Samsara CEO Sanjit Biswas reflects on hitting $1 billion in ARR - ‘You don’t have to squint to see our ROI’

(Samsara)

Earlier this month diginomica reported that Connected Operations Cloud vendor Samsara had hit its first $1 billion in Annual Recurring Revenue (ARR). The company’s share price is up over 30% since the release of these third quarter 2024 earnings and it seems that the market has finally found an ‘Internet of Things’ vendor that has some longevity, after years of others trying and (often) failing to stitch different pieces of technology together to make it work. 

As we’ve noted previously, Samsara found early success focused on fleet management solutions for trucking, connecting sensors to management software in the cloud. Since then, Samsara has expanded to become a ‘system of record’ vendor for organizations with large physical operations - connecting physical assets via sensors to its platform, providing insights to organizations that have largely been left behind by the software-as-a-service market. 

The outcomes for these organizations are often centered around safety, efficiency and sustainability. diginomica recently wrote about how global logistics company DHL, for instance, is using Samsara’s technology to reduce its CO2 emissions and hit key decarbonization targets. 

On a customer visit to London this week, Sanjit Biswas, Samsara CEO, and Lara Caimi, Samsara’s President of Worldwide Field Operations, sat down with diginomica to reflect on 2023 and discuss what’s in the pipeline for the coming year. The key message Biswas was keen to highlight was that whilst the $1 billion run rate is significant, it’s still early days in terms of market penetration - given how long the buyers Samsara is targeting have relied on manual processes and tools. Biswas said: 

I would frame it through the lens of the customer. If you think about their physical operations, they have vehicles, fleets of trucks, LGVs and so on. But they have other pieces of equipment: it could be trailers, generators, compressors, construction equipment. And then they have their frontline workforce. If you think about the digital penetration of each of those, it's way lower than you might imagine. 

Maybe only half of all the commercial vehicles on the road have GPS tracking, maybe 5%to 10% have cameras for safety monitoring. You think about the equipment that's out there, their construction equipment, again it's sub-10% penetration. There's tens of millions of those pieces of equipment in North America, and similarly here in Western Europe, most of which haven’t gone through that wave of digitization. 

Biswas wouldn’t be drawn on specific revenue targets or what he believes the Total Addressable Market might be, but he did say that the organizations Samsara is targeting make up 40% of the world’s GDP and have largely been underserved. As noted recently, Samsara is positioning its platform as the workflow vendor for organizations with large physical operations - and it's not lost on anyone that the company has hired a number of executives from ServiceNow, a very popular enterprise workflow platform. On the workflow opportunity, Biswas said:

On the frontline worker side, I think we're now seeing these tablets and handhelds in operations, but it's very fragmented. People don't have digital workflows, they still have pen and paper. That's why we believe it's the early innings of this market. If you just get out in the field, you see that they have not gone through the same transformation that we've experienced in the office, at least not yet.

And there’s a generational change that’s occurred, where now everyone who is running these physical operations companies, they have grown up with smart devices and iPads, and they're kind of asking why their business is still running on IBM mainframe and pen and paper? 

A flywheel effect

On where Samsara is anticipating future demand coming from, Biswas pointed to the generational changes in these organizations again, but also highlighted regulatory tailwinds as driving adoption. For instance, in 2017 in the US, it became a requirement for truck drivers to use an electronic logbook - an ELD monitor - to help improve safety on the roads. In addition, the requirement for organizations to provide emissions and sustainability data is helping fuel the adoption of Samsara’s monitoring technology. 

But beyond that, Samsara’s President of Worldwide Operations, Lara Caimi (who joined from ServiceNow, by the way), notes that there is a “flywheel effect” happening in the market, which is helping to fuel demand too. Caimi said: 

There's a little bit of this flywheel effect that starts to happen in these businesses. Even from when I first came here six months ago, I feel even more momentum in the market. And what happens is, you start to be known out there. 

