OpenText CEO: ‘We Had Our First GenAI Wins’
‘We had our first GenAI wins. Not just historical AI wins, but our first GenAI wins. We won a legal tech platform, AI-driven. We won a contract analysis platform, AI-driven. So we’ve been on this journey of announcing a vision around GenAI, listening to customers, building product. Our first GenAI product went into general availability in October,’ says OpenText CEO Mark Barrenechea.
Betting On GenAI
OpenText has been a busy company as of late. The developer of information management technologies has been growing its AI, cloud, application modernization, cybersecurity, and DevOps businesses, and is now an early pioneer in the nascent generation AI, or GenAI, business.
The Waterloo, Ontario-based company early this month reported its first fiscal quarter 2024, which ended September 30, with revenue of $1.43 billion, up over 67 percent year-over-year, based on the strength of its annual recurring revenue which grew to $1.1 billion.
The company also raised its bookings forecast for the second fiscal quarter because of its initial success with GenAI.
OpenText CEO Mark Barrenechea, in a wide-ranging conversation with CRN, said that while the company has been using AI to work with clients for years, GenAI is expected to be the new driver of growth for the foreseeable future.
“We had our first GenAI wins. … We’ve been on this journey of announcing a vision around GenAI, listening to customers, building product,” Barrenechea said. “Our first GenAI product went into general availability in October. Wave two happens in January, wave three happens in April. But we got our first wins, actual wins, actual customer use cases, actual customers gaining enterprise value in GenAI.”
OpenText is investing to maintain and grow the GenAI growth, Barrenechea said. It has introduced what it terms “Aviators,” or GenAI personas, to reflect the different capabilities of the technology based on employees’ tasks. It has also set up its Aviator Lab across three locations to further develop the technology, and has assigned a large number of engineers to developing AI, although Barrenechea declined to specify how much the company has invested in terms of personnel and resources.
OpenText is also continuing to bring all its technologies to the cloud, and engaging channel partners to bring SaaS versions of its key products to clients, he said.
Here’s more of CRN’s conversation with Barrenechea.
We’re the market leader in information management. And information management is the ability to govern, secure, or lock the value of your unstructured data through a variety of processes. So we’re all about following the big data sets inside a company and building platform technologies on those unstructured pieces of data and unlocking value: orders, invoices, employee information, contracts, cases, asset classes, and IT operations management. So you have ERP that kind of manages the transactional side, and then you have the unstructured data more on the experience side that we’re here to manage and unlock the value of.
Earlier this month, OpenText reported its first fiscal quarter 2024 results. What were the highlights?
We just announced our Q1, start to the year, and we’re off to a great start. It was our record Q1. It was our best Q1 in the history of the company. $1.43 billion in revenues. Adjusted EBITDA margins 35 percent. Our cloud grew 11. We grow organically as a company. And we’re on track as well to grow Micro Focus organically. And we raised our bookings forecast to 20 percent in Q2, driven by our first expected first AI wins. So we’re looking to see our bookings actually in Q2 grow 20 percent year-over-year.
Editor’s note: OpenText early this year acquired Micro Focus, a provider of automated enterprise DevOps, hybrid IT management, and cyber resilience technology, in a $5.8-billion deal.
You just mentioned your cloud. Does OpenText have its own cloud that it provides customers, or do you mean the company’s own cloud business?
I mean our business clouds. Now some of them run our infrastructure. Some run in hyperscalers. So I meant our cloud business, to use your vernacular. We leverage hyperscalers in some places. And in some places, we have our own infrastructure. So for example, the OpenText Business Network Cloud runs on our infrastructure. It runs completely in the OpenText Cloud. It’s highly communication sensitive. We literally have over 2 million redundancy points around the world for our CPaaS (communications platform as a service).
You also just mentioned OpenText’s first AI wins. Talk about that. What is OpenText doing in AI? And what exactly do you mean by your first wins?
If you go to the OpenText.ai website, you’ll see our history of innovation out there. And we have what would be traditionally considered AI wins, complex event engines, natural language processing vectorization technologies. So we’ve had wins in the past. And it’s actually about 5 percent of our business.
With GenAI, we’ve introduced our first products called Aviators. The way we present it to customers is, we’ve helped you build the claims analyst, we’ve helped you build the tech support analyst, we’ve helped you build the HR business partner. Now we want to help you build the AI persona for each one of those. And so our Aviators complement our automation. We also have our OpenText Thrust API services, which are AI-driven. And we have our new search product that is AI-driven.
We had our first GenAI wins. Not just historical AI wins, but our first GenAI wins. We won a legal tech platform, AI-driven. We won a contract analysis platform, AI-driven. So we’ve been on this journey of announcing a vision around GenAI, listening to customers, building product. Our first GenAI product went into general availability in October. Wave two happens in January, wave three happens in April. But we got our first wins, actual wins, actual customer use cases, actual customers gaining enterprise value in GenAI.
What kind of investments has OpenText made to build its GenAI business? And what kinds of investments do you expect going forward?
The first is on the product side. We’ve reprioritized some capabilities, and we’ve communicated externally that we’re bringing our R&D investment up to 16 percent of revenues. So for this fiscal year, we’re going to invest up to 16 percent of our revenues into our total R&D. Part of that reprioritization is, we moved on to more AI technology. We also created Aviator Lab and professional services. Also, you can’t find AI talent, so we’re gonna grow our own. We’re very good at training our incredible talent in new things. We have all these courses that are going on internally to raise our AI IQ, if you will, inside the companies. So we’ve reprioritized hundreds of developers, we’ve upped our R&D investment to 16 percent, we’ve created Aviator Labs, and we got our first set of products out in the market.
Is Aviator Lab a single physical location, or is it scattered throughout the entire company?
