Guidewire Software, Inc. (GWRE)

Analyst Day 2019

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Sep 26, 2019

Okay. Good afternoon, everybody. Good afternoon. Okay. Quick pop quiz. How many of you flew into Bay Area from the East Coast, New York? And how many of you are based locally? Okay, great. Good to know. My name is Brian Desmond. I serve as Chief Marketing Officer at Guidewire. I've served at the company for now 13 years. And first, on behalf of Mike and Marcus and Curtis and Priscilla and the whole team, thank you very much for being with us today in our 8th Annual Analyst Day. And particular thanks to those of you who have traveled to be with us here today. This is 3 months and one day since we moved into the buildings. You might have picked up the new paint smell, but it's just an honor for us really to have this Analyst Day at our new headquarters. And again, thanks so much for being with us today, and I hope you enjoyed the tour. A couple of quick logistical items. First of all, by the end of the day, we'll have the PDF of the presentation on our website, on the Investor Relations section of our website. So that will be up at the end of the day. Also in the event of an emergency, the emergency exit is on your right. So over here, your right is the exit. In terms of what we're trying to cover today, first of all, just want to give you an update on our business, how we're doing. Secondly, we want to give you an update on where we're going. So our vision as a company and with a very much a focus on our technology and how we're evolving. And as a big part of that, as you know, we're accelerating our use of cloud, right? So Guidewire cloud. So we'll tell that story from a number of different voices. So I should mention that this is our safe harbor slide. This will also be on the PDF that will be on the website later on today. So with respect to the agenda, just in a minute or 2, Mike Rosenbaum will be covering our company update and vision. He and all of the other speakers will also take your questions at the end of his session. And Marcus, as many of you know, is with us here as well. And he'll also take questions at the end of Mike's section. And then we'll give an update on our product strategy with Diego De Vale, our Head of Product. And then we'll shift gears and invite one of our partners really into a discussion to talk about from his perspective and kind of like a fireside chat without the fire with Christina Colby about a partner's perspective on the industry and again Guidewire Cloud. We'll have a short break and then we'll shift gears and really again have a discussion with 3 of our customers. 3 customers who are using Guidewire Cloud, one is using InsuranceNow, the other 2 InsuranceSuite and just have an open discussion including answering your questions as well as part of that session. We'll round out our day with an update from Curtis Smith, our CFO. And it will be great if you could join us after that for a cocktail reception on your left, so on this side of the building actually where you had lunch. Sound good? So without further ado, I'd like to welcome Mike Rosenbaum, Guidewire's CEO. Thanks very much, Brian. Here we go. Let me just say again, how thankful we all are that you're here to share the day with us and welcome. I'm the new guy here. I was going to say Brian said it already, but Marcus is here. He'll be able to take a couple of questions at the end and he's also available in case I follow-up the stage, he will pick up seamlessly and continue the presentation. Want to start the presentation by just talking about my first couple of months. I think we're almost at 60 days, But I thought I'd give you a couple of things that I've noticed and insights that I have before we get started with the presentation. I think the first thing that I wanted to say kind of reflects some of the things that I talked to you all about, about what was interesting about me joining the company. It has been very insightful for me to see the actual culture of this company in action. I think it's one thing to talk about it with the Board and with the CEO, and it's another thing to meet people, to talk to people, to talk about their commitment to this company and their commitment to this industry. It's sort of almost every single person that I meet and say hello to, I ask them how long have you been at Guidewire and how long have you been in the insurance industry and usually it's a decade and another decade before that. And the next thing that you notice about the culture is this incredible commitment to customer success and dedication to this industry. And I've been saying and I think it's 100% true that if you think about the long term durable advantage of this company, it's really the culture and it's really that commitment and it's something that I have absolutely noticed in my 1st 60 days here. The second thing that I noticed is a little bit new for me, is just in the conversations with customers about the level of commitment and the level of partnership that's associated with the implementations and the service that we provide to those customers. Multiple conversations in my first 60 days where Marcus and I are just me sort of going out and meeting a customer and talking to CIOs and talking to CEOs about the fact that they have effectively bet their careers and bet their business on the success of the implementation that's powered by this organization and this software application. And that really, really resonated with me. Again, this is something that we talked about a little bit, but it's completely different for me to be experiencing it firsthand. And again, I think that that relationship that we have with our customers is again becomes a long term durable advantage for our company. The last thing I'd say is about the demand and the opportunity that I see in the market. Very, very it was one of the things you do, I suppose, when you look at, so the subtext of the conversations that you're having with customers on a position like I'm in is thinking about, hey, what's the potential here? What's the long term potential? And it's one thing to talk to the customers that have made a decision and say, hey, we've made a decision to go with Guidewire Cloud. It's another thing to talk to the customers that said, we haven't made that decision yet. But the subtext of that conversation is, you do this, you do this, you do this, you prove it and we're there, right? And that's kind of the tone of the conversations that I've been having is that they're very, very aligned with the approach and the strategy that we're taking. And really it's just up to us to execute and prove that we can be that partner for them. And so that's been very, very validating for me sort of in the 1st 60 days around the long term opportunity for Guidewire. Okay, so that's my 1st 60 days. I'm going to give you an overview of the company, my perspective on Guidewire and what it is we do and where we're headed in the future. Okay. So I'm going to steal a line for Marcus actually because I studied a couple of his connection speeches. And one of the things that he says is that we live in an uncertain world. Okay. That was a picture of a fire last year in California. This is a picture of some of the destruction that was caused by recent Hurricane Dorian. And what I think as a newcomer to the and a newcomer to Godwire, it's very interesting to think about the role that insurance plays in our society and in our economy. It's an incredibly important thing that I don't think too many people think too deeply about before they need it, right. But it sort of creates the surety that we can take risks, that we can make investments, that we can live our lives without worrying about the consequences of these sort of unforeseen events. And that role that the insurance industry plays in our society and our economy, it's incredibly important and it's something that we all at Guidewire take very seriously. And now as a newcomer to this organization and this industry, I take very seriously. This is our chosen domain and this is the thing that we've chosen to focus our careers on. I think like I said before, in terms of the culture of the company, I think that serves us very, very well. It turns out also that this is an incredibly big market, right? This is an update to the slide that we showed you last year. There's $2,400,000,000,000 in direct written premium across the world, right, which is it's an incredibly big market. It's also, from my perspective, somewhat surprisingly concentrated, right? That $2,400,000,000,000 is concentrated in about 1500 insurers. And if you look at the Tier 1 and Tier 2 insurers, 50 and 250, that represents about 70 of the market. You're going to hear me talk about this slide and some of the context of the market, it dictates for us and for me the specifics of the type of software platform that we need to build to specifically suit this industry and this market, okay. So very, very big, somewhat concentrated, especially in those top two tiers and also incredibly varied, right. If you think about the types of things that these insurers, these insurance companies, these carriers ensure, it's effectively anything of value and anything at risk, which in some ways is sort of limitless, right? If you look across this slide, what I want you to imagine is the incredible complexity of the business systems necessary to be able to ensure and collect the information associated with pet insurance and at the same time ensure and collect the information necessary to insure cyber insurance, right. And this is the sort of physical or the technical challenge that these companies face and this is why it's so exciting, I'd say, to be running a technology organization focused on solving what I consider to be an incredibly difficult computer science challenge. And so that's our mission, right, and I'm going to go ahead and read it. To deliver the industry platform that P and C insurers rely upon to adapt and succeed in a time of accelerating change and to ensure that every customer succeeds in that journey. That last clause is really important, relates back to the cultural conversation that I started with. This is a company that's founded based on the principle that these implementations are incredibly difficult. This is not something that we walk in, shake hands and say, this is going to be great, this is going to be easy. We actually start with the exact opposite approach. This is going to be very difficult. In some cases, this is going to be the most difficult thing that these people will ever do in their careers. But this company and this culture and every single person here, we are up to that challenge and we are committed to ensuring that every single one of these implementations is successful, right. And it's one thing to say it, it's another thing to deliver it. And I think you'll see as we go through the presentation, this is a company that has done an incredibly good job living up to this standard that we have set for ourselves and it's something that as the CEO of the organization, I fully intend to continue to deliver on. All right, so that's our mission. This is how we do it, right? We aspire to deliver the Guidewire insurance platform, We are doing We are doing that and that's a lot of what we do, but we're also creating an ecosystem of professional services professionals, sometimes led by Guidewire, but for the majority of cases led by an ecosystem of systems integrators. And we also are creating an ecosystem that surrounds the company that enables the value proposition that is delivered via Guidewire to be enhanced by connected systems. That's a big, big part of the value proposition of the overall company. And it's like this idea that we are creating standard for our industry and we're providing this platform that P and C insurers can rely on is sort of core to the technical approach and the physical approach of how we are managing the company. So if I think about the conversation as it relates to the customer needs and the customer benefits and the customer problems that we're trying to solve, I think in some ways, it's not that different than most other industries, okay? We want to basically run our IT organization more effectively, lower the total cost of ownership and complexity via our implementations. We want to make better and faster decisions and take more advantage of data. We want more agility. We want to be able to move faster. We want to be able to execute on business initiatives more quickly. These things are very common. I spent 14 years at Salesforce prior to joining Guidewire a couple months ago, and these things are very similar. I think what's interesting to think about is how are we solving these specific problems for the P and C Insurance Industry. And if you think back to that slide about all the different kinds of risks that are insured and all the different nuance associated with managing and controlling and selling and all of those unique characteristics of the P and C Insurance Industry, how are we focused on doing these things specifically for our industry. That's the kind of mindset that this company is taking. We're not a general technology company. We're a technology company solving these specific problems for the insurance industry. So look, I want to start actually, let me go back a slide. I'm going to go through 2 of these, and then Diego Duvallay, he's going to talk about increasing agility. So if you feel like the 3rd chapter is missing, you have to wait for Diego. I'm going to talk about total cost of ownership and I'm going to talk about the data opportunity that we are focused on. So very simple. Total cost of ownership is very simple and our strategy is very simple. It has moved this industry to the cloud, okay? Now different industries have been on different paths and different timelines, different use cases in an enterprise have been different have been on a different path and a different timeline for moving to the cloud. But I think we can all agree at this point that the business model is proven, the technology delivery model is proven and there is an incredible opportunity to unlock a lot of value by moving on prem systems, by moving self managed systems to a cloud based architecture. Okay. Just to summarize what we do here, and you're going to see this in a couple slides as I proceed in the presentation. All over our customer base, these IT organizations are working on problems that are not adding significant value to their enterprise and those patterns and that work and that expense is repeated and repeated and repeated and repeated at each one of the customers, okay. To the extent that we can centralize that expense, that we can conform the requirements associated with managing that expense, we can unlock a significant amount of value. We can lower the total cost of ownership for a company. We can reduce the complexity of managing a system like Guidewire. We can take that burden on ourselves and manage it centrally and in the process unlock a significant amount of value. That model has been proven in industry after industry after industry and I think that's what's really special about Guidewire and a big part of me joining this company is that the P and C insurance industry is now ready to make this move, that we have built enough trust with this customer base that we can reliably run and securely run these core systems as a cloud based service. And that's really that creates an exciting opportunity. All right, so here's the first slide in this deck that is the that I'll claim as a Mike Rosenbaum slide. This is something that I've been working on with the team for the last couple of months since I joined. And the goal here is to basically create a picture of everything that we do in the Guidewire insurance platform, right? So we're running the baseline service on AWS, that's our cloud infrastructure layer. Then we're creating a set of services, Guidewire specific services that enable us to run this application efficiently on behalf of our customers. The next layer in this diagram is the cloud platform and the data platform. 2 things that this company has spent 18 years of work developing, enhancing, evolving based on every single customer win and every single customer requirement. There's 18 years of IP in that platform, which we're now able to deliver via the cloud. This next layer is something that doesn't get discussed very much, but there's a significant amount of content associated with effectively deploying Guidewire for every single state and every single country and every single line of business, there's a significant amount of IP that's been built up by this company over the years that facilitates a customer going live very quickly. Those all of that work, all of that IP is expressed in terms of applications like Policy Center and Billing Center and Claim Center. And then it's exposed out to digital channels to customers and agents and employees, even chatbots maybe. But basically, we don't know what those digital layers will be. We have to be flexible and we have to be adaptive and we have to be able to move as quickly as the market is moving in order to take these core systems and effectively expose them through whatever channel our customers want. And then on the left, you look at the ecosystem. This is something I talked about in the previous slide. We think there's a very, very significant opportunity to greatly enhance the repeatability of the integrations that make up a significant amount of the implementation expense associated with Guidewire. So things like partner add ons in our Guidewire marketplace, solution partners that are connecting in VR this ecosystem into this platform. And then there's implementation and operations. Like I talked about before, systems integrators and consultants and especially as it relates to our cloud offering, Guidewire specific operations and support that support our ability to do all of this very effectively, reliably, securely and as repeatable a process as we possibly can define. All right. So I want to talk for a second about cloud because in the conversations that we've had over the past couple of months, there's been this sort of persistent thread about margins and about how are we going to get more efficient. Okay, so this kind of relates to what I was talking to you about before. If you look at that dark blue line on your right, these dark blue lines, that's the sort of expense and the effort that each customer is putting into the implementation of Guidewire that's not really adding a significant amount of value. The value that they add is in the application layer or in the digital layer above that dark blue line, okay? And this is the kind of thing that we can recognize and say, hey, let's centralize that. We will centralize that. We will run that on top of the Guidewire cloud. In the process, we will unlock a significant amount of value. There will be efficiencies gained by that process so that customers no longer have to focus on it and can put their resources on the platform layer, on the digital layer or they can redeploy those resources anywhere they want. But for Guidewire, what it does is it forces us to optimize the system around running that system more efficiently because we have centralized it. Now I want to talk to you about how this improves over time. It's kind of very simple. I don't know, I'm going to do that again because it's kind of a cool animation. Are you ready? Okay, don't look down. Ready? Okay, watch. So look, this is what we're doing, right? Diego, the team, hundreds and hundreds of people. What we're doing is, is we're looking at that per customer expense that we are now managing and we are centralizing it. We are optimizing it. We are building a common control plane so that every single thing that we do, we're asking ourselves can we do it centrally? Can we take an approach that enables us to do this a little bit more efficiently? That becomes a backlog item for the team that's driving the Guidewire cloud services layer. And in this way, the system gets more and more efficient over time. Now obviously, we are going to add more customers, right? And when we add more customers, there's just value unlocked. And so that improves the efficiency of the overall system. But I also want to make it clear that we are at the same time making the system more and more efficient with every single release, with every single day. We are adding technology to that layer to enable us to run this system more effectively and more efficiently on behalf of our customers. Okay? Now I want you to take a look at that picture for a second, all right, and I want you to realize something right now, which is this, Guidewire did not take a team of developers and put them in a bunker for 3 years, come back out with a new cloud product. That is not the approach we took, okay? The approach we took is we said, let's take the InsuranceSuite platform that we've spent 18 years building and let's run that efficiently on our cloud, okay? What that enables us to do is to say that it's the same product. The self managed version of the product, the Guidewire cloud version of the product, it is feature complete. Whatever you can do with the self managed version of the product, you can do with the Guidewire cloud version of the product. Now make no mistake, I think eventually 100% of Guidewire customers will make the decision to move to the Guidewire cloud. But I don't know how long that will take and I want to make it clear that we are committed to customers who make the decision to continue to run their Guidewire cloud applications in a self managed mode. That's completely up to them. That timeline, that choice is up to them. And you'll see here in the second slide that we're going to continue to evolve that product. We're going to continue to enhance it. But basically, it's not a different product. It's a different deployment option, right? And so I want to create a compelling reason for customers to make that transition, and I think we will and I think we are, but it's not something that we're forcing on our customer base and we remain committed to those self managed customers. We can run it on top of AWS, we can do that more and more and more efficiently. Over time, we will release enhancements to that InsuranceSuite product. And those capabilities, those new products that you see sort of on the right hand side of this, there'll be more and more sort of based on the fact that we are running the service in the cloud. And to the maximum extent possible, we will drop those capabilities back down and make them available to customers who are running the product in a self managed mode. Sometimes there's going to be capabilities that we're able to build in the cloud that we aren't able to deliver in self managed, But very often, that's not the case. And the upgrades that we're able to provide to self managed customers will do so. Does that make sense? Okay, I'm going to keep going. I've got a couple of nods. All right. So we have 4 customers, 4 new customers who have selected Guidewire Cloud. I had an opportunity last week to go down to Texas and visit USAA, where I am because of my military background, I'm a member of. Incredible wins, incredible milestone for the company and I think for the industry. The fact that a company is really revered in the industry as USAA would choose Guidewire and choose Guidewire Cloud as a packaged solution is an incredible honor and it's incredible responsibility that I'm excited to live up to. We also have 9 existing customers who were existing Guidewire customers who have made the decision to move to the cloud with us. On this slide, I'm excited to point out, Massif, which is an insurer in France. And it's great to see that this is happening not just in North America, but it's happening all over the world. Two more customers, Amica and Grinnell, on this slide that you're going to have an opportunity to talk with and ask them how the process has gone and ask them how the journey has gone and hear from them firsthand about the experience with Guidewire. All right, so my second favorite slide, because my first favorite slide was the one that I told you that I had a hand in building, but this one tells you something that I always looked for back in my career at Salesforce in terms of something that really proves that something is durably growing, right? And that is the growth in our SI partner ecosystem. With 9,000 Guidewire trained consultants at SI partners, this sort of gives you an indication of the demand out there for Guidewire implementation services, right? And the health and the growth rate associated with this ecosystem is really phenomenal. And I wanted to say, because it's come up a couple of times and I just want to answer the question directly, we are absolutely working with this partner ecosystem around ensuring that they're trained and ensuring that they're capable of participating and leading cloud implementations. And so just like before when I said that I expect eventually every single one of Guidewire's customers will in the long run make the decision to move to our cloud. We think that every single one of our SI partners will eventually be participating in cloud implementations with us. We're in the early stages of that journey, but we're absolutely committed to the same model that we have with a self managed approach. We will just take that model to the cloud. All right, I want to switch to the next chapter here and start to talk about making smarter and faster decisions, because this is an area I think that in the long run might prove to be just as valuable to Guidewire and our industry as the core systems modernization opportunity that we've been so focused on up till now, okay? And this is how I would think about this. Again, I don't think that this is particularly unique to