Good morning. How are you? My name is Richard Buckman. I'm the CFO of Kinaxis, and it's my pleasure to, on behalf of Kinaxis welcoming you to our 2019 investor days. It's great to see so many familiar faces, as well as a number of new faces.
We do appreciate your support. It's very important, and we hope today will be informative. Prior to starting, there are a few additional members of the Kinaxis team I want to introduce. Our chair Ian Gibson, is here as well as another board member, Jill Denham. Paul Ferrero, our Chief Revenue Officer and many of you know, Rick Wadsworth, our VP of, of IR.
We're fortunate today to have a number of guests as well. So, to start off, John, our CEO, is going to, give you some updates as well as talk about some of the new strategies we are deploying. And Robinson, a recent member to the team, is going to be talking about some emerging trends. Andrew McDonald, our Chief Product Officer, will then next speak, as well as then David Kelly from, who heads up our professional services organization. We're also extremely fortunate to have, representation from as well as an Ronan from Ipsen, as well as a long term customer Gus from Flextronics.
So with that, I will, hand it over to John.
You got sound? There we go. Well, good morning, everyone. It's a it's a distinct pleasure to have such a full room. I'm told we might have more people here than some of our competitors.
Who shall remain nameless, but larger, but still it's great to have a full house. I just wanted to add my welcome, obviously, to our guests Regina, Ronan Gus, it's great to have, newest, one of our newest additions to the strategic partner initiative We have a customer who we have known now. It's got to be 20 years, Gus. So it's great to see someone with that kind of 10 year with us. And you have Ipsen, who is relatively new.
Okay. So you you're gonna get a a great story from, from those, from those folks. Okay. So I wanted to just start by setting some context with that as a background. The fact that we have customers for 20 years, how does that happen?
That kind of stickiness. What we have done at Kinaxis is more than build phenomenal technology. I like to describe what makes us so relevant and makes us so so potent in the industry is the fact that we've invented a new technique. That's what's relevant. When we are, campaigning against the likes of, of JDA or SAP or those usual suspects that we might see in the field, we start first by talking about technique and not technology.
So you've heard us talk about concurrency. As the basis for what we do. And, I have to tell you this, you know, it's What concurrency brings to the supply chain market is a giant leap forward. This isn't one of those situations where we're slightly better than the competitors are Our product looks better or it's easier to use or those kinds of nebulous things, which I all, I think are all true also. But it it I would say the notion of concurrency is really, you know, the basis for for what makes us so special.
And to give you some context, not everyone in the room is going to be a supply chain practitioner, but to give you some context, from for where the world was and where we are bringing them. The past where supply chain has been about planning in silos, working on one chain link at a time. Focusing on demand, so you hear about product they're about forecasting. And so I'm going to improve your forecast. Okay.
So imagine that's just one chain link out of this supply chain. There might be another piece of software and another vendor focused on capacity, and I'm going to optimize your capacity. Someone else is working on distribution. Somebody else is working on multi Echelon inventory optimization. You hear all these buzz terms, etcetera.
The point is they're all working in, in a silo. They're focused on one chain link. And what we know to be true is that each one of these functions affect one another, like a chain. When you think of a chain, if you pull a link of chain, what happens to the other chain links? They move with it, right?
So concurrency is about inextricably connecting all of the elements. In one system, one brain. And we use the brain analogy a lot to describe this and the significance of this. Because every human brain is actually concurrent, right? The greatest example of that is when I say the words 4 times 4, you're all thinking 16.
Yeah. Scientists have proven that the language part of your brain is distinctly different from the math part, yet they're inextricably connected. It's almost like a reaction, right? You couldn't help yourself, just like I can't tell you, please continue to listen to me, but stop understanding. Can't, right?
Your brain is concurrent. It has to happen. What we have done for supply chain is the same thing. We've connected demand to master scheduling, to capacity, to inventory, to distribution. We've connected them all into 1 inextricably connected brain.
And what that does, is it creates what I call hyper agility, right? We're compressing time. The speed at which you can detect your out of kilter anywhere in that supply chain gets collapsed. So that's just a context for the value proposition and, what makes us so unique and so special. The next few slides I wanted to cover, just a description of our strategy, at least the strategy, that I'd spent time with the board to discussing.
There's 5, I'll call them 5 major rocks that we're trying to push forward. Okay. So this is how I would describe it. So certainly, We're hyper razor focused on dominating the market segments that we're, that we're focused on. You know, you know us to focus on 6, right?
We're in Aerospace And Defense, life sciences, high-tech electronics, automotive, industrial equipment, and missing one. CPG. The most I'd say exciting one for us. I might say the CPG market space dwarfs all the others combined. Why we're so excited.
Now you see the, the, you know, one of the recent wins there Unilever, which we, we announced, last quarter. We've got some phenomenal names in that space already, some we can't talk about, but we're obviously thrilled to have Unilever on that list. The other market segment that we talked about was in Europe. I'm going to spend a little bit of time on that subject because a year ago, I stood up and said we're going to double down on that region. We were being successful, I would say, quite by accident, not by purpose.
And, so we thought, Hey, what would happen if we actually applied real energy and real investment and real focus on that region? Well, I'm happy to say it's it's done exactly what we anticipated. Even in the last quarter, as we described, we had Unilever, Dyson, Novartis, earlier in the year, BASF, these are all Phenomenal European names, and those are the ones we're allowed to talk about. I can tell you for the first time in the company's history, over 60% of the new people hired were outside of North America. There's clearly a shift towards being a global company, not just saying we are.
These are just artifacts of our growth. The other strategic areas around product innovation, and we talked last year about the self healing supply chain This is a very, very much a modern, I'll call it emerging type of technology where we're leveraging machine learning technologies and machine learning techniques and applying them to the supply chain. What's exciting about what we've done with self healing, notwithstanding, winning an award for it, which is pretty phenomenal, from Forrester. One of the key elements around, the self healing supply chain is that it was born of practitioners. These are not academically technologies.
There's a lot of that around machine learning and AI. There's a lot of academically interesting articles to read. You know, our focus was to go talk to the likes of, of Ronan and other practitioners and say, listen, what What do you need? What is valuable? And, from that, was born the self healing supply chain.
So, We're quite thrilled there. But the other area you've heard us talk about is the platform. Andrew will spend some time a little bit of time talking about this as well. There's something truly unique about, well, there's a lot of unique things about Kinaxis, but one of the things that's actually, quite phenomenal is the fact that we're able to serve these 6 very distinctly different market segments. I mean, whether you make missile systems or tofu, Those are completely different supply chains and they're using exactly the same product, exactly the same.
So that is a testament to the value. It's not about the technology. It's about the technique first. And so we have been focused on rapid response as a platform, although not necessarily marketing it that way. The facts would bear out.
You can't men you can't support a tofu manufacturer and a missile systems company at the same time with the exact same object code unless you're building it on a platform. And so, a lot of the innovations that we have been focused on, especially in the last, I want to say, 3 years, have been around the platform. And so we'll share a little bit more about what we've been doing there. And the other areas of innovation, aren't so much, I would say, new modules like the self healing supply chain, that's something we can resell to the base. A lot of the innovations have been in focus or in support of new market segments, right?
So CPG, as we described, a year ago, we said we're going to go tackle that and a lot of investment in the R And D factory has been in support of that new market segment. The other thing I will say is people have said to ask me, well, when's the next market segment going to be announced? And I will tell you that the way we enter market segments is very much the same. Been this way as long as I can remember. I don't know another way to be they'll find they'll find a lighthouse account.
Prove that you can satisfy that new segment. It was a time we couldn't support tofu and now we can, so we can talk about it, okay? We are in other market segments. We just haven't described them yet. Right.
So it's not a question of if, it's a question of when. You know, can we solve, do you use this technique to sell forestry? Yes, oil and gas? Yes. Retail?
Yes. I can go on and on. Fashion, yes. Furniture Manufacturing, yes. Yes.
Yes. Yes. It's just a matter of when. And in many cases, spending time with a partner ecosystem is where we're going to accelerate that. Continuous value for customers is an area that we're also focused on as we grow I recognize that, it's very easy for companies that are being successful to focus on the next one and to potentially neglect your past.
And so as a strategy, I've been working with the management team with the board, to apply a lot of focus on continuous customer value and make sure that we don't neglect our land and expand. Because it's always exciting. It's always exciting to announce big names like Novartis and Dyson and IPSson and others. These are phenomenal names and you can get wrapped up in that, but we'll be focused on customer value. Great to have Regina.
I just came back from Europe. I was there a couple of weeks ago and spent time with some of the team over there. Man, there's some serious talent at E And Y And Supply Chain. I'll tell you that. So we're super excited about, that flourishing partnership.
And we, I'll say this again, why are we so hyper focused on partners? Well, we simply don't believe we'll grow organically fast enough to support the demand. We just can't grow organically fast enough. I'd rather I'd rather share and bring in some of the greatest, partners in the world, that have armies at the ready, right, and have the talent at the ready. So that it's a scale equation for us.
And we also, I said this to all of our partners. We know what we don't, well, we know what we're good at we know where we just don't have the pedigree. We're not a large essay. We're software. We're software at our heart.
It does not mean that we're not that we're neglecting, if you will, the professional services side of the equation. We just know That isn't our that isn't our future scaling that function. This is where we need to light up partners. So this is one of the areas that's very near and dear to me. I learned this a lot.
I learned some great lessons from some great leaders about companies that are in high growth and culture is one of those things that, is first to get neglected, especially if you're growing globally. And I recognize that every new human being that you hire is a new ingredient to your culture. And so if you're not focused on it, you get some random flavor. And, that can poison you. Especially, again, as you start hiring outside, we're now, I think, 13 countries.
We have people in 13 different countries. And, and so if you don't focus on culture, on purpose, as you grow, you won't know about it until months or maybe even years later that you're poisoning yourself, quite by accident. So we hire against the cultural standard. Okay. We we know who we want to be.
We know the personality that we have And so, think of it as a framework. There's certain, characteristics that we're looking for. And so I've worked very closely with Megan, who isn't here, Megan, our chief human resource officer, on making sure we hire for cultural fit So often the highest academic fit doesn't make the cultural fit. They don't make it in the door. Okay.
They just what's that line? Culture eats strategy for breakfast or something? There you go. So, so again, I really think this is an important some people might think it's kind of a soft thing. Let me tell you, I've learned not.
You got to do this on purpose. You have to invest in it and you have to make sure you're communicating with everyone in the company, every executive, right? Because I'm telling you I've watched it. When you slip, you know you do. You have to sometimes come back and fix things.
So, you know, in short, the areas that we're focused on for investments, you're going to hear from Anne. And, you know, we brought Ann on board. She'll, you know, I'll let her run her her, introduction of herself. But We recognize that, we can absolutely continue along the vectors we have today and be wildly successful. So we've been at it for quite some time.
So we've gotten really good at this. And part of being really good at being very consistent And, and frankly, it's just not good enough. So we think that there are plenty of opportunities yet to explore. And plenty of accelerants, I'll call them, to add to the equation. And so we're investing in the office of strategy, where I spend a lot of time with Anne talking about the next 3 to 5 years.
The next 0 to 3 years, we've pretty much have a pretty solid handle on what that growth strategy will look like. But the 3 to 5 year is where we can see opportunities to invest now on some accelerants. And part of that, is in R&D. We last year, we made a very big push into Europe. During earnings calls, I talked about how quickly Paul He outpaced our, our desires by an order of magnitude and we lit up that region very, very quickly.
And this year, with Andrew's help, and you'll hear from Andrew, we're igniting R&D in a very specific way. And a lot of that is tied to rapid response as a platform. And again, I won't steal too much of this thunder, but I'm I'm absolutely, thrilled with where we are right now from from a technology disposition. I'm thrilled with the fact that no one seems to be able to catch up. That's just when you can ask our customers, I mean, ask us, I challenge you.
I mean, We have something quite special. But I'm also, thrilled with where we can take the technique back when people ask me, what is, what equation is Rapid Response solving? I answer it the same way and I eliminate all the supply chain buzz. Okay. It's a very ubiquitous problem.
Right? It's a problem that exists when you have volatile supply or demand for something that's constrained. You don't have an infinite amount of it. That's the problem. Right?
Does volatility in the supply or demand of something that is constrained Well, you can fill in the blank something with a word as well. Cost supply and demand for Cash that's constrained. That's a supply chain problem. Okay. So obviously that has us thinking about where we could apply the technique further using the platform.
We're going to continue to focus on, Asia and Europe. You know, we've seen a remarkable increase in pipeline in those 2 regions. And as you would expect, when you invest heavily in sales and marketing and you go at a region on purpose, and you win the names that I just described, it creates a little bit of momentum in that region, in those regions. So we're going to continue obviously to to focus our attention there. Just a short note on pipeline because I said the word, I've said this in earnings calls, It is a, it's significantly larger now than it was 12 months ago.
It just is. It's not, it's not like slightly, it's significant. And again, it's reflective of the investments we made early in 2018. What's more remarkable to me is that it's, it's incredibly balanced. There's no concentration problem.
Not like it's 60 percent high-tech electronics and then the rest, we've seen an uptick in aerospace and defense activity, for example. So it's very well balanced and it's also remarkably balanced across all the geographic regions. Which I care about. I want to know whether we have some concentration in one region or one sector and we're seeing, none of that. So we're quite we're going to continue to focus on Asia and Europe.
I talked about continuous the customer experience and the customer journey. As we grow these accounts, this is, I say a couple of things internally at Kinaxis to drive this home. Number 1, you have to win your customer every day. That's the world of SaaS. It's not like the world of perpetual software where you win it.
Book it on to the next. Fort maintenance stream is a smaller element. In the world of SaaS, you win your customer every single day. You have to do it on purpose. And it has to become a part of the cultural fabric of your company.
The other thing I, I'm, and Andrew would conversations I've had with Andrew and R and D that one of the hardest things in SAS is to have your R and D, your R and D group The developers, the testers, the product managers have to love the customer more than they love the product. That's really hard if you're an engineer. But those are the sort of the seeds. Those are the seeds for making sure you create the proper customer experience because We want every, every single customer be like Gus. 20 plus years, great relationship, 20 years from now.
It'll be Ipsen and others. So that happens on purpose. And, that purpose requires investments. So we're going to focus on that. I mentioned this earlier, the, again, it was, I mean, this sort of happened over the year, but it was only at the board meeting, the February board meeting where I was sharing with the board our growth in headcount and how it happened and where it happened and Again, I was almost surprised to see it over 60% outside of North America, not just Canada, but the United States, it means we're growing in Asia and Europe.
A faster pace than we are anywhere else. And so again, making sure that we don't fail at that We're focused on the HR function and making sure that we can continue along that scale. So lastly, this is sort of a reflection obviously of what we've already shared, but we're expecting another very strong year. Based on our investments of 2018, based on the current conditions that we see in front of us, based on where we currently are in the year, we're seeing a total revenue between 21% 25%. Again, continued strong, profitability.
This is, again, just part of our personality. We don't know another way to be. We think that this is the definition of SAS. It should be highly predictable and profitable at the same time. And so we've built, an access and we've built our business on purpose to be growth with high profit.
And I think we've consistently done that. And lastly, looking at our benchmark, which is SaaS, the SaaS element of our revenue looking at 22% to 24%. So we feel very, very, very comfortable at this stage with those numbers. So with that, I will pass the baton here I think it's Anne, who's next. So, Anne, come on up.
Good morning, everybody. It's a great pleasure for me to be here today. I feel very honored to join such an interesting and innovative company I wanted to start by first just telling you a little bit about me. I know some of you have been poking around on LinkedIn profiles and whatnot. But I am a proudly from the tropical island of Newfoundland.
So it did my heart very well to join a Canadian company and to be me moving back across the north of the border again. I spent many years in supply chain as a supply chain practitioner. So as I go through the day, a lot of it will be very pragmatically from that perspective that you'll hear from me and echoed by our customers and partners who will speak after me as well. I was a professional academic for a very long time. I like to tell small children that I stayed in school till grade 25 just to watch their eyes bug out of their head a little bit.
