Appian: Developing low-code software to tackle a tight job market (NASDAQ: APPN)

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Most of you may not have heard of LCNC or Low-code No-code. It’s about developing software without going through the intricacies of hundreds of lines of code. Today, this new software development technique not only increases the number of mobile applications on the market, but also reduces development costs.

In this regard, any means of reducing costs in times of rising inflation must be analyzed objectively, and to this end, I look to Appian (NASDAQ: NASDAQ: APPN), whose stock has been volatile over the past year as it has lost more than 60% of its value since peaking in late June.

Data by YCharts

I begin by providing an overview of the low-code (“LC”) aspect of LCNC while highlighting its appeal at a time when a talent shortage in technology is leading to stiff competition for developer expertise, increased higher salaries and turnover rates.

The need for low-code

LC, which is more commonly provided by vendors compared to No-code, where no lines of code are used, makes it possible to build applications or automate business business processes without mastering the programming steps that are normally taught as part of computer science. Classes. In this regard, templates guide beginners, including the use of powerful AI tools in the background, as well as visual interfaces that hide lines of code.

These tools are aimed at “citizen developers”, or those with little or no development experience who come from marketing, HR or finance departments, but who need IT applications for their day-to-day tasks. The idea is for users to create primarily workflow-based applications themselves bypassing IT, which is normally tasked with these tasks.

In this regard, with the acceleration of the digital transformation trend from mid-2020, the demand for IT jobs has skyrocketed, with CIOs not being able to access developer talent pools or seeing their development budgets of software stretch due to wage inflation. While it is true that some companies like Cognizant (NASDAQ:CTSH), a multinational IT consulting firm, have access to cheaper developer skills in India, this is not the case for the average SME (small and medium-sized enterprises). Now, for those who have chosen the LC route, the table below shows the market potential along with some key statistics related to adoption, time to market, and the ability to compensate for the lack of IT developers. .

Characteristic Details
1 Global low-code adoption and market size.

Low-code market growing at a CAGR of 31.1% from 2019 to 2030 and reaching $187 billion.

2 Acceleration of time to market and reduction of development time.

Reduced development time by 90%.

3 Compensate for the lack of developers in the market

46% improvement in the organization’s web and mobile development project backlog.

4 Uncertainties in the adoption of low-code.

Not suitable for complex use cases where some level of technical expertise is still required.

The adaptability of employees.

How to respond to cybersecurity in the new business paradigm.

Benefits such as reduced development time and the ability to remove developer skills are attractive from a cost-cutting perspective in a time characterized by the “big quit” where many are unwilling to return to their office after working long hours from their homes during the pandemic. Additionally, the adoption of LC is transforming the way businesses operate by facilitating the transition from Capex-intensive software development to a flexible and scalable SaaS subscription model.

However, as LC is still an emerging technology, it is important to also consider the uncertainties, shown in red in the table above. My next step, therefore, is to realistically assess how Appian has tackled this with its cloud-based platform.

Appian’s low-code platform

The goal here is to use visual development and “speed drawing” applications instead of tediously writing lines of codes ranging from simple to complex with attractive user interfaces. Another goal is to bridge the gap between business and IT, a factor that can cause an IT project to fail as developers and business owners may struggle to interact to identify requirements. Therefore, with business owners or delegates building the app themselves, the likelihood of success is higher.

I also noted that there is also an emphasis on IT security and meeting compliance and data privacy standards, which means that LC uncertainties are addressed. Exploring further, the preset connections to popular business apps and the ability to access the platform from a laptop or your smartphone provide a good user experience. These help gain buy-in from the tech-savvy GenZ (those born in the mid-to-late 1990s and early 2010s), who now make up a growing percentage of the workforce.


Appian Low-Code Platform (

Additionally, based on customer reviews, the company was ranked first by Gartner Peer Insights survey over its top competitors, with these rankings also confirmed by TrustRadius. One of the reasons for this superiority is the grouping of low-code with RPA (Robotic Process Automation) so that companies can automate low-level processes faster.

