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AppDynamics CEO on Cisco, transformation, and the CIO as hero

Phil Wainewright Profile picture for user pwainewright May 29, 2018
AppDynamics CEO talks surgical integration with Cisco, correlating digital transformation to business outcomes, and recasting the CIO as hero

Hero CIO surveys racked servers © vectorfusionart - Shutterstock
When Cisco acquired AppDynamics for $3.7 billion early last year on the eve of an IPO, I worried that the APM vendor would be swallowed up and never seen again — a common fate when an established giant buys up an innovative smaller business. A year on from the acquisition closing, what's changed? I took the opportunity to catch up with AppDynamics CEO David Wadhwani on a recent visit to London to find out.

Rather than overwhelming the smaller business, Cisco has been careful to add value by what Wadhwani calls "surgical integration" of the two companies at appropriate points, he tells me. That has ranged from bolstering AppDynamics' global reach and helping close deals with large Cisco customers, to adding new AI capabilities with the acquisition of machine learning startup Perspica — more on that below.

A year on, therefore, R&D spending is up 80%, annual recurring revenue (ARR) growth rates "have accelerated" and deals close 50% faster with Cisco involved, he says.

For us, the surgical points of integration are without a doubt Cisco's massive scale and reach in the enterprise as points of acceleration for our go-to-market and winning the market there.

And if you look at it from the other way around, our goal is to make Cisco gear and Cisco software-defined network smarter, so that they can start to have differentiation in their network stack against their competitors.

The CIO as hero

What AppDynamics brings to Cisco is its ability to give a business context to the data being generated in the infrastructure, he explains:

We believe very much that, with the right set of assets integrated the right way, we can build the central nervous system for enterprises, where all of the telemetry firing in different places are being captured.

The telemetry is cheap. What really matters is correlation. And by capturing all of that telemetry, and correlating it to the business transaction — whether it's coming out of a Cisco router, whether it's coming out of a public cloud context, whether it's coming out of your application — that lets us do things that are more impactful.

That enables the CIO, across industries as diverse as banking, retail, healthcare, travel, digital or manufacturing, to become much more of a partner to the business, he adds:

People are asking so much of their CIOs — they have to run these old systems, they have to adopt these new technology stacks, they have to change the culture to agile. But, by the way, they also have to be business owners, because they don't want to talk in tech terms — they want CIOs now talking in terms of conversion rates and revenue augmentation and revenue recovery, and all these things. So, we're asking the CIOs to really be more of a CEO of a tech start-up.

As a result, what we find is when we have those conversations higher in the stack ... the relationship is completely different. And they can then create all kinds of things for the line of business, but our goal is to make the CIO the hero.

Correlating digital transformation to business outcomes

One of the most important factors driving uptake of AppDynamics, says Wadhwani, is that enterprises want to embrace digital transformation — although few have a clear strategy for doing so. So instead of selling application performance management (APM) as a tool, AppDynamics comes in as an enabler of digital transformation, providing a framework for measuring what's happening in the infrastructure, understanding the impact on business outcomes and gaining insight into how to meaningfully improve performance. It's "giving them the blueprint for digital transformation, as opposed to selling piece-parts of technology," he says.

At the same time, organizations are building new, more responsive and iterative application infrastructures to support that transformation — where monitoring is a key enabler of agile development.

If you ask me what our single largest tailwind is, it's the move to more distributed and service-oriented organizations ...

You don't want to be agile just for the sake of being agile. You're looking for outcomes. And the reason for that is in today's world, it's moving so quickly, you can't build the perfect product. You have to build a good product, and you have to iterate a thousand times to perfect it. And the difference between the winners and the losers are, the winners just iterate those thousand times faster.

And so the foundation is, you need an entire system end-to-end, from front-end all the way back to back-end, that you enable your team to work on quickly, and move quickly, and iterate and deploy quickly in micro-segments ...

If we can give you that immediacy to say, 'You just changed the configuration setting in your network, and conversion rates dropped,' that's the foundation of how enterprises need to operate, and no-one is able to do that today other than AppDynamics, especially now that we're in the context of Cisco.

Hybrid infrastructure and machine learning

This is a hybrid world that has to span everything from legacy systems to cloud-hosted containers and serverless computing, as this month's launch of AppDynamics for Kubernetes underlines. As well as its work with Google Cloud, Wadhwani points to the company's partnership with Amazon Web Services (AWS), where it's often involved in migration projects to move enterprise workloads from on-premise or private cloud infrastructure to the AWS cloud. This speaks to the platform's reach, he believes:

In a world where more and more is going to move to and/or be born in this service-oriented, micro-cloud, elastic computing model, whether it's in public cloud or private cloud, we have to stay in the front end of monitoring all those capabilities, from microservices and Docker to Kubernetes to things like [AWS] Lambda functions and serverless. All of those are areas that our core teams are continuing to innovate on and build to.

But, in large organizations, you also have to go and focus on some of the legacy systems that are interacting with it. You have to have mainframe support. You have to support for Message Broker, for things like SAP. If you break down on any one of those individual areas you're really leaving large gaps, in these enterprises. So, the investment we have for that end-to-end coverage is critical.

The addition of Perspica, which Cisco bought in October last year to bring its technology and team into AppDynamics, adds new machine smarts to that reach. Perspica's strength is in analyzing data that's streaming in high volumes. This means the technology can apply machine learning algorithms to data on-the-fly, rather than waiting until it's been written into a database. In combination with the business transaction focus of the AppDynamics data model, Wadhwani says this will enable faster, more joined-up insights into the data.

Our architecture and our data model is all correlated to the business transaction, which means we have a more prescriptive data model than anyone else. What that effectively does is, it lets us look at all of these stats, all of this telemetry in a correlated way. That's why I said, 'Telemetry is cheap. Correlation is what matters.'

And that correlation, that machine learning, actually work in a more effective way because we're not just getting data on the stats, we also know the semantics. We know what things should look like and feel like in the system — when you're logging in, versus creating an account, versus transferring funds, or checking out, or buying a ticket, or whatever. By having that semantics in there as well, these are not abstract bits of metrics. These are actual semantics associated with the underpinnings of what's happening in the technology. So, machine learning can be a lot smarter about understanding the relative difference between these things.

My take

AppDynamics is one of several sizeable enterprise technology acquisitions in the past couple of years where the acquirer has held back from major changes so that the acquiree can continue to accelerate its growth. Wipro's $500 million acquisition of Appirio is one example. Oracle's $9.3 billion acquisition of NetSuite is another that seems remarkably similar.

Of course one can still harbor the suspicion that Cisco is focusing more on a defensive play that bolsters its presence with existing customers than seeking to maximize AppDynamics' growth across-the-board. But the investment in R&D and technology acquisition demonstrates a commitment to ensure that the AppDynamics product set remains competitive in a rapidly shifting market. It is still very much in the game.

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