And, now I'm very pleased to be able to put all of that I'm probably the one of the few people out there that can say everything I learned in school, including my PhD thesis, which happened to be on order promising and order fulfillment, I have used it all in practice. So with that, I wanted to spend a few minutes to tell you a little bit about my organization and how it fits into overall Kinaxis. I know there were some questions on kind of the different roles and what the expectations were. Really, my role is to look to the future in craft that vision of what's possible for us in the 3 to 5 to 10 year timeframe. Along with that, I have an expectation around the skill that's going to be required to be able to meet that vision and to truly position Connexus as a recognized destination beyond what it is So it's really looking into where can we go, what does it need to look like, who do we need to get us there, and how do we figure that out, what we need today to be able to achieve that vision.
There are three areas that I'm primarily focused on. The first is industry outreach and thought leadership. This is really understanding what are the trends, where is supply chain going, where is advanced analytics and planning going, Let's make sure that we have all the leading trends in our current verticals as well as the spaces that we're exploring next. How do we identify which industry forums, which organizations to partner risks, and really position Kinaxis in a broader range than we necessarily are today? That's one of the things I've spent a career kind of in the advanced analytics space, positioning organizations out there.
I want to make sure that can access can be, have that same level of presence. The second is around strategic development, and this is really the incubation zone. So I like to say this is my team, R and D before R and D. An example that I think I've used many times with Andrew is if you think about blockchain sort of 5, 6, 7 years ago when the words were just kind of coming out, this team would really focus on, let's explore, let's see if there's an opportunity Is this the right fit for Kinaxis? If yes, let's translate that into R&D with the product roadmap and go from there.
So this is the idea incubation area. We expect to look at potential opportunities to explore new ideas, also potential adjacencies and where we can see Connexus and rapid response growing over time. And the third area is probably the one John is most excited about is around strategy management, And this is the group that really takes all of those ideas as they're coming out of our industry outreach and thought leadership as we're curating from the strategic development saying, let's put that into the framework and let's turn it from the art of the possible into our big vision into that roadmap that will allow us to get there, let's make sure we have our metrics, our change management in place that will actually allow us to accomplish that vision. As the organization expands, and I'm sure many of you know, ensuring that we have that ability that every individual employee understands how their role fits into that big level vision. This organization will be the mechanism for making that happen.
But you can't do any of this alone, And very specifically, the messaging from outreach and the messaging from marketing need to go hand in hand. When I talk about R And D, you'll hear from Andrew, but the strategic development in R&D need to be in lock sync. And when you talk about strategic developments, strategic management and the ideas if we don't have the right people and the right financing in place and it certainly doesn't make sense. So this organization is definitely a partnership organization as we look at in place as John mentioned for the future. So looking at the metrics, establishing that pervasive voice of expertise, Not only in the capabilities of planning, but specifically around each of our verticals, having a presence in each of the geos as well.
Effectively positioning for the long term. More value. And it's through, this, dimension of my organization that will make that happen. I've had many questions as to why did I switch from being a supply chain practitioner of running large organizations to coming to join Connexus. And as I look at what was available as I had decided to make a career change, I've been in the digital transformation space myself for many, many years.
As all of you probably get bombarded with different ideas and different and some them have a lot of credibility and some of them are sort of just vaporware ideas out there. And I wanted to make sure that I was joining an organization that I felt aligned with what I was truly seeing supply chain organizations go. And when I was asked to speak her today and kind of talk about trends, I could have gone through and said, you know, you need these algorithms, but that's not reality. I wanted to take you through what I was experiencing as a practitioner and how that, afforded my choice in coming to join Kinaxis. So if you look at the landscape, the amount of change that has happened over the last 5 years, is breathtaking.
We call it the Amazon effect. I know we've all had that instant gratification of ordering things personally, But the reality is that organizations, even large organizations are expecting that same level of personalization, attention to detail, attention to customization in specifics that we as individuals expect in our day to day lives. The products, the amount of product proliferation that that's resulted in as an organization is also gone through the roof. If you look at Iphones alone, as an example, something that we can all relate to, in 2007, 2008, 2009, two, three, four models of phones and is very close to the world I just came from. When I left, so 2018, there were 60 models of iPhones.
Of which about 200, 250 models were required to cover all the variance of all the different cell providers in the world. That is just one tiny example of product proliferation that we're seeing happening ubiquitously. The supply chain network complexity. On the back end, suppliers, the number of suppliers, the different types of pliers that everyone's requiring. I think P and G at last count was over 75,000 suppliers.
And those number can change overnight as we look at dual sourcing. We're looking at diversity in our supplier portfolio. We're looking at ensuring we have the right mix for all of the different regulatory. This is causing a proliferation across all of the supply networks or supplier suppliers up the tier. So it makes planning that much more complicated.
And then technology, everywhere you turn, there's yet another technology that's available to you. Another way of looking at your data, another way of running your technologies. This has just created a crazy mess of landscape for most corporations. One thing that it's done that's been really interesting is to put the supply chain at this strategy City and everything going on, they're the last ones before that product reaches the customer. Back in 2013, 2014, Laura Cessary, one of the supply chain guru types said, you will see a shift from the marketing driven supply chain to the market driven supply chain.
All the nuances as customer interest change, as customer expectations change, that information is not going to come necessarily from your traditional sales and marketing information is coming from your customer base. And it's the supply team's ability to sense and respond to those changes. That's what's really driving a lot of organizations. So you're seeing chief supply chain officers not only having the same amount of clout in the conversations that organizational strategy, sitting at that table, but you're actually seeing So with this in mind, there's a lot more pressure on supply chain organizations clearly, and I think you'll hear that from our peers as well as they get up. And so this notion of digital transformation and figuring out what are the right sets of solutions has really put a bright shiny spotlight on that Chief Supply Chain Officer to get it right, to get it right in a timely way, and to get it right in a way that's not just for today, but for the future.
How many of us have been in a situation where we've had a new technology introduced? It's worked fantastically right now and next year you're having the exact same conversation because you over engineered to where you are today. That's not acceptable anymore. It's about looking towards the future and figuring out what that needs to look like. So digital transformation, everyone's talking about it.
They're talking about accelerating. We want to scale. We want bigger. We don't because of this notion that the supply team is at the big seat at the table. We know we have partners in marketing.
We have partners in sales and finance. We have beyond the supply chain. The conversation often led from the seat of the chief supply chain officer is scaling beyond those, those traditional walls. However, everyone's asking for it. I think one of our board members recently said, it's digital confusion.
That's what's out there. Everybody's talking about it. They're driving different things, but There's not a clear definition of what they're trying to accomplish through this adding all this digital stuff. So what I've found, and I do see it now, is that, they're inviting partners to come in to talk about what is it to try and create some sense out of all of this confusion and really clear the fog. The other piece that we're and I'll talk a little bit about this later is that it's fundamentally changing the supply chain operating model.
It's no longer a support organization and the expectation of the supply chain leader being the strategic role has elevated all of his or her staff, to also sitting in a much more strategic position in the organization. So let me talk a little bit about the the favorite topic I couldn't get out of here without talking about the technologies and the technology evolution. This is my personal background. It's in advanced analytics. And we are seeing a load of things happen around what's the next descriptive, predictive prescriptive tool in the toolbox that's going to help make the supply chain perform better, more efficient and more effective.
And this is leading to, I think we've heard the word augmented analytics. It's the balance that tricky balance between the most complex analytics and how much automation. But the reality is these two pieces as much as you want to investment, it's absolutely pivotal on trust, trust in the data that goes in. Clearly, we need to trust what information we're relying on. It's trusted the technology that we have strong technology partners because now we really are putting a lot of faith that that technology is going to drive the right solution for our business, but it's also trust in the operator because the supply chain operator has changed.
We have this information. Back in the 10 years ago, we had a lot of people that were really just data operators inputting information, typing in the plan, verified that each data number was right and going through. That's not the case anymore. We're seeing that the supply chain operator is absolutely being upscaled. A few months ago, I think we were all talking about an article that came out from Harvard Business Review called Death of Supply Chain Management.
And probably the biggest thing that came out of that was shame on Harvard for doing a clickbait article, but, But what they were getting at wasn't that the supply chain was going away. It was that the traditional operator, the person who didn't need to be actively involved in the supply chain, those positions or not necessary anymore. The supply chain operator now, the talent that's required as somebody who truly understands the dimensions of the supply chain? What are those trade offs? What's happening?
What's happening in my specific space? How do I operate when there's an exception? Because guess what? The technology is smart enough to do things when there's the world is going as planned. It's when things start to go sideways.
Change evolved, we introduce a new product, you need to be actively involved. So that supply chain professional is a lot more skilled. They not only know the domain of supply chain, they need to understand the business strategy because they need to know how their role fits in. Oh, by the way, they need to be really good communicators. And collaborate and have an understanding of change management.
That is not the profile of somebody who graduated with years ago. So we're seeing those skills change and evolve. And absolutely, I think I called it out individually here. Collaboration is absolutely the key to success. So with that, I just wanted to sort of summarize all of these pieces And you'll see that as I can put this together, and then I was thinking about why I joined Connexus, and they really do go hand in hand.
The use of the Advanced Technology, this holistic approach to supply chain and be able to operate at the speed of business, That's what winning supply chains. That's where they're playing. Being able to get the information from the customer as quickly and respond and sense to respond to that as quickly as possible all the way up the supply chain, reducing that latency as much as possible. That goes so much of what John just talked about. And then finally, probably the biggest thing With Connexus isn't all about technology first.
It's about the human. It's about the planner and the process. And absolutely, that notion around change management and how to drive and really own the supply chain is absolutely key to being a winning supply chain. So that was probably the biggest piece for me, was recognizing that it's the human in the process, complemented with the technology, looking end to end, reducing all that latency. That allows you to to be in the top class.
So with that, I'm gonna hand it over to Andrew to take you through the innovations in the platform.
Thank you. Alright. Grilled to be here. I want to talk about 3 really key areas that we're investing in. But before I do that, I'm going to give you a little introduction to myself.
I spent my whole career in software, I love technology. I love innovation. I love the chance to build a business using technology. I've been in some roles that were broad and global. So when I was at Alcatel, I had responsibility.
Of a business that was over 1,000,000,000. I was part of the executive committee. And I've been part of businesses recently, a small venture backed company, that got sold to Ericsson. And through all of that, and during the sale process, I started to think, what do I want to do next? And I started to talk to John.
And the reason I joined Connexus is I thought back to probably the favorite part of my whole career. And the favorite part of my career was early early 2000s. How was that, Alcatel? And we bought a company and our thesis was Internet is going to change everything. It seems pretty obvious now.
But at the time, best effort internet was kind of the hippies in the corner. Who were doing, some radical things, but they weren't delivering video, they weren't delivering voice. There's no way anyone would trust a 911 call on that infrastructure. Our thesis was with great technology and a better solution, we could break into the duopoly of Juniper and Cisco. So when I thought about why that was the favorite part of my career is because we had a mission.
We had a mission and we were going to go and get this done. We had a great team. It was unbelievable, but we also had a technology that no one else had and we rode that real hard as we entered the market. When I talked to John and I met the whole team, I saw all 3 of those characteristics. And so being part of a business that grew from 0 to 1,000,000,000, in 8 years was phenomenal.
And I wanted the chance to do that again, and so that's really wide in Kinaxis. And I live in a part of Ottawa that a lot of folks who are analysts here, they have a financial planners are obviously reading your material. And I noticed the transition, since I joined Kinaxis, before that, they always asked me to move my money to them. And since I joined Kinaxis, they're actually asking what's happening at Kinaxis and trying to find and trying to get the information on what's going on, which I thought was kind of interesting. So I get a cost as a gym regular to find out what we're doing.
And since I've been there, it's been better than I thought it would be. And it really is because of all those three elements, of how strong the focus is on the mission, how strong the people are, but the technology, and I'll talk a bit about why it is differentiated. My organization is responsible for the development of the software. We've got a great R and D team, making sure the quality is there. Making sure it's well documented, draining material, everything to do with product.
My team is responsible for. We've got a great product management team who knows the industry really well. Is listening to the customer to make sure that we stay ahead of everyone. And finally, we also have the SaaS operations, which is really integral It is the embodiment of the product. This is how we deliver our value.
But we brought all that together in this organization to make sure we deliver a consistent product to all industries. I'm going to start off with, an area that we're really investing. And so John mentioned that we're investing heavily in R&D this year. And if you look at the numbers, it bears out in our financial plan. I think what you see as we go through the year and we report on it, you'll see that we're putting a fair bit of investment in our R and D capacity.
There's 3 principle areas that I have the team focusing on. One of them is how do we earn money in kind of the, I would say, short to medium term. And that really is we're a supply chain planning company. And we have phenomenal capabilities. We've got to make sure we invest in those to stay on top.
Than we are. So we've got some innovative new ways, help practitioners understand what's going to happen to the supply chain. So this is about predicting the future. We've already proven we can do this in a number of areas. We're returning our attention, our investment.
We've got quite a few data scientists now. And we're working closely with a number of customers on figuring out how we can do a better job forecasting the demand for their products. If you think of a big supply chain network with thousands of products and tens of thousands of parts, the implications for these kind of vibrations in demand are huge. And so if you can kind of get a few points better in the demand sensing side, it has a phenomenal impact. And we're already seeing that bear out in a lot of the work that we're doing.
So we've got a whole bunch of disparate data. Kinaxis is at the center of planning. That means we have data across all the enterprise. We see across all the different supply chains, even in cases where a company has been built through acquisition, and has multiple systems and multiple disparate manufacturing plants, we have one view of all that data. So we're a very rich data source.
The number one thing you want, if you're going to be able to predict is great data, and we have that. We couple that with some really publicly available data, data like weather, data like market share, data like social media sentiment. And we've already starting to prove that we can do a better job at forecasting the demand that's coming. And it has pretty profound impacts. Whenever we build new capabilities though, we want to build it into a way that automates as much as possible for the practitioner.
Today's practitioner doesn't have time to look at the 10,000 parts and what does that
mean? We've got
to automate all of that. So when we do sense differences in demand. We bring that back in. We show them you're going to have a demand variation that maybe you're not ready for. Here's a couple scenarios that you can use, and we automatically build a capability to show them so they can analyze that.
So we're investing in that heavily this year. And I think it's going to be pretty impressive when we start rolling that out. We also want to have the best techniques. So, planners, and it's a very technical world out there. There's a lot of different ways, lean 6 Sigma, MRP.
There's new techniques that are always coming out. We're always going to be on the leading edge of all of these techniques. We're going to have the most complete planning solution in the market. So demand driven MRP is a combination of some of those techniques. It's especially applicable, where there is high customer service expectations.
So we're starting to see some interest in this. So we're investing in this space as well. So the most complete product also means we want to invest in some breadth. So one of the things that really impacts The bottom line is the efficient use of expensive equipment. And if You followed this space and you know there's a lot of companies that are very targeted on how do you optimize the manufacturing part of the supply chain?
And that's a very bespoke, very different in all these different industries. We're building capabilities so we can work with those systems and we can broaden. So we really want to broaden who works with a rapid response in our customers. And so being involved in the production sequencing of what you manufacture is a key aspect that's going to bring us more breadth as the customers were already at. So the more we can start bringing out new capabilities that expand our current base, those are easy easier cells than even acquiring new customers.
And both with production planning and with S and OP, This is an example of our innovation tightly coupled with our customers. The first public event I was at, I met, I think a couple of you folks It was only a week in the job. It's an event we hold called connections. And I was absolutely blown away by the customers and how they love the product. And it gives us an unbelievable capability to work closely with practitioners who can look into our ideas iterate through challenges that they're having, figure out better ways to do things.
And so a couple of these supply chain or actually all those supply chain capabilities that we're doing, it's all close, close coupling with customers. Making sure what we develop in the end comes out and works in their environment. In the sales and operations planning, we realized that we've got so much great data that we can start adding more capabilities And what we're doing is we're starting to add more capabilities that'll appeal to some folks in the financial side of the house. So again, what we're trying to do now is expand the people who use our product. People now on the financial analysis side are going to be able to take what we're doing in these investments this year and be able to do better planning on their side of the house.
So we're excited to try and expand not just in capabilities for some of the planners, but also start to expand The mid to long term investment really is the technology play. And if you don't make the right investments And I've been on the good side of some of these technology decisions. And I think right now, in Access, we're on the good side of some of these technology decisions. Decisions that the team made in the past were riding right now. And so what are we investing in, in the future?
This is a very simple slide and we'll see if we get some questions later. But Our in memory database is something that in the industry people have asked about ever since competitors have come out with their own in memory database. The idea that you could store some information in memory versus on a disk Simply put, that should be faster. That kind of misses the point of what we do though. What we do is a different type of database.
