brand. Some perspective partners, and just those who are really in the business and even in the periphery of the business. So give us just maybe a snapshot of a high level. You've spent a lot of time with clients, everyone likes to index against peers, maybe hear some pressures or some pains or some opportunity in the business. But give us the top one or two, maybe sentiments you're hearing as you're in the field interacting with clients of Kantata.

Michael Speranza: Yeah, so I think the first one which I expected, but I think it was really at a crescendo that was even greater than I expected was the passion for the problem that we're solving for them. You know, when you get out and you meet with clients, this was something that was surprising to me. It was really how much pain they're feeling from this category of product and how they're using the product. And that despite us really offering a great solution for them, which has a massive ROI, and they're saying it adds tremendous value to the business, there's still so much more that we can do for them. And that to me was really something that was quite exciting, where okay, this is something that we're doing, it's meaningful, we're solving real issues, and that there's a tangible, quantifiable value back to them when they take the journey with us and deploy our products. That was one. The second one that was just still incredibly exciting to me also, and almost dumbfounding, was my favorite question to ask when I meet with a prospective client, or in some cases even a current client, is what do you use to run your services business? And the response that comes back most often from a C-level executive when you ask them this question is what do you mean? They almost don't know how to answer. And to me, that's such a telling response where a lot of these executives are just not thinking critically enough about the technology that they're putting in place.

They're not pressure-testing their leaders that are running these businesses, and more often than not, their response will include just a complete hodgepodge of different solutions. They muddle through the answer, they don't know how to give you a crisp response. And when it comes down to it you still see multi-billion dollar organizations that are using their gut, that are running this business on a spreadsheet. And to me, those are like really the two main elements that were exposed for me in probably the first three to five months of the journey. And I would say that those remain consistent today. We go out with clients and I think more often than not, they simply just don't understand what tools and processes they have in place to actually run this business. And a lot of them struggle to really figure out how they need to move it forward because it is an effort, and there is some change management associated with it.

Brent Trimble: Now, it's great. And to follow on that, you've got a wealth of experience in assuming leadership roles in brands, platforms, SaaS platforms like ours that are kind of on an ascendant trajectory. You've also had a background in some services roles, so you understand kind of the fundamentals of the consulting business and professional services. And I presume that when you're assuming a leadership role, you're going through due diligence, you're meeting leadership, you're meeting the board, you're assessing some of the market, the market fit, the category and so forth. I love asking leaders this, and I've done the same thing for myself, assuming different leadership roles in the past, that you always go into a new venture with some pre-baked assumptions. And it'd be great, and I think fun for the listeners to hear. What assumptions did you make prior to taking on the role that have been validated? You know, here you are 12 plus months in. And what expectations or assumptions did you make that maybe now you've done a complete 180 and thought gosh, this is kind of new and has been illuminated to me over time?

Michael Speranza: Yeah, that's a great question. And whenever you take a new role, you do as much diligence as you can. You get color from the board, you get color from executives in the business, and you also try to reach out to customers and really understand kind of how they're receiving the product. And for me, I think the thing that was really probably affirmatively validated was kind of the amount of pain that exists in this area and really the gap that exists in the current solution. So if you think about the competitive landscape for a moment, a lot of the clients that are in this space today are dealing with kind of legacy on-prem solutions that really haven't, I would say, migrated to a vertical SaaS orientation around the product. So first and foremost, if you look and you say okay, how many clients are out there? This is an $8 billion industry, and you look across the competitors that are really focused in the space, if you add up all the true vertical SaaS players, the market is probably less than 10% attached in terms of actually taking this journey towards deploying a vertical SaaS solution. So that was confirmed loud and clear.

When you meet with these customers, many of them are just stuck in the past. And a lot of the benefit and the value that they'll see in taking the journey is moving to a solution that is purpose-built specifically for the needs of their industry. They're not trying to manipulate a piece of kind of generic ERP technology to run a services business. They're not taking a generic time tracking tool that focuses on you know, kind of knowledge workers or some other adjacent vertical and trying to apply it to a team of highly skilled professionals. And there's just immense value in moving into that vertical SaaS moment. So that was, I would say, loud and clear, confirmed that there's just tremendous opportunity from customers moving to a focused, tailored provider. And a lot of that is really driven by the way technology has evolved probably really over the last decade with the likes of AWS or Salesforce and the platforms that they're putting out there. You can now afford to develop and tailor this technology to very specific use cases that you just couldn't do in the past. And I think a lot of clients in this space just either have not realized that or just have not taken that move towards vertical SaaS. So that was one that I think was loud and clearly confirmed.

