Item 1. Business
Item 1. Business.
Overview
Appian Corporation (together with its subsidiaries, “Appian,” “the Company,” “we,” or “our”) provides a low-code 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.
The Appian Low-Code Platform unifies the key capabilities needed by enterprises to build mission-critical business applications: process mining, workflow, and automation. With our platform, organizations can rapidly and easily discover, design, and automate powerful, enterprise-grade workflows and custom applications through our intuitive, visual interface with little or no coding required. Our customers have used workflows and applications built on our platform to launch new business lines, automate vital employee workflows, manage complex trading platforms, accelerate drug development, and build global procurement systems. 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 by leveraging software to automate and optimize mission critical operations, enhance customer experiences, and drive competitive differentiation. Historically, organizations have principally relied on off-the-shelf packaged software and custom software solutions to operationalize and automate their businesses. Packaged software often fails to address unique use cases or to enable differentiation. It also requires organizations to adapt their business (processes, systems of record, etc.) to the software package, as opposed to adapting the software to their unique business needs. While traditional custom software solutions can be differentiated and tailored to meet strategic objectives, development requires a long, iterative, and cumbersome process, as well as costly integration that relies on scarce developer talent.
We enable organizations to differentiate themselves from their competition through software-enabled digital transformation. Our low-code 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, workflows, data structures, reports, user interfaces, 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 process mining, industry-leading workflow engine, dynamic case management, and complete automation capabilities, which include our rules engine, native Robotic Process Automation, or RPA, native Intelligent Document Processing, or IDP, artificial intelligence, or AI, and Smart Services. Our customers can leverage these technologies to apply the right automation approach for their specific use case.
We believe our unified low-code platform is a differentiator in the marketplace. We strive to deeply integrate our capabilities so that they are all interoperable and low-code. The result is a unified platform that makes it easier and faster to address complex use cases, particularly those that involve multiple departments within an organization. Process mining enables customers to discover processes and identify those that can be optimized. We expect this to expand customers’ use of our platform as they look to build, automate, and optimize such processes. We expect this new capability will allow us to upsell existing customers and accelerate deals.
Our go-to-market strategy consists of both direct sales and 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 our applications or increasing the number of applications developed on our platform. 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 or through non-user based single application licenses. Every additional application an organization
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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 $369.3 million, $304.6 million, and $260.4 million in 2021, 2020, and 2019, respectively. Our subscriptions revenue was $263.7 million, $198.7 million, and $151.3 million in 2021, 2020, and 2019, 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 $179.4 million, $129.2 million, and $95.0 million in 2021, 2020, and 2019, respectively, representing year-over-year growth rates of 39% from 2020 to 2021 and 36% from 2019 to 2020. Our professional services revenue, which is generated by our Customer Success organization, was $105.5 million, $105.9 million, and $109.1 million in 2021, 2020, and 2019, respectively. Over time, as the need for implementation 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. We intend to continue to invest in our business to take advantage of our market opportunity. As a result, we incurred net losses of $88.6 million, $33.5 million, and $50.7 million in 2021, 2020, and 2019, respectively. We also used cash in operations of $53.9 million, $7.6 million, and $8.9 million in 2021, 2020, and 2019, respectively.
Recent Developments
COVID-19
Beginning in late 2019 and continuing into 2022, 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. In the third quarter of 2021, we announced an option allowing for our employees to return to offices in select jurisdictions if they elect to do so. We remain focused on ensuring continuity for our customers, and we continue to conduct 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 2021 financial results.
Through December 31, 2021, 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 2022 and beyond 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.
