Your company may benefit greatly from the presence of clouds. If you can make it work for you, and that’s a huge if. Businesses like Cloudify, which offers an open source B2B e-commerce platform, may help with this. With the addition of ServiceNow IT Operations Management (ITOM) to the Cloudify infrastructure automation platform, you can make it even more powerful.
Orders, pricing, products, and stock data can all be seamlessly integrated with a wide variety of ERP systems, including SAP, NetSuite, and Microsoft Dynamics, with the help of Cloudify. Warehouse and accounting back office systems may also be used. The usage of plugins enables you to extend the functionality of your current toolchains such as Jenkins, Terraform and Ansible. Together, they form the “Ecosystem As A Service” offered by Cloudify (EaaS). Founder and CTO Nati Shalom of Cloudify views EaaS as the future of DevOps. When it comes to driving innovation and simplifying dispersed systems, Shalom stated, “it’s all about how to do it.”
When it comes to running apps across several cloud or data centre platforms, EaaS promises to be able to orchestrate and automate the whole process.
The Cloudify platform has extended its scope one again today. Purchase it from the ServiceNow Store right now. With Cloudify and ITOM, you can cooperate with your development team to automatically correct your cloud resource settings.
This is accomplished via the use of ServiceNow Cloud Configuration Governance to verify resources (CCG).
Remedial action is then triggered. Cloudify then takes care of this for you. ServiceNow or CI/CD pipelines are used to complete the last step of the deployment process.
Customers may “enjoy a self-service experience required to fast set up and take down dev/test environments, as well as simplifying change management of production systems,” according to the business.
In order to create, share, and manage cloud and multi-cloud work environments for your cloud developers, this pair provides the tools you need. Daily, the Now Platform serves as a vehicle for process automation. Day 2 management and environment setup are also taken care of by Cloudify.
With the help of Cloudify and ITOM, businesses can streamline the provisioning and administration of multi-cloud infrastructure installations by collaborating between their DevOps and IT teams.
According to Cloudify, the ServiceNow integration makes it simpler to:
As a consequence, what happened? In a news statement, ServiceNow’s ITOM VP and GM Brian Emerson noted, “Developers are constantly being expected to move quicker and bring new features into production rapidly.” As a result, they will be able to meet demand. DevOps can now manage diverse cloud environments at scale while complying with IT standards, according to Cloudify CEO Ariel Dan.” Finally, “an company may manage end-customer environments and internal Dev/QA/Production environments more effectively,” as a result.
And, after all, isn’t it your ultimate objective to better manage and use your company’s cloud and its resources? Yes, that’s what I’m thinking.
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Technology leader and co-founder of Opkey — a continuous testing platform redefining test automation for web, mobile and ERP applications.
Many business and technology leaders realize that their digital transformation initiatives can’t be utilized without modernizing their enterprise resource planning (ERP) software. Incorporating new technologies such as artificial intelligence and machine learning is essential to modernizing ERP solutions.
Through a 2019 study of ERP migration and transformation projects, McKinsey revealed that two-thirds of enterprises did not get the ROI they were looking for from their migration project. The common reasons for this dissatisfaction are delays in ERP implementations and misaligned project goals. Intelligent test automation, which powers a continuous testing approach, will help ERP transformation projects run on time and stay within budget.
Continuous testing for ERP applications: Why do you need it?
Next-gen ERPs and digital operations platforms require innovative software to be released rapidly, with minimal business risk. Leading analysts from Gartner, Forrester (paywall) and IDC (registration required) now recognize that software testing in its current form cannot handle the challenges posed by ERP applications. These analysts have concluded that software testing must be aligned with DevOps and AgileOps practices to handle giant ERP transformation projects.
The Agile/DevOps approach is incomplete, inefficient and ineffective without continuous testing. In ERP migration projects where platforms are extended to incorporate new features, functionalities and technologies, continuous testing helps you transparently validate the performance of critical business processes. This significantly reduces the risks associated with a new implementation, along with scheduled software updates. By catching bugs early in the development cycle, continuous testing ensures minimal time and budget overruns while providing advantages in risk reduction.
What are the testing challenges of ERP transformations?
According to a report by Bloor (registration required), more than 80% of migration projects ran over budget in 2007. While I have seen that statistic Excellerate over the years, I know migration projects regularly face issues of running over budget and over time. A 2019 ERP report from Panorama Consulting Group (registration required) shows that 45% of respondents had an average budget overrun of 30%.
Here are some specific testing challenges.
• Unclear Testing Scope: Determining what to test remains a major challenge for QA teams. The business risk grows every time too little testing is done. If you test too much, it wastes the time and resources of your business users.
• Inadequate Test Coverage: There are many moving parts in any ERP migration project. Functional and nonfunctional attributes get added, updated or removed with these migrations. Testing needs to pass various stages, from a unit test to a volume test, and eventually a mock go-live cutover.
• Change Frequency: In a latest Deloitte CIO survey, almost 45% of respondents reported that managing changes in an ERP project scope is one of the top frustrations in planning their ERP journey (pg. 10).
• Testing Fatigue: ERP projects are long and tedious processes. Using a manual testing methodology for ERP transformations can be inefficient and error-prone. Ask yourself: “Can my business users provide their full effort to testing?”
Continuous testing for ERP applications: How can I make it work?
To incorporate continuous testing for a digital transformation, leaders must utilize automation. Teams should now focus on next-generation automation platforms that allow them to quickly build test cases, automate them and build the infrastructure to run them in a continuous fashion. Let’s review the four pillars of a continuous testing strategy.
• Know your ideal coverage: Here are some questions to ask yourself: “What’s my current test coverage? Am I testing all of our critical processes? If something goes seriously wrong, is it because I didn’t test enough?”
If the test cases you are automating only cover 30% of your core business processes, the automation might not be good enough. Emphasize knowing your ideal coverage and leverage a process mining technology to validate your ideal coverage. Test mining techniques surface your existing test cases, business processes and configurations from your system process log to determine your existing testing baseline.
• Apply continuous test development: Test assets require considerable reworks to keep pace with the frequent ERP changes typical in an accelerated release cycle. This speed cannot be achieved with continuous testing.
• Monitor changes continually: Ask yourself: “What has changed in the most latest ERP quarterly update? What business processes or test cases are going to be impacted?”
Emphasize the importance of knowing whether you are testing what is needed. Before the updates are pushed to production, use automation tools that provide better change visibility to users by alerting them of processes that will be impacted.
• Test execution at scale: Prepare a scalable infrastructure to run thousands of tests on-demand with every change. Opt for a platform that can run your tests continuously on-premises, in the cloud and on mobile seamlessly.
What do you need from a test automation tool?
Three key capabilities must exist in a test automation tool to support an ERP transformation’s continuous testing paradigm.
• Autonomous Configuration Of Tests: Many changes happen at the configuration level for any ERP transformation. Leaders should leverage an automation tool that can autonomously create relevant data sets for test execution.
• Continual Impact Analysis: In the ERP world, updates are rolled out frequently. QA teams can find it difficult to decide the minimum number of test cases that need to be executed to ensure business continuity in post-application updates. AI-based impact analysis recommends a minimum number of test cases that need to be executed based on highlighted risks, keeping business application disruptions at bay.
• Autonomous Self-Healing Tests: QA teams often struggle to continuously maintain test scripts with each new release. Through leveraging AI-powered self-healing capabilities, changes can be identified automatically and test scripts can be fixed autonomously.
Continuous Test Automation: A Summary
The key to successful AgileOps is releasing updates as early and as often as possible.
With enterprise application vendors like Oracle, Microsoft and SAP rolling out updates on a weekly, monthly or quarterly basis, enterprises need to embrace those updates as early as possible. However, supporting your software testing initiatives will only be achieved with the right continuous testing strategy.
