Gartner, Inc. (IT) Earnings Call Transcript & Summary

Yes. It's really interesting. And all due respect to everything Chris just said, and with the thought in mind that I also spend a lot of research time on the notion of articulating value in business outcomes. That sounds really hard. I mean, think of it the federated buyers and you've got to figure out outcomes, and you've got a -- Chris had a great phrase about understanding product customer fit. What if we all said, hey, let's not do that. Let's try this a different way. And so instead of strictly going from top down from the enterprise buyers down to trying to get them to understand and figure out how your product fits their needs. Why don't we start with giving them the product and let them experience it -- they see value from it and bang, quick close. And that -- and I'm being a little bit glib about it, but that's sort of a basic notion behind product-led growth. And the reason that even though it's been around now for, let's say, 6 years or so in some form or fashion, it's really coming to its fore now in the B2B space. And the reason is that everything we just heard about takes a really long time. So -- or not average, but the longest sales cycles typically can take up to 14 months. On average, we hear timing of 10 months. Now things can close more quickly than that. I guess it can close more slowly than that. But the impetus behind PLG is, let's make things happen faster, and let's do that by getting the product or getting a product experience, I should say, in front of users on the product so that they can see its value and then they can become advocates, dependents, other phrases you might want to attach to that. But then they are able to be referred to the people that actually purchase the offerings or the solutions when the users are not those same people. So again, that's kind of the background behind it. I want to emphasize one thing. I know we're on to the next slide, but really quick on the other one. It's really important to understand that it's not product-only growth, it's product-led growth. So let's keep in mind as we go through these, that it's about getting the product experience in front of someone as early as possible in a process or just as early as possible in general. But it doesn't mean that we don't need marketing, we don't need sales and we don't need to promote the value of the product in some form or fashion, but we'll talk about that as we go through now. So now you can go to the next one. Let's talk about aspects of PLG. I've indicated a bit why it's popular, why it's important now. And up on the top right of the slide, you see a group of vendors that are pretty well known to be -- to have a successful product led growth. And there are lots of other ones. There are hundred and hundred things these days about PLG is that it is predominantly about land and expand. This is not the -- you experience a product and all of a sudden, a $1 million deal gets done. That's not the way it works. And I will tell you later on, spoiler that in most cases in B2B you're going to end up having to have sellers speaking to buyers, even if we're starting with users experiencing the product, and I'll talk about that in a moment. But seeing the product value quickly and letting the users experience that is part of the magic of the motion. And you can see the quote from a growth expert out there named Elena Verna who says product-led strategy, excuse me, product-led sales strategy aims to land accounts earlier than top-down sales ever could. The notion here is you inculcate the users in the product, you get them the value quickly, and again, they become advocates and dependents on the product. That hopefully make it easier to sell, talking about land and expand. I will also tell you that doing PLG right means data. It is a data-driven motion -- and I don't care how many free trials and premiums and whatnot are out there. You can't put those out and hope that things will work right. Hope is not a strategy. So in order to do things right and get to an all later call precision at scale, you've got to understand what those users are doing or not doing in your product while they're experiencing it. But if you do it right, that last stat on the bottom is really interesting. For one customer, they were able to not only cut in half the amount of time it took to close a deal, but they were able to drive twice the number of deals through this motion. And in fact, what's interesting as they did retain an outbound motion as well, but every one of those outbounds was steered into a free trial. Everyone goes through the free trial. Everyone experiences the product, and you can see some of the results there. Let's go to the next slide. Really quick, I'll try to be quick about what's all happening with the trend with a go-to-market motion that is product-led growth. So 2 things are happening, and they're coming from sort of opposite sides of the spectrum. And it is useful to understand go-to-market and PLG within it as a continuum for most organizations, it's not going to be -- we're only doing PLG or only doing sales led. We'll get to a point in the next couple of years where everybody is going to be doing hybrid, and I'll address that in a second. But where we are now is that many companies who were what I'll call, PLG natives that said, yes, we're going to go full bore into the product-led motion, we're going to put products out there and give a trial experience or a premium or we're going to offer interactive demos and another kind of neat way to give a product