More than a decade ago Chris Anderson wrote an article for WIRED magazine called "The Long Tail". It described how the Internet has changed the sales and distribution model of products such that it made sense for vendors to not only sell a few popular items, but to also sell a large number of unique items. Good examples of these new strategies are Amazon and Netflix. According to the article, an average Barnes and Nobles carried 130,000 most popular book titles in stock where as Amazon makes more than half of its sales from outside the top 130,000. These “outsiders” are called the long tail.
Picture by Hay Kranen / PD
According to Wikipedia, the long tail of a distribution of numbers is the portion of the distribution having a large number of occurrences far from the "head" or central part of the distribution. A probability distribution is said to have a long tail if a larger share of population rests within its tail than would under a normal distribution. The yellow space in the graphic shows the long tail.
While the Internet has changed the way companies can sell and distribute products, 5 years after the WIRED article, Marc Andreessen published an article called “Why Software Is Eating The World“ in The Wallstreet Journal.
Mr. Andreessen said in his article: "My own theory is that we are in the middle of a dramatic and broad technological and economic shift in which software companies are poised to take over large swathes of the economy."
Four years later - today - companies such as AirBnB, Uber and Alibaba show that he was right and the digital revolution is taking place in all vertical industries.
Combining these two articles, “The Long Tail” and “Why Software Is Eating the World” will tell us that Amazon, Netflix, AirBnB, Alibaba and Uber are just the “head” of the digital revolution. Of course there are approximately a thousand billion $ companies who take a big piece of the cake but there are also hundreds of thousands or even millions of smaller companies with very special markets that make the long tail of the digital revolution.
These long tail companies are called Small and Medium sized businesses (SMB). Gartner defines SMBs by their number of employees and annual revenue. The attribute used most often is number of employees; small businesses are usually defined as organizations with fewer than 100 employees; midsize businesses are those organizations with 100 to 999 employees. The second attribute used is annual revenue: small business is usually defined as organizations with less than $50 million in annual revenue, midsize business is defined as organizations that make more than $50 million, but less than $1 billion in annual revenue.
It is tricky to estimate how many new SMB sized companies are using software to "eat their world", but there are some indicators. Let’s look at the number of eCommerce shops in the entire Internet to help make an assumption about how many SMB businesses are available in that space.
According to BuiltWith statistics there are more than 6,200,000 eCommerce websites on this planet. New shops are coming to life every day. Clearly there is a long tail here. Big shop platforms like SAP Hybris, with 1,432 shops, or IBM WebSphere Commerce Suite, with 1,503 shops, are the head of the eCommerce business powering the bigger e-shops on the planet. The biggest will even be custom implementations. But there are also 910,398 wooCommerce and 242,539 Magento shops which form the long tail of the eCommerce world. We can categorize into three groups:
- The Top Edge
The giant eCommerce shops like Amazon, eBay or Zalando. These vendors build there own custom systems with high scale and highly sophisticated features and integrations.
- The Head
Large shops like Macy's (ATG Dynamo according to BuiltWith) or MediaMarkt in Europe (IBM WebSphere Commcerce Suite according to BuiltWith) that use the leaders of Gartners Magic Quadrant to customize and build their own systems.
- The Long Tail
SMB eCommerce companies that make significant revenue but have less financial and IT resources. They use Open Source platforms like wooCommerce/Magento or Software-as-a-Service models like Shopify to get their eCommerce business running.
All of these companies have something in common: If the shop is not running or not performing well, they lose customers and revenue!
That’s why all of these customers need an Application Performance Management solution. But in fact they do not have one. Looking at Gartners APM MQ leaders and according to their websites, AppDynamics has 1,500, dynaTrace 7,500 and NewRelic 11,500 customers. That’s in fact only a small part of the market compared to the millions of small, medium and big businesses in existance that rely on healthy software to run their businesses.
This is the Long Tail opportunity of Application Performance Management. It is difficult to say how big the long tail is in contrast to the approximately 50,000 APM customers in the head. Our estimate is there are at least 1 million SMB companies that rely heavily on software to run their business. Looking at Amazon AWS, they claim to have more than 1,000,000 customers for their infrastructure - everyone would be a good candidate for APM.
In the same way I’ve categorized the eCommerce vendors, we can do this for APM:
- The Top Edge
Companies like Facebook, Google, Netflix and Amazon. They will build their own Application Performance Management solution or will leverage a highend analytics platform like SignalFX or they will build on top of Open Source platforms lilke Bosun, Graphite or the ELK stack.
- The Head
The big companies with more than $1B revenue. They will use a product from one of the leading vendors like AppDynamics, dynaTrace or NewRelic.
- The Long Tail
They don’t really have a solution. Tech-Startups will use NewRelic and Hosting providers will have basic monitoring using Nagios/Zabbix or possibly a tool like PingDom.
What are the attributes of an APM solution that can legitimately address the Long Tail APM marketplace?
The key is in a statement by Jim Browning, vice president and research director for small and midsize business at Gartner: “the biggest challenge they face is that they don’t have enough internal IT people and skills”. His research showed that the primary challenge for this audience is less specialization and fewer dedicated IT resources.
Current APM tools demand the opposite, highly qualified experts and dedicated resources are needed. As NewRelic says on its billboards, “Data nerds”. These APM tools are very good at providing exceptional quantities of data and give you the opportunity to query the data and build dashboards (aka Analytics).
The other challenge is cost. Amazon just announced first revenue numbers for AWS: Approx $6B per year. With one million customers this means an average of $6,000 per year or $500 per month. It is likely that there will be much more customers that pay less than $500 per month because there will be some really big AWS customers like Netflix etc.
But if you spend $500 per month for some servers and storage in the cloud that runs your whole application infrastructure, it is not likely that you will pay $100-500 per server per month to monitor it.
What would be the best strategy to attack the Long Tail of APM?
Quoting Clayton Christensen from his book “The Innovator’s Dilemma” about disruptive products: “Empowering innovations transform complicated, costly products that previously had been available only to a few people, into simpler, cheaper products available to many. Empowering innovations create jobs for people who build, distribute, sell and service these products.”
So the solution to approaching the Long Tail which could provide millions of companies with APM is to make a much simpler and cheaper solution than the products currently addressing the Head of the market.
That is what drives our mission at Instana: Building the best APM solution in the market that is really simple to use and cheap enough to address the Long Tail market.
Our key idea at Instana is to go beyond data. Providing only data to the user demands they must be an APM expert to transform that data into actionable information. So to make APM really easy, the expert has to be built into the tool and the information delivered in a way that every IT operator, developer and manager can understand it. In addition to that the delivery and maintenance of the product must be a one-time, one-click, no-configuration experience.
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