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Recent tech vendor earnings calls reveal an emerging challenge for customer CIOs — an increasing number of sales strategies explicitly bypass them.
For instance, on ServiceNow’s 2021 Q2 earnings call, CEO Bill McDermott informed investors, “We have upped our game [with] C-level relationships. Instead of dealing with only the CIO, which is an incredibly important executive to us, we have also created relationship plans across the c-suite.”
Similarly, on Cognizant’s 2020 Q4 earnings call, CEO Brian Humphries touted, “We can show up well beyond the CIO/CTO organization and now engage much more broadly at the c-suite.” Ken Tuchman, CEO of customer solutions provider TTEC Holdings, recently echoed, “More of our conversations are no longer just with CIOs, but they're dramatically shifting to the CEOs and chief marketing officers who are being instructed by their board [to improve] net promoter scores.”
Such proclamations challenge CIO stature and foreshadow possible relegation to implementing systems chosen by other functional leaders. However, if viewed differently, this trend surprisingly hands CIOs long-sought opportunities to increase board visibility, guide strategic decisions and rethink IT budgets.
Managing technology vendors is inherently challenging. Dominant players, such as the large cloud and ERP providers, limit choices and command premium prices. Vendor delivery is often stretched serving many clients simultaneously, while also racing to keep products and services current. Many contracts also impose restrictive covenants with high financial and non-monetary switching costs.
Most of all, vendors indisputably have long-term incentives to entrench their offerings. However, with technology now so central to business models, workflows and data security, it’s customers who ultimately bear the reputational, operational and organizational risks. That’s why CIOs cannot be sidelined from vendor selection.
At a minimum, CIOs who are absent from board-vendor discussions risk being depicted poorly. For instance, on the 2022 Q1 c3.ai investor call, CEO Thomas M. Siebel characterized “IT organizations that build [technologies] in multi-year, multi-hundred million dollar science projects” as “real competitors.” He warned IT’s efforts “come crashing down after a few years. Then we come in and bail them out. It's a natural part of the process and we've got the new technology.”
Boards and c-suites that welcome tech vendors’ direct overtures signal low confidence in their IT organizations. Likewise, CIOs who tolerate such “end-run” forays significantly risk “shadow IT” escalation, diminished credibility, tech talent retention, technical debt bloat and bungled implementation blame.
Alternatively, it is not uncommon to find collaborative sales pitches that still prioritize customer CIO goals and responsibilities. For instance, on Box’s 2022 Q2 earnings call, CEO Aaron Levie explained, “The trends are remarkably consistent across CIO conversations. Every CIO, whether for a 500 person or 500,000 person company is trying to figure out the future of the workforce and workplace. [Businesses] have major vendors that must work together across technologies.”
Ill-advised procurement choices will impair a company’s future. CIOs can avert hasty decisions and inform executive discussions by monitoring current and prospective tech vendors’ investor updates. These regulated disclosures clearly and candidly discuss competitive pressures and sales differentiation.
Such detail can help leaders anticipate sales pitches, better evaluate strategic fit and negotiate more favorable deals. In turn, CIOs reinforce their own strategic role and boost their credibility with boards, c-suite peers and tech teams.
In addition to enhancing c-suite conversations, here are three meaningful leadership actions that CIOs can take to re-purpose vendor sales pitches:
1. Formulate an enterprise-wide technology plan. Vendor successes provide tech leaders ample “best practice” and “pain point” examples to guide strategic investments. However, CEO Dan Adika, on WalkMe’s 2021 Q2 earnings call, points out that despite massive investment, c-suites still face significant hurdles in maximizing tech’s value and effectiveness.
“When I talk to CIOs, the biggest challenge they have is figuring out how their multi-million dollar IT budgets are driving improvement across their businesses. They tell me that their lack of visibility and insight into digital assets and business processes, which makes it very hard for them to extract value from applications, including those that they may not control or even know about,” Adika said.
An enterprise-wide tech plan staves off vendors’ direct selling to non-technology executives, as it provides an agreed-upon central mechanism to screen all IT investments. To gain organization-wide support, CIOs must diligently reinforce how the plan aligns with company strategy, priorities and data needs.
According to CEO Mike Cannon-Brookes, on Atlassian’s 2021 Q1 earnings call, “The CIO’s agenda has never been more aligned with the CEO’s agenda. Fifteen years ago, the CEO and CIO agenda would be marginally overlapping. They now face the same problems - how do I make my workforce productive while we're remote. How do I serve customers in new ways?”
Such challenges are central to successful digital transformation and align perfectly with top-performing IT teams’ expertise and technical competencies. That’s why promoting and implementing a compelling enterprise-wide tech plan that serves cross-functional needs is essential to an IT organization’s reputation.
2. Collaborate with CFOs to rethink IT budgeting. Traditionally, IT finance steering committees set budgets, prioritized projects and oversaw spending, with CIOs cast in unenviable intermediary roles. Zscaler’s CEO Jay Chaudhry argues tech projects are funded faster when boards initiate vendor inquiries.
On Zscaler’s 2021 Q4 earnings call, discussing cybersecurity, Chaudry observed, “First of all, the number of inbound engagement from not just CIO and CISOs, and in many instances, the board have stepped up. When those level of C-level get engaged, the budgets open up, they become less of an issue. When you're dealing with the CIO, whose budget is hundreds of millions of dollars, to [finalize] a few million-dollar deal generally becomes a lot easier.”
Once budgets are allocated, CIOs can leverage vendor experience to accelerate implementation benefits. For instance, on Rimini Street’s 2020 Q3 call, CEO Seth Ravin shared that a client freed “significant IT budget to drive innovation projects and support its corporate initiative to double revenue. [The client] leveraged its savings to help fund five innovation incubator start-ups.”
With compelling examples of how technology drives revenue and frees cash flow, CFOs are more apt to replace IT cost allocations with more strategic financial models. That’s when tech leaders truly become indispensable partners in buying decisions.
3. Promote vendor consolidation. Gartner’s 2020 CISO Effectiveness Survey found that 80% of surveyed tech leaders report high interest in vendor consolidation. Without strong governance, vendor agreements proliferate and result in patchwork IT systems, unused legacy applications and antiquated infrastructure. All drain time, incur hefty costs and undermine cybersecurity.
Alteryx CEO Mark Anderson on their 2020 Q4 earnings call, explained “Any transformation that's happening these days is happening across the executive team, but absolutely with the support and partnership from the CIO. Customers are open to multi-vendor solutions, but they want seamless integration.”
Vendor management is notoriously complicated, time-consuming and tactical. However, CIOs who streamline workflows and speed strategic initiatives are most likely to be rewarded with greater board and c-suite visibility, credibility and trust. A consolidation program helps that cause greatly, as it pits vendors against each other and requires each to justify their ongoing relationship, pricing and terms.
Regardless of vendors’ sales aims and approaches, CIOs must focus on keeping a seat at the CEO’s table — rather than worrying about who’s paying for lunch. Those who do so will be the ones that boards ultimately value, respect and retain.
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The shift to remote work fueled a need to examine and Excellerate upon the strength of county workforces and cybersecurity. Federal funding opportunities that emerged in response to the pandemic have boosted investment in broadband. And the need to innovate quickly has driven the creation of new partnerships — both interdepartmental and those that involve public-private collaboration.
What sets apart the winning counties this year is their ability to leverage the challenging times to reimagine traditional strategies and propel their technology approaches forward.
Woven together through all the county’s efforts is a collaborative enterprise technology governance model that allows interdepartmental collaboration, such as between the public records requests system and lobby management and queuing systems.“That’s what an IT governance structure will do for us is provide that forum, that place to gather everybody and have those conversations,” Monaghan said.
For Nevada County, technology innovations range from security to digital equity. And to Excellerate collaboration and connectivity, the county is working to position itself as a desirable county for Internet service providers to invest.
