Will AppDynamics become the Tivoli of the digital era?

Profile picture for user pwainewright By Phil Wainewright June 27, 2014
Summary:
A new breed of software-defined businesses needs a more business-aware class of application performance monitoring, says AppDynamics CEO Jyoti Bansal

© kentoh - Fotolia.com
In 1996, when big-ticket acquisitions of rising startups in the tech industry were less commonplace than today, IBM's three-quarter billion dollar acquisition of seven-year-old Tivoli Systems was a sit-up-and-take-notice moment.

Tivoli had established itself as a leader in managing the sprawl of client-server applications that had exploded across the enterprise in the early 1990s amidst the rise of commodity-priced PC servers. It fulfilled a desperate need for control and management that had barely been recognized just a few years previously.

This helped it rise quickly to become a dominant force in the new frontier lands beyond traditional systems management — a discipline that had previously been the sole preserve of the likes of IBM and Computer Associates. Tivoli became a hot property: IBM's acquisition valued its stock at more than three times its IPO listing price of just a year prior.

The cloud generation

"Every fifteen years we go through this kind of technology shift," says Jyoti Bansal, founder and CEO of Appdynamics, a startup founded in 2008 to help enterprises manage today's explosion of fast-paced cloud and mobile applications. He explains:

Starting in 2008 to 2009, we started getting into this fourth generation — we call it the cloud generation of application architectures. Everything is interconnected and broken into these small services.

The new architecture, typified by the way Netflix builds its highly responsive on-demand movie service, relies heavily on loosely coupled services, open source and agile development — all unfamiliar territory, says Bansal, to the established systems management vendors such as IBM, CA and BMC:

The legacy vendors are so ripe to be disrupted by the next generation of vendors. Market share is shifting very rapidly.

There are three disruptive forces in play, argues Bansal:

  • The shift of IT spending into systems of engagement that automate interactions across the enterprise boundary with customers, partners and outbound employees, rather than the traditional systems of record that automate internal transactions.
  • The architectural shift to loosely coupled, service-oriented architectures based on increasingly atomic, highly distributed micro services, designed for a hyperconnected digital world
  • A consumption shift from traditional software licensing to a pay-as-you-go SaaS model. With a freemium go-to-market model, AppDynamics is penetrating enterprise accounts in exactly the same pattern of incremental, tactical purchases that was so successful for salesforce.com in its early years.

Digital customer experience

Jyoti Bansal CEO AppDynamics
Jyoti Bansal, AppDynamics

While there are many thousands of customers on the free-of-charge Lite version of its products, the majority of AppDynamics' 1200 paying customers are consumer-facing organizations with a big investment in delivering a digital customer experience — banner names include Netflix, Expedia, Citrix Online, Nike and Paddy Power, along with large banks, travel sites and retailers, plus some B2B brands including John Deere and Staples.

They rely on Appdynamics to track everything from the user experience and customer behavior of their cloud and mobile applications all the way through to the underlying functions and components that contribute to how the applications perform. By understanding what happens under the covers in the application infrastructure, the tool can not only alert devops teams to problems but also provide insight into how to improve the experience or even automate some resolution patterns.

In a world that's increasingly digital and on-demand, this is becoming essential, says Bansal:

Software allows every business to redefine the customer experience. Any industry that's not doing it will get disrupted.

You lose a lot of revenue and your customer experience is very bad if your apps don't perform well ...

How you define trust for your customer is now through customer experience.

Enterprise focus

AppDynamics, with $86 million in venture backing, is not the only player in the field. Most notable of its competitors is New Relic, which recently raised a pre-IPO round of $100 million. Its founder was previously CEO of Wily Technologies, acquired by CA in 2006, where Bansal worked as lead software architect.

Both companies have grown rapidly in a very short time. Two years ago neither were included in Gartner's magic quadrant for application performance management. In the most recent, released in December, both were recognized as leaders.

AppDynamics is more exclusively focused on the enterprise market, with deeper specialization in languages such as Java and .NET, whereas New Relic has a more widespread developer appeal, with strong support for PHP, Python and Ruby environments. Another distinction is New Relic's SaaS only credentials, whereas AppDynamics offers on-premise licenses and added SaaS as an option more recently, although it now sees it as a strategic play.

AppDynamics is now doubling down on that enterprise focus by betting on a convergence of IT operations with business analytics. The thinking is that application performance is so crucial to the welfare of today's "software-defined businesses" that enterprises need a solution that provides real-time monitoring of the business impact of IT operations.

For example, if a retailer is registering lower sales from its mobile application, then being able to rapidly identify the operational cause in the IT stack delivers a significant bottom-line benefit. Says Bansal:

We're calling this application intelligence. You have to be able to make changes in your application within hours or days now ... [We're giving businesses the] power to drive revenue through software.

Bansal believes AppDynamics has the potential to build revenues above the billion dollar a year mark. With digital becoming increasingly important to business and an explosion in the mobile and ecommerce applications that drive digital engagement, it doesn't seem unrealistic to portray 'application intelligence' as an important new category. It remains to be seen whether AppDynamics can seize the crown as its leader, but it has made solid progress so far. Definitely one to watch.

Image credits: System network © kentoh - Fotolia.com; Jyoti Bansal courtesy of AppDynamics