What GitLab’s $ 11 Billion IPO Says About In-House Software Development: Iterate to Innovate

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On October 14, GitLab, a ten-year-old coding platform company with just 1,350 employees, went public at a valuation of $ 11 billion. Just over two weeks later, the stock is up more than 50%, giving the company a market cap of $ 17 billion. This valuation is for a company with revenues of $ 108.1 million in the six months ending July 31, 2021, and a net loss of $ 69 million during the same period, although revenues increase by 69 million. % year over year.

This is further confirmation that the world is now increasingly software-driven. Microsoft acquired competitor GitHub in 2018 for $ 7.5 billion and Prosus acquired question-and-answer site Stack Overflow for $ 1.8 billion in June 2021. There is a diagram here. As I said before, with all companies now having to act like software vendors, the market for solutions that facilitate this transformation is growing rapidly.

GitLab’s IPO prospectus contains a passage outlining its take on this trend. “Today, every industry, activity and function within a company depends on software. To stay competitive and survive, almost all businesses need to digitally transform and become experts in creating and delivering software. GitLab’s success contains a number of important lessons for CIOs developing internal software capabilities, starting with its integrative approach to software development and emphasizing innovation through rapid iteration.

The challenge of software development

Developing quality software on a large scale is difficult and becomes even more so as the deadlines demanded in today’s highly competitive environment become shorter and shorter. Many companies struggle to meet pressing demands for custom software, which ultimately limits their ability to compete effectively. A CIO at a large US company recently told me how difficult it is to prioritize a few projects out of a long list of worthwhile initiatives due to software development capacity constraints. It’s no surprise, then, that CIOs appreciate toolkits that help their developers not only work more productively and collaboratively, but also enable them to achieve results that generate revenue and create new business opportunities.

This is where GitLab and competitors such as GitHub and Atlassian come in.

When the founders of GitLab looked at the state of software development internally, they observed that the new demands placed on developers (more projects, faster delivery, continuous updates, etc.) had resulted in fragmentation of the software. set of productivity tools, making it more difficult for businesses to become software-driven businesses. Simplifying this set of tools without sacrificing efficiency seemed like a winning strategy.

The company’s core offering, the DevOps Platform, is an integrative development environment that brings together development, operations, IT, security and sales teams in a single application to deliver desired business results while reducing software development cycle times. The company describes it as open-core, which is basically a business model that offers a limited and free open source version of the product (GitLab Community Edition) and a proprietary and paid version (GitLab Enterprise Edition) that includes additional features. GitLab has been releasing a new version of its software every month for nearly a decade, benefiting not only from internal R&D expenses but also from contributions from its user community.

Score a hat trick

In my opinion, these abilities are important for three main reasons. First, as a single application that spans the software development lifecycle, it helps accelerate delivery. Second, the platform’s support for cross-functional teams in the software development process is important to delivering results that matter to businesses. Third, the rapid pace of product innovation, including open source contributions, signals to customers that the risk of obsolescence, heightened when a customer engages on a single platform, is drawing the attention of the customer. management team at GitLab.

A glance at its customer base is indicative of the growing importance of in-house software development. The company has 383 customers who each generate $ 100,000 or more in annual revenue for the business and ten times that number who spend more than $ 5,000 annually, both up significantly from the previous year.

Goldman Sachs says GitLab has been able to “dramatically increase the speed of development” with many teams moving to daily production rather than weekly (or longer) releases. At Siemens, the platform grew from a small team in 2013 to 40,000 users, allowing developers around the world to collaborate and share code in minutes.

Iterate towards success

The most important lesson from all of this for CIOs, in my opinion, is the importance of rapid innovation by iteration. In the dynamic and uncertain times we are living in, the ability to innovate quickly is crucial and CIOs and application development managers must invest in tools that are well suited to their environment.

It’s at least as important to experiment and iterate to ensure that solutions reflect the current state of the art and to bring business partners into the process. Productivity toolkits can help development teams go faster, but CIOs need to design and implement management systems to encourage this type of innovation process.

There is another very important lesson. GitLab has been a completely remote company from the start, allowing it to hire talent from anywhere, giving it a competitive edge. As the business world increasingly opens up to new forms of work organization such as hybrid and remote work, and the demand for software talent continues to increase, CIOs must consider the viability of these. new options.

The success of GitLab’s IPO is proof that investors are betting on the tendency to make software a core competency in companies around the world. It’s also another timely reminder that code is an essential asset. To create value software better than their competitors, CIOs need to accelerate their investments in internal software capabilities (talent, tools, and development practices) while leveraging GitLab or other productivity offerings that can overwhelm their armies of coders.


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