To do so, the county has streamlined the time-consuming environmental review process through a programmatic broadband environmental impact study. Monaghan explained that because of the California Environmental Quality Act, projects must meet a high threshold for environmental responsiveness. The study that Nevada County has conducted lays out the mitigation strategies providers can implement, which speeds the process and enables small local providers with fewer resources to participate in projects. In addition, by working with the Public Works department, IT has simplified the process of acquiring road encroachment permits for providers.
“We’re trying to make that barrier to entry very low so they can come in and do these projects and do them quickly," Monaghan said.
On the security side, a significant project was a countywide cybersecurity IT risk assessment, which involved interviewing county stakeholders. In addition, the county has created the position of an IT security manager. As Monaghan explained, this position will be the interface between customers and IT staff, focusing primarily on high-level security issues like risk, policies and procedures.
Monaghan also underlined the expected impact of the High Performing Organization initiative that the county has been working on for several years and is continually moving forward. Its aim is to decentralize process improvement, and it allows departments to re-envision how they do work. Not only will it Excellerate productivity and the customer experience, but Monaghan expects it to reduce service demand reliance on employees through automation, ultimately increasing financial sustainability.
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While capital improvement plans typically look forward to the next decade, Belcher cited the pace of change and the challenge of planning for technologies that are still emerging. He stated that the IT strategic plan should be a framework that is flexible enough to adapt as needed.
The type of foresight that can help government keep up with these rapid changes is something that has set the county up for success in digital equity, as it has been over a decade since the decision was made to build a fiber-optic network for government agencies. Although the county cannot provide services to homeowners without authorization from the Virginia Legislature, Belcher said the county is leveraging its fiber optics to create competition among other service providers and lower costs. In addition, Belcher noted that a latest partnership with real estate developer JBG Smith has enabled an expansion that better serves digital equity by expanding coverage in some affordable housing units.
All of this is part of the biggest change the county has been preparing for: Amazon’s second headquarters (HQ2), a project that has been in the works for several years. Belcher says this requires creating a collaborative ecosystem, from the creation of cloud edge data centers to reliance on public-private partnerships.
“The synergies will create solutions," Belcher said. "In many ways, I don’t think we’ve imagined what might be possible."
And when it comes to securing the county’s data in this new ecosystem, Belcher explained, “It starts with staff.”
But like the county’s overall approach to tech advancement, collaboration is a crucial piece. As a member of the Metropolitan Washington Council of Governments, the county was able to leverage that collective buying power to acquire federal funding and create a baseline for how cybersecurity testing and response should be done.
“I think that’s one of the most significant things we’ve done," Belcher said, "to recognize that we’re not alone."
The county’s current undertaking is reschooling and retooling a workforce that will help the county prepare for ever-evolving technology needs. To meet this challenge, Belcher underlined the county’s agile approach: allowing for remote work where possible, hiring young people with new ideas and increasing process automation to simplify tasks.
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But the county’s response and recovery efforts in the county also focus on the local economy. BizLink Orange is the county’s online collection of resources for local businesses. The Information Systems and Services Division has also implemented an eProcurement System to make it easier for collaboration between the county and businesses.
Protecting citizens goes beyond the public health space, which the county has demonstrated with an increased focus on cybersecurity. The county has implemented several new cybersecurity policies that focus on awareness, zero trust and supply chain management. The Orange County Supervisor of Elections Office has implemented identity-bound biometrics, which will help protect user data in future elections. In addition, the county expanded its Cybersecurity Awareness Month in 2021 with bulletins and seminars to Excellerate defense and awareness in an ever-evolving cybersecurity landscape.r
One of the biggest developments in this area is Ready Placer, a county website that features critical information about disaster events like wildfires. Its GIS dashboard provides real-time data about current incidents and conditions. With increasing wildfire threats, like the 2021 Caldor Fire, this website has helped to reduce the burden on the county's offices and 211 system.
Placer County’s Information Technology Department’s submission of a Cyber Annex document to the Office of Emergency Services this year will enhance the county’s Emergency Operations Plan, outlining procedures for a cyber incident. In addition, the implementation of the ServiceNow Business Continuity module will help maintain security in a time of disaster recovery.
2021 also marked the launch of the Placer County Broadband Equity Program, which will help to increase digital accessibility, with six broadband expansion projects being awarded in 2021. One broadband project in the county is expected to be complete by October 2022.
“That’s a big focus of ours right now and it’s going to be a big focus for the next several years, expanding broadband throughout the county,” CIO Jarrett Thiessen told Industry Insider — California* in November 2021.
Like other winning counties, Placer County is working to expand access to government services. To do so, the county has adopted a virtual agent and subscribed to Zencity for community engagement. The county also conducted its first remote mobile court hearing from a camp of unhoused people in March 2022. But as Thiessen explained to Industry Insider — California, digital services will continue to evolve as technology does.
“What new channels become available in the future and how can we leverage them to make more county services available?” he asked. “I think that’s an ongoing process.”
The county has adopted digital solutions to streamline workflow processes, like using smart online forms with automated notifications to boost productivity. Placer also implemented a workflow software called Just Appraised in 2021, which enhances the change-of-property-ownership process using AI technology, reducing human error.
And looking forward, the county’s employees have an incentive to continue innovating. The Idea Accelerator program, which provides grants to support employee ideas for service improvement solutions, was rebranded as the Idea Innovator program in March 2022 and will continue to provide grants to deploy such solutions.
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“Things are still changing in the post-COVID universe,” Gibson said. “From an IT standpoint, that gives us more momentum.”
And a big theme through this county’s work is connectivity. One way the county has achieved that is through the launch of a new 311 application. Gibson said the county understands that people are mobile, and creating mobile capabilities improves the user experience. The county will work to further Excellerate the 311 experience by implementing texting and virtual assistant capabilities.
This connectivity goal is woven throughout other county initiatives as well, like a new website portal to make government services easily accessible to constituents through technology and other apps — for example, PGCLitterTRAK, which assists in litter cleanup — to let residents get information from anywhere.
And in digital equity work, the county has taken a collaborative approach with the 27 municipalities that are part of the county’s footprint. As CIOs of these localities talk and work together, broadband expansion projects can target communities that are underserved, like rural areas. Gibson said that working with industry and community partners helps the county fill gaps.
Like other first place winners, the county has enhanced its cybersecurity approach. For Prince George’s, this starts with the creation of a cybersecurity officer position that will help develop and enforce policy, training and collaboration to ensure safe practices are in place across the county. Like Arlington, the county is leveraging the collective power of the Metropolitan Washington Council of Governments for cybersecurity preparedness. Gibson said cybersecurity needs to be laced in everything the county is doing, and security is a function the county will continue to prioritize in the future.
“When I say future, I mean now,” Gibson said. “Because the future is now, and this county recognizes that.”
And while she underlined the importance of taking bold risks to achieve technology advances, she also emphasized the need to translate needs and ideas in business language to leadership, because working in line with county executives’ priorities and speaking in a language they understand enables bold action.
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From transit to communications, the objectives of connected communities, data and government drive the county’s work, according to David Mendel, who was appointed interim CIO in June 2022, after having been with the county since 2005.
“Those things that are hitting our residents and our public that really create value for them, that’s where the wins are,” he said.
On the connected community side, Mendel explained that the county has enabled enrollment for reduced-fare bus passes, allowed community members to obtain protection orders online and performed outreach to increase enrollment in federally subsidized Internet programs.
Connected data work has involved implementing systems to make digital evidence files available to various case management systems and a jail management system to better monitor COVID-19.
“Using a more mature governance structure will foster not only connection of disparate data," Mendel explained, "but it’s going to increase our productivity, [and] it’s going to increase our efficiency, both for our government and for our residents."
