Welcome to innovators and ideas, an audio series from RBC Capital Markets where we explore bold thinking and impactful leadership shaping the future across sectors today. We're on location at RBC Global TIMT conference in New York. Joining us is CEO of sigma computing, Mike Palmer, a leader whose company is at the forefront of navigating today's fast evolving landscape.
Olivia Hack
Mike, thanks for coming to speak with us today.
Mike Palmer
Thank you for having me today.
Olivia Hack
Could you start by telling us a little bit about your company and the audiences that you serve.
Mike Palmer
Our Sigma Computing has been focused on the market that is transforming data from premises infrastructure to cloud data warehousing. So think about the Snowflakes, the Databricks, the big queries. We're seeing a huge accumulation of data as it becomes cheaper to store. Our users, though, are not the traditional IT users. Our users are the business population, the business user, if you will, that does most of their work in a spreadsheet today, that in the past, has extracted data from products like Tableau or Power BI, so that they could manipulate it themselves, so that they could add their own input. So think about the finance users, the marketing teams, the people that work in inventory management. That is a good characterization of the spreadsheet user that ultimately finds value in Sigma.
Olivia Hack
Okay, fantastic. Thank you for that. How would you say Sigma stays ahead of the competition? There are a lot of larger analytics firms also integrating AI and ML capabilities into their platforms. What would you characterize your biggest competitive advantage as right now?
Mike Palmer
Our most differentiating feature is the ability for users to “write back” to the warehouse. Most data products are what I'll call read-only products. So that data sits in the warehouse and you can visualize it either in a chart or in a table, but that's all you can really do. And then some of the better ones allow you to go a little bit further and manipulate that data in some way, or drill down into it. None of them allow you to add your own, which is really interesting. Because for most companies, most of the money is spent on salaries. It's on people. But yet, we can't collect the information that those people have. Or if we do, we have to collect it through myriad applications and then somehow combine that data in the warehouse later on. So write back is our most differentiating feature. But off of that write back, we've been able to expand features to include workflow development. So, Sigma is a company that originally started out as a next-generation analytics and BI product based on huge data growth, live query, better security, but has really moved into augmenting that historical data with forecasting end-user input and then ultimately workflow and application automation.
Olivia Hack
Fantastic. How do you think forces of change, such as digital transformation, cloud migration, etc. are reshaping the way that businesses approach data-driven business intelligence?
Mike Palmer
So the underpinning force of change has been the migration of cloud. And as part of doing that, the cost of storing data has been declining for many years now. And I always say law of economics will tell you that if the price of storing data goes down, then the volume of data will go up, and that's created opportunity. So storage, for most companies, used to be a problem. It was a problem of cost reduction, and so you'd move it from tier to tier, and with every tier that you would move it to, the less accessible it became. Now data is about opportunity. It is how many people can we extend that data to? How unique can that data be, relative to my competition? So it's an issue of access, and in that world where companies have pivoted from infrastructure mentalities to end-user enablement, mentalities is where Sigma shines. We are the interface to give that end user, regardless of their skill set, the access that they need to the data that will make them competitive.
Olivia Hack
What do you see as the biggest challenges and opportunities for businesses in adopting decision-making tools like Sigma?
Mike Palmer
Well, I think the number one commitment they would have already had to make is that cloud migration that I spoke of earlier. If they're making that move to the infrastructure part, the computer and storage part of cloud, they've layered on top of that a cloud-based database, a warehouse. They've already sort of set sail, and we're just going to ride on that. So, we don't have too difficult a time walking into a company that's already well down that path to understand that they weren't really trying to just make an infrastructure pivot. They were trying to make a business-process pivot. And there's no sense in adopting Snowflake or Databricks, or the like, if they didn't change the life of their employee population. And they can not only make that user's productivity higher, but as an IT team, they can also consolidate the many tools that they ended up buying along the way, because they had specialty capabilities or interfaces, in favor of a single platform that gives you all of that specialty access, but in one product.