insurance. Insurance happens to be a pretty data centric industry already. But I think every company in the world, every CEO in the world, every CIO in the world is asking themselves, how do we take advantage of the data that we are collecting to make better and faster and smarter decisions, right? Everyone is asking themselves this question. Sort of as an industry, I think we've spent the last 30 years modernizing and digitizing business processes, trying to make ourselves more efficient, right? And now we're saying to ourselves, hey, we're collecting all of this data, all this data exists and the technology and the tools kind of sort of exist for us to take advantage of this and help us make better and faster decisions. But who can make this easier for us, right? I think unfortunately that doing this effectively is actually harder than the core systems implementation in the 1st place. And it's our job to take all of the potential here, to take all of the technology that we can muster and package it into a service that makes it easy for P and C insurance carriers to take advantage of this data opportunity. Okay? If you put it really simply, right, we're running a core system. It's a transaction based system that helps a business process run more efficiently. Now you got to get that data into an analytics data warehouse. And it's really easy for me to say it right up here on stage. It's actually really hard to do consistently and reliably and based on every single upgrade, right? And then you want to map that data, You want to map that data to external data. You want to augment the data that you're capturing from current your core systems with external data. You want to sort of put it all into a format that makes it easy for your data scientists to work with it, right? This is incredibly difficult. This is incredibly specialized, the data science associated with managing information at scale and making it and presenting it and creating it in a format that makes it easy to do analysis on. This is our vision for what we will provide specifically to the P and C Insurance Industry. And we're not going to kind of do this generically. We're going to do it on behalf of the P and C Insurance Industry and we're going to do it in such a way as it connects seamlessly to those core systems that we are so expert at delivering, right? And then you can make it available to analysts, you can make it available to business users, and this is really where it becomes sort of really business impacting, is you can make up every single interaction that any of your employees are having with a customer, better By taking this data, analyzing it and pushing it back into the core operating systems, you can make your enterprise run more effectively. But I but I wanted to bring it up because I really, really think it's a powerful idea, okay? So this is a sort of representation of the value proposition that science and this analytics and data platform provides. Okay. So this is typically how insurance works. It's just as simple as those four questions on this slide, right. As you say, I want to insure Bob's Hardware and I want to insure Thompson Tools, We're going to ask him 4 questions and we're going to get 4 answers and we're going to put them into the system and we're going to get an answer and we're going to say it's low risk and we should underwrite that risk. It's low risk and we should underwrite that risk. Okay, but science presents an opportunity to augment the information that you collect directly with information that we have collected on your behalf, that Guidewire has collected on behalf of all the P and C insurance companies in the world, and we have formatted and matched and done all the hard work associated with turning that externally collected data into something useful that enables a model, a risk analysis model to run-in real time on top of the questions that you asked a moment ago and enable you to distinguish between customer A and customer B and turn that into a better, smarter decision that you can make in the moment, right? This is an illustrative example of how this might work. I want to talk to you in a little bit more detail sort of about our approach, okay? So we're collecting data at Internet scale. And just to be clear, the science data platform was originally built and designed for underwriting cyber risk, Okay. So that was the approach. And I think it was actually very, very smart that the team said cyber risk is the first application we might provide, but we actually could use this technique to apply it to any risk, okay? So we're collecting data at Internet scale and what's interesting about this is you really want to think about this economy scale and sort of network effect related to this product line is that every single time we have a new customer who says to us, hey, we'd really like you for our business, we really think it makes sense for you to collect this data set, we look at it and we say, yes, that makes sense. And we do the work to ingest that data set and massage that data set and match that data set. Well, guess what? That data set is now available to the next customer and the existing customers of that platform. It's a very powerful model. It's like that centralized network effect really kicks in here and gives us and kind of you think back to this mindset of creating an industry platform, this I think really represents it. So we're collecting this data at Internet scale. We're doing all the hard work associated with data science. You probably heard people talk about this, right? When you talk to people who work on artificial intelligence and machine learning, what they'll tell you is that about 10% of their job is fun and about 90% of their job is associated with wrangling data sets and engineering data sets such that they can get them into a format that makes them easy to use and fun to do the actual machine learning and the actual AI. And so what we're doing here is we're taking all this information that we collect and we're massaging this information and we're transforming this data and hosting this data and putting it into a format in which a P and C insurer can do the fun stuff, right? That they can use it to underwrite better, they can use it to price better and they can use it to do accumulation, which if you're interested in what that means, you can ask me afterwards. But I was instructed by the team not to try to explain it right now because I'm pretty new. All right, I got a couple of laughs. Okay. All right, I want to switch gears and talk a little bit about winning our market, okay, and the performance of Guidewire over time. This is a slide that I can take absolutely no credit for because I only joined 60 days ago, but this is incredibly successful company with a long track record of sort of very consistent growth. One of the things about this slide that I think is particularly interesting is that you can see that the license and subscription revenue is growing slightly faster than our services revenue, and it's taking up a greater percentage year after year of the overall revenue of the company. And I think we should all expect that trend to continue, but I wanted to point out something that I think is really important to understand. Getting back to what I was talking about at the beginning about my observations in the 1st 60 days, I think this is a really important for me, I'm counting it as a really important insight. And that is that the services organization here at Guidewire is incredibly strategic for us, okay? And so when I say, when I meet a CEO or meet a Head of IT and we say, hey, listen, we are very committed to ensuring that you're successful. This project is going to be very hard, but we're committed to ensuring that you're successful. When the inevitable bump comes in that implementation or when the challenge comes and there's something that we need to do, having an incredibly strong services organization gives us all a lever to pull, right? It makes it possible for us to say where is the expertise that we need to drop into this project and help this customer And who is it that has solved this problem in the past and can offer advice? So I absolutely don't ever see this part of the organization getting to 0. This is going to remain a really important part of our strategy. And I think for our specific industry and the specific nature of the types of implementations that we do, that services line will remain forever a very, very important part of the company. All right, so you also heard me talking a lot about ARR. ARR. I think that Guidewire companies that go through this transition from a term based license model to a cloud subscription model, it creates a lot of difficulty in interpreting the financial results associated with the revenue recognition necessary based on the type of implementation that a customer chooses to deploy the product with, right? So from my perspective, ARR normalizes that, right? And we can very easily say, look, customer wants to buy a term based license and deploy on prem in a self managed mode, that's okay. Customer wants to buy cloud, we think that's great, that's okay too because both of those transactions end up being normalized through this metric ARR. And you can see here, we've had a very consistent and steady growth rate in ARR and also 4 quarter recurring revenue, which we reported on prior to FY 'seventeen. But this is the goal, this is the orientation that I am taking for this whole organization. This is what we do. When we are able to successfully win deals, when we're able to successfully deploy customers, when we're able to keep customers consistently continue to grow and invest in the P and C Insurance Industry. So this is the to grow and invest in the P and C insurance industry. So this is the orientation that I'm taking and we're taking with our management team and effectively everybody at the company. And so if you look at all of that history, it's like this company has been very, very successful across tiers, okay. So if you think back to the first one of the first slides in the deck, we were talking about the overall industry. We have 34 out of 50 of the Tier 1 insurers, we count them as customers, and 99 out of 250 in Tier 2. And I'm anxiously awaiting that triple digit number in the Tier 2 line this year. And it's important to note that we also have a significant presence in Tier 3 and Tier 4, but we've been particularly successful based on that focus around Tier 1 and Tier 2 insurers. I think this is the hardest part of the market and I give all the credit in the world to the continue. So if you look at this slide, you might ask yourself and if I'm coming into the company as a new CEO, I'm kind of looking at this and saying, what do I have, 16 customers left to sell in Tier 1, is the story over, okay? The story is absolutely not over, right? The majority of core direct written premium remains an untapped potential, okay. If you look at Tier 1, we're a quarter of the way done we're a quarter way through this core modernization effort, right? And if you look at Tier 2, the opportunity is even bigger. Tier 3, 45, the opportunity is even bigger, right? And that same thing plays out across region, right? If you look at, yes, we are a North American company and we've got our start focused on the North American market. We've been very successful. There's a major opportunity for us in EMEA. There's major opportunity for us in Asia Pacific and Japan. There's more work for us to do. We're going to make it easier and easier and easier every single release and every single day, But there is a very, very significant market opportunity for these core systems for Guidewire and for our future. This next slide I think is also kind of interesting in that basically creates a new potential, okay? So what you can see here on the upper left is how that DWP penetration looks like. And as I told you before, when I said, hey, we've been successful in Tier 1 and Tier 2, that's what it looks like, right, with that self managed Guidewire implementations in those first two tiers, okay? That creates a cloud upgrade opportunity for us in the self managed base. So in addition to the opportunity that we have to take new customers and upgrade those systems, we also have an opportunity to move self managed customers to the cloud. This next chart, the market ARR potential or penetration, excuse me, that's our view into if you take all the products that we have and you look at all the insurers that exist today, what's the real overall potential of the market? And my summary to this slide is, it's enough, okay? So if I'm thinking about my job as a CEO, I need to be thinking about whether or not I'm focused on finding a new market or executing on the opportunity that presents itself right now based on the products and the customers in the market that we have right now, that slide tells me very, very clearly that we have enough market right now and this is a big, big opportunity that we have an opportunity to go execute on. And I forgot to paint the slide. I told the team that I would do this. All right. So I want to give a summary explanation here because it's come up a bunch. It relates to this example of a example of a customer that's been with Guidewire since 2000 or fiscal year 'five, right? And they started with ClaimCenter and then we added a policy center to that and increased ARR to $2,500,000 And then you can see we added billing center and data hub and predictive analytics and digital and sort of inching up our opportunity to provide more value to that customer and increase the ARR associated with that customer over time. And then we did this cloud deal, okay? And this reflects what we've been talking to you about around ramp deals, okay? So if you can imagine that customer is not going to receive the full benefits of the cloud solution until they're able to fully move off of the self managed solution that they're paying for and running right now. And so we work with that customer on ramped pricing that enables them to match the investment they're making on that transition with the cost they're saving in terms of the implementation and it ends with a fully ramped value of over 2.5 times what they started with. Okay? So this is, like I said, and it's an illustration of the type of conversation and the type of relationship that I believe that we can have, not just with the hundreds of customers that we already have, but with the hundreds of customers that we don't yet have. The same pattern can be executed on as we sort of follow on this journey with each and every carrier. Okay, so this is my slide where I get to say it's not easy, okay? So a couple of people have asked me about competition, okay? And I would say this because I am 60 days into the job. It's definitely one of the things that I've been personally assessing. And I would say my summary is that the competitive situation has not changed dramatically for Guidewire. But make no mistake, we still have competitors. This market opportunity that I described, the P and C insurance industry, this potential to modernize these systems and help people move faster and be more agile, other people have recognized that opportunity. We remain very focused on that competition, but I believe very strongly that if we continue to execute as we have before, and it's absolutely my intention to do so, that I think we will continue to win the majority of contests that we participate in. So, one, Pat on the team's backslide, I think one of the sort of indicators of how we win or why we win, we've been named the leader in the Gartner Magic Quadrant within the InsuranceSuite. I also wanted to point out, nobody can probably read this, but there's a second Guidewire product that's on this chart and that is InsuranceNow. And InsuranceNow is a product that we have and we focus specifically on the smaller insurers, the insurers that are trying to launch a product very, very quickly, less of the customization capabilities of the overall insurance suite, but something that enables you to get up and running very quickly. I will say just on behalf of the team that that dot that you can see there, if you're a tennis fan, it's sort of on the line, right? And I would count that as in, okay? I don't know. It's kind of like we'll get there completely in, but if you're a tennis fan, it's on the line. So I want to just say to that team, they've put in a lot of hard work and this is a great result. All right, one more slide or 2 more slides. I want to talk for just a second about InsurTech and whether or not I consider it a threat or an opportunity and what's going on. It's an incredible amount of investment in the insurance space. I think in large part due to the success of Guidewire improving that you could build a software company to successfully serve this market. On the one hand, you have here digital attackers. And these are the sort of natively digital companies that are trying to disrupt the insurance space. And in a lot of ways, some of these become customers of Guidewire because they need to manage claims too. But in a lot of ways, this provides the initiative into the market. This causes the industry to be a dynamic one in which the digital frontier around which insurance carriers are competing for business is pushed by these digital upstarts. And I think that creates a big opportunity for Guidewire to help these customers, these carriers compete in this new world. On the process optimizers, what I love is that there's much, much more, many more of them. This is where we have an opportunity with our marketplace to more easily connect these new systems, these new ideas into the core business operations of our customers. And then I see all of this as just more fuel to the overall market, creating more intensity and more passion and more opportunity around core system modernization and what it is we really do here at Guidewire. All right. This is actually my last slide. I thought it'd be interesting just for you to get a sense of my priorities for the next 12 months, okay? Someone told me recently at our services meeting, they said they just read a book and they said you should only ever have one top priority, right, which is obvious, maybe only one priority. I have one priority and that is execute on the cloud opportunity that presents itself to us right now. I could describe that as cloud efficiency, cloud opportunity. We see in front of us, I see in front of us a pretty unprecedented opportunity and it's our opportunity to take advantage of and it's all about execution and that's my number one focus. My second focus is just operationally run the company, right? All the things that you can imagine the CEO does. We'll look at the budgets and the operations and help win the sales deals and do all the things. But that's sort of secondary for me, if I'm being completely honest, about executing on the opportunity that presents itself right now on cloud and helping drive the efficiency of that model and helping ensure that we're able to win our fair share of those cloud opportunities. And last but not least, and this is the one where it's always frustrating that you wish you could spend more time on this, is product innovation. Like I said to you before, I'm not kidding when I say that I think that the data and analytics opportunity that presents itself to us right now might end up being bigger than the sort of fundamental core systems number 1 and number 2, I'll be spending with that team and trying to make sure that we are presenting ourselves in the future to our customers and executing on that opportunity. So whoever is running the show should give me a gold star because there literally is 24 seconds left on my countdown timer. And so, I am done with my presentation and would like to open it up for questions. I don't know, how are we doing the questions? Does Mike do good? Yes, sorry, sorry, sorry. Just to be clear, we have 15 minutes more for questions. Yes? Hi, thanks. Rishi Jaluria, D. Davidson. Really appreciate all the detail you gave us today. 2 for you. First, the slide on kind of the InsurTech and what you call the digital attackers. Just help us understand if players like Lemonade are going to become share gainers in this space, is there a kind of vector at which you can benefit from that share gain of these players there? And then second kind of follow-up, Tier 4, Tier 5 is clearly a really big opportunity. That's why the ISCS acquisition, it actually looks like the number of Tier 4, Tier 5 customers declined year over year relative to last year. Was there anything there? Was that just a function of M and A and maybe re categorization or maybe if you can provide some other color that would be Yes, let me answer the second question first because it's more top of mind and I've specifically looked at that one. We needed to take a renewed focus on the InsuranceNow product. We did not have the best year for new customer attraction last year, not what we hoped. We've done a couple of things. We've really enhanced the product. We've put a new investment And we've also reorganized our internal sales organizations to be more specifically focused on that segment. I think strategically that segment is very important to us and I expect to drive some more growth in that customer count and that segment of the market for us. It's been one of the things that Marcus and I talked about when he joined and something that we've been executing on in the latter half last year and latter half of the year and I feel good about the prospects going forward. And then the and I mentioned Marcus because I'm going to ask him to come up and help me with the answer to your first question because I think he has a significant more significantly more background on that space and that answer. Rishi, your question was about Lemonade and some of the digital attackers. I think Lemonade has been the prominent among them. But for all of their number, what's really been striking is that the aggregate amount of premium that they've been able to attract is still just a rounding error on the total industry. I think about 5 years ago, maybe the last 3 or 5 years ago, there would have been tremendous agita expressed by a lot of incumbent insurers to say maybe if we're going to have our lunch eaten by this new category of player. And I think that's all but gone right now. I think there's a recognition that everyone needs to up their game that the digital imperative is now the battleground for competing for customers and policyholders. But all of the growth is still being robustly captured by the incumbents. So I think that it's a segment that we aspire to serve and that will there's no question we'll get a few customers out of that, but our primary orientation as a company is absolutely at the large multi $1,000,000,000 multi decade developed books of business that are represented by incumbents. Thanks guys. Brad Sills here from BAML. Thanks Mike and thanks Marcus. This is super helpful. I wanted to ask Mike, coming from sales force, what is different about Guidewire cloud deals than say a bigger Salesforce kind of cloud deal? What are some of the similarities? What are some of the differences? And I guess also what's your comfort in kind of the reference counts that you have today already, some of these early wins in Guidewire cloud? Thank you. So I think the biggest thing that's and I think I don't know if it's cloud. Guidewire is for the most part a replacement industry, replacement opportunity, okay. That necessarily means that the approach to the implementation, the implementation projects are just very, very different. I remember very clearly, given all kinds of advice to customers in Salesforce around basically saying, hey, take an MVP approach to the implementation. No matter how big the vision is for the implementation, no matter how big the deal is, let's get something started tomorrow and let me work with you to find the smallest bit of CRM that we can implement tomorrow on the Salesforce platform and then build from there and build from there and build from there. Because Guidewire is a replacement market and there's an existing system that's really running the show and the ship, right, to basically do the hard work of doing that transition. I think there's opportunities for us to take that more sort of incremental book of business, incremental product, but it's not the norm. And I think that is the difference between the two approaches. I think sales cycles are longer and the due diligence that the customers are performing is deeper. I think that the surety that everyone has about how this is going to be approached and how long is it going to take and what kind of commitment that there is going to be, I think that that's just much, much more serious here at least from what I've seen so far, right. And I think it just logically makes sense given the nature of the situation and that being that core system replacement. So I don't know if that answers your question, but that's my take so far. And to be honest with you, I'm learning that as opposed to trying to sort of say, hey, this is how we did it in the past because there's a lot for me to personally learn about how that sales cycle evolves. Brad also asked about your confidence in the reference accounts that we have right now. Yes, sounds good. Great, I've met with a number of them. I'd say what's interesting is that everybody throws around the word partnership pretty loosely, I'd say, but like there's a real commitment here and the customers know where Guidewire is in the journey. I mean we're being completely open and front about it. Here's the number. Here's the logos. Let's talk. So there's that sort of direct nature of here's where we are and here's what we're doing and there's this partnership around saying, hey, we'd like you to focus here and we'd like you to evolve the solution here and can