Benefits of Our Platform
We enable organizations to stay ahead of change. We accelerate customers’ businesses by discovering, designing, and automating the workflows and processes to help them most differentiate their products and services from their competition. The combination of workflow, automation, and process mining in a unified platform enables us to take customers from insight to action quickly and efficiently. Our platform has always delivered speed and agility, and our words are backed by our commitments. The Appian Guarantee delivers a customer’s first application project in 8 weeks with a flat service fee, and the
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Low-code Promise states customers can build apps at least 10x faster, reduce costs by 50%, and gain superior functionality as compared to traditional development. The result empowers organizations to stay ahead of change, outpace their competition, and drive meaningful digital transformation.
Key benefits of our platform include:
• Powerful applications to solve critical and complex challenges. At the core of our platform is an advanced engine that enables the modeling, modification, and management of complex processes and business rules. 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, 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, workflows, data structures, reports, user interfaces, 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.
• Build once, deploy everywhere. Our patented SAIL technology allows developers to build an application once and use it everywhere with the consistency of experience and optimal performance levels that users expect. Applications developed on our platform can be immediately and natively deployed across a full range of mobile and desktop devices with no additional cost or 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.
• Integrated process mining. Other low-code platforms do not offer process mining integrated into their platform but rather provide a standalone acquired product or have process mining available through a partnership as a standalone tool. Integrating it into our platform alongside workflow and automation delivers significant additional value by reducing the number of steps and time from insight to action. It can be applied to discover processes as well as to optimize existing ones.
• Automate with one platform. Our complete automation capabilities allow companies to combine people, systems, and data in a seamless workflow to quickly deliver meaningful business impact. Our automation capabilities are not limited to one technology but to a set of unified, native technologies enabling customers to use the right one(s) for the job. Our low-code RPA automates the routine tasks across legacy and modern systems, increasing efficiency and providing even more value to the customer. Smart Services also automate common business activities, such as sending e-mail and generating documents. They are also drag-and-drop, more resilient than RPA, and do not require dedicated hardware. AI boosts business outcomes by making the applications intelligent, including intelligent document processing. Business rules allow for complex decision logic to free up people for other activities.
• Seamless integration with existing systems and data. 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. Customers can access and orchestrate data from internal and external sources without needing to migrate data. This reduces data migration complexity and time to value. 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. We also integrate data without coding; however, since accessing data is only as good as the associated performance, we take the extra step of automatically performance-tuning data, saving time and resources.
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• Deployment flexibility to serve customer needs. Our platform can be accessed from Appian Cloud or self-managed in any cloud or on-premises. Our flexible deployment model also preserves a seamless path to future cloud deployments for organizations initially choosing on-premises for their most sensitive workloads.
• Industry-leading security. Our platform is designed to meet the highest demands of our U.S. federal government and large enterprise customers. Therefore, it holds some of the highest security certifications available. Our platform was one of the first to achieve Federal Risk and Authorization Management Program, or FedRAMP, compliance. Further, we were among the first RPA vendors to have its RPA cloud components FedRAMP certified. Finally, our low-code platform is one of the first to receive a Provisional Authorization at Impact Level 5, allowing our Department of Defense customers to build, deploy, and manage complex workflows with the security they need. Our platform is also certified under the Payment Card Industry Data Security Standard, or PCI DSS, and meets all requirements under the HITRUST Common Security Framework, or CSF. To protect personal health information, our platform is U.S. Health Insurance Portability and Accountability Act, or HIPAA, compliant and enables General Data Protection Regulation, or GDPR, compliance. Our controls are documented through our SOC 2 Type II report and ISO 27001/27017/27018 certifications, in which independent audit firms provide detailed reviews of Appian Cloud’s security, availability, and confidentiality controls. We also possess both a SOC 1 Type II report and a SOC 3 report, as well as regional certifications including UK G-Cloud, UK Cyber Essentials, and Spain’s Esquema Nacional de Seguridad (ENS).
• Governance capabilities. We deliver the guardrails that CIOs of enterprise organizations need to have full visibility and control over their systems. Our strong governance capabilities enable us to excel in regulated markets such as financial services, public sector, and life sciences.
