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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No. of Recommendations: 7
Thus, SoA is not a new business line for Docusign, and it is in fact a big reason why Docusign is so dominant.


Nice post but the above conclusion is not least from the perspective of how DOCU now defines the "modern" SOA.....a concept they have been working on for the past 6-8 months before launching it in earnest. From last earnings call:

We've just been in the last sort of six months as we really started the initial message development around system of agreement. And then from an additional product standpoint around Spring, I mean we're really -- really as we get to our new year, February 1 is where we're going to be focused on the DocuSign side is really selling that aggressively. We're integrating the company but we haven't really started an aggressive sort of cross-sell opportunity.

Their forte has been the esignaturing and enhancing the agreement process......but they have not had a "modern" SOA product in place.

The "modern" SOA process addresses what happens BEFORE and AFTER the signing......they have previously been used as an add-on to other products (SAP, CRM, etc.) or home grown products that took on the SOA duties. But they want the whole enchilada.

If you go back to their first earnings call, they told us that their TAM was $25 further evidence that this "modern" concept is new, they have now added another $25 Billion to that TAM..….2 earnings calls later. These are new products and capabilities.

Here from the CEO's own words:

Daniel Springer
Absolutely, Pat. So I think the first piece I’d start off is signature which is the core of the business that we build today and we talked about that kind of $25 billion TAM that we are focused on, with only just starting to scratch the surface in a few percent penetrated there is still going to be a core focus area, we believe we can continue to grow that substantially.

When you look at the other component in the System of Agreement that you referred to. I see the opportunities in sort of this order. I think in the pre-agreement or the we say prepare phase. That’s the place where we’re most focused right now as we think about our product development and the innovation that we’re driving and as well as we’re seeing with the conversations we’re having with customers, saying this is where they really pulling us.

And the other piece I’d point you to, when I look at the long-term and the real macro building that’s out, I think some of the post agreement phases particularly around manage and that’s where you remember Appuri the company we bought with machine learning capability.

We start thinking about the artificial intelligence opportunity to go to our customers and say all your agreements are now in DocuSign and you can now make your business better by the way we help you manage your core company through these agreement process. Helping them understand risks, helping them understand trends in their business that’s the place that I think I maybe even most excited for the biggest opportunity going forward. But in timeframe I think prepare first and manage coming second.

This encapsulates the "modern" SOA (pre-agreement, post agreement, AI, etc.)....not what they had previously offered.
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No. of Recommendations: 1
That Appuri acquisition was intriguing to me. They bought it because it was so valuable to them internally in determining how customers decided to buy their products. I suspected they had an inclination to move into the marketing software area (a portion of CRM I guess) with this product. What you cited in your post indicates that this is indeed true.

I will give it a more thorough look through later as of course Docusign remains very fascinating to the board.

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The way I read it is systems of Agreement will more fully be integrated both before and after the signature.

Before, employee takes a template document, manually adds stuff from their crm system, and sends it to the customer for an esignature. Customer DocuSigns and returns. Employee takes info off the document and puts it into the system, formats it into a file saves it into a database (no not a mongodb database just a repository for the files).

Now, Docusign automatically populates the document by pulling information from crm itself, employee sends to the customer, and after signed is automatically formatted and stored into the repository.

Correct me if I’m wrong or there is more to it but that’s what the case study said for Salesforce.

Docusign is already advertising this.

If I watch the video (automatically pulling from and back into Salesforce) that’s exactly what I get for the description of system of agreement.
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The question is, is there something special about what Docusign can do or not? I know of tons of companies who populate PDFs from data in databases. A little rudimentary workflow can handle moving from completion of one document to whatever should happen next. Is there some special sauce here or just something that bunches of people do or could do with little effort?

