The enterprise standard for digital intelligence.
There’s no mistaking the clarity of New Relic CEO Lew Cirne’s objective for his firm or his thesis that the timing is right with the correct drivers in place to achieve this goal. He points to what he calls two “secular trends”:
First, we see the enterprise imperative to drive new digital based initiatives; and second, we see the shift of applications from on-premise to the cloud. Together, these trends drive substantial demand for insight into performance of these mission critical initiatives. We believe recent activity in the market, validates and significantly underscores the opportunity in front us. It also underscores the criticality of companies having full visibility into performance of their business as they undergo digital transformations.
The addressable market here is, well, just about everyone. Cirne says:
We see every enterprise becoming a software business and placing digital transformation as one of their top strategic priorities. As enterprise companies launch new initiatives to drive their businesses, often including the cloud and mobile, we see it is natural that they would prefer a digital intelligence platform that was born in the cloud.
Legacy tech isn’t going to meet those needs, he argues:
In our view, traditional solutions were never designed to monitor, measure and analyze the digital business initiatives that are the future; rather, they were built for the use cases of the past. In addition, we see growing demand from customers to move from on-premise solutions to cloud-based digital intelligence platforms.
We believe the demand stems from the desire to benefit from the much-faster pace of innovation and greater scalability inherent in the cloud solution, as well as the avoidance of costs often associated with deploying, updating and supporting on-premise products.
From a competitive landscape perspective, Cisco’s recent acquisition of AppDynamics changes the game by teeing up a mega-competitor, but Cirne sees this as a positive:
Cisco’s acquisition of AppDynamics serves as a great point of validation of the market. We believe we pioneered in that that serves a important role to all these enterprises that are moving to digital and moving to the cloud. So, we think this as a wonderful validation of our market opportunity. We feel stronger than ever about our competitive position.
AppDynamics is a good fit for Cisco because the vast majority of their revenues is coming from on-premise hardware. We believe the future is predominantly cloud. When we look at our offering and when it competes both in cloud and digital, we feel stronger than ever in our ability to compete in that sphere against a company like Cisco. Our growth rate in the enterprise segment is the fastest of all of our direct competitors. So, we’re going to continue to drive that leadership position.
Cirne believes that New Relic has succeeded in its pivot from its traditional SMB customer base to the enterprise market:
It’s showing in the types of names we’re bringing on board when you think of companies like Nationwide, Peterson, Royal Dutch Shell, McDonald’s, Morningstar, these are world-class enterprise names. And what’s driving all of their adoption of our solution is two secular trends, it’s the digital imperative in the enterprise, and it’s a secular move to adopt cloud computing.
Increased adoption of public cloud is also a positive factor, adds Cirne, citing a closer relationship with Amazon Web Services as an asset:
That shift to vendors like Amazon Web Services represents one of the strongest tailwinds to our growth. Due to the strength of our belief in this and our incredibly strong relationship with Amazon, starting in April, we’ll be launching joint go-to-market activities with Amazon, initially focusing on DevOps practices for teams working in the cloud. The campaign will include jointly published marketing assets, solution architecture descriptions and joint customer targeting through digital marketing events and telesales resources.
It’s an interesting alliance given that Amazon’s own X-Ray offering might be assumed to be competitive to New Relic. Cirne doesn’t appear fazed:
We had dialogue [with Amazon] about what X-Ray was and how they believed and we believed the overlap was minimal, certainly different strategic objectives, and we quickly concluded that this wasn’t going to be a much of a direct competitive threat at all. Nor was it intended by Amazon to be that, from what I can tell.
Our customers want a holistic view of the entire environment. The customer experience in the mould of browser, a comprehensive view of the application, not just a single data point, which is largely what X-Ray provides. [It] is a simple tracing capability for Amazon-specific, whole-hog Amazon-specific deployments.
Looking forward, there is, as with so many enterprise tech companies, an AI play coming in the shape of Project Seymour, previewed at last year’s FutureStack conference in San Francisco and coming with the pitch that it will enable enterprises to “see more”. Cirne says:
Seymour uses unique machine learning algorithms to service targeted and actionable information to users depending on their role and interest. We believe only New Relic can deliver this kind of value as on-premise vendors don’t have the breadth or the quantity of application, infrastructure and business data needed to make this technology relevant to their customers.
Cirne can also see opportunity for further expansion - and perhaps revision - in the enterprise APM market.
My first company Wily was credited as creating the category of APM, and we acquired these wonderful accounts for this project, but then where we struggled was deploying it everywhere. It was cost effective or made sense for one or two really important projects, but was too expensive to roll it out across everything.
Most of the expense wasn’t in license, it was actually in all the on-premise hard work and rolling it out. So, the marginal and cost of rolling out APM in a new application, in new project was too high, but they still wanted the visibility. So, the whole idea with New Relic was, ‘Let’s take that marginal cost of monitoring more, down to near zero in terms of a product complexity or TCO perspective’.
[There was] this depressing Gartner report that came out a year or two ago about how the typical APM deployment is only 3.5 active users. That’s a niche tool for a specialist. We want to turn this into a mainstream platform and we’re turning it into a mainstream platform where hundreds or thousands of people use our product to enable digital and cloud migration to be successful. That’s how we become a standard in these enterprises.
The recent Cisco takeover of AppDynamics emphasises the attractiveness of this market and the potential for growth. Cirne’s mission statement objective to be the enterprise standard is well-articulated with a roadmap that includes AI and infrastructure, while riding the wave of public cloud adoption.