Application performance management (APM) startup AppNeta is a lot like many of the other companies that have moved into a section of the Boston waterfront dubbed the "Innovation District."
They're new, they're young and they are trying to find buyers for what they're selling. In AppNeta's case, it's cloud-based APM software that tells companies how applications and networks are functioning, alerts them when something goes wrong and explains to them how to fix it.
CEO Jim Melvin is a little older than his young staff. He got his bachelor's degree in computer science from Worcester Polytechnic Institute in 1984, before many of his recent college graduate hires were even born. He has worked in IT in the region through many of its incarnations, including eight years as an engineer with Digitial Equipment during the I-95 corridor's heyday.
"Information technology will not be the core capability of most of the companies on the planet as we go forward. "
Jim Melvin, CEO, AppNeta
A big believer in cloud computing, Melvin thinks that IT will be sold one day, just like electricity is today. He compares individuals who are still skeptical of cloud computing to the manufacturing companies skeptical of buying power from the newly formed utility industry at the end of the 19th century. In this interview, he shares his thoughts on the challenges a startup faces, what utility computing is and what is shaping Boston's tech scene.
You say the cloud model has eliminated cost and messy implementations as barriers to sales. What is the challenge now?
Jim Melvin:Getting people to know. We're an early company. We're AppNeta. We're not Cisco, we're not IBM or CA. The biggest challenge is [that] I need to get on the tallest building I can with the biggest megaphone I can and say, "There's a better way; there's a much, much better way."
Do you run into people who say, 'What you offer sounds better than what we've invested in, but we're stuck with it for a certain amount of time'?
Melvin: Sure, because somebody has to go to the boss or CFO and say, "We should have gone to the cloud."
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Do you have to catch people at the right time when they are in transitioning between software options?
Melvin: No, because I can allow people to start small. You don't have to go budget a million dollars. Let's get started, put three of them out there, give it a try and see if it works. Solve problems. That's the beauty of SaaS and the cloud; it's largely elastic. I love that term. I think Amazon first started calling their cloud services "elastic". I love it. You can grow when you want and how you want, and we're the same way.
Why do you think that the rise of cloud computing parallels the rise of electricity companies and other utilities in the 19th century?
Melvin: Banks are not IT companies, but they are some of the world's largest IT consumers. They spend hundreds of millions a year on being IT experts. Insurance companies, health care providers, you name it. Every company, to a certain extent, has some IT expertise.
In the new wave -- I run a company with 125 employees. I don't have any services in the building. I don't have a CRM, I don't have an email service here, I don't have a finance system -- I don't have any of that. I use cloud-based services and it works great. That's the shift: It allows companies to focus on their core business.
Information technology will not be the core capability of most of the companies on the planet as we go forward. It will just be something you use like power. You just plug it in. I have no idea if the lights are on because there's a nuclear power plant, coal power plant or hydroelectric power plant. I don't know; I really don't care. The lights are on and it costs me a fair amount of money to run my business, and that's how information technology is going to be.
You're native to the Boston area. The neighborhood your office is in has been dubbed the "Innovation District" by the media. How many of buildings on Summer Street are housing IT companies?
Melvin: A lot. [The building across the street] is being redone for a large company. This has become a very popular space. I didn't realize when we moved in [that] it was called the Innovation District. It's great; we love being down here. The fact that the other companies are down here isn't really a benefit to me. It just drives up real estate prices. But we like being down here.
We're employing a lot of young professionals that are just starting their career, and they're in the city. We hired probably 25 college graduates this year. They might still live in college or live with their friends. They're taking public transportation. They're just starting their career. It's great.
Is there anything unique that Boston has done to facilitate this Innovation District, or is it a function of empty office spaces in one neighborhood and dozens of local colleges with graduating young talent?
Melvin: I think it's the talent, which I suppose [is because] decades of investment by the city generated the educational infrastructure that's here, but it's probably the talent pool in the city that's the biggest draw for us. I think there is a rebirth that's going on. I think that Boston has had an incredible history with the world of technology. If you think about the waves of technology, several of them have been anchored in Boston. The number of folks that lived through that who are still in some ways investing in or running these companies is very real.
Will legacy vendors eventually buy up all these startups, and will the same dynasty companies still be running IT ten years from now?
Melvin: Maybe. Salesforce isn't going away, but maybe neither will IBM. IBM has persisted through every single one of those waves. IBM has reinvented [itself]. I find myself a fascinated student of that. But most have not. There will be winners and losers.
Some of the dynasty companies of today will not be here 10 years from now -- they just won't. Some will, and there will be new companies we never thought of. Think about the mobile phone market. Five years ago, who's Apple? Apple didn't have a mobile phone; they weren't even on the landscape. And now, the companies that were dominating the phone market are practically gone.
This was first published in November 2012