we do a better job? I hope you hear that directly from the customers, because that's certainly been my take. The other thing which I didn't know, I don't think came out in my conversation is there's a real sense that our customer base is rooting for Guidewire, that there is this there is a real sort of in a way that and I mean not to say anything negative about sales force, it's just the number of customers is sort of different, the customers understanding that us being successful in doing this is going to provide a benefit to the industry and provide a benefit to them that I think is really, I don't know, it's very noticeable for me. Hi, Mike. Ken Wong from Guggenheim. Welcome to your first Analyst Day. I think you touched on an important point earlier about some confusion with the investor community around kind of the cost and potential margins debt long term. I think the one area that people typically focus on is around that Guidewire support cost in the overall TCO. When you look at Guidewire versus, let's say, something like Salesforce, I guess, how close to driving efficiencies similar to Salesforce do you think we can get here? Or is there something fundamentally different in terms of the customer needs and the infrastructure that would potentially limit what that margin structure could look like? Well, I think I would say that it's premature for us to I mean, we can hold our we can aspire to margins and economics associated with companies like Salesforce, but I'd say it's premature to be saying that we're tracking, right. I want to be really clear, right. Our strategy is to build a cloud platform for the P and C insurance industry, and then we're going to be the best one of those that we possibly can be. That may end up having a margin target that's close to sales force. I don't know. I hope it does. But no matter what, we're going to optimize around that business opportunity and what those specific customers need. I think there's really interesting things about the characteristics of the architecture that we've approached this with, right. Some people would call this a single tenant implementation or a multi tenant implementation and single tenant implementations, like there's a lot of flexibility and there's a lot of isolation that's associated with the approach that we have chosen to take. In the long run, I hope that we'll be able to make it more and more efficient. I mean, I know we will. I don't yet know to be able to tell you, hey, hold us to that standard. As we evolve, as we get more customers and as we get more of a track record running those customers, I think we'll be able to provide more detail about that. Hey, over here. John Horton, Waterford Capital. Hey, Mike, just curious, could you elaborate a little bit on how you decided to come to Guidewire? Because I don't know if I was your agent or something, maybe I would have told you, geez, you've got all these unicorns in Silicon Valley desperate for a guy like you. They're cloud native companies, app native, whatever. You're coming to an enterprise software company that's got 400 customers on 6.5, 7.2, 1,000,000 of dollars investment. They're going to take forever to move to the cloud because they're so invested. So how do you decide to come here? Thank you. I love it. Thank you very much for the question. I'd say number 1, I was completely attracted to the culture here. So I don't know if you noticed it, but when you came out the elevators and you looked at the wall, there was 3 words there and the first word was integrity. I consider myself to be a person, I at least aspire to be a person of integrity. And when I sort of talked to Marcus about the culture here and the approach here, it really felt like a place I'd be at home, okay? And would I be having could I have fun at some other company? Probably, I don't know. But it just felt like a group of people that I would work well with. I think that was number 1. And the other part of my personality is that I just love hard problems, right? I mean I know that this probably sounds weird to all of you, but the part of my day that I most enjoy is the sitting down with the engineers and the product managers and the difficult customer situations and just digging in and working on hard problems. Hard, multiyear kinds of projects were the things that I look back at my sales force career and I say that's when I was having the most fun. And so as hard as you could make the situation here with Version 6, Version 4 or whatever, that was just going to make this more fun for me to think about joining. And so that didn't scare me at all. It actually was something that I was really excited about, but mostly it was the culture. Tyler Radke from Citi. So Mike, obviously, coming from Salesforce, you know a thing or 2 about building clouds. And I couldn't help but notice that I think your first priority was around cloud efficiency. So maybe if you could just talk at a high level, like what were some specific areas that maybe you feel like you can change over the next year or 2 in terms of what Guidewire was doing before and how you're thinking about incorporating that into the infrastructure? Sure. Great question. Okay. This is what I want you all to imagine, right, is step 1 is get 1 customer. Step 2 is get 2 customers. Step 3 is get 3 customers and then you've got 3 customers, you can start to see a pattern, right? You can start to look at where are we spending our time, what's troublesome, what's our opportunity space in terms of making this system more efficient, right? At the same time, you can start to develop a backlog of physical requirements that can be delivered in that infrastructure layer that enable you to run that system more efficiently. This is a really fun special moment at Guidewire where we have 4 live customers running the cloud. We've got 9 more customers coming and we're developing those requirements and looking at that system. I mean, this is like there's people in my old company that sort of dreamed about, hey, if we could only go back to the early days and re change a few things, all these things we could take advantage of this new technology, this is just a really fun computer science opportunity right now. And so you can articulate it in terms of efficiency, which we did on the slide, and that's how it manifests itself, I think, to investors. But what's exciting is you could also say efficacy, you could say repeatability, right? You could say what are we learning from all of these implementations in every single day that we're spending helping make sure that these customers are successful and how are we building that into this core product, that's a really fun project. It's also a lot of hard work. It's a really tough, tough thing to do that I think we're up for, but that's why I would describe it that way. And I think if and when we do it effectively, it sets us up for the next 10 years of growth at Guidewire. I think we're going to do one. Hey, Mike. It's Chris Merwin here with Goldman Sachs over here. I got you now. Thank you. Yes. So I thought I'd just ask about TCOs. When you walk into customers and you talk to them about the cloud opportunity, what can you tell them about TCO? I know it changes for probably it's different scenario for each and every customer. But with the pricing increase 2x to 3x on cloud versus the on prem, how do you walk them through that math of here's how you can save money? Is it more about that or is it more about the dynamism of updates? Like what are those key things that get them over the hump to actually take the cloud product? Mike's pass the ball to me because at least I was involved in a lot of the customer contracts that we closed, particularly in the last quarter, well, all 13 of the ones that we have today. There's obviously there's absolutely a kind of cost emphasis because they want certitude in that respect. But I will say that the general transition to the cloud has been motivated much more by a desire to transfer risk and complexity and to disburden the current IT organization to pursue other objectives that are considered to be really on the strategic vanguard of what they need to do competitively. So I don't want to suggest the customers are pricing sensitive. I would just say that's not to a striking degree, that is not the leading consideration. It is much more about the certitude that we can actually execute against the service promise. And it's best put, I think, by one of our earlier earliest cloud customers that said, I want to be out of the business of owning an IT asset, especially as complex one as a P and C core system. I want a reliable business service on top of which I can deliver distinctive service to my policyholders, etcetera, etcetera. And the question is, is Guidewire capable of that? I have the view, and I think Mike shares it, that as we develop our bona fides and our credentials and become utterly reliable in that respect, that our influence, our stature in that economic discussion will only be enhanced, right? I mean and I mean, we're really looking forward to that. And we're trying to keep our expectations and yours contained in that respect, but I think that's what execution will reward us with. Hi, Mike and Marcus, Colin Decharm with Sterling Capital. My question is surrounding the timeline of the cloud build. And I understand as you migrate the business over time, there's an element of legacy customers that take a very long time to make that transition with you. But assuming just for a moment that your entire customer base were ready to move today, should the product be ready, I'm interested, given your sales force background, how long do you think it would take to build that stack? What I'm trying to do is dissociate customer timeline versus the gate that Guidewire sets. And then relatedly, as you think about that build, are there internal milestones you're using like percentage of containerization or number of absolute number of microservices or something along those lines that help you set operational milestones as you progress along this runway? Thanks. Yeah. The second half of your question, I think, absolutely yes, and you could push some of those questions over to Diego, who's going to present in a few minutes. But there absolutely is those types of KPIs that we can look at associated with measuring the efficiency of the system. Would say the real it's not exactly build, it's build an operation capable of managing hundreds of customers, right. And you don't think about it like plugging in servers because we are running on top of AWS, but it's more building an operation capable of running a system at that type of scale and complexity, hiring the people, ensuring that the people are trained to operate and run and manage the system, because this is, like I said, it doesn't go away when you engineer it, you just centralize it, right. So we need to centralize it. It's still very complicated, right. We still need to monitor load and we need to monitor the network traffic, We need to monitor the reliability and the security of the system. And all that work is still happening. It's just happening on behalf of end customers, right? And so building an organization capable of scaling to the full capabilities of Guidewire, we will certainly be ahead of demand, I think, but I don't we wouldn't do it tomorrow. That wouldn't be that would not be appropriate. Time for maybe 2 more questions. Yes, go ahead. Good luck. Hey, Mike, I just had a quick question about the ecosystem Guidewire platform. What do you think like how big of an opportunity is it like how do you envision the platform being is it kind of like an app store almost? And I guess longer term, do you see it as like a significant revenue opportunity or monetization opportunity? Yes, I love the question. Thank you very much, because I just I spent my whole previous career comparing the Salesforce AppExchange to the Apple App Store. So now I get to do it again. It's a great model, okay, to think about how it works, but I think the economics of it are very, very different. I think I was talking to a customer the other day and they had identified 175 integration points to the implementation that they were working on. And I asked the team, I said, well, okay, well, what percentage of these can be covered by out of the box pre built application like prepackaged integrations? And we looked at each other and said, okay, we got our work cut out for us to sort of make sure that that's a high percentage. We've done certain things to make those things repeatable, but there's a lot more that we can do. There's something that you'll hear, DevConnect is a technology that we're talking about sort of enhancing the capability to package those integrations, and there's just a lot of work for us to do to get that integration expense sort of much, much more controlled and much more repeatable. If you ask me is it a revenue opportunity, I would say possibly, but it would be very it would be a bad strategy for us to optimize the revenue associated with selling those things or monetizing those things versus ensuring that those things exist such that they are increasing the velocity around ton of experience thinking through as it relates to my old job and happy to talk afterwards because it's actually a complicated function. But for sure at Guidewire, the opportunity is to be able to tell a customer, those 175 integrations that you need to deploy, we can do that very quickly and X percentage of them are covered by the marketplace and you don't want to slow that down based on an effort to monetize those customers touching and using those marketplace add ons. Okay, I think one more. Hi, Mike. Tom Roderick with Stifel. So, I guess at the risk of forcing you to do too many sales force comparisons, I can't help but think of all the Dreamforce years where you've had a mascot walking around with a circle and slash through the word software. And I was interested in the part of your presentation where you talk about what you can get on prem, you can get in the cloud and vice versa. I guess when we've seen some other cloud transitions, there's perhaps been more of a product strategy pushing new products in the cloud that you can only get in the cloud and not on prem. How do you think about that dynamic between trying to push on customers who might not be ready for it and what to introduce things that they can only get in the cloud in the future? So I'm going to answer this, but I also want Marcus to, because I think it speaks to a little bit of the cultural approach to customer commitment that we've made. I mean, literally had this conversation with a customer yesterday and he said, I don't want you to compel me to the cloud. I want you to create a compelling reason for me to want to go to the cloud. And that is my philosophy, okay. The size of these implementations relative to the sort of mental bandwidth of a company is very large, okay? It's not like Guidewire can go to a carrier and say, we're going to force you this year to go move. They might say, that's impossible for us because we have 6 other projects and there's just no way that we can allocate the people and the resources and the bandwidth to go execute on your timeline. That cultural commitment to customer success, I think, necessitates a mindset that we will create a compelling value proposition, but we will also maintain our commitment to the customers who choose to continue to run-in a self managed mode, right? What I want to do is create a pull, not a push and make the product better and better and better, such that they all decide that it's on their terms when is the right moment for them to move over. But I'd love for you to give your opinion on that, Ann. Just a quick loss on it. I'd say that our messaging to our customers and to the overall market has been the most intricate, kind of complicated waters that we've ever had to navigate. And I think we've gotten through it remarkably well and Mike articulated it perfectly. The main elements of the message have been as follows. Number 1, it will absolutely be a pull, not a push, right? And we're not here to compel, we're here to motivate, right, and to entice by offering a really distinctive value proposition, one whose day has come. Point 2 is we're not guaranteeing absolute feature or technical parity between the cloud modality and the on premise one. That wouldn't be reasonable and it would ultimately retard our progress in that. And we were anxious about that message, but it's been we are utterly forthright about it and I think it's been internalized and accepted and embraced as rational, right. And then the third thing we said is that the cloud capabilities and cloud architecture is actually uniquely suited for a large category of technical use cases that will allow us to do things distinctively that are almost impossible to do or at scale the way in an on premise mode. And we have not put forward really compelling examples of that in production yet, but I think the ideas such as pricing, such as data and analytics, it's going to contribute to data sharing and syndication. These kinds of ideas are intuitive and compelling. So it's really, as Mike has said repeatedly, it's an execution task. But if we could deliver that, I think then, the flywheel that's already turning with respect to that motivation to transition will only spend that much faster. Thank you all very, very much. Yes. Thank you very much for your questions. Our next speaker will be Diego De Valle, the Head of our Global Product Development team. Hello, hello. Good morning, good afternoon. I recently been to the U. S. Open and there was that moment into which everybody was there to watch game 1 and then game 2 start and everybody walk out. So I hope that it's not that moment right now that we got 2 CEO and then it's me, it's I got what I need. So I have half an hour, so and I hope that I'm going to be as good as Mike to get 10 seconds before the end. I don't know. I'm originally from Italy, so it's not exactly my number one skill. So just to start with, I want to give you a little bit of the typical slide of myself. I think in general, there is always the right moment to join a company, the right moment from a company perspective. There is multiple facet things. So here the story I want to tell is that, first of all, I think I had an experience at being at large company, enterprise, smaller start up, learn with a couple of failure, came back on a large company. So I think it was the right time for me to kind of come to this challenge with a bunch of knowledge that was very much applicable to where Guidewire was. Guidewire started to have a multi location development, grow kind of 2x in the year in the 2 years before I joined. I actually personally lived in 4 different countries. I've been running development team in different countries. I've been living in India, in Germany, in Holland. I think it was personally the right time. I think it was also the right time from a company perspective. I joined in March, if you guys know, IS10 was released in October. So a large enterprise solution like something that is released in October, by the time you join in March, is in the last mile of baking. It's not like that there is like key decision to take. It's like you're bringing it home. So that will give me a kind of unique opportunity to kind of look a little bit, assess the development, take a look at how we were executing, look at the different development center. And so my priority number 1 was team. I really focused on teams, structured the team in a way that we could scale up. The company came up of a gigantic growth into, let's say, the different environment, the different development environment were more like different startup kind of instead of kind of an enterprise grade engineering execution. So I focused on TIM first. I did a little bit of rationalization of things like processes, tools and basic things like having everybody on the same process, having everybody on the same tool, everybody using Jira. I mean, we can go through all the details, but you cannot run a large organization when in every single location, they use different things into which everybody has his own idea and this is more efficient. Number 3, I kind of looked ahead of the task that we had to do and start to recruit talent that we didn't have. I mean, the company historically had an expertise that was built to do a different task, right? So I kind of rebuilt a little bit of team. And last but not least, by now we are running to August ish, start to focus on the strategy. And pretty much a lot of the things that Mike covered is part of that strategy, but we're going to, of course, go into a little bit more into the product aspect of it. This is a typical slide, finance meets engineering. So I'll start to tell you a little bit of a story and then we go into the number eventually. It's been kind of puzzling me always to sort of we discussed yesterday with Mike the word cloud. What is a cloud? It's a bunch of computer interconnected. A bunch of computer interconnected existed many years ago, right? So what is the new thing? The new thing is clearly the delivery mechanism. It's a delivery mechanism and it's a dream for every developer to have every customer on the latest and greatest. If you go downstairs and you talk to developer, you ask them what you want to do, they want to work on the latest and greatest. They want to innovate. They want to build new stuff. It happens that especially on a self managed environment, you have somebody was asking customer on 6, customer on 7, customer on 5, you have all that long tail that you need to deal with. So cloud predominantly on an engineering level is a gigantic opportunity to add the vast majority of the team working on the latest and greatest, focusing on innovation and most important, have a short feedback, a close feedback. Now if you look at historically Guidewire, we were releasing every 2 years. In my years at SAP, we were releasing every year, but it was every 2 years. And because of the length of the project, because of the complexity of the project, customer were upgrading every second release. So now picture that at the engineering level, at the product management level. There was a world into which we're developing a feature that the adoption was kind of further down the road. It's not the best way for engineers to get excited about what to do. So that's why I'm saying this is a gigantic opportunity. Everybody downstairs is super excited to be in a model in which we can deliver something quickly and get it adopted and correct it, adjusted, learn and make an X release and make an X release. Why did I tell this story? I tell this story because from a high level perspective, if you look at this slide, that is a slide that shows multiple development location and the distribution of my team and the fact that we are growing the budget and we have more research and development to spend. The first thing that is going to look like here is self managed goes from 45% to 30%. The two things here I wanted to kind of point it out is number 1, in absolute in constant budget, that number is just going down by 5%. That is totally normal. Last year, we have a major release. This year, we have not had a major release. But the most important thing is that what Mike also talked about is we are going to do a way better job to develop our cloud first and then validate that functionality. And then depending on that validation, bringing back to our self managed customer. Compared to our current model that you build something, you ship it, by the time you ship it, you have to wait that implementation goes and a lot of time waiting, waiting, waiting, waiting. And I have right now some situation in which couple of engineers developed some feature 2 years ago that is start to kind of get adopted now. And so that feedback is going to be completely different. I think we're going to be way more efficient in building things that are actually used and correct them, adjust them. And as you know, in engineering, it's always easier to rebuild something that you have built it first, right? So if I have to build it for cloud and validate it, this is exactly what I need to do. And if you need to make some choice to bring that back to self manage, it's going to be an easier task rather than innovate it in the 1st place, right. So that's what I'm trying to say that it's a gigantic opportunity for us. The team downstairs is super excited. And the number that you see here is basically showing we're doing cloud first. We're keeping our investment on digital pretty much constant. And on the data analytics, Mike touched upon, we are betting down we're doubling down on analytics on many aspects, and I'm going to touch that in a second. So now if you look at the cloud strategy transformation, I wanted to kind of summarize a few points here that are kind of the first one is transition when you're ready. We discussed that quite a bit. But I think number 1 is we are not rebuilding this. We are not rebuilding the platform. We are taking all the investment that has been done and we are moving into the cloud. All the customers that spend many, many, many, many, many years and to build functionality, we are carrying that over. And it's pretty obvious. I mean, you don't want to go into an enterprise customer and tell them, I have this shiny thing that has been building in a bunker, it's fantastic, but it has 20% of the capability that you want to migrate. It's going to be an opportunity for maybe not. I mean, I don't want to do that. So we made it very early on a decision that we are moving the customer and we are innovating from within. We are not kind of changing the platform. Because of that, we are consequently second point is we are modularizing. You need to modularize to sort of create those openings in which you can now build