Tacton is one of the leading CPQ vendors. It is also one of the few independent vendors that have not acquired or been acquired in recent months. Enterprise Times spoke to Bo Gyldenvang, CEO at Tacton for just over a year. We asked him initially to describe what Tacton is all about.
“Tacton is a Swedish CPQ, SaaS solution provider, with 250 employees in the US, Europe and Japan. It has 24 years of history, only focusing on CPQ for complex manufacturing. That will be approximately 5000 of the largest manufacturers globally. “
What’s your vision for Tacton
“Our official mission statement is that we want to have manufacturers shape and build the future. I truly believe that we can help manufacturers shape and build the future, especially with some of the trends that are happening right now. What is becoming more and more important for our customers is being able to document, explain and optimise how you produce in a sustainable way. That is where we help when it becomes complex. My 2025 mission is we’re going to be a growing, profitable company but we’re also going to be here for a higher purpose.”
Since you joined Tacton what steps have you taken to enable that vision?
“Sustainability wasn’t really on the agenda when I started a year ago. I’ve joined a lot of other groups and read a lot about it. We all feel some of the change that’s happening right now. What I have done is pitched it internally and tried to explain to my colleagues how important it is. I explained how we can make a difference and why we should make a difference.
“I’m also bringing in experts from the outside. Both from our customers, but also external people, people that speak with the European Union about their guidance, about how they should set regulations and guidance for our customers. These are the individuals that I’m working with, to make sure that we do the right things to support our customers in the future and that we actually can make a difference.”
Sharing that vision
It seems like you are trying to understand what is around the corner for your customers?
“That’s what I’m trying to be, yeah. We see ourselves as visionary. We have been in this market for 24 years and are recognised as one of, if not the best in complex manufacturing. When it really becomes complex we are the ones that companies turn to. If we want to stay here, we have to be ahead of the curve.
“We need to come to our customers and say, sustainability, this is what from a CPQ perspective, how you can make a difference. That’s what I want to do. I truly believe if our customers don’t go this direction, if they don’t start to think this way, they will be out of business. At some point of time in the near future, this is going to be if not just as important, maybe even more important than price and TCO.”
What is interesting about Gyldenvang’s perspective is that his vision aims to bring the customers along. He is finding solutions to a vision that is global, and one those major manufacturers must also adopt in part.
Tacton is more than CPQ
What do you want Tacton to be famous for?
“First of all, I want us to be famous for adding a tremendous amount of value to our customers. But a lot of companies are famous for that because there are a lot of great companies out there that provide a tremendous amount of value to customers. We have done that for years.
“What I want us to be famous for is when we speak with our customers, we both advise them and challenge them, for them to be able to shape the future, for them to be able to make a difference They may not necessarily always go with what we think is the right solution. They are not afraid of telling us if we are wrong. That’s what I want us to be famous for. By being able to do that we can also influence the right decisions. I say to my colleagues that I want us to be the McKinsey for CPQ.”
The ERP partnerships that Tacton has are generally with the larger ERP vendors, SAP, Oracle, Microsoft but these often have their own CPQ solutions. Does that create a coopetitive relationship, how does it work?
“Where we end up is we have very good integrations to all these platforms, but there is a little bit of separation happening in the market now where you see companies building platforms. We end up competing against best of three versus best of breed.
“I have seen a lot of consolidation. Many of our biggest competitors have been acquired, which is nice for us because we actually hear from customers that there’s a lot of uncertainty with these providers. So we go with you because you know where you are.
“Revalize just bought another CPU provider in the Netherlands, Sofon. They ended up with seven or eight companies within revenue optimization in manufacturing. They are going to build a platform as well. That’s fine. Where we want to position ourselves is that if you want the best of breed in CRM, in ERP, in PLM, in CPQ we want to be the CPQ player.
“If you want best of suite then we are not the one. If you go best of suite, you will end up with a very nice suite that can do everything. But you will not have the 100% best solution in all the areas. If you are okay with that you should go with SAP. If you want the best and integrate these platforms, you should look at CPQ, and that’s where we want to chip in. That’s where we think we have a uniqueness.”
“The trend we see in manufacturing where we are investing a lot of resources right now is the whole subscription, pricing and configuration. Just like software, instead of selling perpetual, they want to sell as a subscription. That requires a different configuration, different pricing, different quoting, different aftermarket. We have increased our R&A capacity by 50% since I started, simply to speed up the roadmap.
“Subscription management and pricing are one of the key development areas in our roadmap. We can see that’s a trend that is here to stay in manufacturing, If you take Rolls Royce, for example, they sell their engines by the hour, they don’t sell a number of engines. Many of them are not there yet. But it will go that direction, it’s a different business model. It’s much more healthy, more predictable. You will see manufacturers going there as well. We are already there with our solution and we are going to extend that functionality.”
