‘We disrupted ourselves’: Sitecore outpaced a chunk of its customers base on cloud and composability shift, admits new CEO Dave O'Flanagan, but troubled integration claims rejected
Clear strategy and hefty innovations won't help if the customer isn't ready to buy. Push them too hard and they will push back as Sitecore has learned. A little over a month ago it parted ways with CEO Steve Tzikakis and Chairman Jonas Persson and appointed Dave O'Flanagan as interim CEO, before subsequently appointing him full-time in late April. The interim also saw the departure of key executives as O'Flanagan, a product guy, began bringing in his own team. The changes happened after private equity business EQT tried to exit the business, but couldn't find a buyer at a time when tech sector valuations remain under pressure. So now, the firm is holding its investment and counting on O'Flanagan to deliver a return on all the cheques it and its partners have written; well north of a billion dollars since 2016. In his first media interview since taking the job, O'Flanagan tells Mi3 Australia while the company will continue to put composability at the heart of its strategy and along with the shift to the cloud, he recognises that not all customers are ready for the move. Cue a change in messaging.
What you need to know:
- Sitecore has experienced a wholesale overhaul of its leadership team in the last two months.
- CEO Steve Tzikakis who raised $1.2b and fed the company's cloud and composability fervour is out, after private equity business EQT failed to find a buyer. Gone also, Chairman Jonas Persson.
- Dave O'Flanagan, the co-founder of Boxever who joined the company with the acquisition became the new CEO last month. The company also has a new chairman Darren Roos.
- With O'Flanagan determined to build his own team, the changes didn't stop there with a clean out in the executive ranks, for instance Danny Robinson was appointed as the new chief technology officer (CTO), and Rohinee Mohindroo took on the role of chief digital and information officer (CDIO).
- Sitecore's strategy involves betting large on software composability and moving its customers off on-prem systems and into the cloud, but the company may have overestimated the appetite for rapid change.
- The strategy remains the same, but the messaging and likely the timing will change, with the new chief acknowledging customers want more choice and more time. "We disrupted ourselves," he tells Mi3 in his first media interview as CEO, reflecting on the arguably aggressive timetable.
As a customer, it feels like their roadmap has been very focused on the cloud, which, from a future-proofing point of view, makes me a little bit uneasy. But that's just a technical challenge that we'll have to overcome.
The failure of Private Equity firm EQT to secure a buyer for Sitecore in a process that began last year and continued into Q1 this year led to a complete overhaul of the leadership of the business with Steve Tzikais and a number of senior executives now out.
Tzisakis was replaced by Dave O'Flanagan, the former Boxever founder who has already started filling key roles, appointing Danny Robinson as the new Chief Technology Officer (CTO), while Rohinee Mohindroo takes on the role of Chief Digital and Information Officer (CDIO).
Rather than a shareholder revolt, O'Flanagan claims the changes merely reflect the reality of private equity cycles. He suggests it was simple bad timing, which meant valuations didn't match what EQT wanted.
The company has achieved strong organic growth since the start of the decade, doubling revenues to approximately AUD$730m ARR and growing headcount 40 per cent according to O'Flanagan. But questions are being asked about how ready (and willing) the company's customers are to move into the cloud, and also to embrace the cornerstone of the Tzikakis $1.2bn vision – Sitecore reimagined for an era of software composability.
As underlined by the State of Martech Report from Scott Brinker and Frans Riemersma, composability is finally starting to emerge in the world of martech after years of promise. Think of composability as Lego-like, best-of-breed, multivendor tech deployments using modular systems versus bundled stacks. (Mi3 noted when the report came out last week, "Composability held the hype cycle for a brief moment in martech, with composable CDPs and composable DXPs, before the buzz of AI drowned out everything else. But it’s a concept that is bigger than any one category of marketing platforms.")
There are also questions about whether the previous leadership tried to do too much too soon. It made four key acquisitions:
- Boxever, a CDP company co-founded by O'Flanagan (Now called Sitecore CDP).
- Four51, an ecommerce solution.
- Moosend, an email marketing platform delivering personalisation capabilities (Now called Sitecore Personalize).
- Reflektion, a search solution (Now called Sitecore Search).
But that was just the start. The company also commenced a root and branch redevelopment of core systems that would allow it to move its clients into the cloud, and which would be built upon composability principles.
Critics, including some from amongst the 5 per cent of staff it let go earlier this year as interest rates drove up the cost of servicing its debt, suggested the scale and speed of the change led to corporate indigestion and issues with integration. Industry analysts also reflected their concerns. For instance, Gartner in its DXP Magic Quadrant marked Sitecore down on its ability to execute and excluded it entirely from its first-ever CDP Quadrant – although O'Flanagan says Sitecore chose not to participate in the later report.
Gartner disputes this and says Sitecore was not included because it didn’t meet the market definition or inclusion criteria. "Vendors can’t choose to either opt in or opt out," a company spokesperson told Mi3.
In his first media interview since becoming CEO, O'Flanagan acknowledged that customers wanted more choice and a more digestible timetable when it comes to cloud and composability, although he disputed any criticisms regarding progress on product integration.
