Lew Cirne, CEO New Relic, on sleepless nights, culture, customers and technology
- Summary:
- Lew Cirne has a lot to say about culture, good customer fit and where New Relic is going.
If I've learned anything this year, it is that hard charging technology people are spending more time than ever with the business and adapting very quickly. I've not had a tough time with anyone who is technology focused this year. If anything, their natural curiosity seems to be opening doors. I've yet to be convinced that business people have afforded the geek squad the same degree of courtesy. With that in mind, I was very much looking forward to my first meeting with Lew Cirne, CEO New Relic. It was a great conversation spanning many topics.
Sleepless nights
I like to know what keeps CEOs up at night. That's because the answers provide insights into the 'tone at the top' and which in turn sets the path for the company's culture. This has implications at multiple levels including the way in which the company chooses to do business, the degree to which employees are happy in their work environment and the extent to which customers believe the company is acting in their best interests. Here is Cirne's response to that question:
Creating a super high growth tech company is very hard, sustaining it is hard as we're no longer a start up but a public company. But what keeps me up at nights is, can we sustain that growth, can we keep what's special and warm and beautiful about the culture of the company? I think you get a sense in the room like the people who come to Future Stack they're authentic and nice and, you know, they're passionate people.
Great culture
A great answer but how does Cirne deal with managing that cultural aspects?
We didn't codify what we stood for until after the IPO [Spring 2014]. You need years of introspection to understand who you truly are and that informs what your core values are. People know when statements of values are interchangeable with other companies and there's not a lot of heart in them but when they're rooted in the truth then they resonate. It helps inform our hiring decisions and then it really comes down to the hard hard people decisions and so you bring it back down to the core values.
Now we're getting to the meat of this discussion which, in my experience, is only possible when the founders are central to that cultural formation process. What are those core values?
We're bold, we're passionate, we're accountable, we're authentic and we're connected.
Those are big statements upon which New Relic relies and especially in its people related issues. The pursuit of those values seems to be working well for the company:
It brings me great joy when I go to the Dublin office and I see my New Relic family there. It depends immensely on who you hire to set up that office. I didn't have to be personally involved in some of the hiring decisions you might think because it isn't about me it's about this culture that's more than one person. But there's a lot of people who don't get our culture and don't want to be part of it and that's fine because there's a lot of resiliency to it and it doesn't depend on one person.
I find this brand of humility incredibly attractive and while it wasn't stated as a core value, it would not surprise me if there's a lot of conversation about that element in this complex equation.
The right customer
Moving on, I wanted to get Cirne's view on working more closely with the business. This was something I sensed as important as I listened to a variety of customer stories. I believe this takes on greater importance as New Relic moves up the enterprise stack.
Where we align well is where people believe software is going to be the transformational agent for the whole company and the CTO ought to be at the CEO side. If you look at companies like GE, they're companies that love us and partner well with us. And we struggle sometimes with companies that think that IT has this back office function. Think about Paul Cheesbrough [CTO, News Corp], he gets more time with Rupert Murdoch than the CIO does, or at least similar, they're in constant communication. So Paul and Rupert and two other executives come visit and because he's passionate about his business and curious about technology, he [Murdich] goes visit New Relic and Dropbox and a bunch of other technology companies to see how those companies can help. I think that's shortening the connection between the technologist and the business person.
That was a revelation to me but then I know of a few other CEOs who share similar passion for their business - again - mostly founders but it gives you a flavor of the kind of company that will likely gravitate towards New Relic. This is really important as the company evolves and develops its place in what is a crowded market.
Equally, such melding of corporate and technical conversations will be important for those businesses that are transforming to the new digital realities and which are either defending against alternative business model disruption or which are creating entirely new models that are informed by software.
Let's get technical
Moving forward with the technology, I explained that while the real time monitoring capability was impressive, I really want to see alerts that help me make decisions. Here, New Relic has been developing a sophisticated set of alerts that in time will hopefully help customers understand the parts of their system they need to address. The New Relic phone app has the potential to let business people know that IT is dealing with issues. Right now, New Relic has policy control in beta so that customers can properly route notifications to the appropriate people.
New Relic makes a specific point about its multi-tenancy approach to deployment. Cirne's argument is clear and precise:
I liken it to a 747 - why would you be the only person in a 747 to cross the country that costs you half a million dollars a few times a year why not buy a $500 seat on the plane? And so at some point the cost benefit is so enormous, it's similar to cloud computing, why build your own data canter when somebody else is really good at building data centers and you share a part of that data center and in a way that's just a different flavor of multi-tenancy. If there's fear around it then it's a fear that's not rooted in any specific reality, it's just fear of the unknown and so a conversation with our security people gets them very comfortable with it very quickly.
But that about the fear of cloud lock-in? This is an increasingly important topic of conversation.
Absolutely which is why New Relic can support any flavor of on-premise or cloud environment because we know that customers don't want another Microsoft or Oracle situation five years down the line. Having New Relic as an honest broker that can watch the software in any environment is super strategic to our customers that they're not tied to a specific platform.
Pricing
Which answer took me swiftly along to pricing. New Relic starts at a fixed fee of $150/month per host. Cirne says that in typical environments, customers will deploy to a number of hosts, increasing their investments as they derive value. The customer may then decide to contract for a given number of hosts but negotiate at a different price point. In addition, customers may add more products beyond the core APM.
When customers go over the agreed host number, New Relic doesn't swoop in with account execs looking to squeeze more out of the account on a per unit basis. Instead, it prefers an orderly negotiation that reflects an agreed assessment of value. It is a classic 'land and expand' strategy where unit pricing is not the end game but value exchanged. The strategy is working well because according to Cirne:
Over the course of the last year, we've seen a 20 to 30 percent growth in the customer base on an annualized basis which means if we didn't add a single customer today, serviced the existing base including those that would churn out for whatever reason we'd grow 20 to 30 percent next year. Not many enterprise software company are growing 20 to 30 percent at all.
Predictive?
It's hard to argue against that and so, as we closed out the conversation I wanted to go back and ask about predictive analytics. Readers will know this is a topic where there's a lot of talk yet APM is an area that might benefit significantly from the application of predictive technology. Cirne is circumspect:
There is a lot of hot air on this because a lot of the folks trying to do this don't have access to the treasure trove that we have. We collect over two million application software events a second so while we don't have specific announcements today, we have an opportunity to build real predictive analytics. If anyone has the right data with which to build new algorithms it's New Relic because we're all in on cloud.
My take
Going into this conversation, I was concerned that I might struggle to find relevance with the kinds of business conversation in which we know our constituents are interested. That is because past conversations elsewhere with technology led vendors have always required something of a decoding exercise. I came away more than satisfied.
New Relic is one of many competitors in the APM space but it is carving out a place of its own as it replaces legacy solutions while appealing to those businesses transforming through technology or which are going straight to cloud. I found Cirne's answers to be an agreeable mix of enthusiasm, caution and reality.
I was particularly impressed by his direct reference to the kind of customer to which New Relic appeals rather than listing all the functional achievements that differentiate the company. That suggests a maturity of thinking around positioning that is unusual.
It will be interesting to watch how this fleshes out over the next year.
Disclosure: New Relic covered most of my travel and expense for attending Future Stack.