• Open platform giving customers choice. We respect the technology decisions organizations have made and empower them to leverage their existing investments with us. For example, customers can leverage Appian RPA or orchestrate any third-party bot from a major RPA vendor within our platform. Working with the customer’s current information systems allows our customers to obtain value from their initial Appian deployments quickly before migrating additional workloads to our platform over time.
• Access to Appian’s market. We host a robust AppMarket that partners and customers use and contribute to, enabling everyone to accelerate their application development. Organizations can select from hundreds of secure plug-ins, utilities, and more.
Our approach to digital transformation goes beyond simply enabling organizations to build custom applications fast. We empower decision makers to reimagine their products, services, processes, and customer interactions with software by removing much of the complexity and many of the challenges associated with traditional approaches to software development. Because we make application development easy, organizations can build specific and competitively differentiated functionality into applications to deliver enhanced user experiences and streamlined business operations.
Our Growth Strategy
Key elements of our growth strategy include:
• Expand our customer base. We continue to grow our customer base in a variety of industries, including financial services, government, life sciences, insurance, manufacturing, energy, healthcare, telecommunications, and transportation. We believe the market for our low-code platform is still in its early stages, and we have a significant opportunity to add additional large enterprise and government customers globally. We offer the Appian Community Edition, which is a free trial platform with guided learning for our prospects and customers to quickly access the Appian low-code platform for up to 25 users. Once prospects or customers decide to move forward from trial to transaction, they can transfer from Appian Community Edition over to a production environment with a seamless export, making it easy to do business and transact with Appian.
• 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 or through 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, process, and data across the organization and facilitates knowledge sharing. Applications built on our platform may be used only on our
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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, government, and life sciences. In 2021, we generated over 71% of our subscriptions revenue from customers in these verticals. 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 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 and our partners offer pre-built solutions in our key industries. Every Appian solution is built on our platform so they are fully standardized, upgradeable, and compatible.
• Expand our international footprint. Our platform is designed to be natively multilingual to facilitate collaboration and address challenges in multinational organizations. In 2021, approximately 34% of our total revenue was generated from customers outside of the United States. As of December 31, 2021, we operated in 13 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, Accenture, PwC, Infosys, Wipro, 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. Additionally, they also leverage pre-built solutions using our platform, delivering us software license revenue. We intend to further grow our base of partners to provide broader customer coverage and solution delivery capabilities.
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, 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 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. 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 content described herein (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. Gartner Content speaks as of its original publication date (and not as of the date of this 10-K), and the opinions expressed in the Gartner Content are subject to change without notice. Gartner and Magic Quadrant are registered trademarks and service marks of Gartner, Inc. and/or its affiliates and are used herein with permission. All rights reserved. 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 disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.
Our Opportunity
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We believe we have a significant market opportunity in helping organizations accelerate their digital transformation by leveraging our low-code platform. We believe our platform addresses several key core software markets, as follows:
• Low-Code. According to Gartner, spending on low-code development technologies (excluding RPA) is expected to grow from $9.6 billion in 2020 to $24.7 billion by 2025, at a CAGR of 21%. 1
• Intelligent Process Automation. According to IDC, the market for worldwide IPA software is forecasted to grow from $16.9 billion in 2020 to $42.4 billion by 2025, at a CAGR of 20%. The market for worldwide IPA software (excluding RPA and Process Mining) is forecasted to grow from $15.0 billion in 2020 to $31.6 billion by 2025, at a CAGR of 16%. 2
• Artificial Intelligence Software. According to a report by Forrester, the Global AI Software market (excluding AI maker platforms) is forecasted to grow from $12.5 billion in 2020 to $23.3 billion by 2025, at a CAGR of 13%. 3
• Robotic Process Automation. According to IDC, the market for RPA (Cloud) is expected to grow from $57 million in 2020 to $3.2 billion by 2025, at a CAGR of 123%. 4
• Process Mining. According to Gartner, the market for Process Mining is expected to grow from $550 million in 2020 to $2.3 billion by 2025, at a CAGR of 33%. 5
Taken together, the market opportunity of these current core software markets represents a combined $37.7 billion in 2020 and is expected to grow to $85 billion by 2025, at a CAGR of 18%.
