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

1/31/11Follow @wroush

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programmer-entrepreneurs seeing a burgeoning gold rush and deciding to sell picks and shovels—but in a way that’s created a lot of actual value for its customers.

“Often, tech companies are started by a couple of Stanford MBA guys saying ‘We should be rich, let’s write a business plan and go down to Sand Hill Road and get some VCs and boomity-boom, we’ll sell out and we deserve it,’” says Dillon, who became Engine Yard’s CEO in January 2009. “The problem is that nobody knows whether there is any value in that, or whether the dogs will even eat the dog food. Tom and Lance built a company the old-fashioned way. They encountered demand and they worked their tails off to meet it.”

In 2005 Mornini and Walley were partners a Sacramento, CA-based software consulting company called Quality Humans, teaching big companies about software version control and other practices that would bring their systems into compliance with Sarbanes-Oxley regulations. One day a copy of Hansson’s 2005 book Agile Web Development with Rails showed up in Mornini’s mail. (He’d ordered a pre-release version from Amazon and then forgotten about it.) “I started reading through it and I was just blown away,” Mornini says. “The root philosophy they had is that there isn’t more than one way to do everything; they said ‘You should do it our way,’ which I saw as an unbelievably powerful mechanism for keeping programmers aligned and being able to work on multiple projects at once with one code base.”

At the same time, Mornini says, Ruby on Rails was a very clean language. “I saw these beautiful examples where you literally didn’t need documentation, because you could just read the code and it was entirely obvious what different sections were doing,” he says. Mornini was so excited that he used a redeye flight from California to Washington, D.C., where he and Walley were involved in a federal consulting gig, to try reimplementing the website for one of his failed previous startups using Ruby on Rails. “I got off this five-hour flight and had about 80 percent of the site rewritten,” he says. “I was amped and buzzing. I showed up at the apartment we were renting, and Lance was like ‘What the hell is going on with you,’ and I said, ‘Check this out, we need to get into the Ruby on Rails business today.’”

Walley and Mornini started consulting on Ruby on Rails development projects, and “the business started flying in,” Mornini says. That was when the pair realized that established Web hosting services like Rackspace weren’t equipped to help developers get their Ruby on Rails applications out to the world. “None of the traditional hosting services knew a darn thing about it,” Mornini says. “We decided we had the opportunity to be the commercial entity in Ruby on Rails.”

So Quality Humans morphed into Engine Yard, and Mornini and Walley started building a data center—what would now be called a computing cloud—and hosting other companies’ Rails applications. “It was unbelievable how it took off,” Mornini says. “Three months after we started, Benchmark Capital contacted us and said, ‘We’ve noticed that all the interesting companies coming to us now are using Ruby on Rails and it seems like almost every one of them has chosen to host with you. We want to know who you are.’ That was a meeting we didn’t turn down.”

By December 2007, Engine Yard had moved to San Francisco and collected a $3.5 million Series A round from Benchmark. That was followed by a $15 million follow-on investment just six months later—with Amazon and New Enterprise Associates now joining in—and a $19 million C round in October 2009, which brought in additional investors … 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.