Veeva vs IQVIA, SDI Group, Rightmove, Watsco, FERG, Core & Main, Evotec, Dynatrace, Jamf

Published Last Week

1. Veeva Compass and OpenData vs IQVIA

2. SDI Group: Challenges and Risks in the Acquirer Model

3. Rightmove vs Zoopla Software: Sales & Lettings User Journey

4. Watsco, Ferguson: HVAC OEM-Distributor-Contractor Relationship Dynamics

5. Evotec: Business Model, Sales Process & Org Structure

6. Dynatrace: APAC Observability SaaS Market Dynamics

7. Core & Main & Waterworks Distribution: A Supplier's Perspective

8. Jamf & Mobile Device Management Software: Partner Channel & Competition

Veeva Compass and OpenData vs IQVIA

Since COVID, big pharma companies have been restructuring their sales teams. Not only are they cutting headcount, but many are refocusing the sales org from traditional sales reps to more technical, medical sales liaisons:

the medical sales reps who could engage in proper medical conversations found virtual calls quite beneficial. When a doctor set aside 10 or 15 minutes, they could have a very uninterrupted, deep conversation. This has led, post-Covid, to many pharmaceutical companies downsizing their field force. They realized that even when Covid prevented sales reps from visiting doctors in person, there wasn't a significant drop in sales. Many doctors I spoke to enjoyed this because they weren't pestered by five or six sales reps waiting in their waiting room between patients. If you're a top oncologist or cardiologist, you might see reps from Pfizer, Amgen, and Novartis all waiting to see you. It's not like these companies coordinate with each other to take turns. - Former Director at Veeva Systems

This reduction of industry sales FTEs and overall market saturation has pressured Veeva CRM's user-based revenue model and places the emphasis on VEEVs data products to drive future revenue growth.

This interview with a Former Director of Veeva's data products explores the history of VEEVs Data Cloud offering and competition with IQVIA. Veeva's Data Cloud includes many different data sets across Rx, patient, and reference information:

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In 2019, VEEV acquired Crossix for over $400m as the foundation for its data platform. One insight from the interview highlights the fundamental differences between building and selling software vs data products and why VEEV has struggled:

One of the principles that Peter uses in building Veeva, and even when you look at how the businesses are structured within the organization, he avoided complexity in organizational structure with a principle he called autonomy over alignment. He wanted each individual business unit to be able to be profitable, run their own P&Ls, and not have dependencies between the other business lines. That is virtually impossible to do within a data business because you need the data elements from every part of the business to work together. - Former Director at Veeva Systems

The interview goes on to discuss the history of the Crossix acquisition, how VEEV have struggled to build patient data, and the difference in the collection, qualification methods, and overall data quality of VEEV and IQVIA claims and reference data:

Peter's rationale for acquiring Crossix was to compete directly with IQVIA. To me, this seems like a classic case of targeting where the puck was, rather than where it is heading. Historically, IQVIA has been like Peter Gassner's Moby Dick; he has been trying to outperform it for a long time. In his view, he wanted no distractions from building the core product that would enable him to compete with IQVIA. In the traditional pharma retail model, the focus is heavily on new prescriptions, total prescriptions, which doctors are prescribing, and aiding the field sales team in targeting those doctors. That's his core business. However, the market is shifting towards patient data because drugs are no longer just retail; they are specialty drugs. - Former Director at Veeva Systems

SDI Group: Serial Acquirer Case Study

Over the last decade, we've been studying companies that aim to consistently conduct accretive M&A across a range of sectors. This includes companies such as Berkshire, Danaher, and Nordic acquirers like Lagercrantz and Lifco. But these are the success stories. All have compounded at over 20% for decades. We're just as curious, if not even more curious, about how acquirers fail or why they may struggle.

We're currently working on two case studies of this type: SDI Group and Storskogen.

SDI is a UK-based acquirer of niche, SME scientific instrument manufacturers. The company has ~20 operating companies and ~£70m in annual revenue. It’s share price has declined 75% from its 2021 peak and is close to COVID lows.

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We interviewed the Former CFO of SDI, who worked closely with the Former CEO, to understand what lessons to draw from the last 5 years at SDI.

The interview is an interesting read for anyone interested or invested in any acquirer model. We explore what was missing from SDIs M&A Checklist, how to detect management quality, scaling acquisitions, and M&A accounting.

One interesting thought to ponder is just how much these models have benefitted from low rates. It's no surprise we've seen significant goodwill write-downs in the last 18 months as rates have normalised. We previously discussed how this may be a risk for smaller acquirers. The goodwill headroom when rates are 1% is very different when rates are 5-6%. Some acquirers are now testing goodwill with a 20% discount rate. Those acquirers with CGUs of single operating companies have little room for error.

