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No. of Recommendations: 12
The discussion on Docusign seems to be one of the longest such discussions that we have ever had over one stock that we are considering.

First, some people say signatures are a commodity that will be priced down to zero. Well so is buying stamps online, but still people pay a premium subscription to and others to do so. The premium is so high I gave up and just take 45 minutes to go to the post office and back and stock up on stamps.

Second, others say that the Systems of Agreement is the differentiator, the new thing...

Both are wrong!

To start the numerical order over:

First, the number of signatures in the market is real a proxy on the number of Systems of Agreement being used.

On the premium Fool boards a lady post how in 2008-2009 she got her company started with Docusign and then integrated it into her systems (like SAP and the like). The easiest integration she has ever had she said. Docusign was also the first place she looked to for eSignatures so there is no wonder why Docusign has done so very well.

The reason I say that SoA is a proxy is because as we have discovered individual subscriptions are just a minor part of Docusign's revenues. Docusign makes most its revenues from the much more expensive enterprise subscriptions. The enterprise subscriptions allow much greater editing and integration and Systems of Agreement to manage the contract process. And Docusign has been doing this for more than a decade.

Thus, SoA is not a new business line for Docusign, and it is in fact a big reason why Docusign is so dominant.

Thus, the majority of signatures are taking place within the enterprise SoA processes (including refinancing and financial transactions) but not with individual real estate agents or small firm attorneys.

What Spring represents to Docusign is a new SoA upsell product that both enhances what they already offer, and also provides something that Docusign sees as compelling to upsell into their existing base and of course future existing base of customers.

You integrate it into your systems and of course you no longer want to use anyone else's eSignature either.

Thus the market is already the market of enterprise SoA's for the most part. So SoA is not a new thing, but it is the differentiator as it is a turf war, get into the system, you never leave. Docusign is winning this game in the cloud. SpringCM is cloud based.

It is not a new market, but the market is transitioning to cloud, and Docusign intends to take advantage of this transition and be the #1 SoA cloud vendor in the world. Therein lies your investment thesis. I tis not a commodity one. It is one that takes into count the power of brand, the power of path dependence, the power of existing customer relationships, and THE POWER OF A NEW LEADER FOUND IN ALMOST EVERY NEW PLATFORM CHANGE.

SoA is transferring to the platform of cloud and mobile, Docusign is bidding to be the leader in this transformation.

Is SoA that sophisticated of technology? It depends. It depends on how much scale the system has to handle. In that context yes, yes it does. As an enterprise customer you will not go with a small player who has (1) to proven the ability to handle such scale, and (2) has not proven that they will be here for the long term.

Watching the Salesforce, the T-Mobile, and the smaller event planning business videos it becomes clear just how critical SoA software becomes in regard to the tactical running of your business every day. If it works, if there are no pain points, you are not going to mess with it. Further, you are not going to just go with any vendor who may offer you better pricing precisely because SoA is too crucial to the tactical running of your daily business.

We have heard the example of a poster on Saul's board who works in the entertainment industry and has to weekly get contracts and payroll and the like done with hundreds of people, thousands of documents, every week. SoA using Docusign made it a process that was done before the day was out on Monday vs. late Thursday with a ton of tedious labor done, and the number of mistakes by employees almost eliminated.

That is why you invest in Docusign (should you decide you wish to invest in Docusign). eSignatures themselves is the central offering everyone has to have and Docusign still does that best anyways.


As to point that did concern me that was raised, growth rate. As the market leader Docusign should at least grow at the rate of the market, and in fact should grow faster and eat up more marketshare. Docusign has the largest and most focused sales force, the largest and most focused R&D, the largest and most focused existing customer base, and by far the brand so that Docusign is the #1 and first product looked at in almost 100% of the decisions made by buyers in this field ( of it not #1 then the one product they compare against first).

That is my summation. That is where it stands. That is what it is all about. We have some misconceptions, but no longer. SpringCM is (as Duma stated) an evolutionary offering, but it is an evolutionary offering on a new cloud platform.

The "Achilles" of course is they only have $15-$20 million in sales to begin with, 600 customers. However, many of those customers they obtained by partnering with Docusign. How closely did they partner with Docusign? I don't know. If close enough, will now owning SpringCM and integrating it into the Docusign product instead of just partnering be a sales catalyst? I don't know.

One last thing, Docusign is also producing an SoA product to address the small and mid-size business market. That may be an underserved market. But a market we do not know much about. Thus another piece of Docusign that may be worth investing in long term.

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