Sapiens Under New Ownership Faces Cultural Overhaul

Mike Ettling, Chairman of Sapiens and a partner at the investment firm Advent, revealed in an exclusive interview that the software company suffered from a "bad culture" where employees repeatedly failed to fulfill promises made to customers. Ettling stated that this issue was a recurring theme mentioned by nearly all customers interviewed after Advent acquired Sapiens in December for $2.5 billion. He noted that even when issues were escalated to the CEO, no action was taken, highlighting a leadership problem that permeated the organization.

Advent, led by Ettling, has already implemented significant changes since the acquisition. This includes replacing most of the senior Israeli management, including the long-time CEO, and laying off approximately 800 employees, reducing the company's workforce to 5,000. While the majority of Sapiens' employees are now based in India, the company maintains a significant technological presence in Israel. Management operations have been consolidated in London, where Ettling and the designated CEO, Paul Wheeler, are based. Wheeler is expected to assume his role in the coming weeks.

Ettling described the company's organizational structure and management style as detrimental to its growth, despite its well-regarded product in the insurance sector. He explained that the company's brand value is strong, but its internal operations hindered its market perception and valuation compared to competitors like Guidewire. To address this, Sapiens has transitioned from a collection of business units to a global software company management model, with new executive roles for revenue, customers, product, and technology. The company is also leveraging its Indian operations more effectively and restructuring around customer needs to eliminate the old culture.

Regarding workforce changes, Ettling acknowledged the impact of layoffs but emphasized the company's focus on integrating Artificial Intelligence (AI). Sapiens is providing all employees with access to AI tools like Claude to enhance productivity and is developing its own AI platform, "Sapiens Brain." Ettling anticipates that AI will significantly alter the workforce dynamics, potentially leading to further reductions but also creating new roles for AI development. He stressed that while long-term career guarantees are diminishing, the company will focus on employee development and learning.

Ettling confirmed that Tel Aviv will remain a crucial technological hub for Sapiens, with an expected shift towards more technology-focused roles and less administrative work. He also indicated that some products that do not align with the new strategy, focusing on life and pension insurance, reinsurance, and property insurance software, will be discontinued or sold. The company has revised its growth projections, now anticipating $1 billion in revenue by 2029, two years earlier than previously projected, largely due to the integration of AI. Ettling expressed confidence that Sapiens, with its 40 years of industry experience, is well-positioned to leverage AI, unlike newer AI startups that may lack specialized insurance knowledge and face higher error rates.