Olivia Hack
Okay, amazing. I want to talk about the recent launch of AI toolkit for business. How do you envision AI transforming the data analytics landscape, especially for non-technical business users, which we were just talking about…
Mike Palmer
I like the term toolkit, because I don't think AI is the end state. I don't think it is the singular answer. I think it is another tool in the toolbox. And the history of the way that we do business and we just act as people, is that we take a next technology and we add it on to our pre-existing behaviors. I often talk about communication. When we started to text, we didn't stop making phone calls and we didn't stop hand typing emails. Similarly, AI gives us a natural language interface, but it doesn't mean that we're going to stop using spreadsheets, writing Python or doing SQL. It just gives us another choice for the workload or the work that we're trying to get done. For some users, it may be the only skill they have, and it brings, therefore, a new population. And that's the idea of the democratization. And so we're as invested in widening the population in terms of their access to data, allowing them the best choice of the interface to get whatever it is they need doing, done. And I think it has a great place in that toolbox.
Olivia Hack
Okay, we're going to talk a little bit about privacy. How would you say Sigma is addressing data privacy and security on the cloud to build client trust? And how do you ensure that data democratization doesn't actually compromise governance and compliance?
Mike Palmer
I think Sigma is one of the very rare tools that has enabled enterprises to increase security and governance while increasing access. And I say that because from the beginning we've been architected to never move data out of the warehouse. And what that means for enterprises is that their authentication systems, their permissions, all the logging they do, all the audit reporting, is inherently built into the warehouse. We don't change that in any way. Prior generation products would extract data and put it into a cache, and that just created another infrastructure, another access layer, another set of reports and authentication tools that are required. So we can go to the IT team and say, “good news, everything you've built to be secure is 100% consistent with the way that Sigma will also access that data.” It also means that for end users, there's only one version of that data, so the confidence level will be much higher. It's not the data that was copied to another layer, and maybe the first copy has changed and the second copy hasn’t yet. So, I don't know if my data is accurate and current. All the data used in Sigma is live. We have increased access and increased confidence, while making it far simpler to be secure and governed.
Olivia Hack
That makes a lot of sense. So, since your time at the company Sigma has undertaken some strategic shifts. We've talked about some of the product enhancements with the AI toolkit. There have also been data model features introduced. What advice do you have for successfully integrating new initiatives to keep pace with rapid industry changes?
Mike Palmer
First of all, with any product, you can't be 20% better than whatever it is that the company was doing before. So, the hardest question everyone has to ask themselves is: what new thing are we introducing here? I use this expression everywhere I go. When it comes to product, I tell everybody, I only want to talk about binaries, not “ers”. Binary things are ones and zeros – I do it and you don't. “Ers” are, I'm better, faster, cheaper. You know, whenever you're selling something on a comparison basis, it's really hard to make a compelling argument for change when you're doing something that you could never do before; like write back to a system, like build a pivot table on 40 billion records, like avoid any sort of infrastructure modifications or improving security radically. You know, teams and enterprises recognize this is going to be a step function improvement in what they do. I think that our job is just to recognize when the necessary preconditions are there. Companies that have set themselves on the cloud journey, customers that have adopted and migrated data into these warehouses, are ready to ask the next question. We need to be there at that time.
Olivia Hack
We've talked about some of the features that you've recently enhanced, but as Sigma continues to evolve, are there any new features or capabilities that you anticipate to be most transformative in the years to come?
Mike Palmer
That is a great question. Coming back to my binary, not “er”, one of the things that we're rigorous about is that we spend 30% of our R&D efforts on things that are completely new. When I say completely new, things that no other competitor does in an equivalent way. The area that I see customers likely to get the best net new benefit from Sigma will be in the data applications space. I think that the market shift in a post cloud data warehouse world that we're about to undergo is the consolidation of what often is 70, 80, 90, 100 different SaaS applications, which are hard to manage. They are not integrated. They are constrained by the data they have access to. And we're watching our customers leverage sigma to replace those applications. So, I think a few years from now, we're going to see customers having gone from 70, 80, 90, to 15 to 20. And, as a result of that, gain the ability to do far more customization that is going to make them more competitive and make those products more useful. So data apps is the thing to watch out for as Sigma grows.
Olivia Hack
Okay, amazing. What trends in cloud-based analytics and data infrastructure are you most excited about? And how does Sigma position itself as a pioneer in leveraging these trends?
Mike Palmer
So, the number one trend is AI, and it’s a wild west area because the potential is enormous. I don't believe that we are going to wake up in six months and find that our world is radically transformed on a day-to-day basis. So, all of us have an obligation to understand – what does this mean for people? How do we increase productivity? How do we increase security? How do we enable people that maybe sit on the fringes to be able to do their jobs effectively and leverage AI to do that? That is clearly one of those major areas. I also think that the day-to-day job of a company, aside from creating new customers, is doing that profitably. I think the second major area is rethinking the way that we've built application infrastructure on top of cloud-based infrastructure, and not just simply porting the legacy from 30 years ago and the way that we would deploy those applications to the new cloud stack. I think there's going to be significant disruption in the SaaS application provider space, over the next few years, and I think in that area, there are significant opportunities for cost savings, more flexibility and competitiveness.