• Traditional custom enterprise software market. 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. According to Gartner, the worldwide enterprise application software market (in constant currency terms) will grow from $273.4 billion in 2021 to $424.0 billion by 2025, at a CAGR of 11.6%. 6
• Our internal estimate. Based on approximately 195,000 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, 2021, we internally estimate our market opportunity to have been approximately $49.3 billion in 2021. We determined relevant global companies and government institutions by industry and size by referencing certain independent industry data from S&P Global Market Intelligence. We calculated industry- and size-specific average annual recurring revenue as of December 31, 2021 by adding the aggregate annual recurring revenue from all existing customers within each industry and size segment and dividing the total by the number of our existing customers in each industry and size segment.
1 Gartner, Forecast Analysis: Low-Code Deployment Technologies, 22 January 2022
2 Worldwide Intelligent Process Automation Software Forecast, 2021-2025, Maureen Fleming, July 2021
3 The AI Software Market Will Grow to $37 Billion Globally by 2025, Forrester, December 10, 2020
4 Worldwide Intelligent Process Automation Software Forecast, 2021-2025, Maureen Fleming, July 2021
5 Gartner, Forecast Analysis: Process Mining, Worldwide, 26 October 2021
6 Gartner, Forecast: Enterprise Application Software, Worldwide, 2019-2025, 4Q21 Update, 21 December 2021
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Our Low-code Platform
With our low-code platform, organizations can rapidly and easily discover, design, and automate powerful, enterprise-grade applications through our intuitive, visual interface, with little or no coding required. 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. 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 the key elements of our technology infrastructure are as follows:
Unified Offering
Our heritage as a BPM company provides us with a differentiated understanding and ability to discover, design, and automate complex processes. We have incorporated that expertise into our platform to enable the development of powerful business software.
Workflow
At the core of our platform is an advanced engine that enables the modeling, modification, and management of complex processes. Appian combines people, technologies, and data into a single workflow to maximize resources and improve business results. Workflow can include any worker (people or digital workers) or any resource (data and system). Workflow serves as the bridge between process mining and automation, and we believe starting with it at the core gives us an immediate competitive advantage.
Automation
Our complete automation capabilities allow companies to combine people, systems, and data in a seamless workflow to quickly deliver meaningful business impact. Our automation capabilities are not limited to one technology but to a set of unified, native technologies enabling customers to use the right one for the job.
• Robotic Process Automation. 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.
• Intelligent Document Processing. Appian includes native IDP, which automatically extracts structured and unstructured data from digital forms such as invoices and classifies it using AI. The out-of-the-box application does not require the use of time consuming templates and continuously improves accuracy with AI that learns from human corrections.
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• Artificial Intelligence . Appian includes a range of native and third party AI capabilities. These capabilities include native intelligent document processing as well as sentiment analysis, translation, and document and image analysis. Appian also allows customers to integrate with their preferred AI provider using our zero-code connectors.
• Case Management. Appian dynamic case management enables automation of many of the most common patterns of collaborative human work such as service management, incident management, and investigations.
• Business Rules. Appian includes a declarative environment for defining and executing business logic or rules. 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.
Process Mining
Appian Process Mining discovers how to reduce costs, increase efficiency, and optimize processes. Appian removes the single largest friction point in process mining, enabling customers to spend more time improving and automating workflows. Appian Process Mining features a no-code module that simplifies the preparation and transformation of enterprise data. Pre-built process packages with mapping and dashboards also accelerate process mining time-to-value.
Appian combines the power of process mining, workflow, and automation into a unified, low-code 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 serves as an administration utility for managing people, processes, and data.
