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Item 1. Business

2021-02-18 compared with 2020-02-20 · 179 added, 188 removed, 174 unchanged (68% of the section changed)

Appian provides a low-code automation platform that accelerates the creation of high-impact business applications, enabling our customers to automate the most important aspects of their business.

Appian Corporation (together with its subsidiaries, "Appian," the "Company," "we," "us," or "our") provides a low-code automation platform that accelerates the creation of high-impact business applications and workflows, enabling our customers to automate the most important aspects of their business.

Global organizations use our applications to improve customer experience, achieve operational excellence, and simplify global risk management and compliance.

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With our platform, decision makers can reimagine their products, services, processes, and customer interactions by removing much of the complexity and many of the challenges associated with traditional approaches to software development.

Organizations across all industries are digitally transforming—leveraging software to automate and optimize mission critical operations, enhance customer experiences and drive competitive differentiation.

Organizations across all industries are digitally transforming by leveraging software to automate and optimize mission critical operations, enhance customer experiences, and drive competitive differentiation.

Historically, organizations have principally relied on packaged software and custom software solutions to operationalize and automate their businesses.

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Our low-code automation platform employs an intuitive, visual interface and pre-built development modules that reduce the time required to build powerful and unique applications.

Our platform automates the creation of forms, data flows, records, reports and other software elements that would otherwise need to be manually coded.

This functionality greatly reduces the iterative development process, allowing for real-time application optimization and ultimately shortening the time from idea to deployment.

Our applications take advantage of a complete stack of automation technologies, including our industry-leading workflow engine, rules engine, native Robotic Process Automation, or RPA, capabilities, leading case management capabilities, and integrated Google-based artificial intelligence, or AI.

Our customers can leverage these capabilities to apply the right automation approach for each specific use case.

Further, our patented Self-Assembling Interface Layer, or SAIL, technology ensures that applications developed on our platform can be immediately and natively deployed across a full range of mobile and desktop devices with no additional customization, including desktop web browsers, tablets and mobile phones.

Updates to applications developed with SAIL disseminate automatically across device types to ensure that all users benefit from the most up-to-date functionality.

Our platform automates the creation of forms, workflows, data structures, reports, and other software elements that would otherwise need to be manually coded.

This functionality greatly reduces the iterative development process, allowing for real-time optimization and ultimately shortening the time it takes to design, build, and deploy applications.

Our customers take advantage of our complete automation capabilities, including our industry-leading workflow engine, rules engine, native Robotic Process Automation, or RPA, capabilities, leading case management capabilities, and integrated Google-based artificial intelligence, or AI.

Our customers can leverage these technologies to apply the right automation approach for each specific use case.

Further, our patented Self-Assembling Interface Layer, or SAIL, technology ensures applications developed on our platform can be immediately and natively deployed across a full range of mobile and desktop devices with no additional customization, including desktop web browsers, tablets, and mobile phones.

Updates to applications developed with SAIL disseminate automatically across device types to ensure all users benefit from the most up-to-date functionality.

At the same time, we unify enterprise data in a single searchable environment, providing organizations with a comprehensive view of customer, product, organizational asset, and other critical information.

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Our platform can be deployed in the cloud or on-premises, with organizations able to access the same functionality and data sources in all cases.

Our go-to-market strategy consists of both direct sales and, to a lesser extent, sales through strategic partners.

We sell our software almost exclusively through subscriptions and intend to grow our revenue both by adding new customers and increasing the number of users at existing customers that use applications developed on our platform.

As of December 31, 2019, we had 533 customers in a wide variety of industries, of which 427 customers were commercial and 106 customers were government or non-commercial entities.

Our customers include financial services, life sciences, government, telecommunications, media, energy, manufacturing and transportation organizations.

As of December 31, 2019, 24% of our commercial customers were Global 2000 organizations and included 48 Fortune 500 companies.

Our go-to-market strategy consists of both direct sales and sales through strategic partners.

Strategic partners work with organizations undergoing digital transformations projects and, when these partners recognize an opportunity for our platform, they often introduce us to potential customers.

Many of our customers begin by building a single application and grow to build dozens of applications on our platform, which implicitly reduces the per-user cost of each application.

Generally, the development of new applications results in the expansion of our user base within an organization and a corresponding increase in revenue to us because we charge subscription fees on a per-user basis for the significant majority of our customer contracts.

Every additional application that an organization creates on our platform increases the value of our platform for that organization because it further integrates people, process and data across the organization and facilitates knowledge sharing.

At the same time, our industry-leading professional services organization enables our customers to more easily build and deploy applications on our platform to achieve their digital transformation goals.

Generally, the development of new applications results in the expansion of our user base within an organization and a corresponding increase in revenue to us because we charge subscription fees on a per-user basis and, to a lesser degree, non-user based single application licenses.

Every additional application an organization creates on our platform increases the value of our platform for that organization because it further integrates people, processes, and data across the organization and facilitates knowledge sharing.

At the same time, our industry-leading

Customer Success organization enables our customers to more easily build and deploy applications on our platform to achieve their digital transformation goals.

We have experienced strong revenue growth, with revenue of $304.6 million, $260.4 million, and $226.7 million in 2020, 2019, and 2018, respectively.

Our subscriptions revenue was $151.3 million, $126.0 million and $91.5 million in 2019, 2018 and 2017, respectively, and includes sales of our SaaS subscriptions, on-premises term license subscriptions and maintenance support.

Our cloud subscription revenue was $95.0 million, $67.4 million and $40.2 million in 2019, 2018 and 2017, respectively, representing year-over-year growth rates of 41% from 2018 to 2019 and 68% from 2017 to 2018.

Our professional services revenue was $109.1 million, $100.7 million and $85.2 million in 2019, 2018 and 2017, respectively.

Our subscriptions revenue was $198.7 million, $151.3 million, and $126.0 million in 2020, 2019, and 2018, respectively, and includes sales of our software-as-a-service, or SaaS, subscriptions, on-premises term license subscriptions, and maintenance and support.

SaaS subscription revenue, which is also referred to as cloud subscription revenue, was $129.2 million, $95.0 million, and $67.4 million in 2020, 2019, and 2018, respectively, representing year-over-year growth rates of 36% from 2019 to 2020 and 41% from 2018 to 2019.