Ultimately, Appian’s platform stands to benefit from more revenue as LC gradually drives the creation of more workflows in 2022. In this regard, there were 4.5 billion workflows on Appian Cloud in 2021, an increase of 81% compared to 2020.

Coming back to the LC uncertainties, Appian has addressed them through its cloud platform, but it’s equally important to assess how it’s marketed.

End-to-end solution for differentiation

The company, which already offers task automation and business process management services, added LC Workflow functionality so employees can quickly create simple applications like data collection forms . As they gain experience, they can move on to more complex tasks.

Plus, by cross-selling to its existing customer base, the company has a better chance than low-code pureplay vendors like Outsystems or Quickbase to actually take advantage of this new way of developing apps. Analyzing the industry, there are also other much larger competitors, such as ServiceNow (NASDAQ: NOW) with App Engine, Microsoft (NASDAQ: MSFT) with Power Apps and the SalesForce (NASDAQ: CRM) platform.

Of these, it’s Appian that seems to have put more effort into building an end-to-end platform that eases the customer journey from discovery, design, to process automation (including the part analytical), as shown in the slide below.

low code

Slides for the Appian Low Code Platform and Workflows (

The addition of Process Mining as noted above was accomplished through the acquisition of Lana Labs for $30.7 million in August 2021. Process Mining is the process of obtaining actionable insights from things like company records or to make the most of existing data. Additionally, Appian executives highlighted the end-to-end aspect of their platform as a key competitive differentiator during the fourth quarter 2021 earnings call in February. Thinking out loud, having an expanded platform driving more sales makes sense from a revenue perspective, with Appian’s solutions gaining traction for companies with annual revenue over $1 billion. dollars.

For investors, one way to gauge LC usage will be to look at the growth in the number of workflows created on Appian’s platform in 2022, with the figure above showing numbers through 2021. On the other hand, Appian’s higher investments resulted in lower profit margins than ServiceNow.

Evaluations and key points

As shown in the table below, with a market capitalization of $117.7 billion and annual revenues of $5.9 billion, ServiceNow’s scale of operations is far greater than that of Appian. Its higher gross margins mean fewer working hours on its platform. Moreover, with EBIT margins of 4.36%, it is a profitable business.

This profitability also explains its better 6-month price performance versus Appian during a period characterized by higher volatility for unprofitable tech stocks, with the value strategy taking the upper hand.


Comparison with peers (

On a shorter one-month horizon, Appian performed best, which seems to indicate that the growth strategy is back on the agenda as the market has already priced in the upsides. Fed rate. Along the same lines, the small company’s outperformance could also be due to its lower debt-to-equity ratio (table above) as investors focus more on borrowing costs in a lower interest rate environment. rising interest.

Going forward, in addition to the LC market growing to $187 billion by 2030 (from $10.3 billion in 2019), the process mining market is expected to grow from $627 million in 2021 to $10.4 billion in 2028. The integration of LC and process mining enables synergistic growth for Appian, as a company, provides one-stop service to companies currently transitioning to more data-driven phase of the digital transformation trend, which is now also under pressure from rising labor costs.

In addition to low-code, the business process and workflow management market in which Appian currently operates is expected to reach $55.35 billion by 2028, following a CAGR growth of 30.6% from to 2021. So with the potential for improved sales numbers in a significantly expanded market size, Appian looks undervalued with its 12x P/S multiple. However, for value-oriented investors, the company is poorly rated by SA in terms of profitability and cash from operating land.

On the other hand, for growing investors, with an ever-growing economy and Appian’s cloud subscription business expected to grow between 33% and 35% year-over-year in the first quarter of 2022, there is potential for an LC-derived revenue beat when results are announced in the last week of May. In this regard, the company has produced positive surprises over the past eight quarters and is therefore a buy at $60-61.

Finally, there was cash and cash equivalents of $168 million as of December 31, 2021, with sales of $444-446 million expected for 2022, 20-21% higher than last year.

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