MarTech Interview with Michelle Swan, CMO and Partner at Tercera

Introduction:

Michelle, could you start by introducing yourself and telling us about your experience in the industry so far?
I currently serve as Chief Marketing Officer and Partner at Tercera, an investment firm specializing in high-growth IT services businesses. I began my career in technology PR and communications, working for agencies and mid to large sized software companies, however, I spent some of my most formative years leading marketing and customer experience at one of the early cloud consultancies, Appirio. After Appirio and prior to joining Tercera, I founded my own brand and communications consultancy helping B2B technology firms discover and tell their story.

Could you provide an overview of Tercera and elaborate on your role as a partner at Tercera?
Tercera is a growth equity firm that provides founders of IT services firms with the capital, counsel and connections they need to grow and scale their businesses to the next level. Most investors tend to overlook people-centric businesses. We’re trying to redress this imbalance. As former operators, we recognize the value of people in a tech-driven world and believe services firms will play an important role in the Third Wave of Cloud Computing and enterprise adoption of AI.
Like many leaders in smaller organizations, I wear a few different hats in the firm. Given my marketing background, I lead our marketing and thought leadership agenda, and mentor our portfolio companies on brand and go-to-market strategies. I also co-lead our Advisor community, am on the board of two of our investments, and help lead investment decisions for the firm.

Mission:

Could you describe how your position relates to Tercera’s technological and artificial intelligence purpose and vision?
I am fortunate to lead our market research initiatives, including the Tercera 30. We use this research to understand which segments and software ecosystems offer the greatest opportunity for services firms, which ultimately helps guide our investment decisions. This research and the insights we get from talking to hundreds of entrepreneurs in this space also helps us to identify patterns, and develop playbooks, benchmarks and methodologies that ultimately can benefit our portfolio companies. How services companies can leverage AI for both internal efficiency, and alongside partners and customers, is a big piece of this.

Tercera’s 30 list:

How important was AI in 2023 Tercera’s 30 list? Did it have any impact on the companies that made the list?
While AI wasn’t a specific qualitative metric we used in our weightings, it certainly factored into our evaluation and influenced decisions on who made the list. We view AI as both an accelerant and disruptor. It will create tailwinds for some sectors (like data engineering, security and the hyperscalers), and headwinds in others. Our job as investors is to evaluate where those winds are blowing, and which software vendors and service firms are poised to take advantage of what’s to come.

If you look across the software vendors on our Tercera 30 list and our Ones to Watch list, there are a number that are leading the AI conversation. Names you’d expect like Microsoft, Google, AWS, Snowflake, Databricks, OpenAI, Nvidia, and Cohere. However, there are others that might not be the first names you think of when you hear AI, but are making interesting plays. Companies like commercetools, HubSpot, Dataiku, Collibra and UIPath, all of which are leaning in hard into how AI will shape their markets.

According to you, what were the key aspects kept in mind while creating Tercera’s 30 list?
The Tercera 30 is about identifying the best enterprise software ecosystems around which to build a services business. To identify them, we looked at 21 different factors that we believe facilitate a high calibre, high potential partner ecosystem. Those factors fall into four primary areas:

1. Market size and potential: What is the current and future size of the market? Is the segment big enough to support a $10M technology services practice or a $50M business?

2. Brand and growth potential: Is the software company perceived as a leader in that fast-growing segment? Is it considered dated technology, or is it taking share? Is the company investing in the product and future growth?

3. Potential for external services: Is the product targeted towards small and medium businesses and easy to implement? Or is it enterprise-grade technology that can be highly customized, paving the way to medium to large projects with high service intensity? Is there a level of talent scarcity around the platform necessitating the need for outside support?

4. Partner support and collaboration: How open and supportive is the partner program? How easy or difficult is it to enter as a new partner? Are Global Systems Integrators taking interest? Is there an internal professional services team with which partners will compete for work?

