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International Business Machines Corp
Scott Witucki joined New Relic Inc., a startup that tracks website performance, after six years on the road peddling bottled tea. Within months, the technology novice became the top salesman.
“The product sells itself,” said Witucki, 36, who booked more than $400,000 in sales in his first quarter on the job without ever hopping on a plane or playing a round of golf -- the way software used to get sold. He’s hardly even had to leave New Relic’s office in San Francisco’s South of Market district.
New Relic, whose Web-based products help companies monitor the speed of their websites and pinpoint bugs in applications, is among a host of startups trying to make complex technology as easy to use as e-mail or Facebook Inc. (FB)’s social network. That simplicity is winning sales in the software-as-a-service market, which researcher Gartner Inc. predicts will surge 80 percent to $22.1 billion by 2015 from $14.5 billion last year.
For New Relic Chief Executive Officer Lewis Cirne, who founded the company in 2008, cloud computing has changed everything. Cirne previously started and ran Wily Technology Inc., which CA Inc. (CA) acquired in 2006 for $375 million. Wily sold software the old way, sending representatives out to try to convince executives to spend hundreds of thousands of dollars on multiyear licenses to install it on in-house servers.
Wily was at a disadvantage relative to competitors such as International Business Machines Corp. (IBM) and Hewlett-Packard (HPQ) Co., which were flush with cash and had many times the number of salespeople. It was also dependent on a few main accounts. New Relic serves more than 25,000 clients, ranging from two-person teams to companies as big as Nike Inc., Intuit Inc. and Groupon Inc.
“No one customer threatening to leave can threaten the business,” Cirne said.
At New Relic, even salespeople with no software expertise can pull in $1.2 million a year on average. The company says it’s poised to generate more than $100 million in annual revenue by the end of 2013.
New Relic has a free basic product and a $24 monthly service for small teams that has more monitoring features. There’s also a package for $149 a month that lets companies thoroughly analyze the root cause of problems.
Customers log in through a browser and use a dashboard to see how well their apps and websites are performing in real time. If a site is slow, the company can drill down into the specific cause of the problem, whether it’s a failed server, slow database or a sudden surge in Internet traffic.
New Relic’s chief competitors are older technology companies like IBM, Hewlett-Packard and BMC Software Inc., which have been slow to develop Web-based offerings.
Envato, an Australian startup that owns a suite of websites focused on education, technology and employment, was “in the dark” before using New Relic, said CEO Collis Ta’eed. His developers would receive calls in the middle of the night because of a site outage and spend hours guessing what happened.
“When something goes wrong it’s usually one of thousands of different possibilities that’s causing it,” said Ta’eed, who co-founded Envato in 2006. “Unless you have specific insight into which dial you need to turn, which specific thing is causing the problem, it’s very difficult to make adjustments. With New Relic, you get a whole bunch of stats and analytics.”
To reach more companies like Envato, New Relic has almost tripled in size in the past year to more than 120 employees, with about 20 percent of the staff in sales. All transactions are done over the phone and by e-mail, with many leads coming from users who download the free product and then inquire about an upgrade. Each salesperson handles 50 to 80 transactions a quarter with deal sizes ranging from $5,000 to $8,000, Cirne said.
New Relic has raised $36 million in private funding, including a $15 million financing round in November that valued the company at about $400 million. Investors include Silicon Valley firms Benchmark Capital, Trinity Ventures and Tenaya Capital.
While the cloud market is growing rapidly, Gartner analyst Jonah Kowall estimates that 85 percent to 90 percent of companies are still focused on buying traditional monitoring software and have yet to migrate to the cloud. That will change over time, he said.
“There’s definitely a new next generation of monitoring products coming,” Kowall said. “There’s a push for simplicity across the board.”
Cirne is witnessing it firsthand. A screen in his sales department continuously flashes the names of employees closing deals, with sales of $10,000 prompting a gong. He’s hearing it so often that he’s expecting annual revenue to double for at least the next two years.
For competitors stuck selling software the old way, Cirne has an even bolder prediction: “It’s the beginning of the end,” he said.
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