Why Databricks’ Sid Kumar is Always Planning

0:00I think the player coach is back. The more layers there are between the decision making and what's happening on the ground, I think it just slows things down. You just need to be much more hands on. I think gone are the days where, you know, it's annual planning. It's a always be planning mindset. Constantly looking at, all right, what assumptions did I hold true? Where did things change? The motion specialization matters, I think, a lot because it's hard when you give too many choices on where to go spend your time. The fewer choices you have to make in a day on how to go spend your time, you can get focused.

0:36The contract itself is not the moment of truth. And it goes back to this point of value. Are you helping your customer realize the value as part of that contract? Is this thing on? yesterday's price is not today's price

1:03sid kumar spent his career working at companies that keep changing the way software gets sold this guy started his career in investment banking before quickly moving over to ca technologies, then AWS, then HubSpot, now Databricks, where he's the SVP of go-to-market strategy and planning. Perpetual licenses, cloud, SaaS, consumption, he's managed to work through pretty much every permutation of how software gets priced and sold over the last 25 years. I mean, this guy, he only picks winners. I wanted to understand how you build a sales org when the economics keep changing. At Databricks, closing a seven-figure contract doesn't necessarily mean the customer is going to consume seven figures of product.

1:44That creates some interesting problems for the people setting quotas, hiring reps, and deciding how much commission to pay everybody. We got into what ARR actually means in a consumption business, how much of a dollar of revenue you can afford to give back to your sales team, and whether AI is about to make all of our carefully constructed sales capacity models go kaboom. I'm CJ Gustafson, and this is Run the Numbers. Sid, welcome back to the Run the Numbers podcast, my friend. Thank you so much. It's great to be here. This is so exciting because the last time I talked to you, you were at HubSpot and you have probably the most impressive background for anyone I know within the strategy and ops world.

2:25So just to update listeners, you started investment banking. You moved into a go-to-market operating role for the first time at CA, which is like the pinnacle of software sales at the time. You ran field sales and ops at AWS during the cloud boom, and you led go-to-market strategy and ops at HubSpot. And now you're leading go-to-market strategy and planning at Databricks. I mean, dude, you only pick winners. It's been a fun ride, lots of learnings along the way. Why does a finance background translate so well into go-to-market? Because there are probably a lot of people who are listening right now who say, I'm in private equity right now.

3:01I'm in investment banking. I have this dream of going over to the operator side and maybe doing this go-to-market stuff, but it's all kind of foreign to me. Finance is a very systems thinking type of function, right? And you're constantly trying to think about what inputs do you take into a financial model, right? What are the drivers? And then what are the ultimate outputs and outcomes you're trying to ultimately get? I think it was that investment banking just really drilled that into me. If you build a model with the wrong assumptions, you're going to get the wrong output. The deal may not happen, right?

3:32Or you build a multi-year financial plan with assumptions that don't hold, then you don't achieve the company's objectives. Arguably, you don't hit the objectives from your board or shareholders for that matter. So I think in many ways, like go-to-market is very similar. You think of lots of inputs. What does my pricing need to look like? What does the number of account execs or technical sales look like? How do I incent people? How do you think of all of these different inputs into this like go to market system effectively, right? And drive the output, which is, you know, growth, profitability, all the things that we talk about, right?

4:13And at the core of all of that, it's resource allocation, which is kind of the art of science. And you're putting it through this lens of how do you sell stuff off the back of the truck to get the best risk adjusted return possible. That's exactly right. It's resource allocation with constraints. It's how do you maximize the output or the outcome, in this case, revenue growth or profitability or whatever happens to be for the company. And it could be constraints on talent. It could be constraints on your cash flow. It could be a number of different things. But ultimately, you have to be thinking about it that way.

4:49And also overlaying incentives, so getting people to actually take the actions that are good for the company, which I look at you as my Yoda to go to for these Jedi mind tricks of how to do these plans. So that's something we're also going to talk about in a bit. Before we get there, Sid, you've had this incredible front row seat to the evolution of go-to-market models. So I was tracing it through your career. You had the perpetual model at CA. You had the advent of the cloud at AWS. Then you had SaaS at HubSpot. And now you're leading the pack with consumption at Databricks. So you've had to move between these companies from one model to the next.