On the contrary, I think one of the items that was a surprise to me was despite clients that have deployed the products and are very successful with our products, that there is still so much more that we could do for them that despite rolling this out, making changes, gutting other parts of their infrastructure and taking the leap with us. They come in and they say wow, you're doing so much for me, but guess what, there's so much more you can do. And for me it was almost like an incomplete journey where you have these clients that were incredibly happy with the product, but they're left wanting more. And to me, that's incredibly exciting because you have this community of customers now, I think we probably have one of the largest communities out there, you know, thousands and thousands of customers that are using our products. We've got over half a million users that are engaging with our products every single day and they're helpful. It's this flywheel of innovation that allows you to understand the pain and to help them solve the pain. So for me, quite honestly I did not expect that, I kind of expected that they'd be happy and they would say okay, the journey's complete. Okay, what are you gonna do for me next? And it was very much different. It was like wow, there's so much more value realization that could be had here just with the current product.

Brent Trimble: A lot more opportunity for innovation and adaptation to the nuances of the variety of services businesses, so plenty of room to run. One of the things that comes up a lot when we interact with our current clients, feedback we get from listeners to the show, of course, is because we've got this unique vantage point, we have, as you mentioned, thousands of clients and customers, and we have thought this very focused orientation to the services business. So everything from BPO, management consulting, internal PS to other software companies, a lot of them come to us and say, what are you hearing? What's coming around the bend? How are my peers reacting to different factors in the market in and out of the control? We're all attuned to business news and press and see kind of the turbulence on the horizon. And there's a lot of debate and variation of how deep this could go and how soft we could potentially land. But what are the challenges that you, from your leadership vantage point see for 2023?

Michael Speranza: Yeah, so I think in the culmination of 2022, I think the biggest kind of interesting thing that I'm observing is kind of diametrically opposing forces, right? And if you look back and say okay, the year of, call it 2021 or 2022, it was probably really all about the war for talent and the great resignation or whatever kind of nomenclature you want to use to describe it. But if you look at the overall job market, I think unemployment is still at historic lows. I think the last number I checked it was 3.7% in the US and it's an incredibly tight job market. And I think folks may overemphasize that, but if you were to really canvas back and ask our clients what is their biggest challenge in their business, it's always been employee retention and attrition. Like the great resignation and the war for talent, I think just really escalated that and emphasized that. And the corollary point to that is if you look at client demand on their businesses, it's largely still surpassing capacity, right? I think that the biggest challenge out of a lot of our voices to us is that they can't recruit, they can't hire fast enough. They've got more demand from their customers for things like digital transformation than they can service. Which is amazing when you think about the corollary in the press we're talking about headwinds and slowdowns and recessionary dynamics coming into play and the juxtaposition of really trying to manage those two very opposing forces. And if you think back, I'm trying to remember a point in my career where those forces were so opposing, everybody still focused on this war for talent retention and employee attrition, but on the same breath, they're being super cautious about the future. And that to me is kind of a dynamic that everybody's trying to wrestle with and manage now.

And across the board, these pressures are still out there and there's still pressure to fund digital transformation, and they have to. And economists can theorize about the nature of the landing. Is it hard? Is it soft? How long is this period that we're entering into? But I think clients, especially when it comes to larger/longer term projects and transformation projects are incredibly reticent to pump the brakes because there's an extreme cost to doing so. And I think our clients are also incredibly reticent to pump the brakes because then they're just putting themselves on their back foot when it comes to trying to rebuild the team or rehire the team or staff and train these folks and get them back to being productive on projects. So I think it's just a really interesting set of dynamics where I've never seen them so opposing in that sense where everybody's being super cautious, but at the same time, we're still fighting probably one of the most buoyant job markets that has existed.

Brent Trimble: You've brought up this notion a few times internally and looking both at the present and these opposing forces, and then at the future and notion with that extreme war on talent for services and for technology. And of course, in the news we have the fang companies announcing some layoffs, and that gets a lot of publicity. If you look at the broader technology transformation services sector, still really strong. But you've brought up in the past this notion that this preceding period has potentially lent to some bad habits. So what kind of habits do you think have been formed and looking ahead as we're barrelled now into 2023, what kind of changes to business fundamentals do you think services would need to make to be successful?

Michael Speranza: There are two that really come to mind, Brent. You know, in any time of just incredibly outstretched demand, I think one of the elements that in my experience tends to suffer is making sure that you're reinvesting in your people. And in the spirit of really just trying to staff projects and get people productive and delivering to clients, I think there's a tendency to ignore the advancement or the career progression or enrichment of the staff. You know, kind of marry that up with wage inflation. And I also think we're getting role inflation where at the end of the day, we need to really pause, go back, assess our talent pools and make sure that we're investing in the talent and that they're growing alongside the business. And that they themselves are acquiring new skills and to enriching their skills, not just delivering content to customers. So that's definitely one trend, and we've seen that certainly within our business and we're making corrections to make sure that we focus on that career pathing and provide kind of the talent and the training alongside that.