The Appian design repository incorporates design and DevOps 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.
Our platform 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, 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.
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User Interfaces for All
Our platform allows our customers to easily build the user experiences they need to serve their employees and customers best, including:
• Unified employee interface . Our end user interfaces enable users to discover data, collaborate with other end users, and participate in process actions. The end user experience begins with a news feed that allows end users to monitor key events from processes, systems, and other end users, providing a unified view of all applications and activity in one place. End users can collaborate with others, obtain status updates, send direct and secure messages, and create social tasks for other end users. Our activity stream is designed to be intuitive for end users familiar with popular consumer social interfaces, allowing them to instantly track important events and occurrences and collaborate with little to no training. We also enforce company security policies, so end users can confidently collaborate without fear of compromising regulatory compliance. Our end user interfaces solve the problem of information silos, allowing organizations to respond to constituent feedback in real time by uniting the right team with the right information.
At the same time, our platform provides transparency, visibility, and control across all of our applications through a dynamic and powerfully flexible tasking environment. We provide detailed tracking of all human process tasks on our platform, including when tasks have been assigned, addressed, and completed by any user. Business Activity Monitoring reports display real-time enterprise performance, bottleneck detection, and process optimization while scaling to millions of tasks.
• Customer experience. Appian Portals securely connects external users to apps without authentication. It allows users to quickly build public websites connected to their apps using low-code in a way that is easy to scale and manage.
• Mobile. Automatic mobile experiences, including dynamic offline capabilities, enable workers to continue using their mobile applications even when offline.
Low-Code Data
Appian Low-Code Data 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 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 decide which existing data sources within the enterprise they want to capture. Appian Low-Code Data gives users an immediate snapshot of all centralized data relating to common business activities such as customer, product, employee, or service requests. Appian 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.
Technology
We designed our platform to support large global enterprises and government organizations at scale, in the cloud or self-hosted. 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. We also employ cutting-edge React technology for building web and mobile user interfaces. We use third-party proprietary database and database language technology licensed from Kx Systems, Inc., or Kx, to power the high-performance in-memory database of our platform. Under our agreement with Kx, we are permitted to distribute Kx’s software as a component part of our software platform as well as to host Kx’s software on behalf of our customers through our cloud offering. Our agreement requires Kx to provide maintenance directly to us on the software we license as long as it provides maintenance to any other customers. We pay a variable license fee based on the number of applications built by our customers, subject to an overall cap on payment. We have paid Kx the overall license fee cap in each of the last five years. 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
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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 62 availability zones in 21 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 belonging to both our customers and us.
Customer Success
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 customer success, as well as efforts by partners to build their practices around Appian, will drive increased adoption of our platform.
Our focus on customer success creates happy customers. Appian was named a Customers’ Choice in the 2021 Gartner Peer Insights TM ‘Voice of the Customer’: Enterprise Low-Code Application Platforms. The report recognizes vendors that are highly rated by their customers through Gartner Peer Insights verified reviews. Appian was the sole Customers’ Choice for the Global Enterprise ($10B+), Large Enterprise ($1-10B), North America, and Finance categories.
When we first acquire a new customer, our professional services experts or our partners’ professional services experts start the implementation process. Specialists facilitate deployment of our platform, and training personnel provide comprehensive support throughout the implementation process. 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 teams also assist customers by building applications on our platform for them.
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 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. We have consistently been able to achieve at least a 98% customer satisfaction rating for our customer support organization, based on our surveys.
Our Customers
Our customers operate in a variety of industries, including financial services, government, life sciences, insurance, manufacturing, energy, healthcare, telecommunications, and transportation. As of December 31, 2021, we had 816 customers, of which 635 customers were commercial and 181 customers were government or non-commercial entities. Generally, our sales team 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 55 at the end of 2020 to 75 at the end of 2021. As of December 31, 2021, 25% of our commercial customers were Global 2000 organizations, and 68 of our customers were Fortune 500 companies. No single end-customer accounted for more than 10% of our total revenue in 2021, 2020, or 2019.