This domain is one where the TAM is relative to time, i.e., eventually whole lots of people will probably be doing it, but thus far only a small part of that total potential is doing anything. Docusign has a big market share of one piece of what will eventually be a very large market covering many functionalities which no one is delivering today. I would think they could be vulnerable to a giant like Adobe waking up and saying "hey, that's an interesting market" and whipping up a solution with little effort beyond what they have already. Or, is there something more here?
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Appuri, is a machine learning company with a product that analyzes etransactions to determine who will and who will not purchase and why, and giving suggestions to cause more transactions to go through.

It raised $6.5 million in funding and had less than $1 million in revenues at the time that it was purchased for $60 million or so.

What we have to Docusign is a base of customers and branding that is open to being marketed into. With this base one either has to have faith that management will pull this off or not. How is Appuri different from anyone else? According to Appuri they are different because they are a cloud service and their only real competition are home built versions that may be built in-sources by IT.

Thus, at least we know it is another cloud service. A service that is quite useful obviously, but I doubt unique. But maybe it is, who knows? Further, there are few companies like Docusign that have a more than $300 million a year sales budget and such a huge existing base of customers.

As for SpringCm and what that brings, 12x thinks not so much about it, but the functionality the sample companies are showing us is profound for their businesses. How easy is it replicated?

Lets use an example of legal practice software. I spoke about this before. The software I use is the ONLY legal practice software not just built on top of but built AS PART of Outlook. There is a ton of competition out there, each with their own marketing messages, etc. But as I looked at each and every one of them none of them could natively support Outlook email. Being able to do so makes a profound difference. I mean utterly profound. The other practice management software allows you to link Outlook emails to files, but this takes additional steps and the linkage is not complete and creates frustrations that you don't even realize until you actually try a program that is built with Outlook.

Further, no other program has the same built in billing software that is completely integrated natively. Thus, they are practice management, one would never know Amicus has those special qualities given the how competitive the market is, but still Amicus is that special in regard. I have looked, I have tried. There is no comparison. It is not like this is rocket science.

In the same manner it is very difficult for us to judge individual SoA packages against each other. All we can do is follow the money...follow the money.

With Docusign, they paid more than 60x revenues for Appuri, they paid 11-13x revenues for Spring. They are extremely excited. We have no money to follow yet though.

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You never grow do you? You said the exact same thing when I first presented DOCU...adobe fear.

How about you doing some heavy lifting and really try to understand this market. Why hasn’t adobe moved in?
If there is no moat then why do they have 70% market share? After all, esignaturing isn’t why aren’t these many competitors eating DOCU lunch.

Just curious if you will ever actually contribute something to the investment discussions is another gonna waste it again?
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It is very rare that the large incumbent takes out the business of a well established front runner first mover in a new business line.

Netscape...yeah, yeah. That is because Microsoft also had a monopoly on computer desktops and since the browser had zero marginal costs for Microsoft they gave their browser away for free. Tough for Netscape to compete in that manner when Microsoft can use its monopoly power, with practically zero costs, to simply give away a multi-billion plus product just to destroy a competitive threat. Rare circumstance.

Why don't we say that Adobe will take down TTD as well, or that Amazon will take down SHOP, etc.

For me Adobe is not a big concern.

Here is how I see Docusign - they have potential unanticipated upside. If they succeed that potential will increase the multiple and propel the business. Thus why one invests in Docusign. Adobe is not going to impact Docusign's business anymore than it currently does and what it does is already in the share price. Not too much care or concern there because of this.

Sure Adobe can include signatures and SoA for free in its Adobe products, but why? Docusign is not an existential threat to Adobe. Any business Adobe wants to do with SoA or eSignatures will be done with a legitimate profit motive and not to kill a competitor with no thought of profit. As such Adobe's largest threat is bundling things together.

However, how often have you actually used bundled software that comes in the package? Usually that is an after thought. Adobe would have to specifically price bundle the functionality as part of the entire contract. If that is profitable, perhaps Adobe will do so, or perhaps they already are doing so. To date however they have not been anymore successful than they currently are.