experience without the product. we're going to do that, but we're not going to have salespeople. And what's happening is among every one of those companies, they figured out, hey, if we want to close large deals, if we need to move up the food chain, guess what? We need sellers because at some point -- or excuse me, in many cases, the users of the product are not the buyers of the product. And when you have to interact with the buyers of the product, you end up in the world that Chris talked about before. So Zapier is a great example of a company, if you looked at their website and talked to them 2 years ago, no salespeople. You look at their website now on their homepage, it's, hey, if you want to contact sales, let's do this. They also have human assistance that help with adoption and usage and so on. So that's one end of the spectrum. At the other end of the spectrum, our more established companies with established product portfolios that have said, Hey, there seems to be action and some benefit in this product-led motion, we want to take it on. And in many cases, it's for portions of their portfolios, not every product. In other cases, they may have a product that was an enterprise-grade product but doesn't fit an SMB audience they might want to go after, so they're taking on the motion. And in their case, the big question is, well, I have established marketing and sales and customer success resources and people and processes. How do I make those work for product led. And I would love to share the answer to that on this call, but we don't have 2 hours to do it. So what's happening is we're headed toward the middle of this picture where in many, many cases, maybe not all cases, but in many cases, it's going to be a hybrid model, and that will take us to the last slide where I can sum it up. We'll have a hybrid model in which in SaaS, in general and for most technology providers, you may lead with a product or even service experience, but you're going to be following that up as quickly as -- or not as quickly as possible -- at the right time with the right sales experience and getting that right is where the data element comes into it. We can hit the last slide here. So the takeaway is for your organizations, you have to understand what's the right product experience for the users. And PLG is a motion that's very dependent upon the combination of your product and your audience. And it doesn't work all the time. It doesn't work the same way all the time. But take a look at that combination for you. And try to reduce friction. That's the soul of the motion. Even if you're a hardware provider, there are ways that you can reduce the friction between people showing up in your website and leading them to an account executive or a partner, reducing friction is where it's at. Over time, over time, this is going to be the way that we do things. We're not going to, I think, in 2 years, be talking about exclusively PLG and exclusively sales-led organizations will be working in their go-to-market motions combinations of both. So with that, I turn it back to you, Rajesh.

Thank you, David. For the audience, please keep asking your questions. David and Chris and all the other presenters, we will try to keep answering offline. And David, there are a couple of questions, hopeful you can answer them off-line. And in the interest of time, we are going to move to the third trend that we have for you. And this one is about digital marketplaces. Anshul is here to speak about it, and he has reviewed this for a few years. Anshul, marketplaces are something we talking about Amazon and Baidu? We thought it is a consumer thing. What's important about it from B2B and the technology provider sense?

Sure. So as you said, digital marketplaces have been here for over a decade. But what's really emerging now is the role these marketplaces are playing in tech sales, especially in a B2B context. So we see more consumer-like experiences in a B2B transaction. I see more and more tech buyers are inspired consumers, so you can blame it on democratization of technology or millennials coming into the workforce and leading business transformation. So all it means is that they want to easily find tech solutions that are composable and come with assurance to integrate with existing products and the infrastructure they use. So they want to discover trial and even purchase software in a very low-touch take forward way and a B2B digital marketplace just makes that happen. So marketplace providers are launching marketplaces to let tech buyers easily find solutions from third-party providers, which built their products our services on top of the marketplace providers, product, platform or infrastructure. Marketplace providers are bringing their partners and customers onto this single platform. So marketplace goes beyond the intent to get a commission for matchmaking, instead amplifying their business opportunity to sell more of their products alongside third-party providers product. So think of cloud marketplaces from hyperscalers like Amazon, Google, Microsoft, or Hyperscience marketplace for intelligent document processing apps and services or E42.ai marketplace for digital AI workers or Snowflake marketplace for data and data services. There are various examples like that. The rise of marketplaces is emerging as a powerful trend impacting all sort of TSPs in a big way in terms of how they are going to operate and sell in the future. In a 2022 Gartner survey of tech providers, 60% of respondents quoted increasing their reach to potential buyers and 