Arik Hesseldahl

Recent Posts by Arik Hesseldahl

Seven Questions for Sunny Gupta, CEO of Apptio, the CIO's New Best Friend

All CIOs say they want to get a deep understanding of the costs and benefits of all the IT gear and services they buy. Yet too often the information they need to make decisions about how to spend precious IT dollar is murky.

It was a complaint that Sunny Gupta heard often around the time that the company he was working for, Opsware, was being acquired by Hewlett-Packard. “CIOs kept pulling me aside and telling me their jobs were changing,” he said. “A job that used to be about managing technology was quickly becoming one of managing costs.”

It was a rare opportunity to launch a service that numerous big companies were clamoring for. His response is Apptio, a cloud-based service that tracks IT costs and other metrics for CIOs who are constantly under pressure to justify their budgets to CEOs. Backed by $41 million in venture capital funding from Greylock Partners, Madrona Venture Group, Shasta Ventures and Andreessen Horowitz–the venture firm run buy Gupta’s former Opsware colleagues Marc Andreessen and Ben Horowitz. It’s growing like crazy, and customers include Cisco Systems, Starbucks, Facebook and J.P. Morgan Chase. Cisco liked it so much it joined with the venture firms in a $16.5 $20 million Series C round of funding that closed last November, and it also resells Apptio to its customers.

I caught up with Gupta by phone while he was on a trip to London to talk about Apptio’s business and how it’s shaping up.

NewEnterprise: Sunny, let’s start at the top. What does Apptio do?

Sunny Gupta: IT has a lot of raw materials like labor, hardware and software. A lot of these things are tracked at the company level. But the CIO’s job is managing the IT products. We aim to help the CIO really understand the cost structure of all their IT assets. We do this by producing what we call a Bill of IT. It captures the supply and demand of IT resources to the business. It helps the CIO show what the levels of demand and spending really are. We also help them with planning and budgeting and forecasting. And then we help them make cost-reduction decisions and benchmark their performance against other companies in their industry.

How many customers do you have?

We have about 60 customers, and we are managing more than $50 billion in IT spending.

So every company does a return-on-investment analysis on its IT spending. This sounds like it’s a lot more detailed than that.

You can think about it as a detailed ROI, but the way our customers think about it is as an ongoing management system that tracks the fully loaded cost structure of the products and services they provide to their businesses on a month-to-month basis. It tracks costs, but also utilization, so you can see how the resources are being used, and whether or not it makes sense to, say, consolidate a data center.

You said Facebook is a customer. Can you tell me a little about how it’s used there?

The CIO there uses Apptio to track monthly telecom expenses, and to help understand costs and to make decisions around getting the most out of what they spend.

A lot of companies are struggling with decisions about moving their IT to the cloud or keeping it on-premise, or some mix of the two. How does Apptio fit in a situation like that?

We’re seeing a lot of hybrids. At the large companies, the biggest portion of their costs are still in-house. Without naming names, some of our largest customers have 50,000 or 100,000 servers. These are systems that have been in use for a long time and they’re critical to the business. But we also see large enterprises adopting external cloud services. It may be Amazon Web Services or something from Rackspace, or they may be using a software-as-service like The trick is to get a handle on what the costs are and if you think it might be time to move something to an external provider so you can make an objective decision.

A lot of the time a CIO has to decide between something that’s really good and really expensive or something that’s good enough and less expensive. Can you help in cases like that?

That’s one of our prime use cases. If you talk to Rebecca Jacoby, the CIO at Cisco, she says she’s stopped asking “Why not IT?” and started asking “Why IT?” If what you have is good enough based on the cost structure and utilization, you get the granular visibility into all those metrics so you can make decisions. For example, it may be that you don’t need as much storage as you think you do, and so the best move isn’t to switch to the cloud but to stop paying for some of the storage that you’re not using. For the first time, executives are able to make business decisions around technology based on true business metrics. We find on average that customers are able to save 5 to 6 percent of their spend, and over 12 to 18 months they can reduce it by 10 to 15 percent.

What’s involved? If it’s a cloud based service, I presume there’s nothing to install at the customer site.

It’s fully cloud-based, so there’s nothing to install. It takes the financial data from enterprise resource planning software, like SAP or Oracle, and it also takes IT operational data, support tickets and other data. It combines them with the financial data. Once you have all that data you can start working on what-if scenarios and make decisions about what to do–or not do–next. If you want to control or reduce costs, having that detailed visibility is the first step.

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