What have you achieved this year?
“From a company perspective, we have gone through this transformation from being an on-premise into a SaaS solution. That’s an expensive transformation where you invest a lot in R&D.”
That transition has seen Tacton return to profitability as cloud revenues grew and perpetual fell. It took longer than expected. Gyldenvang helped complete the transition to profitability, something he is proud of. He concluded, “We are now profitable, we are growing our EBITDA as expected. Our annual recurring revenue is growing double the market growth, approximately 35%.”
That transition has had an impact on Tacton’s channel as Gyldenvang explains.
“Going into a SaaS model is tough for the channel because suddenly they need to deliver differently. Five years ago, Capgemini was a huge partner of Tacton. The Capgemini business on Tacton alone was larger than Tacton. That tells us a little bit about how much partner revenue that you could sit on if you work with our solutions.
“The SaaS standard product has a much faster implementation. That changed the partner model. Over the last four years, we have become extremely direct with a direct sales force and direct account management. We have still had resellers and smaller partners. It’s more boutique partners but we haven’t had these global partners that have been able to invest in us.
“What you’re going to see next year is we will start to invest in that channel. We are simply getting more customers in right now than we can cope with ourselves. So, we are building a system integrator network of partners right now that’s going to help us implement this. Right now we are very direct. In the next six to 12 months, you’re going to see a heavy increase in our indirect business.”
On the future
While funding is off the cards, in 2022 GRO Capital and KIRK KAPITAL, the investment companies that acquired Tacton in 2017, may look to exit and hand the company to another investor after five years in charge.
What do you hope to achieve in the next six to 12 months?
“I need to have our messaging very, very clear around our different cases, and about sustainability. If I’m looking from the outside, that’s where we need to be more clear in our profile. We just signed up a new CMO. Her job is to secure that communication. Of course, I want us to finish the year, as predicted, and I want to have a very strong start to 2022.”
What are your challenges?
“My key challenge right now is to secure enough capacity to implement the projects we have in the pipeline. When I started it was pipeline, new customers, new logos, and get them on board. Right now we are not at a critical stage. But I can very well see within the next 3,6, 9 months. If I don’t really start to ramp up now both on our own consultants, but also on the partner network, I will end up having too long a delivery time to our customers. That’s not sustainable for a growth company like ours.”
What’re your customers challenge?
“They have multiple actually but the whole pandemic has pushed a lot of our customers into much more eCommerce, much more online selling. That speaks to CPQ and that’s an area where we play. They need to reach more customers, online, faster.
“Then another general challenge is that when they quote, they make errors. That’s something a lot of customers are not documenting. The error rate, when configuring a product is so high in many companies that they end up selling products that they don’t make any money on. These are the two biggest challenges that our customers sit with. That’s the reason why they buy CPQ.
“You also see digital transformation is becoming a bigger agenda in manufacturing as well. Digital transformation is probably the most used word within the IT industry at least for the last 5-10 years. But it is coming into manufacturing as well now. They have to digitalize their go to market. That’s becoming much more important for many of them. Then, the customers don’t know it yet, sustainability will be probably the biggest challenge for manufacturers very soon.”
Solving the challenge of Sustainability
If sustainability is becoming more important will CPQ need a greater understanding of the supply chain?
“Whenever you’re going to sell a product going forward, you have to be able to document your impact, your carbon emissions on that product and your ESG number. With manufacturing, probably 80 to 85% of the components in many of these products that they configure, are delivered by subcontractors or sub-suppliers. That doesn’t take the responsibility away from the manufacturer to document what are they actually putting into their products and how has it’s been produced.
“That is going to be an important factor when you are configuring going forward to be able to have access to data from your suppliers from the supply chain backwards. Just being able to manage that data and use that, is going to be a challenge in itself. That’s something that we’re working on a lot. How to build that into the reporting going forward. It is still a challenge to be resolved.
“Then you also have the forward-looking supply chain where you have to go through resellers and dealers, before you get to the end customers.”
Gyldenvang also argues that companies will need to consider more carefully where components are manufactured and the impact of transporting them on sustainability. He cited the example of a UK car manufacturer whose engines crossed the UK border seven times before being installed in a car.
The book question
What’s the latest book you read? And what was your takeout for business from it?
“The latest book I read was The Qualified sales leader, by John McMahon (Amazon Aus, UK, US). That’s mainly because I used to work with John McMahon. It is a Sales methodology. It’s how you shape up a sales organisation. I liked it because I like John. I just finished that on the way home and the plane last night.”