50% of respondents quoted demand from current customers as the top 2 reasons to join the marketplace. We believe by 2025, 80% of B2B sales interactions between tech buyers and sellers will happen in digital channels. Now let me discuss in the next slide what is causing the rise of marketplace trend. Well, multiple buyer and provider-led initiatives are driving marketplace, when we look at it from the buyer side, it reveals that the low friction buying. For example, faster tech owning experience, simplified vendor management and procurement, consolidate IT spending get volume-based discounts and take advantage of committed spending. And the other one is non-IT tech buyers coming into play, driven by democratization of technology. Since these non-IT resources participate in Fusion teams to build technology solutions, they need composable technologies that can easily fit and integrate with existing enterprise applications and infrastructure. Digital marketplaces, which are built around specific solutions like analytics, no code, low code platform or workforce management offer that composability and easy integration as tech providers in these marketplaces are pre-validated for the same. Now when we look at it from the providers' side, it reveals that providers are actually raising their investment in the marketplace because they anticipate huge growth in sales through the marketplaces. Providers are joining marketplaces to accelerate deal velocity, advanced partnership unlock core sell opportunities and improve new customer acquisitions. And tech providers are also responding to the need for whole product solutions. In a 2022 Gartner buying behavior survey, it was revealed that tech buyers prefer integrated solutions rather than individual technology. With a mean number of individual technologies reaching 7 in an integrated solutions. What else can make that happen? A marketplace enables tech buyers to purchase integrated solutions comprising multiple technologies from a single source under a single billing. Thus, technology selling through a marketplace increases customer satisfaction, retention and stickiness. Now let's discuss how this trend impacts TSPs in the next slide. So marketplace will disrupt all types of TSPs, be it large or small, providing software and services or hardware, in the next 3 to 5 years. but the impact and the requirement to react will occur earlier for some, particularly to those who offer light touch solutions with limited implementation, overhead and low complexity preferably delivered through the cloud. So if you're offering SaaS cybersecurity, identity and access management, data and analytics solutions, then you must respond to it now. Now in terms of the impacts, TSPs will face increased competition, as marketplace enables tech buyers to find solutions from tech providers that otherwise would be unknown to them and provide us with little brand recognition and limited sales outreach will get reach and brand visibility through the marketplace certification and ranking. They can leverage the relationship and trust that typically much larger provider has with the customers. Providers with an ecosystem of partners and value-added resellers can even launch their own marketplace to offer a complete solution and better compete in the market. So there is going to be increased competition with the rise of marketplaces. But with this, it also brings raised entry barriers, as the marketplace is becoming a segment in itself with buyers sticking to purchase technology solutions through it. Providers not considering or prioritizing the marketplace as a route to market might lose some of the potential customer base to the competition. And providers must so customize their products and services to integrate with the marketplace as well as adjust their road map constantly to stay aligned with the innovation and development in the marketplace. And this will also require significant operational investment to attract buyers to invest in the engineering capability and maybe even recruiting more partners to the marketplace. Now with that, let me go to the next one. What should TSPs do then? So if you are one of the TSPs who are yet to participate in the marketplace, you must adjust go-to-market strategies to respond to the buyers engaging through a marketplace. You might like to evaluate one or more marketplaces of other providers to connect with the target customer and sell faster. And those who are already engaged in the marketplace, they must use composable product solution architecture to easily integrate into and scale possibly into multiple marketplaces, attract tech buyers to transact more frequently through the marketplace, maybe by offering discounts or credits or maybe some marketplace feature enhancement Basically, you should be doing things that are necessary to remove buying friction. So one final point I would like to make before I hand it over to Rajesh. As David also mentioned, we are seeing the beginning of a new era in go-to-market strategies. And it is clear that there will be more options available than ever before. It could be sales-driven marketing-focused, product-centric, top down, bottom up or a blend of all of these approaches. It could be a marketplace or a Metaverse or maybe something new. Important thing is TSPs who develop their skills in incremental go-to-market strategies now will have the ability to better respond to it in the future. TSPs will assist buyers in making digital purchases and marketplace will play a crucial role in this process. Now I hand it over back to Rajesh.