The competitors have a database and there's many competitors out there that have databases to use, whether they're from a big database vendor or something they build themselves. Those databases are generally something called a relational database. They're very good at a lot of different things. They're really good at say high transaction. If you're getting a lot of say a point of sale system, an ATM machine that's doing a lot of withdrawals, a lot of rights changing data.
What we have is a planning application. And so way back when when Kinaxis was formed, It's not just that the database was in memory, and that was amazing at the time, by the way, the fact that the team went that way. But it's 2 other things. The versioning database. And I won't get into all the details about that, but in a nutshell, it means it's possible to make a scenario an exact copy of the entire supply chain instantly and the whole technology is optimized over decades to do that.
Irrational to databases don't have that. They don't have that capability. The other one is since it's our database, we tightly couple the math. Everything behind what we do is calculations, lots of calculations. So we tightly couple the calculations to the versioning database.
If you have a generic off the shelf or even a database that you've built for multiple applications, it's very difficult to do what we're doing. And so that's why I feel very confident that when I talk about the 3 things that were interested in joining, the underlying database technology is so attuned to planning that no one else has anything like it. But we understand competitive forces. We don't want to rest on our laurels. So we're coming out with new version and it's coming out this year.
And it's just going to be more of everything, more data, more speed, more reliability. And we're very confident that we're going to stay ahead. And right now, we don't see, anyone coming out with exactly the same techniques. But it's possible. What I do know is with the decades of engineering, each iteration gets better, gets faster.
So we have a good amount of runway ahead of us with this underlying technology that gives us a technological advantage. And my team's responsibility is to keep technological advantage as much as possible. And that's what we're going to do. The other thing that is really happening in the industry is a decade ago, it was okay to ingest information in overnight in batch. Let's get the latest data from the ERP system.
And by the time the day runs through, you're about a day out of date. Not too bad considering the state of the
art at the
time. But since that time, there's been a lot of investments and we're really doubling down on making everything real time. And the reason for that is exactly what Anne was talking about. Is digital technology is the expectation that trends like IoT will have impact on planning, we're already ready for. So if all of a sudden there's a shipment that's late, these investments are going to be able to tell us and they're going to be automated what your planning outcome should be.
How are you going to replan for that? Huge amount of relief for a supply chain executive who's trying to figure out how do I staff and how do I support with all the challenges we have in finding the right professionals, the more we can automate, the more it relieve that pressure. And so we're already doing integrations with other data sources. We're already doing trials with IoT companies. We're going to keep investing in this.
So this year, you're going to see more come out from from the pod product in this regard. I think, John said it really well that there are a lot of PhD papers going on today about machine learning. And what we've chosen to do is work very closely with customers to automate their pain points. We're using machine learning to predict. That's really the main focus of what we're doing today.
We're predicting better than what you can do, with your current supply chain team. Take, for example, lead times. So when you're trying to do your planning and you're trying to figure out, what you should build you're going to look at how long it takes you to order your 10,000 parts, 10,000 parts. That's a lot of lead times to look at. What we've shown already in a number of customers is we can look at the historical deliveries on all those ten thousand parts and we can just keep analyzing it.
All night long, all day long. And when we see trends and we can predict better and we see misalignment between what was designed. So the lead times that someone put in, they maybe got it from a supplier. Yeah, we'll deliver it to you within 60 days, but 60 days in the system. What if that supplier is delivering it in 80 days?
What if they're doing it in 40 days? What if it's consistent? We can change that result. Now all of a sudden you've got supply chain that has the right values. You cannot afford to have humans sitting there looking at that data.
So we're picking the areas to automate that really make impact in making a more accurate plan on a consistent basis. And we're going to do that across the supply chain. The demand sensing that I talked about is using the technology that we've built. So we're already seeing some pretty good results. Some of the results, I mentioned, 55% of the lead times were not as delivered.
The parameters were just wholly insufficient for proper planning. But really excited about what our machine learning team is doing. So technology is about the midterm and long term. John talked about the fact that this is a platform that we've built, the 1 binary. From tofu to missiles.
But it's very clear that we can't build the business fast as we want unless we can leverage partners. If you think about the global reach, if you think about being in every country, company, if we can only grow as fast as we hire our services people that's going to restrict the amount of growth that we have. But we've known that for a while. So one of the biggest investments, and I only have one slide on it, but one of the biggest investments is in a platform that allows our partners add more to it. So they're already working and doing integrations.
So what market they want? But one of the things that we really do want to build is a platform that will enable them to be creative to add value. We don't know a lot about forestry right now. What if we have a partner who knows a lot? How can they add those capabilities in?
The day that they start coming back surprising us with the applications that they build on top of their platform, that's the day we know we're successful. This investment is going to take time. To really bear that kind of fruit, but we're investing it heavily now. We are really going to allow them to be creative on top of our platform and add value like we never have before. So this is one of the longer term plays.
I think you're going to hear about us talk about this in the coming years. But the investments we're making now are going to enable us to go into other areas, other sectors, other verticals, without having to have a massive team because we're going to allow us to now leverage a partner network that's just flourishing. We've been in discussions with some of the partners and most recently we had an event in London that John mentioned. And as we talked about this, the excitement level from those teams was profitable. And my excitement was extreme because these folks have knowledge in sectors that I can set that we're not in.
So the partner strategy in building our capabilities in the product, and specifically, it's all around new experiences for the user? How can a partner build a new experience in a new vertical that we don't understand? A lot of it is going to be related to how do they build new calculations and math for areas that the product doesn't support, making the product extensible for them, we'll be a brand new capability that we're really looking forward to unveiling to the market and to the partners. So with that, I will hand it over to David.
Okay. Thank you, Andrew. And, and thanks folks for having me. I am looking forward to talking with you. This is, the first chance I've had to speak to this group and move forward the slide ahead here.
Okay. So my name is David Kelly. I joined Kinaxis just about 5 years ago. And, when, when I started, we were just about to go public. So, so I've been here for the journey, with you all.
And prior to, to Connexus, I was with IBM. I was within the IBM Software group running a Services business within a brand within the software group. So, my career spent a lot of time working for in the services business within software group. So this is a very natural spot for me to be and it's just been a great journey. So a quick overview on the business that I run and what we focus on.
So as I mentioned, I joined 5 years ago and there are folks in my team who have been working with rapid response for 15 plus years. So I have a team of individuals that are deeply, knowledgeable in rapid response, the capability of the product and what it can do. But as Anne said in her presentation, over the last 5 years, we've seen a huge shift in the marketplace. I think companies expect more from us and they look for value to be achieved faster and they look for us to guide them in their deployments. So as that market shift has changed, my team needs to change as well and our capabilities need to change.
But we have done projects successfully with just about every single customer. I don't think there's a single customer that we don't touch Today, we have a lot of partners involved our engagements, but we are still working closely with those folks, during these deployments. You can see the average expertise we have within my team. I get a lot of a lot of tenure. Most of the folks that we hire historically come from industry, or have been working with Kinaxis for quite some time.
We're just now starting to shift to bringing in some younger talents to, well, quite frankly, replace the folks that are moving out. So, we need to grow that pool. And we also are looking at models in which we can bring down the total cost of deployments. So we have a team in India right now with a strategic partnership with one of our partners that we're doing that. And we are focused on a methodology that is an agile deployment.
So, a lot of companies think of these projects in a waterfall approach. That can take a little longer to get value. So, we look to do this through an agile deployment methodology, which drives value a little faster. Some of these key customers here, some of them have been long time customers, and some are newer customers, but this is a mix of projects that we do directly or with our partners. And each model varies.
And I'll talk about that throughout the presentation. So some highlights This is a pretty interesting slide. This talks about on the left here. You can see that Kinaxis roughly $32,000,000 in, in professional services revenue. And we have a team of a little more than 100 folks.
And that is an expanding team. But I think what's more important is the ecosystem, the partners that you see up there. When I started 5 years ago, there were four names on that list. Today, you can see how that's expanded significantly. When I started 5 years ago, I would guess I don't have any specific numbers, but I would guess that those partners did maybe $5,000,000 in services revenue as it relates to rapid response.
Today, I believe though all those partners combined probably do 3, 4, maybe 5X what Kinaxis does in services business. So the ecosystem has significantly increased. We see these partners working on a global basis. My team works with every single partner up there, doing joint projects. Either those partners could be prime, we could be prime or we are both direct relationships with the customers.
So we work in a lot of in a lot of collaboration with our partners to drive greater value for our customers. As well at the bottom, we mentioned this Kinaxis delivery center concept. So we've had a lot of people working virtually and I mentioned bringing up some younger talent. So we've established an office in Amsterdam and Chicago and through a strategic partnership in India. And this is where we have individuals located in one facility, and then we can send some requirements to to these folks, just focus on some specific activities during a project.
This allows us to groom individuals to then go out into the field in the future. So it's kind of a development center, if you will, for resources on my team. And we expect to see that concept being built out over time. So where do we have folks and where are we located again? You know, when I started, we had an office in Ottawa.
We always have had an office in Ottawa, obviously. We had a location in, in Tokyo. And today, these are physical offices. Today, you can see that that map has improved quite a bit, with offices in London, Amsterdam Hong Kong has been there for quite a while as well, but Seoul, Chicago, the new office. And then where are the people located?
So in North America, very common for folks to work out of their house. When we get outside of North America, that doesn't work so well. That's why we have more of a presence with physical space. When we get into some of these, some of these other regions. This doesn't represent where we're doing work.
We have active deployments throughout Southeast Asia right now down into Singapore and other markets in that region. We're doing our customers take us everywhere in the world. So we have folks that We'll head down to South America and then in China for those customer deployments and to support those engagements. So my team is truly a global team And this is something else that we have worked very aggressively is to put people where our customers are located. So we're not flying people back and forth across the world.
That burns out the team, but also we are not as responsive for our customers. So a few things that, Tom, we've also evolved in the services offerings is, is again, how do we how do we drive the value for our customers, faster? Now again, a lot of our focus has always been on the implementation services. The deployment of rapid response. But as we've engaged with our customers and as the market has changed, our customers are looking for more from And I'll just highlight a few boxes on this slide.
Change management, when we think of change management, a lot of people think of organizational change management, they think a broad, changes within, within a division or a region for a country or for a company. That's not the focus of what my team is necessarily doing. What we're focused on is helping companies change the process by which they're going to do a specific task. We've deployed rapid response. They're replacing spreadsheets potentially, they're replacing another tool potentially, but how does that specific job change?
So we're not here to do change management from the scope and scale that our partner might be doing. We're here to complement what that partner might be Another aspect I'll highlight is what we call premier support. So our customers engage With us, we finish a project, we leave, and they say, wow, I still could use a little more help here. So we want to put in a model that is a little more cost effective for them to be around with that customer to support them as they have new requirements as they have new, new features that they want to deploy. And this is where our India team comes in and we can help them in a lower cost model or even with the delivery center, we can have folks located closer to their facilities.
And I'll also mention here the business transformation roadmap. So I think that that is something that we too are getting a lot of interest in. In that a customer says, Kate, how are you going to make me successful on this journey? What are we going to go do to make sure that at the end of this project? I know it's going to finish on time and on budget.
Again, we want to be able to work with the customers to drive the overall sales cycle to get them to a successful deployment. And this is where, on this journey, we will start that initial phase working with the customer. So we could come in and do a roadmap session, something that talks about where are we going to go, how are we going to deploy the different phases how are we going to deploy by region, by brand? How are we going to engage or be part of a broader program? We get into a lot of customer engagements where we have a systems integrator who is currently involved doing a much larger transformation program.
And so we will engage with that customer to be a subset of that overall transformation. But these are some of the typical steps that we'll go through to get to where the project starts and a project then might be 9 to 12 months typically. Not all projects last that timeframe. We have some that can be 6 months. And I actually have an example here at the end of the presentation that I'll talk through that's a little faster in that respect.
But generally 9 to 12 months is a typical engagement. We do also get into engagements that are multiple phases, so we might deploy an initial phase upfront, a phase 1 deployment by region, by world, by overall requirements, and then we'll continue on to, to subsequent phases. And that's also another area where we'll turn over some of that work to a partner to let the partner drive those long term deployment activities. So collaborating with partners, I want to talk about that for a minute because it's not an either or, it's not Kinaxis or a partner. I'd say in most cases, it's an and.
We do have customers that come to us to say, look, Connexus, we're buying the solution from you. We want you all to deploy it. Want to make sure it's successful. It's going to be a narrow scope specific around the technology. That's probably 20% of our engagements.
It also might be in a new region of the world where we that there's not a lot of talent around rapid response, which bring people in to support that activity. But A lot of our engagements today are collaborated with partners. And so we will engage upfront with that partner. We'll map out a joint plan and a joint approach will bring the best skills from the Kinaxis team and from that partner to drive success with that customer. And we have multiple examples of where that has worked quite well for us.
And this is an example and a representation of how we would engage with a partner. Now, this here shows 6 months, but 6 months, this is a phase of an overall engagement. This actual project lasted, I think, 2 years. But you can see the various components and activities within that project. And you can see who led or where it was led by the SI led by Kinaxis and then the joint involvement by each party.
And I think that, Tom, that this is where we in this scenario brought in the core expertise and capabilities around rapid response. The folks that we had on this project have a lot of deep expertise. They have direct knowledge and collaboration back with Andrew's team from a product development perspective and then we can represent that with that partner and drive that program forward. So this is, something that we have done on a number of projects and we're really trying to drive this when we get into the large scale customers this is this works works quite well. So a couple of examples of where we've had success.
This is an engagement that I talked about was about 6 months in effort. This is a large global, global automotive manufacturer. And in Europe, the European Union is a requirement that the mix of cars that are sold has to have a certain level of CO2 that's submitted. If they go above that amount, there's a significant penalty in which they need to pay. So how do they get the visibility of which cars and how much which cars are being manufactured?
And sold and then what's the volume of CO2 that those cars are emitting. So this was on a very tight timeline a very tight requirement that had to be delivered late last year. So we work with this customer to define that model and to deploy that overall solution and to allow them from a global perspective to create that mix. This too was engaged with a partner of ours, a large systems integrator led this activity and it led to a successful deployment. And so this manufacturer has met their objective for the European Union and they have not paid any penalties, but I know of, to date.
So very significant, very significant win there for us. Another example here is with a beverage company a global global beverage company actually, but we did this work for the wine division of this company. And when you do a project out in wine country, fortunately, it's not very difficult to staff that project. That's one of the challenges I deal with is staffing projects and And, and so people do like to that for some reason, they spend a lot of weekends there. But, but this is, this was a very unique scenario too.
And these are some of the challenges that we take on, from a project perspective that people don't really think about. So the most interesting component of this project is we think in a year of 12 months, maybe January to December, in in in winemaking, grapes don't think that way. A vintner year is very different than a calendar year. Because grapes grow at a different rate. There's weather that plays a big factor in that.
So it could be a 13 month horizon. It could be a 14 month, it could be 10 month horizon. But we needed to accommodate that because the grapes come in at different times potentially and the volume of grapes come in at different time. And as a result, this company had a significant challenge with an inventory and shipping the wine where it needed to be based on the market demands. So we worked very closely with them to define a solution to meet this requirement, which is now applicable, obviously, across that entire industry.
So a very unique, unique use case here and something that drove significant value for this customer and reducing what they call as, as stranded wine. So they would ship it to locations where there is no need for it. And then they have to go back and pull that in. So, so a great scenario and a great example of a rapid response solving a unique business challenge for our customers in a great industry. So looking ahead into 2019, where are we going and what are we doing?
I do get asked quite a bit where do I spend my time? And, a lot of my time is in our newer markets, certainly over in Europe and in Asia. And we need to hire folks over there and we need to grow those markets and we need to develop our partnerships and our deployment capabilities along with our partners in those regions. And John talked about the culture, so that's a very key component of what we do as we spend into new markets. And I'll tell you, when I was at IBM, I had the chance to travel the world as well, and I would go into China, for example, and the culture at IBM in China was exactly as it was in New York City.
And that was one of the values of IBM. And something that we're really trying hard to do here is to make sure that when you walk into the office in Japan or in Korea or in Amsterdam, it's the same culture that you would get in Ottawa. And it's not an easy thing to do because they have cultures obviously in those parts of the world. But we work very hard to do that. So that's where I do spend a lot of my time, is going out into the and expanding our abilities to deliver into these new markets where our customers are buying our solutions from us.