5:26At a high level, what breaks if you try to drag what you had in the old planning model with you to the next one? You have to really rethink everything, I think, from a first principle standpoint and say, like, what is the economic model that you're in? And what's the unit of value, right? And I think that's the biggest difference across these models. Like in Perpetual, it was the big upfront booking. Then in SaaS, it's subscription. And your value accrues based on the subscription term. In consumption, it's value realization for the customer. Are they using your product? Are they getting value from it?

6:03And you're in everything around, like how do you reduce that time to value for the customer? And then you work backwards on how does planning and strategy work in that context as opposed to the other way around. I'm just processing what you went through. And I think it's both the unit of value and also the time attached to reaching that unit of value. How do you think about that? Because each of those models that you explained, like in Perpetual, there's a huge moment of like when you get signed the deal, you don't have the exact same value moment in all of those. No, you don't. And they're extremes to your point.

6:37You can have elements of both in all models, right? Like you have a perpetual model that has some subscription or consumption elements. So these are not as necessarily as binary or discrete. But I think the big thing with consumption is, you know, value realization for the customer is directly aligned with what drives value for the company. What's one go-to-market belief you had to completely throw out as you moved into consumption? That the contract itself is not the moment of truth. And it goes back to this point of value. Where does the value come from? And contracts are certainly important.

7:16Every business has them and needs them. But are you helping your customer realize the value as part of that contract? And I think it's too easy to move away from it in a perpetual or subscription model and have the two disconnected. it. It's kind of like you're waiting for the renewal to come up on the calendar. Okay, three months before, start the discussions. There's lots of handoffs, right? Lots of different roles in a company that have sometimes unclear accountability on whose job is it to make that customer successful. Totally. And you teed me up nicely because I want to touch on how consumption changes your entire operating model.

7:58It's not simply just the way that you price and package. And you mentioned that in SaaS, you close the deal, you get everybody high-fiving, and in consumption, you close the deal and you basically say, okay, great. How do we get the customer to value as quickly as possible? And I've lived this in a true usage-based model. When I was at PartsTech, it was time to seven orders, right? We had very specific value metrics to see if somebody was on track. How much does this shift change the whole go-to-market model? You know, we were kind of on this string of roles, right? I think, you know, in our model, we have an account exec, which is a traditional year AE, and we have, you know, an SA, which is a solutions architect.

8:41And, you know, one of them is the AEs owning the commercial relationship largely and driving the exec engagement and working hand in hand with the SA and other technical roles that'll help really manage the technical roadmap and make sure that the vision, the roadmap is artificial. articulating into something on the ground that the customer is getting an ROI from quickly. What I didn't say, if you notice, is I didn't say pre-sales and post-sales. I was going to ask, like I'm thinking about pre-sales, post-sales, system engineer, BDR. There's other, you know, certainly roles for sales development and product specialists and so forth.

9:18But the concept of pre and post-sales is very different. It's like the time continuum collapsed. You think of it as like a GM of the account. If you're the AE, you're really like the GM working with the solutions architect and other technical folks. And you're certainly bringing in other folks who have subject matter expertise in certain areas. But you think about it as, how do I make this account? If I sign a deal, I need to figure out how am I going to get this customer to start getting value and start consuming? Because that's the true test. Are they getting value? It's not the, did you sign the deal?

9:55And I think when everybody orients around, all right, here's where this customer is today. Here's what the roadmap could look like for this customer. How do we go figure out the sets of activities, the engagements, who else to pull in, what partners to bring in to help with that value realization, both for maybe an initial set of use cases and then, you know, a broader transformation. I want to touch on the role of go-to-market planning in this, but while we're on it, picturing the typical AE that I knew in SaaS and what they look like, what they talked about every day, what their KPIs were, does this call for a different type of sales individual?

10:32Do you think of this as a partnership with your customer or is it a vendor, vendee, if that's a real word? Think of it as transactional or do you think of it as a partnership. And I think when you start to look at consumption, you're building a business with the customer. You're helping deliver some set of customer outcomes for that customer, and your solution is intrinsically tied to that. So as they're consuming more and more, arguably, they're getting value for it, and every day is like proof in the pudding. Are they using what they initially worked with you to go buy? And then are there opportunities to go expand?

