by Nancy Weil

Apptio Helps IT Departments Run Like a Business

Jan 30, 20133 mins
Business IT AlignmentIT Strategy

The vendor's on-demand software helps CIOs manage IT financial performance, but competition has intensified

Apptio calls itself the “technology business management,” or TBM, company for any organization that has a technology function, says Sunny Gupta, co-founder, president and CEO. Its customer roster includes large, multinational enterprises in markets including financial services and the hospitality industry, and IT vendors such as Cisco and Microsoft.

Apptio’s on-demand TBM software applies business metrics to IT, taking the best practices of financial and performance management and applying them to technology spending and running IT departments. Previously, IT financial management was handled mostly through homegrown systems and spreadsheets–and it still is at many companies.

  • Company: Apptio
  • Headquarters: Bellevue, Wash.
  • Employees: 350
  • Revenue: Private
  • CEO: Sunny Gupta
  • What They Do: Apptio provides on-demand software that helps CIOs run IT like a business, by managing and communicating the cost, quality and value of IT services. Applications include IT planning, service costing, chargebacks, service performance and benchmarking.

Apptio’s launch in 2007 proved to be fortuitous timing, because transparency, closely tracking costs and proving ROI took center stage in the wake of the global financial crisis, says Dennis Callaghan, an analyst at 451 Research.

The Catch

“Their competition has really intensified in the last few years,” Callaghan says. VMware and BMC have made acquisitions to compete in IT financial management, while Apptio also faces niche competitors such as ComSci and Costnomics.

“If you look at the expertise they have [at Apptio], and if you look at how much funding they’ve raised, there’s no reason to believe they won’t be able to withstand the challenges they’re facing. But it’s worth noting that they’re facing a lot more challenges today than when they launched, and that can slow them down,” Callaghan says.

Apptio also must educate CIOs about its TBM approach, says Rob Webb, a former CIO of Hilton, an Apptio customer. “Fundamentally, the vision of Apptio to leverage cloud-based services to run IT as a business is absolutely critical for all CIOs these days,” he says, but the problem is that CIOs don’t have a curriculum for managing IT that way. “Apptio has a challenge of raising awareness [of the idea] that the best way to do this is more holistic and consistent” than relying on spreadsheets and homegrown approaches, he says.

Gartner analyst Jim McGittigan echoes that viewpoint, adding that it’s important for Apptio to make CIOs understand the advance work that has to go into implementing TBM. “Some people think it’s easier to do than it actually is,” he says. “It’s not six to 10 weeks and you implement a tool and it’s fine.” Instead, he says, it takes six to 10 months.

Apptio’s aggressive marketing and promotion has left it vulnerable to competitors’ claims that it is more focused on those areas than on software development. “With growth comes the fact that you tend to have a marketing-oriented company with an aggressive sales force that may or may not understand the value proposition,” McGittigan says.

The Score

While Apptio faces growing competition, it needs to focus on managing growth and making sure its sales teams are tech-savvy. The company maintains that it is up to those challenges, thanks to a seasoned leadership team and a corporate culture whose top value is, in Gupta’s words, “creating wildly successful customers.”

The timing of Apptio’s launch, plus robust venture capital funding, are helping it stay a leader in the TBM market, analysts say.

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