some new service and new capability that interact with your existing core. And we will have implementation into which implementation that we're carrying over and they will not take care of this new capability and then some implementation that at some point we're going to make it so compelling that customers are going to say, I want to reimplement rating. We're going to discuss rating in a second because it has performance that we didn't we couldn't achieve before and it has a design environment that we couldn't do before. And finally, I can change my rate table without restarting the server that it wasn't possible before. So step 3, expand with new cloud native functionality. This is just kind of what does it mean is when we rebuild this, the piece that we're innovating around, we're going to innovate directly cloud native first. It's just a kind of logical choice. Business friendly codeless configuration and metadata, this is basically saying one of the complex aspects, one of the competition is coming really from our capability to kind of build a digital experience efficiently and a very lower cost. So we've been investing and we are going to be focusing a lot on the capability to sort of do that last mile as efficient as possible. If metadata is difficult to sort of process, think about a UI that auto generates itself, a UI that does not need anymore a lot of service to people to kind of build that UI from customer to customer, but something that will auto generate based on some metadata definition. Last but not least, Mike talked about it, infused with analytics from the get go. And again, we're going to come back on a second. So this is pretty much the sort of the main bullet, right? This is the strategy. We're going to move them over. We're going to innovate from within. We're going to invest in API and we're going to do any kind of new development cloud natively. What are the Mike said, only 1 top priority. I like 3. I think I like 3, maybe because I find it always difficult to sort of just have one to choose. So we kind of build up last year, going back to that conversation about around August, refocusing on what are our where our top three priority for FY 2018, our fiscal year goes from July to July, August to August. So that was pretty much September last year. We kind of reset and said, okay, how are we going to invest this cloud budget? And we decided on 3 main things. First of all, is API and SDK. What is the logic there? The logic is pretty simple. The more you develop outside of the core, the more you will be able to upgrade the core without dependency, right? So we need to go into a direction into which all those extension, all those customer specific things, all those famous integration could be built in a way that will not require a sort of tedious upgrade, right? So and remember that the number one part of our typical number one cost of our implementation is integration. So that's why number 1 was an API integration strategy. Number 2 was cloud infrastructure service. Mike talked about it. I have a slide in a second, but is learning from our early adopter customer 1, 2, 3 and 4 and start to package inside that layer all the things that are repetitive, authentication, logging mechanisms, Kubernetes and all the kind of things that are common across the customer. Number 3, product innovation. There was a bucket of we need to keep in mind that we want to innovate and we want to build a bunch of new features that were feature from which traditionally our solution was, let's put it like that, not the best at. Somebody talked about lemonade. Lemonade is mainly digital. But we wanted to look at the entire kind of the entire aspect of where is the area of biggest innovation looking at this world that, as the first slide says, continue to accelerate, how could we what is our innovation focus for that? And I'm going to cover that in a second. So those were the top three priority in FY 2019. This year, we get 35% budget allocated to debt. And guess what, those are exactly the same three top priority. We didn't change a bit. It's exactly the same thing. We've been we're continuing to working on the API and SDK. We are in double down on the cloud infrastructure service and this cloud policy, let's call it cloud product innovation area is becoming to fruition and we're going to launch some kind of cool new capability at connection in a few weeks. So I have a slide for each one of those priorities just to kind of double down on those. So number 1, cloud API SDK strategy. So this is two angle. On one end is make it more efficient and for our customer to implement those integration. In some case, it is a public add on. As Mike talked about, there is an idea of a marketplace. But from the get go, the feeling was let's not focus on monetization of those add on. Let's go under on a strategy into which the more that those integrations are repeatable and available, the better it's going to be for our overall ecosystem. So think in term of number of user rather than adoption first, right? Adoption rather than monetization first, similar to strategy of company owning consumer goods that they've been first going after number of user and when they have a good number of users, they switch about, let's think about monetization. This is being predominantly about efficiency in the integration. Compared to last year at Connection last year, we launched DevConnect and the SDK approach. We have now 5 we have 6 SDK available and we have 6 add on public add on on the marketplace and 9 in development going to 16 pretty shortly. And the ecosystem is increasing. We leverage we want to leverage the same approach for the counter integration. We are expanding in Europe. And in Europe, the implementation has even more integration need and clearly integration that were very, very different from the integration that we were doing from the U. S. Market. So a lot of the work that we did in U. S. Was not work that we could kind of reuse it immediately. So this SDK strategy enabled us to kind of piece of code that are common across and then more efficiently build integration for country 1 and country 2 that share the same SDK. On the left side, we are increasing our API on top of the core. Why do we do that? Number 1, because we want to build a new application, a new capability on top of the application. So this is think about that granule expose some granular capability of our platform that Rating is one example. Rules is another example. Rating is one example. Rules is another example. Rating is a typical example. You want an insurer that they want to change the rating and keep all the system up and running and they want to have customer 1 ending up on the old rate and the customer number 2 end up on the new rate. And slowly but surely, you have this kind of complete transition that happened within 3 seconds. Rule, same thing. You want to have some validation rule, you want to you learn and you realize that you want to build a new validation rule, you want to deploy that new validation rule, system up and running, new customer hit the system, you get the new rule and everything continues running. We are all used to that on the consumer world. All of us use Google, Gmail and things like that. We normally don't really realize when Gmail is updated nor Facebook and so on. It's a typical thing. That is exactly what we want to do for our customer as well. Number 2, this is the slide that if I was kind of when Mike was talking about which one of the slides more proud of it. So I don't know if I will pick this one or the next one. But for clarity, I'll pick this one for excitement as the one that's come down the road. So this is a slide that show IS10, somebody down here, down the valley, a little bit more south on the valley will say this is our best release yet. So I will say the same thing. This is our best release yet. IS10 is our best release yet. We spent a lot of investment and money to make it cloud ready. When we talked about cloud ready, we talked about running efficiently on AWS for 1 customer. That was the first priority. Mike said, first, you want to have 1 customer, then you want to have 2, then you want to have 3. But our first goal for last year was to run it for 1 customer. And to run it for 1 customer, you needed to be AWS compatible. There were some things in our code that was not perfect for AWS, things that AWS do not support. We wanted to support Aurora, for example, from cost aspect, but also from a performance perspective. So that was the goal number 1. We released that in October last year. Immediately after, part of priority number 2 was to invest in our cloud infrastructure service. So we formed a team not late than August last year that we gradually ramped up with the deadline of delivering this year in October, kind of in a month, the first version of what we call the Guidewire cloud services. We don't have a name for that yet. We're still debating if we're going to give it a name, yes or no. But point being, we put together a team that had the goal of taking all the learning from customer 1, 2, 3 and 4 and package it into a common layer that, as I said, has to do with deployment, has to do with Kubernetes, has to do with containerization, that word, has to do with logging, has to do with traceability, has to do with all those things that are the initial kind step 1.0 things that you need to run multiple customer. And so now after October, we're going to go into that step 2 that as you can see the insurance suite is moving from the AWS orange bar kind of in a sort of every customer has something specifically built for them into a world into which is going to run on top of our in our Guidewire cloud services. Now Mike was referring to the cost aspect of that. Put aside the cost aspect. That bar is the key piece to go back to my initial statement of continuous delivery. That is the CICD pipeline. That is the continuous delivery piece. That is the infrastructure to be able to do that. The goal is we press a button, and once we press a button, the customer gets some new feature. Now we can then create different gate to figure out which feature you can push and which feature you want to have the customer validating and so on. But forget the kind of, how to say, approval aspect. But from a pure code perspective, you needed to have an entire rail and entire infrastructure to be able to do that. So that is the part that is the most exciting for the engineering piece. Engineering wants to add that capability to really innovate and make it available to the customer as quickly as possible. The other interesting aspect of that slide is the cloud native capability. That is nothing else than saying going forward because of the orchestration that we have into our Guidewire cloud service, because we can run multiple cluster, we can run Kubernetes and we can run all those kind things. We are going to build everything cloud native and we're going to move in that direction. And once we deliver some kind of capability that is going to be valuable to bring back to our self managed customer, we are going to consider those and consider when to bring them back. Of course, if we've been doing a fantastic job on making compelling to them to move to the cloud, the customer is going to say, I'll rather move to the cloud and get those capability rather than implement it myself, because if I implement it myself, I have that blue bar that cost me an arm and a leg. And maybe that compelling argument is not step 1, right? Maybe for a couple of years, some of these customers will still say, get me that feature on the self managed and then down the road at some point is going to be so compelling that they're going to say, okay, now I don't want to do that once again. So that is kind of part of the strategy. The next slide is pretty much the same slide, but building in a slightly different way to kind of help you out understanding. And you probably will notice I'm color blind that is not exactly a skill that you need to run engineering, but what we've been trying to do here is trying to use the same blue in this policy center. This is the same blue of the upper part of the rectangle, right? So what we're trying to do here is showing a different picture between the cloud native capability and the InsuranceSuite, kind of an example of what we're thinking of. This is PolicyCenter. 10.0 is basically 6, 7 key steps to go from a submission all the way to the financial reconciliation once you issue a policy. This can run on top of our blue bar and a lot of our customers who are uplisting have an entire policy implemented like that. Once we uplift them and they are going to be on top of our cloud, we are going to have them as we said a second ago, they're going to be on top of the AWS infrastructure. They're going to benefit from the common service platform. And from that moment on, now I could start to kind of innovate from within. Now I can start to have a risk analytic service. I can have a business rule service. I can have a rating service. I can have a personalization service. A bunch of things that the customer to consume, they will need to reimplement a portion of their flow. But again, it's a matter of making compelling, right? If a customer that needs to run a 1,000,000 quote per minute and the previous system at the 1,000,000 quote per minute was running into some trouble and now I can run a 1,000,000 quote per minute, then of course, they would be more compelled to do that kind of transition. And our game is going to be make it as compel as possible and kind of offer them functionality under the hood in a way that they can consume it. On the top part of this slide, you're seeing also the other part that I was talking about, the Ded Connect, the address lookup or the properties info or the e signature. This is nothing else than saying, on top of this infrastructure, we will be able to offer quicker integration for those most common third party, the things that are needed. So again, this is just to show you a little bit how is the strategy moving, right? We are moving them first on top of our common layer and once they are on top of our common layer and once we have the capability to upgrade our capability, we want to kind of make it more and more and more interesting for them to consume more and more potentially new product. Increased agility. So that was a sort of element on my slide on the first couple of slides about fee number 3. So increased agility is a big word that basically delivering things faster. So what have we been focusing on the increased agility? The slide that Mike is the most proud of it, we can go and talk about this for a while. But instead of doing that, what I would like to kind of give you a sense is that we have decided to on our agility, we set the goal into cover an entire slice. Sometimes company want to innovate on one element. They want to innovate the digital piece and they go and build a new digital channel. We realized that what we needed to innovate was the entire flow from building a policy all the way to deployed. And then based on what you learn in the deployment, reiterate that process and adjust it. So we took as a priority for our innovation bucket, we focus on policy because policy is the area into which, going back to the first slide, this continuous acceleration world that's changed. 6 years ago, there was an Uber. 6 years ago, I was pretty stable to have a car and have a car insurance. In 6 years from today, maybe the number of people running owning a car will decrease. Instead, people running on an Uber will maybe increase. What if you want to build a new policy that is a policy that is based on when you got when you jump on an Uber, you want to insure yourself, when you jump out of an Uber, you want to de insure yourself. If you want to do something like that, typically, there is maybe some insurtech company that is focusing only on that capability. We didn't want to compete on that only capability. We wanted to extend our platform to be able to cover that, to cover in a rapid deployment anything that has to do with policy. So we picked policy because strategically is the most important part of the business to own around policy, claims and billing and other aspects are revolving around. So we focus on policy and we said, okay, how do we allocate that budget? We're located across. We're located we want to have an entire experience that go from building a line of business all the way to digital and come back and come back with fuse analytics in between. And so that's pretty much what we kind of set our mind to. And so this slide sort of wrap everything together and it's going to be the base of our connection presentation. Then those of you that want to sort of double down on this presentation, you can kind of access the recording. November 6, Brian, what is November? We're actually going to stream it. Okay. So we're going to be streamed. You can actually join into it. So I tried to simplify here, but basically a policy, the life cycle of a policy is it goes from designing the policy, defining the rating, defining some of the rules that says, hey, if you have not filled out these things, you cannot go forward. If you have not this information, I cannot get a quote to the digital experience, to the analytics and then back again. What does it mean back again? Think about when you are on Amazon and at the last click, you don't purchase something. There is analytics all the way that they know that you have not done that click and there is all kind of statistics. And the next day, they're going to change that website, maybe not next day, but their mentality is they are going to improve the website to make sure that I don't lose that, right? So there is an aspect of that, that is part of policy. You go to screen number 3 and you don't purchase the policy. What is the issue? You want to have those analytics. And based on those analytics, maybe you want to go back to the product designer and change a little bit the product to make it more compelling or maybe you want to change a little bit the digital experience to make it more compelling. So that's why we're saying is iterative process into which it's not like the old world into which you implement policy, you build your line of business, you deploy and the next time you touch your system is in a year or 2 or maybe 3. It's a world into which you needed to use the system to kind of figure out what you want to build and you want to adjust it and maybe deploy it in an AB test, you want to launch this product only to the San Francisco area because it's a metropolitan area, you want to start there, Based on that result, you want to extend. It's pretty much what Uber does all the time, right? It's nothing different. So that's what we put our hat to, and that's what we're going to present a connection for those of you that will spend the time is going to be pretty cool. I think it's going to be pretty cool. And so this in some extent, this is my most exciting slide. I like to build things. So this is by far my most exciting slide. So we picked just a couple of things to create a little bit of visualization to show you what does it mean at advanced product designer, what does it mean digital experience, auto generation and so on. So this is today's product. It's a great product. We can it's called you can see product designer and it's a combination of code plus tooling. You can really build any kind of policy with this. It's a fantastic solution that the success of the solution speaks in the is showed in the number. The sort of shortcoming of that solution is that, as I said, it's not perfect for a world that change all the time. This is great for a world into which you have your homeowner policy, you no more line of business and you build it once and you deploy it and you run it for multiple years. So we changed that and we are evolving that with what we call the advanced product designer, an environment into which we can design the policy with a graphical tool. And while we design the policy from a graphical tool, the UI auto generates itself. And here, there is a little bit of fun because I asked a couple of days ago to a couple of developers to give me a couple of screenshots for this meeting. And as you can see, they've created an insurance that is totally fictitious in a way in which you have to pick an address and then you have to decide if you want to insure your cow or insure your sheep and you're running a farm. So I kind of to be honest, I didn't double check on that until yesterday. And then yesterday, when I got the slide, I said too late. We're going to kind of play the jokes of cow and sheep and that's what it is. So and with 65 seconds to go, I want to kind of go back to the kind of key three pieces of our kind of innovation. Number 1 is really rapid product launch and refinement. This continuous refinement is the key piece. The second aspect is we have a platform that we want to go from design to full scale production. The lemonade of the world and so on, they will not be able to do that. So we wanted to kind of leverage all our investment and bridge the gap of the couple of things that we were not as innovator as some of our competitor. Last, we want to infuse this with analytics and real time decisioning. Why is this important? Because you want to look at the dashboard and see submission as we go. You want to launch a product and see the submission. And then you realize that the submission on the zip code XYZ is better than a submission on a different zip code. And then based on that, you realize that maybe you need to change a little bit of product, why that zip code is reacting differently. And so part of what Mike was saying and then kind of in multiple conversation with COO of running P&C Company, they want to move more of their skills in the business decision, not in the IT decision. The IT did spend a lot of money in the IT decision. We're going to upgrade to Java 11. Are we going to run this in AppServer XYZ? They want to shift all their investment in tooling and in any decision that is more business related, right? So that is why we kind of focus on that piece. This is the first innovation that we are launching on top of our platform. We are keynoting the ASAT connection. We are demoing it all the way and we're going to start to look for early adopter next year. And with that, question? Yes, Johnny, Diego will be with us throughout the afternoon. So you can ask questions at the break or you can ask questions. We have time for a few questions now, if you'd like. Thanks, Diego. One quick question. So you talked about going from 1 to 2 to 3 to 4 customers and that there will be a part of the cloud infrastructure services that will be repeatable. Could you try to dimensionalize that one step further, sort of what portion will be repeatable? What are those services? What portions do you think will not be repeatable? And what are those? Yes. So first of all, there is an aspect of learning it, right? So the we have now 4 customer on our live right now. And as Mike mentioned, there are 9 coming immediately after. So step 1 that we have decided was to get to this common platform as version 1.0. What the common platform version 1.0 has, has all the lessons learned so far, are the kind of, call it, version 1.0 and we're going to move a couple of customer immediately on top of that. And then we're going to learn a little bit and move a couple of more and learn a little bit and move a couple of more. How we did define the sort of MVP of that platform was based on the initial for customer. We went back to our ops team and we asked them, okay, what are the most repeating things that you need to do? And then we went through like number 1, for example, is traceability. The integration are not only difficult to build and costly to build, are costly to monitor. And so number one thing was we needed to add logging in the system. We need to have standard logging in the system. That's a key thing. We don't need to build that logging for every single customer. We need to have a standard way. We need to standardize that and so on. And so we went with all kind of we create a typical backlog list. We prioritize. We said, okay, this is NBP 1.0. We put the date for that NBP 1.0, as I said, is end of October. And then we went through set of complex conversation with the end team and the management team to pick the 1st customer that is going to kind of validate if what we did was the right thing or how far we are from that. But the most important thing and also for my team downstairs, that is a team that traditionally was used to deliver something for self manage. When you deliver for self manage, the mindset is, I need to get it right. I need to get it right because my next chance is in 4 years. We are shifting into a world into which you needed to get it right enough and you need to be ready to fix it 3 minutes later. That is a gigantic shift, right? So it's an opportunity, it's exciting, at the same time, it's a different way of working and that's why when I my first thing I said, I'm fixing the team, I'm structuring the team in a way that they can handle that, I'm recruiting some talent and some skills that we didn't have. And so now we are at that journey, we are step 1 into that journey. A year ago, we had a cloud ready solution. A year later, we have a layer into which we're moving that cloud ready solution. Yes. I'm Donald Light with Celent. You've mentioned I think you had a phrase that you're planning to innovate with cloud native functionality. And I wonder if there's going to be an inflection point in terms of the amount of cloud native functionality that's going to be in the cloud based system. Is it 1 year, 2 years, 3 years out where it becomes a lot there and then that makes it very compelling to upgrade? Yes, I get this question very often. So I would like to