Engine Yard: The Ruby on Rails Company Salesforce Didn’t Buy

Salesforce.com startled Silicon Valley techies last month by acquiring Heroku, a San Francisco startup born just three years earlier at Y Combinator, the venture incubator program. Heroku’s specialty is hosting Web-based applications written in Ruby, a programming language so powerful yet easy to use that it has become the tool of choice for developers building consumer-facing Web services. Heroku had won a rabid following among fellow Y Combinator companies and other startups, perhaps helping to explain how its founders—who had raised just $13 million in venture capital—persuaded Salesforce.com to fork over $212 million for the 30-employee property.

But just a few blocks away from Heroku in San Francisco’s South of Market neighborhood is another Ruby hosting company that’s been around longer than Heroku and has a lot more engineers, support staff, and paying customers. It’s called Engine Yard, and with almost $40 million in venture backing from Benchmark Capital, New Enterprise Associates, Amazon, and other firms, it’s assembled a user base of more than 1,800 companies for its “platform as a service.” Its customer roster includes names like Bleacher Report, BuyWithMe, Get Satisfaction, MTV, Oneforty, and Path.

So why did Salesforce.com go after upstart Heroku rather than established Engine Yard?

The answer may have as much to do with Silicon Valley politics as anything else. I got part of the background from CEO John Dillon and chief technology officer Tom Mornini when I visited Engine Yard in mid-December. Dillon, I knew, has a history with Salesforce.com. He was its president and CEO from December 1999 to November 2001, when he was ousted by founder Marc Benioff. Salesforce.com said at the time that Dillon departed by mutual agreement, but the real story, Dillon told the San Francisco Chronicle in 2002, was that “Marc decided that he wanted a turn at the wheel.”

Whatever the case, there’s no love lost between Dillon and Benioff. Dillon—who has what you might call an unguarded speaking style—has gone on the record as saying that Salesforce.com’s own Force.com cloud application platform is “crap” that “no self-respecting developer would use.” So once Salesforce.com decided it wanted to get into the Ruby hosting game, Heroku was likely the more palatable choice, Dillon told me. “There are only two companies you can buy to get this, and one is Engine Yard,” he says. “I don’t think Marc wanted to write a big check to me.”

Of course, there’s a lot more to Engine Yard’s story than its rivalries with Heroku and Salesforce.com. The rise of Ruby and the closely related tool Ruby on Rails, a package of open-source software that greatly simplifies the creation of database-driven websites, has transformed the way Internet entrepreneurs implement their visions. Ruby on Rails was designed specifically to allow rapid product iteration—the so-called “agile” development strategy—with the result that developers can release and test several versions of a Web-based service in a single week, sometimes even a single day. “Ruby on Rails is somewhere between 2 and 5 times more efficient for coding a website than anything previously—and we believe it’s closer to 5 times,” Mornini says.

Engine Yard has been contributing to this transformation since its beginning: Mornini and co-founder Lance Walley set up the company in early 2006, less than a year after Danish programmer David Heinemeier Hansson of Chicago-based 37signals released Ruby on Rails. It’s a classic story of … Next Page »

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Wade Roush is a contributing editor at Xconomy. Follow @wroush

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