Thank you, Anshul. There are a few questions for you. I'll leave most of them for you to address offline. One question that you can address online is this. In addition to digital marketplaces, what is your view on API marketplaces. You spoke a lot about marketplaces could be very different. What's your view on API marketplaces? Do you see them as distinct first of all, and second, do you see them coming to the mainstream before digital marketplaces, after? What are your thoughts on API marketplaces? And for the audience, please keep those questions coming.

So I would say that it is not important here to identify the different types and the categories of the marketplaces. We really need to see the intent when it comes to the API marketplaces or the marketplaces, which is, let's say, coming from the snowflake, all they are really trying to do is bring all their partners and customers together onto a single platform. And the intent here is to really make their platform, their infrastructure, make it more accessible and sell it along with the partners' solutions.

Thank you, Anshul. So that covers 3 of our 4 trends that we wanted to address. And let's go to the next one. We have Anushree Verma to speak about not Metaverse, but Metaverse used in marketing and customer experience. So Anushree, we thought metaverses in a sense what Mark Zuckerberg announced, it's a lot about in consumer world, and we get a lot of questions whether it's real. But you're seeing Metaverse for marketing and customer experience is something technology companies should pay attention to. Why?

Yes. Thanks, Rajesh, and hello, everyone. I'll certainly answer this through the slides that I'm presenting here and Metaverse had certainly created a lot of hype before ChatGPT came in. But despite of all the hype, the adoption of Metaverse Technologies remain nascent and fragmented. And before I go into the Metaverse technologies, let me set the background. Gartner defines Metaverse as a collective virtual shared space created by the convergence of virtually enhanced physical and digital reality. And Metaverse is persistent providing enhanced immersive experiences. Now this is going to go through an evolution and a long-term one. And Gartner believes that it will eventually be device-independent, and I know we're all talking about VR headsets, experiences through dependent edge interfaces. But in the long term and to be scalable these -- we do need innovations at the edge as well. And again, that's a complete topic by itself. And it does not need to be owned by a single vendor. All solutions today are precursors to the Metaverse or our emerging Metaverse solutions, if you call it. So you shouldn't be waiting to evaluate the opportunities and trade-offs if you are not get into it. So we're talking about today is utilizing the Metaverse technologies, as Rajesh mentioned, that would enable marketing and customer experience use cases. We have been seeing that the early use cases are marketing and customer experience focused, for example, hosting virtual events in virtual spaces, leveraging digital twins, showcasing products we have automobile vendors building virtual showrooms, details and fashion doing virtual try-ons, spatial audio to have greater engagement, right? So we are seeing many of the providers piloting or experimenting with these kind of use cases to enhance their customer engagement. So it does help in brand perception, which in turn gives you a competitive advantage. Now the appeal and the experience of this sort of Metaverse experience that you're creating is definitely going to vary by demographics and you're going to have younger customers adopting it initially, but we do see a healthy growth here. And we need to start as a provider, you need to start evaluating how to incorporate the near-term use cases into your products and services. And I'm going to explain that through the next slide that Rajesh is bringing up. Now if you can see the different technologies that are listed on this slide for marketing and customer experience, you need to integrate that definitely depending on your products and services portfolio. Now let me take them -- some of them through examples. Digital humans, you can deploy it as a customer success managers and leverage it in product and service communities. You can use it as an Avatar, humanized robot or simply just as a speaker or a tech stat interface. There are multiple scenarios I can keep going on in the way you can use digital humans for marketing and customer experience. They are more human in their approach, and therefore, it makes it sound look more natural. And therefore, for a customer experience, it starts impacting your customer retention. And therefore, you start building your customer loyalty as well. We do expect, as Gartner that by 2035, the digital human economy will become a $125 billion market and will continue to grow further and not just limited to these kind of use cases. Now let me take another example, spatial computing. immersive and interactive marketing through spatial computing is one of the critical elements of the Metaverse. Content marketing has evolved from traditional static content to interactive and hyper-personalized kind of content based on buyer behavior personas. Spatial computing, therefore, enables you to make your audience as a participant instead of a watcher sitting and watching as a -- just as a customer from outside? Now the next one, let's say gaming. You can create gaming experiences for customer implementation and onboarding. Now if you are trying to tell a story, the art of storytelling