And in terms of connected government, the county has implemented remote employee collaboration tools, including a platform that enables employees to reserve space in the office. In addition, first responders throughout the county use a single two-way voice radio communication system for interoperability.
But a large part of connectedness is digital equity. In addition to leveraging federal funding opportunities to connect underserved and unserved areas, the county is matching funds where possible to invest in these areas.
The county is working to address budget constraints, as funding sources have changed and more responsibility for distributing funding is now in county hands. However, as Mendel noted, state law restricts property tax increases, so the county has taken a multi-pronged approach to sustain the same level of service despite inflation’s impact on expenditures: lobbying the state Legislature to change tax laws, increasing efficiencies and reducing redundancies, and building strong relationships with other departments to use that collaborative power to work with policymakers.
Like other counties, Mendel said that cybersecurity work starts with staffing — but it also involves developing best practice frameworks, investing in security platforms and tools and adopting multifactor authentication.
The county has come a long way from being the site of the first COVID-19 outbreak in 2020, and Mendel cites the value of having technology systems in place to enable remote work without missing a beat.
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Up to 150,000 Population Category
150,000 to 249,999 Population Category
250,000 to 499,999 Population Category
500,000 to 999,999 Population Category
1 Million or More Population Category
Business leaders are told they need to do a lot of things when it comes to technology. They need to build an app. They need an AI chatbot. They need more data. They need a social-media strategy.
In short: To better serve their customers, they need to go digital—and fast. But beyond buzzwords, what’s actually at stake in this transformation?
Today, across sectors—from finance to health care and public services—customers are increasingly connecting with companies and governments online, but they often encounter outdated or confusing systems that weren’t built with them in mind. This matters: When consumers can’t easily access what they need online, they’ll look elsewhere, leaving companies racing to digitize their experiences so they won’t get left behind.
This, perhaps, is truer now than ever before. In light of COVID-19, social distancing, and a widespread shift to remote work for much of the public, accessing goods and services digitally is simply the new reality. The pandemic has served as a shock across industries and accelerated the need to meet customers where they are: online.
To better understand the challenges that organizations face and help them plan their digital transitions, ServiceNow surveyed 600 global executives in an array of industries—including telecoms, health care, manufacturing, the public sector, and financial services—between February and March of 2020. They discovered that businesses have a lot of catching up to do. No matter what “the new normal” looks like following the coronavirus, how businesses digitally connect with the public will remain key to their success.
Creating a positive customer experience isn’t just about building a beautiful website or app. It’s about creating a digital workflow that enables customers to seamlessly access what they need, and most organizations don’t have a plan in place to do that. Even companies leading in digitization—those who have adopted the 11 best practices of building a digital customer experience (listed here)—have a long way to go.
The percentage change that’s expected over the next three years as organizations digitize is staggering.
Those further behind in their digital transformation will have a considerable amount of ground to cover in order to compete with leaders.
One essential component of a digital customer experience is maturity. Does a business know its key consumer touchpoints? Does it have a road map for implementing a customer-experience plan? Can it measure its impact on customers or create a single customer view? Based on the framework of the 11 best practices, only 27 percent of organizations surveyed could be categorized as “leaders” in this field.
Of the private sector, health care/life sciences and manufacturing have the fewest leaders and the most beginners, and financial services and telecoms have the most leaders.
There’s no single approach to going digital that works across all industries and business models. Companies should tailor their strategy to their business goals, but they can learn from these industry insights, which reveal both the blind spots that beginners may be missing and the key areas of progress that leaders focus on as they mature their digital customer experience.
Blockchain and virtual reality may sound like exciting technological leaps forward for your business, but in reality, the solutions that yield high returns on high investment are often simple, effective technologies that better serve most customers’ needs, such as cloud-based platforms, digital payments, and social media.
To learn from leaders’ progress, companies should first prioritize identifying key customer touchpoints, which will then enable them to create the customer experience that fulfills their goals.
As businesses seek to bridge the digital maturity gap, they need to keep their customers at front of mind. This isn’t just to gain a competitive edge—it’s to keep up. ServiceNow believes that developing a mature digital customer experience is key to the ongoing success of organizations across industries, and these survey insights reveal just how pressing the matter is. While many companies have made progress in this area, the divide between beginners and leaders is set to grow rapidly. Beginners also lack many of the skills needed to excel in customer experience, as well as a deeper understanding of their customer touchpoints to inform a digital road map moving forward.
Prioritizing this digitization has noteworthy benefits, too: Organizations report a positive return on investment as they mature their digital customer experience, plus greater customer loyalty and understanding of their audiences’ needs. The outlook is clear: Those who implement digital solutions today to better serve their customers will be ready for what’s next—not only enabling them to succeed in the future but also to advance in the present.
Lightstep has announced the addition of incident response management to their observability platform. The general availability of Lightstep Incident Response provides integrations with common collaboration tools, rotation scheduling, escalation policies, APIs, and a CLI.
Lightstep Incident Response integrates with a number of common monitoring and collaboration tools. This includes LogicMonitor, Postman, Sumo Logic, Grafana, Zoom, and Slack. An API is available to enable building connectors for tools without one out of the box. With the acquisition of Lightstep by ServiceNow in 2021, there is a tight integration with ServiceNow's Now Platform. This facilitates integrating the teams, configurations, and data within ServiceNow into Lightstep Incident Response.
Lightstep Incident Response provides tooling for managing on-call schedules. The schedules are synchronized onto a shared calendar to provide a single location to see all individuals currently on-call. The scheduling tool can automatically recommend users that have the most free capacity to fill gaps in the schedule. If an alert is triggered, notifications can be routed to individuals via email, SMS, or via the mobile app. The mobile app is available from both the Google Play store and the App Store and is available with each Lightstep Incident Response license.
Teams can be created to manage both on-call schedules and escalation policies. It is possible to add multiple teams to a single incident. When a team is added to an incident, the escalation policies will dictate how the incident notification is handled. In addition to adding teams to incidents, individuals can be specifically added. Lightstep Incident Response supports a Stakeholder role which cannot be placed on-call. Instead these users will only receive email notifications regarding incidents they are included on.
Automation of common tasks is possible through the interface. This includes automatically inviting individuals to incidents based on tags or setting up automated post mortems once an incident is resolved. Automation can also be created to self-triage and automatically remediate common issues.
The release includes a command line interface (CLI) that facilitates executing a number of common commands with Lightstep Incident Response. For example, an alert can be created with a description, priority, and source with the following command:
lightstep alert create --desc 'VPN Service breakdown' --priority 1 --source 'VPN Client'
That alert can then be acknowledged by executing
lightstep alert ack --alert 'Alert0010006' where
Alert0010006 is the alert number corresponding to the alert being acknowledged.
Lightstep Incident Response is able to be integrated with a number of platforms including AWS, Azure, and Google Cloud Platform. Within AWS, it is possible to integrate with Amazon CloudWatch so that CloudWatch alerts are sent to Lightstep which then manages the incident response. Similar integrations are available with Azure Monitor and Google Monitor.
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Upwork, Inc. (NASDAQ:UPWK) Q2 2022 Earnings Conference Call July 27, 2022 5:00 PM ET
Evan Barbosa - Vice President of Investor Relations
Hayden Brown - President and Chief Executive Officer
Jeff McCombs - Chief Financial Officer
Conference Call Participants
Matthew Farrell - Piper Sandler
Maria Ripps - Canaccord Genuity
Andrew Boone - JMP Securities
Bernie McTernan - Needham & Company
Eric Sheridan - Goldman Sachs
Nat Schindler - Bank of America
Rohit Kulkarni - MKM Partners
Logan Reich - RBC Capital Markets
Marvin Fong - BTIG
Good day and thank you for standing by. Welcome to the Upwork Q2 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. And I would now like to hand the conference over to your speaker today, Mr. Evan Barbosa, VP of Investor Relations. Please go ahead sir.
