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New Relic streamlined its portfolio of IT monitoring software products and cut pricing this week, amid a volatile and highly competitive market for observability tools and rapidly changing IT infrastructure trends.
The vendor, founded as an application performance monitoring (APM) specialist in 2008, emerged in a world where IT infrastructure was made up of physical and virtual servers and applications. Since then, IT monitoring tools have had to keep up with exploding complexity amid trends such as containerization, serverless computing, microservices and AIOps. In response, New Relic broadened the scope of its tools, mostly through acquisitions such as CoScale, SignifAI and IOpipe. Amid an executive reshuffling last year, the company also took its first steps toward unifying its tool suite with New Relic One, which offered a single interface to manage data and create dashboard visualizations.
Now, the company will fold nine previously separate data collection and IT monitoring tools into a set of three products under the New Relic One moniker. The new platform will consist of a base Telemetry data platform, which will collect metric, log, trace and other data types for a flat rate of $0.25 per GB, per month. From there, customers can add the Full Stack Observability product, which brings together previously separate APM, infrastructure, mobile user experience and serverless monitoring tools for troubleshooting. Finally, New Relic will offer its Applied Intelligence AIOps tool as a third add-on license, which will analyze and correlate data for proactive incident response. Each of these tools will have a per-seat license price starting at $99 per user, per month.
New Relic officials were blunt about the impetus for the overhaul -- customers weren't happy with the company's sprawling portfolio.
"The No. 1 complaint right now in observability is the complexity of the pricing and the complexity of the tools," said Bill Staples, who joined New Relic as vice president of product from Adobe in January. "Engineers have to go between different tools to do their jobs every day, and there's also the complexity of managing multiple contracts with vendors for each sliver of the observability pie."
New Relic pricing break a relief for existing users
The savings compared with the previous New Relic pricing scheme are potentially substantial. Under the previous model, users had to purchase APM at a base price that started at $25 per month for a Pro account; this price was calculated based on a tiny AWS t2.micro instance running 750 hours per month, according to the company's website. Those who wanted to collect log data had to pay a separate fee starting at $55 a month for eight days of data retention; for 30 days' retention, that price went up to $75. Example pricing calculations on New Relic's website showed costs of $750 per month for 10 GB ingestion per day with 30 days' retention, for a yearly cost of $9,000. With the $0.25 per GB flat rate for data ingestion, that same 10 GB daily data collection would cost $912 per year.
The price reductions mean existing customers can expand the types of data they use New Relic's IT monitoring tools to collect and measure.
"In this new model where they're just going to charge me for data, and it doesn't matter what type of data it is, we'll be looking to expand how we use New Relic to encompass business-facing metrics," said Steve Evans, vice president of engineering services at Chegg Inc., an e-learning platform for higher education based in Santa Clara, Calif., that has been a New Relic customer since 2015.
For example, Evans said, "We could tie together what a degradation in an IT service means for order rates, because at the end of the day, that's the metric that matters."
Steve EvansVice president of engineering services, Chegg Inc.
The simplification of the product line will also be a relief for Evans, as the product hasn't always been easy to deploy and manage. Since 2018, Evans and his team have leaned heavily on New Relic account managers to help them deploy the tool effectively and get the most value from it. In 2018, the Chegg team also turned to New Relic's open source Groundskeeper tool to track complex changes to licensing costs as it transitioned from physical and virtual servers to containers.
"We had a big push where every engineering team had to update the New Relic agents for containers," Evans said. "The improvements New Relic's made in its reporting have helped since."
With the account team's help, Chegg has gotten results in the form of drastically reduced mean time to repair IT issues by the end of 2018 compared with the beginning of that year, where it cut MTTR from 197 minutes to 33 minutes; in 2019 it further trimmed MTTR down to 24 minutes, and added New Relic Logs alongside APM in early 2020.
Still, especially before last year's New Relic One updates, the vendor was "getting long in the tooth," Evans said. "It was like the Winchester Mystery House -- things keep getting tacked on, and then you have a mess."
All existing customers will be eligible for the newly streamlined product upgrade July 30 without required reconfigurations to IT monitoring agents, according to New Relic's Staples. Customers won't be required to move to the new platform right away, but New Relic will slowly phase out the previous versions of its products over the next year.
New Relic pricing a response to volatile, cutthroat market
New Relic must boost its appeal to new users in addition to retaining existing customers with these product and pricing changes, which also include an expanded free tier. Where New Relic previously offered a 14-day free trial for products such as APM and New Relic Browser, the new platform will include a perpetual free tier, which will include 100 GB of data per month; one free user license for the Full Stack Observability tool; and Applied Intelligence AIOps support for proactive anomaly detection on up to 100 million app transactions per month and incident analysis on up to 1,000 incident events per month.
This expanded "freemium" offering will be key to New Relic's growth as developers and cross-functional teams take over IT monitoring, which had been an ops specialty when New Relic was first founded, analysts said.
"To grow adoption in this market, your product has to be easy to deploy, especially for developers," said Stephen Elliot, an analyst at IDC. "The new consolidation makes products easier to use and the new freemium tier takes away pricing friction for teams that want to experiment."
Stephen Elliot Analyst, IDC
New Relic officials have also made clear in recent months that they've become concerned about the company's growth, especially as compared with competitors such as Cisco AppDynamics and Dynatrace. New Relic saw healthy growth in its fiscal year 2020, which ended in the first calendar quarter of the year. It reported $600 million in revenues, up 25% from the previous year. However, it also reported an $85.5 million operating loss for the year, and reports of internal unrest surfaced in June with the publication of a stern internal memo from the company's CEO urging employees to "get back on track."
In the leaked memo, New Relic founder and CEO Lew Cirne said the company's growth lagged competitors. Cirne didn't name those competitors, but Dynatrace grew 225% compared with a year ago in its most recent fiscal quarter, and beat Wall Street guidance expectations with its forecast for another $160 million in revenue in its current fiscal quarter. New Relic, meanwhile, forecast 13% growth for its next fiscal quarter when it reported results in May.
Chegg's Evans predicted new customers will have an easier time rolling out and expanding with New Relic than his company did in his three years working there.
"You're always going to get out of tools what you put in, but this gives companies an easier place to start, and moves away from a big initial investment, which lowers the risk," he said. "You don't have to come up with six figures in funding just to try it out, and you can grow with it as the value grows."
In the meantime, the market for IT monitoring and observability tools will remain volatile and crowded for the foreseeable future, analysts said. In the past five years, it's already undergone huge shifts both technically and economically, as acquisitions such as Cisco's $3.7 billion AppDynamics buy and Splunk's $1.05 billion acquisition of SignalFx last August rerouted sales and distribution channels for software products. Meanwhile, new startups continue to flood the market with each new technology trend, adding to the competitive chaos. And other vendors such as Sumo Logic have also reduced data collection and retention pricing over the last six months.
"New Relic is positioned well, with a good reputation as both an established company and one that's focused on modern cloud-native trends, as long as they don't take their eye off the ball," said Jason Bloomberg, president at analyst firm Intellyx in Suffolk, Va. "But this is still a very noisy space that will continue to shift, and it's always difficult to tell a modern story without confusing your existing customer base."