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Pivotal Claims Big Growth for Its Cloud Software Business

Mar 07, 2017

Pivotal, the business software company spun out of EMC and VMware five years ago, says revenue from Pivotal Cloud Foundry, its primary cloud development product, more than doubled last year.

That's an indication that big companies are interested in building applications to run in their own data centers and/or on rented computing power managed by Amazon, Microsoft, and Google, said Pivotal CEO Rob Mee.

Pivotal said booked revenue grew 130% last year to $270 million from $117.4 million for 2015. The privately held company does not talk about profitability. In an interview with Fortune, Mee noted that Pivotal remains in investment mode, which means that it's willing to sacrifice profit while it builds its business.

But it claims traction among the biggest of the Fortune 500 cohort. Pivotal Cloud Foundry, the company says, is used by six of the ten largest carmakers; seven of the top ten banks; and half of the 10 largest insurance companies.

San Francisco-based Pivotal has 2,300 employees, up from 2,000 last year. Other than Pivotal Cloud Foundry, it has two other businesses: A big data group and consulting services. Not long ago, each of those three units accounted for roughly equal amounts of revenue.

But Pivotal Cloud Foundry, which companies can use to build, test, and deploy their own custom applications, is now "pulling away as the major growth engine," Mee said. Cloud Foundry is what techies call open-source software meaning that the code itself is free and is worked on by a large community of developers. But commercial or paid versions that include support are available from Pivotal, IBM IBM (ibm), and Huawei and other companies.

The initial Pivotal Cloud Foundry sales pitch was that it gave big companies a way to build new applications that run in a public cloud (rented space on Amazon (amzn) Web Services, Google (goog) Cloud Platform or Microsoft (msft) Azure) or private cloud (flexible infrastructure that runs in a company's own data center.

The need for faster, better software deployment resonated with older companies facing competition from smaller, newer rivals that already use cloud computing. You could argue, for example, that Hilton (hlt) and Hyatt (h) hotels should worry more about Airbnb (airbnb) than about each other.

That existential threat from tech savvy startups drove endless talk among established companies about the need for their"digital transformation." That message probably resonated with such Pivotal Cloud Foundry customers as Comcast (cmcsa) and Allstate Insurance (all).

And it no doubt helped Pivotal get the attention of General Electric (ge), the poster child for digital transformation. Four years ago, GE invested $105 million in Pivotal. Ford (f), along with partner Microsoft, followed with their own $182 million investment in Pivotal last May as part of an overall $253 million Series C round. At that time, Pivotal's valuation was estimated to be about $2.8 billion.

Since Dell bought EMC last year, the combined Dell Technologies owns just over 50% of Pivotal while GE, Ford, Microsoft, and VMware splitting the rest. Pivotal is now valued at more than $3 billion. All of these Pivotal stakeholders are also Pivotal customers.

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According to a Pivotal blog post on Tuesday that describes the company's momentum one customer, Home Depot (hd), has deployed 3,100 applications using Pivotal Cloud Foundry. Another, Comcast (cmcsa), used Cloud Foundry to build 900 applications in the first year of use.

For more read: Cloud Foundry Is Not Just for New Apps Anymore

Still the notion of running important applications in the cloud remains scary to some older companies, and may have gotten scarier after last week's Amazon Web Services outage. That snafu took several popular web sites offline for several hours.

Asked if that hiccup might cause big companies to think twice about using cloud services, Mee said it actually illustrates why companies should use multiple clouds to have backup in case something goes wrong in one.

Of course, using multiple clouds is something that Pivotal Cloud Foundry can help with.

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