Teradata Corporation (TDC) Earnings Call Transcript & Summary

Okay. Good morning, everyone. This is Derrick Wood, Enterprise Software Analyst at Cowen. And today, we have Teradata. We have Hillary Ashton, who is the Chief Product Officer; and Chris Lee, an Investor Relations. Thanks, everyone, for joining. Hillary let's get kicked off here. You joined the company recently. Why don't you give us a little bit of background of where you came from and what led you to join Teradata?

Sure. Thanks, Derrick, and hi, everybody. Thanks for having me. I joined Teradata just about 18 months ago. I have a pretty strong background in data and analytics and really have a passion for helping customers get to value from their data and analytics. Over the past 20-plus years, I was most recently at PTC in the manufacturing space, and I was a General Manager of their Augmented Reality Business unit end-to-end. Prior to that, I've been in a number of software-as-a-service companies. And prior to that, I was at Saas, the analytics company, for 11 years. So always had a big interest in the intersection of technology and value that it can bring to customers, and that's what I'm doing here at Teradata.

That's great. And just a reminder to the audience. I think it's obvious, but if you have questions, I'll try to field them as we go through the fireside, and you can enter them in your website. So Hillary, before we kind of get more specifically into Teradata's cloud initiatives, I wanted to talk specifically about how the market is evolving and maybe just talk about -- for people that don't understand data warehousing, kind of what -- it's been around for 40 years. Why is this such a critical technology for companies and specifically for a lot of Teradata customers?

Yes, absolutely. I mean, our customers are the Global 5000 in the market across virtually every vertical. Any customer that collects massive amounts of data is likely to be in our customer population. Data warehousing has been around for, I don't know, 40-plus years. Think back like punch card probably. And data warehousing is really what runs enterprises today, full stop, whether that is your financial reporting, whether that is your term prediction. If you're a telco provider or franchise services, organization, a bank and you're trying to figure out which customers are likely to lead the business. Or if you're looking at which next best offer you should give to a customer and that full 360-degree customer journey, all of that is run in data warehousing and for our customers it's run in Teradata Vantage. Whether it's back office, HR services, and systems or where whether that's front office, call center, web, social media, that's what data warehousing has been, and it continues to evolve. Obviously, there's more and more data being produced out there in a wide range of formats. And we're very focused on helping our customers get to that data, but really get to the value of that data because data is not useful unless you can do some analytics on it and try to understand what it's going to tell you about where you've been and what it's going to tell you about the future and how to take the next best action based on that insight.

Yes. And databases are kind of one of the last big applications to move to the cloud. When you talk about enterprise data warehousing, very complex data environments. What's the challenge of moving those systems to the cloud? And why it's kind of lagged other applications? And I guess, how do you see that progression of on-prem to cloud looking over the next 5 to 10 years?

Yes. No, absolutely. I think it's the -- one of the -- well, maybe 3 of the key factors within a data warehouse environment, right, as there are tens of thousands of users in many of our customer sites that are hitting the system every day. And so that performance is really critical. And there's a wide range of workloads, everything from like your traditional BI query sets to real-time transactions based on IoT data that's streaming in. And so performance is critical for all of these workloads and we call mixed workloads. And so moving all of that mixed workload to the cloud is both complex and expensive, right? It's expensive to move it to the cloud. It's also expensive once you get to the cloud because Teradata and competitors out there have unlimited scale, right? And so you can start to wrap up a pretty significant credit card bill with your CSP and less kind of unfettered access to unlimited elasticity and availability can get extremely expensive in the cloud. And obviously, enterprise customers are thoughtful about that. And finally, as you mentioned, kind of a lot of these applications, some of them are in the cloud, some of them are on-prem, that's extremely complex. And so getting it right because our customers can't tolerate 24 hours of downtime, never mind even the long weekend or a week or 2 of downtime to move to the cloud. And so that's actually one of the big advantages of Teradata Vantage is that the move to the cloud is much faster, much simpler, lower complexity, and you can maintain that high scale performance while also managing costs through our workload management capabilities.

So you mentioned with Vantage, you've made it easier to move to the cloud. What have you done to make it easier? And I guess, our conversation, especially in a post-COVID environment, kind of what's the imperative to try to shift more of workloads to the cloud at this point?

Yes. So we have made it easier for customers to get to the cloud while taking advantage of a modern cloud architecture and deep cloud-native integrations. If you'd like to, in just a minute, we could pop up the slide that shows kind of the architecture of Teradata Vantage in the cloud. But suffice to say that the software and the integrations that run on-prem also run in the cloud. And so you're not having to necessarily rewrite everything, but we also provide cloud-native integrations. And so those cloud-native integrations are pretty substantial. Chris, I don't know if you're able to share that [ marketecture ] slide, but we really have designed our core platform, which is the advanced SQL engine, which you see here, in this picture, to be a multi-cloud data platform for enterprise analytics. And you can see inside the advanced analytics SQL engine, we have the ability to load data and optimize a huge range of mixed workloads at scale. And that really is that our core value proposition, always has been is that software tied to robust workload management at scale sets us apart from the competition pretty significantly because that results in a lower total cost of ownership as you get to scale. But we talked a little bit, just a minute ago, about kind of the cloud-native integrations. And so if you look at -- and this is, I think, just our AWS, example, we have similar marketecture slides for Azure and Google Cloud. But we have full separation of compute and storage, leveraging NAS S3 for AWS, for example. And our ability to bring the stores closer to the compute is very critical because it's one of the core elements storage and compute separation. There's also some other kind of highlights that I'll show here. So we've got Kafka and Kinesis. We also embraced tools like ServiceNow, Salesforce and Workday. We can pull data from those systems. And on the fly, I run a query against that data and then get rid of that data. So you don't have to move everything into our SQL engine in order for work to process and we used something called QueryGrid to make that possible. But we have over 18 different cloud-native integrations, whether that's Azure, Data Factory, Blue, Google data flow, Spark, Hive. And within AWS, in particular, I mentioned Kinesis, AWS, LaMDA delivers Kinesis, which is an event-driven real-time services or trigger-based services on AWS. And then LaMDA is doing the transformations of data on the fly, like aggregations, data processing and then landing that data directly into Vantage or in an S3 object store and then consuming that data from S3 directly from Vantage. And so this just gives you kind of a high-level overview, Derrick, I just found it before we hopped on the call. Every time I show this to a customer, they're -- actually, they're surprised, which is a little bit disappointing in terms of the perceptions out there, but then they're really excited about the cloud-native integrations that we have and the simplicity with moving forward to the cloud with Teradata Vantage. So we could spend the whole time on our marketecture slide. I won't do that to you right now through porter, but I'm happy to answer questions.