We are going to continue to be developing out delivery center concept, certainly something we'll be doing in Asia. And as well, what we're calling these for strategic services offerings. And again, these are meant to be complementary to our partners, working side by side with our partners. But when customers are saying, Hey, we want to focus on a narrow scope or specific technology focus. This is where we can come in and work with our partners and provide these skills.
This will not be a large team of folks that we have It's a few folks that we have focused on this who kind of work 2 hats actually. So we may be bringing in architects with deep rep response expertise but then they can go and work with the customers to deploy a roadmap and how best to, to define a solution and deploy that based on their business development. So this will be a key focus for us going forward into 2019. And that is what I have. And I think at this point,
and turn it back over to Richard.
David, I appreciate that. We're going to take a short break now and come back at 5 after 10. For the presentations by, EY, Ipsen, as well as Flex, and then we're going to have a Q and A session afterwards. So thank you. All right.
Well, welcome back to the second half of the Investor Day. It is my pleasure to introduce Regina from. And, she's going to give you, E. Y's perspective. And right after her, session, we'll have a few minutes to ask direct questions and then we'll proceed with our other 2 customer presentations.
Thank you.
Well, good morning, everyone. Really glad to be here with you guys today to represent in our supply chain practice. This is a huge, new strategic partnership for us. I think you probably have seen some of the press releases. So we're really happy to be part of this and I'm really happy to start doing even more work with Connexus.
And so I'll start off
with a brief introduction of myself, Regina Sanders. Based out of Atlanta, Georgia, I have been a consultant in my higher career. However, I started off, as being, being educated as an engineer. And I always say that engineers make the best consultant because we know how to solve problems. We know how to get into the details.
Over the past 20 years, I have been on the systems implementation side as well as the supply chain transformation side of the house across multiple industries. I've spent most of my time in the Advanced Manufacturing Or Industrial sector. So working with a lot of the heavy industrials, a lot of the, Aerospace And Defense Companies as well as Chemical Companies. Implementing supply chain softwares, doing supply chain transformation, really getting into the weeds of what the real business problem is. And how we can actually solve those.
I spent a few years also doing, consulting primarily with Private Equity Firms, their portfolio companies looking at opportunities to take cost out. And at the core of everything that I have done, supply chain planning is at the center of it. It's so important to understand what needs to be done from a demand side, the supply side, and how to put all that together to make sure that manufacturing has what they need in order to get the product out the door. So, this is an incredibly important part of a business and its operational value. And I for 1, have been extremely happy to see over the past past 5 years in particular, supply chain has now become less of a conversation about operations of getting things from point A to point B and more of how can I leverage my supply chain to be a, strategic, differentiator in how I run my business and how my customer's perceiving?
I'm going to
spend a little bit of time today talking about our E Y supply chain practice globally, and I'm going to talk about some of our experience. I'll talk about some of market challenges that we see as well as what our vision is. I'll talk about why we have decided to do some partnership and work with Connexus and why this is so important to us. And, give you a little bit of flavor of how we partner. You heard a lot of the conversation today about, they bring the expertise.
We've worked with businesses and we know how to really bring that change management component to make sure that whatever we're implementing sticks, right? So that's, I'll talk a little bit about how we're going to partner on that. Particular area. And then I will talk a bit about our future vision. And I'll hopefully leave a little bit of time at the end to take some questions from you guys.
Does that sound good? Alright. So globally, our supply chain practice at since 2015. If you really think about it, E Y kind of reinvented itself from a supply chain perspective, not in the supply chain, but advisory services perspective, back around 2008, we got back into advisory services. And supply chain was one of the areas that we spent a great deal of time really building out.
So you'll see that the highest concentration of our supply chain practitioners are, of course, in the Americas and in Europe. We have, emerging growth in Asia Pacific and Japan, But you'll see in that total number, we have a budding and growing supply chain planning practice, again, with the highest concentration being here and in Europe. We have, in terms of an integration perspective, we plan to continue to grow this practice. This is a huge investment area for us. We expect to eventually reach 6000.
So we want to
take that almost double. We
want to want to realize $3,000,000,000 in revenue. We have a lot of growth targets from an investment perspective. And we really wanna be perceived as the number 1 or 2 supply chain provider. And, you'll see in a few slides ahead We recently got a great accolade from ALM intelligence of being, in the top quadrant of supply chain planning providers, in the Americas, as well as, well, actually, globally. It's a global survey that they did, on the level of Gartner.
So you'll see that a little bit later. But as you can see, we've got a nice footprint. That I think that balances out, the Kinaxis footprint that you saw earlier. In terms of experience, So, when we think about supply chain, we kind of kick it off with this framework. There's a strategic layer that we call our supply chain intelligence layer, So that's all around analytics and using data for decision making.
From there, we've got our strategy layer where we look end to end and what the operating model needs to core of the plan source make deliver, right? So this is where we get into a lot of the integration that we'll talk about with Kinaxis, how we actually execute supply chain planning, and you'll see at the very top of that integrated operational excellence layer is integrated planning segmentation, because that is the heartbeat of a supply chain. Digital, you heard and talk about that earlier and everything that we do, digital is embedded in that from a data perspective, as well as using advanced analytics There's a lot of things that you see out there. And the reason that we listed those on the left hand side is because there's a digital thread and everything that we do in our supply chain practice in terms of how we create our solutions, how we determine who we want to partner with, as well as how we deliver to our clients. And that last layer, we call it supply chain resilience.
So that's our sustainability layer that once we do all the strategy, once we use the data, once we prove the operations, how do we make it sustainable? And that's where the change management component comes into play. Understanding a company's business readiness, understanding what their culture is, what their attitude is for change, and how we're able to make whatever changes to the systems or people or technology. How do we make that sustainable? So that's our supply chain resilience layer.
The other thing that I'll add to that is risk. Right? So with a growing and complex supply chain also introduces additional risk, right? So One of the things that we lack a lot about Kinaxis in particular is the ability to do a lot of the simulation so that in a disruptive market, in an, in market of uncertainty, we can be responsive and that sort of helps with that whole supply chain resiliency piece as well. Here, you'll see, all the sectors in which we do supply chain work.
I've highlighted the ones that we have in common with Kinaxis and you see there are several others, that are listed there. So I mean, these are opportunities as we continue this partnership to help and expand together into those ones that you see in Greg. So the Kinaxis, so what we have done is join forces to really drive supply chain reinvention we feel that together with the capabilities that we have and the wonderful tool that Connectis has, we can drive even more penetration across the market. I'll talk about this in a little bit more detail later, but what you're finding now is that There's a lot of companies that are beginning to open up the hood on their ERPs as they look at replatforming. This is a great opportunity now for them to really look and see do I have the right solution for my supply chain planning since it's becoming such an area that I need to focus on?
You'll see that Our alliance focuses on transformation, solution architecture, program management, as well as the change management piece that EY will be bringing to the equation. And then from a Kinaxis perspective, the in memory speed, the rapid scenario planning, and the Flex ability of being able to look at data from the end to end supply chain in order to make decisions. That's the core of why we have identified that this is a great partnership for us to be part of. You'll see that as we continue this relationship, we have the industry synergies already I mentioned earlier, there's other industries that we'd love to be able to move into together. And in terms of co innovation, there's opportunities as we work together.
And solve problems for clients, figure out ways that we can help make both of our solutions, solution sets better. How we can learn more about these other industries, how we can figure out other ways to add additional capabilities to Connexus, but at the same time, how we can help them with those challenges of organizational change management as we implement the solutions with the clients. So the market challenge, Anne spent a great deal of time talking about, you know, just the evolution, to Industry 4.0. And the reality is that when we look at our client, they fall into different stages of maturation when it comes to this evolution. Some of our clients, particularly the ones that I work with in manufacturing, they have amazingly innovative products, but when you look at their operations, their operations aren't so innovative.
And they need the help, they need the additional visibility that supply chain can bring to them. This past year, we did a survey of over 400 companies in the U. S. And Canada that are in the industrial product sector. And they anchored on 6 things that we call the 6 big bets that they want to focus on.
And I'll share those with you. The first one was customer connectivity. Being closer to the customer, being more responsive to the customer, being able to respond quickly to increasing customer demands of personalization and customization. As mentioned earlier, our business to business customers are beginning to want to have things at a drop of the dime, just like our business to consumer customers do, right? So in order to be able to achieve that, we've got to have a very responsive supply chain.
The second bid bet was supply chain reinvention, really looking at supply chain as a strategic differentiator in terms of operations. As well as leading to that customer centricity piece with making sure that they're being responsive to their customers and increasing their customer service metrics. The third one was, of course, digital. The 4th advanced analytics. 5th was talent and being able to bridge that talent gap.
And then lastly, risk and being able to take a more proactive versus react the left hand the right hand side, all the way over, to the left when we talk about the industrial revolution and the need for digitization. The need for looking at data in a more strategic way. There's a few things that we feel that, our joint partnership can address. These things anchor on, and I'd really like the one in the center here. New planning technology and robotics We'll actually, if I move over to the right, I'm sorry, 80% of all companies have some semblance of a sales and operation planning process, but only half of that is really something that is a strategic differentiator for them.
So what we're looking at is a large number of companies that have what they call an SNLP process, but how effective is that process? Are they really getting the return that they could if they were focusing on that in more detail, have the right tools, have the right people in place, have the right organizational structure. You'll see that there is also huge change for data sharing between suppliers and customers, between the company that's actually making the product and their customers. So there's a lot of opportunity to take advantage of this platform and this new ecosystem. And with that new ecosystem, as I mentioned earlier, introduces more risk, which means that it's great to be able to test out different scenarios before you actually commit to what this new plan is going to be.
Or if there's some disruption that happens, I can very quickly go in and be able to figure out what impact is this going to have on my overall supply chain. In addition to that, people are also trying to identify where they need to actually place their big bets. So what technology should I really invest in that's going to give me the biggest ROI, right? What new products do I need to invest in? How do I introduce those new products?
So being able to have additional planning capabilities and, like, Connexus, and that's one of the reasons that we want to partner is it helps us with those types of decisions, and it helps us just bring a better overall solution to our clients. You'll see that there's also big gaps in supply chain planning talent, right? So to the degree that we can automate some of those supply chain planning processes allows us to make those planning jobs of old, a little bit more attractive to this newer generation of talent that coming out of college, right? These are people who want to be on the cutting edge. They want to be on the bleeding edge of new technology.
They want to use, analytics. They don't necessarily want to be the person who enters in the plan, in the computer anymore. That's just not, that's just not the way that a lot of the millennials and the new millennials are wired anymore. So to the degree that we can introduce automation, AI, IoT, into the planning process, This helps us attract even better talent and it allows us to focus on those things that are really going to matter versus those things that could be, that are very manual. A couple other points.
88% of companies have ERP systems, but only 22% are using it effectively for planning. I would argue that some of the large ERP systems that are out there, have planning capabilities, but are they the planning capabilities that are really needed for very specific and unique problems that our clients are facing today. Are they really helping them be proactive? Are they helping them to be responsive? So, those are some of the challenges that we see that this Joy Conaxis E Y Alliance can address.
So moving into this, so Hawaii, and Connexus. So, of course, Connexus is considered a best in breed when we partner with software providers, we want to make sure that these are individuals who are represented in the top quadrant of Gartner, Connexus is there. And rapid response in the concurrent planning is a huge differentiator in terms of just how Connexus goes to market and what really differentiates the software. From an E Y perspective, as I mentioned earlier, are alluded to, about 90% of our customers are on, other planning systems. So then when I say other planning systems, these are planning systems they might have had for years.
And now I feel like we're kind of back in the stages of the late 90s when everybody was out doing software selections to figure out what ERP they needed. Now, I feel like with the re platforming of a lot of the ERP systems that are out there, the hood is open, and the companies are beginning to reconsider or consider some of the other emergence like Conaxis to say, well, wait a second. I have even more need for more robust planning capabilities. What are the companies that are out there that are the best that I might look at? So I feel like there's going to be a lot more resurgence of software selections and a lot of opportunity for companies like Connexus to take some of that market share away.
From those that are traditionally dependent on their ERPs for, for planning. And in addition to that, I mentioned that that E Y also brings the breadth of capability and, the practitioners. And we have spent a great deal of time building up our practice, building up some of our internal solutions that can be complimentary, to Connexus, We have been recognized, as I mentioned earlier, in the top quadrant from ALM, from a breath perspective, a reach perspective, as well as working with our clients versus coming with a bag of tricks and saying, Hey, this is going to work for you. We actually sit down with the client, understand their business problem, and make sure that we're bringing the right type of solution to whatever their business needs are, be it an industry specific solution, or be it something that is going to help them be better at new product introduction or help them be better at predicting and responding to different disruptions that are going on. Across the, supply chain.
So how we partner? So this slide is a bit akin to what you saw earlier from David. So when we look across the top, most of these roles all of these roles are represented on any engagement that we will that we will embark upon. Program management, change management, process enablement, data integration and development. So the areas that we'll jointly be working on, of course, span this entire spectrum, but the differentiating factor that we really bring is the business process architecture and the detailed business process design.
We spend a lot of time learning about what's important to different industries, and how we can best implement the software solutions for those industries. Organizational Change Management And Business Readiness are key to success in any software engagement. And with our proven methodology of working with clients to understand the business problem obtaining the right buy in at various levels within the organization, as well as figuring out the right structure of the organization to actually receive the new solution. This is our sweet spot. This is one of the things that systems integrators bring to bear when it comes to implementing these solutions and making sure that you've got the sustainability and the stickiness to really get the return.
In the past, there's been cases with, I've implemented software solutions. And if something goes wrong after go live, the client has a tendency to just blame the software. Well, part of our role is to identify process adherence metrics, how you really should be using the software. In order to make sure that at the end of the day, you can see the market change and how you're running your business process. How your people are responding to it, as well as what changes and roles in organization might need to be tweaked a little bit to really get the biggest effect of implementing the new solution.
So this is where we play. This is how we feel like our capabilities can be vastly complementary to what, Connectes brings to bear. So future vision, kind of a summary of everything that I've spoken about. So first of all, training, you might ask, so do your guys already understand Connexus? Are they already trained in Connexus?
Well, over the past, 6 months, we've been working to develop a plan to really upscale our, EY Resources We've already, accomplished this in, in the North America. We've had 3 sessions. And right now, I think we're at about 50 plus practitioners that are familiar with Kinaxis that are learning more and more about it, that are participating in these sessions that we've had, so that we're ready to go. We also have been sharing our pipelines. Those companies or clients that we have that we have on both of our target lists, we've been having periodic calls to really understand what that pipeline looks like and how we can further penetrate that pipeline.
As mentioned earlier, the way that we partner is looking at shared customers, but then also figuring out other customers that we might be able to go in together jointly with. So the total training piece, and teaming is how we've really been working to date. The market We will also be inviting some of our clients to connections that's going to be coming up. And we're looking at how we already play in certain sectors and figuring out how we can penetrate new sectors. And then lastly, from co branded assets, where there's opportunities where we've been doing some experimentation with machine learning and AI, we're sharing that information with Connected to see if there might be in the future.
Some type of joint development opportunities. So that's our vision, for us to be able to work together to complement each other as we're delivering, but then to also go to market together and teaming along the way. Making sure that, Iron Sharp is iron. And that's one of those situations that I feel like we're in here with E Y and our supply chain practice working with Kinaxis, 2 great companies coming together to really deliver the best in solutions, to our clients. So with that, I have a few minutes left, for questions.
If anyone has some thoughts, based on what we just talked about? So initially, we will focus on where we're both in. Those industry verticals that we also are present in, and we're identifying 1 or 2 so we can really get going improve the model and execution. Then from there, there will be discussions. And in fact, we're about to enter into our fiscal year planning process now.
When we do our fiscal year planning, we actually do it by sectors. So, we're going to be bringing in, I mean, inviting Connexus to some of those sector planning sessions that we can understand what our target accounts are that are, the same as some of those that Connexus is also looking at. And we'll be able to do some joint planning, from there. The timing is great because right around the April, May timeframe is when we're really in earnest start doing our fiscal year planning. So this is going to be a great opportunity for us to focus on where we already are there together, but then see where we can further expand.
Yes.
