Six months ago, low-code software provider Appian (APPN +1.75%) acquired Lana Labs, a process mining company based in Germany.
That was the first step in delivering what Appian calls the most complete low-code automation suite, and CEO Matt Calkins explained at the time that the company was acquiring Lana Labs for its technology. The move made sense as a way to build out Appian's low-code vision, which unites process mining, low-code/no-code workflows, and automation.
Process mining, as Calkins described on an earlier earnings call, is a technology that acts as an x-ray, examining usage logs to discover what work is being done and how it can be done more efficiently and be automated. There's a natural synergy between process mining and low-code workflows, as process mining serves an upstream need for low-code. Knowing how to make your processes more efficient is a natural first step before deploying low-code solutions. Once a company has data on its processes, it can use low-code workflows to automate them. Appian made an earlier acquisition of Robotics Process Automation (RPA) in January 2020, helping to build the downstream, automation-focused portion of its new low-code automation platform.
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Process mining goes live
Although Appian acquired Lana Labs in August, it hadn't been able to integrate its process-mining software into the company's larger software suite until it formally announced Appian Process Mining on Monday. During the preceding months, the company had to do its due diligence and make sure the product was ready to be sold under the Appian brand. In an interview, Calkins explained, "Remember that Appian is the high end of the market, and so any product we put our name on has to be scalable and easy to use, demonstrably low-code, that sort of thing." Coming six months after the Lana Labs deal, the launch of Appian Process Mining represents a big step for the company's low-code platform.
By combining low-code with process mining, the company is essentially connecting two markets that had long been independent. Calkins believes Appian is ahead of the market here and said his company has already received strong interest in process mining from many of its customers, though it hadn't been able to sell it until now.
The launch of process mining and its inclusion in the Appian license should have several impacts on the company's business performance. Calkins expects it to drive additional demand for new licenses, set up an easy opportunity for upselling, and differentiate it from competitors, allowing for it to create more pricing power. Calkins noted that Appian's sales force was particularly excited about the prospects for new upsells from the addition of process mining.
Perhaps most importantly, the process mining integration gives Appian an edge over its competitors and a feature that they can't copy directly. Calkins noted that Service Now (Nasdaq: NOW), a large enterprise cloud software player, has added process mining, but it's only through an alliance with Celonis, not a direct integration like Appian has. And newer automation start-ups like UiPath (PATH +0.00%) and Automation Anywhere don't have the natural synergy Appian does since they're focused more on the automation end of the spectrum.
What it means for investors
Appian stock has been on a roller coaster over the last year as the stock soared to a high of $260 last January with the help of a short squeeze and a strong third-quarter 2020 earnings report. However, the stock has faded from that peak as its valuation seemed to be stretched, and it's since crashed down to around $50 per share as part of a broader trend that has seen other cloud stocks plunge as well.
At the current valuation, Appian is trading at a price-to-sales ratio of about 10, which seems like a good price for a sector leader growing its cloud subscription business at around 40% a year.
Appian didn't update its guidance with the announcement, but its fourth-quarter earnings report in February should provide more color on the process mining integration and what it means for Appian's growth in 2022 and beyond.