Our professional services revenue, generated by our Customer Success organization, was $105.9 million, $109.1 million, and $100.7 million in 2020, 2019, and 2018, respectively.

Over time, as the need for professional services associated with user deployments decreases and the number of end users increases, we expect subscriptions revenue as a percentage of total revenue will continue to increase.

Further, as the usage of partners expands, we expect the proportion of our total revenue from subscriptions to increase over time.

We have invested in developing our platform, expanding our sales and marketing and research and development capabilities, and providing general and administrative resources to support our growth.

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We also used cash in operations of $7.6 million, $8.9 million, and $31.3 million in 2020, 2019, and 2018, respectively.

Industry & Market Data

Information contained in this Annual Report on Form 10-K concerning our industry and the market in which we operate, including our general expectations and market position, market opportunity and market size is based on information from various sources, including independent industry publications by Forrester Research Inc., or Forrester, Gartner, Inc., or Gartner, Prescient & Strategic Intelligence and S&P Global Market Intelligence.

Beginning in late 2019 and continuing into 2021, the outbreak of the novel coronavirus disease, or COVID-19, has resulted in the declaration of a global pandemic and adversely affected economic activity across virtually all sectors and industries on a local, national, and global scale.

The impact of the COVID-19 pandemic on the economy and our business continues to be a dynamic situation.

Operationally, we remain focused on supporting our customers, employees, and communities during this time.

We have responded quickly to adopt a virtual corporate strategy consisting of enabling most of our employees to work productively from home while continuing to guard the health and safety of our teams, support our customers, and mitigate risk.

We are focused on ensuring continuity for our customers.

To the extent possible, we are conducting business as usual, with necessary or advisable modifications to employee travel, employee work locations, and marketing events.

Refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Annual Report on Form 10-K for further discussion regarding the impact of the COVID-19 pandemic on our fiscal year 2020 financial results.

Through December 31, 2020, we have not seen a meaningful adverse impact to our financial position, results of operations, and cash flows and liquidity as a result of COVID-19.

While the verticals from which we have historically generated the majority of our revenue have been less impacted by COVID-19 to date, there may be impacts to our financial condition and results of operations in 2021 as a result of reduced demand for our products and services and longer sales cycles.

The ultimate impact of COVID-19 on our business is not estimable at this time and will be largely dependent upon a number of factors outside of our control including the extent and duration of the outbreak as well as any mitigating actions which may be undertaken by global governments and the general public.

Industry and Market Data

Information contained in this Annual Report on Form 10-K concerning our industry and the market in which we operate, including our general expectations and market position, market opportunity, and market size is based on information from various sources, including independent industry publications by Forrester Research Inc., or Forrester, Gartner, Inc., or Gartner, Prescient & Strategic Intelligence, and International Data Corporation, or IDC.

In presenting this information, we have also made assumptions based on such data and other similar sources, and based on our knowledge of, and our experience to date in, the markets for our services.

This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates.

This information involves a number of assumptions and limitations, and we caution readers not to give undue weight to such estimates.

Although we have not independently verified the accuracy or completeness of any third-party information, we believe the market position, market opportunity, and market size information included in this Annual Report on Form 10-K is reliable.

The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the “Risk Factors” section.

The industry in which we operate is subject to a high degree of uncertainty and risk due to a

variety of factors, including those described in the “Risk Factors” section.

These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.

The Gartner report described in this Annual Report on Form 10-K represents data, research opinion or viewpoints published, as part of a syndicated subscription service, by Gartner and are not representations of fact.

The Gartner report speaks as of its original publication date, and not as of the date of this Annual Report on Form 10-K, and the opinions expressed in the Gartner report are subject to change without notice.

The Gartner content described herein, or the Gartner Content, represent(s) research opinion or viewpoints published, as part of a syndicated subscription service, by Gartner, and are not representations of fact.

The Gartner Content speaks as of its original publication date and not as of the date of this Annual Report on Form 10-K, and the opinions expressed in the Gartner Content are subject to change without notice.

Gartner does not endorse any vendor, product or service depicted in its research publications and does not advise technology users to select only those vendors with the highest ratings or other designation.

Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact.

Gartner research publications consist of the opinions of Gartner’s Research & Advisory organization and should not be construed as statements of fact.

Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.

The S&P Global Market Intelligence data described herein represents proprietary data gathered by S&P Global Market Intelligence and is not a representation of fact.

The S&P Global Market Intelligence data is as of June 11, 2019 (and not as of the date of this Annual Report on Form 10-K) and is subject to change without notice.

Benefits of Our Platform

We enable organizations to differentiate themselves from their competition through software-enabled digital transformation.

With our platform, organizations can rapidly and easily design, build and implement powerful, enterprise-grade custom applications through our intuitive, visual interface, with little or no coding required.

Our patented SAIL technology ensures that applications developed on our platform can be immediately and natively deployed across a full range of mobile and desktop devices with no additional customization, including desktop web browsers, tablets and mobile phones.

We also enable organizations to easily modify and enhance applications and automatically disseminate these updates across device types to ensure that all users benefit from the most up-to-date functionality.

With our platform, organizations can rapidly and easily design, build, and implement powerful, enterprise-grade custom applications and workflows through our intuitive, visual interface, with little or no coding required.

Our patented SAIL technology ensures applications developed on our platform can be immediately and natively deployed across a full range of mobile and desktop devices with no additional customization, including desktop web browsers, tablets, and mobile phones.

We also enable organizations to easily modify and enhance applications and automatically disseminate these updates across device types to ensure all users benefit from the most up-to-date functionality.

Key benefits of our platform include:

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Our heritage as a business process management, or BPM, company provides us with this differentiated understanding of complex processes, and we have incorporated that expertise into our platform to enable the development of powerful applications.

Organizations have used our platform to launch new business lines, build large procurement systems,

manage retail store layouts, conduct predictive maintenance on field equipment and manage trading platforms, among a range of other use cases.

Organizations have used our platform to launch new business lines, build large procurement systems, manage retail store layouts, conduct predictive maintenance on field equipment, optimize supply chain logistics, and manage trading platforms, among a range of other use cases.

• Rapid and simple innovation through our powerful platform.

