Cloud Computing

FrontRange CEO bets against a cloud-only IT future

FrontRange CEO Jon Temple speaks with an accent that’s hard to locate. He’s actually a California-based Brit who has travelled around quite a bit. His company is a similarly confusing combination, with roots in South Africa and having once been best known for GoldMine, the sales contact management software that it still quietly sells. For some time now though its focus has been on the service desk, another melting pot sector that’s going through change. A person could be forgiven for getting confused…

So when we meet for coffee in central London a couple of weeks before Christmas, I ask Temple to describe his company in a way that would work at seasonal neighbourly parties.

“We help organisations improve their business through relentless service quality,” he says, not missing a beat.

While everyone wants to improve efficiencies - and getting IT to do more with less has more or less become a mantra - the smartest companies are holding service delivery owners to be more accountable than ever before. And newcomers like ServiceNow and Zendesk have shown that delivering broader, non-IT services in a smart, prioritised and measurable manner is hugely popular. Standardised frameworks like Itil professionalised IT service management and now companies are taking that rigour and applying it across the board.

“It’s not about the IT helpdesk anymore,” Temple says, “it’s how you can implement a platform across the company. It might be a question like ‘how effective are you in on-boarding another employee?’ In most companies that’s not a standard process and it’s completely inefficient. [That’s why] companies are dropping the ‘IT’ from ITSM (IT service management).”

But what of the competition? ServiceNow enjoyed a successful IPO in 2012, as did Zendesk this year and FrontRange is today ranked as only the fifth-largest company in the service desk segment. But Temple sees a natural bifurcation in the category between enterprise and SMB audiences.

“Zendesk is doing great but in that lower end of the market. FrontRange is in the mid- to high-end segment and there are only two companies gaining market share in the segment: ServiceNow and us. ITOM (IT operations management) revenues are declining among the others.”

Temple also talks a good fight when he says that ServiceNow’s cloud focus will be a long-term issue and says that company is “increasingly being viewed as unaffordable” when the long-term effects of the SaaS licensing model are added up. After three years, that subscription pricing will pass the old money-down licensing charge and it keeps adding up – suddenly the ‘opex good, capex bad’ mantra doesn’t sound so good.

More companies, especially big companies, will deploy a mixed approach or even return to on-premise deployments, he contends, hence FrontRange’s big push on offering a hybrid model. Temple says that the Edward Snowden case and those escalating costs referred to above are making firms reconsider whether they need service desks in the cloud.

“My good friends at the NSA haven’t done a lot to promote cloud computing outside North America. Ask Australia or try convincing BMW or a German company to move to the public cloud and you end up with a pretty interesting conversation.”

You also need a pragmatic approach to internet connectivity.

“Most companies would like to standardise on one platform. [For cloud] that’s fine in the US or UK but not in South Africa or Indonesia where internet infrastructure is just not as robust.”

By contrast, FrontRange can “integrate and extend versus rip and replace” because it has one code base.

“The further up you are in the maturation scale, the more likely you’re on premise. You’re screwed if your new vendor doesn’t have an offering.”

But surely cloud vendors will add on-premise capabilities to meet that demand or customers will hedge their bets by using multiple vendors?

“ServiceNow will never own on-premise software – that would kill their valuations,” Temple argues. “It breaks the pureness of the model. But part of the evolution of the service desk is the ability to integrate with client/server solutions. History has proven that any time customers rely on two vendors to maintain an integrated solution it doesn’t work out too well.”

The only $1bn annual revenue cloud application company is, he says, making that company by definition an outlier.

While ServiceNow and Zendesk had those IPOs, Front Range is owned by private-equity partners. But again, perhaps predictably and as a former executive of market-listed companies, Temple sees no detriment in this.

“The good news about being owned by a PE company is we’re private and we don’t have to make all the announcements and be accountable to Wall Street. You live without the scrutiny of the public eye, although of course you need to deliver growth back to your owners. A lot of good things can come with [a market listing] but it’s a lot of hard work.”

Temple fights shy of providing revenue numbers or talking about whether FrontRange could itself return to the public markets but, with that service desk category reach extending, he has reasons for being optimistic.

As for service desk market leader BMC, he has more barbs.

“We’ve very grateful to BMC because they were one of the companies that helped create the category, but they have multiple code bases [that will mean customers need to jump off platforms]. In nine out of ten cases we see BMC is the incumbent and it’s then between ServiceNow and Front Range.”

As for the future, Temple says FrontRange could become a $1bn revenue company based on his sense that the total target market has swollen and that FrontRange’s strategy of backing both cloud and on-premise horses is right.

“It’s not one thing or the other,” he insists. “I’ve been through two decades of computing where the first was on-premise and then came the client/server revolution. Then we went through this religion where everything had to be in the cloud and you couldn’t get funding unless you were cloud. Now we’re in a decade of hybrid computing.”


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Martin Veitch

Martin Veitch is Contributing Editor for IDG Connect

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