Thank you. Welcome to Upwork's discussion of its second quarter 2022 financial results. Leading the discussion today are Hayden Brown, Upwork's President and Chief Executive Officer; and Jeff McCombs, Upwork's Chief Financial Officer. Following management's prepared remarks, we will be happy to take your questions.
But first, I'll review the Safe Harbor statement. During this call, we may make statements related to our business that are forward-looking statements under federal securities laws. These statements are not guarantees of future performance but rather are subject to a variety of risks, uncertainties and assumptions. Our genuine results could differ materially from expectations reflected in any forward-looking statements. In addition, any statements regarding the current and future impacts of Russia's invasion of Ukraine and our decision to suspend business operations in Russia and Belarus and the COVID-19 pandemic on our business and current and future impacts of actions we have taken in response to Russian's invasion of Ukraine and the COVID-19 pandemic are forward-looking statements and related to matters that are beyond our control and changing rapidly.
For a discussion of the material risks and other important factors that could affect our genuine results, please refer to the SEC filings available on the SEC website and on our Investor Relations website as well as the risks and other important factors discussed in today's shareholder letter. Additional information will also be set forth in our quarterly report on Form 10-Q for the quarter ended June 30, 2022 when filed.
In addition, reference will be made to non-GAAP financial measures. Information regarding a reconciliation of non-GAAP to GAAP measures can be found in the shareholder letter that was issued this afternoon on our Investor Relations website at investors.upwork.com. As always, unless otherwise noted, reported figures are rounded in comparisons of the second quarter of 2022 or to the second quarter of 2021. All measures are GAAP unless cited as non-GAAP.
Now, I'll turn the call over to Hayden.
Thanks, Evan. And thank you all for joining us today for our second quarter 2022 earnings call. Building on the momentum of strong results of the first quarter, Upwork forged ahead on innovating, evangelizing, and scaling the world's work marketplace growing revenue 26% year-over-year to $156.9 million in the second quarter. We continue to focus on product innovation, and saw outstanding results in the form of higher customer satisfaction scores, faster time to hire, and strong client reengagement rates from our latest innovative feature in the Project Catalog area called Consultations.
Consultations is a one click option for clients to book time with talent for both general getting started advice and guidance on important projects decisions. Its early success is leading us to expand the pilot from four categories to all 90 plus categories in the third quarter. Product enhancements in the quarter also included the introduction of Project Tiers, which enables talent to structure their services in a way that helps clients more easily understand and match their needs to preset project scopes.
Finally, we also advanced the Virtual Talent Bench or VTB experience to enhance the ways clients can find, organize and mobilize the expertise they need. Our continued success with larger customers and our focus on building brand awareness across the market was evident in our sales and marketing performance in the second quarter, enterprise revenue increased 45% year-over-year to $12.3 million. And the number of clients that spent $1 million or more in the trailing 12 months, increased significantly year-over-year.
Our sales team achieved their deals per rep productivity targets. And we've maintained our hiring pace to stay on track to double the land team by the end of this year. We continue to focus on building Upwork into the household name in our space, investing with discipline, and a focus on measurability and brand awareness. Many large recognizable companies, such as Asurion, Fanatics, Newsweek, Payoneer, Pearson and ServiceNow signed on as new enterprise plan customers in the second quarter turning to Upwork as a high trust, high quality destination for remote work and specialized talent at scale.
In an increasingly low trust, fragmented, volatile world, we help clients like these respond to and prepare for economic headwinds, ensuring that organization's growth, digital transformation, and talent innovation initiatives can progress undeterred. The success of our new client marketplace plan and now too late in the first quarter was also on display with its implementation in the second quarter. This plan gives all self service clients more features for a flat service fee, while simplifying their experience, reducing friction and providing them more value.
Many clients have already derived additional benefits from the new plan via access to premium talent, advanced talent searches, utilization of activity codes and more robust reporting capabilities. Our vibrant inclusive online community is a critical component of what makes Upwork distinctive. We're committed to ensuring our community has the full range of resources to enable talent and clients to innovate their careers, and their work to unlock their full potential.
In service of this, we launched Upwork Academy alongside improvements to our community to support the hundreds of 1000s of actively earning talent on the platform. We've seen high levels of engagement on both Upwork Academy and community pages, with over 1,200 course completions on Academy in the first month, and community page views almost 50% higher than the previous month.
Upwork's values are a key attraction point for our customers on both sides of our work marketplace. This is exemplified by our role as a trusted adviser in helping clients achieve their objectives, with new talent from other regions following our decision to suspend operations in Russia and Belarus, where we announced the contract with talent or clients in those countries would be required to wind down by May 1 2022.
Since then, we've seen many global customers working with Russia and Belarus based talent who have relocated outside of the region, as well as with alternative talent they have found through our work marketplace. With respect to business activity in Ukraine, we continue to see strong performance during the second quarter. GSV was above 90% of pre-invasion levels, once again demonstrating the resilience of professionals from Ukraine, as well as the key strengths of our platform.
Overall, we estimate that the loss of revenue directly attributable to the war was approximately $4 million in the second quarter, and we expect the impacts to revenue in each subsequent quarter of 2022 will be slightly less than the impact seen in the second quarter. As we look to the future, Upwork alongside our customers, partners and investors faces macroeconomic conditions that are difficult to predict. While there are risks that a slowing economy puts downward pressure on some parts of our business, we also see this as a catalytic moment for leaders to reevaluate the old ways of working and operating as well as to widen their consideration of more innovative solutions and for Upwork to capture a greater share of the market.
Our business model remains durable, and we are confident that our value proposition of delivering highly skilled, diverse talent from over 180 countries more effectively, affordably and quickly than alternatives as well as them enabling clients to have greater flexibility with their cost structure will continue to resonate even in a recessionary environment. The opportunity ahead of Upwork is massive, regardless of near-term economic conditions. In fact, business continuity, talent transformation, a flexible cost base, and cost savings will likely become even more critical in the quarters ahead.
We remain focused on delivering and during growth fueled by investments and initiatives with strong economic in every aspect of our business, from core product innovation, to building our sales muscle to brand and performance marketing. Upwork is the leading digital platform that clients trust to deliver the talent they need, with the exact skills to get work done, and is the home that talent trust to champion them in innovating their careers, while bringing them exceptional work opportunities, there is vast potential to unlock on both sides of the world's work marketplace. And we've only just begun.
Thank you for joining us on this journey. We will now open the call to your questions.
Thank you. [Operator Instructions]. Our first question comes from Matthew Farrell, Piper Sandler. Your line is open.
Thanks, guys. Congratulations on the really strong execution and managing through all the moving pieces. I wanted to zero in on the $10 million to $15 million impact from the softening of the global environment. Should we think about that, including some further deterioration in the macro from here? And then as I think about that from an upward perspective, how does utilizing the freelance workforce benefit you from a cost perspective as you look to balance costs here as we move forward in a unpredictable environment?
Thanks, Matt. I'll take the first part of that. So with respect to the $10 million to $15 million impact, our guidance reflects some of the softening that we saw it happen in Q2, with respect to client acquisition, client retention, particularly, as we noted, in Europe and in SMB. And obviously, this is, you know, things are difficult to predict in terms of how they will play out. But it's our best guess, based upon the trends that we're seeing at this point, what's that impact could be. Clearly things could be better, things could be worse. But that's how we really box to what we thought the impact could be.
With respect to the second question, which was cost savings on the platform. Hayden, did you want to address that?
Sure. I'd say, Matt, we're seeing in the broader market. Customers are really kind of resonating with as you're talking to them. The value proposition we have around saving more through programs using talent on Upwork. And on average, they save 50% or more using Upwork talent versus alternative. Other things that are really resonating are around flexibility and speed.