Our platform employs a low-code, intuitive, visual interface and pre-built development modules that reduce the time required to build powerful and unique applications.

Our platform automates the creation of forms, data flows, records, reports and other software elements that would otherwise need to be manually coded or configured.

This functionality greatly reduces the iterative development process, allowing for real-time application optimization and ultimately shortening the time from idea to deployment.

Our platform automates the creation of forms, workflows, data structures, reports, and other software elements that would otherwise need to be manually coded or configured.

This functionality greatly reduces the iterative development process, allowing for real-time optimization and ultimately shortening the time it takes to design, build, and deploy applications.

In turn, organizations can better leverage scarce and costly developer talent to accomplish more digital transformation objectives.

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• Delivering measurable results using automation.

Our low-code automation applies the power of RPA, AI, workflow and enterprise integration to quickly deliver a meaningful business impact.

Our low-code automation allows companies to combine people, existing systems, data, process mining, RPA, and AI in a single workflow to quickly deliver a meaningful business impact.

Our RPA automates the routine tasks across legacy and modern systems, increasing efficiency and providing even more value to the customer.

AI boosts business outcomes by making the applications smarter.

Our platform allows companies to design, execute, manage and optimize processes (i.e.

AI boosts business outcomes by making the applications intelligent, and our platform allows companies to design, execute, manage, and optimize workflows.

• Seamless integration with existing systems and data.

In contrast to typical enterprise software, our platform does not require that data reside within it in order to enable robust data analysis and cross-department and cross-application insight.

In contrast to typical enterprise software, our platform does not require data to reside within it in order to enable robust data analysis or cross-department and cross-application insight.

Our platform seamlessly integrates with many of the most popular enterprise software applications and data repositories and can be used within many legacy environments.

For example, organizations frequently use our platform to extend the life and enhance the functionality of legacy systems of record, such as those used for enterprise resource planning, human capital management and customer relationship management, by building new applications that enhance the functionality of those systems and by leveraging the data within those systems to further optimize and automate operations.

enhance the functionality of those systems and by leveraging the data within those systems to further optimize and automate operations.

• Deployment flexibility to serve customer needs.

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Therefore, it holds some of the highest security certifications available.

Our platform was one of the first software companies to achieve Federal Risk and Authorization Management Program (FedRAMP) compliance.

Our platform was one of the first to achieve Federal Risk and Authorization Management Program (FedRAMP) compliance.

Additionally, government agencies can deploy our platform into a fully managed environment at the Impact Level IV security levels with a comprehensive SLA.

Our platform is also certified under the Payment Card Industry Data Security (PCI DSS) and under HITRUST as meeting all requirements under the HITRUST Common Security Framework (CSF).

Our platform is also certified under the Payment Card Industry Data Security Standard (PCI DSS) and meets all requirements under the HITRUST Common Security Framework (CSF).

To protect personal health information, our platform is Health Insurance Portability and Accountability Act (HIPAA) compliant and enables General Data Protection Regulation (GDPR) compliance.

Our controls are documented in our SOC-2 Type 2 report, in which an independent audit firm provides a detailed review of Appian Cloud’s security, availability, and confidentiality controls.

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• Expand our customer base.

As of December 31, 2019, we had 533 customers in a wide variety of industries, including financial services, life sciences, government, telecommunications, media, energy, manufacturing and transportation.

We believe that the market for our software automation platform is still in its early stages and that we have a significant opportunity to add additional large enterprise and government customers.

We continue to grow our customer base in a variety of industries, including financial services, government, life sciences, telecommunications, media, energy, manufacturing, and transportation.

We believe the market for our low-code automation platform is still in its early stages, and we have a significant opportunity to add additional large enterprise and government customers.

• Grow through our differentiated land and expand model.

Many of our customers begin by building a single application and grow to build dozens of applications on our platform, which implicitly reduces the per-user cost of

each application.

Generally, the development of new applications results in the expansion of our user base within an organization and a corresponding increase in revenue to us because we usually charge subscription fees on a per-user basis.

Applications built on our platform may be used only on our platform while customers have active subscriptions, creating substantial switching costs for customers to move to a different software platform.

Many of our customers begin by building a single application and grow to build dozens of applications on our platform, which implicitly reduces the per-user cost of each application.

Every additional application an organization creates on our platform increases the value of our platform for that organization because it further integrates people, process, and data across the organization and facilitates knowledge sharing.

Applications built on our platform may be used only on our platform while customers have active subscriptions, creating a substantial incentive for customers to avoid the difficulties and costs associated with moving to a different software platform.

• Grow revenue from key industry verticals.

While our platform is industry-agnostic, we have made, and plan to continue to make, investments to enhance the expertise of our sales and marketing organization within our key industry verticals of financial services, life sciences and U.S.

federal government.

In 2020, we generated over 69% of our subscriptions revenue from customers in these verticals.

We believe that focusing on the digital transformation needs of organizations within these industry verticals can help drive adoption of our platform.

We believe focusing on the digital transformation needs of organizations within these industry verticals can help drive adoption of our platform.

• Continue to innovate and enhance our platform .

We have made, and will continue to make, investments in research and development to strengthen our platform and expand the number of features available to our customers.

We typically offer multiple upgrades each year that allow our customers to benefit from ongoing innovation.

As we continue to increase the functionality of our platform and further reduce the amount of developer skill required to build robust applications on our platform, we believe that we have the potential to expand the use of our platform.

We offer multiple upgrades each year that allow our customers to benefit from ongoing innovation.

As we continue to increase the functionality of our platform and further reduce the amount of developer skill required to build robust applications on our platform, we believe we have the potential to expand the use of our platform.

• Offer industry solutions to accelerate customer usage .

Our platform enables our customers to build applications quickly.

To give our customers an even faster start, we offer pre-built solutions.

To give our customers an even faster start, we and our partners offer pre-built solutions.

Every Appian solution is built on our platform so they are fully standardized, upgradeable, and compatible.

Our solutions are proactively collaborative with each other and not built in silos.

They have common data definitions, shared reports, and built in calls that talk to each other.

For these reasons, which are facilitated by our long-standing focus on the platform, our solutions approach is different from, and we believe superior, to what is currently available.

