Specialist
Former executive at Duck Creek Technologies LLC
Agenda
- Duck Creek Technologies (NASDAQ: DCT) and its SaaS (software as a service) platform and solutions, focusing on property & casualty insurance
- Industry and competition, highlighting Guidewire (NYSE: GWRE) and smaller players
- Growth opportunities, especially following recent IPO
- Outlook for H2 2020 into 2021
Questions
1.
Duck Creek Technologies describes itself as “the leading SaaS platform for the P&C [property and casualty] insurance industry.” Could you offer some initial thoughts on that characterisation? What do you think positions the company to make that statement credibly?
2.
Duck Creek completed its IPO relatively recently – we have information largely through May 2020 and the company will soon report its first fiscal year results as a public company and file its 10-K thereafter. To what extent might Duck Creek have made a full transition to cloud across new and existing clients, given it indicated that as of May almost all of its trailing nine-month ACV [annual contract value] bookings were for SaaS offerings? Obviously, the company still has Duck Creek Suite as well as the OnDemand cloud offering, so could you discuss the interplay between the two?
3.
What’s your assessment of Duck Creek’s positioning against Guidewire and Majesco with the SaaS Duck Creek OnDemand offering? You touched on its progress vs those two companies earlier. How far along are the players with their platforms, modules, clients and adoption of the cloud approach?
4.
Duck Creek estimates it has a global TAM worth around USD 15bn, with USD 6bn of that in the US. How would you stack up the major players’ market shares, considering that global opportunity?
5.
Duck Creek generated 95% of its revenues from the US in Fy19, whereas Guidewire generated 62%, which reflects your comment on the latter’s strong international footprint. Do you think this disparity in international revenues is due to Duck Creek focusing on the US, as you indicated? Has Guidewire focused more on partnerships that have enabled gains overseas? How would you characterise the disparity?
6.
You mentioned a competitive disparity across Duck Creek’s three core products – Duck Creek Policy, Duck Creek Billing and Duck Creek Claims. Which of those products would you say the company leads with when a customer decides to work with it? Where is it strongest, and what might it need to improve? Would you say Duck Creek’s approach is based around winning a customer and increasing its value over time by selling in more modules, given this seems to be the industry focus?
7.
You discussed Duck Creek’s focus on the cloud transition over the past four years and the associated roll- out of solutions. What do you think is most compelling about Duck Creek’s platform and product differentiation for prospects and clients? It describes itself as having dynamic SaaS solutions, but also as possessing a low-code or highly configurable platform. As you alluded to, the company also points to decades of domain expertise, which I imagine only a couple of other players can claim.
8.
Do you expect Duck Creek’s core platform to be the main revenue and growth driver in the near term, especially with cloud? Could the additional offerings we’ve touched on become increasingly important for revenue and growth as the installed base grows, across Duck Creek Rating, Distribution Management, Digital Engagement, Insights, Anywhere Managed Integrations, Industry Content and Reinsurance Management? Where do you think the tipping point is between the core and additional solutions?
9.
How do you think about the importance of data to Duck Creek, given you alluded to this? How does the company differentiate here? Might Duck Creek’s early and significant cloud investment give it an advantage around surfacing unique insights in an aggregated fashion across its customers? Is the company pursuing that depth of knowledge about its clients, given it has the Insights product? Is anyone doing anything comparable in the marketplace?
10.
What could prevent Guidewire obtaining parity with Duck Creek’s cloud solutions in a few years and then winning business on that basis? You indicated that Guidewire is only 1-2 years behind Duck Creek in the cloud transition – Guidewire now seems squarely focused on making the shift. Do you think Duck Creek can continue to innovate and stay ahead? What if Guidewire reached cloud parity?
11.
How would you stack up Duck Creek against the competition, particularly Guidewire, Majesco and the other players you’ve alluded to? Could you discuss the dynamics when a player is trying to unseat an incumbent vendor from a potential client vs claiming a greenfield opportunity? My sense is that it’s very difficult to unseat an established vendor in this market, so I presume the opportunities are tilted towards greenfield, ie towards wholly new businesses or ones that are newer but don’t have a provider.
12.
It sounds as if Duck Creek wins business on a unique combination between being well ahead on its cloud build-out and having many years of domain expertise – Guidewire seems to be the only player that can make a similar claim to the latter. Would you say that’s a reasonable summary?
13.
Why do you think Duck Creek loses out on opportunities when it does? Is this often due to the potential client already working with an entrenched vendor? Do customers like the fact that Guidewire is the biggest company in this category?
14.
Guidewire’s fiscal year ended in July, and it has reported its FY20 and Q4 results. The company talked about the cloud extensively, and winning a lot of business, but it didn’t seem to prominently highlight a percentage of bookings or revenues from cloud – the company might still be notably behind Duck Creek. What do you think Duck Creek is or should be doing to seize upon this lead, which might dissipate in the coming quarters and definitely years? It seems for now to have the leading on-demand platform for insurance P&C.
15.
Duck Creek has indicated a win rate for new SaaS opportunities of around two-thirds in recent periods, in the range of 60-67%. It’s highlighted that customers on average use 2.7 products, but that each SaaS customer uses an average of 4.9 – the company is obviously winning in cloud. How important do you think it is for Duck Creek to identify gaps in the product offering and to deploy some of its IPO capital into buying companies to help round it out? Where are the gaps or untapped opportunities?
16.
Could you ever imagine Salesforce making a bigger play in this category and focusing on Duck Creek or Guidewire as an acquisition target? Salesforce has come up quite a bit over the course of this conversation – you mentioned its recent interest in Vlocity and some management connectivity.
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