Importance of Data and Marketing in AI:

Data and marketing plays a crucial role in the AI landscape; could you elaborate on why these areas have become pivotal for the AI industry?
There are huge synergies between data and marketing in the AI landscape. As ChatGPT puts it: “think of AI as a highly skilled chef, and data as its primary ingredient. The better the quality of ingredients (data), the more delicious the dish (insightful results).” Marketing is both a consumer and producer of that data. Marketers rely on data to drive strategy and execution, but they also feed data back into the system which helps unlock deeper insights that can be used to grow the business and predict future trends.

Incumbents and Upstarts:

‘Incumbents’ and ‘Upstarts’ are the two words creating a buzz in the AI industry recently. Do you see any particular trends followed by these companies that readers should be aware of?
The incumbents in AI have had years to develop and refine their play here. They’ve invested heavily in R&D, have teams of data scientists and AI experts on staff, and have greater access to the GPUs to train these models. That obviously gives them a huge advantage. However, this space is moving so fast there are plenty of opportunities for upstarts. Niche solution providers that can build tailored solutions that the incumbents might overlook. These upstarts have the capability to build off open source models and can be more nimble and flexible in pricing. This can give them an edge.
Like with any major shift in technology, we’re going to see incumbents acquire upstarts to either integrate their more advanced technology into existing platforms or to eliminate potential competition.

CMOs and AI:

In your opinion, Chief Marketing Officers’ can be the next big users of AI. How beneficial do you think AI could be to CMOs in making decisions and building strategies?
Most good CMOs are already finding ways to incorporate AI into how they and their team’s work. They’re using AI tools to be more efficient with their spend and to be more productive personally, whether that’s using them to develop content, refine campaigns, research targets, evaluate tools, etc. The best CMOs though will figure out how to apply AI to shape strategy and create entirely new customer experiences. Today there are few who are using it in that way, but there will be more.

According to you, could there be any challenges for CMOs to look for while stepping into the AI space? Could you share some tips on how to overcome them?
As CMOs step further into AI, they need to tread carefully. They are the protector of a company’s brand, and AI used in the wrong way can harm a company’s reputation. It’s important to know AI’s limitations and not to over-rely on it without human intervention. Inaccurate or biased data can lead to flawed decisions, which makes it even more important to audit and clean the data you’re using. AI involves analyzing vast amounts of customer data, which could have privacy implications. Marketing leaders need to choose their tools carefully and ensure team members are thinking through privacy implications when using personal customer data. The CMOs job is hard, and it’s not going to get easier. My biggest recommendation is to start small, invest in continuous learning, hire an AI consultant to educate yourself and your teams, and use AI to complement human judgment, not replace it.

Conclusion:

As a partner at Tercera, can you share any unique insights or examples of how Tercera itself is embracing AI and helping your clients leverage this technology in their businesses?
Honestly, Tercera isn’t using AI in a particularly unique way right now. Like most companies, we’re experimenting with it internally, using it to augment what we already do to be more efficient and figuring out its capabilities and limitations. When it comes to our portfolio companies, we’re trying to offer data and insights that are incredibly relevant to the IT services space. Doing research like the Tercera 30, but also sharing case studies from across our portfolio. One of our portfolio companies is creating virtual analysts to support research, while another one is helping regulated industries leverage GenAI on their proprietary datasets in a more trusted way. Watching how they are learning from each other is pretty inspirational.

As we conclude, what are the most exciting and game-changing developments you anticipate at Tercera in the near future?
AI will probably be the biggest game changer in the next few years. There’s a reason why investors and companies alike are pouring billions of dollars into the space.

Final Thoughts:

Michelle, for a quick takeaway, would you like to leave expert advice for the aspiring MarTech professionals?
Get out of your silo. Spend time learning how other teams and functions operate (not just marketing and sales). Spend time with customers as much as you can. It’s easy to just put your head down and do your job, but having a broader perspective will make you a more valuable team member and uncover opportunities you might not know exist.

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