Deal Radar 2010: Appirio

Appirio is a cloud solution provider that offers products and professional services to help enterprises accelerate their adoption of cloud platforms and services. Moving any business into the cloud or even deciding whether to do so can be confusing, as ReadWriteWeb’s Audrey Watters points out. Through its professional services package and cloud connectors, Appirio aims to ease the transition.

Appirio was founded in 2006 by four “reformed enterprise software executives” who built their careers creating and deploying application and infrastructure software at medium and large enterprises – Chris Barbin, Narinder Singh, Glenn Weinstein, and Mike O’Brien. The founders felt that cloud computing was a better software model because:

• In the SaaS world, vendors have to earn business every month and not focus on the big deal and walk away until the next big upgrade.
• IT and product teams can focus on delivering value and providing new features instead of developing basic migration and upgrade features.
• Service and support organizations can focus on one instance of the solution and not virtually infinite number of product versions and deployment environments.

It’s early in the shift toward cloud computing, but it’s happening more quickly than expected. And although PC Mag’s John Dvorak is not convinced that all data should be heading for “that mainframe in the sky,” IDC projects that customer spending on cloud IT services will grow almost threefold to $42 billion by 2012. Gartner recently predicted that 20% of companies will own no IT assets and be serverless, also by 2012. Today, most enterprises have adopted at least one or two cloud applications but maintain most of their applications in-house. Appirio believes that over the next three to five years, companies will move not just some but the majority of their applications and infrastructure to the public cloud, and use these cloud platforms in a more interconnected, systematic way that is much different from the present silo-type approach. This trend, called cloudsourcing, is something which Appirio has been planning for in its offerings.

Appirio says that for most traditional enterprise application deployments, companies spend three to five times their initial license payment on related products (e.g., integration) and professional services. In the company’s more than 400 projects with Salesforce and Google, it sees companies spend one to two times their initial subscription on products and services. This level of spending is both disruptive to traditional enterprise partners used to the three- to five-times level (e.g., Accenture) and attractive to startups that are able to focus exclusively on accelerating enterprise adoption of the cloud.

The per-seat subscription-based flagship product is Professional Services Enterprise, which is composed of tools for managing four areas: people, customers, projects, and numbers. For example, one of the people tools would show all members of a manager’s team with their schedules, and send an alert if someone was double-booked for an assignment. Numbers completely automates timecard entry and calculates project profitability based on this data. Two extensions to the product allow users to connect with Salesforce.com Chatter and to manage PS Enterprise from an e-mail inbox. Further, Appirio has packaged and custom-built cloud connectors to help clients work among applications, including Salesforce–Google, Salesforce–Amazon, and Salesforce–Facebook. Products are built 100% natively on the Force.com platform.

For core services and products, Appirio focuses on medium to large enterprises – typically companies with more than 1,000 employees – and currently focuses primarily on the U.S. and Japanese markets. Customers cut across a range of industries, but Appirio does a lot of work in the healthcare, media, financial services, and high-tech fields. The company has three strategic partners with which it goes to market – Salesforce.com, Google Enterprise, and most recently Workday. Appirio also works with a much larger ecosystem of enabling partners such as Amazon Web Services, Facebook, Boomi, Cast Iron, and so forth.

Since the company was founded, revenues have grown in the triple digits year-over-year. In 2009, revenues were between $20 million and $30 million. Appirio has a profitable services business but is still investing in products and technology for the cloudsourcing trend, so the company is not yet profitable as a whole.

The company was bootstrapped for the first eighteen months. As business started to grow, the founders sought angel funding. In early 2008, Appirio raised a $1.1 million Series A from Salesforce.com and angel investors, followed shortly a $5.6 million Series B from Sequoia Capital in July 2008, and finally a $10 million Series C from GGV Capital and Sequoia Capital in February 2009. There are no current plans to raise more financing, though Appirio regularly evaluates its growth opportunities and the need for additional capital to fuel them.

More than 5,000 customers use Appirio’s products. Within six months of introducing Professional Services Enterprise, it had sold more than 9,000 seats. Appirio has worked with more than 180 enterprise customers, many of which are repeat customers that have completed up to a dozen projects or have a recurring relationship through products or managed services.

Appirio is one of a new type of company called cloud service brokerages by Gartner’s Daryl Plummer and Benoit Lhereux. Such companies help clients get more out of their cloud investment. In Appirio’s case, it may find that as Google and Force.com do more integration work themselves, the company will focus on “more sophisticated functionality on top of that integration,” according to the 451 Group. The group also says that Oracle, IBM, and other big companies could present a threat as they get more involved in SaaS integration. Web middleware company MuleSoft (formerly MuleSource), and companies involved in SaaS consulting and more recently applications, such as Astadia, Bluewolf, and Model Metrics, are other competitors.

Appirio’s growth strategy is based on two elements – expanding its service offerings in new areas, and continuing to innovate on the product side. The founders want to build a profitable, sustainable business. They think this industry shift could take five to ten years and are not looking for a near-term exit.

Recommended Readings
Deal Radar 2010: Layer 7 Technologies
EMC, VMWare, And The Cloud
In the Cloud, the Unthinkable is Just Mission Difficult, Not Mission Impossible (from Daryl Plummer)

This segment is a part in the series : Deal Radar 2010