Apptio, the Bellevue company that just completed its initial stock offering, developed a business on the core idea of helping corporations take their financial data and IT usage data and bring them into one automated system.
The region’s newest public company — technology provider Apptio — first came to be when cloud computing was a rarely used term and persuading people to buy into the concept was much harder than it is now.
Sunny Gupta, co-founder of the Bellevue company, began to explore the idea when he worked at Opsware, a Silicon Valley software company, in 2007. He noticed customers had a common request: They wanted help tracking the cost of their information-technology systems, which was consistently expanding.
Chief information officers needed a way to prove technology improvements and updates were benefiting a corporation’s overall business.
“CIOs have been managing these things on spreadsheets, and they must use a modern mechanism,” Gupta said Friday after Apptio debuted on Nasdaq as a publicly traded stock.
Most Read Business Stories
- Amazon-owned Whole Foods cuts healthcare benefits for part-time employees
- After three decades, Seattle's last black-owned funeral home struggles with displacement VIEW
- The market's chilled out, but Seattle home prices still too hot for many first-time buyers
- 'I was stupid': Huffman gets 14 days in college scam VIEW
- Amazon workers bring parents to work
Apptio’s stock rocketed more than 40 percent Friday on its first day of trading, closing at $22.55 after opening at $16. The company raised about $96 million in its initial public offering.
During its nine years as a private company, Apptio built software that lets IT managers see exactly how much each tech system is being used and by whom, as well as how much it costs.
“The core idea was nobody had taken your financial data and your IT usage data and brought them together into one system and automated that,” said Matt McIlwain, managing director at Madrona Venture Group and a member of Apptio’s board.
McIlwain met Gupta years before the origins of Apptio, when the entrepreneur became CEO of another of Madrona’s portfolio companies, Performant. Gupta pitched the idea for Apptio to McIlwain in August 2007, explaining that CIOs were being left out of the software-as-a-service push.
IT departments were hard at work implementing software for other departments, such as tools built by Salesforce for the sales teams. But they didn’t have their own planning system.
The idea caught on quickly, and Apptio brought in investments from Madrona, Greylock Partners and Shasta Ventures. In 2009, it became the first investment in the portfolio of Andreessen Horwitz, the venture-capital firm formed by Marc Andreessen of Netscape fame.
To the cloud
One of Apptio’s biggest early decisions — whether to build software that would operate in the cloud or on a company’s premises — was not so tough, Gupta said. Some recommended the traditional route, but Aneel Bhusri, a Greylock partner and CEO of Workday, insisted on the cloud.
“In retrospect, of course, you would have picked the cloud,” McIlwain said. “We were seeing the early days of the cloud.”
That was an easy sell for Gupta. Picking a name was not quite as smooth.
That’s mostly because Apptio’s five early team members simply forgot to name the company. It was called “New Co” for four months as the future Apptio developed its product.
But on the eve of the young company’s first official pitch to Madrona partners, the team hunkered down in Gupta’s basement. Each member brought a list of five or 10 name ideas.
Kurt Shintaffer, co-founder and chief financial officer, picked the winner. Apptio was easy to pronounce, started with “a” and the domain name was available. They had a rough idea that it might become an abbreviation in the early days, but now “it doesn’t really mean much,” Gupta said, laughing.
Apptio operates in an industry segment known as “technology business management,” a term it helped coin. Gupta’s goal is to make the name “Apptio” as ubiquitous as “Google,” even to the point it’s used as a verb.
“We want people to say, ‘We wanna Apptio enterprise IT,’ ” he said.
Apptio’s IPO will certainly help bring attention to the company, a reason many businesses enter the public sphere. Its IPO comes in a year when the number of companies racing toward the public markets is slow, but reports indicate activity may be increasing.
A U.S. IPO report from Renaissance Capital shows 59 companies had gone public as of Sept. 1 this year, a 56 percent dip from 2015. But companies that have gone public more recently were trading up from their offer prices, and the report suggested September and October would be busier than normal.
Apptio has been planning for its public debut for a long time, Gupta said. “We’ve been working towards this since Day 1.”
The company, which has 325 customers, plans to continue to expand its customer base to businesses of all sizes, Gupta said. Still, Apptio’s IPO prospectus revealed the company expects its revenue growth to slow.
Apptio’s revenue increased 21 percent year-over-year to $129.3 million in 2015. Losses have grown as well. The company lost $41 million in 2015, a 73 percent bigger dip from the year before.
Apptio faces competition from larger companies, including giant VMware. The biggest disadvantage may be, as Apptio’s prospectus points out, that VMware may be able to offer a similar service free to customers as part of a larger package of goods.
Gupta is confident customers will keep signing up.
Software at work
It’s become an essential part of the business for AOL, said company Chief Information Officer James LaPlaine.
“We loved the idea, even before we knew Apptio was in the space, of trying to bring more transparency to cost of the IT portfolio and what we provide to the rest of the company,” he said.
AOL uses the technology to track its IT consumption — something LaPlaine compares to receiving a power bill at home. Each department receives its own, automatically generated power bill each month.
MapQuest, for example, gets charged each month for the power and electricity it pulls from AOL’s data center and the digital storage it uses.
Apptio’s customers include 40 percent of the Fortune 100 roster. The company has about 700 employees, and has more than 45 open jobs posted on its website.