11:12It becomes a bit of like, how do I think about this account as a partnership, as a customer versus a transactional? I'm done with a perpetual deal like in the old days and I'm off to the next one and I'm anchoring everything on December 31st or, you know, end of the year on that. Right. I'm having this image in my head of the closer. That's what that's what I was trying to say. I think this person who is trying to just close that one deal, it's a big transaction they're trying to get to. And reflecting on what you said, Sid, it sounds like somebody who has more knowledge of how even the department that they're selling into works and how that person is incentivized, what makes them look good, and then what their value metric is to get to that consumption level, which that takes a lot of forward thinking just about how your customer operates.

11:55It's not just get the sale done. You're building the executive relationships in the account. Are you thinking about it multi-year? Right. I think the other shift is really thinking about things in a much longer horizon versus quarterly, or even if you're in a SaaS business, an MRR business. It's just a very short period of time to be thinking about a business monthly or even quarterly. Play the long game. Think about, all right, here's a customer that has trusted me and the team to help them achieve a set of objectives. How do I do that? How do I exceed their expectations? Win that trust. and then, you know, earn the right to go have more of those conversations and other parts of the organization go look at different use cases.

12:41It's a land, but with a, you're perpetually sort of tied to the expansion with the customer. Well, let's dig into that because I do think the engagement model fundamentally changes. Where does the AE's responsibility begin and customer success begin? And I don't know if I'm asking a trick question here. It's a good question. I think we can have some fun with this one. We don't have a distinct customer success team. And I think there's a lot of debates on this in the industry. And it's in the context of who owns the success of the customer. And at the end of the day, it needs to be like a less diffuse thing, in my opinion.

13:20And the more roles that, you know, in a traditional model, the AE signs the deal, wins it, hands it over to customer success. and hopefully there's some engagement before the next renewal. And then the ones where there's not, you realize what happens at the renewal point in time, right? The difference here is the AEs with this customer for the life of the customer, they are covering the customer pre, during, post sales. That engagement from an executive standpoint, from the commercial standpoint, the field engineering team, the solution architects, they're owning the technical journey with that customer pre, during, post.

13:57And we'll bring in teams like when it comes to like delivery, our forward deployed engineers will work with SAs and our AEs to say, all right, how do we make sure that what got scoped, prototyped, we can go deliver and get this customer up and running and going. So there's just fewer handoffs. And they work very closely with our sales development team to go look at how we expand and broaden our relationships in the account. Product will get brought in as and when needed. So it's not to say that there aren't other roles involved, but I think the customer success one, I think that whole function over the past six, seven plus years has just had a bit of an identity crisis, right?

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17:38That's FidelityPrivateShares.com. I'm glad you brought us here, Sid, because you have this purview of all the different pricing models and what I'll call business models because they're not just pricing, it impacts everything. If we take consumption versus SaaS out of the picture and you just look at customer success and its evolution and what you term identity crisis, can you just reflect on what that function has historically been responsible for? why it's always a point of debate of if it's working or not, what they're responsible for? Yeah, I think it's defined very differently depending on the company, stage of company you talk to.

18:15That's what I've seen. If you think of sales, there's a pretty consistent definition of what sales is. You can organize between new logo, expansion, et cetera. There's a couple of flavors. But when it comes to customer success, I think there's certainly the element of who owns the post-sales experience. So after the deal is signed, whether it's a perpetual deal or whether it's a SaaS subscription deal, who owns the value realization for that customer? Traditionally, it's in models where there's AEs and CS, that gets handed over and there's certainly some joint ownership there, but CS is really responsible from time of signing through deployment, go live all the way through to the renewal and they'll bring in the folks along the way around services, support, et cetera, as needed.

19:05So that's one set of responsibilities. The other is who owns the renewal number. And then there's the derivative of that, who owns the expansion number. I think those are really the three variables that I've seen, like who owns the post-sales, value realization, who owns a renewal, who owns expansion sales into existing customers. I think there's a lot of variety in those different areas. And when they don't own the renewal or the expansion side of it, it's them, oh, well, where's the accountability? How do you measure this whole team of post-sales folks, which are additional sales and marketing costs, right?

19:44And then you start to look at things like, okay, feature utilization, and you start to look at product telemetry to go understand how their product adoption, but then how does that translate into revenue, then still becomes the question, right? So I've just seen different flavors of that. In some cases, sales will own the renewal and the expansion and CS will own just that, you know, value realization. So sales owns all commercials, CS owns value realization. In other cases, they own one or two of the other pieces as well. I think it's the inconsistency in definition, lack of necessarily clarity in terms of what the outcome is.