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I have no problem with SpringCM, my confusion is what I thought was going to be the new product release, Systems of Agreement, ie, pulling stuff from CRM and auto populating the document, and putting it back automatically into a database, is already advertised on their website. So maybe they are already advertising it or it's not as new as I thought.

As for signatures, yes, it seems to be a commodity, but that's only if that's all you're doing, which DocuSign clearly isn't. Second of all Godaddy tripled in 3 years in what can be considered even bigger commodity, domain name registrations.
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No. of Recommendations: 5
Questions can be as valuable as answers. I am not going to do any "heavy lifting" on Docusign because it doesn't interest me. That doesn't keep me from having questions to which I haven't seen good answers yet.

E.g., you use the phrase "adobe fear" as if I was predicting something. I'm not. I'm asking a question. Abode obviously has the technology for filling forms with data and creating e-signatures, indeed, in some ways they have been doing it for a long time. And, they have deep pockets and loads of technological resources, so one can imagine then waking up and saying "Oh, this looks like an interesting market. What would it take for us to have a dominant product here?" Now, perhaps they never have that thought, but if they did, it could be scary for Docusign *unless* Docusign had some special sauce that even Adobe would find it difficult to conjure on demand. Workflow seems like an unlikely special sauce since there are a bunch of such products available.

As for the 70% market share, I thought I had addressed this, but I'll try again. Imagine a market which might total $X if everyone who could or should be using it was. Now, think of that market at a very early stage in which the total actual market was say 10% of $X (which is probably overly generous). And then, at that early stage we have a company with 70% of the market ... what that amounts to is 7% of $X. If this company has 70% because they actually control some key element then this is really exciting because they could conceivably grow 10 times or even more if they take over a larger segment of the market. But, if there is someone else who decides that the market is now proven to be big enough to be interesting and who has the money, technology, and savvy to leap into that market, the growth could easily go to the big guy.

What I am asking is, what is it about Docusign that is going to prevent this from happening? Note, the giant may simply never get interested and no one else may emerge to challenge the position and Docusign could well become a giant in the potential market even though there was no reason other than branding for them to succeed, but as an investor I would want to know which was which.

We could possibly have more interesting conversations if you were less intent on being insulting.
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That doesn't keep me from having questions to which I haven't seen good answers yet.

Tamhas, these questions have been addressed for anyone who has been following along.
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Cross post from my post on Saul's board...

FWIW I just re-engaged my accountant to file my UK tax returns.

Usually the process goes like this:
1) I forget about if for 9 months of the year
2) I miss the physical paper filing deadline around September/October
3) My accountant contacts me asking if I want to re-up with them for an electronic submission
4) I say yes
5) I forget about it till new year
6) I spend a month getting hold of paper and electronic copies of consolidated tax certificates,
7) signing applications for online submission,
8) receiving faxes or downloading forms and printing them out
9) signing forms
10) scanning forms back to accountant
11) receive notification of submission
12) receive an invoice for services rendered
13) forget to pay for 6 months
14) pay after 2 chasers

This year it went like this:
1) Client asks me to confirm services needed on email
2) Client requests my documents (Jan)
3) I sent the soft copies of necessary documents on dividend income for the financial year (yesterday)
4) I receive an email with an invitation to sign into DocSafe and a username and password
5) I enter doc safe and see: 1 my documents, 2 the filing form for my signature and 3 an invoice
6) It asks me to attach an eSignature - I type on out and it is done
7) I receive a notification of receipt and completion

It appears that Doc-Safe (a small UK cloud based outfit) is operating as a convergence of an online file storage, workflow manager and eSignature. It markets itself as:
docSAFE is the number one way to work in the cloud
Compliant, safe & secure file exchange • Electronic signatures • Available 24/7 • Audit trail
Access via desktop browser or mobile app

Not sure whether this is a rebranded version of a white label of another eSignature provider or a competitor to Box and Docusign.

Here are a few ranking sites:

Anyhow the one remaining convergence that would help would be eSignature and transaction processing.

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