New Relic president Bill Staples will be its new CEO while CEO Lew Cirne will become exec. chairman.
Staples will oversee New Relic’s transition to a usage-based model, rather than subscriptions.
The transition has been rocky: New Relic laid off 160 workers last month, and its growth is slowing.
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The $3.57 billion monitoring and data software company New Relic announced on Thursday that Lew Cirne, its founder, is stepping down as CEO as it transitions to a new business model.
President and chief product officer Bill Staples will step up as the new chief executive, effective July 1, even as Cirne takes the title of executive chairman. Cirne has served as CEO since founding the company in 2008 — “New Relic” itself is actually an anagram for “Lew Cirne.”
Cirne is handing off his role just as New Relic is in the midst of a sometimes-rocky transition to a consumption-based — as opposed to subscription-based — billing model, in a plan the company announced July. Last month, New Relic laid off 160 employees as part of organizational changes related to that change.
It’s also seen slowing growth over the last 10 quarters: In its most recent earnings report, issued Thursday, the company announced that it generated $173 million in revenue, up 8% from this time the year before. At the time of writing, New Relic is trading on the public markets around $56 per share, just about flat year-over-year.
Upending its business model will now fall to Staples, who joined New Relic about a year ago. Prior to that, Staples spent three years at Adobe and 17 years at Microsoft, where he had served as a vice president at both companies. He says that experience will pay off in helping make the transition.
“The fundamental principle I believe in and have experienced at Microsoft, Adobe, and now here, is when you put the customer at the center of what you’re doing, results will happen long term,” Staples told Insider.
Cirne says that when he first met Staples, he saw in him the potential to be the next CEO. He says he and Staples have a “high trust relationship where we each value how we complement each other.” Cirne describes himself chatty, while Staples is the “thoughtful one.” Cirne further praised Staples’ “capability to make difficult decisions” and his analytical skills.
Leaving the CEO’s chair to Staples “allows me to focus on my passion,” Cirne told Insider. “I’m a software developer. As executive chairman, I’ll have more time for innovation and technology whereas Bill is remarkably gifted at scaling.”
Staples hopes to keep scaling New Relic up to new heights, bringing its software — which helps engineers spot and resolve issues with their applications — to wider audiences.
“I want to help New Relic lead in this category and really serve our customers to make engineers much more productive and much more capable to keep up with demands of the business,” Staples said.
New Relic is switching up its whole business modelThe rise of cloud computing made subscription-based software-as-a-service, or SaaS, the prevailing business model in the software industry. However, the consumption or usage-based model that New Relic is now pursuing is becoming increasingly common and being used by cloud providers like Amazon Web Services and companies like Snowflake, Stripe, and Twilio. Cirne says that AWS in particular was an inspiration to New Relic’s approach.
Under the SaaS model, customers pay per user each month, or sign longer-term contracts. However, this can be “frustrating” for customers and set up an “adversarial relationship” with the vendor if customers are paying for more than what they use, Staples said.
On the other hand, a consumption-based model allows customers to just pay for the services they use, scaled up or down as they need it. In New Relic’s case, that means you pay based on how much data you import into the software to analyze: The first 100GB are free, and it charges $0.25 for every gigabyte above that. Staples says that this gives more flexibility, and means that its customers don’t have to negotiate for better deals with salespeople.
“Ultimately what that leads to for a lot of companies, especially in the pandemic, is some of our customers like Domino’s or McDonald’s saw surging demand, whereas other companies in the entertainment or hospitality space couldn’t consume as much as they budgeted,” Staples said.
Staples likens the model to the electricity market, where customers just pay for the amount of electricity they use a month.
“You don’t think about when you flip a light switch, what am I going to pay for this hour of light?” Staples said. “It’s a commodity that you turn off and turn on. It’s a similar thing that comes with telemetry data and engineering. You want access, and you want to get that data and insights on how your system is performing.”
Originally, New Relic aimed to have half of its customers on the consumption model by March 31, but it’s ahead of schedule so far at 60%, Cirne said. So far, customers have reacted positively to the switch, he said.
New Relic founder and CEO Lew Cirne will become executive chairman.
Drew Angerer / Getty Images
“We undertook the transition all because we know that in doing right by our customers, it will result in business growth,” Cirne said. “We will see benefits over the long term.”
Now, New Relic’s goal is to convert all its customers to its new consumption model.
“It serves them better to be in this model, and it’s serving this business well,” Staples said. “They can increase or decrease consumption as they need to.”
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