I had a fascinating conversation this morning with John Dillon, CEO of Engine Yard, a startup with an agile application development platform that is sold as a service. It’s one of the quickest ways to develop online applications — if you were planning to build the next Facebook or Twitter, you’d likely use Engine Yard.

Engine Yard is growing fast: 70% growth from Q1 to Q2 in 2010. Among its customers are many familiar names: Orbitz, Nike, Howcast, Zendesk, Groupon, and over 1,000 more.

Engine Yard’s development platform is based on Ruby on Rails and integrates more than 40 open source technologies. It enables developers to quickly create applications and then deploy them on cloud services such as Amazon, with more coming. (Amazon has a 5% stake in Engine Yard.)

Mr. Dillon is a Silicon Valley veteran and a serial entrepreneur. He worked at Oracle, ran Salesforce until 2002, and then Hyperion Solutions, and has been involved in many other companies.

He describes the current state of the IT market as very exciting because it is extremely disruptive: software as a service and cloud based infrastructures, combined with agile software development and deployment; are set to revolutionize IT.

He compares what is happening in enterprise software markets to the introduction of the PC and its disruptive effect on the entire computing industry.

Here are some notes from our conversation:

– Applications can now be developed and deployed in weeks, they can be made to be disposable after a year or two. When they are cheap to develop it doesn’t matter if they are used just for a short time.

– In a similar way that Salesforce was able to sell to departments and bypass IT departments we sell in the same way. There are lots of small development shops that can be contracted to develop applications.

– When applications can be developed so quickly, you can "throw stuff against the wall" and see what sticks.

– Ruby on Rails is very scalable — it acquired a reputation as not being scalable because a few companies had some problems a couple of years back. But it is not true, and Ruby on Rails 3.0 is amazing.

– Todays’ best application developers are more like artisans and craftsmen than technologists. You see them at conferences and they look hip — they don’t have pocket protectors.

– Developing applications the traditional way, you have big issues in deployment. You call up the IT department, they want to know how many servers will be needed, how they should be configured, what numbers of users you expect, what the peak loads will be, etc. But often you don’t know those answers, you don’t yet know how the apps will be used. Today, you can just add more cloud infrastructure services as you need them, it’s a much better development and deployment environment.

– Yes, you could use the same open source technologies we use, but we’ve already done the integration for you. We can do it faster, better and cheaper than you can — so why wouldn’t you want to use our platform? If we can’t do it faster, better and cheaper then we don’t deserve your business.

– About 50% of capex in the US is spent on IT — after all, we don’t build factories here anymore. Using cloud based services converts CapEx into OpEx — it’s a much more efficient use of capital. Why would you want to construct another data center to expand your business? For most companies, it doesn’t make sense.

– We give back to the open source community, to around 40 different open source projects.

– The cloud is the wave and we are the surfboard.

– Cloud computing will result in a lot of M&A. Once the big boys figure out what is going on — and they will — there will be a major land grab.

Additional Info:

Ruby on Rails Blog | Engine Yard

AppCloud Demo

JRubyConf 2010

News & Press | Engine Yard

[Editor’s Note: Tom cross-posted this to Silicon Valley Watcher. –mrh]