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Session Name: Addictive Metrics: The Secret To Driving Your Business With Analytics.
It’s moderated by my colleague Barb Darrow, also co-host of the structured podcast, which talks about topics like this on a weekly basis. Just doing another plug for the show. She’s going to be talking with Lew Cirne, who is the Founder and CEO of New Relic, who I was just told goes by the name of Sweet Lew on Twitter, which is awesome. So Barb and Lew, thank you so much.
Barb Darrow 00:23
Hi Lew Cirne [chuckles]. If you guys don’t know New Relic and Lew, you should. My favorite line out of the Amazon Reinvent show last year was from the Obama campaign, and they said, If you’re not using New Relic, you’re doing it wrong. Tell us a little bit, for anyone who doesn’t know about New Relic, what the problem is that you solve.
Lew Cirne 00:46
Sure. Republicans and Democrats both use New Relic, just to be clear. We’re a software analytics company. What that means is we help businesses make sense out of data coming out of their production software. If you asked me a year ago what that specifically meant, I would have said we’re in the business of performance and availability monitoring for software. Data we extract from production software tells our customers – usually developers – what’s going on at a very deep level, minute-by-minute, about the performance of that software. What you see today is that software is a living organism constantly changing production. At New Relic, we deploy changes to production multiple times a day and so do most of our customers. Not only is change coming from what code is going to production, but also the behavior of the internet is constantly changing. The combination of those two requires precision real-time visibility into that system in order to keep it running. Where we’re headed is to deliver more value out of the very same data we collect, and to help answer business questions as well.
Barb Darrow 01:48
Were there any lessons you learned about software design when you guys started using New Relic yourself, and unintended consequences, or unexpected surprises?
Lew Cirne 01:59
Yeah. It’s amazing how data enlightens almost any situation. When you’re coming from absence of data to good data presented well, it helps you make better decisions. Take for example our own software, our hosting bill is 1% to 2% of revenues. That’s operating margin of business. Your value of your company has a lot to do with your operating margin. Most SaaS companies, they’re hosting bill is 8% to 12% of revenues. We didn’t do that just because we guessed right, we made some good architectural decisions, but we used the data that our software presented us about production to refine that and run an incredibly efficient production environment. That goes to bottom line of our business, you can’t run a good business without that kind of information.
Barb Darrow 02:51
Since we’re in Europe, can you talk a little bit about the percentage of your business in the US versus the rest of the world and language issues, that kind of thing?
Lew Cirne 02:59
It’s kind of interesting because we have yet to establish a European office, but 60% of our leads come from outside of the US. As a SaaS business, and as with a product that anybody can download and get running and try on their own without the assistance of a sales person or what’s traditional in enterprise software, weâ€™ve managed to have a global presence without being globally present. On Monday I met the person we’ve hired to head up a European office out of Dublin. We’re excited to follow the demand that’s already established here. Our top countries outside, of the US and the European area, include the usual suspects: Great Britain, Germany, France, and Spain to an extent, and some Scandinavian countries. We’re excited to put some more wood behind the arrow in Europe.
Barb Darrow 03:57
I forget the quoted number of customers you have, it’s a big number. Can you talk about the percentage of paying versus freemium?
Lew Cirne 04:06
We have a free product, but we’re not a typical freemium company like Dropbox. We are a free product designed to satisfy individual developers or personal projects that we don’t expect ever to have a budget, but we want to be valuable to them to build the brand. Of our 60,000 plus customers, about 8,000 of them pay us through a direct subscription to New Relic. Many of our customers that aren’t direct paying customers get access to our product through Amazon web services, or Heroku, or NGNare, or any of the other Cloud providers bundled right into their service. We have a variety of ways to reach different types of customers to build a robust presence in business.
Barb Darrow 04:49
Is it always a sell to developers, or is it creeping up the chain with them?
Lew Cirne 04:54
One of the important things we decided strategically was to focus on the developer as an agent of change in the decision maker for technology. As budgets increase, the decision maker at the high end might be the VP of engineering, VP of product, or CIO. But at the end of the day, we’re in the business of delighting developers, helping make them far more productive. Good businesses realize if they have effective, productive developers building good software, they’re going to have successful businesses. If you look, for example, historically at technology that are now de facto standards that we talked about, such as Amazon web services, or LYNX, or MYSQL, those are all developer driven tends, they weren’t top down CIO driven trends inside the enterprise. So we feel like New Relic is going to be one of those potential new standards for production metrics and visibility.
Barb Darrow 05:48
I should have asked this before, how many in the audience are developers? A couple.
Lew Cirne 05:53
Right on. Me too.
Barb Darrow 05:56
How many of you use New Relic? How come there are more New Relic users than there are developers?
Lew Cirne 06:03
I like that.
Barb Darrow 06:03
[chuckles] Okay, I guess that proves your point.
Lew Cirne 06:05
Barb Darrow 06:06
You mentioned when we talked a couple of weeks ago, you guys are on the road to an IPO and one of my great contacts here said, You should ask Lew how he’s going to keep this company nimble and mean when it’s no longer a start-up and it’s a publicly traded company. Can that be done? If so, how?
Lew Cirne 06:25
Well I’ve never thought of my company as mean, we’re a couple of nice guys.
Barb Darrow 06:28
[chuckles] Mean and nice then.