20:22I think if you can be clear on it. There's certainly value to that function. Not to throw a wrench in this, Sid. Can you explain for the benefit of listeners what a hunter-farmer model is in the traditional sense and if it applies in the consumption world? Yeah. I mean, a hunter, how I would think about it, is really somebody that's going after new accounts in your TAM that are cold, that don't have a relationship with you as a company. They might be spending with another company, they're brownfield, not necessarily greenfield. You want a motion to go activate them and get them onto your solution set.

21:02Farmer, I'm not a huge fan of that term because it implies you're milking or you're trying to get everything out of the customer. It just kind of goes against what I was saying before. Think of it as a partnership. That doesn't sound like value creation on both sides. That seems like value extraction. Right, right. We call them core reps, right? We call Hunter and core reps. And there's other terms for it. We've heard engaged reps is another one. You have a customer who's already engaged with you and they're on the journey. And there it's about how do you help them continue on the journey with you through new use case expansion, new line of business expansion, and continue to build on that partnership.

21:47So I think you're asking the beginning, like, you know, is there a role in consumption? Yeah, I do. I do think there is that role, but I think it's understanding what are the characteristics of customers or prospects at these different points in the customer journey. And then what's the right motion you want to activate to get them on the journey and then keep them on the journey and then get them growing on the journey. And then it's like, what's a profile of people and talent that you want aligned to those emotions? And I ask you that because I think people from the outside, when they hear a consumption model many times does not have a customer success function, they think, oh, so the rep is a quote unquote hunting and farming or providing value.

22:29And like that continuum collapsed. But it sounds like there still can be a place for someone within the pod to go land that new business and the other to follow the accounts activity and try to expand it over time and renew it. Oh, yeah, no, absolutely. What I wasn't getting at before was the value of specialization of roles. Oh, say more. Yeah. I think there's real value to focus and specialization where the motions are fundamentally different. So what does it take to open up a brand new account, maybe on a competitive solution, or what are the set of motions that that requires versus you have an account that's already engaged, that has a couple of use cases.

23:12you have some exec sponsors, but now you want to broaden that relationship. You want to go into different lines of business. You almost think about the motions are different and the type of profile of seller might be fundamentally different there too. Who wants to do that type of work? Who's great at that type of work? They're often different AE profiles. The motion specialization matters, I think, a lot because it's hard when you give too many choices on where to go spend your time. The fewer choices you have to make in a day on how to go spend your time, you can get focused. I think narrowing it down also helps you figure out the incentive structure behind it all.

23:51And you've operated across perpetual SaaS and consumption. At a high level, how do you think about building out a target fully loaded commission stack in each of those models? Is it the same? Is it different? Yeah. I mean, I think you have to look at the, I mean, certainly you have to work backwards from the economic profile of the company, right? What do the margins look like? What's the revenue growth? What are the gross margins? And how are you thinking about your overall cost of selling and servicing? And I think trying to align comp with delivery of value, if you think of it that way. And in this context, in a perpetual model, the delivery of value is you did the deal and the customer owns a perpetual license, right?

24:39And the rep is getting some, you know, big commission check based on the value of that perpetual deal. There's an amortized, you know, 12 month, 24 month, 36 month amortization of that deal. And the rep is going to get paid as the customer is using the product. And hopefully there's full utilization on the product because then it makes your renewal conversation or expansion conversation easier. Whether or not they do that, the rep is getting paid because your delivery of access to that software is what constitutes value, the value exchange, right? I think in the context of consumption, you know, it's as consumed, the company receives revenue.

25:18So as a customer gets value, they're consuming, the company gets revenue for it. And then we align compensation with that. That's where I look at like, what is the economic model that you have and how is the company getting? What's the value exchange timing? And then how do you correspondingly align comp incentives to that? Going back to our earlier discussion on AEs owning the lifecycle, you know, if they're not focused only on pre-sales, they're focused on making the customer successful because they're thinking about what consumption can I generate with this customer? The more proof points of value there are, that consumption would grow.

25:56So in each of these models, I assume you're trying to come up with a target range that you're comfortable of having this stack within. Is it a different number that you're building against in each model? So what I'm alluding to is in one model, you're like, hey, percentage of bookings, another percentage of revenue, another percentage of ARR or consumption. Are they different? Yeah, I think there's different models. I think there's too much focus on like what is the market paying? You want to attract the best talent. You want to retain them. You want to grow them because the ramp time in these enterprise sales roles is not necessarily the shortest, right?