and is the last question? Okay. So maybe I'll take a minute extra, but I want to kind of share a little bit my vision and my point of view. It's not that simply because an app is cloud native, it's more efficient. I mean, there are monolithic apps that can be run on the cloud very well. It's not that it's not an architecture decision. It's always like what you need to solve, right? All kinds of microservice was born out of the existence of mobile. Mobile, more user asked for scalability that the previous world was not really triggering and that was the genesis of distributing on a microservice architecture. From there, things evolved and so on and so forth. So our goal right now is not really to make it all cloud native for a sake of the goal of the cloud native. Our goal is start to innovate every piece and once we innovate that piece, innovate it with a nativeness mindset. It could very well be our expectation is that the core will shrink, but I don't know if there is a moment in time in which that core will sort of disappear and we're going to have everything cloud native. We're going to have a situation into which that is going to shrink, shrink, shrink to a point into which maybe it's going to stay at that size forever. To your question specifically, I think that the it's going to be more compelling based on the capability and the functionality, not on the cloud nativeness, right? Now, if the functionality that I need to build will take advantage from the cloud nativeness, because, for example, from rating, I can scale more efficiently, then of course, the two things are married. But our goal number 1 is really kind of make it more compelling from a functionality and business requirement perspective. Okay. Thanks, Diego. Thank you. So Mike in his presentation referred to the critical importance in the past and ever more in the future of our SI partner ecosystem. So for that reason, we wanted to have a session on the agenda to showcase that. And here to lead that discussion is my colleague, Christina Colby, GVP of Customer Experience at Guidewire. Christina? Thank you. Good afternoon. I'm happy to be joined today by Shane Cassidy. Shane is Executive Vice President of Insurance globally for Capgemini. And I personally have the opportunity to work with Shane for probably about 10 years when we were both part of the leadership team of the insurance business unit, which is now what he leads. So Shane, thank you so much for being here. It's great for you to share your broader perspective of how Guidewire really fits into all of a carrier's needs. So thank you so much. Thank you for having me. Now we can talk about where the rubber meets the road. Okay. So Shane, first question. As you all know, for years now, our customers have been deploying self managed or self managed software onto cloud infrastructure and starting to get some of those benefits from cloud. But it's really, as we believe, through Guidewire Cloud that they'll really start to see the true SaaS benefits that they want to achieve over time. We're obviously extremely excited about the incredible momentum and feedback that we're hearing from customers. But from your perspective, what are you hearing about Guidewire Cloud from the market? Well, it's been out and been talked about for probably close to a year now. And probably before that, as you know, we worked on a cloud solution around Guidewire maybe 5 years ago, where we stood it up on Amazon. I think that was probably a little bit ahead of its time. If you talk to CIOs and even the ones I talked to today, right, that I'm friends with and I had a conversation 2 years ago about how we needed to think about this platform honestly, within honestly, within 1 year, the Board has said, why aren't we cloud? I have to get to cloud and the entire mandate has changed in their office. So you've had this massive change of heart and massive shades of belief. So now they're looking for, alright, can I get the platform there? A lot of them have already made investments in your platform. The question is how hard is it then to get over there? The others that are now thinking about the transformation are recognized the importance of it and there's not one that's not considering it as the primary way to go at this point. I think the question still has to be answered and a lot of them around, all right, how do we do it? What needs to change in my organization? There's a growing recognition of the value of it. I promise you, they won't know the real value of it for several years even. Scalability, the agility of the platform and what they can bring to you, whether it's from a microservices standpoint or product manufacturing, which I saw in one of the slides, which is kind of really take a look at my products and can I deploy faster, quicker, smarter out to the marketplace? So that is on top of every mind that I talk to. They're all interested in it and everybody is leaning towards it. Now the pace at which they can actually go there, the harder part is probably getting them organizationally ready to make the move And then operationally building their teams, their roles and everything so that they can actually extract the value of a cloud based implementation. Quite true. That's great. So I'm curious as you're talking about kind of the pace and the of interest, right? So as you know, I've had the opportunity over the past 5 years really to have a singular focus around mission critical cloud and what that means. And one of the things that I've observed going back through 4 years was that everyone said, no, I could never possibly put core systems in the cloud because it's not secure enough, right? And now we've started to see this pivot going back even 12, 18 months, where in fact it is a complete pivot and not only in insurance, but in other industries as well. CIOs are now considering to say, okay, I want to move to cloud actually because of security, because within my own organization, there's no way that I could possibly support all of the different points of vulnerability. And so instead, I'm going to go with leading providers to help me to fulfill that. I assume that that's something similar that you're saying. And do you think that there's other trends like that that are leading towards basically CIOs now starting to say, okay, look, I really am quite ready for it. What are the things that I need to do in order to get my organization ready and whatnot? Capgemini is actually one of the largest data center providers in the world. And as of probably 2 years ago, that became more of an anchor than an opportunity. Well, I mean, it is an opportunity, but everybody wants to move the cloud. So what you thought was this great line of business that own these data centers and we own the data center. We had to actually change our culture a little bit to say, hey, you need to figure out how to get out of the ownership because that's going to go away. And a big hurdle in that was definitely security. People thought, hey, I've got my own data center because it has its own brick walls that it was obviously safer than something that I couldn't see or touch. When every single data security issue that had popped up happened inside of people's data centers and almost none have happened in the cloud, people started to realize that maybe there's a benefit to having $100,000,000 that we spend every year on security versus my 4 guys that I need to get trained every year on what's changing in the marketplace. So I think there was just a realization that the cloud was the way to go. I think Salesforce is an interesting one that's been in there so long, especially for insurers. They finally came around, well, I do have personal information in the cloud. It's very important and very risky information. I've had it there for a long time. So why not the type of information that I would hold in the core. So I think if you look at core, people are going to move there no matter what. They just want to they're going to want to check some boxes. But I think it's getting easier and easier as well. Security, even 6 months ago, was maybe the first conversation around Guidewire. Now it's more about the roadmap and what are we getting and how do we do the upgrade. I was just at InsurTech Connect over the last couple of days. There isn't a single solution being offered there that isn't cloud based, not either. I didn't meet one that was, maybe there was, but not one that I met. So I think everybody's come to the realization, the market, it's not just core, it's ancillary products. It's data. If you think about it, that's the other big thing moving everybody's data to cloud, not just any data. All the data they have has to be put in the cloud. It's the only place that you can put it, where it can scale. You can do what you need to do to understand it better and actually work with it. So if the data can go in the cloud, everything goes in the cloud. That's great. Thank you. So this also ties into we hear from our customers constantly that they have a cloud first strategy, right. And so obviously that means very different things to each company. But I'm curious from your perspective, how does Guidewire Cloud fit into that generally for most customers? And then similarly, does that actually start to create and maybe open other types of opportunities for Capgemini and the way that you actually think about how you approach Guidewire implementation programs? Yes. I mean the beauty of being an SI, maybe the worst kept secret is change is good. The more change, the better, even the more confusing change, the better for us. So we love change. So there's I don't know that we've ever been busier nor would I say my outlook could ever be better than it looks like over at least the vision I have over the next couple of years, 24, 36 months. Cloud first and people's let's just say where budgets went. So budgets go to core platforms and they go to digital is a large place. They don't have to go into security, they might go into some other areas. But over the last, let's say, 3 years, digital was at the top of everybody's list. And when they thought about digital, it was small, little things they could do around the outside. We've always believed and I think the market is starting to understand that there's very little you can do around the outside if you don't have the inside taken care of first. So if I look at where people are spending money right now and where budgets are sticking, which means when they define that project at the beginning of the year and they're going to complete it, it's more core. You're seeing a lot of the digital programs take a bit of a hiatus, little concern around the market, possible recession, had a couple of bad years around rate and price in the marketplace. So people are saying, I'm going to push out some of this work. The core work isn't going anywhere. But in order for people to actually take advantage of the marketplace and the opportunity that cloud exists, they got to get the strong, reliable, agile core in the middle. That actually allows them to take advantage of millions of opportunities outside of that. So we think it's a great opportunity for Capgemini. Our business has never been bigger. We're 2,000 people and growing. And the work, I always get this question, what does it mean to you if Guidewire has this different approach? The work doesn't change that much. It was a slide, I think, by Mike earlier. It says, it's just the way we deploy is differently. The work is still there. You may still have to integrate. You still have to implement. You got to test. You've got far more organizational change management that has to go on. There's a ton of opportunity in true consulting around helping people understand how the roles have to change inside of an organization. Pricing analysts, product managers, all that's changing. It's all has to change. So for us, it's a massive opportunity. I've been a vocal partner of yours around what needs to change, what information do we need to provide our customers so that this can pick up faster. I'd say over the last 3 months you've seen a massive acceleration around the improvement your organization has made around the clarity of the solution, the expectations. We jointly just won a pretty large significant deal. And I'll give you example, speaking of the CIO in that deal, cloud program, Tier 1, very honest. This is the first time we're going to be doing this as an SI and the first time really at this scale we're going to be putting it in. We're going to learn together on this. And they're very comfortable with it because that's they want. They want to innovate. They want to be helping innovate in the proposition. So to me, massive opportunity for us jointly and individually. That's great. Thank you so much. One of the things that I'm curious about too is sort of how Guidewire Cloud then again fits into thinking about more of the ecosystem, right? So Mike was talking about it's not atypical at all for a customer to say, well, I'm implementing either Policy Center or Claim Center and I have 175 integration points that I need to address. Do you see Guidewire cloud as maybe something that is kind of driving customers to make different decisions around where those 175 systems actually reside themselves? Or do you think that it's not very closely coupled? Actually, I think it is absolutely the advancement and the implementations of Guidewire over the last decade has actually enabled the kind of the current thinking around what to do. Actually, we did the World Insurance Report, which we do. What we determined through talking to people was actually because of having if you have a good robust core and the strategy around having all of these integrations now, they may be very different than your traditional integrations is, insurers have had a closed network, right? They have their own ecosystem. And if you wanted something in that ecosystem, you bought it and you plugged it into that ecosystem. What we believe the marketplace is looking for or what the opportunity is for insurers, one of the very big opportunities is entering into other people's ecosystems. So it's not only just expanding the nature of the integrations you have, but how do you enter the ecosystems as an insurer into another third party to white label a product, a specific product or to working into a blockchain consortium that enables payment processing for subrogation, right. There's all these kind of different opportunities out there that says not only can I build inside of my ecosystem, but I can take advantage of external ecosystems? And you wouldn't be able to do that if you didn't have clear, clean, concise data that was coming out of your core system. If you didn't have an understanding of the product and the platform so that when things are manipulated and come in and out of. You got to think Guidewire sits inside the core architecture. That means when you make a change, oftentimes you got to do a lot of testing of things down stream, up sea. These other opportunities allow you to go enter into other ecosystems without having that same burden. So you have this wonderful core that's reliable and agile and now you can take advantage of a numerous amount of opportunities out there and most yet to be figured out, right? Let's be honest. There was, I don't know, 700 different InsurTechs at the show, yes, in the last couple of days and there'll be 700 new ones next year. So the opportunity is pretty massive and I give Guidewire a lot of credit for making that market a reality. That's great. Yes, I mean it's one thing exciting time for you to be able to take advantage of that. Just thinking back to some of the claim center and policy center implementations that we did years ago, those were complex on their own. We were aspiring towards some of these concepts, but the reality was so far away. So that's extremely exciting. One thing I just I want to go back to, you were talking about digital, right, and the role that the relationship between digital and core systems. And some of the industry analysts have been suggesting over the past couple of years that we're going to start to actually see the core transformation work reducing and in favor instead seeing more of a shift towards a focus on digital. We're not seeing that slowdown in the slightest. And our premise and I expect it's similar to yours, at least my point of view is that because in order to create and deliver the optimal digital agenda, you need to have a highly flexible, very agile underlying core system. And so therefore, the correlation between those 2 and the interaction between those two objectives is closer probably than it's ever been. It sounds like that's very much what you're seeing as well. Yes. We don't see I mean, it would be the opposite. I mean, obviously, we're seeing acceleration in core, which is hard to believe because we've always seen an acceleration in core. I mean, maybe there's been a couple of years where it was flat to slightly up. It's all a good graph of what's really covered from a DWP. I would add another complexity there that says that one of the things that came in our insurance report is people don't have coverage for emerging risk. So think about all the new emerging risk things like personal cyber or people believe they need coverage for climate change, let's say, different coverages for climate change. Technology is driving new and enhanced risk for people. There's a massive amount of product definition and rollouts of the platform for that. If you look at just inherently what we've built to date, there's a massive amount that needs to be converted into cloud and upgraded. But in reality, what's missed in that is the whole model has changed. So we've moved to, I mean, not perfectly by any means an Agile DevOps sort of model of deployment. But that's not really where Agile and DevOps has any value. The real is in run up. So we talked about MVP, I believe in MVP. I believe that MVP implementation has a lot more value than the legacy implementation in most cases. But what you're really trying to do is get up and running fast so you can actually do true product manufacturing and that never goes away. So you have permanent core as your digital strategy, right. The core transformation will never stop if done right. It is really actually where you focus your time. You'll have your product people in there, you'll have your data people in there, you'll your underwriters, if there's much of the underwriting community left to some degree, right? You can there is a large push to automate as much underwriting as you possibly can. And if you think about that, the actual core becomes your digital transformation because it is where you look at price, you look at product, you look at your risk in your market, and where you can really drive the most value in competition, competitive advantage at least. So yes, I don't see it yet. I don't see it in my crystal ball yet, but That's for certain. I think by everything that we've seen earlier today, we're truly seeing the exact opposite. And it's great for you to help to reinforce why that in fact is true. Great. Thank you so much for helping. We want to be certain to open the floor to additional questions and have a few minutes left to do that. Hi, Shane. Ken Wong from Guggenheim. Mike earlier showed a slide where there's like 9,000 SI partners that were out there deploying and done Guidewire. When you think about your organization, can you give us a rough sense of kind of what that headcount growth might look like and where you might be allocating those heads in terms of cloud? You touched on digital. Earlier, we heard a lot about data. Yes. Well, for let's just say Guidewire, we're almost at 2,000 people. We'll be at 2,000 by the end of the month. I think we're about 1500 last year, about 1200 the year before. So our acceleration, adding 300 to 500 people a year is actually tough because you got to add about 1,000 because the real problem and I should talk to Mike is there's too many SIs on that list. And therefore, it is still a bit of a game where we are pursuing some of the other's talent. There's just no way around it. Now we work very hard to train and certify our own. There's no way to grow at 500 unless you're building out schools of 100 at a time, getting them trained and up and running. We used to do policy center, billing center, claim center. We've gone away from that. We think you can be trained across the whole stack so that people don't fit into a single skill set. The data solutions do require their own certification and you need a different kind of resource for that. So I'd probably say, it's 10% on the data side. It's probably 75% on core configuration across the platforms and the rest is PMs. We don't count our business analysts inside of there. There is a bit of a move to say business analysts and testers. Could we start looking at combining the business analysts and testers into a single role? Could we make more business analysts, testers, configurators? We're looking at how we actually evolve the capability because it's just tough. It is a tough market when you grow at that number. There's just there's more work than there are resources. I run into that every day. We've got a great practice that's able to kind of manage it with the customers and start up new accounts. But I assume everybody is kind of seeing the same growth numbers, hopefully not at the same exact levels as Capgemini, but pretty good. Yes. I guess, one of Guidewire's major customers and competitors in terms of Duck Creek has seen it kind of evolve so that the majority of new customers are now booking their cloud product. I guess in order for Guidewire to get to that same place, like you talked about an acceleration and willingness to move to the cloud over the past 3 months, like what else needs to be done to get to a similar kind of percentage of new customers who are choosing cloud? Yes, it's a good question. Yes, I mean and we're an open honest transparency, we're a Duck Creek SI as well. And to me, the biggest differentiator was the starting date of the commitment to move to cloud. So Duck Creek had about a 1 year head start on Guidewire when they decided to move to cloud as their I mean, primary method, just like you're seeing with Guidewire, right? This is our focus. And there those of you like myself that were around at that time ran into a lot of the same sort of questions and opportunities and at first pushback and then now it's obviously I got to assume it's 80 plus percent of all deals are cloud on that side. I would expect based on what I'm seeing right now that the bulk of the Guidewire deals are going to be cloud for new business. I think when you look at the upgrades, it's a lot to upgrade. And you've got a lot of people that are in mid investment, they're in partial investment, they know they got to move to 10 regardless, They may be willing to wait a second to see how everything goes before they move over. A lot of them own their own infrastructure. It's a sunk cost. So if you're new to standing up Guidewire, it's great. Hey, I can get my environments and everything is good, but I already own this. What am I going to do with it anyhow? So and I got a team managing it. But that will I have the same belief as we heard from Mike that inevitably everybody is going to be cloud. But I do think the new business will start we're seeing it already. I think most of all the discussions now are cloud first That I'm in as it relates to Guidewire new deals. And that's significantly different than 5 months ago. Yes, there's definitely quite a few. I would say there still is considerable interest in our self managed platform, just depending on a carrier's need. But understanding that self managed is potentially somewhere that they want to go kind of in the immediate term with a longer term strategy than to move to Guidewire cloud. But yes, I think what you shared is quite accurate. So talked about how Guidewire will earn 2 to 3 times on cloud versus the on prem solution. Just curious if you guys have thought about how your revenue on a given deal will change? Well, that's a good question. We don't see it changing too much. We haven't even though we're a big infrastructure shop, we haven't necessarily been the ones providing the infrastructure. The ones that we've done Guidewire on, we actually did the same thing. We put it right on Amazon and it's a pass through for us. You look at upgrades as a big selling point for the new platform and as a way that we made money in the past, it's a separate transaction than implementation and run. But in reality, yet to be understood, but to me, there's still a ton of work for the SI to do inside of an upgrade because of all the downstream systems that have to be managed, the testing that has to occur, the planning, the change in the actual consulting that goes on around core. Because when I look at all of these deals, as I always have, it's not Guidewire is often the epicenter of it, but it's a very big consideration that we're taking. It's the business, it's the data, it's the security, it's 200 other applications that are impacted, it's functionality, it's the people. So for me, I still look at it that way. And I see the work being eerily similar, if not larger, because the one opportunity we're seeing growing significantly, we call value realization on top of OC, organizational change. And value realization is really about now that I'm implementing this core platform in the right way, how do I actually extract the value that I can prove back to my business. And it's not about the fact that I've got a lower IT expense charge, it's about we're able to do things faster, quicker, smarter, better with sometimes less people, sometimes with the same amount of people, but they are focused on different things, which we have heard here. So for me, I would expect that both a volume of opportunity is going up, which we're seeing. And then I think size of the deals at least staying similar. And what you were sharing about value realization, that's another key interaction point for our organizations, which simply hasn't existed in the past. In that, as Diego was describing, historically with self managed software, we would deliver that software for general availability and then customers would work with SA partners to deliver it. And it would take us quite a long time to be able to hear the feedback and hear how it was really being utilized. Given that we're ongoing partners in the delivery of the cloud offering, that's where we have now a dedicated customer success team to work specifically with partners to help to achieve that value realization and be certain that customers are getting the most out of the software and planning accordingly also towards those features that we intend in our product roadmap. Shane, just two quick ones for Shane here. If you were looking at a Tier 1 prospect today, how do you compare and contrast the cloud capabilities between Duck Creek and Guidewire today? Tough question. Number 2 would just be maybe an easier one for a follow-up, you could maybe start with this one. Reference marketing for shifts to the cloud becomes a powerful flywheel over time. And as we think about Guidewire's migration, at what point in terms of customer number or time does that reference flywheel in your experience really start to inflect? Okay. Well, let's start with the first one. So the 2 platforms have come from eerily different places. 