And so while macro is obviously front and center, for so many businesses right now, we're not losing sight of the fact that they still need to get work done. And they are really trying to figure out how they can do that cost effectively. And that's where our value proposition is resonating. Hence, we are realigned a lot of our marketing and sales talk track to really shine a light on that part of our value proposition. And we're getting a good receptivity around that. So we want to make sure that we are positioning the business to take full advantage of that opportunity, which I think is going to be significant over the coming quarters.
Thanks. And then as I wanted to zero in on -- really strong momentum, again here in Q2 across all the metrics. Maybe just help us understand how conversations have changed with some potential clients, as we've gone from a COVID world to an economic slowdown environment. And could we see accelerated trends, pork marketplace. I'm just given the benefits that the marketplace offers here for enterprise customers over the next couple of quarters?
What we've seen so far, Matt, is strong execution by the team continues, and I think against the backdrop of conversations which story, there's been an uptick of focus in Q1 and Q2 from customers around things like cost savings, maybe they themselves are doing layoffs or shrinking their budgets, but they're looking to us as an alternative for getting talent really cost effectively. And I think that's led to some of the success. We saw a 24% year-over-year growth in new deals. We saw our overall enterprise revenue grow 45% year-over-year in Q2.
So there's a little bit of that that probably in the conversation, but I wouldn't say it's materially changed anything for us. I think the success has largely been driven by great execution by the teams and continue to hiring and everything that we had in the plan coming into fruition. So I think it's -- there's something in the backdrop, but it's not. I say a major change right now, companies are still really focused on the three things that we typically help them with the most, critical skill gap, greater agility, digital transformation efforts. And now just the fact that we offer some of these evergreen things like cost savings is just a little bit more top of mind.
Awesome. Congrats again.
Thank you. One moment for the next question. Our next question comes from Maria Ripps of Canaccord Genuity. Your line is open.
Great. Thanks so much for taking my questions. And congrats on strong results. So it seems like this last couple of quarters, you had a bit higher contribution to growth from spent per client versus number of clients. Can you maybe just talk about whether this has been consistent with your set of internal expectations? And how should we think about this dynamic going forward, especially given sort of continued focus on sales force and expansion and brand investments?
Sure. Thanks, Maria. So there's a number of factors that are: One, we're really pleased with the quality of the clients that are on the platform and the growth that we're seeing from them, right. There are overall spend across the 800,000 approximate clients we have on the platform is up 16%, year-over-year, those are spending over 100,000 are up 38% and million dollar spenders are growing significantly as well.
So we're really pleased to see that. We've mentioned historically that that's been driven significantly by expansion in hours per project on the platform, which we think is a great signal that clients are getting more and more value from the platform.
As we mentioned, we have seen some, some softening in the client acquisition levels, once again, primarily related to SMB and in Europe. So that's putting a little bit of pressure in terms of the overall growth of active clients. But it's great to see that the clients that are on the platform are continuing to grow their spend. And it highlights additionally, the importance of us continuing to invest in our brand marketing, so that more and more clients can be aware of the value proposition that we have, particularly as they're facing the dynamics on the horizon.
Got it. Thanks, Jeff. And maybe it's sort of related to this. Does the current macro backdrop change your priorities or approach to sales force expansion and brand investments?
Maria, maybe I can jump in on that one. I think on the macro side, a couple of thoughts. First of all, we definitely don't have perfect visibility into how things are going to play out. And while it's an imperfect analog, we do look to the 2020 environment where we saw initial softening in our overall marketplace that's been contracted for some businesses. And then things improved. As we leaned into the specific opportunity that we saw for Upwork around some of the work and some of the other specular trends that were happening and economic aspects.
We also see a couple dynamics playing out as we look ahead. So one is spend will likely contracts in next couple of quarters. And as Jeff mentioned, we've rings -- that's going to come from specific customers, probably SMBs, Europe, etc. But we've ringfence that as a $10 million to $15 million downside, which is baked into our annual guidance. And additionally, we really haven't lost sight of the fact that secular trends around remote work and digital transformation continue to be mega trends for our business right now, even as the economic force is going to be what it is for a lot of different businesses.
And so for these reasons, and due to the additional Upwork specific value propositions around cost savings, flexibility, speed, we noticed the time when we can drive category growth and shear shift to Upwork. And that's why we are continuing to bet on brands to your question against this backdrop to really drive awareness consideration and ultimately purchasing by customers who, frankly, today may not even be aware of Upwork solution at all.
So with that in mind, we want to come out of this catalyzing the business to be even stronger than ever before, which is going to be critical, going forward as more customers become aware of an adopt the solution through the coming quarters.
Got it. That's very helpful. Thank you very much for the caller.
Thank you. And again, one moment for the next question. Our next question shall come from Andrew Boone of JMP Securities. Your line is open.
Good afternoon and thanks so much for the questions. Given the 90 basis points step up and take rates quarter-over-quarter. Can you help us understand the momentum and take rates and whether that content can continue from here, and then just given a greater success in terms of monetization, how do you feel about taking price as a growth lever from here?
Thanks, Andrew. Yes, great to see the nice increase in take rates, which is primarily driven by the pricing and packaging structure changes that we made in Q2. When we look at the longer-term horizon, where take rates would go, we do expect that they are -- they will likely be able to deliver additional value and drive increases in take rates for a variety of factors. One, as enterprise which has a higher take rate than non-enterprise continues to grow faster than the rest of the business that will have an upward momentum. Project Catalog and take rate also have higher take rates. And so as they grow faster, same sort of dynamic, now they're smaller portion of the business. So there'll be a little bit longer. There's also additional opportunities to drive take rate through our paid promotional products and potentially value added services.
So we do think that over the medium to longer-term mark, they will continue to rise. As we flagged at the beginning of the year, we expected nice improvements throughout 2022, we do have the additional dynamic that was really the driver of our take rates decreasing in 2021 as clients continue to find more and more value on the platform, more of their spend is at the lower end of the pricing peers. And so that dynamic will continue as we continue to see that that spend back to clients continue to grow.
That makes sense. Thanks. And then as you guys laid out kind of a path towards margin expansion over a multi-year period, can you just help us understand the key points of leverage across the various expense line items and how you guys envision it? Thanks so much.
Yes, thanks Andrew. So we actually think there's good leverage that we can have across the board. So whether that is from cost of revenue, including payments, where the majority of our cost of revenue actually comes from our payments costs, and the enterprise portion of the business, which once again is growing faster, doesn't have those payments costs. So simply that mix shift of that growing faster, will provide some leverage within cost revenue, also will be able to drive efficiencies within other areas of cost revenue, including hosting, or customer support.
But we also think that, over that medium to long-term mark, there will be benefits along all of the OpEx lines. So G&A, R&D, and ultimately, sales and marketing, although we're obviously investing aggressively in those areas right now, as we look over the next several years, we continue to believe that there's good opportunities to drive that, we've mentioned that we're providing the target for 2023 of achieving EBITDA profitability. And that will continue to expand that EBITDA margin by several 100 or by few 100 basis points each year thereafter.
Great. Thank you.
Thank you. And one moment please for the next question. Our next question comes from Mr. Bernie McTernan of Needham & Company. Your line is open.
Great, thanks for taking the questions. Just a follow-up on the macro. So the expected year-over-year growth rate in active clients to decline in the 10 million to 15 million impact. In the release, it seems like that's really isolated weakness in Europe. But does that contemplate any weakness in the U.S. as well?
Yes, as we, I think phrasing was some soft trends, particularly in Europe and SMB, in general, as we look at it, we would imagine that some of the trends that we're seeing more pointedly in Europe would play out in the U.S. And when we come up with the estimates for our guidance, we've taken all that into consideration, once again, flagging that, it's very hard to predict exactly when or how much that will play out. But we have made some assumptions on that.