We're publicly listed, we now have a number of reference customers. And these customers talk - because, interestingly, I think they view safety as a public good and something that they're actually very willing to share the stories about. 

It's better for society and it’s keeping carbon out of the air. There's also a lot of people that move across jobs. We were just in fact talking to a customer who was one of our public reference customers. He moved over to another company and he's now pulling us in, because he saw the impact on the business. We're now having that kind of scale. 

This flywheel effect is being fuelled by Samsara’s focus on “board level metrics”, Caimi added. She said that safety and sustainability metrics are significant for these organizations and get the attention of those senior stakeholders in the organization, particularly given that buyers with a larger number of physical assets typically operate with thinner margins (which are becoming increasingly challenging with high interest rates and inflation). 

Caimi said that with Samsara’s technology and platform, you can do a trial and “within weeks” see real business value. She added: 

You don’t have to believe me, you can see it for yourself. 

Biswas agreed and said that getting traction with buyers is enabled by the quick value that can be delivered. He said: 

There’s hard ROI (Return On Investment), right? You don’t have to squint to see it, it becomes quite obvious. We do these proof of value trials where they can see it in their operations and they can see very immediate changes in these leading indicators. We're having fewer accidents, the frontline workers are enjoying the product because it's streamlined their operations, those kinds of things. 

Changing operating models

I was keen to get Biswas’ and Caimi’s take on how - and if - the organizations that are using Samsara’s technology are using the data collected to implement new operating/business models. For instance, there is a company in the UK that leases vehicles on 30 day contracts, with all the costs bundled into a monthly deal, which is enabled by the organization being able to monitor the safety of drivers leasing the vehicles using Samsara’s camera and sensor technology. 

Are other organizations thinking through new business models and opportunities as a result of the data that they’re now able to collect? Biswas is seeing a number of examples in the market. He said: 

We were just talking to an equipment rental business. What they can do now that they have real time and high quality data, showing what's going on with their assets, they can bill completely differently. 

Before it would be: ‘I'm going to rent out my crane for the month’. Now you can rent it out based on hours of usage. It’s a lot clearer and more transparent to the customer what they’re paying for. 

Sometimes there's a fault code that’s preventing it from being used, right? And so there's a billing dispute. All of that goes away once you have real time data. That's a totally different business model, where it’s consumption based for a physical asset, which simply wasn't possible with manual processes. 

Caimi agreed and said that the data being pulled allows these organizations to think differently about their assets. A truck is no longer just a truck, but they can think about the value added services they can wrap around the truck. 

This is particularly true for government buyers, Biswas added. Samsara has had a number US States and cities begin using its technology - including the State of New Jersey, the City of Fresno, the City of Mobile, Hernando County, the City of Houston, and the City of New Orleans. 

It will come as no surprise that the public sector organizations governing these areas are strapped for cash and looking for ways to save money. Biswas said that this new data is providing new opportunities. He explained: 

They're asset intensive customers. For them, they don't necessarily have enough labor, that's actually an area where they're always under pressure, so they're trying to find ways to be more efficient in their operations. 

For example, we have customers like the City of Boston - they have a ‘where's my plough? App’, which in the winter months makes a big difference for their citizens. We have the City of Memphis in Tennessee, they're using it to provide better services to their citizens. For example, can they proactively find the potholes on the road and fix them before a citizen has to call in, right? 

It's just a better level of service for the same kind of cost. So that's the efficiency play that we're seeing in the public sector. I think there's a real appetite for finding ways to be dynamic and to make these great livable cities.

And these public sector organizations are talking. Biswas added: 

If you think about where the physical operations are, they are at the state, local and municipal level. And all of these people are interested in finding ways to be more efficient and actually share notes, because they're not competitive with each other. 

In Boston, they have these winter storms that basically blanket the city and they have to go get contractors to come in and help, because they have to clear the streets. That ends up being a double overtime shift, and it's very expensive, it costs hundreds of thousands of dollars per storm to clear it. 