becomes much more engaging and immersive if you do it through a game board, right? So by 2025, again, Gartner expects that the serious games market will grow by 25% due to the impact of Metaverse technologies. Let's take the other technology that you can use which is the Metaverse community. We have customers interacting and through a community, you help them build or foster a relationship with the brand. We have seen some of the use cases in the financial industry, in one of the shoes, fitness company wherein they're trying to build customer loyalty through these San association base and build a customer or a community interaction virtually, so you deepen the relationship with your brand, and therefore, your loyalty starts going up. The other one, virtual space, I'm sure you know that we have seen the pandemic that has given rise to these virtual platforms. And in fact, we're having this webinar through these virtual platforms is again an example. Certainly, this has helped in extending the reach, not only for corporates, but it does help in tourism and education as well. Now as virtual events evolve, this will give rise that we expect to virtual spaces so that people are not limited to one sort of an event that is happening, but you enter the virtual space and leave the environment whenever you want. And across all these technologies, whenever you can introduce monetization, you can be using NFTs or any of the product-led future gates and you use them in your products and services, integrate it and it can be monetized. But that will happen towards a more advanced stage of the Metaverse. Now across all the use cases that we have seen across all industries, training and enablement is one of the top use cases adopted across all industries. In fact, we did a case-based research with 50 vendors and around 50 or around 60 adopters or I think about 150 use cases that we surveyed, training and enablement, employee engagement was one of the top use cases, whether it was manufacturing or whether it was a consumer sort of a scenario. These technologies are being leveraged for creating these sort of use cases. Now we'll go on to the next slide to understand the impact of these on the different aspects. Let's take them one by one. Products and services. As I mentioned to you, that it can be monetized in the advanced stages by the Metaverse. Economic gains can be done through tokenized assets. For example, selling access to a physical item using an NFT. And we've already started seeing some premium products doing that so that you can build digital wallets using NFTs. There will be opportunities for new revenue via upsell or additional purchases that you start building on through these platforms. Now going on to the next one, customers and buyers. The buyers have started becoming more comfortable with this sort of a virtual engagement, right? And we have seen that initially, it was still the younger workforce, but we have seen that the other generations have also started adopting these kind of experiences. So this definitely helps in expanding your reach and starts creating a community through Metaverse technologies. Digital humans can be used for customer success, virtual selling and customer support. And you start humanizing those interactions, bringing physical interactions into these virtual spaces. The third one, operations and processes. Now you can minimize or you can create efficiencies when you're trying to plan, research or even having decision-making across the organization. In fact, digital humans can enable true multipresence. I can be -- always be available for interaction even if I'm not actually sitting in front of my laptop, right? So regardless of your presence, digital humans can enable true multipresence -- but you need to ensure that the legal and privacy policies are evaluated well and the compliance is strictly followed when you're trying to use such technologies. Now partners and ecosystems and competitive landscape, as I said earlier as well, Metaverse technologies are nascent However, early entrants and as we keep adopting and learning or experimenting through the use cases, you start learning through the emerging technology, and you, therefore, have a competitive advantage over the other and in this evolution that you have, you need to build partnerships or build your ecosystem so that you can continue evolving your products and services along with the maturity of the different technologies that Metaverse has. Talent and resources, as these marketing and customer experience use cases, there is going to be a new demand for specialized talent specific for these sort of use cases. We do keep hearing about what sort of skill sets does my company need for leveraging some sort of a platform and building it in-house. So you do -- we do see that demand starting to come in for new talent that is specifically aligned to Metaverse technologies. Now -- the key takeaway is, as you understood, Metaverse is yet nascent. It is in the emerging phase. And it's not just VR or AR or we are talking about, but it is more of a collective virtual shared space. So evaluate the viability of the technologies that I showed you in terms of the user and customer reach, and look for the opportunities to monetize them in the future and do not overinvest in terms of building an application and just launching it for marketing purpose, but think of it as an incremental feature that you can continue integrating and evolving with the technologies that we showed you. And therefore, use caution as these capabilities are nascent and is going to take time.

