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

1/31/11Follow @wroush

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 »

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

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  • Lonny Eachus

    Interesting how this whole story about the founding and development of Engine Yard has edited out the very existence of Ezra Zymunctowicz, who was a co-founder and a very essential part of Engine Yard’s development.

    I know the egos of company heads can tend to distort things a little, but this is completely ridiculous. No mention of Ezra at all?

    Then how can we credit any of the rest of the story?

  • http://engineyard.com Jayson Vantuyl

    As one of the founders of Engine Yard who was also not credited, the omission doesn’t particularly bothersome to me. I don’t think the purpose of this article was really to edit anybody out. Sure, Ez and I deserve credit, but that’s not the meat of this article.

    That said, I also have another theory. I don’t think that Salesforce bought Heroku because they just thought Ruby is cool. I think they bought them because they want to provide a solid platform to provide apps that integrate with Salesforce. They want to be a one-stop-shop for their customers to host Salesforce apps. This is reasonable and good for all involved.

    That said, Engine Yard was not so attractive for that. Heroku is trying very hard to be an infrastructure platform. They don’t really have people to help integrate you with the Cloud, architect your app, or make any number of hard decisions that EY helps its customers make. They’re just there to host.

    From Salesforce’s point of view, EY likely has tons of people that would have to be tossed overboard. There would have been tons of friction because we’re about building Ruby, the Ruby community, and businesses that use it.

    If my supposition is correct, Salesforce needs a solid hosting platform that just happens to be built around Ruby. From that perspective, it makes sense to buy the smaller company with less people to fire, rather than the more established company with a strong identity that would have to be dismantled.

    Had Ezra’s work at VMware been ready when they needed it, they might not have even bought Heroku. I really think this is just about their needs at the time and finding the best option that fit those needs.

  • http://engineyard.com Tom Mornini

    Thanks for your article, Wade!

    Lonny, I don’t believe that any “editing” or “ego” are at play here. John Dillon and I were interviewed, and Wade wrote the article.

    No effort was made to bury Ezra’s contributions.

    I wish that every employee of Engine Yard was mentioned in the article! Engine Yard’s success reflects the work of our entire team. Our founders and executives are less important than the amazing team we’ve built.

  • http://www.xconomy.com/author/wroush/ Wade Roush

    @Lonny, @Jayson: In preparation for this piece I had a long meeting with Tom Mornini and John Dillon, and what you read here is what they related to me. I’m sure they didn’t mean to leave anyone out. I had many subjects I wanted to cover in the interview, so naturally they could only provide a thumbnail version of Engine Yard’s history. I do regret not having time to conduct additional research into the company’s founding.

    @Jayson: I think you’re right that it would be have been far more difficult for Salesforce to successfully integrate Engine Yard, for both cultural and engineering reasons. Heroku is already built around the multi-tenancy model Salesforce uses, for one thing.

  • Lonny Eachus

    “Edited” was the wrong word, and I should not have used it. But as a reader, I got the impression that the article was trying to give a pretty complete description of how Engine Yard was born and grew, when in fact some very big parts were left out. It did leave me with a bad impression.

    I just think the article could have done a better job explaining that its “history” of Engine Yard is anything but complete.

  • Think Again

    Whatever the politics, in my opinion as a Rails developer, Heroku is better because it lets people start developing on it for free. Not so with Engine Yard.

    Now that Heroku is part of Salesforce, we can look forward to a slow death to Heroku’s coolness. Smartest move for Dillon would be to offer a free starter package for developers on Engine yard. Will get people flocking to it in troves.