We currently offer financial services onboarding and customer contact center solutions.

• Expand our international footprint.

Our platform is designed to be natively multi-lingual to facilitate collaboration and address challenges in multi-national organizations.

Our platform is designed to be natively multilingual to facilitate collaboration and address challenges in multinational organizations.

In 2020, approximately 34% of our total revenue was generated from customers outside of the United States.

As of December 31, 2019, we operated in 12 countries and believe that we have a significant opportunity to continue to grow our international footprint.

As of December 31, 2020, we operated in 12 countries and believe we have a significant opportunity to continue to grow our international footprint.

We are investing in new geographies, including through investment in direct and indirect sales channels, professional services and customer support, and implementation partners.

• Grow our partner base.

We have several strategic partnerships including with KPMG, PwC and Deloitte.

These partners work with organizations that are undergoing digital transformation projects and, when these partners recognize an opportunity for our platform, they often introduce us to potential customers.

We have several strategic partnerships including with KPMG, PwC, Accenture, and Deloitte.

These partners work with organizations undergoing digital transformation projects and, when these partners recognize an opportunity for our platform, they often introduce us to potential customers in addition to building solutions on our platform.

We intend to further grow our base of partners to provide broader customer coverage and solution delivery capabilities.

Our Opportunity

We believe that we have a significant market opportunity in helping organizations accelerate their digital transformation by leveraging our low-code automation platform.

We believe we have a significant market opportunity in helping organizations accelerate their digital transformation by leveraging our low-code automation platform.

• Current core software markets.

We believe that our platform addresses several key core software markets, as follows:

According to the Low-Code Development Platform Market Research Report published by Prescient & Strategic Intelligence in August 2019, the market for low-code development platforms was valued at $5.6 billion in 2018 and is expected to grow at a 45% compound annual growth rate to $52.3 billion in 2024.

We were recognized as a "Leader" based on our completeness of vision and ability to execute in the Gartner Magic Quadrant for Enterprise Low-Code Application Platforms (Published on August, 8 2019;

Paul Vincent, Kimihiko Iijima, et al.).

According to Forrester, the market for RPA automation totaled $3.9 billion in 2018 and is expected to grow at a 25% compound annual growth rate to $12.0 billion in 2023.

We believe our platform addresses several key core software markets, as follows:

A low-code application development platform enables rapid application delivery with minimal hand-coding and quick setup and deployment.

According to the Low-Code Development Platform Market Research Report published by Prescient & Strategic Intelligence in June 2020, the market for low-code development platforms was valued at $10.3 billion in 2019 and is expected to grow at a 28% compound annual growth rate to $57.3 billion by 2026.

We were recognized as a "Leader" based on our completeness of vision and ability to execute in the 2020 Gartner Magic Quadrant for Enterprise Low-Code Application Platforms.

◦ Application PaaS.

Application platform as a service, or application PaaS, is a cloud service that provides the necessary infrastructure to enable the development, deployment, and hosting of software applications.

We believe that we are well positioned to capture a portion of the application PaaS market.

According to Gartner, the global application PaaS market was valued at $26.4 billion in 2018 and is expected to grow at a 21% compound annual growth rate to $69.3 billion in 2023.

BPM applications are designed to support the optimization of business processes, including process identification, improvement implementation and monitoring and analysis.

We were included as a "Leader" based on our ability to execute and the completeness of our vision in the Gartner Magic Quadrant for Intelligent Business Process Management Suites (Published on 30 January 2019;

Authored by Rob Dunie, Derek Miers, et al.) in 2019.

• Case management.

Case management applications are designed to support complex processes that require a combination of human workflows and collaboration, electronic workflows, data management and processing of files and cases.

We believe we are well positioned to capture a portion of the application PaaS market.

According to Gartner, the global application PaaS market was valued at $41.3 billion in 2019 and is expected to grow at a 23% compound annual growth rate to $118.3 billion by 2024.

◦ Robotic Process Automation.

RPA allows for the automation of high volume, rule-based, repetitive tasks performed by people and/or connecting to legacy systems that do not use modern application program interfaces, or APIs.

According to Gartner, the market for RPA totaled $2.2 billion in 2019 and is expected to grow at a 16% compound annual growth rate to $3.4 billion by 2024.

◦ Intelligent Process Automation.

Intelligent process automation, or IPA, combines task automation with process automation to orchestrate coordination across systems, humans, and digital workforce in a unified workflow.

According to IDC, the market for worldwide IPA software totaled $16.3 billion in 2019 and is expected to grow at a compound annual growth rate of 13% to $30.5 billion by 2024.

4 We were included as a "Leader" based on the strength of our current offering, our strategy, and our market presence in The Forrester Wave TM:

Cloud-Based Dynamic Case Management in 2018.

Taken together, these current core software markets were expected to represent a combined $35.9 billion market opportunity currently and a combined $133.6 billion market opportunity in the near term.

Software For Digital Process Automation for Deep Deployments, Q2 2019, in June 2019.

1 Gartner Magic Quadrant for Enterprise Low-Code Application Platforms , Published 30 September 2020;

Paul Vincent, Yefim Natis, Jason Wong, Saikat Ray, et al.

2 Gartner, Forecast:

Public Cloud Services, Worldwide, 2018-2024, 4Q20 Update, Colleen Graham, Neha Gupta, et al., 21 December 2020.

3 Gartner Forecast Analysis:

Robotic Process Automation, Worldwide;

Published 2 September 2020;

Fabrizio Biscotti, Cathy Tornbohm, Arthur Villa, et.

Worldwide Intelligent Process Automation Software Forecast, 2020-2024;

Published 15 July 2020;

Authored by Maureen Fleming.

Taken together, these current core software markets are expected to represent a combined $70.1 billion market opportunity currently and a combined $209.5 billion market opportunity in the near term.

• Traditional custom enterprise software market.

In addition to our current core software markets, we believe that our platform better addresses certain needs of enterprise companies that have historically used manually-developed custom software.

In addition to our current core software markets, we believe our platform better addresses certain needs of enterprise companies that have historically used manually-developed custom software.

The global enterprise application software market is expected to reach $231 billion in 2021, according to Gartner.

• Our internal estimate.

