Red Hat Acquires Ansible, Growing Opportunity in DevOps

Today, Red Hat announced it will acquire IT automation and DevOps leader Ansible. This acquisition will immediately catapult Red Hat – already a leader in hybrid cloud – into an industry leadership role in the fast growing DevOps segment of cloud computing.

Menlo Ventures was the lead venture investor in Ansible and I joined its board in June 2013 just after our $5 million Series A investment.

According to Gartner, IT operations management software is a $21B market in 2014 growing to $28B in 2019. Companies around the world are migrating their IT strategy from running proprietary purchased software in its own internal data centers to running open source solutions on both the traditional physical footprint and private and public clouds.

Under the old, proprietary enterprise software model, companies purchased large monolithic external software and installed major updates perhaps once or twice per year. Products such as OpenView from HP and Unicenter from Computer Associates were widely used to manage internal data center resources and to track updates and perform maintenance. Ansible differs greatly from these solutions, offering a curated, packaged, and supported offering based on the popular upstream open source community of the same name. Through open source, Ansible has been able to drive significant innovation more quickly than the old guard proprietary products.

In today’s computing world, companies need to update and release their code much more frequently. The DevOps philosophy of rapidly developing many incremental improvements has taken over the IT world. Ansible’s customers can update their production code on a daily, even hourly basis. In order to keep their sites up and running, companies need efficient, flexible, and easy-to-use tools that can take servers off the network, reconfigure them or install new code, run some quick quality tests, and then seamlessly re-integrate into the production environment. Ansible is an excellent tool for these tasks and that is why it has grown so rapidly over the past two years.

We’re thrilled to have been investors in Ansible but the whole DevOps sector is in the early innings and we expect to see an incredible set of opportunities over the next few years. The way applications are written and managed as well as the infrastructure they operate on has never been in a bigger state of flux. Already companies such as NewRelic have gone public with a market cap approaching $2B, and there are many others that will follow them soon. The market for IT operations software is surprisingly large, at $21B last year. But, that includes all the incumbent software that does not apply to this generation of applications and infrastructure.

Companies like AppDynamics are disrupting the APM (application performance monitoring) space having reported bookings well in excess of $100M. Other upstarts such as PagerDuty in alert response and resolution, DataDog in server monitoring, and BugSnag in bug monitoring and resolution, are all showing breakout traction and the potential for the broad category. It’s a focus area for Menlo and we look forward to investing in the next wave of companies making infrastructure faster, more dynamic, more reliable, and simpler to manage.