Prophix
Recently, Alok sat down with Aznaur Midov, host of the SaaShimi podcast, to discuss his unique path to CEO and how Prophix managed to transition from an on-premise to cloud software company while remaining bootstrapped.
We share a portion of the interview transcript in today’s blog. You can listen to the full episode on Apple Music, Spotify, or on SaaShimi’s website.
Aznaur: Before we dive into Prophix, could you please say a few words about yourself?
Alok: Yeah, absolutely. Look, I have been at Prophix for almost two decades, and I’ve done a little bit of everything. I started with an engineering background focused on technology and software development, but over time, I got really interested in how to scale organizations. So, I’m an engineer by trade, but I love building things and have become more passionate about how to build organizations over time.
Aznaur: Let’s talk about Prophix. For people who don’t know, how would you describe the product and the value proposition?
Alok: We play in a category of software called Corporate Performance Management (CPM). And acronyms aside, what we do is fairly straightforward. Every organization, whether it’s small or very large, has a finance or accounting group. And those groups have various processes that they run, whether it’s an annual budget process or monthly reporting. And a lot of those processes are incredibly manual, they’re incredibly slow, and they’re laden with Excel.
And so, the first part of our value proposition is how do we digitize work? How do we streamline it, create better workflows, and automate a lot of the manual processes? So, finance leaders can save time, energy, and eliminate errors?
The second part of the value proposition is once you’ve saved a lot of time, how do we allow our customers to reinvest that time in doing more value-add strategic work? How can they better understand the data they have, underlying trends, and where the business is headed by extracting valuable insights? We want to support businesses with the data they need to make smarter decisions.
Aznaur: I know you originally offered your CPM software on-premise, where are you now? Can you walk me through the whole journey from on-premise to realizing you need to move to the cloud?
Alok: It’s an incredibly complicated journey. So, if you have listeners out there that are thinking about it, planning it, or in the middle of such a transformation, it can be incredibly complicated.
Just to add a wrinkle in terms of how we did it as well, up until very recently, we were bootstrapped with zero institutional equity investors. We were a founder-led bootstrapped company, which adds an incredible degree of complexity when you’re doing a cloud migration.
Going back to your original question, let’s talk about the journey. There is the first part, which is the business planning, where we identify the trends we’re seeing. We identified that more and more businesses are moving to the cloud.
Our transition to the cloud involved taking our current product and rewriting it in its entirety to be native in the cloud. And that transition changes the way you develop products and run your operations, including DevOps and CloudOps. Your cadence for release management also changes. And so, there is a transformation that has to happen on the engineering side of the organization, and then you have to reconsider how you build the technology. But it’s more complicated than that.
The way you sell your product and the way you position it in the marketplace changes. You have to change how your service your customers, as well as your financial metrics, which when done properly, is essentially rewriting the DNA of your company. It’s an exhaustive change management process, that took us probably three or four years of hard work and heads-down effort. We’re at the end of it now and 100% of the business is cloud-focused. We only sell cloud products today. We’re happy to be done with that phase of our journey.
I will say that this transition is not for the faint of heart. It is capital intense, and I mentioned we went through this when we were bootstrapped. Effectively, when you’re going through that transformation, you’re pushing revenue and cash into the future. So, you’ve got to be very careful. The margin of error when you do a transformation like this, especially when you’re bootstrapped is very, very thin. If you make a couple missteps, or if it takes longer than you think, you can burn a hole into your balance sheet, which is not a good position to be in if you need to raise capital.
Aznaur: How is your on-premise solution different from the cloud?
Alok: When you’re doing this kind of transition, the first major milestone is reaching feature parity. Because you’re starting from scratch, can it get to parity with your on-premise product? Having said that, we’ve obviously focused most of our energy on our cloud roadmap and so we’re working on enhancing the capabilities of our cloud software. So, some features and functions are obviously different and better in the cloud.