Well, I think that the way that Connexus goes about it is really unique. And the breadth of it is unique because it is more end to end than a lot of the scenario planning tools, software tools that I've seen out there. So to me, that's the uniqueness, the breadth of it, because it is end to end. It gives the visibility. It allows, some flexibility in terms of trying out scenarios.
And I will have to say that when I first had my demo of Kinaxis, that's the thing that I gravitated to the most, because when I look at my clients that are really trying to figure out, you know, trade off, you know, that to me is a huge differentiator and the ones that I've seen in the market don't really compare Yep.
Yeah. Do you, partner with any other software vendors on
the supply chain management side. And if you do, can you
just sort of give us a sense of
the relative ranking where Kinaxis would fit?
So this relationship with Kinaxis is a new one. We, so first, to answer your question, yes, we do. So our position in our supply chain practice is that we are system agnostic, but we want to identify the right solution for our clients. That could be a Kinaxis solution. It could be something else.
But for the most part, we wanna make sure that we're partnering with those that are best in breed, such as Kinaxis. So in terms of ranking, because this is new, we haven't developed as big a pipeline as we might have with some others, but it's growing. And we're spending a lot of time and a lot of to make sure that that happens and a lot of investment to really educate our people, and go to market together because we see Connexus as leading. And, I think that very quickly it's going to surpass some of the other partnerships that we have.
Thank you, said that a lot of organizations are reexamining their ERP solutions. A lot of these ERP vendors have their own supply chain solutions. So can you talk about, are the supply chain decisions being made independent of the ERP provider or do organizations tend to favor ERP providers that have their own supply chain solution?
So, this is the age old question of how the business and IT organization are working together and which one is really leading. So when we go to market, we work with those individuals who are in the business, and I can say, in my experience, we see a lot more business driven decisions when it comes to supply chain transformation. And when we see that, we see people looking across the spectrum at the right solution, not just going with a particular ERP platform, because this is what the IT directive is. So to answer your question, I see a lot more business. I'd say maybe 70% of the companies that I work with is that the transformation is being is looking is being looked at as a strategic business decision.
And when it's being driven that way, people open up the hood and wanna make sure they're getting the right solution, not necessarily one that is dependent on their existing ERP layer. Because we can always integrate. And now with the advent of the cloud, it makes it a lot more easy to share information. God is the day of having to actually build out these arduous, interfaces. There's a lot of plugins.
There's a lot of opportunity for data sharing in the cloud and data lakes. So it makes it a lot easier for businesses to make that decision to go with something that's different from their ERP platform.
You mentioned that you're right in the middle of a big wave of procurement planning vendor selection. Is there something unique about today or this, this year, that makes that happening, the way that's happening right now?
Well, I think that it's just the focus on, having to build a supply chain that is responsive and that is a, as a differentiator. So I feel like there's just more emphasis on making sure we get the right solution versus just looking at it from a technical implementation perspective. In the past, people were moving from manual processes to a system. Right? Now people are becoming more strategic in those types of decisions.
It's not just about getting an IT platform in place. It's about the right IT platform that's really going to address my business challenges. And I think that consumers have driven that, for companies to look less at operations and more at the strategic value that they're bringing to their customers. And when they began to look at things strategically, It's all about making sure that I'm enabling my business processes in the right way versus just putting in a solution to make things go faster. I think people have figured out that, you know, a solution is not gonna solve the problem if we've not got strategic vision, and we've not got right processes in place.
Okay. Any other questions? I think we're almost at time. Could you take one more?
You mentioned that a lot of customers coming to you because the ERP vendors are kind of replatforming their positions
or their platforms. Could you talk
a little bit about that and if you have any quantitative stats around what you're seeing?
So I can speak in generalities, on this, but I would say that in the advanced manufacturing sector, which includes Aerospace And Defense, industrial Manufacturers, heavy equipment companies, and chemicals companies. I would say, of the, the group that we work with, about 60% of those are looking at other solutions besides their ERP. I will also say that people are feeling a sense of urgency because there is a timing of when on premise is not gonna be supported for, some ERP systems that are out there. So that's creating a sense of urgency to begin to take more of a look. And so I'd say 60% of the clients and growing into like 70% are really taking a close look at you know, what am I gonna do?
Do I just kinda take my chances and stay on prem, or do I really move to the cloud to make my business more responsive? And if I'm gonna do that, well, this is an opportunity for me to, you know, take a holistic view at everything that I have. Data sharing is a lot easier. So it's not as important for me to have everything on the same platform anymore because as long as I have a data lake and as long as I have extractors, I can get the data that I need and I can use the best solution.
Hey,
good morning, everybody. Name is Gash Shahim. I'm oops. Sorry. Let me oh, there you go.
Alright. So Gus Shahin, I work for Flex. I'm the CIO at Flex. I've been with the company for 19 years now. I took over as CIO the last 6 years.
Actually 6 years almost to the day right now. I played several roles with the company. Both in IT and out. So, I'm going to give you a quick overview of Flex, where we are, how we operate, tell you a little bit about the complexity, and why supply chain is one of our really bread and butter. I mean, this is what we do for a living, and this is extremely important for us.
And I'll talk a little bit about that. So just quickly about Flex for those of you that don't know the company, we're about 25 plus 1,000,000,000 in revenue 200,000 employees. We also have 3000 design engineers around the world. And we have obviously quite a lot of manufacturing footprint around the world, just to give you a flavor of where we operate. This is actually one of our competitive advantages We operate in 35 plus countries around the world, with the world changing over the last several years really moving more towards regionalization.
I think, Anne talked about that customers want their products more customized to their needs. This has played a big role for us with the tariffs, that's been, you know, the trade war is really that I've been going on. That's even increased even more. We're seeing a lot of activity there. So this helps us out quite a bit.
We operate in all sixteen so called industries, but where $1,000,000,000 or more in 12 of them. So you can see the leverage we have in terms of data and the insight we actually get in terms of data. So healthcare, automotive are 2 of our fastest growing industries. Healthcare has been on the rise. Obviously, connected devices and so on and so forth.
Automotive, even though the holistic automotive industry is slowing down, but the autonomous vehicle is obviously on the rise, not just here, but also on China. So we do a lot of work in that space. And then all the other industries, obviously, we operate in networking, enterprise, compute and telecom are some of our biggest customers that those industries are our 3 of our biggest, industries that we play. And, you know, with customers like Cisco and Juniper and all the other guys. And then you have the 4G, 5G going out strong with Ericsson and Nokia and others.
So that's the space we operate in quite a bit, lots of, lots of data in that space. The other thing about this that really helped us out is you're seeing a lot of convergence in the industry. When I say convergence, I mean, in order to win an autonomous bought a deal, you really have to rely on your enterprise compute folks to kind of help you end that deal. And that's what we've seen. You want to win an industrial deal these days?
Have to rely heavily on the networking folks to do that because they're all converging. The industrial guys need networking equipment, the auto guys, had servers running in their cars and so on and so forth. So that's been really, really effective for us. Our design engineers, 3000 of them, we decided we wanted to focus on certain areas and go real deep have domain expertise in certain areas so that we can actually work with our customers early on in the supply chain. And with a company like Flex, most of you know, our margins are 7% gross margins.
So not very high. Obviously, the $25,000,000,000, most of it is COGS. So enterprise revenue is about $75,000,000,000 to $100,000,000,000 for our customers, but when you operate at 7% gross, you have to do things different. You have to do things really efficient. So we've decided, if we can focus getting real deep in certain areas that we operate at large scale and design, we can actually help our customers quite a bit, and that's been proven to help us out quite a bit.
We get in early. We help them with certain design. We design in the right components that we can get and have better relationships with because of our scale. And that really helps our customers. So obviously cloud autonomous 5G, I've spoken about IoT, everybody knows that.
But you can see, supply chain is another unique advantage that we have. We see ourselves as a supply chain company. And that's really how we operate. And I'll talk a little bit about that here in a second. But just before I get into that, just to give you the complexity and the scale of our my organization, you know, IT, we've got about 3200 employees globally, 1200 of those are scattered in those sites that you saw on that map.
And then the 2000 are centralized. They all reported to, we're pretty centralized, pretty standardized, and that's one thing we we use, you know, as an advantage, especially when it comes to data analytics. And then from there applying machine learning, I think that's effective But you can see the amount of data we store. I mean, we're hybrid. We run on the cloud and on prem.
We see that as an advantage. I don't think we'll ever go either way. I think it you're going to always need on prem for mission critical stuff and you're going to use the cloud where it's effective in SaaS. So we use that pretty effectively, but I think that's the right we have the right balance, but we have 140,000 suppliers, 75,000,000,000 MRP records. Running on a regular basis.
So that's, that's how we operate. As I said earlier, increasing Regionalization is becoming really, really top priority for our customers, particularly in the consumer space, but now we're seeing it in the other spaces as well. Customers want to get or our customers want to get closer to their customers. That's really, really important for them. In the past, it was all about labor arbitrage.
Everything shifted to China or Asia for lower labor costs. Now that's completely changed. It's more important for customers to be closer to their customers and deliver their products faster. Life cycles of products are getting shorter. That was really key.
And then, like I said earlier, with the trade, you know, the trade wars that are going on, it's really opened the eyes of some of our customers, and they've decided shift their supply chains. Lead times, lead times are becoming really, really tough. Specifically last year, as most of you know, we've had the records amount of shortages during components. And again, that a lot of that was driven by the autonomous cars, things like, capacitors, MLCCs We're very short in the market. So when you have shortages like this, planning becomes super important, number one thing you need to do is plan effectively.
And I think that's helped us out quite a bit. The rest I've talked about. But basically, for us, advanced planning is what we use rapid response can access for. It's integrated in our entire ecosystem. I'll talk a little bit about it in a second.
We, it's very well, tightly integrated with our ERP. We use it for fast MRP, what if calculations, we use it for clear to build, We use it for engineering change orders, but, you know, it gives us visibility, flexibility, velocity accuracy. So This is super important. I think Ann talked about that. That'll allow you to get to machine learning.
If you can't do, if you don't have the right data or accurate data, their machine learning algorithms aren't going to be as effective. But, this is something we've been using for a while. As John mentioned early, we were an early, early customer, and then we've grown with the company. And we've scaled out Now we have it very tightly integrated and we've created a platform we call Puls, which I'll talk about next, which is, Well, before I talk about it, let me just quickly talk about Kinaxis. So we have about 4 and 12 operational groups, obviously, using it, 450 plus customer planning analysis done on it.
We've got over 5000 automated weekly scenarios. And we have like 1300 user simulated scenarios going on. But what it's done for us is really it's improved our MRP. It's given us reduced our forecast by 25%. Now when I say that, if you think about our customers, we have over 1000 customers, all giving us forecast data.
Believe it or not, I think they'll tell you the same. They can't predict their forecast. They always overdrive their suppliers. Some of it's for flexibility, but a lot of it's just because they can't really predict. I mean, you look at the customers like that sell through channels and so on, their demand is really all over the place.
So what we've been working on with them lately is to try and help them predict their demand. A lot better with the use of some of the AI capabilities and some of the other tools we have, but it's really been very effective for us. We haven't deployed globally. Like I said, 81 sites around the world is still going. We add sites on average, we'll probably add 5 to 10 sites a year as part of doing business, and we'll probably even take out probably the same amount.
So there's constantly it's even going out there and deploying the product. So it's really, really, you can see the scope 27 sites in the Americas, 19 in Europe and 35 in Asia, which is our biggest, use of force. We generally go out and because we're such a big company, huge scale, like I said, standardization is key. My team has to support several, about 80 different applications we support that we standardize across the company. We send out surveys on a regular basis to make sure 1, they're satisfied and 2, it's actually providing value.
And if not, we'll work very closely with the business, figure out what we need to do if we need to replace certain tools. So you can see, well, the numbers aren't showing here, but it's over 60% in the first two and over 50 in the second, I'm not sure why it's not showing, but efficiency, response time and accuracy, which is what the users, the planners, the master schedulers are primarily getting out of this tool. And that's exactly what we envisioned when we implemented this and decided to partner with Kinaxis and deploy it. We've digitized our supply in about three and a half years ago, July will be 4. But what we did is we decided to take data in real time from all our sites globally, Kinaxis being one of them.
It's a vital part of our Pulse Ecosystem is what we call it. So what Pulses is basically it's real time supply chain data for over 5200 users around the company. But do nothing, but look at that data on a daily basis. That's all they do. They can log into it from most of them obviously do it from their laptops or their mobile phone, but they look for anomalies in the supply chain.
Any spikes, any things that are abnormal And as soon as they see that, they'll start working with the site to try and change that, push something out, if, buyer in Austin put out a PO for a component that the lead time on is extremely is far away and so on and so forth. So we have like 5200 supply chain folks that operate off the spouse platform. Of which Kinaxis is an integral part of it. It's not just Kinaxis, it's other tools as well, but Kinaxis plays a key part of that. And the 2, the platforms available on their cell, mobile as well, and it's actually pretty effective.
So this we launched about 3, 3.5 years ago. And what it's done for us really is, it focuses on specific issue. It removes friction from the supply chain and increases asset velocity for us, which is one of our most important KPIs. If you think about our end to end supply chain on average across a 1000 plus customers we have, but when we procure them, it components until we actually build the product about on average 60, 65 days. Every day, we improve that is about $60,000,000 to $70,000,000 of free cash flow for us because that's the inventory we're sitting on and it's cash, like John and others said earlier.
So that's really, really important. We've taken about 10 days off that supply chain. It's helped us quite a bit. Freeze up cash flow for our shareholders, for our investment community, allows us to invest that money in other places. So on and so forth.
And we continuously work to improve that. Now obviously, those 10 days we took out came back last year because of a lot of shortages and stuff, but we're diligently working to bring that down because there were some scenarios that were out of our control in certain areas. And real time mobility collaboration. I think Dan talked about that as well. Collaboration is super key for us.
Collaborating not just internally within Flex, but also across with our customers. We started sharing some of the analysis we do when our customers send in the forecast together with them and I think that's really helped remove a lot of the overdrive that they send us. Once they get comfortable, you're not going to dip into their safety stuff in turn on ROP reorder points automatically. The system will tell you when you need to build and so on and so forth. Then they'll actually start really feeling comfortable taking out all that overdrive.
They'll still drive you more for flexibility because they want that. But I think that's really helped reduce our inventory quite a bit. And that's really important. And I think Kinaxis, again, Andrew and others talked about it. The in memory calculations that they have, I think, are superior.
We haven't seen anything like it. I think the calculations the speed of the calculations is really what caught us at the beginning and really allowed us to go there. When you have so many alternate parts, so many alternate supplies, that speed becomes really, really important and effective. Other areas in future things we're working on with Kinaxis they spoke a lot about AI and machine learning. We're doing that with Kinaxis, and we're also doing it on our own as well because we feel we've got enough data there and we can apply some of the algorithms there and work with our customers on certain help them predict stuff, but we're also doing it in other areas in production, preventive maintenance for equipment and so on and so forth where machine learning is much more mature than other areas.
Production scheduling, we saw Andrew talk about it today. That's really exciting for us because that's an area that's super important when you have So you've solved your demand management piece. Now you need to solve your production scheduling piece because that allows you to utilize your equipment to the max. We need scheduling down to the minute so that we can actually reschedule different products on the same line. We can manage that real effect.
This is something we've been trying to look for in trying to figure out for a while now. If you look at most of our sites around the world or probably any manufacturer out there because it's all mathematical algorithms, really. We've the best success we've seen is working with universities, R and D, R and D departments and stuff like that. But I think this is an area that's really going to help us go to the next level. So we'll be working closely with Kinaxis.
The services segment is also something important out of our $25 plus 1,000,000,000 of revenue, there's about $600,000,000 to $700,000,000 of that is services, which means it's repair. And distribution. So when you're trying to plan for the repair business, you rely heavily on historical data, which means you need to have large sets of data, Andrew talked about some of the things they're going to be releasing there. When you're in your memory, obviously there's a limitation on how much data you can load on there. But that's something I think an area that will add a lot of value for us as well.
And, yeah, that's it. This is, just a picture from our pulse. Puls is basically, we've got them running 9 sites. Touch screens. That's mainly where we hold workshops between our different supply chain folks around the world.
It's like 3 in the Americas, 3 in Meehan, I think, 3 in Europe, Asia. And then the actual system is available to everyone, depending on your role, by mobile device or on your laptop or computer. And that's it. Thank you. I'd open to questions.