They've started using this data to save taxpayer money and say: was this contractor really working that full shift? Which streets did they plough? They can now pay based on the work performed, as opposed to the hours. So it’s changing the efficiency of their operation and saving millions of taxpayer dollars. So that's exciting. This wasn't possible without the data.

Organizational change

The question that often gets put to Samsara is how employees at the organizations it supplies to feel about being monitored - whether that be drivers of trucks or people operating large equipment. The argument often goes that whilst using manual processes and pen and paper are inefficient, it provides a lot of ‘cover’ for employees who perhaps don’t want their bosses knowing their every move. 

Biswas doesn’t hide away from this point and does acknowledge that it can require a shift in culture - bringing employees along on this digitization journey. Biswas said, however, that the change management is possible and buyers typically focus on two approaches. He explained: 

There are two distinct stories we see. One is around safety. If you think about who's at risk, it's actually the frontline workers. If you can improve their workplace safety, they feel much better about it,. 

Biswas pointed to DHL as an example.it put safety cameras in its vehicles and saw a significant reduction in the number of accidents - 26% reduction in accidents and a 49% reduction in accident costs. He added: 

The business saved a lot of money, but interestingly the drivers who were in these vans all day long felt safer because these cameras were notifying them of distracted driving. Not doing it in a way that was getting them in trouble, just giving them a hint. They also saw their attrition rate get cut in half. So that is kind of the proof in the pudding. 

The other story is around eliminating manual processes. No one loves that kind of manual work, right? It's very tedious. You’re doing these long checklists, some of which are six pages long, then you're taking it to the office, someone's typing it all in every single day and it's just mind numbing work, right? So the idea that it can now be done on a smartphone, or it can be done with a simple photograph. That's amazing, right? It improves the quality of work for people and they feel much better about it as well. 

Caimi agreed and said changing processes and changing human behavior go hand in hand - and that Samsara has learned a great deal about what effective change management looks like. She said: 

How do you get people excited about the change and how do you make it a carrot system instead of a stick system? Create drivers rewards programmes and celebrate wins. Because in many ways, most of your drivers are actually great drivers and you're honoring and respecting the work that they do every day, recognizing them for that and making that part of the culture is a really, really important part of how we drive this change. 

What’s next? 

It’s been a solid year for Samsara and the company has no plans of slowing down in 2024. Biswas was pretty tight-lipped about the product roadmap, but we can no doubt expect developments around AI and the use of Large Language Models over the coming months - something that could deliver interesting results given Samsara is currently collecting 6 trillion data points within its platform annually. 

What will be the focus for Biswas over the coming months? His two key priorities are scaling and prioritizing effectively. He said: 

We've been scaling a lot. If you think about our go to market teams, we have more and more customer engagements, record numbers on a regular basis. And to do that ,you need to staff up, so that's been a big initiative. Not just in our front office, which is touching the customer, but even with engineering teams, we want to build more products. So it's this constant hiring effort that we've got. And to do that, well, you want to have a consistent culture across the company and do that year after year after year, which isn't easy. That’s just kind of keeping up with the pace of growth. 

And then I think the other piece that's challenging is, when you have this much success in the core business there's a focus allocation question. Do you just keep doubling down on things that are working or do you do some new things as well? And we want to be doing new things. Finding that capital allocation framework or discipline framework has been important for us, but I think we've struck that balance of innovating and doing new products and functionality, while enhancing the core. 

My take

It’s always interesting to speak with Biswas and get a sense of his plans for Samsara. The impression I was left with is that this is a vendor that has just scratched the surface and that there are plenty of interesting examples of how the platform can be used in the future, given the organizations that are currently using it are still early in their digitization journeys. My particular areas of interest are how the platform can be used to change business and operating models - those value add services that can be developed because these organizations have data in their hands for the first time. We will be monitoring the customer stories closely during 2024.