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

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DAG Ventures, Presidio Ventures, and Bay Partners. At the same time, other San Francisco-based cloud startups such as Heroku and Joyent were also winning venture funding, reflecting the general enthusiasm in Silicon Valley about the new innovation the cloud-services model was enabling.

But while Joyent and other cloud providers were more language-agnostic, Heroku and Engine Yard stayed focused on Ruby. Mornini says the power of Ruby on Rails—as compared to Java, .NET, C, Python, and other application languages and frameworks—is that it’s paired with a development methodology that emphasizes pleasing customers over planning. “You don’t stress about the future,” says Mornini. “You work on the next feature only, and you rely on customer feedback at each stage to select the next important thing.”

Ruby on Rails developers have time to focus on customers in part because the framework makes it easy to shift certain burdens to providers like Engine Yard. “You want developers to be like best-selling authors—you want them writing The Da Vinci Code and Harry Potter, not setting up variable definitions and all the things programmers used to have to do,” says Dillon. “Now, if you have a browser, you have access to a data center. We go out and source all of this componentry that is necessary to deploy and manage these applications. We optimize and harden it and serve it up as a service, so that you only pay for what you use. It’s cheap until you become very successful, and at that point you’re happy to pay the money, because the development team can concentrate on writing this best-selling novel.”

Engine Yard’s own story has taken a couple of twists and turns. As the economic crisis cut into demand, the company retrenched, laying off 15 percent of its employees in early 2009. That was also when Dillon came in, replacing Walley as CEO. “We needed someone with the experience to grow the company way beyond my/our abilities,” Walley blogged at the time. He has since left to head Needham, MA-based Chargify, which manages recurring billing for Web companies that depend on credit-card-based subscriptions.

Meanwhile, the company decided that it didn’t make sense to own and operate the two data centers—one on each coast—that made up its private cloud. It closed the facilities and outsourced its entire infrastructure to Amazon Web Services and Terremark, a large enterprise hosting provider. Mornini says the move allowed the company to concentrate on maintaining the stack of technologies, such as application and database servers, needed to support Ruby on Rails applications. “We may be the first large-scale hosting company ever to disband and outsource,” Mornini says. Engine Yard makes money now by adding a small premium to Amazon’s or Terremark’s pay-as-you-go prices. “If Amazon is 10 cents per hour per virtual machine, we are maybe 12.”

Demand for Ruby support has bounced back as startups using the agile methodology to build Web-based services have multiplied—which may explain why Salesforce.com wanted in. Mornini says he sees the Heroku purchase as a positive sign for the entire Ruby on Rails community. About a month before Heroku got scooped up, he points out, Palo Alto, CA-based VMware quietly announced that its new “Open PaaS” platform would include support for Ruby on Rails. “To me, that was the first brick in the wall, and now we are delighted that we’ve got two,” Mornini says.

“For us [the Heroku purchase] is great because it’s validation,” Dillon adds. “Now that we have people like Salesforce and VMware as industrial-strength sponsors, it’s wind behind our backs for Ruby on Rails.” And Dillon insists he isn’t worried about stronger competition from Heroku now that it has Salesforce.com’s resources behind it—in fact, just the opposite. “I think it’s going to get mucked up and lost and compromised inside a behemoth company, and that will work to our advantage.”

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

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