Yep. No way for the mic or
Can you just elaborate on AI and
machine learning just in terms of, its applicability Canaxis or where you delineate between using Kinaxis? And I don't know if you looked at the self learning?
Yes. So obviously for demand planning, we're working with Kinaxis. We haven't really used, they just released it, right? So we're starting to look at that with them. On our operations, like preventing maintenance for equipment and stuff, that's separate from Kinaxis.
That's really getting data from the and the equipment, the S and T equipment, rather than having scheduled maintenance, we can figure out when we need to actually do maintenance on the machines before something breaks. So we've applied that. We're also doing it on our cost efficiency. So when we go out and look for pricing on components, we have an engine that we built there that actually goes out and looks at certain paid libraries, libraries you have to subscribe for and what's out there on the public, just to see public internet see if we've actually got competitive pricing or not. We've got a pretty good engine there.
So, yeah, it's a mix. I mean, we're using machine we're trying to use machine learning and apply it in production in many different areas.
Tell me if I misread this. I think you said 450 customers touching Kinaxis in some way?
Well, that's 4, yes, 450
Can you see a situation where all of your customers could eventually be using Kinaxis or are there things about some customers that make it not well disposed season can access?
Well, in our business, some of our customers for many reasons want a dual source or they have multiple flyers, right? And we use Jabil, Flex, Foxconn, whatever, for security for it. And so in some of these cases, they want to dictate what they use, and they'll just dump something on you. But a lot of our customers that we actually have leverage over that are single sourced and others we actually collaborate with them over Kinaxis. They start showing them a lot of our.
And then I guess the other side of that question, 450 customers is more than Canaxis, has customers now. And so, why is it that those 450 people are using Kinaxis successfully now with you? Why aren't they buying Kinaxis? Of themselves?
Well, I mean, we're working with Paul on that. There are a few that we've worked together with Kinaxis on and showed them the value. Some of the others, I mean, it's, When you have, like, when you're running SAP or Oracle or whatever, they're always going to try and sell you something that they have. And the sell there is the integration piece, but that's obviously not true. I mean, we've seen that.
We don't run either of those ERPs, I think, with the world of APIs today, integrations come easier than ever. It's just natural. There's a couple of products out there, but I think Kinaxis has a lot to offer. And I think a lot of the customers that are seeing it, when they come visit Pulsar, giving Paul a call. So many reasons for
I think you talked about adding, I think, 5 or 10 site per year.
Could you
just sort of give us some perspective over the last 3 years as to how much spend you've had with Kinaxis and the growth rate there in terms of spend?
I mean, we won't I don't think it's appropriate to talk about spend because of the relation we have and the type of licensing we have with them. But remember, when we add 5 to 10, we also take out 5 to 10. So because we're always consolidating. So, but, you know, we takes us about right now because of how quickly we roll this out, probably 10 to 13 weeks to get a site up and running on Kinaxis. And you know, we have a good working relationship with them,
I don't
know, up and down, but can't really talk much about the spend.
Yep.
Do you guys get any added benefit when your external customers or suppliers use rapid response? The potential for that are the barriers to sharing and getting a network effect here?
Yes, we do. I mean, it makes our life a lot easier once they give us the feeds directly out of, rapid response. I mean, lots of competitive, you know, it's just easier for it seems to understand, but It's you know, some customers take that to you. It's really different across the, I mean, there are some customers that take that data very seriously and are very speak about, because it's their demand data. They don't want it shared with anyone or any entity.
And lots of NDAs, obviously, going on and there are others that are much more collaborative. So it ranges really.
Flex has a, an in house platform elementum. And it's just, I think
it would be helpful to get a
sense of like what is it that Kinaxis does that elementum doesn't do and how the systems interface with each other?
Yes. So, elementum is external. It's not, it's a company that we kind of spun out years ago. So what we're using them for right now is really more about geopolitical events around the world. And if there's any disruptions around the world in our supply chain.
So they have our supply chain kind of mapped out. And if there's hurricanes, earthquakes, so on and so forth, we'll get alerts, but it doesn't do any transactional. They don't do any transaction. Access a very transactional calculation. We issue out POs once we get the data back to our suppliers, so it's very critical.
Elementum is more outside looking in just kind of a risk, just the supply chain risk tool that we use.
Related to that question, so which modules do you use of Connect the supply and operation planning, capacity planning, demand, planning, inventories? No.
We use all of them except, S and OP because we don't have that as a process in our company. We, you know, We have a different planning process, but you know, the what if, the, forecasting the, clear to build the, you know, we use them all.
Oh, one more
and then we'll end it. Yes, I think you mentioned
that you've got over 5000 pulse
users 2200 wrapped response users. Can you just talk about, why that might be? Do you see that increasing? How do you see traction being built over?
Yes, because, you know, our pulse platform, fans, our buyers are on their planners, schedulers. It's like a larger group, that are looking at load versus commit. Some are looking at component pricing and so on and so forth. So we've got a completely different span. 2200 of them for sure use post, but there are other job functions there that don't require actual planning.
So they don't All right. Great. Thank you very much. Appreciate it.
Job. Am I on? Yes, sir. Yes, so my name is Rona Stevens. I'm very happy to talk to you today.
And I'm going to talk to you about quite a different story. So my story is more going to be about what Ipsen does as a company to fulfill our mission of making, helping sick people and how we partner will connect us in order to do that mission better. So I'm Nolan Stevens. I'm Senior Vice President of Supply Chain And External Manufacturing for Ipsen. If it's a pharmaceutical company, I'm based in Paris.
We have 2 other headquarters in London and in Cambridge, Massachusetts as well. And getting away my age, I have 25 years leading supply chain and manufacturing operations and leading transformation and supply chain and manufacturing as well. I was inspired listening to the speakers earlier when we were talking about how supply chain has changed. And if I go back to the beginning of my career 25 years ago and I think about supply chain at that point in time, I actually remember a story about an individual called Jean Jacques who worked in 1 of 2019 and the Paris office in Jean Jacques was a recycled commercial executive and he had given a job up to retirement or running forecast. And Jean Jacques was a James smoker.
So Jean Jacques uses it in his office. He had a close-up particularly used to chain smoke and he popped away for both and there was builders of smoke everywhere. But he was excellent at forecasting. And if he wants to buy now, What was going to happen, all you had to do is go to Sean Jack's office and ask him for the forecast. This 25 years ago is the first example forecasting the cloud.
So you can see some of the companies I've worked in and you can see underneath, I just summarized the industry segment. So I actually have a lot of experience in different industry segments. And today, I'm in Ipsen. Ipsen is a pharmaceutical company. And I want to talk to you about what's important in Ipsen.
So who we are? So we are a biopharmacy group company and we're specialized and we're focused on specialty care. So specialty care means We are focused on bringing new therapeutic alternatives to people about life threatening our debilitating disease. It's a mission that we take extremely seriously. And we recognize that the patients with these diseases, very often they do not have alternatives.
So they actually get a new treatment, or they have no alternative. So we believe that the agility and the speed of which we work is actually the critical mission that we actually perform. And you can see on the right over here, our ambition therefore as a company is to launch 1 new product or indication every year, which means we will continue to bring new products, new therapeutic alternatives to people who are sick. Our areas within oncology, so it doesn't need translation for anybody. Neuroscience and rare disease.
And in all of these areas, they are critical that they are patient critical. So something just some key numbers. Ipsen is a 2,250,000,000 company. We crossed the 2,000,000,000 mark in 2018. So we're all very proud of that.
And again, we had a 20% growth versus the previous year. So, obviously, we invest heavily in order to do that. So we invest about 14% of our sales back into R&D. On top of this, we also invest heavily in acquisitions. So 4 weeks ago, we announced our biggest acquisition to date inside the company.
For just over $1,000,000,000. So we're quite proud of that as well. And that's a feed into our rare disease franchise. We have 20 drugs at the moment in over 115 company countries and that number is growing fast. We have 5700 employees worldwide, 2 years ago, we were 4500s just to give you an idea of our growth.
We have R&D hubs around the world. And we have 5 molecules in late clinical studies, which means that the launches we're currently doing are going to accelerate yet again. And we have 8 manufacturing sites and we'll see a bit more about that in a few minutes. So we're focused on specialty care, as I said earlier. And what I'd like to do is focus your attention on the right hand side, on the graph.
But you can see we have 68 percent of our business in oncology, which is the life critical franchise for us. Neuro science is 16%, neuroscience is really about curing debilitating disease such as people with specificity often after a stroke. So we can give people back freedom of movement again and enable them to be mobile again. Now we have a double digit growth rate in neuroscience, We have a strong but very small footprint today in rare disease. And we are with the acquisition, we've just completed that footprint will actually grow and become solid very, very quickly.
And what's interesting about the rare disease for the purpose of this conversation is while it's not exclusively, it is heavily focused on pediatric. So children are involved. So through the efforts we're doing in this area, we can help children grow up and live a normal life, which is important. So we believe very, very strongly in this. So everything I've spoken about so far is our specialty care business.
Which is mission critical. We do not have the right to fail. We must never ever, ever fail to give a patient this medicine and we must always always always be very fast. To get new product into patients as fast as possible because they can't wait. The 13% which I haven't talked about in this 13% is actually the part of the company that Ipsen was built on by originally, which is our consumer health care business, our over the counter business.
And while 87% of our business is on the specialty care, 13% of our revenue is not, that 13% actually represents close to 90% of our volume. So from the point of view of supply chain, we got 2 supply chains running off the same platform to John's point earlier about having a supply chain, about having a platform which can support different supply chains. So our rapid response solution is actually supporting both today. Very, very different businesses. So just a little bit about our supply chain and what it actually is.
So our supply chain and numbers, 8 production sites, so 25 contract manufacturers provide us with the product that we ultimately bring to our patients. We do this by distributing through 2 global distribution hubs. We have 35 affiliates with 55 distribution centers, and we have 7300 distributors. And hospital wholesalers in the hospitals in 115 countries. So that's our supply chain.
It's not as complex as some of the other ones that you may have seen. But we can't fail anywhere along the line in that supply chain. So we had thing called growth and growth is great, right, because we've been very successful. So I showed you at the beginning, we've grown our sales by 20%. The previous year, we grew our sales by 20% as well.
On the hydro, we've just completed a new acquisition. We are growing very, very quickly. And that's a really, really good problem to have, but it is a problem that needs to be solved. And as a supply chain, we recognized that and we understood we would have to we would have to adapt to that because in 2018 alone, we had over 100 market launches. Since the rate of creation of new references has doubled versus previous years and the rate of creation and onboarding of external partners has tripled over the same period of time, which is great, but we have a problem because before we had rapid response, we actually measured the length of time it took from the moment we had a demand signal, our spike in our demand, some sort of a signal in our demand that had to be responded to to the moment it was a corresponding answer in our production sites and that time was 2 months.
So pretty far from concurrent planning. So we recognized that we knew we had to do something about that. And we started with this. We started with a very, very simple statement. We started with patients can't wait.
So what does that mean for us? So we sat down as a team and we tried to figure out this was about 2 years ago. We figured out what do we actually have to do given that patients can't wait, given this growth, given we've been successful to date when we've had a few products over a certain number of markets, But we know we can't continue to do things manually. We can't continue to do things with smaller, less professional systems, which are now ten years old. Coupled with Excel spreadsheets coupled with a few other bespoke interfaces and things, it wasn't good enough anymore.
So we had to do a recess. So what we did is we actually came up with 3 promises. First of all, so we promised ourselves, our company, and indirectly our patients that we would do 3 things. Number 1, as a supply chain team, we promised that we would never stock out. And that was a fundamental game changer in terms of the way we were thinking as a team, because we used to think in terms of we got 99% Otis.
Let's try and go to 99 2% notice. It's incremental thinking. But when you turn around and just say, we will never stock ads, then you actually fundamentally ask yourself in order to never stock out what do I have to change, what do I have to do, and you start thinking in terms of game changers. We also said that we would launch our products on approval. So the moment we have a regulatory approval on a product, we would make that available at Marcus.
Didn't quite know how to do it, but we knew it required a lot of agility on one site in order to be able to do it. But we also understood that a product which is just launched in market does not have a history. So you don't have a good forecast. So we also knew we'd have to have the agility to follow that product during its initial life, a daily life and make sure that we could actually all supply it perfectly going back to Point Promise 1 never stuck out, right? And the last thing we said, well, that's not enough because as a supply chain team, we consume cash.
And that cash is cash that could be used to go and repeat the cycle. And ifs in the company would actually like to take that cash and put it back into acquisitions and development and repeat the cycles because we believe we actually do the process of getting new therapeutic solutions to market faster than other people. So we also said, when we're doing this, we're also going to give back cash. We're going to give back cash to the company. So we had 3 promises and we asked her that in order to do those pre promises, what do we need to do with you?
So we come up with 3 programs. One of them will be to focus up today. First program, we realized our distribution infrastructure is not up to speed and not up to scratch, but what we need to do as a growing company. So we decided to externalize our distribution infrastructure. That's done.
The second thing we realized that our actual manufacturing infrastructure was not agile enough. Because of traditional power manufacturing and all of that is buried into regulatory papers and into licenses, which we have in country. So you can't change us. You manufacture a certain way and you cannot change it. So we wanted to introduce at the end of manufacturing a late differentiation.
That's the second initial that we put in place, give ourselves agility through late differentiation. And the third thing, we needed something to pull it all together. We needed to have agile planning and that's the focus of today's meeting. So the agile planning is this. So what we did is we took our promises, you find them on the top of the page, never stuck out, the perfect launch as we call it.
And also to make sure that we're also building into this a constant review of what we're doing to reduce our net working cash, our net working capital requirements in terms of inventory By the way, we're also driving this in other areas. That's net working capital in terms of inventory. Our visibility and our procurement spend over time are strategic procurement over time also will allow us to work on things like our payment terms over time. And I don't even include in here the effect we have on COGS. By being able to drive economic order quantities with some of our external manufacturers.
So there's lots of things we're doing to give a lot more value than just the 20 days that are in here in terms of giving cash. But these are the things we're doing. The on time and full 99.7%, we've actually already achieved this. What we want to do is maintain. We actually have an extremely good perfect order in the company today.
It's time to some excellent men and women who are working every day to get their jobs done. But as we grow our company, we know that's not sustainable and that's why we're putting rapid response in place. Our story for the planning part actually on the bottom of the page and it kind of started with getting basics, right, segmentation, one version of the truth. This one is something that's very close to my heart because one version of the truth, which is very well supported by rapid response, by the way. It's simply the idea we have one forecast and just one forecast for running the company.
Our financial team use the same forecast as the supply chain used for running manufacturing and as the strategic office uses for running the strategy over time. So our budgeting is one budget, one strategic plan and one forecast for running the company and they are all actually sitting in the rapid response to today. Setting our inventory policies in the collaborative manner. So we're doing end to end network planning and we understand how our inventory policies fit together. Up to now, we didn't have visibility on our inventory policy.
We don't hand to it, but this is giving us a different paradigm. And of course, all of that then allows us to empower our affiliates and fuel our weekly planning process and to fuel our monthly planning process as well as allowing for punctual immediate decision making every time a signal pops up, which needs to be responded to. Because really getting the basics right, the backbone for going forward Once the S and OP process is now firmly embedded and our focus is now going on to the center of excellence because we are new to this, right? I didn't give our timeline actually. We went live in rapid response in November of last year.
So we're still into our 1st few months of rapid response. We're still learning from it. And we're still rolling out some of the supply side and rapid response. We have 90% of our demand covered under the system today, and we have about 70% of our manufacturing covered under rapid by the middle of this year, we'll have 100% across the board completed. And as we go forward, we still had, so I showed 55 to 55 distribution centers, not our cost of world, Not all of those are connected on a daily basis and on a re time basis.
So we'll continue to connect them. It's mundane, but we have to do it if we want to get the full benefit from the system. It will take some time. It will probably take a couple of years while we redo the contracts with those partners. And the last one is that people are upskilled.
When people need to be upskilled. So we have good people who are running the business today, but we've just changed something fundamentally for them. And I know that Anne talked about the change management when she was talking. What we've just done is we've just taken a Porsche 911 and we passed in the driveway a very supply chain professional we have, but now we have to go and teach them how to drive a Porsche 911 to its full utility. And that's what we're going to focus on going forward.