Understood. And then most of the times we're talking about the macro, we're thinking from the client perspective, but just interested in terms of what's happened in the past in terms of from a talent perspective, is this also a catalyst for higher quality talent to join the platform as well?
I think it definitely is not going to be a negative for us. We have such a strong talent base as it is and we've seen continued growth in that through the last years and quarters and certainly there's been a mindset shift, I think where in prior recessions going back to 2008, perhaps people might have seen freelancing as a risky place to be during an economic downturn. In fact, today what we've seen in the last two years, we've been serving talent on our platform, sensors actually are feeling more insulated from economic downturns being freelancers, because they feel like they're not exposed to a single employer who can lead them off.
And so to your point, I think today's professionals are looking at freelancing as a highly desirable place to be, they want to have more options in terms of multiple eggs in their basket where they're not exposed to this. So we're certainly going to be positioning ourselves to welcome new talents on the platform, in the coming quarters, as we always do and place them into great opportunities.
Understood. And then just lastly for me, if we just dive into Upwork Academy, we'd love to snow, some of the most popular types of education, the talent seeking out and ultimately, is this a way for to really match the right clients with the right talent as a way to almost you can screen and be able to show clients that, hey, this person passed a certain class, so they should be better equipped to do this job?
Yes, Bernie, this is just the beginning, I think of what we can do here. So with the early courses that we're offering, and where people are getting a lot of value is a lot about kind of freelancing online one on one, and how do I get started building a profile and a reputation on Upwork? How do I win my first job. So that's a lot of the kind of initial coursework that we've launched and where talent is engaging the most. There's also some coursework on the client side around how to operate in the way of working that we offer. But this is, again, the beginning of I think, a lot of what we can unpack for talent and clients around, ways of working online around both hard and soft skills required to be successful on the platform, around remote ways of working.
And our community has tons of ideas, and frankly, is always doing their own work kind of informally sharing best practices that relate to all of the things that they're doing everyday to be successful working in our ecosystem. So, we'll be continuing to evolve the course catalog based on the wisdom of our community. And then also we have partners who potentially we can bring in to continue to up the game there as well. And ultimately, the goal here is, as we raise the bar with our community on the talent quality at the client quality and kind of the work experience for everyone in our ecosystem, that's a win for everybody who's participating.
Great. Understood, thank you so much for taking the questions.
Thank you. One moment please for the next question. Our next question will come from Eric Sheridan of Goldman Sachs. Your line is open.
Thanks, maybe just one question from me, as you've seen the broader macro environment become a little bit more volatile, I know it's early days and sort of the big market opportunity of the next couple of years. But have you seen anything different in terms of competitive intensity across the industry or elements of dynamic in terms of engaging with existing clients or prospective clients on the competition side? Thanks so much.
Sure, Eric. We haven't seen anything materially different in terms of competition. I think in conditions like these, quite often, it's harder for the smaller kind of ankle biters in our space to stay competitive, just because, it gets to be harder landscape for them. But where we're focused is just continuing to offer our outstanding value proposition to clients and talent and forge ahead with our innovations, which I think are really meeting the needs of the market and staying ahead there. So nothing really materially to report at this time.
Thank you. One moment for our next question. Our next question comes from Nat Schindler of Bank of America. Your line is open.
Yes, hi, guys. Just wanted to focus in on how the brand campaign is going and how you are evaluating at this point now some call it eight months into it and whether or not it's been successful at expanding the business.
Thanks, Matt. The focus of this has always been durable growth with strong economic which is our top priority in every investment area we make including brand and I'd say to bolster the discipline and the measurability that we have and even enhance the ROI in the brand area, we did launched two partnerships in Q2 with Ipsos and Universal McCann, which we're excited about as kind of key milestones here. Secondly, we always knew and to your point about the eight months, we committed and communicated that this would be a multi-quarter journey. And so additional milestones that we were excited about in this quarter as we've been on this journey were the Mother's Day Campaign which really provided us important learnings about how the Upwork brands can resonate with customers in key cultural moments, and across critical channels like social.
And so we've been wrapping those learning into our brand and marketing programs going forward. The third thing I'd say about this is we're really finding already that the value proposition that we have, does really resonate, given the broader secular trends around remote work, and digital transformation, as well as Upwork's specific benefits around cost savings and workforce flexibility, which are so top of mind for executives in these very moment. So this is all informing our brand and marketing programs. Right now, as we're going into the back half of the year at this critical time when we are really aware that we can drive share shift and catapult out of this period even stronger.
So as we look to the future, because of our disciplined approach, we feel good about our ability to continue to achieve both our brand goals, and achieve EBITDA profitability in 2023, and further expand our margins thereafter.
Great, thanks. And then just a separate question to totally hammer in on all this macro talk. But I figured that's what everybody's going to talk about with everybody for the next couple of quarters. Can you just speculate or anything you have on history of how does the contracting business, your style of contracting business get affected in recessions? How do enterprises respond usually in this side of the business? And is there any sort of learnings on kind of timing of where they contract and expand coming into cycles? That'd be great if you could help.
Sure, I think there's a couple of things to say about that. We've looked at a few analogs for our specific business, which I think is unique and different from even traditional staffing and others. So we've looked at our business, we've looked at what happened in 2008. And we grew really helpfully through that period. Of course, that was 14 years ago, and the business has changed a lot since then, certainly a lot bigger and have more aspects to it. We looked at 2020. And what happened with the pandemic economy at that time, and what we saw there was an initial slowdown in kind of the March April period, as businesses were overall just contracting their own spend, and many businesses were struggling or going under.
And then, of course, we grew really nicely out of that. And I think, one of the takeaways that I have from looking at those two analogs is for us, the economy and the health of the economy is certainly a factor that impacts our results. And that's why we have put in this $10 million to $15 million impact in the annual guidance for this year. But I think the other big impact, and perhaps even bigger impact for us is things like these major secular trends around remote work around digital transformation around access to critical talent and skills, which are evergreen courses for executives that have become huge and impactful for almost every business and certainly huge for our business and core to our value proposition at this time.
So I think those things together, we're focused on the macro, for sure. But we're also as much are more focused on these critical things that are secular trends driving our businesses, so many businesses and the crosshairs of the value proposition that we're selling into right now.
Great, thanks, Hayden.
Thank you. One moment for the next question. And next we have Rohit Kulkarni of MKM Partners. Your line is open.
Hey, thanks. Nice quarter guys. One question on the pricing plan. Wondering if you have any feedback in terms of the pricing plan affect any client additions, gross additions? And just broadly speaking, how have gross additions trended? As you kind of laugh to all the tougher competitors for active clients as such?
Thanks, Rohit. Yes, as we look at the impact of the pricing change, we paid attention to a number of different things. One, what was the level of adoption of the features that were previously behind the subscription paywall? And how are that -- how are those going in? We've been really pleased to see that increase materially and that was one of the fundamental premises of the change was to make sure those valuable tools were available to many broader folks.
Second wall was to monitor, how was the overall package impacting retention. And clearly the price was going up in some key areas. And we haven't seen anything noticeable. We did a holdout test compared to -- our pension perspective. So we're very pleased to see that. And then from a financial impact on it, we achieved our highest gross margin as a public company. And our marketplace takeaway was the highest, marketplace takeaway seems to be in a public company as well. So we're really pleased with how with the value that we're delivering to customers and the reception of the changes.
Okay, thanks. Thanks, Jeff. And question on project catalog. It's been a while since you disclosed metrics contributions from catalog in terms of bit client additions, or GSP. Wondering if you have any more details to share, or anything that we can look from the outside in terms of how successful you've been with the rollout of project catalog?
