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Apptio counts the cost of virtualization

As well as cash from Andreesen and other VCs

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One of the problems with distributed systems (which was not much of an issue when a company had one mainframe or midrange box a few decades ago) is keeping track of who uses what IT resources so the cost of that processing can be pinned on the users and not the company in general.

With the advent of virtualization on servers, and virtual machines flitting around like swallows on the networks thanks to live migration, matching up IT usage and cost has gotten that much more complex.

Which is why a company called Apptio, based in Bellevue, Washington, and coming out of stealth mode, thinks it can carve out a niche for itself. It doesn't hurt that some heavy hitters in the venture capital community have backed the young company, either, including Netscape and Opsware founder Marc Andreesen and his sidekick, Ben Horowitz.

Apptio was founded in late 2007 by three serial entrepreneurs. The first is Sunny Gupta, who worked for Opsware and Mercury Interactive (both acquired by Hewlett-Packard) and founded iConclude (which created runbook automation software and which was eaten by Opsware before HP et it). Gupta serves as president and CEO at Apptio.

The company's other co-founder is Kurt Shintaffer, who ran just about everything but product development at iConclude and is Apptio's CFO, and Paul McLachlan, who is the company's chief technology officer and who had lead development efforts at Compuware, Mercury Interactive, and HP.

Andreesen and Horowitz were angel investors as Apptio was getting its start in early 2007, and the company closed $7m in Series A funding in November of that year with money being kicked in from Greylock Partners, Madrona Venture Group, and Shasta Ventures. Today, as Apptio is ramping up its poorly named IT Cost Transparency application (poorly named because it sounds like something a business manager might say, not something an IT marketeer thought up in the shower), the startup is announcing that it has closed $14m in Series B funding, with Greylock and Madrona leading and Shasta and the newly constituted Andreesen Horowitz Fund kicking in some dough, too.

Here's the issue that Apptio is trying to solve. Among large enterprises (take the Fortune 100, for instance), the average cost of IT runs somewhere between three and five per cent of revenues, says Jeff Day, director of marketing at Apptio, and this is up from one to two per cent two decades ago. We have system management and monitoring tools to keep all of this gear humming (well, in theory anyway), and IT managers want and need to track the costs of their increasingly virtualized infrastructure, they want to "make IT make dollars and sense" in the Apptio marketing speak.

"But people are still trying to calculate this stuff in spreadsheets," says Day. "And they can't answer questions like this: what is the fully burdened cost to provide an email service - not just a server, but a service - and how have we lowered that over time. And server virtualization makes it more difficult to track the cost of assets to provide a specific function."

The details to calculate such costs - and who is supposed to bear them - existing in the general ledger, help desk systems, asset management systems, and other system and application management tools humming along in the enterprise. Someone has to bring it all together and do the math. That is what the IT Cost Transparency tools, which are run in a SaaS mode on servers hosted by Apptio, aim to do.

The software has four modules. The service cost module takes data from the elements of the systems that comprise a service so it can figure out the cost associated with the service. The business unit and demand management module turns around this cost data and sends bills to divisions, departments, or end users so they are either made aware of the cost of the IT resources they use or are actually billed for it. (Most companies start by making users aware of costs in an effort to change behavior, and then eventually budgets are based on IT usage.)

The software also has a service quality and utilization management module which tracks metrics to show how well IT is providing its services to end users. And the cost and performance benchmarking module takes a company's performance on services and compares it to peers and best-of-breed metrics from other companies to see how the company stacks up. The tricky bit of all of this is to provide the templates that link in-house systems to the Apptio tool, getting the data feeds for the services into the engine behind the Apptio tools.

The Apptio tools current support VMware's ESX Server 4.0 hypervisor in the current vSphere 4.0 stack, and Day says the company is working on weaving in support for Microsoft's Hyper-V hypervisor as well the several commercialized versions of the Xen hypervisor that are out there from Citrix Systems, Oracle, Novell, and a handful of others. The software hooks into VMware's vCenter chargeback features, too, and in doing so can enable IT managers to track the real-time costs of a VM as it moves from platform to platform using VMotion.

To be truly useful, Apptio needs to hook into IBM's PowerVM and z/VM hypervisors as well as HP's Integrity VMs, and Sun Microsystem's Solaris containers and LDoms.

Apptio is priced based on the combination of applications and what the company calls a domain, which has nothing to do with the Internet but which is the aggregation of server, storage, and network capacity. A single domain with one application has an entry price of $6,000 per month, and the pricing scales up from there. ®

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