Veteran tech finance executive Jim Benson joined publicly held Dynatrace two years ago when it was nearing $1 billion in revenue and ripe for a new phase of growth. The company, split off from Compuware five years ago, was producing positive net income, healthy cash flows and yearly revenue growth of nearly 30 percent.
“The philosophy of [Dynatrace] management was very much in line with my personal philosophy that you need to grow, and you need to grow profitably,” Benson said about the appeal of the job. However, the former CFO of Akamai Technologies and HPE alum observes, “What gets you to $1 billion doesn’t get you to $3 billion, doesn’t get you to $5 billion.”
Dynatrace had succeeded in winning large clients in the application and infrastructure monitoring space, but its operational and financial plumbing hadn’t kept up. In an interview last month, Benson discussed how Dynatrace is refining its sales model and setting common goals for the sales, marketing and product teams. He also touched on the effects of the faster pace of technology markets.
Besides the conviction to grow profitability, what else attracted you to the company?
What Dynatrace needed was an operational CFO. That is my skill set—the go-to-market models for software and SaaS companies, R&D lifecycles and the evolution of the product portfolio. What [also] interested me was the company was a rocket ship in a very early-stage market that needed someone alongside the CEO to guide it.
What operational areas of the company required upgrading to suit Dynatrace’s broader portfolio and growth initiatives?
We’re doing many things on the go-to-market side, like building out a specialty sales model to drive adoption in new product areas. It’s also about driving alignment for the company across all functions.
The old functional model of Dynatrace was small and scrappy. That’s not uncommon. We had a sales organization that was very, very tactical and that had a one-play model: Find an application owner, get to a proof-of-concept to land [the prospect], and then expand from there. People were in their swim lanes doing their things.
That works for a while. As companies evolve, they require more coordination between the product, marketing and sales teams, especially when entering adjacent markets like security. The integration of teams is much better now. The sales leader is in tune with the product and marketing organizations. We have not seen any disruption from the changes.
What have you done at ground level to re-accelerate growth but stay profitable while you do it?
We made some go-to-market changes at the beginning of this fiscal year [April 2024]. We re-segmented the customer base. We re-weighted resources to consider the [customer base] as IT 500 companies with the highest propensity to spend.
To drive margin, we look at the weighting of investment. Where can we drive more scale? How do we get more efficiency out of G&A? How do we get more efficiency out of our sales and marketing envelope? One of the things we’re doing is leveraging partners to get better scale for every dollar spent in sales and marketing.
How did the orientation toward profitability become part of the organization’s DNA?
We are a product, financially, of a private equity-owned asset that always valued profitability. The CEO also ascribes to that model. We want to continue to drive margin improvements and efficiency, but if we weigh one versus the other, growth trumps profitability as a driver of company valuation. But you need both. We are a “rule of 40” company—when you measure topline growth and free cash flow or operating margins [they should be equal to or greater than 40 percent].
What’s different in the technology industry from 20 years ago?
The pace of change and the pace of innovation and the pace of disruption. Twenty years ago, the changes happened over one- and two-year cycles. The pace of change has amped up. Winners and losers used to stay in place for long periods. The period between a company being on top and suddenly being unseated is a bit shorter.
Does that mean R&D has to happen faster?
You need a chief technology officer looking to the future. Previously, you could align a product roadmap over a three-year window. Companies had long monetization cycles from roadmap items. Today’s technology landscape requires someone thinking about the next year or two of production introductions and ensuring the company is well-positioned and will not get disintermediated five years from now. There is a need to build for today while thinking about tomorrow.