May - 2004 issue > On The Cover

By Karthik Sundaram

The startup world is familiar with garage days, maxing out credit cards, knocking on Sand Hill Road doors, and trading options for free help. If you are lucky, your project may just take off. If you are Dev Itticheriya and Vijay Manwani, you start off as EIRs and then go buy a startup to jumpstart your business plan. They call it BladeLogic.

“When we first started BladeLogic, we saw a demo from a company called Network Shell, and we got excited because we realized immediately that we were seeing the foundation to accelerate our product plan. It turned out that the founder of Network Shell didn’t have the resources or the business experience to take the company to the next level and we acquired the company,” says Dev Ittycheria, CEO and co-founder of the Waltham, MA-based BladeLogic. Automating data center management—across many multi-vendor platforms and applications, compliance and security issues, and bridging old environments to new—is an IT-business alignment that is enabling enterprises to become nimble. “The telecom industry is a good analogy to explain this market,” says Ittycheria. When the telephone became an increasingly ubiquitous home instrument, manual exchanges—operated mostly by women—transacted the calls, and the exchanges came under stress with the significant increase in traffic. “In 1952, AT&T predicted that—with the then-increasing rate of calls per day—the entire U.S. population of women would be working for AT&T switchboards by 1980. This forced AT&T to rethink how they were doing business and led to the invention of the electronic switch” The device growth in the data center over the last decade is a similar state of affairs. Last year alone saw 5 million servers shipped out, not to mention the past 15 million that are ticking away at data centers worldwide. Provisioning, configuring and changing applications across thousands of servers manually within an enterprise is no more an economical option. With the advent of blade servers and small form factor servers running Linux, the device growth explosion in the data center is further exacerbated. Compounding this problem is the high rate of change associated with distributed applications. With traditional client/server applications, changes were typically made once or twice a year. With distributed applications, changes are made once or twice a week. As a result, the level of complexity associated with managing distributed applications is exponentially higher than the old client/server environment. “People simply cannot handle these maintenance chores anymore. Not with the complexity or the speed of change required,” chimes in Vijay Manwani, the other co-founder and the Chief Technology Officer (CTO) at BladeLogic.

Ittycheria and Manwani—veterans of the ASP industry from Breakaway Solutions—were quite familiar with the pains of managing large, distributed data centers. Ittycheria had joined Breakaway after its acquisition of his startup Applica, when Breakaway was still a boutique consulting company. He was a key officer in the company’s IPO and growth, and was instrumental in acquiring Manwani’s startup, Eggrock Partners, an ASP/eBusiness-consulting firm. “Unlike traditional hosting companies such as Exodus, as an ASP we were responsible for managing the entire application stack including the hardware infrastructure supporting it,” says Ittycheria. “We found that nearly 90% of our labors costs were associated with managing the change inherent to these distributed applications, which over the long term was unsustainable.” As Manwani added, “We identified many tools designed for the old client/server world, but none were optimized for the new distributed computing model.”

Following a market study of the server provisioning market by Battery Ventures in late 2000, Ittycheria—an entrepreneur-in-residence (EIR) at Bessemer Venture Partners at the time—teamed up with Manwani, who happened to be an EIR at Battery, to validate the business opportunity. In 2001, the duo founded BladeLogic, backed by a first round of funding of $6m led by Battery and Bessemer. Atypical of many startups, BladeLogic acquired Network Shell in a strategic move to jumpstart its business plan. In 2002, the VCs signaled confidence in the company’s execution with another round, this time for $10m. “We still have a significant amount of our second round left,” smiles the CEO; the company has quadrupled its revenues from 2002 to 2003, and increased its average selling price by 400 percent.

“The key difference is that industry veterans, who had direct responsibility for managing a large number of distributed data centers, founded the company. So they understand the pains of the people to whom they are selling. As a result, they’ve designed a solution that meets their end user needs better than any we’ve seen in this market,” says Dave Tabors of Battery Ventures. In less than three years, the startup has posted a slew of marquee clients on its site: Chicago Mercantile Exchange, Electronic Arts, GE, HSBC, Novartis, Priceline, SunGard, USAA, VeriSign, and Wal-Mart, to name a few.

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