We have a program called career pathways in supply chain, which we're using to drive that. And that program is currently being rolled out and will be the focus for 19 early 2020. I'm guessing the people in the room would like to know why we choose rapid response and how we got there. So, without mentioning names, when we realized we needed to do this piece of work, We actually identified 6 partners who we talked could potentially help us with this piece of work. We issued in around mid-twenty 17.
We issued functional requirements about 200 requirements that we needed to have COVID and user requirements. And we started getting answers back. Some companies responded quite well. Some companies responded not so well. We got 6 responses back in Tulsa.
And when we actually analyze the moment through them, the rapid response answers were actually really, really, really good. And we're also, by the way, accompanied by very, very good demos with no, and my this is quoting my team, no, we'll get back to you later on your question. Everything was fully understood. They were able to answer every question and we just felt very, very reassured. There wasn't stiff competition.
So by the time we went through the process, we actually had 2 candidates. And when we looked at the 2 candidates, both could have done the job to be quite honest. So it had, again, started coming down to preferences. And one of the things we did during the process, we actually opened up the process to our supply chain community. A lot of people connected at a distance into some of the demo calls that were actually organized because it was part of the change management with getting people to actually involve themselves in the choice.
Of the tool as well. And what came back from that was 2 things collaboration on one side. People said the tool is extremely collaborative. And on the other side with the calculation power. So another little story from my past going back 25 years back a little more than 25 years, actually, it goes back to when I was actually an IT guy.
And I was working in the, in an automobile manufacturing side. And on a Friday afternoon, we used to go to the cobalt driven manufacturing planning system, and we would kick off tentatively, we would kick off the requirements planning us on a Friday for the afternoon and then we wouldn't touch the computer anymore. And we go home for the weekend and we cross our fingers and just hope that by the time they came in on Monday morning, it was still running because if it wasn't running, it fell over. I would have to start again. Can I just go backwards?
Yes, I did. The calculation power in Connexus is we have yet to try and get any calculation that would take more than 10 seconds. And that was something that was very, very impressive for our team. Then it was kind of myself. So I chimed in.
And I'm not a very imaginative guy, so I wanted to just kind of feel reassured because I knew at the end of the day, I was going to be accountable for our choices. So one was recitation and trust. And as I go to La Jifarama and I circulate and I go around and I see literature and I see lots of other things, Nexus has a presence and that's kind of reassuring, right? It's reassuring to save the name in different places all the time. So that was actually something that actually that connects us aside a little bit from the other contender that was left, who had less of a presence.
Then we also have a Gartner contract like many companies have. So we talked to Gartner and Gartner also further reinforce that and reassure us. So I said good about that. And then the last thing was we're specialized in innovation, but we don't have to innovate everywhere. And John was talking about having a lighthouse in an industry sector and establishing that lighthouse and then other business will follow.
Well, that's exactly what happened for us because what we did is when we looked around, who was in life sciences and who was in pharma and who was in pharma, not just in the U. S. But also Europe where you have more to greater complexity of more SKUs. We wanted to understand, in a way, it doesn't we wanted to understand who is in there and there, connects with one hand down because there's an excellence present in the life science business. For Connexus.
So that was very reassuring for me as a head of supply chain to see that. So that's how we made our choice. I should probably talk a little bit about where it fits in the company just to give you an idea. You can see SAP is basically the transactional system system of record. It's also from the pharmaceutical point of view, it's also the qualified system.
So, and SAP is basically our front end to our market. So our sales orders are managed through SAP. Cash cycle is managed to SAP. And on the production side, the line scheduling, it says production scheduling, that should be really line scheduling is managed to SAP. The master production schedule at the time is over by Connexus.
And everything in red here now is Connexus. So you can see Connexus is really driving the drum beat at speed of the organization, starting with the forecasting process and running right back through the production planning for drug product for active pharma ingredient, which is down the upstream from the drug product and also to our collaboration with our external manufacturing partners. And we've got 25 of those at the that's a growing number as well. So that's where Connexus sits. And I just call out here analytics microstrategy on top.
So I did talk about one version of truth. And this is very important because the analytics of microstrategy is really where we are finance tools fit. But it's a perfect match because we're using just one version of truth. So the Connexus system is actually the basis which is feeding into the analytics and microstrategy too. So that's just a little bit about the architecture.
So this is my last slide and I just thought I'd share back few months after 2 months after going live. So this is in February. We asked the same user communities about sixty people, how they actually doesn't want to talk about the 2. The three comments on the bottom, we took a random from the list, so there was more comments than that. But then the scale, I think, for me, is pretty impressive.
So Ergon anatomy out of 10 was 8.3. Forecasting is 7.8. And I think forecast would be higher a little bit later on. People are learning to drive to Porsche 911. Data management is 8.6, reliability 8.4.
So it is really, really, really positive. So that's my last slide. I just want to thank you for listening to me while I explained what we're doing and how rapid response is an integral part of of doing it better as we go forward. So I think we add a few minutes for questions. Yes, sir.
Yes.
Yes and yes. Because of the Connected solution is many times more than the actual cost of the existing solution, which we are now putting away. Which was a fully bought software package and therefore amortize. System. And this is why I put in deliberately the return, just even the 20 days of inventory, which would be reduced PACE per decade, the investment many times over.
In terms of freeing up cash. So the cost is definitely a factor. And when we looked at Connected versus the partners, we were actually comparing the cost between connected was not the cheapest solution, but out of the 2 surviving candidates, there was a cost was not the factor that helped right, it will be a defect as I described. On that last
slide, on the,
all the different use cases that you use Kinaxis for. Where did that start 2 years ago versus like what was sort of pinkish 2 years ago versus pinkish? You mean
on the
on the slider one with the score?
Yes. The one before that, I'm sorry.
To go.
The strategy for Connect, it seems to be got a beachhead and then expand, land and expand. I was just curious what for you in particular that looks like 2 years ago versus today? And what could turn pinker?
There was a product from an editor called Dynasys which was sitting in there, which is basically a forecasting process. There were multiple Excel spreadsheets, especially on the manufacturing end. There were also multiple spreadsheets which are off growth of this page in the finance area, which will also be put to bed permanently because the finance people are actually buying into this big time. And are actually realizing the economics on a virtual P and L of the information, which is in here. So it would have been a multi colored slide with lots of bits and pieces across the board.
SAP where SAP cuts off could use to cut off from the, from the planning system was actually different depending on the manufacturing site. Sometimes bridge with access, sometimes an outage with access, some sites were attempting to use SAP production planning others were not. It was really a hard part. It would have been very difficult to draw, actually, to be quite honest. Yes, sir.
So you said that you started this process mid-twenty 17 and implemented November of last year, right? Call it 17 months. Why does it take so long? Is there anything that Kinaxis could have done to shorten the decision making
Well, actually, it was about getting making sure we had the right strategy for us. So when we kicked off the process around the strategy, we actually engaged Connexus in about March of 2018. That's when we signed a contract. So from March of 2018 to basically now, We have initiated a project, got a run-in the project, we got 90% of our revenue, managed under a rapid response system, we have 70% of our manufacturing planning managed under the rapid response system. So I think actually it's really, really fast.
As far as the deployment process, were there any hiccups or anything unexpected or did it all proceed as you would have hoped? On time, on schedule and on cars, but
which is one exception, which is driven by Brexit.
So you mentioned earlier that some of your growth is being driven through acquisition. What type of role do you see rapid response playing in when you look to integrate and onboard these acquisitions? And was that a factor in your selection process?
The complexity of trying to manage integrating new products, new launches, as I said, was very, very much a factor in there. So when you have a new SKU, you don't have reliable stable history. Where we came from in the past, Ipsen used to have 3 major products which are driving the vast majority of the revenue and they were old products. So we knew them out we knew them by heart. We knew exactly, and we didn't even need to forecast them.
You could just do an population over time. So when you have new products coming in, you don't have a forecast history and in the absence of a forecast history, you have to have agility means that you have to sense changes in demand, which you didn't expect very, very quickly on one side, which is in the scope of this conversation. And on the other side, which is one of the other initiatives I mentioned was creating later manufacturing agility. So if you need to bring a late differentiation, so you can also respond. So the combination of the 2.
So this is a key part, but you can't have you can't be successful with just one part. You need to have the 2 parts. So this is absolutely key to doing that. I would add, as we're talking to potential partners for integrating part of their business, and so I talked about acquisitions, we also do some license agreements with partners. Partners actually get quite excited about.
Typically, the partners we work with are the integrations we do. Our people who are smaller and less mature are less less ready for commercialization than we ask us. That's why they work with us. But what happens is it creates a buzz actually when they actually see what we're doing. And get a kick out of it because they realized they're getting access to something that they didn't have before.
So it's also good to show them during the process is good to be able to show them things. We know really, really well how to commercialize your product. So you should work with us. All set. Great.
So again, thank you very much.
Thank you, Ronen Gus and Regina for sharing your time and your insights that was extremely helpful. We're now going to be, I'm going to be bringing the management team up. So John, Andrew, and David, and we'll have time for some general Q and A. Just give us a second here for some logistics. Actually, while we're setting up, questions.
Thanos?
Hi.
Historically, you've targeted mid-twenty percent growth. Obviously, your guidance 2019 is a touch below that. And if we were to factor in, your on premise business, the blended recurring revenue guidance is probably maybe 20% or high teens. Can you maybe clarify why that's the case? Why there's been a little bit of deceleration in growth relative to your history.
We have all these partners coming on board, all these new regions lighting up. Is that just a function of timing? Is there anything else you'd highlight in that regard?
Well, I don't know if that characterization is correct. In that, we've always talked about subscription revenue. And so really SaaS, so the cloud being the engine of the company and it's growing. And that says the guidance right now is 22% to 24%. That's where we started the year.
We do have other subscriptions. So on premise subscriptions, and you've heard from some of those customers, and we have a history of them. IFRS has certainly clouded the issue. It has not impacted cash, but has impacted the timing of revenue, including from our early adoption, the $21,000,000 of revenue that would have been flowing into 'eighteen and 'nineteen and other years. That's not coming in.
So Thanos, it does It does not sort of pull it in and bring it in. But we are growing and we've talked about the long term growth, expectations, but we've also talked about really being long term. You're going to see this, as you have seen, the consistency, not only on the revenue growth, but also on the, on the bottom line performance, as John mentioned. So we're very, very excited, especially our new relationship with the Y and growing. But the reality is what we do is fundamentally different.
And it is about an 18 month sales cycle. And so you start, you see these investments and now you're seeing the return on them. You've seen the return on our investment in Europe and in terms of customer collaboration such as Ipsen and so on. And so we're very confident to, and we believe in our guidance, we are providing that, that accelerated growth. Deepak maybe.
Oh, sorry.
Okay. Thank you. I guess, John, Richard, question for you on the mid market. I know we've talked about this and asked about it for quite some time. When we look at competitors like Anaplan or ERP vendors like One stream that are up and coming, growing 50% to 100% a year, customer counts of 1000.
When do you start to target this market? How big is it today? How big do you see it in
3 to 5 years? Thank you.
Yes. So I can answer that question. First, we are hyper focused in our sales and marketing strategy. And we do talk about targeting 6 verticals, 3 geographies. Companies that are 1,000,000,000 and above.
That's kind of the TAM that we talk about. Now if you're washing though and you look at every single announcement that we've made about every single customer that we've won, Some of them are under 2. Frankly, some of them are under $1,000,000,000. Some of them are under 500,000,000 And so it does a couple of things. It proves that the value we deliver fits the mid market.
It may not necessarily mean we're purposely targeting it. And again, I would say it's a matter of when, not if, you know, you would see a, a measured marketing and sales campaign towards the mid market. And again, we've got proven cases where this, this fits. As it relates to some of these, these other vendors that, that you've launched, frankly, we just haven't seen the competitive threat from those areas. At least in the engagements, the very, very few engagements we've seen them.
They may be tackling the problem from a different angle than we are. But we're not necessarily seeing a competitive threat in the current verticals that were, in the current target areas that were, that we're focused on, 2,000,000,000 and above 6 segments of the 3 geographies. So that's how I would describe it. I think, part of our strategy for growth, would quite obviously be going slower, going to the to the mid market function or the mid market manufacturers and especially in the verticals that we're in and the geographies that we're in. So, it's a matter of when, not if.
I think Rob was.
Rob, yeah.
Sorry, Nick.
Sorry. So just
Just to summarize a little bit of what we heard last year and this year. Last year, you guys talked about increasing or accelerating the spend on sales and marketing. Go more global into Europe, into Asia. And at the time, you had a TAM around 2000 companies This year now we're hearing acceleration on the R and D side to drive the platform. And I'm just trying to understand why now as far as investing and as far as investing on the R and D side as opposed to waiting a few years?
Is it something as a result of competition within the existing markets you're currently in? Is it a function of the partners you're bringing to the table? As we heard from E and Y, there's other verticals that they want possibly see you in? Or is it just part of your strategy and the initiative you guys are just taking, on your own? Is it a combination of all the above?
Yes, Nick, it's, you know, people don't always realize how much effort, how much time, how much investment goes into serving the current market that we're in. I mean, when, when Andrew talked about this next rendition of the engine, okay, we have a code name for this, We're, I've got to say, 4 years into this. And now it's, we're starting to talk about it. But 4 years ago, We realized that in order to satisfy machine learning technology, we're going to have to be able to scale to the tens of billions of records. At the time, We didn't have an engine that can do that.
But think about in memory technologies, while they needed to be seeded, right? You start with a giant lake of data and you need to ingest it all into memory. It can often take hours to do that. With billions of records, you're waiting hours to ingest data into an in memory environment. That's going to go down to seconds, okay, but it takes 4 years to produce that.
And so, you know, when we're making investments, we're we are thinking about long term, also. So I, I would say that, you know, much of what we're talking about now that's coming out, those are, investment decisions made 3 to 4 years ago. And the investments we're making now on platform and driving the potential for third parties to produce their own intellectual property. We're seeing the benefits of that will manifest, not imminently, but the benefits of that will in, we believe will manifest in the, in the very, I'll say, midterm. Sorry.
Hey, John.
So good to see that you guys are having good involvement with your partners like you and why it seems to be in the planning process, would you say that you're seeing the vast majority of the opportunities out there given your broader partner network now. And what would you say your hit rate is in winning these opportunities? And what are the main reasons why you would lose some of those?
Yes, the hit rate, obviously getting partners involved is pretty critical for us. And we are seeing the majority of, of net new wins where we have direct partners engaged and working with us. We're still obviously involved because we deliver the solution. We have the SaaS environment in the background. We have the data center.
And so the solution is, is delivered. You heard from David, how deployments happen even with, partners. You know, still very, very collaborative. Okay. I'd say the hit rates very strongly have, you know, companies like E and Y have privilege where we don't.
And they have pedigree where we don't. You saw the the incredible list of services that takes years to develop that kind of of service strength. So we feel like the combination of what we bring to the table and what our partners bring to the table is a 1+1 equals 3 equation. We really do. Now, you know, I'd be naive to say we win everything.
That'd be naive. We don't. We still have individuals. We still have companies out there that that believe in their existing techniques and there are not necessarily bought in, to concurrency. Okay.
I scratch my head when I see that. You know, I liken it to people who still prefer to take a boat New York City to London for business.
Okay.
The UN 6 days, I'm taking a plane, okay. But we still encounter that. We still, we don't give our solution away. Okay. We respect the women and men that produce it, and we respect our shareholders.
And, we respect the customers who pay for it. So we're not going to engage in pricing warfare. And sometimes that will be a factor. We don't win everything, but, I would say, we're winning sufficiently to drive the growth agenda that we've shared with you. And you know, our confidence is high enough to be investing.
We know that we have runway you know, I gained, I know I, you know, what this, you call me, the hype machine or whatever. I can really hype this up because I'm just so excited by it. He calls me the hype machine, but when Andrew joined the company, he said, you know, I have to tell you it's real. You know, the technology is actually quite, astounding. So I feel confident.
I really do. I feel like there's a terrific runway there for us terms of the growth strategy. And, I'm hyper excited about offering companies like E and Y and and the other partners that we have, the ability to build their own IP. Oh my goodness. This is, I mean, this is what Benny often imagined when he invented force.com.
Right? So what happens? Great things, right? I'm not going to pick the next adjacency. The partners will.
I just have to enable them. It's wildly exciting. Hi, Rob.
