The accelerating digital transformation, redux

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Earlier this week, TechCrunch covered a grip of earnings reports showing that some companies helping other businesses move to modern software solutions are seeing accelerated growth. Inside the Software as a Service (SaaS) world, this is known as the digital transformation. Based on how many software companies are talking about it, the pace of change is only picking up.

But since we published that first entry, a number of SaaS companies that have posted financial results seemed to disappoint investors. Seeing some companies in the high-flying sector struggle made us sit back and think. What was going on?

Today we’re going to explore how the digital transformation’s acceleration seems real enough, but how it’s not landing equally. We’ll start by going over a short run of earnings results, talk to Yext CEO Howard Lerman about what his B2B SaaS company is seeing, and wrap with notes on what could be coming next from software shops.

A quick word on digital transformation

We all hear about digital transformation, but it’s hard to define. Generally, it’s a broad area that includes digitization of manual processes, modern software development practices like continuous delivery and containerization and a general way of moving faster via technology — especially in the cloud.

Speaking last month on Extra Crunch Live, Box CEO Aaron Levie defined the term as he sees it. “The way that we think about digital transformation is that much of the world has a whole bunch of processes and ways of working — ways of communicating and ways of collaborating where if those business processes or that way we worked were able to be done in digital forms or in the cloud, you’d actually be more productive, more secure and you’d be able to serve your customers better. You’d be able to automate more business processes.” he said.

What we’re seeing now is that the pandemic has accelerated the rate of change much faster than many had anticipated. Efforts to slow the spread of COVID-19 and its related workplace disruptions have accelerated what would have been a normal timetable. But on its own, that doesn’t mean the market is seeing equal results across every company and industry that might be part of that trend.

Earnings results

Lots of SaaS companies reported earnings this week, but two sets of returns stuck out as we reviewed the results, those from Slack and Smartsheet.