If I can jump in on that one, Rohit. I think it's a catalog experience is the way we're seeing it now is really, it's wrapped into the overall work marketplace. Because the point of that product was never about just catalog by itself, it was about bringing customers into the broader Upwork work marketplace. And where we are now is incredibly pleased with the progress we've made, not just with catalog, but with the innovations on top of that, such as consultations, which we launched in the last quarter.
And now are going to be rolling out from four categories to all of our categories, presently, because we're really seeing that catalog and consultations are excellent inroads for customers to get started, either with something small and bite sized, or becoming with for example, consultation. A great way to get into a conversation with a talent that more often than not leads to follow on work.
And so with consultations, for example, we're seeing clients are averaging a much faster time to hire than we had in the talent marketplace. So it's 50% lower with just 1.5 days to get started. And they're also returning to do follow-on work, which often is in the talent marketplace at a much higher rate 50% higher than we've seen with talent marketplace jobs historically. And so this is a nice kind of like in between offering that is really graduating clients really nicely from some version of catalog kind of into the broader marketplace.
And so this is really validating yet again, our whole thesis around catalog talent marketplace, consultations, as being part of this broader work marketplace ecosystem that is just adept at getting customers in the door and getting started with any variety of our products.
Okay, great. Thanks, Hayden. Thanks. Jeff.
Thank you. One moment for the next question. Our next question comes from Logan Reich of RBC Capital Markets. Your line is open.
Hey, thanks for taking the question. Logan on for Brett Erickson. Question on enterprise. So you guys had a strong client growth this quarter. Just curious what you think is the driver of that, why are you seeing increased adoption of people signing up for enterprise now? And how much would you attribute that to the larger sales force then I have a follow-up?
Sure, thanks, Logan. I'll start with that. So a part of it is, is simply the fact that we are executing against our plan, where we identified the opportunity to invest more aggressively in building out our sales motion here. We start adding reps in Q4 of 2021. Those reps are starting to ramp and really have an impact really starting in Q2 of this quarter. So we delivered the 36 new accounts. That was up, I think, 24% year-over-year.
So we're really pleased to see that and then as Hayden mentioned earlier, obviously our value proposition resonates very strongly for accounts of all sizes, which haven't yet start to see those accounts shift exactly what they're interested in to cost saving, dynamics is a result of any recessionary dynamics, but we are actively engaged with them on those topics. So we're really pleased by what we're seeing both on the land side as well as the expand side, and continue to be pleased with the opportunity ahead of us.
Great, thanks. And then just any sort of divergence, you guys might have noticed in the behavior from companies that, might be cutting costs or laying off full time employees. Are you noticing any difference in behavior from those clients relative to your overall client base?
We're really not seeing this yet. I'd say the average customer is looking just like it was over the past couple quarters. And the success stories are very similar. We have customers like Emirates and NBDs. That's one of the largest banks in the Middle East in North Africa. And, they came to us looking for new flexible talent that can drive innovation, their marketing team, and this is typical for us, we're not really seeing an influx of customers who are coming to us, just because they're doing a big layoff or even our existing customers who maybe are trimming headcount coming back and saying, okay, now we need to overhaul the program.
So as Jeff mentioned, as we look ahead, maybe as the economy worsens, or other things, there may be more of those types of things. But certainly, as we looked at Q2, it was really more of, kind of, I hate to call it same old, same old, but you know, these value propositions that we've always had really driving customer activity in really great ways.
Great. Thanks for the color. I appreciate it.
Thank you. And one moment for the next question. Our next question comes from Brent Thill of Jefferies. Your line is open.
All right. Thank you. This is [indiscernible]. I'm going to add a couple of macro questions, if possible. So you talked about the client acquisition in Europe in SMBs. I want to see if you can maybe add a little more color in terms of behavior there. I don't know whether there's any tendency for smaller projects, or use of more project catalog, as opposed to more hours. Whether by geography or by industries or customer size. And then this is going to be a little bit different into previous questions about enterprise, but any signs of anything on the enterprise segment in terms of activity on your platform?
Sure, thanks, John, I'll start. In terms of activity that we're seeing in from a geographic perspective, I can't say that there's any notable trends or more details that that we can provide, we just saw a little bit greater softening in the Europe market overall. But nothing, nothing in particular to call out about specific customer segment behaviors.
And then, with respect to enterprise, is your question, what sort of impact we're seeing in the enterprise? Or can you clarify the question?
Yes, I mean, in terms of overall level of activity, or chronic acquisition and so on, I mean, is there any softness at all among the larger customers?
Yes, what we're seeing in enterprise is, starting at the very top, we're having good success hiring our land reps against our plan there. They're continuing to execute well against their productivity targets. We're beating and achieving that. The new reps that we're hiring are onboarding well. It's early, we're just basically, I guess, seven, eight months out of the first kind of reps that we started hiring in Q4 last year.
Conversations with those accounts are going very well. Nothing, no material impasses noticeable from a sales cycle perspective. And engagement with our existing accounts also continues to go well, and you can see that in the overall revenue per account or revenue growth from the enterprise segment. So nothing to call out there.
Great. Thank you.
Thank you. One moment. Our last question will come from Marvin Fong of BTIG. Your line is open.
Good evening. Thanks for taking my questions. And congratulations on the quarter. Let me just start with so many questions about the current environment as to a bigger picture question perhaps. Just curious, maybe we just think about some of your other key performance indicators like time to hire or fill rates. In light of all the improvements you've been making to the platform over the past years and the new point membership structure has either time to higher flow rates, change meaningfully since look, let's say before the pandemic to right now, and how are those trending? And then I have a follow-up?
Sure. I'd say, we feel good about the state of time to hire fill rate. Certainly, it was pretty remarkable, I think to us that as we went through Q1, for example. And we saw, a pretty significant shock to the system in the WMSD, web mobile software examine category. As the Ukraine war, and our decision to suspend operations with inside of Russia and Belarus played out that as you reported in the Q1 call, there was really no impact to fill read in that category, for example.
And so I think we've navigated both some external shocks, potentially very well, with regard to a metric like that, which is a critical one on our platform. And with innovations, like the launch of consultations, we're seeing the potential for acceleration in places like time to hire with a product like that, and with catalog, which connects the talent and clients get on the platform even faster.
So I think all of these metrics are really healthy. And even as we look at to some of the things that I think are viewed by the outside world as monetization oriented features, but truly our marketplace health features like boosted proposals, and things like that, that we've also launched over the last couple of quarters. These are also leading to higher quality connections, faster connections between available talent and seeking clients in the marketplace.
So, across the board, I think we're feeling great about all of these metrics and where they are, and we'll continue to just focus on innovating the product portfolio, and the specific features to dial, how clients and talent are getting connected.
Great. Thanks for that. And then just a question on guidance. So it looks like 7 million to 8 million EBITDA loss in the third quarter, and based on your full-year guidance it seems to suggest pretty healthy improvement, a lower loss in the fourth quarter. And I realized the fourth quarter for the larger revenue wise, but is there anything else to call out for instances? Is your brand marketing spend peaking in the third quarter? Is there anything you can call out there with the would be great? Thanks.
Yes, there's nothing overly notable. Primarily, Q4 is often a little bit stronger than Q3 from a revenue perspective, and a bit harder from a marketing perspective, in terms of efficiency of dollar spend. So there's a little bit of a decline on a quarter-over-quarter basis from marketing from Q3 to Q4. Those really are the primary drivers that impact the EBITDA change from Q3 to Q4. Next one.
Great. Thanks, Jeff.
Thank you. And with our last question, I would now like to turn the conference back to Mr. Evan Barbosa for closing remarks.
Thanks. On behalf of the entire Upwork team, thank you for joining us today and thank you for your interest in Upwork. If you need any clarifications or have any follow-up questions, please do not hesitate to reach out to me at email@example.com This concludes our call.
This conclude today's conference call. Thank you all for participating. You may now disconnect and have a pleasant day.