Appian (APPN -0.89%) is different from most software-as-a-service companies in a number of ways.
The low-code specialist was founded in 1999, pre-dating the cloud software boom, and has been through several business cycles, including the financial crisis and the dot-com bust. It's based in Northern Virginia, away from the tech hub of Silicon Valley, and grew as a bootstrap, funded by its customers rather than venture capitalists like the typical Silicon Valley start-up.
While many CEOs seem to be downplaying the prospect of a recession and have said they don't see signs of one, Appian CEO Matt Calkins is taking the opposite approach.
In an interview with The Motley Fool, Calkins said his company has been planning for a recession since the third quarter of 2021. In fact, Calkins believes a recession could hit the U.S. economy as soon as this fall if the Federal Reserve doesn't show more willingness to raise interest rates to a higher level.
However, Calkins isn't fearful of an economic downturn. He believes his company is well prepared to take advantage of it.
How Appian can capitalize on a recession
Last year, Appian acquired process mining company Lana Labs. The move into process mining -- a tech discovery tool that helps companies figure out how work is done in order to improve workflows through automation -- helped Appian complete its low-code platform. As the graphic below shows, that begins with process mining and then uses Appian's low-code tools to build workflows, which are then automated, eliminating the need to spend excess resources on those processes.
Image source: Appian.
Investing in process mining also has an added benefit for Appian. It gives the company's low-code software suite an additional selling point because process mining helps businesses improve efficiency and lower costs. Calkins described process mining as "analyzing the efficiency of your business processes so that you can improve them and squeeze every last dime out of your processes," or "exactly the kind of thing that businesses want to do in a recession."
Calkins said the company isn't currently leading its sales pitches with efficiency or cost-effectiveness, but he expects it to when a recession hits, and that the company changed its product line to make it stronger in an economic downturn. Calkins elaborated:
We're going to be saying, 'I know you don't want to take on new expenses, but you do want to be sure the ones that you're already making are efficient. And we've got a tool that can quickly tell you where you're wasting money.' And, therefore, this is the kind of purchase you can make in a recession because it'll quickly pay for itself.
In past recessions, Appian has tried to shorten the "investment-to-return" cycle, meaning it highlights how quickly businesses will get a payoff with Appian products. Its new process mining features seem to offer just that.
Appian's going offensive
The company plans to do more than just make process mining and efficiency the centerpiece of its sales pitch. While other tech companies are announcing hiring freezes and even layoffs, Appian plans to ramp up hiring, building momentum during the downturn.
Calkins said, "We are building our recruiting capacity. We want it to be absolutely larger than it was last year," adding, "We're looking to win the recession, not just get through it." The Appian chief also left the door open to a potential acquisition during the downturn as buyout opportunities often become more appealing in tough times. The company is also well-capitalized after being awarded a $2 billion verdict in its lawsuit against rival Pegasystems.
No one knows for sure where the economy is going in the near term, but signs of a recession are on the rise as consumer sentiment has plummeted, inflation remains at 40-year-highs, and the Federal Reserve has vowed to aggressively raise rates to bring inflation under control.
If a recession does hit, Appian's early preparation and its strategy with process mining seem likely to give it an advantage over other software stocks.