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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, 2021, we had a total global workforce of 1,798 full-time employees, 1,334 of which were based in the United States. None of our U.S. employees are covered by collective bargaining agreements. 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 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 one or more automation technologies, including business process management, case management, process mining, and robotic process automation. Such providers include Pegasystems, Celonis, UiPath, IBM, ServiceNow, Microsoft, SAP, 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:
• Platform features, reliability, performance, and effectiveness;
• Ease of use and speed;
• Platform extensibility and ability to integrate with other technology infrastructures;
• Deployment flexibility;
• Robustness of professional services and customer support;
• Price and total cost of ownership;
• Strength of platform security and adherence to industry standards and certifications;
• Strength of sales and marketing efforts; and
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• Brand awareness and reputation.
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.
Seasonality
We have historically experienced seasonality in terms of when we enter into agreements with customers. We typically enter into a significantly higher percentage of agreements with new customers, as well as renewal agreements with existing customers, in the fourth quarter. The increase in customer agreements for the fourth quarter is attributable to large enterprise account buying patterns typical in the software industry. Furthermore, we usually enter into a significant portion of agreements with customers during the last month, and often the last two weeks, of each quarter. 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 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. However, this decline will negatively affect our revenue in future periods. Accordingly, the effect of significant downturns in sales, 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
Sales
Our sales organization is responsible for account acquisition and overall market development, which includes managing relationships with our customers. We also sell our software through our strategic partners. 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, government, and life sciences. 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.
Marketing
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 website and partner portal, press outreach, and customer relations. In response to the COVID-19 pandemic, we reduced the number of in-person marketing events, including shifting Appian World to virtual-only in 2020 and 2021.
Partner Strategy
We have a strong and growing ecosystem of partners that helps accelerate our customers’ digital transformation initiatives and deliver customer value at scale. Our workflow, broader automation, and discovery capabilities paired with our partners’ industry and functional domain experience help companies digitally transform their business. Partners also help us to offer industry-focused solutions as we help companies drive new approaches in engaging their end users and employees.
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We have many strategic partnerships around the world including with companies such as KPMG, Accenture, PwC, Infosys, Wipro, and Deloitte. These partners refer software subscription customers to us and generally perform professional services with respect to any new service contracts they originate, increasing our subscriptions revenue without any change to our professional services revenue. As we expand the network of strategic partners, we expect professional services revenue to decline as a percentage of total revenue over time since our strategic partners may perform professional services associated with software subscriptions we sell.
We are also growing our network of regional and channel partners to further expand our business into traditional and new markets. These partners provide delivery services, sales and marketing capabilities, and contract fulfillment.
Intellectual Property
Our success depends in part upon our ability to protect our core technology and intellectual property. 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, 2021, we had six granted patents, two allowed patents, and four patents pending related to our platform and its technology. None of our issued patents expire before 2034. 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. We control access to and use of our proprietary software and other confidential information through the use of internal and external controls, including contractual protections with employees, contractors, end customers, and partners, and our software is protected by U.S. and international copyright and trade secret laws.
Facilities
As of December 31, 2021, we leased our headquarters office in McLean, Virginia and offices in six cities outside the United States. In addition to our leased offices, we occupied three flexible workspaces outside of the United States. In 2021, 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
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, 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 exclude the ® or TM symbols.
Available Information
Our website address is www.appian.com . Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Exchange Act are made available free of charge on or through our website at investors.appian.com as soon as reasonably practicable after such reports are filed with, or furnished to, the United States Securities and Exchange Commission, or SEC. The information contained on, or that can be accessed through, our website is not incorporated by reference into this Annual Report on Form 10-K or in any
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other report or document we file with the SEC, and any references to our website are intended to be inactive textual references only.
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