Dynatrace: APAC Observability SaaS Market Dynamics

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What do the partners bring to Dynatrace in this region? Is it just these customer relationships, or is there something else they are doing for Dynatrace?

Yes, a lot of things. Historically, all these partners that Dynatrace works with now are very old partners. Let's go back to when Dynatrace was not the current Dynatrace but the older solution, like AppMon and DC RUM, and network monitoring, and Keynote. These partners would do a lot of other stuff. They were Cisco partners, they deployed networks, they had Symantec, they had Microsoft products, and they had a very strong relationship with the customers. Not only that, in ASEAN or in Asia, including Taiwan and other regions like Korea and Japan, they understood how procurement works. They had a very strong relationship at the backend, which these partners brought to the table, which helped Dynatrace to close and expedite the deals.

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Yes, exactly. Their top-line growth rates have slowed to what seems to be the teens in the coming year, as opposed to the 30% to 40% growth they achieved in some cases over the past couple of years. Is this just due to macroeconomic factors, or is there something else competitively going on?

Let me give you an example. Three years ago, just before Covid, for the Account Executive, the quota retirement was based on TCV, Total Contract Value. If a total contract value is, say, 1.5 or three million, depending on the quota, then you qualify and that's your number, and you get compensated accordingly. Now, some of the deals, especially when you're working with banks, telcos, or the government, the average sales cycles in the region are a minimum of nine months, typically ranging from six to nine months. When you have a lot of things in the pipeline because of the past budget and you've put in the year before, changing the plan all of a sudden on April 1 impacts everyone. That was one issue. Then you change your mindset, and then you change again and say, "Okay, let's start now and then next year we will build on that." Even if I lose my quota, even if I miss my number this year, I'll build up on it for next year. And then the following year, they switch back to ACV from TCV. This has happened quite often, leading to inconsistency for the salespeople as well.

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