Remember that adage about the shoemaker’s children going barefoot? It’s an apt description of how many organizations manage their IT budgets—outfitting sales and operations leaders with increasingly sophisticated applications and data analysis software while leaving CIOs to track their own decisions with spreadsheets. Apparently, I’m not the only one who finds that a bit ironic, based on the market’s positive response last Friday to the public trading debut of a not-quite-unicorn company dedicated to breaking that cycle.
Apptio, which surged 40% after its initial public offering at $16 per share, sells software that help companies centralize information about what they spend on their other infrastructure—everything from their own data center equipment to cloud software application—and assess the impact of that spending alongside other business metrics. One of Apptio’s initial investors, Matt McIlwain, managing director of Madrona Venture Group, said these systems drive “fact-based dialogue with business and function unit leaders—marketing, sales, product, etc.—within their company about how to improve agility and manage costs as the enterprise transitions to software-as-a-service and cloud-based services.”
Today, Apptio (APTI) has more than 325 customers, including cable company Cox, digital media giant AOL, managed care provider Molina Healthcare (MOH), and software giant Microsoft (MSFT). Its business proposition is straightforward: Find places where companies can cut costs so they can divert more of their technology investment to places where it will influence new revenue streams, such as new customer service systems.
“Whether you are managing existing investments or creating new digital investments to increase shareholder value, you need to do that differently,” Apptio co-founder and CEO Sunny Gupta said after his company’s Nasdaq debut. Gupta cut his teeth in engineering roles at Mercury, Opsware, Rational Software, and IBM. He started two other companies before the idea for Apptio was born in August 2007.
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Like many other companies born of the cloud software era, the newly public Apptio runs at a loss. As of the quarter ended June 30, it had an “accumulated deficit” of $183.7 million. Its IPO prospectus makes it clear that won’t change soon as the company builds visibility for its central mission.
But the management challenge it addresses is sizable and not exactly shrinking: Market research firm Gartner projects global IT spending will reach $2.7 trillion this year. In other words, there’s plenty of room for companies to trip up if they don’t tread carefully.