Based on approximately 150,000 global companies and government institutions in 2018 in relevant industries and revenue-based size segments, and our industry- and size-specific average annual recurring revenue for customers as of December 31, 2018, we internally estimate our market opportunity to have been approximately $34 billion in 2018.

Based on approximately 166,000 global companies and government institutions in relevant industries and revenue-based size segments as well as our industry- and size-specific average annual recurring revenue for customers as of December 31, 2020, we internally estimate our market opportunity to have been approximately $37 billion in 2020.

We determined relevant global companies and government institutions by industry and size by referencing certain independent industry data from S&P Global Market Intelligence.

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5 Gartner, Forecast:

Public Cloud Services, Worldwide, 2017-2023, 4Q19 Update, Colleen Graham, Neha Gupta, et al., 19 January 2020.

2 Gartner, Forecast:

Enterprise Application Software, Worldwide, 2018-2024, 4Q20 Update, Neha Gupta, Chris Pang, et al., 18 December 2020.

With our platform, organizations can rapidly and easily design, build, and implement powerful, enterprise-grade custom applications through our intuitive, visual interface, with little or no coding required.

Through the speed and power of our platform, organizations can make their digital transformations happen more effectively and efficiently than could be achieved through building an application with standard programming languages.

We believe that the key elements of our technology infrastructure are as follows:

Full-Stack Automation Capabilities

We believe the key elements of our technology infrastructure are as follows:

Low-code Automation Offering

Our heritage as a BPM company provides us with a differentiated understanding and ability to automate complex processes, and we have incorporated that expertise into our platform to enable the development of powerful business software.

Appian applications can leverage a complete stack of automation technologies, applying the right automation approach for each specific use case:

• Business Process Management.

Appian applications can leverage our complete automation capabilities, applying the right automation approach for each specific use case:

At the core of our platform is an advanced engine that enables the modeling, modification, and management of complex processes.

This engine enables orchestration of any business workflow, and can distribute work to Appian’s other automation capabilities, which include decision rules, RPA and AI.

Appian combines people, technologies, and data into a single workflow to maximize resources and improve business results.

Workflow can include any worker (people, RPA, AI) or any resource (data and system).

• Decision Rules.

Appian includes a declarative environment for defining and executing business logic or rules.

These rules can be highly complex and can be applied within the Appian platform to many use cases, ranging from automated decision making to user experience personalization.

These rules can be highly complex and applied within the Appian platform to many use cases, ranging from automated decision making to user experience personalization.

• Robotic Process Automation.

Appian will include native software robots which will be used to execute simple repetitive tasks, reducing the human burden of that work.

These robots will facilitate integration with legacy systems that do not offer modern application program interfaces, or APIs.

Appian includes native software robots which can be used to execute simple repetitive tasks, reducing the human burden of that work.

These robots facilitate integration with legacy systems that do not offer modern APIs.

• Artificial Intelligence .

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These features include sentiment analysis, translation, and document and image analysis.

Appian also allows our customers to integrate with their preferred AI provider using our zero-code connectors.

Appian also allows customers to integrate with their preferred AI provider using our zero-code connectors.

• Case Management.

Appian case management enables automation of many of the most common patterns of collaborative human work - including service management, incident management and investigations.

In the aggregate, these core capabilities enable Appian to automate and govern end-to-end processes.

Appian complements these automation technologies with related features like process reporting, analytics and management, which make it simple for organizations to quickly improve and upgrade their automations as business needs change.

Appian case management enables automation of many of the most common patterns of collaborative human work such as service management, incident management, and investigations.

Appian combines the power of workflow, decision rules, RPA, AI, and case management into a unified platform.

Our platform has the complete automation capabilities to fuel enterprise-wide workflows and the ability to scale with an organization's growth through performance, governance, and security.

Our complete automation offering is core to unlocking business results for organizations by bringing people, technologies, and data into a single workflow along with the development speed to keep organizations agile.

Web-Based Development Environment

The Appian design interface is a model-driven, web-based development environment for application creation, testing, deployment, and performance optimization.

Appian design is a shared repository of all Appian components—interfaces, process models, APIs, new component builders and user collaboration modules—and administration utilities for managing people, processes and data.

Appian design is a shared repository of all Appian components (interfaces, process models, APIs, new component builders, and user collaboration modules) and serves as an administration utility for managing people, processes, and data.

The Appian design repository incorporates best practices and years of lessons learned from digital transformation initiatives.

Common development operations tasks require just a few clicks and can be automated for hands-off deployment.

Dramatic improvements in developer productivity can be achieved through user-friendly capabilities such as fast impact analysis of all changes;

auto-updating applications and components when data types change;

and live views of interfaces under development.

Appian design guides developers through the necessary steps to create the foundation elements of reusable interfaces, records and business processes, while providing all the power that developers need to design, build and implement enterprise systems at scale.

Organizations have used our platform to launch new business lines, build large procurement systems, manage retail store layouts, conduct predictive maintenance on field equipment and manage trading platforms, among a range of other use cases.

Dramatic improvements in developer productivity can be achieved through user-friendly capabilities such as fast impact analysis of all changes, auto-updating applications and components when data types change, and live views of interfaces under development.

Appian design guides developers through the necessary steps to create the foundation elements of reusable interfaces, records, and business processes, while providing all the power developers need to design, build, and implement enterprise systems at scale.

Our Patented SAIL Technology

SAIL is our patented technology that allows developers to create dynamic and responsive web and native-mobile user interfaces through a “build once, deploy everywhere” architecture.

SAIL interfaces only need to be created once and SAIL automatically assembles customer applications for optimal viewing on each device type, including desktop web browsers, tablets and mobile phones, and each device operating system, including iOS and different permutations of Android.

SAIL leverages native functionality inherent across a myriad of devices and operating systems to ensure the consistency of experience and optimal performance levels that users expect.

Updates to applications developed with SAIL are automatically disseminated across device types to ensure that all users benefit from the most up-to-date functionality.

This approach enables enterprise mobility without the extensive time and resources that other development approaches require.

We believe that SAIL provides a significant advantage over other platforms that both require extensive customization for various devices at the time of the creation of the new applications and on an on-going basis as mobile device manufacturers continue to update their software and capabilities.

