New Relic CEO Lew Cirne - programmability will be a competitive differentiator, but it will take time

Profile picture for user slauchlan By Stuart Lauchlan November 6, 2019
Summary:
Will programmability be a competitive differentiator for New Relic as CEO Lew Cirne believes? There are positive signs...

New Relic CEO Lew Cirne at Futurestack19

While there was a “challenging” first half to the year for New Relic, the firm beat Wall Street expectations yesterday with a 27% year-on-year revenue rise to $145.8 million, with a Q2 net loss of 18.6 million.

Looking back at the quarter, CEO Lew Cirne pointed to the addition of programmability to the New Relic One platform as a significant development:

[Programmability] gives our customers and partners the ability to build entirely new applications on top of the New Relic One platform enabling them to integrate business data and create seamless workflows on our platform to drive real time actionable insights.

We see programmability as a platform-defining capability and a litmus test of the observability platform. In other words, it's not a platform unless application development is supported. Unlike dashboard-only solutions, our platform enables software to be built and shared combining observability and business metrics to deliver unique digital customer experiences.

Connecting technical customer experience and business data in visualizations tailored to the unique business needs and integrating our customers' workflows has nearly limitless use cases which we see as a competitive advantage for our company.

At the firm’s recent FutureStack conference, Cirne put this thesis to the test:

I talked to our top 15 or so customers in North America. And literally 100% viewed programmability as strategic to them. And it's the first time we've ever gotten all 15 of our customers to agree on something when we've asked for feedback. You can imagine some of the largest companies in the world, they're demanding, but that they help us execute better. So that was great as an example.

Adoption 

That said, it can take time for such innovations to get customer traction, he adds:

Something like programmability which is literally new - nobody has done anything like this in our category - that takes time for our customers to understand, discover, think about the use cases and adopt. We're very pleased with the customers that have done that.

We're seeing signs of stickiness and engagement, particularly in moments of truth like launch days, or game days, or important moments. They're turning to programmability to really make sure that there are moments of truth. They understand exactly what they need to see in their business. But that's going to take longer I think to fully develop in terms of being broadly adopted and broadly understood and that's fine. That's really a strategic that we're thinking about that that bears out over a longer period of time.

Cirne cited a case-in-point of how end users are responding to functional enhancements to the platform:

In one particular case, our team was able to expand a mid-six figure account in the social technology sector to a multi-million dollar customer. The incumbent environment involved a typical sprawl of competitors homegrown metrics, logging built on the Elasticsearch stack, and an open source visualization tool. The value proposition of standardizing on New Relic was driven by the power of New Relic One.

The customer created two applications through our programmability capabilities recognized by our superior scalability and then deployed our log, metric and trace offerings while in beta.

Drilling down further, he added:

This particular customer, we had a great conversation with them over the course of Q2 in the summer about them standardizing on our platform. They recognized that the sprawl of lots of different tools was working counter to their goal to deliver a great customer experience and to move faster.

They're an innovative company, and they understood the power of being able to develop their own capabilities on New Relic One, so that there was really no exception case that would prevent them from seeing everything they needed to see in one platform. That was a big thing that attracts them to us. So they adopted programmability. They adopted our metrics capability our OpenTracing capability and then they started adopting Logs and they're aggressively using our Logs.

My favorite part about it is a different part of this company that was less familiar with New Relic during the course of that discussion. They were informed that New Relic One was the new standard and two weeks before a major launch, they moved from a combination of open source technologies onto the New Relic platform and they developed the custom view they wanted to.

So going from no familiarity with our platform to building their own software on top of our platform in the final two weeks before making a major launch. And the usage of that custom software they built themselves was the highest of anything that we saw on New Relic One programmability, because it was specific to their business. They knew what they needed to see. It was an important moment. They were launching an important piece of software and it was worthwhile for them to spend else a little bit of time programming on New Relic One to show exactly what they did.

The launch was huge success and it was huge for the business and that was a huge success for us and our reputation within that company.

The conclusion Cirne drew from this:

When customers understand the power of our platform, they build strategic relationships and that's what drives the growth of our business.

My take

Cirne’s use case example is a compelling one in terms of how organizations adopt new functionality and innovation. It’s a long game, as he suggests.  The Q2 numbers were solid, with a couple of promising numbers contained within them - paid business accounts of over $100K were up 15% year-on-year to $906 million, while enterprise paid business accounts ARR now make up 62% of total revenue, up from 56% at this point last year. Overall conclusion - right direction, keep on keeping on.