I think there's a disconnect between what we've achieved in the composable [aspect]. We've been trying to re-educate the market about what those integrations look like in the SaaS world.
Integrations
"I don't know what more we could have done," O'Flanagan tells Mi3.
Any suggestions the integrations are behind schedule or that they tried to do too much too soon, are almost a personal matter for O'Flanagan, previously the chief product officer. "I was right in the hot seat."
He suggests it is simply that the company got its messaging wrong.
According to O'Flanagan, "I think there's a disconnect between what we've achieved in the composable [aspect]. We've been trying to re-educate the market about what those integrations look like in the SaaS world, which is APIs. All of our products are truly headless, and can be configured programmatically and integrated programmatically. And you can do all of the configuration using low code, no code, which again speaks to, I think, the way people want to integrate in the future.
"It kind of baffles me sometimes that we probably haven't controlled the message in the right way to give people clarity about the level of work that we've been doing."
Managing that messaging is a priority going forward, he said.
"If I look at what we've achieved over the last three years, product-wise, we acquired businesses, we retooled them, we created a new cloud platform that meant customers have unified data, telemetry, tracking, identity, and security, they all got migrated onto that platform. Then we integrated functional elements such as XM cloud with CDP and Personalised. I'm not sure we could have done more in terms of integration."
We were probably super excited and focused on the cloud message. Some of our customers were worried that we weren't doing enough for them or we were somehow end of life-ing our XM / XP product. Nothing could be further from the truth.
Sitecore customers Mi3 spoke with flagged concerns about Sitecore's degree of focus on shifting to the cloud with one full-stack client telling us, "As a customer, it feels like their roadmap has been very focused on the cloud, which, from a future-proofing point of view, makes me a little bit uneasy. But that's just a technical challenge that we'll have to overcome."
He provided his feedback anonymously as he was not authorised to speak for his company. However, better news for Sitecore, he was a fan of composability, due to the flexibility it offered and the ability to control costs. (His organisation is currently looking at consolidating or at least rationalising its tech stack.)
O'Flanagan expressed sympathy with customers like those we spoke with, acknowledging to need to ensure customers understand they had choice and control over timing.
"We were probably super excited and focused on the cloud message. Some of our customers were worried that we weren't doing enough for them or we were somehow end of life-ing our XM / XP product. Nothing could be further from the truth," he said.
"It's clear to me that not every customer is ready to upgrade immediately. So we absolutely have changed [our messaging] on that," he said. "What we want to do is give customers clarity and confidence about the product they're on right now and offer them the choice they need as they move forward."
Likewise with composability – which sits at the very heart of the strategy – Sitecore's enthusiasm may have made a rod for its own back.
"I think with composable, we stretched our proposition quite broadly and it wasn’t clear what Sitecore stood for. Now, I am refocusing Sitecore on XP, XM Cloud and Content Hub as our core differentiating propositions and being the vendor of choice to support the full end to end content lifecycle for brands."
"These content products will be our lead propositions in the composable DXP and they are complimented by great supporting capabilities in Personalize, CDP, Search, Connect and OrderCloud for customers who want more from Sitecore," he said.
"On the DXP, coming back to the point about disrupting ourselves, we went all-in on composable being our lead product there. We don't have as much reference ability and so we have suffered a little bit on execution," acknowledged O'Flanagan. "We want to get really much tighter on messaging, much clearer on helping our customers migrate, evolve, change, and as we transform we can support their transformation as well.
"I think we haven't been really crisp with [that message]. And we want to get much much crisper."
While he said Sitecore has done a huge amount of work architecturally on composability, "Customers don't buy composability."
"They buy platforms that allow them to move their business forward. And our message has been a little bit too focused on the composability piece. You will see us focus more on the customer value, how our technology uniquely solves for the customer in retail, in financial services, healthcare and so forth."
Project Symphony
As a business that sits at the core of content management, Gen AI is a no-brainer for Sitecore.
O'Flanagan told Mi3, that customers would see the deliverables from Sitecore's investment in Gen AI at the customer annual user conference in October.
Rather than simply adding AI to the products, Sitecore has instead gone back to basics and examined the core marketing workflows across the DXP.
"What do marketers want to do? They want to create campaigns, create briefs, generate content to generate or enhance imagery, and publish across omnichannels. We looked at all of the workflows, and at what marketers want to do. They want to be able to do things quicker. They want to be able to collaborate with their co-workers, and they want to be able to do things without any IT intervention. So we looked at all of those workflows and started to rethink how we could do that Gen AI first."
That work led to Project Symphony. "It's a new layer that sits across the whole DXP."
Full steam ahead (but with a little less steam)
"We're at a point now where it's all about getting the value from the investments that we've made," O'Flanagan tells Mi3 at the end of our call.
"We've got a really big R&D team that can deliver a huge amount of capability. We've got a global sales team and global partner organisations. So for me, it's about picking the right things to do."
"But to my point about focus, it's about picking the right things to do so that we can grow the business in a sustainable and profitable manner."
There's a hint in his answer that perhaps that wasn't the case before.
O'Flanagan doesn't bite.
"I don't think there's any change in strategy, per se."
Note: The story was updated after publication to include Gartner's response as to why Sitecore was not included in its CDP Magic Quadrant.