SAIL interfaces only need to be created once, and SAIL automatically assembles customer applications for optimal viewing on each device type, including desktop web browsers, tablets, and mobile phones, as well as each device operating system, including iOS and different permutations of Android.

SAIL leverages native functionality inherent across a myriad of devices and operating systems to ensure the consistency of experience and optimal performance levels users expect.

Updates to applications developed with SAIL are automatically disseminated across device types to ensure all users benefit from the most up-to-date functionality.

This approach enables enterprise mobility without the extensive time and resources other development approaches require.

We believe SAIL provides a significant advantage over other platforms that both require extensive customization for various devices at the time of the creation of the new applications and on an on-going basis as mobile device manufacturers continue to update their software and capabilities.

Low-Code Data

Appian Records is an advanced data management technology that allows end users to discover and unite enterprise data into a single searchable environment, providing a comprehensive view of an organization’s data.

In contrast to typical enterprise software, our platform does not require that data reside within it in order to enable robust data analysis and cross-department and cross-application insight.

In contrast to typical enterprise software, our platform does not require data to reside within it in order to enable robust data analysis and cross-department and cross-application insight.

Using standard database software and service connection frameworks, including APIs, our platform seamlessly integrates with many of the most popular enterprise software applications and data repositories and can be used within many legacy environments.

Users simply need to assign a name to a given topic and then decide which existing data sources within the enterprise they want to capture.

In addition to the benefits of having an immediate snapshot of all centralized data relating to the customer, product, employee or service request.

Records also allows organizations to analyze the end-to-end journeys of any given person, entity or asset.

Users simply need to assign a name to a given topic and decide which existing data sources within the enterprise they want to capture.

In addition to the benefits of having an immediate snapshot of all centralized data relating to the customer, product, employee, or service request, Appian Records also allows organizations to analyze the end-to-end journeys of any given person, entity, or asset.

Once the connections are established, users may navigate, analyze, collaborate, and take action on data from our intuitive dashboards and interactive reports.

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We designed our platform to support large global enterprises and government organizations at scale, in the cloud or on-premises.

We designed, deploy and manage our platform with the goal of it being a “joy to use” for both developers and users of applications.

We design, deploy, and manage our platform with the goal of it being a “joy to use” for both developers and users of applications.

Our customers build powerful and unique applications using our proprietary and patented SAIL technology, which we also use ourselves to develop features of our platform.

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We may maintain the contract as long as we pay maintenance fees.

Kx may terminate the agreement if we

materially breach the agreement, become insolvent, make an assignment for the benefit of creditors, or if a bankruptcy proceeding is initiated against us.

Kx may terminate the agreement if we materially breach the agreement, become insolvent, make an assignment for the benefit of creditors, or if a bankruptcy proceeding is initiated against us.

Unless we fail to pay amounts due under the contract or violate certain of Kx’s intellectual property rights, Kx may not terminate the agreement until either it has successfully litigated a breach action or six months, whichever is earlier.

Our cloud offering is hosted by Amazon Web Services, or AWS, and is available in 49 availability zones in 14 countries.

Our cloud offering is hosted by Amazon Web Services, or AWS, and is available in 77 availability zones in 24 geographic regions.

Our software is also able to run in the Microsoft Azure cloud and the Google Cloud Platform.

Our enablement of the Microsoft Azure cloud and the Google Cloud Platform is consistent with our principle of platform neutrality.

We have also implemented a wide set of technical, physical and personnel-based security controls designed to protect against the compromise of confidential data that belongs to both our customers and us.

We have also implemented a wide set of technical, physical, and personnel-based security controls designed to protect against the compromise of confidential data belonging to both our customers and us.

Professional Services

Since inception, we have invested in our professional services organization to help ensure that customers are able to deploy and adopt our platform.

Since inception, we have invested in our Customer Success organization to help ensure customers are able to deploy and adopt our platform.

We believe our investment in professional services, as well as efforts by partners to build their practices around Appian, will drive increased adoption of our platform.

When we first acquire a new customer, our professional services experts or our deployment partners’ professional services experts start the implementation process.

When we first acquire a new customer, our professional services experts or our partners’ professional services experts start the implementation process.

Delivery specialists facilitate deployment of our platform, and training personnel provide comprehensive support throughout the implementation process.

Customers have access to our Appian Academy, which caters to a diverse range of skill sets and roles within organizations and trains developers on our platform.

We also provide instructor-led courses at our Tysons, Virginia headquarters and certain of our other offices, as well as virtual classrooms for self-paced learning and on-site training at our customers’ offices.

Customers have access to our Appian Academy, which trains analysts and developers of different skill sets on our platform.

We also provide instructor-led courses globally, delivered either virtually or in-person.

Once our customers have deployed and implemented our platform, our Appian Architects review our customers’ programs and applications to find potential issues and provide recommendations on best practices.

Our professional services team also assists customers by building applications on our platform for them.

Over time, we expect professional services revenue as a percentage of total revenue to decline as we increasingly rely on strategic partners to help our customers deploy our software.

Over time, we expect professional services revenue as a percentage of total revenue to continue to decline as we increasingly rely on strategic partners to help our customers deploy our software.

Customer Support

Our customer support personnel are trained engineers and designers who can work with customers on the front lines to address support issues.

We provide email and phone support, with teams in the United States, the United Kingdom and Australia.

Developers can also find answers to their questions on the Appian Community, a community site that provides online customer support;

real-time collaboration and networking;

a growing knowledge base of answers for common questions;

and live product webinars and training.

We provide e-mail and phone support via teams in the United States, the United Kingdom, and Australia.

Developers can also find answers to their questions on the Appian Community, a community site that provides online customer support, real-time collaboration and networking, a growing knowledge base of answers for common questions, and live product webinars and training.

The Appian Community also includes documentation, methodologies, and reusable components for our platform.

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Our Customers

Our customers operate in a variety of industries, including financial services, government, education, technology, media and telecom, consumer, life sciences and industrials.

As of December 31, 2019, we had 533 customers in a wide variety of industries, of which 427 customers were commercial and 106 customers were government or non-commercial entities.

Our customers include financial services, life sciences, government, telecommunications, media, energy, manufacturing and transportation organizations.