26:31They're complex sales cycles. So that's a data point. But I think if you go look at what is my revenue model, what does my economic engine look like? What does that envelope look like in the context of my overall go-to-market expense? And then how do I make sure that that's competitive and gets me the best talent? So I think if you go back to what we were saying before, these different motions, really it's working backwards from these and saying, what are the different behaviors that you want to incent and drive across each of those different motions, whether it's hunter, different segments of the market, and then how do you prioritize those accordingly?

27:15And then from there, you go build up a sort of a bottom-up view of, okay, here's what the OTI on the street looks like. And then what are the outcomes I want to go drive against that OTI? And how do I prioritize different things like accelerators, driving, focus on the most important things? And if I was to play that back, it's less about what is the market pay a rep and more, hey, what can the unit economics of our business actually support? Yeah. And I'm not saying take a turn, don't look at the market. Of course, you need to get right talent. But I think over anchoring on that without looking at how do you create durability, sustainability, because as I said, some of these can be multi-year type of pursuits.

28:00So you're thinking about how do I create a durable model that drives the right incentives over the long term? Well, to that point, having a longer term view of the customer relationship allows you to be comfortable paying the rep more because I always coach people to look at it like, hey, what's my gross margin on a deal? Go to the unit economics of it. You can't sell a dollar for 70 cents. And then what is the customer acquisition cost? And then what's your estimated lifetime value in terms of how long the contract lasts? Spot on. I mean, I think that's where it becomes cleaner and easier to see in a consumption model what those different metrics are.

28:41There's always the methodology you use around CAC and what do you have as a fully loaded CAC. But when you go look at lifetime value, it is what do you believe the value of the consumption revenue stream is from that customer. I think this is where it gets a little bit more like when you go look at a portfolio of customers, it's a bit more like probabilistic versus like deterministic. This is how many deals. This is the average sales price. This is the win rate. You know, it's less like that and more like let's go look at this range of outcomes from this portfolio of customers based upon, you know, these different trajectories that we can go look at.

29:19And based on that, what does a lifetime value of a segment look like or a portfolio of customers look like? What am I willing to pay for that? You know, in year one, year two, et cetera. Like what is the CAC that I'm willing to find acceptable on finance and go to market? I feel like consumption economics is like very, very financial. Like the models are very, what you just said, like LTV, CAC. And I think it really helps to have a lot of that financial mindset in terms of what you're thinking about return on investment. Sid, you teed me up nicely for this because I wanted to jam out on how measurement gets harder in the model that you're currently living in.

30:01Because if you look at HubSpot, ARR was pretty clean. You knew the contract value, you knew the term, and you could annualize it. And so that's the deterministic model that you were alluding to there. But consumption business like Databricks, what does ARR even mean? You know, it's still a good metric. I think there's the value of, you know, you do a commit, right? Or you do a contract. There is a value, an annualized value of that contract, which is effectively like the hyperscalers have it. Like also, it's like, what is the annualized commit? that you expect out of this customer. So you had this AWS too?

30:40We had this AWS to hyperscalers. Yeah. Generally I'll do this where you do want the, have a longer term relationship with your customers. You have a commit in place and then you're looking at what is the, does your dog have a point of view? My dog is very passionate about multi-year commits. Oh dear. Clearly multi-year is a good thing. Then it's a, okay, consumption. What does actual consumption look like when that commit is signed? And are they ramping into it? How does that adoption curve look like against that annualized value? And then from there, I think there is a forward projection that you take based on run rate.

31:24It takes a little bit of time to ramp up the consumption. You then have whatever your monthly recurring revenue is. and what does your annualized view look like based on that ramped value? So I think it's a triangulation, candidly, across a couple of different metrics. There are still a metric. You can over-rotate on it, but ultimately it goes back to, are you driving consumption? Because as I go back to their value being realized and as measured by, or is your product or solution getting used? So I think I would triangulate across those. And you're looking at, like, If the consumption on an annualized basis is greater than what they committed on an annualized basis, that's good.

32:09If you start to see this divergence, a big divergence between what was the business case that went into the commit and you have an annualized making it up, you have an annualized value of$10 million a year and you're ramping up and you see that the forward run rate is five at best. you start to wonder like, okay, did you miss, did you miss size the commit early? Did something else change at the account or was that the right size commit? Did you lose an executive sponsor? Did the project get derailed? Like what's causing that gap between the commit and, you know, the annualized like spend in this model, you get a faster signal on usage, you know, days, months, but then to actually go see, was that the right deal at the right value?

