Process mining 2.0: Celonis's promise of enterprise efficiency

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The Big Story

The age of process mining?

It's an era of seemingly limitless cash for software companies. Celonis is no exception. The company, which helps businesses optimize their workflows, announced a $1 billion round, a head-turning amount for a concept that is over two decades old and appears to still face a skeptical business audience.

The amount is a strong reflection on Celonis — the company could hit over $400 million in annual recurring revenue this year, according to a Forbes estimate that Celonis doesn't dispute — and a sign that investors like Durable Capital Partners and T. Rowe Price Associates think it has found a new way to make companies more efficient.

Process mining companies analyze common business practices within an organization in order to find bottlenecks or other areas that could be fixed or improved for operational gain.
It's what enterprises pay Accenture and other system integrators the big bucks to do. Historically, consultants would interview employees and pore over documents to piece together the systems and make customizations to pricey software from providers like SAP that promised to help address those problems.
"We could have raised any amount. We could have raised $3 billion," Celonis CEO Alex Rinke told Protocol. "It's a very positive market for SaaS and Celonis is a very unique asset in this space."
In theory, process mining is easier to do now, because most processes run digitally. But the application suite has also exploded, which means that customers are using more than just SAP's systems to support finance, HR, supply chain and other verticals.
That makes it harder to get a full view of operations that often span several departments and different programs, and that's the problem Celonis claims it can solve. A simple order-to-invoice, for example, could ultimately touch products from Marketo, Oracle, Salesforce and several other vendors.
It's one reason why integration-as-a-service upstarts like Zapier and Workato are seeing so much traction. Those providers largely focus on specific business processes, such as linking together the various applications that add up to the whole order process.

Celonis's opportunity, according to Rinke, is examining the whole ecosystem of apps to unearth previously unknown inefficiencies. It's part of a new category that Rinke is trying to build with Celonis called "execution management."

The company's backstory is borderline unbelievable. Rinke said the founders discovered the 20-year-old tech behind its service in a book in the "dusty section of the math library." That stroke of luck is now paying off.
"We have customers that have processes that run over 100 systems connected to Celonis," said Rinke. "I don't think there is anyone else that can really claim that today."
The company is also assembling an impressive executive team. Alongside former Salesforce execs Miguel Milano and Arsenio Otero, Celonis just hired former Google exec Carlos Kirjner as its CFO.
And it's striking notable partnerships with PwC, IBM, Siemens and others.

But is Celonis pioneering a new market? Rinke may have claimed so, but there are many companies promising the same capabilities.

Most notably, SAP acquired Celonis rival Signavio earlier this year. And while SAP is struggling to convince some customers to move to the cloud, it has a dedicated base of users who continue to run the bulk of their operations on SAP systems.
So as the software giant continues to partner with other SaaS vendors, it is building lots of integrations with other SaaS applications, which could allow it to serve the same function as Celonis. That scenario, however, is far from reality and will require substantial work on SAP's part. (SAP and Celonis actually have a pretty complicated backstory, including partnering back in 2016.)
But there are other providers trying to tackle this in more traditional ways. Salesforce, Microsoft and other behemoths are expanding their industry-specific product lines to try to get more customers to abandon the "best of breed" model and consolidate around their products.
All those systems would likely already be linked on the back end, which would theoretically give companies the ability to pinpoint the bottlenecks that Celonis uncovers more easily.
And then there's ServiceNow, which is also growing outside its historical core IT focus. The company's tech sits above the core application layer, which means it can draw insights about how different programs are used across the enterprise.
While it is still used mostly by IT managers, it's easy to see why ServiceNow could see an opportunity in "process mining" as it moves horizontally across the enterprise. It also knows Celonis well; the two firms partnered in 2018.

Process mining often gets looped in with robotic process automation, another tech that seemingly came out of nowhere and is now all the rage among investors, despite confusion among many end users.

"RPA is a transient technology; I don't think the idea of plugging a robot onto people's desktop is ultimately how processes should get automated and work in the enterprise," said Rinke.
Regardless of his feelings, RPA appears to be here to stay for the foreseeable future. And that means the onus is now on Celonis, UiPath and others to not only persuade executives that their approach is better, but to also spend hundreds of thousands of dollars, if not millions, to deploy it.
That becomes more challenging in an age when countless vendors promise a pie-in-the-sky world of a connected enterprise where one system can serve as the all-important "source of truth."

Whenever any company raises $1 billion, there are bound to be more competitors on the way. But Celonis has the first-mover advantage and a fat balance sheet on its side. It looks like process mining has arrived.

— Joe Williams

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Coming Up

June 21: Pride Summit, hosted by Lesbians Who Tech & Allies, kicks off.

June 22: Larry Ellison is slated to give an update on Oracle's cloud ambitions. PagerDuty Summit starts and runs through Friday.

June 24: Microsoft unveils its big update to Windows.

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