Generally, our sales force targets its efforts to organizations with over 2,000 employees and $2 billion in annual revenue.

Our customers operate in a variety of industries, including financial services, government, life sciences, education, technology, media and telecommunications, consumer, and industrials.

As of December 31, 2020, we had 693 customers, of which 548 customers were commercial and 145 customers were government or non-commercial entities.

Generally, our sales

force targets its efforts to organizations with over 2,000 employees and $2 billion in annual revenue.

Our number of customers paying us in excess of $1 million of annual recurring revenue has grown from 48 at the end of 2019 to 55 at the end of 2020.

As of December 31, 2019, 24% of our commercial customers were Global 2000 organizations and included 48 Fortune 500 companies.

As of December 31, 2020, 25% of our commercial customers were Global 2000 organizations, and 60 of our customers were Fortune 500 companies.

No single end-customer accounted for more than 10% of our total revenue in 2020, 2019, or 2018.

Culture and Employees

We believe that fostering our distinct culture of innovation is an important contributor to our success as a company.

When we started Appian, we used to debate about everything.

It was second nature since half the founding team had been competitive debaters in college.

Debate proved to be a great way to reach the best decisions.

Bad ideas couldn’t survive;

ideas got better.

We encourage everyone to speak up, but we also delegate every decision to a single person.

So, we can disagree, and we still reach firm resolutions.

Our culture was purposefully created by our four founders, who are still heavily involved in operating the business, including recruiting, interviewing and educating new employees at Appian.

Our founders, led by Matt Calkins, our Chief Executive Officer, have intentionally grown our business organically, focusing on developing a single solution—the Appian platform.

We do so by employing a unified development team located in a single office in the Washington, D.C.

metropolitan area to maximize the cohesion and simplicity of our platform and our company.

When a client buys Appian software, they get a piece of Appian culture along with it.

As of December 31, 2019, we had 1,018 full-time employees in the United States and 257 full-time employees internationally.

During 2019, we had a voluntary attrition rate of 10% among all employees of our company.

We believe that this low voluntary attrition rate is a testament to our company culture.

Human Capital Resources and Management

Employees, Culture, and Labor Relations

Our distinct culture of innovation is an important contributor to our success as a company.

We promote an inclusive environment where our employees can thrive every day and contribute their unique, diverse perspectives to help create transformative solutions for our customers.

Our culture was purposefully cultivated by our four founders, who are still heavily involved in operating our business, including recruiting, interviewing, and educating new employees at Appian.

Led by Matt Calkins, one of our founders and our Chief Executive Officer, we have grown our business organically by employing a unified team to maximize the cohesion and simplicity of our platform and our company.

As of December 31, 2020, we had a total global workforce of 1,460 full-time employees, 1,124 of which were based in the United States.

During 2020, we had a voluntary attrition rate of only 9% among all employees, which we believe is a testament to the strength of our culture.

None of our U.S.

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We believe our employee relations are good, and we have not experienced any work stoppages.

Additionally, we are subject to, and comply with, local labor law requirements in all countries in which we operate.

Talent Acquisition and Development

We have a robust talent acquisition program to attract, recruit, and retain new talent.

We utilize an extensive campus recruiting program, provide for an employee referral program, offer opportunities for internal transfers, and offer competitive compensation and benefits programs.

We also provide a variety of resources to help our employees grow in their current roles and build new skills, including access to Appian University, a system that houses Appian’s in-house learning and development solutions.

Inclusion and Diversity

We believe employee diversity and an inclusive environment are paramount to our continued success, as our individual styles of communication, management, and problem-solving enable us to learn from one another and discover creative solutions.

We sponsor a number of affinity groups, initiated by employees, that aim to build stronger internal and external networks and partnerships, create a positive lasting impact through social and educational outreach and other activities, and create development opportunities for future leaders.

Our Competition

Our main competitors fall into three categories:

(1) providers of low-code development platforms, such as salesforce.com, ServiceNow, Outsystems, Mendix and Bizagi;

(2) providers of business process management and case management software, such as Oracle, Pegasystems, SAP, Microsoft and K2;

and (3) providers of custom software and customer software solutions that address, or are developed to address, some of the use cases that can be addressed by applications developed on our platform.

As our market grows, we expect that it will attract more highly specialized vendors as well as larger vendors that may continue to acquire or bundle their products more effectively.

(1) providers of custom software and customer software solutions that address, or are developed to address, some of the use cases that can be addressed by applications developed on our platform;

(2) providers of low-code development platforms, such as Microsoft, Salesforce.com, ServiceNow, OutSystems, and Mendix;

and (3) providers of business process management and case management software, such as Pegasystems, IBM, Bizagi, Oracle, and Nintex.

As our market grows, we expect it will attract more highly specialized vendors as well as larger vendors that may continue to acquire or bundle their products more effectively.

The principal competitive factors in our market include:

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• Brand awareness and reputation.

We believe we generally compete favorably with our competitors with respect to the features, security and performance of our platform, the ease of integration of our applications and the relatively low total cost of ownership of our applications.

We believe we generally compete favorably with our peer group with respect to the features, security, and performance of our platform, the ease of integration of our applications, and the relatively low total cost of ownership of our applications.

However, many of our competitors have substantially greater financial, technical, and other resources, greater name recognition, larger sales and marketing budgets, broader distribution, more diversified product lines, and larger and more mature intellectual property portfolios.

Backlog represents non-cancellable future amounts to be recognized under software as a service, or SaaS, and term license subscription agreements.

Our backlog is equivalent to our remaining performance obligations.

As of December 31, 2019 and 2018, we had backlog of approximately $176 million and $230 million, respectively.

Approximately 41% of our backlog as of December 31, 2019 is not expected to be recognized in 2020.

The decrease in backlog is due to the primarily upfront revenue recognition of our on-premises term license subscriptions under ASU 2014-09, Revenue from Contracts with Customers (Topic 606), or ASC 606, and the reduced contract lengths of our on-premises term license subscriptions.

We expect that the amount of backlog relative to the total value of our contracts will change from quarter to quarter and year to year for several reasons, including the specific timing and duration of SaaS and term license subscription agreements with large customers, the specific timing of customer renewals, changes in customer financial circumstances and foreign currency fluctuations.

