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Packaging AI for Multiple Industries is a Play
C3.ai and DataRobot have something in common: both are packaging AI software functions into suites that offer to speed adoption for customers.
Packaged software is a bundled set of features long-established as products in the software industry; today, entrepreneurs see opportunity in packaging commercial and industrial AI applications. (Image by OpenClipart-Vectors from Pixabay.)
By John P. Desmond, Editor, AI in Business
Packaged software is software that can be resold to different customers in largely the same configuration. In earlier days, the software was usually installed on hardware at the customer’s site, and could be renewed each year for a percentage of the original purchase price, often 10 percent. Today, most software is sold as a service for a subscription price, and is accessed via a cloud platform.
Human resources and sales automation have historically been a target for software packages, since the functions tend to be fairly static and can be grouped together.
Thomas Siebel, the founder, CEO and chairman of C3.ai, is a serial entrepreneur in the software industry. AI is the new territory. He attended the University of Illinois at Urbana-Champaign, majored in history as an undergrad, then earned a graduate degree in computer science. He cut his teeth in the software industry working at Oracle from 1984 to 1990. He founded Siebel Systems in 1993, offering packages of sales automation, human resources and customer relationship management functions.
In September 2005, Oracle announced plans to acquire Siebel Systems for $5.85 billion, to further its own strategy of dominating sales automation software. Oracle had recently completed the acquisition of PeopleSoft, another HR package software supplier, for $10.3 billion. Larry Ellison, then and still today the chairman of Oracle, stated to the New York Times then that the purchase of Siebel “moves us closer to our goal of being number one in applications globally.”
Siebel founded C3.ai in 2009, to provide an AI software platform and applications for multiple commercial uses -- essentially the packaged software formula updated with AI. The company’s original applications focused on energy management, predictive maintenance, fraud detection and predictive CRM. C3.ai achieved a valuation of $2.1 billion in 2019. The company’s current market cap is some $5.15 billion.
For C3.ai today, subscription revenue represents 90 percent of its total revenue, according to a recent account in Seeking Alpha.
Seibel took C3.ai public in December 2020. Asked how he does it in an interview in Barron’s at that time, Seibel stated, “To the extent I have any expertise, it’s in building and operating software companies.” He added, “The big picture is we have a huge addressable market, and the investment community recognizes there is a huge market in commercial and industrial AI applications. We’re looking at a $250 billion addressable software market—that’s bigger than a bread box.”
He said the company spent 10 years building out the C3.ai suite, representing 1,000 man-years of software engineering work.
The line between packaged software and cloud offerings, such as from Google and Microsoft, is getting fuzzed up. But C3.ai has agreements in place with both Microsoft and Google, enabling lots of co-selling opportunities. The company today has just under 100 customers, is not yet profitable and continues to invest in R&D, which the author of the Seeking Alpha account sees as likely to lead to continued revenue growth. Siebel recently sold $29 million in stock, leaving him with lots left.
Asked by Barron’s about competition, Seibel mentioned a number of companies, including DataRobot, that he says provide a part of the solution that CIOs trying to build their own systems may employ. He characterized DataRobot as having automated machine learning, which he called “a feature: in the context of his product.
“If Shell wants to use DataRobot instead of our auto ML capability, God bless them, it’s fine,” he said, adding, “They don’t have to lose for me to win.”
DataRobot’s AI Cloud for Industries is an AI Package Play
DataRobot, for its part, is extending its capability. The company recently announced DataRobot AI Cloud for Industries, a move to expand AI capabilities to target more industries.
DataRobot was founded in 2012 in Boston by Jeremy Achin and Tom de Godoy, both graduates of UMass Lowell who both worked at Travelers Insurance in Hartford, doing data modeling.
DataRobot offers a subscription-based enterprise automated machine learning platform that incorporates a library of hundreds of open-source machine learning algorithms. The DataRobot platform automates, trains and evaluates predictive models in parallel, which is said to offer more accurate predictions at scale.
DataRobot has customers in manufacturing, banking, healthcare and retail organizations. AI Cloud for Manufacturing was included in the latest package announcement, as offering enhanced supply chain and inventory forecasting, preventive maintenance and quality assurance.
“We needed a tool that could help us navigate through a rapidly changing business landscape,” stated Aleksandar Lazarevic, VP of Advanced Analytics & Data Engineering at Stanley Black & Decker, in a press release. “Since implementing DataRobot AI Cloud for Manufacturing, we are utilizing time-series forecasting to better predict demand from our customers and take corrective action with logistics disruptions.”
Other customers include United Airlines and Deloitte. The company reported its annual recurring revenue was over $100 million last year, picking up during the pandemic, according to a report in Reuters, which added that the company’s valuation was $2.7 billion last fall..
In a management shakeup in the spring, both founders left the company. Achin will focus on “making major contributions to all matters of national security,” according to the Reuters report, and de Godoy started a new company, CaspianDB. Dan Wright, who joined the company as president in January 2020, took over as CEO. DataRobot has raised over $1 billion in capital to date, according to Crunchbase.
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