We were in a low cost of capital regime for many years. Every acquisition we made was both cash generative and profit enhancing in the first year. You would immediately see a bump; you paid five million for an acquisition and your market cap went up by five million because your own cost of capital was much less than what you were paying for the acquisition. It's a really good business model to be in when interest rates are low. It's still a fantastic model, but it's just not quite as good as it used to be, and it's more stringent now. - Former CFO of SDI Group

Rightmove vs Zoopla Software: Sales & Lettings User Journey

In 2018, Silverlake acquired Zoopla, the second largest UK property portal behind Rightmove, for over £2bn. Zoopla struggled to compete against RMV in its core property listings business and pivoted to real estate agency software. It now owns ~50% of the estate agency CRM market in the UK. Zoopla has accumulated a large amount of critical data in the hope to 'close the loop' on property transactions to convert more leads for agencies:

The agents use this as their core system to run their business. This means that all the data in there, considering we have five CRMs and about 50% of the home CRM market, the agent CRM market, involves about a million transactions a year. We're talking about half a million of those transactions going through our software. So, half a million or 50% of the home transactions are completely visible to Zoopla's software. It's incredibly powerful because think of the cross-sell opportunity, the upsell, the data insight, how many home sales collapse. - Former Director at Zoopla

However, Zoopla hasn't managed to integrate its listings and CRM business to drive higher value buyer and seller leads:

The challenge and frustration was that the two businesses never aligned on priorities. We had different priorities and never brought them together to make them the next most important thing. There's a missed opportunity with this closed loop. The closed loop involves having the marketplace and software. The opportunity we never took advantage of was bringing them really close together and sharing that data between them to massively amplify the information the agent has and help the agent spend their time in the most effective way possible. - Former Director at Zoopla

OnTheMarket is also offering new agency customers its CRM for free. RMV is yet to move significantly into software for agencies.

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Although RMV is undefeated in providing the highest volume and value of buyer and seller leads to agencies, it's potentially missing a large and critical piece of the property transaction data which flows through the agency CRM and other parts of their software stack.

The competitive threat to RMV seems to increasingly come from using software as a segue to drive higher quality leads. This interview with a Former Director at Zoopla Software explores the typical agency software stack and how Zoopla and OTM aim to enter the market via software to drive more value to its listings business.

Watsco: HVAC OEM - Distributor - Contractor Relationship

Last week's Watsco customer survey highlighted how influential the contractor is in the HVAC end customer purchase decision:

I would estimate that about 98% of the time, the customer will buy the brand that the salesperson recommends. On the residential side, there are a few instances, about 2% of the time, where people are brand loyal, for example to Trane or Lennox, and they want nothing but that. But 98% of the time, they're going to buy whatever brand the salesman suggests. - HVAC Contractor 1

In this interview, a former President at East Coast Metal Distributors, a subsidiary of Watsco, sheds light on the historical relationship and bargaining power between OEMs, distributors and contractors in the HVAC market.

Evotec: Business Model, Sales Process & Org Structure

We recently published an interview discussing the fundamentals of German CRO Evotec. This interview with a Former BD executive goes deeper on Evotec's business model and the potential tension within management:

it is true that Werner was a different kind of CEO. And this is again my view, I think also that having a new CBO, well, not new, but having CBO Matthias Evers, who was recruited maybe two or three years ago, this generated lots of changes internally as well. So I think there is some sort of confrontation between the vision that Werner wanted to implement and the reality of everyday work at Evotec. I think maybe there's a disconnect. - Former Business Development Executive at Evotec

Dynatrace: APAC Observability SaaS Market Dynamics

When choosing observability SaaS vendors, it seems DevOps teams typically choose Datadog whereas operations or infrastructure teams pick Dynatrace. This difference in customer preference stems from the granularity offered by each solution.

The commercial model of Datadog, along with their module-based approach, presents challenges. Operations teams need to be very alert and focused. They require constant alerts and a high-level view of what's happening with the application and infrastructure. They need to easily identify whether the issue lies with the application or the infrastructure. They aren't concerned with metrics within the app or deeper dives, as they are likely triaging issues. Operations teams just need to know where and what the issue is. Datadog delves too deeply into metrics, which is a problem. In contrast, Dynatrace offers a very user-friendly solution for operations teams. So, it's very easy for operations teams, but for developers, they have to perform many clicks to drill down to what they want to see. However, it's much easier in Datadog for developers to get the answers they need. - Former Country Manager at Dynatrace

In this interview, a former Country Manager at Dynatrace sheds light on the ASEAN observability software market dynamics and how each provider caters differently to customer needs.

Core & Main & Waterworks Distribution: A Supplier's Perspective

Core & Main is the second largest waterworks distributor in the United States, competing mainly with Ferguson. A Former Regional Manager and Current OEM Supplier to Core & Main explains the history of the company and the fundamentals of waterworks distribution:

Distributors have access to pipes that complement their product portfolio. One side benefit for a manufacturer, especially for us with high dollar volume, is that we get paid on time. Distributors, I can almost say universally, are great payers. I don't spend time worrying about distributors not paying us. Contractors, on the other hand, can be notoriously slow on the payment side, requiring us to spend significant time and resources on collections. This is another side benefit of distribution. It's a symbiotic relationship. - Former Regional Manager and Current OEM Supplier to Core & Main

Jamf & Mobile Device Management Software: Partner Channel & Competition

Jamf is the market leader in MDM for Apple devices. Jamf's unit growth is a derivative of iPhone unit growth. A Channel Partner with 20 years experience in the Apple ecosystem discusses how Microsoft are trying to gain foot with Intune:

I know enterprises are looking at Intune, and Apple has always had a deep relationship with Microsoft. Apple's primary goal is to sell devices, so they try to remove barriers to sales. For instance, Intune wasn't respected as a viable solution three years ago. However, Microsoft has significantly developed it, and now it can handle some basic MDM tasks. If Apple has a product that can provide the experience they want for their customers in the enterprise, and considering Microsoft's presence in every enterprise, it makes sense for them to offer that. - Jamf Channel Partner