The second element that I think really pervades this is when you have a buoyant business model and things are going well, you tend to not take your eye off the ball, but you'll tend to focus on the revenue side of the business as opposed to the cost side of the business. And you tend to be potentially a little bit less efficient, or you're focusing on getting the revenue in as opposed to really optimizing the way that you're actually conducting your business and still maintaining that level of discipline on continuous improvement. And that is one where I expect that we'll see a rebalancing certainly over the next 6 to 12 months where customers in the industry will be looking at technology and how it could provide better visibility, better efficiency. Give them more control of the business and allow them to manage it at a level of precision, and that's quite honestly necessary when the potential growth rates are a little bit slower. You know, optimizing the outcome of each individual project will become more important as opposed to getting the next project across the line. So I think that is something that in this time of buoyant demand, I think customers have probably focused a little bit less on.

Brent Trimble: And as we sift through the deluge of data and news and everyone on the edge of the seat of FED decisions. We just had one yesterday, we're recording here in mid-December. And there's sort of those natural reactions of going through cyclical business downturns and upturns of let's cut expenses, slow down hiring, slow down CapEx and so forth. You've had the benefit and experience of probably leading through downturns and up and upturns and for our listenership and for our potential clients and partners. Give us one or two, maybe cutting across the grain or a vignette, beside, of course, the obvious return to profitability and some discipline there that you've had in your playbook that you think might be beneficial.

Michael Speranza: Yeah. So I think that the way I tend to operate the business is don't try and control things you can't control, right? I think there's always that inclination and desire to get the white knuckle moment about what the FED is doing or interest rates or whatnot. You know, our approach is to characterize it, make some assumptions, understand them, and then let's divert our attention to how we're operating our business. And I've seen a lot of leaders tend to try and get overly myopic on the news of the day or the crisis de jure and what's happening and in my view, it's generally wasted energy. You need to understand it, characterize it, make an assumption, and then understand how it's gonna impact the operation of your business. That's number one. Number two I think is in these sorts of times, there's always more pressure that gets put on the businesses, and I think culturally you just have to align your teams to respond to it in a positive way, right? We're gonna ask more questions, we're gonna validate things multiple times before than perhaps we would do in the past. And we're gonna make sure that we're really driving an ROI out of the investments that we're making in the company.

These are all great business practices and that seem fairly straightforward and fairly basic, but I think to me, it really helps create a common framework of understanding as to why we're funding some things, potentially why we're not funding some other initiatives. And that at the end of the day, you're using data rather than emotion to inform your decision-making. And that's something that I think in these buoyant times where there's tons of demand, firms probably got a little bit lax in putting that sort of discipline in place. And for me, it's really just exercising a framework of accountability down through our team about why we're doing certain things and why we're not doing certain things. And if you use data to inform those decisions and do it in an open and transparent manner, I find that everybody aligns and gets together and moves forward in a more constructive manner. And for us, I think we tend not to react to things. We try to be a little bit more patient and understand what the second bounce of an action is, particularly with our clients. And what I try to do is really just amplify my listening, follow the lead of the customer and ask questions. Ask the question that you are potentially afraid of the answer, right? And the sooner you seek out that information and understand it, the better able you are to respond to it. And those are all just general sound business practices that I find during these things. And then when you gather all that data, you can respond to it and make the best decision for your business.

Brent Trimble: Those are three really great points. You know, focus on what you can control, certainly focus on the data, let data guide decision making. And then amplify listening I think are great key points anyone can put in a playbook. So this has been a great conversation. You've been able to take us through the arc of the story, the merger, some of the assumptions you made prior and how those have been validated or changed post. And then just this fluid dynamic business state that we all find ourselves in as we embark on 2023. It's been an enriching conversation. And as always, for our listeners, you can reach out, provide feedback on the episode, on the content, give us some ideas of some future content. We'd love to have you back on the show as well. So we're recording here in mid-December. We're approaching the holiday season, I guess we're in the holiday season. So any specific or wishlist in the Speranza stocking for this season? You're a dad like me.

Michael Speranza: Yeah, so three kids. I think for me it's just relishing some time off with them and getting to fill their emotional buckets. Yeah, that's probably the only thing that I hope for. And in the busy business world, just making sure you carve out the time to do that. So if I achieve that over the next few weeks as we lead into the holidays in the new year, I'll consider it a success and hopefully leave that period with some great memories as well.

Brent Trimble: That's awesome. That's great and good advice. I told my sons to gift wrap a nap coupon and put it in my stocking. But Michael, thank you again for the time today. It's a busy time as we're into the holidays and then gonna close out our quarter. And for our listeners, again, thank you for listening, for downloading, thank you for the feedback. And as always, you can reach us at podcast@Kantata.com with any follow up questions or comments for us or for Michael. We'd love to hear from you and always do, so thanks again for listening.