I wouldn’t say scattered. It’s Montreal, it’s Waterloo, and it’s Gaithersburg (Md.). So it’s really three places.
And what’s the dollar investment that you’ve made in building GenAI capabilities?
We haven’t published a number. All we are talking about is up to 16 percent of our revenues going to R&D, and reprioritizing a significant amount of engineers, but we haven’t come out with a total headline number for AI.
You said AI has introduced wave one of AI this year, with waves two and three coming next year. Can you talk a little bit about that?
We published a roadmap [last month] at OpenText World. For our phase one aviators, half are available in October, and half will be available in January. And we release software every 90 days. So we have very short turning radiuses for our engineering cycles. We went to 90-day engineering cycles about three years ago. Very difficult to do actually, to get 8,000 engineers coordinated to release software every 90 days. So our Content Aviator, our Developer Aviator, and our Experience Aviator were released in October. We’ll have our Business Network Aviator, our Technical Assist Aviator, our Search Aviator, and our IoT Aviator available in January. In April, we will be very focused on decision support field workflow. So that’s the next big piece of capability where we’re elevating our rules engine and our complex event engine to actually start to make choices for you, given its parameters.
Your term ‘aviator.’ Is there a more generic term?
That’s our brand. OpenText Aviators. So you’ll have the human form, and you’ll have the AI Aviator persona. But OpenText Aviators are a brand.
But what exactly is an aviator?
Someone who’s going to sit next to you and augment your work. It’s going to help you navigate. We did a fantastic demo at OpenText World about a month ago. We showed what a typical insurance claims manager does with the world’s best automation from OpenText. We then applied Content Aviator, to work with the claims manager. And what would take two weeks in processing an insurance claim, we got it down to 10 minutes. It was, ‘Find me all the history. Find me similar claims. Find me risk adjustment analysis. Find me settlement analysis. Help me draft a settlement letter. Help explore the terms and conditions of a contract.’ And we showed the contrast of work using incredible automation and work augmented with AI, or in this case, an OpenText Content Aviator.
Sounds like AI is a big strategic initiative for OpenText going forward. As we move into 2024, what are some other major initiatives the company is working on?
We weren’t born SaaS. We were reborn SaaS, but we weren’t born SaaS. Now we have SaaS equivalents for all the major components in our portfolio. We’re gonna keep protecting and investing in our off-cloud products and our customer off-cloud investments. But as customers modernize their infrastructures, as they look to be even more secure and to get more capabilities, we’re here to migrate them to SaaS. We’re here to have them run hybrid, to introduce new use cases with SaaS. So SaaS is top of the stack. AI is top of the stack. Also security. Those would be the three big things as we head into calendar 2024.
What kind of initiatives are you look at in security?
In integrating Micro Focus, we got three incredible pieces of technology. One is the historical piece called NetIQ around identity management, elevating users and identity across everything we’re doing. We’re embedding NetIQ everywhere across the portfolio. And there’s a lot that goes with identities, usage patterns, multi-level authentication, auditing, rules-based. It’s just an incredible suite of identity capabilities. The second piece is OpenText Voltage. As all transactions float over the Internet, Voltage provides world-class encryption, whether you’re moving contracts, IP, formulas, or plans to nuclear power plants, and how you really secure and tokenize information. Third is, as more work moves to the edge, we have some real incredible edge security technologies.
So those are the three things needed to get the most secure content management, the most secure digital operations, the most secure business network, the most secure writing of developer code. We think that security and trust remain really important.
So for anyone who did not attend last month’s OpenText World, what did they miss?
In addition to our greater scale and our expanded mission, we announced that we architected our partner programs, and announced OpenText Partner Network, or OPN. And we talked about how we can’t be the best version of ourselves without continuing to embrace the partner community. We all want to be the best version of ourselves. So we went through the strategic initiatives in our partner network. We talked first about segmentation, of how we think about our strategic partners, our delivery partners, our VARs, and then our resellers.
Embedded IP is really important. Our platform is now open through our all our Thrust [API] services. Everything we do as engines, we now make available via RESTful services. So we’re also going to be an API company. We’ve published over 20 services that are fully consumable now to any third party in the world. So we want to embrace partners: new companies building new technology and embedding our content management, security, tokenization, CPaaS. All these things are incredible services now to this whole information management, lifecycle and governance.
And we also spent a lot of time talking about cloud. We for the first time opened up the reselling of SaaS into the OpenText Partner Network. We had over 500 partners there, and an amazing amount of energy.
What part of OpenText’s business goes through indirect channels?
The vast majority of the company is available to indirect channels. As we’ve scaled to our 25,000 colleagues, as we’ve defined the information management market, we think it’s a singular powerful concept as enterprises and medium sized businesses keep growing and growing their datasets. What makes great AI is great information management, in our perspective. As we talk about OpenText’s role, we have a whole new, well-defined, go-to-market architecture at our top 100 global accounts. So we’re investing way at the top of the pyramid with GAM program, our global account managers, our strategic accounts. The next part of that pyramid is the global 10,000. And we got full coverage now to the global 10,000. And that is a rare, rare franchise in software.
And when you say ‘full coverage,’ do you mean by OpenText or partners?
Our company directly assigns the global 10,000 to our salesforce. The next segment are medium-sized accounts, and we have about 45,000 of those. And then we have smaller businesses, and our technology also reaches to the home. So everything is available to a partner. Everything. We’re all about customer choice at the top of the pyramid. And in the middle of that, we’re partner preferred, if you will. But everything’s available to a partner.
Anything else we need to know about OpenText?
We can’t be our best version of ourselves without the partners CRN communicates with. We’ve put a lot of thought into our new OpenText Partner Network. We’re a very good listening company. And we want to help our partners thrive in the world of SaaS, cloud, and AI. And we look forward to embracing those partners deeply.