Apptio Tailors BI Software for the IT Department
December 15, 2009 Alex Woodie
One of the problems with the way IT is managed at many shops is the lack of clarity into how much is spent, on everything from servers and software to salaries and electricity. While IT is very good at analyzing company-wide spending, when it comes to IT, things are usually tracked on messy spreadsheets or an in-house product somebody hacked together. (Cue comparisons to the cobbler’s kids.) SaaS startup Apptio is hoping to change that with its line of IT Cost Transparency software, which this week got new budgeting and forecasting capabilities.
Apptio was founded in late 2007 by several ex-Hewlett-Packard employees who worked in HP’s Mercury Interactive and Opsware businesses, as well as a former lead developer for Compuware. The founders realized that, outside of some very expensive and kludgey IT cost analysis solutions from the Big Four systems management vendors, there really wasn’t a viable offering for tracking and analyzing the spending done by the IT department itself, and correlating that spending to the department’s goals.
Apptio’s solution to this problem is basically a business intelligence (BI) offering that’s tailored to fit IT’s unique role within the business. The offering gathers data from all kinds of sources–the general ledger (GL), a configuration management database (CMDB), help desk software, and timesheets–and consolidates it into an in-memory database (Berkeley DB, from Oracle‘s Sleepycat) that’s hosted on servers at Rackspace. Users access the BI solution using a Web browser.
The secret sauce to Apptio’s offering is a “data inference” routine that segments the variable costs for servers, storage, software, network, power, real estate, human capital, and matches them to the applications or services that IT provides. This allows Apptio to create a “cost model” it can use to treat IT more like a regular business unit, according to Michel Feaster, another former HP-Mercury-Opsware employee who was hired recently as Apptio’s vice president of products.
“A key differentiator between us and traditional cost management solutions is, instead of managing costs at the GL level, we actually help customers turn that monetary data on its side and aggregate costs at the business-service level, which is really how IT wants to communicate to the business,” she says. “Once we’ve done that, as we get that service costing picture, we then generate what we call a bill of IT that enables the CIO and his staff to speak in a fundamentally different way to the line of business.”
When it’s all said and done, Apptio’s software allows managers to do rigorous total cost of ownership (TCO) and return on investment (ROI) calculations. This helps to answer important questions, including: What is my most expensive application? What is my most expensive server platform? What is the least economical aspect of my most expensive application or server platform? How much money will I save by virtualizing my servers? Will outsourcing save me money?
Based on the answers generated by Apptio, customers may decide the best way to bolster their department’s bottom line is by adopting server virtualization from VMware. Or they may elect to outsource storage to Amazon‘s S3 service, if a TCO analysis finds that their in-house storage for a commodity application is much more expensive. Or, they may decide to outsource their e-mail environment if they find their in-house e-mail system can’t compete with Google‘s Gmail.
From the perspective of a System i user, Apptio’s software could help to justify keeping an existing ERP system, instead of migrating to a new application running on Windows. Or, it could show a new CIO that it would take five years to recoup the cost of modernizing a legacy green-screen application.
Several of Apptio’s clients in the financial services industry use the software to analyze System i-related costs. One noted System i shop, Starbuck’s, saved millions of dollars when it realized it could delay a company-wide PC upgrade by a couple of years without hurting itself; next, it will use Apptio to analyze its e-mail delivery.
The biggest customer is networking giant Cisco, which uses Apptio to analyze many elements of its IT spending. Cisco CIO Rebecca Jacoby “believes it’s strategic to the whole way she runs her organization,” Feaster says. Jacoby recently joined Apptio’s board of directors as a strategic advisor.
The biggest driver for Apptio these days is the rise of cloud computing, which is forcing CIOs to get better informed about their existing cost structures. “We see this kind of strategic disruption happening, where customers are considering the cloud, where they’re building virtual private clouds, and/or where the CIO is being pressured by line of business” to look at cloud offerings, she says. “Application and infrastructure TCO are the heart of the set of questions people begin to try to understand, but there are a whole range of decisions that come out of it.”
This week, Apptio is adding a new module to its offering: Budgeting and Forecasting. This new module will allow teams of users to collaborate on creating plans for future IT spending, and tracking budgets, and identifying over- or under-spending at the application and server level.
“The real benefit here is we can push accountability down within the IT organization,” Feaster says. “It gives all of middle management in IT much more cost transparency and cost accountability, and makes our value proposition much closer to being business management–running the business of IT better, and helping to manage the economics of IT in a much more ongoing way.”
The forecast would seem bright for Apptio, which is based near Seattle, Washington, and has raised $21 million so far through two rounds of funding. With trillions of dollars spent on IT every year, the business of IT has outgrown back-of-the-envelope calculations, and demands the kind of disciplined rigor that IT has helped to deliver to other parts of the business, but which so far has been lacking in the IT department itself.
Even tracking IT expenditures in traditional BI tools is fraught with difficulties, because the target continually changes, requiring changes to the underlying database. Apptio claims its Berkeley DB implementation gives it a “slowly changing schema” that can adopt to the dynamic and quickly changing world of IT. “We don’t have any of the vulnerabilities of a traditional BI platform, where you change the scheme, and the whole cube breaks and all the reports break,” Feaster says.
Pricing for Apptio is dependent on several things, including the number of modules a customer adopts, how much data they have stored on Apptio servers, and other factors. Pricing starts at around $100,000 per year, and can scale up to more than $1 million. For more information, visit www.apptio.com.