1 came started as a rating engine, really. That's where Duck Creek was. It was just a rating engine that they built into a core policy system, whereas Guidewire came at it from the opposite. It was a core transactional system that went the opposite direction and actually came to rating almost as kind of the edge of the platform. So to me, Guidewire would have always been considered kind of more the more robust productized platform because it was built in that manner. And they've gone towards and Guidewire has moved towards kind of becoming more digitized and highly configurable and they're going even further saying, hey, we're going to try and keep you even more in the box, which I think is a great idea because that's where most of my challenges run into is people making bad decisions around what they do with the platform. So if you look at a Guidewire coming from that end and having claim policy and billing start in the same manner with the same base underlying architecture, it gives it a pretty big advantage that way. I'd say on the product side from a pure insurance product side, that's where Duck Creek had its capability. And some might say that from a policy perspective, it was a little earlier in the capability. In that, there's some more creativeness that you get there. They're also very ISO centric, which allows you to maybe ramp up some of those products in an accelerated way, whereas Guidewire is going that direction. So they both started in kind of 2 very different directions and they've ended up in the same place. Generally, what you see though, if you're going to go large scale Tier 1 transaction, high transaction volume, you're going to lean towards the more reliable platform quite often, right, which says that I need the transactional performance and reliability that I get there and the ability to stand up those kind of products real quick. The second part of the question was about reference customers and the tipping point on cloud. That's a good question. I mean, you could say that maybe one of them has already engaged and therefore that ends a lot of credibility to it. Insurers are interesting in that. They're quick to follow, right? They get onto a trend and they all jump on. And I think when some of the big brand names say, we've certified this and it's good enough for us, especially ones that have such a strong presence in the marketplace and kind of a respect for how they do things and seen as an innovator, it will push it quicker. Is it 2 more? Is it 10 more? Is it this year or next year? I don't think it's that far away quite frankly. We'll see coming out of connections what the feeling is. But my guess is you're going to get a lot of people there that are maybe say the flywheel has already been lit. If not, it's not far behind. Great. Thank you so much. I think we're going to call it there. Thanks. Thank you. So we're going to take a 10 minute break. I will start again at 3:30. During that time, please also take time to fill out the survey as we take your feedback. We keep trying to improve this event. So please take the time to fill out. Thank you. Okay, everybody, if you could take your seats. Shane Cassidy, could you take your seats? Thanks, everyone. I'll remind you that there will be ample time for Q and A and questions at our cocktail reception after the event. So in this next session, we're going to shift gears again. Before the break, we had Shane and Christina talk about well, really Shane's perspective on the industry and on a Guidewire and our partnership. Now I'm privileged that we have 3 of our customers who are coming to really share their stories and have Q and A and also take your questions. On behalf of well, all of you, I think, and the Guidewire team, I just want to thank them very much for traveling from the East Coast and the middle of the country to be with us, especially for this event here today. So thank you so much for coming. And here to moderate this panel is my colleague, Nicole Bruns. Nicole serves as Director of Product Marketing. Nicole? Thank you so much. We are so delighted to have these customers here with us today. What's actually really great about them is they are all in different stages of their cloud journey. So I think you're going to get some really great varying perspectives from them. So let me introduce them to you. So first, next to me, we have Gina Switzgebel. She is the CEO and General Manager of NCJUA, NCIUA in North Carolina. They are an insurer, dollars 436,000,000 in direct written premium and they had their Release 1 go live back in January of 2018. And then next to Gino, we have Robbie Shea. He is the VP of Enterprise Solutions and CIO at Grinnell Mutual. That's in Grinnell, Iowa. And they are a $700,000,000 direct written premium insurer and they had their release one go live earlier this year in February, Robbie. And then last on the end, we have Pete Moreau. He is the SVP and CIO at Amica. Amica is a $2,400,000,000 direct written premium insurer. And Amica has been a long time Guidewire customer partner with us, but they just recently made the decision to implement on Guidewire Cloud and they started that implementation in April of this year. Welcome. All right. So actually, Pete, I'd like to start with you as the most recent customer on the panel to decide to go to the cloud. If you can tell us a little bit about your organization's kind of motivation to go to the cloud, what were the some of the business drivers and technical drivers? Thank you. Yes, from the business perspective, you've heard some of this already today. A lot of it revolves around the upgrade process. When you look at these core systems, large systems like these, we've done a few upgrades. They take quite a bit of time and you heard that a little bit from Shane as well. You're looking at a 9 to 12 month process depending on the upgrade size of the implementation that you have. That requires resources both from the business and from IT to execute on that upgrade. So while you're doing that, you're also distracting yourself from delivering value or other applications. So that was one of the motivations of moving to the cloud because when you move to cloud solutions, the upgrades are taken here as part of the process, someone like Salesforce handles it. The other part of that upgrade process is because they take that long, you tend to delay them. So for us, when we did our claim center upgrades, there were typically 3 version jumps because we'd wait. We'd stay on it for a longer period of time because the investment of actually getting the upgrades done. While you're waiting that time, you're missing the value that Guidewire has delivered in new features and functions in every one of those releases. So you can think about that. That takes you're missing that value. Just as Diego had talked about, the developers at Guidewire really want you to start using their products and get feedback, we're holding off on it because it was a long process. So I think for us, all that combined from a business perspective is really playing into what we really wanted to do with Guidewire cloud. From the IT or technical perspective, it was also mentioned here that we have folks that really spend time on infrastructure that runs the Guidewire platform, both from a performance and upgrade of the supporting products that sit around Guidewire, the databases and patching and all the rest of the things that you have to do. This isn't really value added work that our business would be looking for or we would want to do. So to take advantage of cloud solutions, you actually get a chance to move those resources or at least redeploy them in a better area and have Guidewire take management of that. Yes, yes, that's great. And like we talked about a second ago, you've been a longtime Guidewire partner. So why Guidewire for the cloud? Well, I think timing was very good. And obviously, we've been a long partner with Guidewire. I think going back, I know Marcus was on-site when we first signed up. We were maybe customer 11, so we're going way back to the beginning, early days where ClaimCenter was the first system we had selected. So we've had a long partnership even as their products got where our products were younger, we helped kind of develop those along the way of our journey of modernizing our core systems. And we had a good partnership throughout. So we've had challenged each other, I think, throughout. And I think in the end, all the systems came out well. So we enjoy the partnership. The values that we both hold are very similar in terms of how we operate and we like that in Guidewire. Another factor for us around why Guidewire is the timing was good. We need to take 2 large upgrades of our policy system and our billing system, both free level jumps. The timing of where Guidewire is right now with some of the early adopters already being on the cloud, we felt it was a good time and it really sunk up pretty well. We've also partnered with Guidewire on some other initiatives like the Salesforce implementation, where the anchor customer for the Salesforce Guidewire partnership of getting Financial Services Cloud up and running. So we've got a lot of experience working in a fairly new implementation, and we think we're going to bring a lot to that partnership as well. We've been running the Guidewire systems for a long, long time, and we've gone through some things. So we can actually help Guidewire in terms of their education around operating these systems because typically you haven't been doing that until you started moving to the cloud. We've been doing it for a very, very long time. So I think that upgrade that we're seeing people become more and more interested. Yes. And we appreciate your willingness to always be an early adopter. But we see the pivot point a lot where it's at the time of upgrade that we're seeing people become more and more interested. So next, the move to the cloud is it's designed to enable organizational agility. So do things faster, be able to respond more quickly. Gina, do you have an example of where you've been able to be more agile because you're in the cloud? Absolutely. I mean, we adopted for some of the same reasons that Amica is beginning to do the adoption, because we wanted standardization, we wanted simplification, we also wanted to be able to upgrade quickly. But the one where we're a little bit different is we operate 2 non profits and we are the residual market of North Carolina. So it means that our risks are highly concentrated. So we insure 7 out of every 10 homes on the Outer Banks and Barrier Islands and we insure 35% of the property in the coastal areas. So we have $95,000,000,000 worth of property exposures in North Carolina. So we always understood that we needed to be able to fight a Cat 5 hurricane coming into Wilmington. So we run lots of very extensive load testing. And what do we need from servers? We need servers spin up really quickly and we need a reliable partner in that. Last year, our prime example for cloud was in September of last year when you saw Florence marching across the ocean straight at North Carolina and coming straight at North Carolina into Wilmington, which was our largest areas that we insured in that specific region of the United States. So when we were looking at that, we called Guidewire and we said we need you to spin up servers. We need you to give us more processing capacity. And it worked very well. We actually had 25% of our customers had claims. So we had about 100,000 claims from Hurricane Florence. And we were able to settle 90% of those claims within 60 days. And we're a little bit unique in that we have a process where member companies, if they exclude the wind, they then step in and help us adjust the claims. So we will partner with over 200 member insurers to help us adjust the claims. In addition to outside adjusting firms, 3,000 outside adjusters ourselves and 600 inside adjusters. So we had to be able to get lots of people on our systems very quickly, be able to train very easily. And I think a lot of the decisions that we made in going to Guidewire, in going to the cloud, really during Florence when it really mattered, everything worked as planned and expected. This year, we had Dorian and it looked like it was going to Florida, but then it made a change. So again, Guidewire got the call from us. Luckily, it's been a much smaller event than Florence was with about 7,000 claims. But again, quite honestly, Florence was only a cat 1, but you never know how the hurricane is going to stay and how long it's going to pay on a particular area. So you always have to be prepared and we think the cloud enables us to do that to spend ramp quickly and to be able to add lots of users onto the system. Yes, that's an incredible story. Thank you. So I think as Guidewire has been kind of growing in our cloud kind of transformation. We're growing very quickly and we're also learning very quickly. So Robbie, maybe you can talk about some lessons learned that Grinnell has had during your implementation. Sure. Perhaps I'll settle the context first, so the audience will understand kind of our journey. So we are in the middle of not only the Guidewire implementation being new to Guidewire, but also the transition to cloud. The process started about 2 years ago and once Guidewire announced their intent to move into the cloud, we sat down with them, had a good discussion and decided to make the pivot in the middle of our project. Now we've learned a lot of lessons along the way. And I think, I really classify those as kind of 3 categories. From the technology perspective, we went through this assessment process to kind of see where our implementation was from on prem versus what it would need to look like when we moved to the cloud. And frankly from that, we didn't really find a lot of things we needed to change, probably more than we originally had hoped, because we had this idea in our heads that we were pretty out of the box, but we kind of found out maybe that wasn't quite the case. But all in all, we didn't have to make a lot of changes to make the transition to the cloud. I would say the biggest lessons learned were mostly in the people and process space. Obviously, our organization, 110 year old insurance company, we're actually literally located in a cornfield 60 miles north of any the largest metropolitan center in the state of Iowa. And so we had a lot of fear, uncertainty and doubt around what this meant to the IT organization. It was a big enough change for the company to start moving away from a legacy system that people had essentially built their careers around, the system being 26 years old to this thing called Guidewire. Then all of a sudden in the middle of that, we throw in this idea of moving to the cloud. So we spent a lot of time really focused on demystifying the program and making people comfortable in terms of that. Process was probably the biggest issue and I think that was both on our side and the Guidewire side. As we know that we were an early adopter and Guidewire didn't have it all figured out. So and nor did we in terms of process. We naively thought by going to the cloud, we could sweep some of our process inefficiencies in the process inefficiencies. We're in the risk transfer business. We'll just transfer all that risk and this process inefficiencies over to Guidewire. Well, as we found out, that isn't quite how it works. So the lessons we learned there were really around making sure that we had our processes lined up to really work with partners. That was relatively new to the organization. We've not partnered a lot. There had been a lot internal kind of build it here mentality. So we spent a lot of time focused on that and that's probably where we had our biggest hiccups as we made the transition. Change management? Yes. So organizational change management became a big, big thing in that context and we actually took a fairly heavy handed approach, I guess you would say. We made it part of the program, brought in some external help and really, really focused on helping folks understand what this was all about. And that included our employees, our board and our agents and distribution organizations as well. So that really, really helped I think. We did a lot and I said this earlier to demystify kind of what the cloud was and really what Guidewire because that was all new to us as well. And we made it really a company wide initiative. We made it clear that it was our number one priority and I'm happy to report we stayed steadfast in that resolve and not strayed from that. We also created a lot of opportunities for folks to engage. So we had all kinds of demo sessions. We had sessions to explain what the cloud was and why we had chosen to move to it, really engaged all the employees. And then we celebrated a lot of successes, a lot of victories, not only on the Guidewire and Connect program as we call it, but in our legacy organization. Oftentimes in these initiatives, the traditional IT organization feels like they're being left behind and we made sure that we this new platform. Great. Thank you. So the next question that I have is kind of an industry question. So I'll ask you, Robbie, the rest of you are welcome to jump in on this one. In moving to the cloud, it's a big deal for the industry. So why do you think that is specific to insurance obviously? Yes. So I don't know if it's a unique perspective, but I'm relatively new to the P and C industry having only been in it nearly 4 years now. So a couple of different things I think that's made it hard. Obviously, I'll speak from the vantage point of our organization. But as I alluded to earlier, we're 110 year old company and we've enjoyed a lot of success over the years without really having to change much. So I think as I say, oftentimes the status quo has a lot of momentum in an organization and I think that would describe us pretty well. There wasn't really this view that we needed to change. We'd been running a nice profitable business for 100 and 8 years at the time. And why change? We also had an internal kind of mindset of build things internally. So when I was brought on board, it was really about trying to change that mindset and culture. And I think, I always say an IT organization mirrors the business organization. The business was in the same place. We thought we could do things ourselves. We didn't really frankly pay attention to what was going on outside the four walls. I think there's a lot of things driving change in that regard. And I think one of the first ones is actually a demographic switch. I see it within our employee population, where as we hire younger folks, they really aren't that excited about learning how to work on a green screen, IBM based system. Additionally, talent, the new kids coming out of school as our workers start to head off into retirement, they too do not want to learn how to program COBOL or work on these legacy systems. So I think a lot of that is really starting to make companies maybe be a little more receptive and open to the ideas of moving to the cloud. Obviously, the competitive pressures are changing. There is a lot of money being invested in SureTech that clearly has everyone's attention. Other things out on the horizon, autonomous vehicles, I just think the industry is paying a lot more attention to the need to be agile. One thing I've learned about this industry is there's a lot of players in it and I think the competitive pressures are becoming greater and I think that's opening the eyes for a lot of organizations recognizing not only do they need to get to modern platforms, they need to get to a platform that can actually enable business agility. Yes. I would echo that. It's the agility, the business climate we're in is changing obviously and the insurance industry has probably been a little slow to that. But you can see some of the new insurtechs coming out, what they're attracting what they're building is much faster products. They're changing them quicker and they're focusing on the user experience and that's something that we traditionally hadn't focused on. The move to the cloud will help us stay back to my comments on staying current, keeping those product sets up to date so you're not spending and wasting time working on other things and you can focus on that experience more than the infrastructure that you're running or the core system itself. You're actually focused on functionality. Yes, for sure. And I think you want to continue to deliver upgrades to your customers, especially in competitive markets and especially in markets where you've got disruption with new players coming into the market. So being in the cloud and being able to take upgrades quickly, even ourselves being a residual market, we wanted to be able to continue to have updated technology because I didn't want to have a project 2 years or 3 years from now after I had just done a major project to have another major project that I was going to have to upgrade over 3 or 4 or 5 releases. So I wanted to have to be able to continuously provide value to our customers and to all of our stakeholders. So that quick adoption of new technology is very critical. And I applaud Guidewire for trying to help us to have continuous updates in our technology so we can offer value back to our consumers. I think that's a great point. And one of the things that my IT career, it's always been very difficult to stay current on things. There's always a good reason not to go to the next release or to switch to a platform. And I think that's one of the things we're excited about with the Guidewire cloud is that it will evolve along with us where we've not been able to necessarily have the discipline to stay current, which is why we have a 27 year old cobalt based platform. So that's going to be a huge benefit, which will ultimately show through I think in business results. Great. Thank you. So Christina and Shane actually touched on security a little bit. I think we're seeing security was a key concern in moving to the cloud and it's lessened a little bit. So Gina, how did you and NCJUA kind of overcome the security issue and become more comfortable with it? We felt really good about our own security. We actually had outside vendors come in and review our security and we scored within the top 5% of all organizations, not just insurance organizations, but all organizations. We take security extremely seriously. And so when we evaluated Guidewire, we took a look at their protocols, their recognition and what they were doing. And we felt very confident that they were a solid business partner and they would be able to deliver the same kind of security that we expected on our system. So we did a lot of evaluation of it before making the decision to go to the cloud, but we feel phenomenally confident. Great. All right. We have some time to take some questions from the audience. Several. See where they're going. All right. We'll go right here. I just had a quick question about the cost of Guidewire cloud versus on prem. How do you Guidewire charges more for the cloud? How did you think about that? Was there a TCO analysis involved in that? And can you you don't have to go into specifics, but can you just talk about what did that look versus you running it versus cloud? And how did that how did you think about that? I can I'll take that one. So, yes, we absolutely looked at that and we may have been in a little different situation because with the guide to our cloud, we actually were closing some capability gaps. So we had to kind of think about what it would take to close as if we invested in ourselves. Security was an example of that. I think some other things around keeping current patch management alerting, monitoring of our system. So when we looked at it, we just build a side by side comparison, what we thought the services would cost us either to build or what they were costing us today. And then compare that with the subscription model and it was actually fairly easy assessment. And we also had to factor in some things around. We had never done an upgrade before. So we build an assumption based model of kind of factored in based on others we've talked to what that might take. And then we also did factor in some things around business agility and also the ability to take on new feature