Published December 8, 2023 | 3 min read
Key Points
- The technology landscape continues to evolve at breakneck speed. Companies that do not prioritize innovation risk being left behind as a result.
- Generative AI is set to become the defining technology of our time, and CEOs are challenged with adapting quickly. Companies must consider how GenAI can improve efficiency, create new products, and accelerate revenue growth.
- Over the longer term, companies should consider where data is being stored, its quality, and the benefit of ensuring the right infrastructure is in place to use the data effectively.
- M&A can be one route to accelerating growth, particularly through expansion geographically.
Software-as-a-service company Clearwater Analytics hit the New York Stock Exchange with a valuation of $5.5 billion in 2021, offering automated investment accounting and analytics to asset managers.
CEO Sandeep Sahai believes the factors that have contributed to their success post-IPO is that Clearwater Analytics prioritizes innovation. “The technology landscape is changing massively on a daily basis. If companies do not take cognizant of that and act, they could be left behind,” says Sahai. “At Clearwater Analytics, the culture is focused on innovation. We are always asking how we can innovate faster.”
Clearwater Analytics has quickly become a market leader in the rapidly changing field of SaaS accounting by capitalizing on trends in the marketplace through R&D. “The company spends 27% of all revenue on R&D,” says Sahai. “We believe in building a good product, taking it to market and spending less on sales and marketing as a result. If you build a product which is really good, people will come to it.
Seizing the GenAI opportunity
The rapid and seemingly unstoppable advances in Generative AI technology is already causing seismic shifts in the future planning of many companies in the tech industry and beyond. Clearwater Analytics has been quick to integrate GenAI tech into the company’s near-to-long-term strategy, and CEO Sandeep Sahai is emphatic about the potentially monumental role GenAI will play in our future.
“We are very excited about GenAI,” says Sahai. “I would urge everyone to think about this tech like the internet. Initially, when the internet was first coming into common use, many businesses thought that they would not be affected. But of course, it changed everything. If you are not on the internet now, it is game over. I think GenAI is going to be like that.”
Successfully implementing GenAI into product and operations
Successfully implementing GenAI requires a strategic focus on improving the product offering underpinned by an improved workflow. Sahai remarks: “When it comes to GenAI, I think companies must have two different focuses: one is improving efficiency, and therefore improving margins. The other is creating new products and accelerating revenue growth.”
“You should look at every piece of your business and your market and client needs and think about how Gen AI is going to transform that. Three years from now, five years from now, ten years from now, and if you lead, you will succeed. And if you don't, you could very well die.”
Where does data come into the story?
Tech companies that have refined their approach to data are likely to come out on top. Data has become completely vital to success across nearly every business process — from machine Learning models to effective digital advertising. Clearwater Analytics harnesses the power of data, to provide benefits to its users. “I would urge everyone to think about their data sources. Companies that have all the data in one spot win. You can use it and query it far more efficiently,” says Sahai.
“At Clearwater, we typically encourage our customers to add all of their global assets to our platform. Combining this data provides one comprehensive global picture. That's what the company does, at its core. But sometimes that isn’t always possible. Sometimes there is an asset pool in Germany, or there is an asset pool elsewhere for example, which is using a different accounting engine.
“We offer Clearwater Prism, to bring disparate data sources into our platform and still offer a comprehensive view. PRISM enhances our ability to provide a core value proposition, which is a comprehensive view of your global assets.”
An M&A philosophy
Clearwater Analytics are focusing on growth above anything else. Sahai notes: “M&A would be considered if it accelerated our growth; that could be through geography for example. Something in Europe or Asia we might look at seriously,” says Sahai. “Our bar has always been high because we are growing, and our margins are continuing to expand.
Sahai notes that as stated at Clearwater’s recent Investor Day: “We will grow from 27% EBITDA and 200 basis points next year, and then another 200 basis points a year after that. And we just said last month that it is not 27%, it’ll be 28% this year. But we still committed to doing 30% and 32% in the next two years. Do you really want to mess up the financial metrics? You don't.”
Featured Guest:
Sandeep Sahai
CEO, Clearwater Analytics