Dynatrace CEO John Van Siclen - moving up the stack to be as big as ServiceNow

Profile picture for user jtwentyman By Jessica Twentyman May 29, 2019
Autonomous clouds and customer experience both play role in management’s bold growth ambitions for the private equity-owned application performance management (APM) company.

It’s high time that organizations were thinking about running their businesses on self-driving, autonomous clouds, says John Van Siclen, CEO of application performance management (APM) company Dynatrace. And he’s not just talking about well-heeled, talent-rich, hyperscale providers of cloud services such as Amazon Web Services, Microsoft Azure and Google Cloud, who rose to prominence by pushing back the boundaries of IT automation, he stresses.

No, says Van Siclen: he means airlines, banks, logistics companies, manufacturers and everything in between. As he told attendees at the company’s Perform Summit in Barcelona last week:

If we can be thinking about self-driving, autonomous vehicles, then companies should definitely be able to use software to build self-driving, autonomous clouds.

According to Van Siclen, Dynatrace is well-positioned to help its customers achieve this goal, with its combination of automatic instrumentation of IT stacks, real-time dependency mapping and its Davis artificial intelligence (AI) engine for root cause analysis of issues. And it’s such an attractive goal in efficiency terms, he claims, that the cash that customers will be prepared to spend chasing it could propel Dynatrace to twice, even four times its current size. Or, as he puts it:

We could be as big as, or even bigger than, ServiceNow.


That’s an interesting declaration, not to mention a bold one - and it requires some unpicking. Under the ownership of private equity company Thoma Bravo, Dynatrace doesn’t disclose its revenues. A March 2019 estimate by Gartner, however, places the company’s sales of APM (excluding professional services) at somewhere between $250m and $550m and, since Dynatrace did reveal back in mid-2017 that total sales had passed the $400m mark back, it can be safely assumed that today’s figure is somewhere at the high end of the Gartner estimate, if not slightly more. Plus, most estimates of APM market share by revenue show Dynatrace comfortably ahead of rival New Relic, which posted full-year revenues for its last financial year of just over $479m.

Whatever the exact figure, it’s also safe to assume that Dynatrace is around one-fifth the size of ServiceNow, which in its last financial year posted revenues of $2.6bn. But either way, ServiceNow isn’t a competitor of Dynatrace. In fact, it’s a close partner, with the two companies offering highly complementary software. In the simplest terms, the combination of Dynatrace and ServiceNow means that a problem in an IT environment detected by Dynatrace can be automatically pushed to ServiceNow as an incident to be managed and resolved, with ServiceNow aggregating alerts from Dynatrace (among other alert generators, including Splunk, for example) to identify and repair affected business services.

Indeed, at the Perform Summit event in Barcelona, several flagship customers explained how they are already using this Dynatrace/ServiceNow combination. From consumer credit reporting company Experian, for example, vice president of global IT service excellence Jonathan Hayes described how Dynatrace plugs directly into the company’s ServiceNow-based CMDB [configuration management database], so that the company can manage its highly dynamic infrastructure better. By automating the detection of IT service components and dependencies, and more importantly, any changes to them, he explained, the CMDB can be maintained in real time.

In other words, Dynatrace’s future fortunes may to some extent be hitched to those of ServiceNow, as the larger partner in this relationship. Still, Van Siclen is adamant that, of the two, it’s his company that is playing in the potentially bigger market:

There’s no question that the market space we’re in, which is a pure-play in [the trends of] software eating the world, plus cloud-first, plus everyone needs software to run perfectly, is bigger. The symbiotic relationship between us and ServiceNow couldn’t be more ideal, because IT needs process and governance [ServiceNow], and the cloud needs super high-fidelity, real-time visibility and insight to sift and sort issues from noise [Dynatrace]. We have work to do to become as dominant as they are, but the potential is there.

User proofs

Arguably more crucial to Dynatrace’s growth potential will be its ability to move ‘up the stack’, with an increasing focus on the business impact of underlying IT issues and their effect on the experience of employees and customers.

Here, high hopes are pinned on the Session Replay tool, first unveiled at the company’s 2018 conference in Las Vegas. Since then, Dynatrace has launched a production version of this tool, which takes a log file in order to track an individual user’s interaction with a digital application. The company has also included it as part of an upgraded version of the Davis AI engine, as reported by diginomica in February.

The aim of Session Replay is ‘digital experience monitoring’: in effect, it’s a way to capture, index and visually replay the complete digital experience that a specific user has, click by click. This is now in the hands of several major Dynatrace customers, who spoke about their use of the tool in Barcelona.

At cruise line Royal Caribbean International, for example, senior operations manager for e-commerce Carlos Gutierrez-Menoyo has been using Session Replay since late 2018: 

Customer expectation is super-important to us and e-commerce customers don’t have patience, they demand great performance and it’s our job at Royal Caribbean to deliver. We use a lot of technology to support customers booking a cruise, preparing for that vacation, while they’re on the cruise and afterwards - but for the customer, it can’t be about the technology. It has to be about the experience and us making sure that experience is enjoyable for them. 

So we can look at a customer booking a cruise: were there any problems, did they hesitate, were there areas they struggled? Do we understand the flow and can we see any problems with it? These could be with small details: date formats, UK versus US, international zip code formats and so on. There could be bigger problems: a page not loading, a button not working. Seeing how users are interacting, using Session Replay, has allowed us to tackle issues faster and improve overall flow.

Like most companies, Royal Caribbean already has analytics about drop-out rates, basket/cart abandonment rates and so on. But the beauty of using Session Replay, says Gutierrez-Menoyo, is that it enables he and his team to understand the story behind such metrics. In other words, why did that customer drop out, why was that basket/cart abandoned?

Similarly, at airline Alitalia, CIO Roberto Tundo and his team are also using Session Replay,

This is a really disruptive functionality for us because any time we have a service disruption in B2C or B2B channels, the first thing I need to do is to understand what is the problem, in concrete terms. So I could have general information from the contact center, or I could see information from customers on social media because they post about what’s going on - but I always have a sense of being uncomfortable in terms of whether I’m looking in the right way at the problem that my customers are telling me about. 

So Session Replay gives me the opportunity to do the same thing, taking the same actions that my customer is taking, so I can look at the problem in exactly the same way that they experience it. For me, that’s fundamental. And it’s essential for us in terms of being proactive in the resolution of a problem.

My take

That’s music, of course, to Van Siclen’s ears - but what about the company’s owners, Thoma Bravo? After all, private equity ownership doesn’t always lend itself to the kind of radical transformation that he has pushed through at Dynatrace since it was liberated from Compuware in late 2014. Historically, it has tended to be less about growth, and more about milking the installed base and cutting costs to drive up profit margins. As Van Siclen jokes:

The reinvention of the business was definitely a little controversial [at Thoma Bravo], but they did put up with us through this. And now, they’re extremely happy. In fact, they’ll probably tell you it was their idea, their vision. So now, when we take them an idea - an idea like autonomous cloud - they believe. They’re believers, because we’ve already taken such huge leaps and executed successfully that they’re like, ‘Yes, go for it.’

What all this means for Dynatrace’s future is less clear. With an IPO, it could have a future as an independent software vendor, an outcome that Van Siclen mentions more than once and perhaps his preferred choice.

On the other hand, it could be sold by Thoma Bravo, if a potential buyer could be found. Only a year ago, Bloomberg reported that the firm was exploring both options, but since no action was taken, it clearly decided to hang on to Dynatrace - for now.