functions much more quickly than waiting for these big upgrade cycles that we may or may not have had the discipline to do. So we considered that and built a model that showed us that it made sense for us. Yes, I can answer a little bit. We went through we were in a little different situation. We've been running the systems for a long time. So we have a lot of data on what it costs us to run. So we spent quite a bit of time looking at that, what it would cost to transition to the subscription base. Upgrades factored pretty heavily into that because we knew we've had experience with the upgrades, so we know what it costs to actually do them both internal and external costs. And obviously, after we factored all that in, we also gave some thought to we're going to get some new functionality and new features and we're going to be able to roll those out. So it was a pretty compelling decision at that point for us. Yes. Just to build on that question, can you give some examples of how moving to Guidewire solution you're able to generate more better profitable growth? Were there other areas that you're able to expand in or were you able to underwrite better? You guys want to I can start again. So I think that's actually a really important point, at least for us. We've talked a lot about the cloud today, but the Guidewire platform in and of itself is really where the value is. And obviously, we're early days in terms of our journey. We've only deployed in one state so far. We're working on rolling out the others. So I'll give you an example that's really hit some for us, straight through processing. So in our auto book and our legacy platform, only 23% of our policies go through without a human touching it. In our first state with Guidewire, which have been live since February, we're seeing that at 87%. So again, these are huge numbers. I've got a number of other stats too. Now, does the cloud help enable that? Well, yes, I think so, because we are going to get this additional functionality and these other states rolled out, we believe, quicker. We're actually seeing that in our second release where we're a couple of months ahead. And then those of you who've been around IT a long time, the IT guys never say that, right? We're always behind. We're always costing more. So we believe some of that's attributed to us just getting better and learning, but also some of it's attributed to the fact that we don't have to focus on infrastructure anymore and we can deploy our resources on those things that are really going to drive the kind of productivity and efficiency enhancements that we're seeing within our first state. And prior to me taking the job as the CEO of 2 residual markets, I spent 25 years in the private market. So I would like to answer the question based on my experience in the private market and what I have in the system. We can take rate changes quicker. We can add endorsements quicker. We can put new states up quicker. So all of those things are very critical because I can't tell you how being on legacy systems when I go to IT to get a new state up and they're telling me that it's going to take 2 years, what a competitive disadvantage that puts you in. And I have been there. I have ran private companies and I have been adding I've added states before. And so having a system where we can quickly change rates, change forms at states is critical in a market where you are competing. For me now, I like the ability that it's a cost savings because we don't compete for revenue, but I always look at our organization versus our comparable organizations with our cost structure because the more we're able to add to our surplus, the less likely that we impose any assessment onto any companies in the industry. And last year, our beach plant operations, we paid out $1,500,000,000 with no assessment back to member companies. So we are very serious about cost structuring and we feel that it's enabled us to operate more efficiently and be able to add surplus back for our company, which benefits the overall market. I may have misunderstood you, Robbie, on the point you made about transference of risk from in going to the cloud to Guidewire. I too I thought that that was part of the point of making that migration. So was this a simple misunderstanding? Or could you detail or expand a little bit about what you thought was going to be transferred and what wasn't? Yes. So I mean, I think it has been transferred. I think it's operational risk. So I'll give you an example. In our current environment, we again, these legacy systems, they're old, they're brittle. Some of the stability around them is marginal at best. We are seeing we're hitting 99.99 percent uptime in the cloud. So that's again just kind of transferring some operational risk. Security, I alluded to earlier that we were we have a good security team, but we had some gaps and so we transferred that risk to Guidewire, obviously protected by some contracts. But those are the kind of things I was referencing, if that makes sense. There was another one up here. I'm going to run over here. Thank you. Was interested in hearing how IT headcount had changed post implementation, if at all? And for folks who have stayed on board, whose jobs have simply just gone away like infrastructure management or function similar. How those FTEs have been redeployed? What are they now doing? Thanks. I think they're deployed yet. So we're still implementing. So I would say that we've not really changed the mix at all yet. I would say though that we probably we would have been probably in a more of a hiring mode around infrastructure. And so that's probably more of a cost just avoidance more so than it is anything else at this point. Now we do believe longer term that we'll see some value. Obviously, we have a bunch we're still running legacy systems. We have a bunch of other things that we do as well. And it's actually probably helped us be better at running those other systems because we don't have our folks spread so thin. But I think it's more of a hiring avoidance in the future more so than it is reducing headcount in the near term. I think in the near term that you also have you're running legacy and you're running your new system and you're converting the data together. So I think that's what your point is in the near term, you're running dual systems until you get through that transition period. And you're also adding more value and doing more work with your data analytics and some of the tools that they have. So I think that measuring it based on just FTE savings, you really need to look at it in terms of value and the ability to continue to compete in a very competitive environment in the future. For myself, being able to repurpose some of my systems engineers to look at better ways that we can do business, it's been much more valuable than for me to lay off one of my system engineers. Yes. I think we'll see some reduction obviously as the because Guidewire has a significant environment management because we run a lot of concurrent projects. We run a ridiculous amount of testing environments, which has a lot of overhead. Part of it moving to the cloud is going to clean that up as well. So we're going to see some reduction there because we've just been running so many environments. You'll also see a little bit in the database area. We're not managing the databases anymore. That will be in the Guidewire camp. And that's a significant piece of our database infrastructure. So we got a few people that just focus on that in the test environments for the most part. So we will see a little bit, but it wasn't a huge in that assessment that I mentioned. It wasn't a significant piece and we'll probably redeploy those resources or have some of the trade out and have resources somewhere else. Nicole, maybe 1 or 2 more questions. Sure. Yes. There are other questions. Peter, just a follow-up on the question. So obviously, you're migrating to the cloud from an existing on premise solution. Can you just kind of talk about the timeframe there? And obviously, as you're paying continuing to pay for the thing on premise, just kind of how that ramp looks like between paying for the on premise product versus the cloud product and how you thought about that from a valuation and purchasing perspective? Yes. Well, from a timeframe perspective, as I mentioned earlier, we're coupling this move with a 3 version upgrade. So this is a pretty major upgrade. So we've been deployed. We write in all states and we've got a pretty large implementation. When we went through the cloud readiness assessment, I did mention that earlier, we found a few things in there that we had to change, but nothing that was usually surprising that we would have to change. So some of that work is part of that upgrade. This all goes to the timing. So what the good news is, we feel this will be the last major upgrade that we have to do. It will be more updates that Guidewire does and that we take in the end. So we're kind of looking forward to that. From a timeframe perspective, our implementation of billing and policy are pretty large. We've got our entire company is running on the platform today. So we're shooting for, and I can't say too much, mid next year for billing. We're going to try a different approach. We haven't settled totally on this, but we're going to do billing first. As we're working on policy, policy is going to take a little longer. And then towards the end of the year, we'd like to do policy. That's where we sit right now. We are working on the upgrade process. We haven't finalized the roadmap itself. There's tons of work to do, so we're already doing that. But that's roughly the plan we're looking at. Like I said, we've done 2, 3 jump claim center projects and those were about 9 months. 1 took 12 months, but we're an early adopter of that upgrade process with Guidewire. So we helped them work the kinks out with that. Policy is infinitely bigger than claims. So it's going to be a challenge to get that done in that timeframe. But it has nothing to do a lot of this isn't necessarily that time frame is the cloud issue. It's really more these are major upgrades that we got to go through. Yes, the cost and I think the folks at Guidewire gave you an example of a ramp model and then we looked at that as well when we were talking to them about the program. So we can kind of deal with that. We were in agreement on how we were going to make this move. And we're both in this trying to move Guidewire forward with the cloud. So we're into that as well and they were. So it's kind of a partnership again. Yes. So I wanted to close just really quickly and have you each, just offer some quick feedback for Guidewire based on where you are in your journey and your experience? We'll start with you, Gina. I think for Guidewire, it's just continuing to do best protocols, making sure that they're ramping staffing as they're adding additional clients onto the cloud. And I think they're very committed to that. And I like you're talking about with Mike why he came on, talking about the culture. I mean for us, we really do believe it too that they have integrity and they're a good business partner. So I think just continuing to watch the staffing as they continue to move to have more clients. Ravi? Yes, I can offer a couple of perspectives. I think one thing they need to keep doing is listening to their customers. It's been a great relationship so far. Guidewire knows where they are on this journey and they've been very open to our feedback and we've seen a lot of change because of that. So keep doing that. I think it's been great. I think it's what makes Guidewire special. I think another thing Guidewire needs to continue to do and it's a hard transition and they're doing it, but I think it's a difficult thing that I keep their eye on is as they move from a product company to more of a service company, keeping in mind they're really competing with internal IT organizations in terms of providing that infrastructure support. So the ability to think about responsiveness and communication, We've had some challenges there early. We've seen improvement, but we continue to have our internal business partners are always comparing the old IT organization with this new Guidewire thing. And so expectation management around those things, service level management and just keep in mind that these organizations have a track record of a certain kind of service they're expecting internally and making sure they're cognizant of that. Thanks. I think for me, it was good to hear Mike actually talk about the culture and the values because that's where I think Guidewire needs to continue to focus. It's one of the things that attracted us to Guidewire going all the way back to 2,004. And it was good to see the new offices and the culture and the values right on the wall. I think that's key. In the insurance business, you'll find a lot of folks that have been in this business a long time and relationship matters a lot, especially in technology. So keeping your eye on those culture and those values as you're making a switch even in the CEO role, that's important. Going public a while back, now a new CEO, keeping those values in mind, we'll keep customers coming back. The other thing would be just to keep open with the customers and be honest with where you're at. And I know they're doing a good job of that right now. Even as they're working through this, they title their conference every year connections. They really focus on customers getting together and discussing things. Don't lose that because that's actually a good thing, Making sure you're referenceable across the board, that's been at the heart of what Guidewire has been about. So keep that going and all the rest will come. We'll all pitch in. Thank you. Great. Thank you. Thank you so much, Peter, Gina, Robbie and Nicole for moderating. It's an honor to serve you. Our last session of the day is going to be Curtis Smith, our CFO. Now Mike provided a few high level overview of our financials. Curtis is going to get into a lot more detail about the state of the business and our long term model as well. So for our last session of the day, Curtis Smith, Guidewire's CFO. Thanks, Brian. I'm Curtis Smith, Guidewire's CFO. Thanks again for joining us for our Analyst Day here. We really appreciate you spending some time to get to better understand the Guidewire story. And we really appreciate you coming out to our headquarters in the Silicon Valley here and hopefully experiencing our office was added some value to this experience. I will walk you through the financial slides and then I've asked Priscilla Hung, our COO and Jeff Cooper, our VP Finance, come join me on stage for Q and A. So framing fiscal year 2020 beyond, we have 4 key topics we want to talk about today in our financial presentation: key metrics update cloud driving business model changes modeling revenue and then a long term model update. And I'll drill down in each of these in more detail. First, our key metrics update. Over the past couple of years, we've spent a lot of time with you, our investors, our analysts, other software CFOs to get data, a better understanding of what is helpful to you in understanding this cloud transition or transition to the cloud. And based on that feedback, we'll put together these metrics. We first introduced these key metrics last year, and we're updating them this year. So we've divided them into 2 categories, transition metrics and go forward metrics. We're maintaining one of our transition metrics, subscription new sales as a percent of total new sales. This year, we talked about a range of 55% to 75%. Last year, that range we provided was 40% to 60%, and we ended up with 65% of our subscriptions as a percent of the total new sales. Fully ramped ARR, this is a new metric, a new transition metric to us. We first introduced it back in Q3. We talked about it more in Q4, I will spend a little time drilling down on it today. InsuranceSuite cloud deals. This is one we will no longer be providing going forward. Over the past couple of years, we gave you a range. Last year, it was 4 to 8 IS cloud deals. We came in at 9. We will, however, be providing an update on any IS Cloud customers we sign during our quarterly earnings. Go forward metrics. So we'll continue to show subscription revenue and break that out. That's in our public filings. This year, we talked about a range of $105,000,000 to $115,000,000 or 69% year over year growth. And then we'll continue to report on the increasingly important metric for us that we talked about in our Q4 earnings and that is ARR. We talked about a 14% to 16% growth rate expected this year in 2020. All right. Let's drill down a little bit on annual recurring revenue. This was introduced last year at our Investor Day, Analyst Day meeting. It's the same definition. And let me walk through that with you. So we define it as annual occurring value at period end for active term license, subscription agreements, maintenance contracts and hosting contracts. It excludes perpetual licenses and professional services, multiyear term contracts adjusted to annualized values. This aligns to our annual invoicing or billing in ramp agreements. It's bottoms up analysis by customer, but it cannot be derived from our financial statements. We will be disclosing this year after a year of experience talking about ARR in our 10 ks and in our 10 Qs going forward. So this will be a new non GAAP metric that we'll be disclosing in our public filings. Fully ramped ARR. This is a new transition metric. We first talked about it in Q3 and Q4. We heard from you quite a bit about providing this type of metric to help you better understand all the selling activity that's taking place with our IS cloud contracts that may not be captured in year 1 of that ARR metric. So the definition here, annualized value of recurring revenue at year 5 for ramped contracts, ramped pricing agreed to with customers and based off pricing schedule outlined in the contract pricing schedules may extend beyond the committed contract period. We spent a lot of time talking about how almost all of our contracts have a 5 year pricing table as a part of them. And then pricing schedule is time based and not milestone based. So on the graphic on the left, we talked about this earnings. ARR on a constant currency basis grew 13%, fully ramped ARR on a constant currency basis grew 24%. On the right hand table, we show the cumulative ramps for 2019 cloud deals. And we also discussed this in earnings where we said of the 9 cloud deals that we signed in 2019, they added approximately $20,000,000 in ARR in the current period and $65,000,000 in fully ramped ARR. Also as discussed during earnings, we expect fully ramped ARR to grow faster in 2020 than our ARR metric. All right. Our topic number 2, cloud driving business model changes. Cloud shift to subscription. This slide is updated from last year and there are a few things I'd like to point out. We expect overall new sales to grow after a very strong fiscal year 2019. We expect subscription new sales to grow and as a percentage of total new sales to be approximately the same as last year. And as indicated in our 'twenty outlook and we've discussed earlier today and in Mike's presentation, we remain committed to our existing on prem or self managed customers and new customers if they choose that path for the next 15 years. Mix shift in new subscription sales impact on revenue. As noted in earnings and earlier in this presentation, we are maintaining this transition metric in 2020 to help understand a mix shift's potential impact on our revenue and our revenue growth rate on the L and S side of things. From earnings we noted, achieving the high end of this range would result in approximately $30,000,000 less in fiscal 'twenty LNS revenue than at the low end of this range. And in this slide, we have indicated the impact of a 1 percentage point change on revenue. Final bullet point here is an important one too. ARR is not impacted by this mix shift, That's another reason why we continue to focus on ARR as an indicator of the progress that we're making in this cloud transition. Cloud impacts on license and subscription margins. This is also an updated slide from a year ago. And as we've discussed, more subscription revenue is a good thing and we see that climbing and expect that to climb again this year, But it has an impact on our L and S gross margin. Levers to reduce cloud COGS. This is one of our top priorities and will be for a few years. We divided into 2 broad areas, software infrastructure and people, and are offering an illustrative view of current state versus future state based on unit economics of 1 mid tier company. While there is a much broader and detailed list of initiatives, our operations team, R and D and Infosec teams are focused on, we have summarized these initiatives into 3 categories: drive standardization, contract implementation and conformance maximize cost and compute resource efficiency, adopt common Guidewire cloud infrastructure in the short term, adopt SaaS native software in the long term, as Diego talked about, and then streamline people and process efficiencies via automation, tooling and best practices. Cloud impacts on services. Also as we've discussed over the past year and as Mike covered earlier, we are intentionally investing in our SI partners through training, educational content to prepare and certify them to take on more cloud implementations. In 2019, as we discussed in our Q4 earnings, and we were happy to announce this, of the 5 new customers, including MACIF, 3 cloud implementations we expect to be led by our SI partners. Greater SI involvement, Shane, is a good thing, but impacts our overall revenue growth rate. All right. Our 3rd topic, modeling revenue. Guidewire Analyst Day would be incomplete without a little accounting and 606 discussion. Thank you for chuckling a little bit on that comment. I know it's late in the day. Last year, we provided some examples. A slide that was titled Term License Rev Rec 605 versus 606, and we talked about the rationale behind the contract remediations that we went through the prior 12 to 24 months. Today, we want to review a new term license deal and a new cloud deal and the modeling of ARR, fully ramped ARR and the revenue recognition. In addition, in the appendix, we have provided some examples of the framework for modeling cloud migration deals. All right. The new term deal. The terms we're using here, standard 2+1 contract and as a reminder, we've intentionally moved to this 2+1 structure for 606 purposes and avoid the lumpiness of having multiyear contracts all recognized upfront in 1 year. That being said, we may see more than 2 year contracts going forward, if our customer is demanding that. ARR, for a ramped contract, You can see how the ARR is annualized even though this contract is 5 year committed pricing and it is executed midyear. The ramp from 1,000,000 to 1,500,000 to 2,000,000 to the fully ramped year, year 4 of 3,500,000 dollars is how we set this up to show you how the fully ramped ARR and the revenue would look. On ARR, the year 1 ramp takes annualized amounts to calculate the $1,000,000 even when the deal is executed midyear. And a reminder that our ARR is tied to invoicing or billing. Fully ramped ARR then looks at the fully ramped year. At a committed pricing table and period and calculates ARR at the fully ramped year, which can extend beyond the contract period. And this year, we're using an example that shows the customer, the contract being fully ramped in year 4. And then finally, revenue. Under 606, we take the revenue under the contract period of 2 years and recognize it upfront in year 1 and then allocate a percentage of the maintenance over year 2. Since it's a midyear signing in this example, some of the maintenance allocates into year 3. In year 3, at mid year renewal, the increased $2,000,000 ramp amount is recognized with allocation of half of the maintenance going into the following year. All right. New cloud deal modeling. So the deal terms here are a 3 year contract, ramp pricing, 5 year committed pricing and then also executed or provision midyear. One thing we would note here though is for we kept it this way for comparison purposes, but would expect the 2 to 3 times increase in pricing with our cloud deals, as we've discussed earlier. ARR is the same as we saw it for the term deal and based on the ramp of $1,000,000 to $1,500,000 to $2,000,000 and then getting fully ramped in year 4. Fully ramped ARR also looks at that fully ramped year and calculates that on a yearly basis and is the same as the new term deal. And then the revenue rec for subscription. Subscription averages amounts over the contract term, in this case, of 3 years. Let's say $4,500,000 divided by 3, you get $1,500,000 per year and then ratably recognizes. So in year 1, because it was midyear signed, we get the 0.75 instead of the 1.5 As I noted earlier, we provided some migration deals in the appendix. Okay. Now to our 4th topic, long term model discussion. We want to review our fiscal year 2020 outlet look that we discussed in our Q4 earnings, provide some model commentary and then our long term model update. So first, the fiscal 'twenty outlook, showing 2018 actuals, 2019 actuals and then our fiscal 2020 outlook at the midpoint of the projections that we provided. We're also adding ARR in this table that wasn't there last year to emphasize the importance this is taking internally for us and we think should be again an increasingly important metric for you. We expect ARR growth to accelerate off of the fiscal year 2019 low point. On the revenue side, subscription as a percent of license and subscription revenue and subscription revenue is increasing. Services revenue mix declining for the reasons we have talked about