32:57It takes a little bit longer to realize. Whereas I think that is, as I said, the celebration moment in SaaS, traditional SaaS. It's like, I got the booking. They now have access to my technology. It's not necessarily making a statement around, are they utilizing the technology? So I think you have to just plan for, it's much more of a plan for a range of outcomes based on, it's a portfolio. So every year you're kind of looking at what is a mix of my portfolio? Where are they across these different stages of the journey? What motion do I need? How do I think about commit? You and I could spend a lot of time unpacking the details under it, I'm sure.

33:36But yeah, there's a lot of moving parts to think about. I can't help but observe that there's a lot of pattern matching that's going on here. You're not only pattern matching on the accounts historical trends, but you're also looking at other accounts that may act and look like it. We do a lot of work with econometrics and with data science to do exactly this, you know, to go look at what does a successful journey look like? What can we deduce from that? When, you know, a customer is going from A, from zero to something, like how did they get there? What were all the engagements along the way that got them from point A to point B?

34:18And is there pattern matching? Or when you go look at a larger end count, is there something more systematic that we can learn from that and apply more broadly as a set of place? You know, changes to the motion or is there a change in behavior from a comp plan perspective? So pattern matching, because it's less of a deterministic model, you start to go look at other ways to go identify what does success look like. I got news for you. The ERP category is finally getting disrupted. And if you haven't heard of Rillit yet, please pay attention. It's the AI native ERP built specifically to replace NetSuite.

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35:37That is simply unheard of in the ERP space. If your books aren't running as fast as your business, check out Rillit. Book a demo at Rillit.com slash CJ. That is R-I-L-L-E-T dot com slash CJ. That's me. You are what your gross margin says you are. Sorry, my kids are tired of hearing me yell that at the kitchen table. Dad, I'm two. I don't know what cloud costs are. Well, I do. And cloud infrastructure is the second largest line on most tech P &Ls. And yet, most finance leaders couldn't tell you how it's priced. And as a CFO, I understand there's a nonlinear impact to your company's valuation when you improve your gross margin.

36:15And the path of least resistance is through your AWS or GCP bill. Because like anything you buy, cloud gets cheaper when you buy it in bulk. In fact, you can get the rate down by 20%, 30%, even 60 % in some cases. The flip side is getting saddled with a bunch of capacity you never touch. Happened to me once, I think I still got some megawatts in the kitchen cupboard somewhere. That's exactly what cloud capital solves. Cloud Capital underwrites the risk so you can realize the same savings of a deep long-term commitment sans the downside. Oh, and it takes no engineering work. Bingo! I've known Edward since back when he was just starting the biz, and it's incredible how much they've saved customers on their cloud bills.

36:56That could be you too. So head over to cloudcapital.co, that's cloudcapital.co, and find out how much you could save. Every decision a company makes is inherently a financial decision. Folks, I've been trying to tell you that for 300 episodes. So it's wild that most finance teams have to spend a week on what already happened. While my favorite movie is Back to the Future, we'd be living in the past. Speaking of movies, here's a terrible plot. Tired accountant chases down a receipt from March and then polices a$20 Anthropics subscription starring the accountant Ben Affleck. So stop living it. You don't have to play defense on what already happened if you get your system sorted.

37:35And Brex's intelligent finance platform clears the backward-looking work. Policy enforced at the point of sale, receipts matched instantly, closed short into days, not weeks. What's left is the forward-looking part. Where to deploy capital, how fast you can move, what next quarter actually needs. Because the defense is handled by Brex. It's time for finance to go play offense. Throw the ball deep! Thousands of companies, including Anthropic, Coinbase, and DoorDash, already run on Brex. Head to brax.com slash metrics to join them. That's brax.com slash metrics. It sounds way more difficult from outside how to forecast accurately a usage-based model, but you actually have more context clues than you would in a SaaS model because there is this binary, did they renew or not?

38:23As you'd expect, we track a lot of things as on our own platform and we use this really powerful capability called Genie is natural language, understanding of structure and unstructured data. So I can go understand and query my business in real time and go understand what's happening and where. That's been a pretty big game changer in terms of how we think about the business. We do collect a lot of data. We have a lot of data in terms of telemetry on these accounts and how they're spending and engaging with us. But then how do you make sense of all these patterns and what are the actions, decisions you take from it?