No. Yes, that's helpful. And yes, I mean, I think that the native interoperability you had it with -- you hit a milestone, I think, with cloud storage and query processing directly off of S3 and other cloud object storage. And can you remind us, a, when that really became fully GA? And I think it took some time. And so maybe just trying to get a sense for why that's so was challenged to get done? Or how much of a re-architecture that required?

Yes. I mean, first of all, so GA last year, one of the things that we did right after I joined was, we doubled our spend in cloud from an R&D standpoint. So we went from 35% spend in R&D to 70% spend in R&D last year. That allowed us to deliver things like native object store, read and write capabilities across AWS, Azure and Google. Last year, we also released consumption-based pricing. We also released Vantage on Google Cloud, and those are just a couple of the highlights. So we really put our money where our mouth was and where the market opportunity was. It wasn't actually technically hard, believe it or not, it was a focus problem for us. I think go back maybe 2, 2.5 years ago, and I don't think we were particularly clear where we should be spending our time and money, if I'm being honest. And so we have a tremendous amount of skill and capability, internal to Teradata. And we've been around for decades, figuring out how to get to data and how to make it perform for enterprise use cases. And so the technology aspect of it was not the challenge. It was really a focus problem. And so now that we've fully separated the compute and storage, that gives us great price performance for folks who want to take advantage of NOS. But they also have the opportunity to take advantage of EBS, right, which is a different performance characteristic than NOS. And so we give our customers the best of all worlds in terms of how they want to manage their workload and the performance and cost performance that they want to pay for that so that let's our customer take advantage of that cheap and deep storage for a wide range of use cases and also have even higher performing EBS capabilities, which our competitors don't have today. So I think you're on mute there, if you may hit the button there?

I guess, well, sorry about that. We'll touch on that in a second, competitive differentiation. But the -- I mean I've covered Teradata since they were -- went public and spun off of NCR. And I mean, I remember when there was a presentation by Apple, and it showed Teradata on the data center floor and part of Teradata historically has been selling system, hardware and sitting into the data center. So as you go to the cloud, very different kind of value prop. How does the value prop change with -- when you're not selling hardware, when you're attached to cloud infrastructure and cloud hardware? I guess it's really around the database and the performance of the database. Is that really how to think about it? Or when you move to the cloud, what's the -- how does that conversation change around buying Teradata systems and Teradata hardware?

Yes, absolutely. I mean, several years ago, we made a hard shift away from that hardware business model and really focused when we launched Vantage box, I think that was about maybe 3 years ago. Vantage is the database platform. It is software fundamentally. And so that shift has continued with rich investment behind it, as I mentioned before, in the cloud. We realized that one of the things that we learned through our history of having a hardware part of our business was we are exceptionally good at getting every last piece of performance out of environment and out of systems. And that is highly differentiated for us and something that people really only start to appreciate as you ramp to scale in the cloud. You want a salami slice out a little plenty workload and run it and give it kind of unfettered access, yes, no problem from a competitor standpoint. But as soon as you start to get thousands or tens of thousands of users banging on that system, you can run into serious cost issues. We've had several customers go out and PoC or even try a competitor solution only to come back and say, everything looked kind of pretty. But from a cost standpoint, boy, our cost just ran away. It was way harder for us to get there. The migration was, in some cases, a total failure. We have one customer who spent 9 months and over 100 peoples' worth of time to try to migrate to a competitor only to find out -- only to pull the plug and say this is never going to work. We're going to come back to Teradata, take advantage of the cloud-native capabilities that you have and move their migration much, much faster, while still delivering that modern enterprise architecture in the cloud. So I think that's what we're seeing. And as folks stop experimenting and start getting serious about cloud workloads at enterprise scale, they're finding that value proposition of our software. And our optimizer engine and our workload management being critical reasons why they're picking Teradata.

So maybe we can double-click into that because, yes, you've got some competitors that are newer and are growing quite fast in the space. You guys have a big incumbency, and it sounds like maybe you hadn't been that focused on the cloud. Clearly, you've doubled down and more so. And so when you look at the kind of compare technology-wise to some of the rising competitors, what are some of the key differentiations? And you mentioned, take advantage of EBS. I think it's EBS, I don't know, but maybe touch on that point and any other points around key competitive differentiations?