PagerDuty buys Rundeck for $100M to boost its product and go-to-market strategy

PagerDuty Inc. today said that it will spend about $100 million to acquire Rundeck Inc., the maker of a popular software tool for troubleshooting technical issues in information technology systems.

The deal, announced as PagerDuty holds its annual conference virtually today and tomorrow, is a big exit for San Francisco-based Rundeck. It had raised only $3 million in funding, according to Crunchbase. PagerDuty will pay 60% of the $100 million transaction value in cash and the rest in stock.

Publicly traded PagerDuty provides a cloud-based platform that IT teams, as well as others, rely on to get alerted about technical issues. PagerDuty can, for example, automatically notify a database administrator if their MySQL cluster encounters problems. The platform also provides tools that teams can use to coordinate their response to issues and perform troubleshooting.

Rundeck competes in a similar niche. The startup has a popular open-source tool that enables administrators to create workflows for automatically fixing IT issues. Workflows can perform tasks such as restarting a malfunctioning server or adding an extra instance to a cloud environment. 

This type of automation has several benefits. It allows administrators to perform repetitive chores faster and removes the risk of human error in the process, because troubleshooting  steps are carried out automatically. Plus, workflows can be shared with less technically savvy users to let them fix certain common issues on their own.

Rundeck will complement the core alerting features offered by PagerDuty. In fact, the two companies already offer an integration between their offerings: Administrators can use Rundeck workflows to fix issues automatically that are flagged by PagerDuty’s platform.

The deal advances a yearlong push by PagerDuty to expand beyond its core niche of IT alerting to adjacent markets. “We almost started out more like a consumer app,” Chief Executive Officer Jennifer Tejada (pictured) detailed in one of her interviews on SiliconANGLE Media’s theCUBE studio, “It was really an application for engineers to make better use of their time on call and not being woken up when they don’t need to be. All those users started pushing their data to us … and with that information comes the power to create context.”

On top of advancing PagerDuty’s product roadmap, the deal aligns with its go-to-market strategy. In its S-1 filing last year, PagerDuty said it uses a “land and expand“ strategy to acquire customers wherein it wins over an initial group of adopters inside a company, then gradually onboards more teams and departments. PagerDuty specifically pointed out “Rundeck’s land and expand go-to-market motion” in the acquisition announcement today. 

Because it’s open source, the Rundeck platform is free and therefore relatively easy to adopt. That makes it a useful means of building initial product traction inside a company, which PagerDuty can then leverage to advance to the “expand” phase of its land and expand strategy and upsell that company on its paid products. 

In addition to everything else, the deal potentially also buys PagerDuty a new revenue stream. Rundeck offers a paid version of its open-source platform to companies under the brand Rundeck Enterprise. PagerDuty says the startup serves about 150 enterprises and midmarket firms on top of its more than 60,000 open-source users.

The acquisition is expected to close in October. 

Photo: SiliconANGLE

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