38:58I think gone are the days where it's annual planning. It's a always be planning mindset. It's you're constantly looking at these signals, constantly looking at, all right, what assumptions did I hold true? Where did things change? And do I need to alter the course in any which way? So do you feel like your job when it comes to annual planning has turned less into this one big boulder and event and more into just working faster and continuously all the time? It is a continuous cycle. And I think because of the fact, you know, AI is like help so much. I was having our data in one place in Databricks with AI, with Genie, these things like I can access to data becomes no longer like the blocker.

39:45I don't need to have a team of people go do an analysis for two weeks on something before we go make a decision. The access to information analytics is like really, really, you know, at your fingertips. How long does it take before you feel like you have a signal that either says, all right, double down because your assumption was right. You could do more or the other way you got it wrong and you need to reverse course. How many data points or how much time do I need to elapse before I feel convicted that we should change course? It's this constant monitoring of signals and being much more real time about it.

40:27It was this market that's just moving so incredibly fast. And I think the days of set a plan in October, November, I'll revisit it the following November. I think those days are just gone. they've been gone for a while, but I think it's even more true in this market with how fast assumptions change and how quickly you can speed up execution based on better intel. Well, Sid, we have this partner of the show. Their name is EY. And they're always asking me, how do you ask better questions? Their slogan, Sid, is ask better questions. And the folks at home are always asking me the question of how AI is changing go-to-market planning.

41:06And so the first question I want to ask you here is traditional capacity planning. We assume that the productivity of one rep can hopefully materially change because of AI. How are you working that into your models? I think you have to plan in scenarios, number one, to go look at different outcomes. But I think it does boil down to what are the jobs to be done of an AE or an SA and go look at like what parts of their role can be augmented and improved with AI. You know, first call decks, you know, account planning, emails. Like I think there's a standard set of like, what are the administrative tasks that take up a large chunk of a rep's day that you can take off their plate?

41:52But then I think you have to look at, are you in a supply or demand constrained type of market? If you're not supply constrained, as you might be in the chip world or in the data center world, there's lots of demand for data and AI, right? And I think you then go look at how do you unleash the productivity of that rep to go after that increasing total addressable market, go broader, deeper, wider with their customers. So less of a binary, you know, you're taking, you know, administrative, maybe rote work off their plate, but you're giving them, helping them repurpose that time to do more higher value added work to go after that demand.

42:38That make sense? It does. And this is where I make a bit of a confession because, and this is pre-AI, whenever I had a gap to close in my capacity model, Sid, say it was 2%, I would just plug that with efficiency gains. I don't know really what was in that. You know what I'm talking about, right? If you know, then you know. I don't really know what was in that nebulous bucket, but I'm like, hey, we got them the new version of Salesforce. They should be able to make more calls. You mean like the blue colored hard-coded sales? Bingo. Yeah. Who put that assumption in there? They don't even put a comment on there and tell you why.

43:10It does have to go back to where do you want that work redirected? The Salesforce has put out a study for, I haven't seen it in a while, but 30 % of a rep's time is in front of customers, right? Where does the other 70 % go? That's scary. Maybe that number is nudged up, but the reality is, how do we give more of that time back to the rep to be customer facing? So you go after the demand that obviously then plays into, if you can tangibly do that, that'll play into your capacity planning and assumptions. But I think you need to see that first and make sure they're able to realize the impact of it.

43:48So many people listening right now are go-to-market leaders. More specifically, they may run sales ops. They may run a deal desk, something like that. Do you think that AI changes their roles fundamentally? I think if you look at, as I was saying before, access to information, I think so much of the ops world ends up being, how do I get access to data in a timely manner, analyze it, get insights out of it, and then either make a decision or take an action. That ends up being the loop. You've now, I think, really truncated the time to insight. So the role then becomes, I think, are you able to pattern match?

44:29Are you able to synthesize, understand how to connect the qualitative data from the field, from customers with ground truth, and then use that to make, you know, move in an agile way. And then think about planning as a much more fluid type of thing where you can bounce back and forth between strategy and execution much more fluidly versus these being like these discrete functions. And that's what's been really interesting about my role where these are combined. I have multi-year strategy, but then planning and comp. So I can't develop a strategy if it can't be executed and I can't pay somebody on it.