earlier. More and more of those implementation opportunities are intentionally being directed to our SI partners. Gross margin, contraction near term due to the investments in cloud operations we talked about and we'll talk about it a little bit here as well. And then operating margin declining largely as a result of the gross margin decline and those investments we're making in our subscription COGS here initially to meet that increased demand we are seeing on the cloud front. Okay. Some commentary now on the long term model. We split it up into 2 categories, growth and profitability. On the growth side, new sales and ARR. Cloud demand higher than previously expected driving subscription revenue growth. Cloud deals driving subscription mix of new sales above the 80% we initially talked about in our fiscal 'twenty three model. Overall, software growing faster than prior plan. And we're noting here ARR growth, as Mike talked about, we expect see at 20%. We expect that by fiscal year 'twenty two. On the services side, partner led implementations lowering services' mix of revenue and so now we're seeing that to be approximately 25% of total revenue by fiscal 2023. Services revenue expectations lower than prior fiscal year 'twenty three expectation. And then in total revenue, we're still targeting the $1,300,000,000 dollars that we talked about a year ago in fiscal 'twenty three, and that is basically higher software revenue offsetting lower services revenue. Okay. Now some commentary on the profitability side of our longer term model. Starting with gross margin, investments required near term to support the cloud demand. We talked about this in earnings that we are intentionally making these investments beginning last year and then increasing them this year to make sure that we can meet the demands of the cloud opportunity that we see out there and that we particularly with our early IS cloud customers, we can ensure success that we are committed to. Lower software margins versus prior fiscal year 'twenty three expectations, longer term, 65% plus subscription margins still expected. On the cloud COGS side of things, these are the similar categories or drivers that we talked about in my earlier slide. To add to that, we're focusing on leveraging standardization and conformance, focusing on driving costs of support and implementation down. On the automation and tooling front, focusing on driving down future FTE needs and leveraging resources for higher value work. On the OpEx side, incremental sales and marketing investment versus prior fiscal 'twenty three targets support cloud demand. No change to R and D and G and A margin ranges. Operating margin, fiscal 2023 operating margin lower versus prior 2023 expectation by 4 to 6 percentage points. Longer term, 30 percent plus operating margin target expected in fiscal year 'twenty four to 'twenty six. Finally, on the free cash flow side, once a tax once a cash taxpayer free cash flow expected to trail operating margin by approximately 2 to 4 percentage points. And for modeling purposes, we have modeled in a 21% non GAAP tax rate. All right. That all comes down to a slide where we hope to be able to summarize where we currently are, what our updated fiscal year 'twenty three expectations look like and then what our expectation is in the longer term. So this is how we've set up this slide. Same table that we showed you before on the left with our fiscal 2019 actual numbers and then our fiscal 2020 outlook at the midpoint of the ranges that we provided. The fiscal 2023 estimate column now is an update showing where we expect that to be after a year's worth of data that we've gathered and based on our current outlook. And in the 3rd column are the bullet points, our long term commentary, that we'll talk about. So I am going to walk you down the fiscal 'twenty three estimated column and the bullet points at the same time here. Again, we start with ARR, as the key metric for us going forward. In fiscal 'twenty three, we didn't put out an estimate for that, so this is new. Dollars930,000,000 is our current estimate for ARR in fiscal 'twenty three. That represents a 19% CAGR from fiscal 2019 to fiscal 2023 and a 20% plus growth rate in fiscal 2023 over fiscal 2022. Percent subscription of new sales, now expecting 81% to 81% in fiscal 2023. That's an increase from our initial view of approximately 80%. Subscription percent of license and subscription revenue, 57% to 59% now in fiscal 'twenty three estimate. This is higher due to the cloud demand we saw coming out of fiscal 'nineteen. And then services as a percent of total revenue, as I referenced earlier in our commentary, we expect this to be approximately 25% versus where we were previously, which was under 30%. And this is lower. I don't know if that was commentary on that metric or not. Was that intentional? I don't think Lower on faster cloud growth and higher SI involvement. So as I noted earlier, total revenue is still expectation for fiscal 'twenty three to be at $1,300,000,000 no change there. And then on the gross margin side, 62% to 64% in fiscal 'twenty three, again, largely driven by the investments we're making in our subscription COGS, our cloud operations early on here to meet the demand we're seeing and to ensure customer success. And we note going forward, we expect a 65% subscription margin in fiscal 'twenty four and to grow beyond that in the outer years. R and D investment, no change there from the previous range we provided for fiscal 'twenty three. Sales and marketing, 13% to 15%. This is a modest increase and reflects the increased selling activity that we saw coming out of 2019 and we expect going forward, including the commissions that are associated with that. And then G and A, no change there to the prior range that we provided a year ago. Overall, that adds up to an operating margin for fiscal 'twenty three estimate of 22% to 24% and over the long term expect a 30% plus operating margin by fiscal year 'twenty four to 'twenty six and then to move beyond that in the outer years. Our free cash flow margin, 23% to 25% versus the earlier estimate we gave. This, we expect to trail operating margin by 2 to 4 percentage points once we are a cash taxpayer. In summary, we're pleased, we're very pleased with the demand we are seeing on the cloud front. And while it has a shorter term impact on our profitability, we remain confident about our longer term profitability levels. With that, let me invite Priscilla and Jeff on stage with me and we will be happy to answer your questions. You can stand up here. It's okay. We can share the stage. Hi, Kurt. It's Ken Woll from Guggenheim. I'm sure everyone's got this on their mind. But in terms of the profitability, beyond fiscal year 'twenty three, you highlighted greater than 30%. But when we think about the old guide, 30% was sort of the high end of the range. I guess maybe you can help us perhaps kind of fill in the blanks a little bit, like is that meaningfully higher than 30%? And then on the cash flow side, I think previously it was a couple of points above operating margin. It seems like you guys are calling out a kind of a cash tax as perhaps the delta there. Can you just clarify that that's the sole headwind? Yes. So on operating margin, that's right. Our expectation is to be 30% plus by fiscal 2024 to 2026. We believe there's room for it to expand beyond that in years beyond fiscal year 2026. We wanted to give you some markers along the way. There were some different years where we expected ARR growth to be X or we expected our gross margin to be at certain points like our subscription gross margin. We're doing the same thing with our operating margin showing you compared with what we were talking about a year ago, where we expect that to be, where we expect that to hit that 30% range and then we expect it to go beyond that 30% after that fiscal 'twenty six timeframe. On the cash flow, that's right. We do expect on our current estimate, it's always hard to get this right to be a taxpayer in fiscal 'twenty six. All right. Thanks. Rishi Jaluria, D. A. Davidson. Really appreciate the detail. 2, just going back to the long term model. First, on the gross margin front, I get that you're talking about a greater mix shift of cloud, but you're also talking about services being a lower mix shift. Why would gross margin come down overall if that's the case? Because I imagine by FY 'twenty three, you're going to get subscription gross margins above 15%, which is where professional services tend to run. So maybe help us bridge that delta. And then on the sales and marketing line, you're bringing that up a tick. Just help us understand where is that incremental investment in your mind going to on that line? Thanks. Yes. Sure. So on the gross margin, what's you're right. If we see less services revenue with lower than software margin associated with that, that should have a positive impact on gross margin. So we have factored that in. But we're seeing initially here the demand for our cloud, the margin associated with our subscription deals being lower than it eventually will be due to this pretty significant investment we're making in subscription COGS in the early years here. And again, it's to make sure that our early IS cloud adopters are successful. We do expect to find efficiencies in that investment over time, and that's why we could point to our expectation around that subscription gross margin to be 65% plus by fiscal 'twenty four. We don't think that's the endpoint. We think there's still room for that grow beyond that. And can I just jump in real quick? The other mix shift to focus on is the mix of license and subscription, how much of it is going to subscription. So we are expecting faster subscription demand, which is cannibalizing some of the term license revenue, which carries 98% margins. And on the sales and marketing front, you probably saw from the graph. We saw pretty fiscal 'nineteen was a very strong year. I mean, Mark has talked about it being the best year in Guidewire's history. We expect to see that sales and marketing activity continue to grow faster than we initially expected. There are costs associated with that. Part of it is commissions cost. Part of it is people to be able to manage that growth as well. Over here, Brad speaking. Thanks so much. Wanted to ask about one of the key drivers you mentioned for COGS and cloud efficiency is getting conformity and standardization. What does that entail exactly? If you could just elaborate on what that means? And then also, that 50% to 75% range for new business going to the cloud, what would drive that metric to be higher versus lower? What are some of the factors you've kind of built into that variance? Thank you so much. Take the first part, we'll take that second. Can you hear me, Brett? Okay. All right. So the cloud efficiency is absolutely the number one priority right now. You saw it in Mike and I think about it literally every day. And there I would say that there are 3 main factors in terms of driving COGS down. One, I would say is scale, right? What does it mean by scale is, we're very happy that we have 13 customers and we have 4 lives. But if you in grand scheme of things, we are really, really early in the journey. And we really didn't start a go to market with the cloud solution until about a year ago. It's a connection last year. So this is really beginning of the journey. Now we're very, very happy with the demand, but still it's really early days. And Mike also mentioned in his presentation that in order to drive efficiency is to try to standardize all the maybe like a common platform, so to speak, right? And for us to rather than having, do But in order to really realize what the shared services should be and what we should be asking Diego to do or cloud ops to do in terms of automation and tooling and technology you built into driving efficiencies. You really have to have a large group of customers for you to really observe what kind of commerce services makes sense, right? So you really need to zoom out. So now with 13, with 4 going live and a few more coming and hopefully that very steadily, we're going to continue to build up our core capability and install base. We have more and more learning to do. So we know that it sort of increased the pool of technology driven efficiency that we are in the beginning days of building. Now in terms of conformance is, I would say particularly to the lift and shift sort of migration of existing installed base to the cloud, right? So you have all met Peter. So Peter has been running Guidewire for 14 years, right? He's one of our very early customers. And because our platform was very flexible, I mean, our platform is still very flexible, so you have a lot of freedom to configure the way you want. So therefore, if you look at the large real estate of installed base, you have a very wide range of configuration. It can look like this all the way to look like that. Now you can only drive costs down if you have scale, if you have commonality, right? So if you drive 50 different versions of a guy way customer to the cloud, it's hard to and they don't conform to a certain shape or unwilling to conform to a certain shape. It's very difficult for us to actually build that common technology or common services to build scale and realize the cost efficiency. So that is what I meant by conformance and standardization. And that will help, I think, by 2 factors. The first is, I think that our customer would need to accept that this is part of going to the cloud. I think that, the more value they see, the more value they can derive from the business perspective of what they can get to the cloud could be a good motivation for them to be more conforming. And second of all is, Diego also pointed out that one of the top initiatives of our technology roadmap is to provide expose API. Exposing the API standardized a lot of integration that right now is a lot of times is a very customized kind of integration. And that is also an obstacle for us to drive performance, right? When you have a Galway customer with 50 different customized integration and each and single one of them, we took responsibility of monitoring and whatnot when we stand in the cloud, it's sort of an obstacle for us to drive the efficiency there. So I would say that at the beginning, it's people process technology that we're building, zooming in and zooming out when we're more scale, more customer. And that's where we will drive the efficiency. Makes sense? And on the 55% to 75% range, so that's subscriptions, new sales subscriptions as a percent of total new sales. We're providing that range or an updated range this year. And we indicated that current expectations are that, that will be pretty close from a percentage where it was last year. If we end up at the high end of that range as we did last year, that's a good thing. We're seeing more subscription than we initially expected. It does impact revenue if we get more subscription and less term revenue, which has the 2 plus 1 accounting that goes along with it. That impacts the license and subscription growth rate for the current year. But ultimately, we think that's a good thing for the long term. Hey, guys. Hi, Chris Merwin. Just a really helpful slide showing the kind of what the accounting looks like for a term deal and a cloud deal. I guess specific to that for term, it showed like a ramp up, I think, in revenue. I mean are the term deals being sold now with the ramp structure and the cloud deals of course were to accommodate the implementation fees and the existing term license fees that your customers were paying, but is reselling ramp term license deals is question 1. And 2, I just want to confirm that the revenue recognition for ramp deals, is that not ratable? Is that actually a ramp up in terms of the rev rec? I know the invoicing and the billing is a ramp, but is the actual revenue recognition ratable or is that scale up? So ramp deals is not necessarily a new phenomenon for Guidewire. We've been selling ramp deals for a fairly long period of time. And if you go back and look at Analyst Day event slides from 2 or 3 years ago, you'll see us talking about that phenomenon. So that exists in term licenses. We do sell ramp term license agreements. I think the cloud dynamic has made some of these ramps a bit more dramatic and especially in a migration context and I think some of you have heard us talk about that. From a revenue recognition perspective, the reason why we highlighted the ramp deals is because there's a little bit of incremental complexity. So there are 2 types of revenue recognition patterns. In a term license, we would take the 1st 2 years of that contract and the ramp that is clearly spelled out in the customer contract and recognize the 2 years of the license portion of which the customer is committed to and then there'd be an allocation to maintenance as well. And so that's why you see that bump up for the 1st 2 years. And then as you roll through the years 3, 4 and 5, the term license looks very much like the invoicing activity on an auto annual renewal framework. On the subscription side, we recognize the average over the contracted period. In our example, we used a 3 year committed subscription contract. So we would recognize the average over that 3 year period ratably, which is why you see the numbers start at 0.75 and go to 1.51.5 and then as we invoice more activity in years 4 and 5 which were outside of the original contracted period, but part of the original pricing schedule, then the ratable recognition bumps up in line with that. Historically, you guys have broken out land versus expand on the revenue side. I guess qualitatively, do you expect that to change significantly in the next year end in the long term model? We don't. We've seen that same pattern historically, and we continue to expect that going forward. We were trying to introduce some different metrics and some different ways for you to look at our business going forward. And we excluded that when we've included some other ones. Right there. Go ahead. Hi. I was just wondering, have you had any instances where the committed pricing is renegotiated down the road? Or is that pretty locked in like committed? Not that I'm familiar with. Maybe I can elaborate a little bit about why it's Israeli or hopefully never it would happen because the ramp pricing is actually tied to what we call go live mostly go live milestone. So what that means is that so for instance, if you are taking a core customer to the cloud, so they won't do everything at the same time. They might do a claim first and the billing and the policy. So over the course of 18 to 24 months. So the ramp up is tied to, say, if you go live in month 18 and then for billing and then for policy, it's month 24. So the ramp pricing is designed to tie to the go live milestone that suggests then it then translate to what year that ramp pricing hit. However, the way that our contract is written is such that well, hopefully, we'll never miss milestone. I mean, our number one priority is to make sure that customer go live on budget and on time. And that's our commitment. Now but even if for some reason out of our control that, that slipped, the pricing still hit for a specific year, right? And also you think about the Visa core system, right? So they can turn it off, right? So even though that so the term pricing, they will still be paying even if that the ramp pricing doesn't kick in. But contractually, they have to pay because it's a time based, it's a time based payment. Yes. Should the ramp get less deep over time as we make shift towards more new customers and also just your initial customers probably got some sort of favorable transition given initial challenges like how should we expect the ramp steepness to evolve over time? Yes. Sorry. From a business perspective, I would say, we would expect almost all cloud customers to have some form of a ramp, right? Because we're trying to tie value to how much they pay. Now the difference would be the slope, the steepness of the ramp. But again, how we as I said before, how we determine it's basically tied to a little bit of a go live schedule, right? So if the go lives are much more close to each other, you can imagine that the ramp will be a lot steeper. If the project is sort of spread out for a little longer period of time, you can see that a ramp would be a little bit more modest. And to add to that, if we look at a migration customer versus a new cloud customer, we do expect the ramps to be not as great for the new customer versus the migrations we've talked about before. Our migration customers in year 1 of their subscription agreement, they're paying full fee on term. And so we expect to see that ramp to be steeper for those migration customers than our new customers. Can you give us some clarity on the cash flow you receive in the new cloud model? Will deferred revenue tick up in 1st year? And then will the cash flow match the revenue schedule that you laid out? Or will it be faster? So we typically invoice our customers annually in advance. So that's our invoicing mechanism. So in a new cloud customer, you would expect to see some deferred revenue bump up as that takes on a bigger part of our overall software revenue pie. There are some other counterbalancing elements in there related to term licenses that create unbilled accounts receivable, which makes the story a little bit complex. But the cash flow dynamics of the 2 are very similar. We have annual pricing schedules, we invoice our customers annually, so they should be pretty similar. Yes. Thank you. You all have a lot going on with the revenue line over the next few years. One of the things that the key piece of the growth story is wallet share over time. So as you came out with the new metrology, I'm curious if you considered metrics like net dollar retention or a cohort analysis, something along those lines. I assume the ramped nature of your contracts might mean those metrics are less relevant for you than perhaps some other models. But how are you analyzing wallet share internally? How do you measure that? And then how do we measure that from the outside looking in? Thanks. Like customer wallet share? Yes, sure. Just kind of penetration over time, whether that be within a Tier 1, going from policy to billing or proliferating among additional smaller subsidiaries over time? Yes. And so it's a huge opportunity for us, customer wallet share over time. We do consider other metrics. We get a lot of feedback from the investor community, from the analyst community. And as we've done a year ago, we offered up for metrics new metrics to better understand our progress in the cloud. We added one this year and we continue to evaluate, are there other metrics that will help you better understand the progress we're making. So we're open to that and we do consider that and evaluate if we should do that or not. We do look at very explicitly at customer wallet share. An example is we take on a new customer and they buy just one part of our core, we've captured all of the DWP for that customer. But if they bring in the other 2 or 3 parts of the core, there's a 2 to 3 times uplift in wallet share just for those parts of the core. And so we do stay very focused on that. We view that as a very big opportunity for us going forward with our existing customers. Could you talk a little bit about the steepness of the ramp in fiscal 'twenty four? So it looks like you're saying 30% plus operating margins by the period fiscal 'twenty four to 'twenty six, but subscription margins are hitting 65% in fiscal 'twenty four. So is it effectively that fiscal 'twenty four has 3% from the prior model that shifted to fiscal 'twenty four? Or are we getting to like 30% margins in fiscal 2024? Like just can you help us understand the progression? Yes. So what we talked, we showed subscription margin in fiscal 'twenty four, and that's where we're really focused. So we thought that was one of the key metrics to focus on from a modeling standpoint going forward. It's obviously lower than that right now as we've talked about all the investment we're making, the pricing on the ramps, right, if we're just pricing this much in year 1, but we're paying full COGS fee, that impacts the subscription margin. As the pricing gets better over time as the ramp comes up, that obviously impacts it even if we don't touch the subscription COGS piece of it. So that's why we focused on that and we pointed out that our expectation is 65% plus subscription margin in fiscal 'twenty four. We do expect that to increase over time, primarily as we're focused on the cloud COGS that Priscilla talked about. Another potential lever for us going forward, which we have not included is, is there a pricing opportunity for us there too? I think we're good? Yes. Great. Listen, thank you very much for joining us today. We really appreciate it, and we appreciate you digging in and spending time. We understand there's complexities in our model as we go through this cloud transition. And so we appreciate you spending the time, the extra calls, the extra things and follow ups with us. And we're more than open to that post Analyst Day here, too. As you get a chance to digest what we talked about today, take a look at the deck when we post it on our website later today. This concludes our Analyst Day presentation. Special thanks to our guests over here. We really appreciate you coming and spending some time with us and our investor and analyst community. It was awesome. And many thanks to all the Guidewire colleagues for making this event happen for the first time ever in our headquarters. Thank you very much. All right. You can follow us over here. There's a cocktail reception taking place, and we'll see you over here. Thank you.

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