Olivia Hack
Yes, absolutely. And I think one of the things we wanted to talk to you about is actually partnerships. And how those play a role in supporting your business development efforts and supporting your innovation efforts – what qualities you might look for in bringing a strategic partner on board.
Mike Palmer
All companies grow within an ecosystem. Our ecosystem started with the AWSs, the Microsoft Azures, the GCPs, providing storage and compute in a different way. And then on top of that, the Snowflakes and the Databricks and the others really pulled through with databases that made that data better organized and more accessible, or at least potentially accessible. So we really partner closely with those database providers. They understand that databases don't exist for themselves. They only exist when people and applications take advantage of them. So they need an interface that is providing more and more capability over time for more and more people to take advantage of that data. That is where a lot of our partner time is spent. But at the same time, as we think about the data apps evolution, there's plenty of space in the world for SIs and other teams to help companies rethink those workflows. Typically difficult to get from A to B for a lot of companies; they need outside help to do that, and we're constantly looking for the right partners to help them accomplish that.
Olivia Hack
I'm sure some of that information comes directly from them, helping collaborate and make things work for everyone. I wanted to talk about whether or not Sigma is actively exploring acquisition, and if so, what capabilities or companies might align with your growth vision.
Mike Palmer
This is the shortest answer I'll give you: we are not. One of the things a lifetime career in product will teach you is that it’s very difficult to integrate someone else's product and actually make yours better. And we pride ourselves on the velocity of which we develop features. And we've yet to see a case where we couldn't build something faster than trying to figure out how to integrate someone else's product. So, it’s not really on our roadmap.
Olivia Hack
Okay, fantastic. I want to talk about leadership and what success looks like for Sigma in five years – how you envision the company's role in guiding the business through this ongoing data and technology transformation…
Mike Palmer
I always answer that question with a combination of internal employee experience, financial outcomes and then market outcomes. On the market outcome side, we have 1000s of customers today. I think we want to take that into fully penetrating the Databricks and Snowflake market, adding on the customers and the other competitive warehouses as well. I think they are all going to pursue the transformations we've spoken about here today at different rates, but we're growing into being able to make sure that we're there for them when they are ready. So, we want to see ourselves dominating that BI space. We want to see the billion worldwide spreadsheet users move into a true enterprise solution. We want to see significant application workflows built in Sigma. We have a really strong vision around productivity, simplicity and automation for enterprises. From an employee perspective, I'm super proud of our employee retention rate. We think we're a great place to work. We give people a lot of space to pursue their ideas and we want to keep up that culture. I always describe us as being this combination of helpful with a high-velocity attitude toward doing work. From a financial point of view, I see the company being a public company candidate within two-to-three years. We have one of the fastest growth rates in the market, 80%+ at scale already, so we want to keep that pace up. We were one of the many companies that emerged out of the ZIRP era being able to position ourselves as a very strong, fiscally responsible, efficient company that can also drive a significant top line growth rate. So, we're going to keep up that focus and hopefully be a public company in the next couple of years.
Olivia Hack
Great to hear the trajectory. What major challenges do you think software CEOs are facing, in the near medium term, and what advice would you have for them?
Mike Palmer
It really depends on the part of the market that you're sitting in. I think the world has created a bifurcation in what SaaS was once thought of. It wasn't that long ago when 50 to 80% growth rates were the norm. Net dollar retention rates in the 120s to 130s were the norm. Burn was always high, but sort of supported by those growth metrics. And I think if you're sitting at a software coming today, and you're hovering in the less than 20% growth rate, and you're not posting great retention rates, you're probably thinking about acquisition at this point. If you are one of the very few that are posting growth rates, like we are, then I would say it's the exact opposite. You should be deploying as much capital as you can to take market share, because companies are transforming, and they are going to create the usual few winners. And now is the time to take advantage of that. The market will reward growth where it can find it. I wouldn't have told you that two years ago, but I think we're back to that place today.
Olivia Hack
Yes, fantastic. We've been talking a lot about balancing growth and profitability. I think that's been a key theme here for a couple years now. So, I appreciate your perspectives, and thank you for being with us today