45:11So it forces you to really figure out how do you make sure that your assumptions are internally consistent and the plan is executable. If you can play up and down, like go between strategy and execution, back and forth and iterate, I think there's lots of value to that role because you need a lot of judgment. You need a lot of relationship building and what's actually happening out there in the field and with customers. So that side is very important. The other is, I think being deeply technical, I think is, you know, the go-to-market engineer or that type of role that is able to be AI native in terms of how you're accessing insights, developing workflows, automations to make the running of the business a lot more efficient and taking just, you know, calories out of the process.

46:00Like where I think there's less demand, I think that's going to come along the way is if you're just the traditional analyst role of just, you know, spreadsheet jockeying, I think just goes away because what's the value add on top? I think the player coach is back layering. I think the more layers there are between the decision making and like what's happening on the ground, I think it just slows things down. And I think if you can have fewer layers, but people with more rich context that are able to move back and forth between these disciplines of strategy and execution, operational excellence, you just need to be much more hands-on.

46:39I think get your hands dirty, become more technical. Like, you know, I've been on my own, like deep in my technical journey. Like last December, I said, all right, I'm going to take at least 20 % of my holiday break and not eat and sit on the couch. I'm going to go play with AI and go build. And I was like, I can no longer say I'm not technical because you don't need to know I write code. You need to be able to access your own data. You need to be able to analyze your own data and not relegate that. So now I'm like, you know, I've been building on Databricks and building, you know, I built my own health app that brings together a bunch of signals and tells me every morning what I should be doing.

47:24That's been fun. It's just, I think you have to get uncomfortable again. That is such sage advice because I've often been the finance person who stood behind that moniker or excuse of, hey, I'm not technical, but you can't really do that anymore. There's something fun about the build too. and you're starting to learn all sorts of technical concepts that you never thought you'd need to know, but are just interesting. I think it's a different learning curve and it's given me a very, you know, a lot more appreciation for data and the structure of data. And how does that data flow across the enterprise?

47:57I mean, there's a Databricks free edition. Maybe that's my plug here that, you know, anyone could go access. And it's just, you know, it gives you a slice of compute to go play with. One more to end on here. Do you have any hot takes on planning, the process of annual planning, quarterly planning, the speed of it, any hot takes, just how fast things are going here? Instead of thinking of the annual plan as this like operational blueprint that can't be changed, which I think is oftentimes you spend so much time on it. You spend so much energy. It's locked in, man. We can't, no, it's locked. We can't touch it until next year.

48:34I didn't think of it more of as a strategic framework, right and you figure out what the right time frame is for your business but constantly like relitigate the assumptions you're in a monthly business you want to do monthly or quarterly or semi-annually that that depends on the cycle of your business but i think looking at that and saying all right what is fungible and what is not fungible you know something like the comp plan design is something that's a little less fungible after you've kicked off a year and you've issued compliments out. No one likes receiving multiple compliments. Nobody, right?

49:06You want to know how you're getting paid, how you're getting measured, and you're off to the races. The headcount envelope, maybe you could certainly play with that, but it's, you know, when you start to look at capacity allocation, that becomes a bit more of a annual exercise because it ties into your long-range plan and there's other implications to that. It doesn't mean it can't change, but just where is it most tangible? I would say things like, did you get territory construction wrong, quotas wrong, right? So there's targets and then there's quotas, right? How are you paying and sent in the field?

49:38Did you get something wrong around productivity assumptions or what the uplift in a market was going to look like? Have a point of view going into the year on, if you did get these wrong, what are your levers to go address it? And I think having that plan going in allows you to be way more agile. Shifting from annual planning to like agile planning or continuous planning is how I would really sort of reframe the way to think about it. This has been a blast, man. You always impress me with your depth of knowledge on planning and the go-to-market process. So thanks for being generous with your time.

50:13No, thanks for having me back. It's been fun. Run the Numbers is a mostly media production. Yelling an intro by Fat Joe. Artwork by Meg D 'Alessandro. Nothing said on this podcast is intended to be business or investment advice. It's the sole opinion of me, a guy who feeds his dog way too much ice cream and has a history of net operating losses, LOL. If you like this podcast, hit subscribe and give us five stars. It will take like two seconds and our algorithm overlords love it. Drink water, call your mom and have a great day. Peace.