Lew Cirne 06:29
We certainly want to maintain or increase our pace of innovation. I think the way we do that is, it’s my goal to always have kind of a Russian doll company where inside the company, and with my personal involvement, is a little start-up working on the next thing. For example, in early January, I spent multiple weeks off site starting with a brand new project, first line of code on a new product that we’re going to be pre-announcing in about a month–
Barb Darrow 07:07
You don’t want to do that right now and avoid the rush?
Lew Cirne 07:09
You think my marketing guy would like that?
Lew Cirne 07:12
I’ve given some hints that we’re going to help deliver more business value out of the data we collect, and we’re collecting five billion metrics a day. We have the click streams of 60,000 Apps. Think of what that can do if we’ve got that Cloud hosted and we can do more than tell you about response times. But the point is, I have two meetings in my company that I will not miss. They are my direct reports, which are the President, the CFO, and the Senior Vice Pres. of Product and I talk about how the company’s doing, largely taking the mark of the idea that I thought of five years ago. The other meeting I absolutely won’t miss, are five engineers working on this brand new thing that I hope drives the next 10 years of growth. Trying to do both at the same time is very hard, it’s kind of breaking the innovators dilemma. I think we’ve got a crack at it when the coding CEO is like “I’m still the geek who loves to create new things, and I’ve hired world class professional managers to manage the more mature business that we have in place with New Relic.” And we’ve got to be continually doing that, not just today, but over the course of, hopefully, decades.
Barb Darrow 08:14
You mentioned before, you’re an analytics company, not just application performance monitoring. I guess I could guess you’re getting into more application management automated fixes, that kind of thing.
Lew Cirne 08:26
The hard part of what we do in APM is we collect an enormous amount of data that’s hard to get, and then we make sense of it in a simplified way. That’s not easy to do and we’re good at that. So we want to take that domain expertise and apply it to a broader set of problems.
Barb Darrow 08:39
Would any of the New Relic customers like to ask some questions since you’ve got him here? Don’t be shy.
Lew Cirne 08:44
Feature requests too. Anything.
Barb Darrow 08:45
Yeah, feature requests. What do you want to see? Oh, you guys. When will you have this opportunity again?
Lew Cirne 08:51
Barb Darrow 08:53
All right. One of the questions I want to ask all of my panelists this week is basically the Amazon question. I bet a huge percentage of your customers are using Amazon web services.
Lew Cirne 09:04
Barb Darrow 09:05
My question is, can anyone that you see out there now compete with Amazon in public Cloud?
Lew Cirne 09:12
I’d like to broaden the question a little bit. The market’s perception of Amazon today, and that’s accurate, largely reminds me of how we viewed Microsoft in ’99-2000. The question was, Can anyone beat Microsoft in the internet? The answer was not in a head-on war. Netscape couldn’t do it by just out-browsering IE. But over time, and nobody can predict this – definitely I can’t predict this – new things come along and people with totally different views on solving problems somehow disrupt incumbents that seem to be completely impregnable and invincible. That’s just the way of technology. I think that doesn’t impact whether or not Amazon will have a wonderful business and likely be the leader in public Cloud. The question is, what’s the kind of completely different angle that’s going to find a way to disrupt Amazon’s seemingly impregnable position right now?
Barb Darrow 10:13
Just the way people talk about how could a book seller have come out and just kicked our butt.
Lew Cirne 10:19
It’s a beautiful thing I love about technology business, it’s not the destruction of necessarily incumbent, but the notion of completely fresh thinking and innovation can create entirely new opportunities.
Barb Darrow 10:31
Do you foresee any kind of issues, are you going to localize your service for different markets, or is this not a huge priority for you?
Lew Cirne 10:42
Well, unlike Google Docs, for example, you absolutely have to localize because you’re trying to service tens, maybe even hundreds of millions of end users on the desktop. In our business, our end customers are developers, and most of what our product presents to them is charts of numbers. There are some words, and menus, and things like that, but it’s not much of the product. But despite it not being much, it would be a significant engineering effort to localize that for all the major languages. We think it’s a better business decision for the foreseeable future to invest that into more innovation on the core feature set, because most developers get by on English to find their way around the product and read the charts.
Barb Darrow 11:26
When did you found New Relic? How old is it?
Lew Cirne 11:30
New Relic was founded five and a half years ago.
Barb Darrow 11:33
And you’re on track for 100 million or something in revenue right?
Barb Darrow 11:37
That’s roughly the revenue range we’re expecting next year as a subscription business. There’s no professional services in that, that’s a pure SaaS business.
Barb Darrow 11:45
So if there are start-ups out here wanting to be the next 100 million dollar, any words of wisdom other than always being churning new features?
Barb Darrow 11:56
For me personally, this isn’t the play book. I started New Relic off thinking it might be a little lifestyle company if I can get it to five million and five employees, that could pay the bills and I could be spending more time with family. The point is, I started on a small but interesting market, Ruby on Rails monitoring, and we have 90% plus share there. Then we just continued to seek. Try to see how you can double the business in the next 6 to 12 months, early on, and in that process, over the course of that 6 to 12 months, find the next double. I never could have the 10 year plan to a billion perfectly figured out. It’s just more of a way to continuous improve and continuous growth.
Barb Darrow 12:43
Great. Any questions? Last chance. Well, we’re out of time. Thank you very much.
Lew Cirne 12:49