We often sign multiple-year SaaS subscription agreements.

Backlog may vary based on changes in the average non-cancellable term of SaaS and term license subscription agreements.

The change in backlog that results from changes in the average non-cancellable term of SaaS and term license subscription agreements may not be an indicator of the likelihood of renewal or expected future revenue.

Accordingly, we believe that fluctuations in backlog may not be a reliable indicator of future revenue, and we do not utilize backlog as a key management metric internally.

We have historically experienced seasonality in terms of when we enter into agreements with customers.

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However, we recognize the majority of our subscriptions revenue ratably over the terms of our subscriptions agreements, which are generally one to three years in length.

As a result, a substantial portion of the subscriptions revenue that we report in each period will be derived from the recognition of deferred revenue relating to agreements entered into during previous periods.

As a result, a substantial portion of the subscriptions revenue we report in each period will be derived from the recognition of deferred revenue relating to agreements entered into during previous periods.

Consequently, a decline in new sales or renewals in any one period may not be immediately reflected in our revenue results for that period.

This decline, however, will negatively affect our revenue in future periods.

Accordingly, the effect of significant downturns in sales

and market acceptance of our platform and potential changes in our rate of renewals may not be fully reflected in our results of

operations until future periods.

While we will continue to recognize the majority of our subscriptions revenue ratably over the terms of our subscription agreements, as a result of the adoption of ASC 606, we may experience greater variability and reduced comparability of our quarterly revenue and results with respect to the timing and nature of our term license subscription agreements due to the upfront revenue recognition.

However, this decline will negatively affect our revenue in future periods.

Accordingly, the effect of significant downturns in sales and market acceptance of our platform and potential changes in our rate of renewals may not be fully reflected in our results of operations until future periods.

While we will continue to recognize the majority of our subscriptions revenue ratably over the terms of our subscription agreements, we may experience greater variability and reduced comparability of our quarterly revenue and results due to the upfront revenue recognition associated with our term license subscription agreements.

Sales and Marketing

Our sales organization is responsible for account acquisition and overall market development, which includes managing relationships with our customers.

While our platform is industry-agnostic, we have recently made, and plan to continue to make, investments to enhance the expertise of our sales organization within our core industry verticals of financial services, life sciences and government.

We also expect to continue to grow our sales headcount in all of our principal markets and expand our presence into countries where we currently do not have a direct sales presence.

We also sell our software through our strategic partners.

We expect to continue to grow our sales headcount in all of our principal markets and expand our presence into countries where we currently do not have a direct sales presence.

We also intend to further grow our base of partners to provide broader customer coverage and solution delivery capabilities.

Our marketing efforts focus on building our brand reputation and increasing market awareness of our platform.

Marketing activities include sponsorship of, and attendance at, trade shows and conferences;

our annual Appian World event;

social media, advertising and other digital programs;

management of our corporate web site and partner portal;

press outreach;

and customer relations.

Marketing activities include sponsorship of, and attendance at, trade shows and conferences, our annual Appian World event, social media, advertising and other digital programs, management of our corporate website and partner portal, press outreach, and customer relations.

In response to the COVID-19 pandemic, we have reduced the number of in-person marketing events, including shifting Appian World to virtual-only in 2020 and 2021.

Intellectual Property

Our success depends in part upon our ability to protect our core technology and intellectual property.

We rely on patents, trademarks, copyrights and trade secret laws, confidentiality procedures, and employee disclosure and invention assignment agreements to protect our intellectual property rights.

As of December 31, 2019, we had five granted patents and three patents pending related to our platform and its technology.

We rely on patents, trademarks, copyrights, trade secret laws, confidentiality procedures, and employee disclosure and invention assignment agreements to protect our intellectual property rights.

As of December 31, 2020, we had five granted patents and six patents pending related to our platform and its technology.

None of our issued patents expire before 2034.

We cannot assure you that any of our patent applications will result in the issuance of a patent or that the examination process will not require us to narrow our claims.

Any patents that may issue may be contested, circumvented, found unenforceable or invalidated, and we may not be able to prevent third parties from infringing them.

We cannot provide complete assurance that any of our patent applications will result in the issuance of a patent or that the examination process will not require us to narrow our claims.

Any patents we may be issued may be contested, circumvented, found unenforceable, or invalidated, and we may not be able to prevent third parties from infringing them.

We also license software from third parties for integration into our products, including open source software and other software available on commercially reasonable terms.

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and international copyright and trade secret laws.

We have offices in six U.S.

cities and ten cities outside the United States.

Our headquarters are located in Tysons, Virginia.

We believe that our facilities are adequate to meet our ongoing needs, including substantial rights to expand within the property.

If we require additional space, we believe that we will be able to obtain additional facilities on commercially reasonable terms.

As of December 31, 2020, we leased our headquarters office in McLean, Virginia and offices in three cities outside the United States.

In addition to our leased offices, we occupied two flexible workspaces outside of the United States.

In 2020, as part of our response to the COVID-19 pandemic, we reduced the number of offices we occupied as we shifted to largely remote work.

Our use of flexible workspaces is dependent upon our current business needs.

We believe our facilities are adequate to meet our ongoing needs, including substantial rights to expand within certain properties we lease.

If we require additional space in the future, we believe we will be able to obtain additional facilities on commercially reasonable terms.

Corporate Information

Appian Corporation was incorporated in Delaware in August 1999.

Our Class A common stock is listed on the Nasdaq Global Market under the symbol "APPN".

Our current principal executive offices are located at 7950 Jones Branch Drive, Tysons, Virginia 22102 and our telephone number is (703) 442-8844.

Our current principal executive offices are located at 7950 Jones Branch Drive, McLean, Virginia 22102, and our telephone number is (703) 442-8844.

“Appian”, the Appian logo, and other trademarks or service marks of Appian Corporation appearing in this Annual Report on Form 10-K are the property of Appian Corporation.

This Annual Report on Form 10-K contains additional trade names, trademarks, and service marks of others, which are the property of their respective owners.

Solely for convenience, trademarks and trade names referred to in this Annual Report on Form 10-K without the ® or TM symbols.

Solely for convenience, trademarks and trade names referred to in this Annual Report on Form 10-K exclude the ® or TM symbols.

Available Information

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business