Thank you, Anushree. So those are the 4 new trends that we are introducing this year. And this is the entire list of the 10 trends, right? So the other 5 that we did not cover are these. I'll very quickly, 20 seconds, cover each one. Co-innovation ecosystems is a trend where as your clients become more and more interested in technology as a competitive advantage and to strengthen the value proposition they are looking for to create innovative things working with you. So your goal is to partner with them to create something unique for them, and this trend speaks about that. Democratization of the tech is the other aspect of what Chris spoke to us earlier, how technology is spilling over from the IT department on to other aspects of the organization and not only who is getting involved and as different people get involved, their nature of technology changes. That covers that. Intelligent applications is one of the only trends that's focused on a specific technology, AI, because we believe the impact of AI on computing is going to be sweeping and it's going to lead on to better and new things, and it's much, much more beyond ChatGPT. And intelligent applications is how all the applications we see, whether it's hardware, software, et cetera, will get injected with the dose of AI and become intelligent and do new and better things. Sustainable business, you all know what it is. It impacts technology providers, both as a new area of business as well as impacts on what they do. AI consume significant amount of resources. And the last one, Techno nationalism, we all see countries and regions across the world are putting barriers or investing in technology specific to their area, whether it is in software, whether it is in semiconductors, et cetera. This has become very important for technology leaders to pay attention to. We are reading more about all of these trends. We have experts who cover all 10 of these trends. We are happy to engage more. So if you have any questions, please be -- any way we are running out of time. Hopefully, you got some answers. Our experts are available to speak more on -- more about that off-line as well. So thank you for all the analysts, Chris Marshall, David Yockelson, Anushree Verma, and Anshul Gupta. They lead these strengths and there are more analysts. Julian, I'll turn it back to you, and thank -- thank you all for spending time with us.

Excellent. Thank you so much, Rajesh. And as he just said, thank you to the audience for joining us today. Before you go, we have a couple of additional resources at the end of this presentation for you below in the Attachment tab. And 1 of those includes the Gartner Tech Growth and Innovation Conference 2023. It is the premier event for technology solution providers with 2 locations. This is the link to learn more about these and other upcoming Gartner conferences. You can also explore the top 10 trends that will impact tech providers and how to effectively harness these trends for business success. Download your copy of the top tech trends for tech providers 2023. Also, our Gartner for High Tech LinkedIn page is dedicated to providing you with the latest insights, best practices and strategic views into the most important topics impacting tech and service providers. Followers on LinkedIn And sign up to our biweekly newsletter today. And if you want to learn more on how Gartner can help you achieve your most mission-critical priorities, contact us via the methods on this slide. And you can download all these resources from the bottom of the page, as I said before. And plus, you can find more Gartner insights, access the presentation slides and see upcoming and on-demand webinars at gartner.com/webinars. And just on your way out, as we had also said at the beginning of this program, if you could please take a moment to submit a rating and leave some feedback for us below the video player under the Rate This tab, and you'll find it below the video player or below the abstract, a box will open for you to select 1 to 5 hearts when you click Rate Session. Please note that 5 Hearts is the top reading and share your feedback on the insights provided and the Leave Further Feedback box and click Send. And with that, I'd like to again thank all of our presenters today, and thank you for listening, and you'll find it below the video player, below the abstract, a box will open for you to select 1 to 5 hearts when you click Rate Session. Please note that 5 Hearts is the top reading and share your feedback on the insights provided and the Leave Further Feedback box and click Send. And with that, I'd like to again thank all of our presenters today, and thank you for listening. Have a great day. Goodbye.