I want to comment on a couple of things that are more significant and only available in the cloud. Several years ago, we put a lot of energy and research into understanding what type of Artificial Intelligence (AI) and Machine Learning (ML) Natural Language capabilities would be beneficial in our industry. Machine Learning is incredibly resource-intensive and weaves together a plethora of other applications so it’s much more suited for the cloud, rather than on-premise. As a result, our cloud product is now deviating from our on-premise offering because it’s easier to execute these complex capabilities in the cloud.
Aznaur: And can you share your Net Promoter Score (NPS)?[1]
Alok: Yeah, our trailing 12 months NPS is around 81.
Aznaur: Oh my, holy.
Alok: I told you, I’m an engineer. I measure everything that I can possibly measure, whether it’s customer or employee interactions, then we look at how we can improve. So, I’ve been tracking every customer interaction and we’ve tracked something like 45 different vectors to calculate a customer health score – NPS is just one of them.
What we’re really trying to do is really make our customers love working with us. And we find in the mid-market, customer satisfaction is incredibly important. If they enjoy the interaction, if they get value from the interaction, they’re going to renew. But if you don’t provide value, they’ll just go.
And so, we spend a lot of energy understanding how our customers are working with us and trying to remove all points of friction, so they have an exceptionally smooth experience.
Aznaur: How big is your team, Alok?
Alok: We’ll cross about 400 employees this year.
Aznaur: Do you have plans to go upmarket? Or are there other strategic initiatives you’re prioritizing?
Alok: Yeah, we didn’t go upmarket. Although, when I mentioned that we operate in the mid-market, it covers a broad range of companies. So, we’re specifically not going upmarket.
As I told you at the beginning, I’m an engineer. I love to build and scale organizations. And when I looked at the organization, I thought we could probably build and scale on our own.
But I thought about the current market opportunity and realized that we could build a very significant multinational organization with the support of a partner. And so, it’s about scaling up the organization, broadening the reach, and really growing to something that would be substantially bigger than what I think we could have done on our own.
Aznaur: That’s fantastic. I want to ask you the last question. So, people want to transition from on-premise to cloud, what are the main things that you think they should focus on and something that you probably did wrong in the beginning?
Alok: The first thing I would say is if you’re going to make the transition, have the conviction to follow through. It’s like ripping a band-aid off. It’s incredibly painful but if you stretch it out and turn it into a 5, 6, 7, 8, 9-year journey, you’re just prolonging the pain and you’re not going to get the upside that you’re hoping to get.
And so, what I would highly encourage if you’re thinking about the process, is to make the decision and go. And when we did this initially, we were essentially committing to being cloud-first. And then a customer or prospect comes to you and says, “Hey, look, I’d like to buy on-premise software.” And I’ve seen it so many times, where CEOs then change their position because they don’t want to turn an account down.
You must the conviction to do the transition, which means convincing that customer or prospect to go to the cloud or letting that account go. Think about every time you bring on an on-premise customer, you’re adding debt to your organization that you have to resolve over time. You’re getting cash, but you’re creating a problem for yourself down the road. And so, what ends up happening is you have conviction, and you want to do it, but then you’re not following through and that trickles down the organization. Your employees see the inconsistencies and then they operate in a way that is not full of conviction.
It is a painful process. There’s no doubt about it. It is difficult and heart-rending to see what happens to your cash flow and revenue because you’re used to taking all the revenue upfront. But you must stomach the pain because you know you’re on the right path, and you must focus on getting out of the transition as quickly as possible. That would be my advice to people who are thinking about this, especially if you bootstrap. Know what you’re getting yourself into, and then either do it or do not do it.
Aznaur: That’s super, super helpful advice. Alok, l just want to thank you for a fantastic interview. It was great.
Alok: Yeah, no, absolutely. If you’re listening and think this is super compelling or you’re thinking about going through this transition, find me on LinkedIn and message me. I’m happy to talk one-on-one about all the pros and cons of transitioning from on-premise to cloud.
Listen to the full episode, Converting On-Prem to a Cloud, on Apple Music, Spotify, or on the SaaShimi podcast website.
[1] Net Promoter or Net Promoter Score is a widely used market research metric that typically takes the form of a single survey question asking respondents to rate the likelihood that they would recommend a company, product, or service to a friend or colleague.