Maybe I was hoping you can give a little
bit of context on two things that you said earlier in the presentations. I was just going to build on Thanos questions around the growth guidance. The first thing, you were talking about the funnel, the funnel is very healthy. Maybe if you could talk about the shape of the funnel, is there a lot at the front end that's not necessarily falling into 2019? And the second was a comment from David Kelly around the the volume of revenue flowing through the professional services line that your partners are seeing.
I think you said five times. Imagine that they get a lot of change management that Kinaxis wouldn't. But how do I put the 5x increase in professional services and the strength of the funnel in context with the guidance. Maybe I'd like to see a little higher growth now.
Yes. So I would say that the funnel, the current state of the funnel, significantly larger than 12 months ago, and I see it reflecting the investments we made 12 months ago. I would say that the funnel as it relates to Europe and Asia is significantly higher than it was 12 months ago. Again, reflective of the investments we've made in in those 2 regions. I'd say the, you know, you give some color on the funnel.
As I said before, it's remarkably more balanced than I've ever seen it. I'm usually, I'm expecting to see life sciences, I'm expecting to see, some automotive, the more emerging and CPG. And then I start to see, well, wait a minute, there's resurgence of Aerospace And Defense opportunities, are merging. So that gives me great confidence that we're seeing, I won't call it an inflection point because that it won't happen Monday, as I often say, it's happening It's not like some day, you wake up in the morning and say it's happened, but these are good early indicators. And The strength of our opening, our opening remarks at the beginning of the year in terms of guidance is based on what we currently see.
And every quarter, you know, we'll, we'll describe, you know, as it matures and as things fall in or out. Again, we don't win everything, but as things fall in or out, we'll, you know, we'll provide everyone here with updates as the progress. And maybe I'll have David comment on the professional services question.
Yes. So I would say that that, that 5x number, that's kind of a speculative number on my part. But I would look at it as the total amount of services that, that companies are contracting these partners for us. So everything from the stuff that you, I talked about in the upfront planning, but don't forget about all of the ongoing support slash statement services that go on. There's a lot of activity there that these partners are driving.
So, it is, I think it's indicative of what we've done in the past from a selling perspective. I think it's going to continue to ramp and continue to, to grow overall in the places, these partners continue to expand their offerings and capabilities.
For Andrew. I mean, when you're talking about the solution
or wrapper response, you've mentioned
the versioning capabilities and the ability to make an exact copy of the database. And like, can you, how unique is this amongst competing solutions and why is it so important to the end user?
I can't speak to all the solutions out there in the market, but we have done a fairly exhaustive search both with startups, building different types of databases. It seems a lot of the startups are focusing a little more on big data type problems that can power other types of calculations, like machine learning, our calculation our engine supports, techniques that calculate in 10 seconds, or less, as Ipsen said. So if you look at the types of calculations that if you want to figure out from a big change in demand, how that's going to impact all of your various parts that are required to fulfill that demand and you want to do it instantly and you want to run scenarios and compare whether you should be expediting because of some problem or you want to get a second supplier All of that and playing with that in real time has a phenomenal impact. And I think to speak to it, It really was great to hear Ronan talk about how his planners now can play with those scenarios in real time. Instead of waiting for a weekend, to try and figure out what should my plan be.
They can play with scenarios and try these things. What if scenarios in real time? And so that's the power of it. And I really don't think there are companies out there focusing on such a targeted technology as we have. The versioning in memory database and the tight coupling to our math is fairly unique, I believe.
We do keep watching it though.
I just want to add one thing that Gus mentioned. Seen all that material, but, you talked about the number of active scenarios that are going on. So I think it was 1200 or something
like that.
It was a big number. So think about having 1300 instances of the entire data set. It's a computer science problem. If you had 5,000,000,000 records and you said I need 1300 versions of that. That's a computer science problem, not a supply chain problem.
At all. Now what it does for the supply chain though is you can test the theory, okay, before execution of that theory. If you ask, if you ask anybody in business, would you prefer to guess, execute something in real time in production and then see how it goes, or would you prefer to simulate that change beforehand and see what the impact would be before you make the decision, everyone would say I'd rather simulate the decision. If that's true, and we describe this to practitioners, you're eliminating the I didn't know excuse. It takes 3 100 of second to create one of these things.
If it's 5,000,000,000 records or 50,000,000,000 records, it's 3 100 of a second. Now you have a sandbox in which you can test any theory you want, any decision you want. You're essentially from a, that's the business value now. Is you're eliminating the, I didn't know excuse. You can test the theory before you go.
So the versioning technology from a computer science perspective is quite unique. We, you know, to give you some context, this technique and the approach and the base technology was invented in 1994. But I'll tell you, it requires thinking of the problem before you've written a single line of code. And so, as Andrew said, there are other in memory environments, but they weren't thinking of this problem before they wrote a single line of code. They were thinking of a problem.
So that, you know, I, you know, being a computer scientist myself, I believe this is near impasse very, very difficult to retrofit after the fact. You have to know you need this before you've written a single line of codes. Like to give it as kernel code, Line 1, you better know you need this. And, and this is one of the reasons why it's, giving us the advantage it is today.
Sorry, I don't want to jump ahead. So a question for John and perhaps Ann, So you guys had some, presumably, some insight into global supply chain. Most of your customers are in there. We hear about Brexit security issues trade wars. What do you see as a macro risk, that might affect your business?
Where are we in industrial cycle wetting how do you plan for that over the next 3 years?
So I have an opinion and I'll pass it up to Ann. First, we, yes, we do have, a lot of major companies on rapid response, but we do not, correlate all that information, you know, to derive any kind of industry knowledge. The customer's data belongs to the customer. We don't actually use it and start learning from all of the pharma data, for example, But I do think people have asked me, well, is there a use for rapid response under the current conditions of Brexit and uncertainty and so on. And I'm like, yeah.
I mean, the reasons are different. Efficiency becomes the issue. You know, when they're looking at all of the, even as it relates to the, you know, some of the things going on in the U. S, and where you manufacture. Well, now you need to be able to simulate changing where you're going to manufacture your goods to assess what kind of impact that has on margin.
Right, call it, the tariff management problem. Okay. I mean, tariffs are one way today. Well, if If they change tomorrow, let me tell you, everyone cares about what that does to margin. So you're dealing with the margin erosion problem.
In good times, it's about market dominance, right? I want to win every account on time in full as Ronen talks about. OTIF on time in full is about never losing a customer. So there's a, there's a fit for our solution in both equations and I'll let you
So I'll preface this by saying this is week 8 for me. So, we'll take it with, you know, with that in mind. Looking at the broader market, sort of what I before, right? The growing complexity, velocity and technology, and the culmination of those 3 are what's sort of stirring up the supply chains around the world. And I think that's more opportunity for us than anything else, honestly, at this point, and it's just staying ahead of the curve and hearing Andrew and other speak I feel confident that we're positioned there.
And just how it impacts from our business perspective. So we have seen whereby if the level of change and uncertainty is so high, that may sometimes defer decisions to move to rapid response. But If you recall, our agreements are fixed, determinable. And so it's a step function. So once we are in, we are working with a customer not really predicated on their business volumes and so on.
It's about providing that overall solution. So that's where we provide that confidence in terms of longer term growth and and the revenue stream.
What are the most notable bottlenecks on growth? Is it Is it you need more salespeople in Europe or Asia? Is it that more people need to be trained at the partner level? Just what you're growing great, but just what is that what is that incremental 5 points, 10 point to growth? Where does that, where do those bottlenecks that prevent that?
Yes. So, we do look at a lot of leading indicators, you know, in the markets that we serve, right? The markets and geographies that we serve. And, you know, when I go back and I said, well, a year ago, you know, there's, it's it's a multiple larger, okay. And I take that as a market leading indicator that there's and by the way, when we say These aren't just suspects.
These are names we're touching. Okay. So, you know, this is very important. When we prospect and we identify it pipeline, it means we are touching this customer. We are engaged.
There's conversations. There's relationships forming. And it's It's a multiple larger, and I'll look at that as a bit of a leading indicator of the maturity of the market, right? I love Regina's comment about The market in general is, in a position to rethink and reorient and adapt new technologies in this space, you know, in a more deliberate way than perhaps 3 or 4 years ago. Maybe some of this is, you know, thanks to some, you know, some decisions that ERP companies are making.
You know, they're forcing a decision on their customers. So that means those customers could say, well, instead of just, telling doing whatever our, you know, our ERP vendors are telling us to do. We're gonna open this up and open the hood as she put it. Let's see what best in breed is. What's the right business decision to make?
So that's how I look at, the one thing that we're pushing against is the maturity of the market to move. Because I, you know, this the thing about rapid response and the thing about solving, problems that relate to supply chain, you saw this with Gus' presentation, you saw it with Ronan's presentation, this becomes business fabric. This isn't one of these experiments you run, because it's fun. You're going to affect the business fabric of these organizations. So that's one of the reasons why it's 9 to 18 month kind of a cycle, because they're very, very serious decisions, but I do have to I feel like There's a momentum building.
And it's Early doctors? Yes.
Top meters, early doctors.
Exactly. And and it's manifesting in things like this pipeline. The other area that I think I've talked about this during, while I know I've talked about it during earnings call, the unsolicited inbound, leads that come in. These are people ringing our doorbell that we've done nothing to invite them. Like, there's not like some mark These people ringing our doorbells saying can I come in, and it has been on a steady increase, I want to say, for the last seven quarters?
It's undeniable. I can just see them, the lines, and those are leading indicators of a maturing market. And it doesn't mean we're going to win them all. Like I said, it doesn't mean that, but That's one of the growth, vectors that we see in, you know, in our space. Yeah.
It also means maybe you don't have enough salespeople, right, who are making the outbound? You mind just helping maybe us gain comfort that you have enough resources to get the word out?
Yes, no, I think there's there's two sides to it. I'm going to point back to the partner ecosystem in that, I think I mentioned earlier, I don't believe we can scale organically fast enough. To meet the demands we foresee, the demands that we're expecting to see in the future. So So part of it isn't just about having our own sales reps at the ready. We have significantly invested over the last 12 months in our own field.
And it's been a reflection of what we see in the market. But we're equally investing in the in the partner community because for every sales rep that we hire, there's 100 out there in the ecosystem. So it's I'm not going to win that math equation, and I'm perfectly happy to share to make sure that we don't get crushed by success. We'd rather share with the partners and we also recognize they bring something that we can't. There's a pedigree, there's a trust, there's all of those things.
So that's that's the way we're taking.
John, at this point, to what extent is the services implementation delivery a constraint on growth? So obviously David's been doing some good work building out the delivery capability internally, even ramping up and training partners. This is very complex software, obviously, we're in a tight labor market in some regions. To what extent is that a limiting factor in terms of the amount of new able to deploy if you were to come into tomorrow?
It's a 0 limiting factor. And the reason I would say that is, because of the partners. I mean, as David said, there's, I mean, it's a guess. And we do track. Yeah.
We have other indications like we know there's a a significant multiple of individuals certified on deploying rapid response than actually carry a Kinaxis badge. We count those. We don't disclose them because they'll say, well, which partner has the most, but it's a very, very large community. Of certified implementers that don't work for Kinaxis. And we've also said this that we're seeing a significant increase in partner led deployments.
We're happy to let that happen. It would be absolutely foolish for us stick our hands into E and Y's pocket to take some money out of them. I mean, that's just a crazy thing to do. We want E and Y and all of our partners to be successful. So we're doing everything possible to make sure we provide all of the support needed for the partners to be, reliable and capable of delivering.
So I don't see that at all as a friction point or a limiting factor. Brian?
Andrew, I just wanted to ask how ready are the partners to innovate on the platform that you're building And for John, I just wanted to ask, how does that change the lighthouse dynamic for new verticals when you have some of the IP outside of your Four walls as it were?
I think the partners are phenomenally ready. The 2 characteristics that you want from a partner is someone who knows a space really well. I mean, the conversations, we have some of the spaces that they're in that we would love to get in like really blow my product management team's minds. They're like very excited about helping being led into some of these spaces. The other aspect is having someone who can realize the intellectual property.
And that skill is not as hard to get. We're some of the things we're going to do to allow them to extend, intellectual property. Is really going to be very simple coding techniques, SDK, those types of things. I'm not worried at all about our, I mean, our partners have huge back office in all sorts of places. So the coatings go, not an issue, having great domain knowledge, they have it.
So I'm pretty comfortable.
And just to follow-up, I'm, we're doing this on purpose, eyes wide open, and we're not inventing this approach You know, we I used the Benioff example a lot. Someone invented force.com for a reason, right? They said, we're not going to pick the next adjacency. We'll let the market pick the adjacency. We'll let the experts pick the adjacency.
They're in every market that matters. They're in every geography matters. I'm not going to outpace, the entire ecosystem. So our job is to produce the platform, to accelerate the creation of value. There's no way.
I just, I just couldn't do it organically fast enough. And so we're doing this eyes wide open.
Yes, I
was wondering if you could elaborate on the partner strategy a little bit. So is your goal to get to, I don't know, 30 partners or 100, like just give us some perspective on that, a strategy standpoint.
I think that the partners we have there today is going to remain mostly steady for this year. So not a, not a huge change there. But I think that what you'll see is really the adoption by the partners to be able to do more deployments into, partner collectively with us to drive more opportunity. So we have some new names up there that you saw. UI obviously being here today is 1, but it's continuing to, to build that collaboration and to build those skills within those partners to support us across our ecosystem, which is not just me, but you talked to Andrew and many other aspects of the overall business.
So it's an evolving, an evolving development, I guess, with those partners.
And Richard, just to add that, to that statement. We've said this before as well. There are a lot more partners that want their logo on our webpage than we allow. You know, the model we take is very much like what Regina described. They're signing up to build a practice.
They're investing in their people. It's not like, oh, I have this opportunity. Please say I'm a partner so I can, so I can win this business. That's no, that's not the way it works. And so we, you know, when we sign up with strategic partners, because we've, established a common motive, and that they're serious about building a practice to serve their customers.
It's not just the marketing put my logo on the website kind of thing. So we're cautious about that. There's far more partners just saying, please, can I put my logo next to Ian wise?
I'm
you talk a little bit about the partners and how they're helping you in the sales effort? Are they, getting engaged after a prospect comes to the decision that they want to use Kinaxis? Or are they wrapping Kinaxis into a managed services offering, or are they helping Kinaxis come to the, or sorry, are they helping prospects come to the conclusion that they should use Kinaxis? Because I think a lot, one of the big worries that there are some very large companies like SAP who dominate a lot of the, some of your partners' business and going against them would be maybe difficult for them. So talk about how that's maybe developed over years where they are now?
Yes, Rob, it's a great question. So, I would say, the after the fact, that's how it started. Very much so, I mean, the largest, if I go back 5, 6 years ago, when David started, I mean, we, of course, Japan, we had partners because in Japan, that's how they, that's how the companies would deploy softwares through partnership. But we wouldn't have been able to talk about ENY or or Deloitte or Accenture or any of these large, large firms. And so it started by us winning business in their diamond accounts or whatever they want to call them and they said, we better learn how to do this, because the business was making the decision.
Right? The business isn't there's I put it this way, you know, it's rare, well, it's rare if not impossible to see what I call IT bigotry, okay, in business. You might see it more in IT, but in business, there's a focus for value and solutions that work. They don't care about the color of the bits and the bytes and what the logo is. They needed to work.
Now today, we're seeing a lot of activity where our partners are bringing us in. There's an active engagement already. And it's somewhere where we don't have the privilege. So I use that term, you know, E and Y will have privilege where we do not. You know, I could wax poetic about the value rapid response, but I'm always, I'm not necessarily going to be, you know, I won't be as believable, if you will, if unless, as an E and Y, whether it's already a trusted relationship with management.
So we're definitely seeing, partners leading, bringing us into their accounts because they know there's a business problem and there's a practitioner at the back of it. Sorry. Yeah, last point, you know, I would say the managed service One is very nascent. Some people have said to me, this is a natural evolution of where contract manufacturing will go. I've, you know, I've I've subcontracted out my bill.
I've subcontracted out my design. I've subcontracted out distribution. You know, you buy, you buy products and it shows up in a flex box, you know, wow, it was packaged and delivered in all this. So it may be a natural evolutionary step for companies like this to outsource supply chain planning functions. I'd say it's nascent right now.
There's no real, you know, burst, I'd say, in that space.
I know we're a little over time, and so I think we'll wrap it up. We do appreciate your participation and your support. And look forward to seeing everyone next year. So thank you.