cloud computing

Boundary, an enterprise infrastructure firm, raises $22 million

April 3, 2014: 7:51 AM ET

It's never been more important to keep services and applications online, which is why CEO Gary Read says his company can be bigger than ServiceNow.

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FORTUNE -- Boundary, a company that monitors the performance of companies' technical infrastructures to ensure that their applications and services stay online, announced this morning that it raised $22 million in a Series C funding round.

The round was led by new investor Adams Street Partners with participation from Triangle Peak Partners, Lightspeed Venture Partners, and Scale Venture Partners. It brings the Mountain View, Calif.-based company's total outside investment to $41 million.

Chief executive Gary Read says the funds will go toward product development and sales of its tools, which help businesses understand why they experience downtime and how they can fix it.

"I read a news piece this morning that WhatsApp was down again -- the company that Facebook just purchased for $19 billion has now been down twice in the few weeks that Facebook has purchased that company," he told Fortune. "All of those hundreds of millions of people who rely on that app for messaging now have to go without that service. I use that as an example to say that if you look at downtime and outages, in the last few months we've seen Dropbox and Gmail and Healthcare.gov and Azure and Apple outages. The challenge is that the consumer -- folks with mobile devices that expect access to their applications whenever and wherever they want it -- they start to rely upon those applications for e-mail, for driving directions, for business. It is very, very difficult for the companies that are providing these applications to make them available and performing on a 24/7 basis."

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Read, the former CEO of Nimsoft (which was sold to CA Technologies (CA) for $350 million in 2010), said he joined the three-year-old company because it was addressing a business problem that affects every Internet-connected business -- and is only "getting worse."

"We expect a higher level of service than we've ever expected before," he said. "The scale of these applications is growing to sizes that they've never grown to before. And we expect our applications to be updated on a very regular basis. Think about how often your phone's applications are updated -- it's like every week! So we've moved into this agile world where we expect things to move much faster than we ever have before. One of the things that's true, and always been true in IT, is that over 80% of the problems are caused because something changes. As soon as you introduce change into the environment, you introduce the potential for error, and therefore downtime. The number of changes that are taking place today is orders of magnitude more than at any time in the past. Netflix talks about making thousands of changes every day in their infrastructure. Things are constantly changing all of the time, and when change is the primary cause of issues ..."

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That's why Boundary closed its first round of fundraising in just seven weeks, Read says -- because investors fully understand the problem and opportunity.

"Five, 10 years ago, if an application was down, it was an IT problem," Read said. "Today it's a CEO problem. Remember when Yahoo Mail was down for like five weeks? Marissa [Mayer] was apologizing to Wall Street. It's a board-level, stock-price-affecting issue. And it's a really hard problem to figure out. I'm not suggesting that Boundary solves everything, but what we do do is enable our customers to find things that they otherwise don't know about, the cause of them, and therefore be able to resolve issues."

Gartner estimates that companies spend $20 billion annually on such tools. More than half of that spend goes to legacy companies like CA Technologies, BMC Software, IBM (IBM), and HP (HP). Read believes younger companies like his have an advantage because they have designed their tools around the always connected, cloud-based infrastructure that dominates business today, rather than adapted them from the data center-centric environment that dominated years ago.

"I would point, as good comparisons, to ServiceNow (NOW) and Splunk (SPLK)," he said. "When you look at what ServiceNow did, they went into an existing market where the primary providers were BMC, HP, and CA and took a modern, SaaS-based solution to the same problem as the legacy vendors and attracted companies who wanted to move that way. And now they have a market cap of eight-and-a-half billion dollars. The addressable market for Boundary is every bit as large as the addressable market for ServiceNow. Of course, there are many years of hard work and execution ahead of us. But does Boundary have the potential to be that company? Absolutely it does, and that's the reason I joined the company. And companies spend huge amounts of money on this. Imagine how much more the federal government would have been willing to spend to keep Healthcare.gov up and running on launch day."

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Boundary has 45 employees and 120 customers (Salesforce.com, Zendesk, Gilt, HCL Technologies, Rackspace) to date, and it's growing fast. ""We are processing over 2 trillion metrics -- for instance, a response time for an application component, or errors occurring -- for those customers every day," Read said. "And every metric is fully processed within one second."

In the future, Boundary could assemble a large enough database of performance data to mine for further insights, Read said. For now, it's just riding the wave.

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