Editor's note: Inc. Magazine announced its pick for Company of the Year on Tuesday, November 29. It's Riot Games! Here, we spotlight Pivotal, one of the contenders for the title in 2016.
At first blush, Pivotal would seem an odd company to boast a valuation of $3 billion. After all, its core business--a software consultancy called Pivotal Labs--is focused almost entirely on putting itself out of business.
An offshoot of the Hopkinton, Massachusetts, technology firm EMC, three-year-old Pivotal helps its customers build software--from consumer-facing apps to enterprise technologies. In doing so, the San Francisco-based tech firm also teaches the engineers of its clients how to replicate Pivotal Labs' process. The purpose is to show the engineers the knowledge they need to build software as Pivotal Labs would on its own.
"What we've always done is try to make ourselves obsolete as fast as possible, which seems like a crazy business model for a consulting firm," says Rob Mee, Pivotal's CEO since last August.
And one that's undoubtedly working. With clients like Ford Motor Company and Verizon, Pivotal now employs more than 2,000 people across nearly 20 offices around the world, and in 2015, it generated $267 million in revenue.
Pivotal's path wasn't always so charmed, notes Mee, who co-founded Pivotal Labs in 1989. For a long time, the company struggled to sell customers on why they needed help building software. Pivotal Labs was sold to EMC (now Dell Technologies) in 2012 for an undisclosed sum. The following year, EMC bundled up Pivotal Labs with others parts of its business and spun it out as Pivotal, an independent software and services company that at first was not quite sure what it was supposed to do.
"It was like, 'Wow. How do you take so many things and put them into something cohesive?'" Mee said. "You can't have a startup or a company at that stage of size or evolution that is trying to focus on many different areas. You have to clasp it down to one purpose and one mission."
Over the past three years, that's exactly what Pivotal has been working on--focusing and defining itself.
That identity solidified one day in 2013 after Mee, a self-described software developer who is "allergic to mission statements, corporate values, and things like that," was cornered in his office by one of his senior vice presidents who threatened not to leave until Mee clarified Pivotal's mission.
"I realized he was right," says Mee, who recalls saying: "It sounds grandiose, but what I'd really love to do is be able to transform how the world builds software."
While hardly humble, directionally at least, that mission statement has helped the company chart its growth, as well as tap into its key value proposition: upselling.
Aside from its flagship Pivotal Labs consulting service, Pivotal offers two other products--Pivotal Cloud Foundry and Pivotal Big Data Suite. With Cloud Foundry, Pivotal provides its clients the tools necessary for them to build apps for cloud computing. The Big Data Suite, meanwhile, makes it easy for Pivotal customers to store and analyze the troves of big data they gather from their software.
Altogether, the three parts of Pivotal's business feed into one another. As companies turn to Pivotal Labs to learn how to build software better, often they will simultaneously adopt Pivotal's other products and vice versa.
It's a strategy that has fueled the company's growth. First quarter revenue for 2016, for example, was $83 million, which was up 56 percent year over year, the company said. That kind of performance is what made it possible for Pivotal to raise a hefty $653 million Series C funding round in May from investors like Dell EMC, Microsoft, General Electric, and Ford.
"Their perspective is very helpful," says Marcy Klevorn, chief information officer at Ford. "They have people whose job it is to think about culture and how changing culture can help you develop and deliver software better."
With its mission defined and cash in the bank, Pivotal heads into 2017 with a clear goal: setting itself up to go public.
The company has not been shy about its ambition to eventually hold an initial public offering, and fortunately for Pivotal, its timing is shaping up right. After a disastrous 2014 and 2015, in which Silicon Valley saw notable companies like Box and Square go public and then struggle to stay above their opening price, fewer tech companies opted to IPO in 2016. However, for those that did, such as Line and Twilio, the results have been promising, which many experts have taken as an indication that Wall Street has built up an appetite for more tech IPOs.
"Pivotal is a dynamic company. They have a talented engineering staff," says Yefim Natis, vice president and research fellow at Gartner. "They could have great potential."
But the atypical startup's path is not without obstacles. As Pivotal grows, the company may find more of its value lying in its cloud-computing products rather than its consulting services, Natis says. Navigating that transformation will not be easy.
"Pivotal has this fork in the road between selling software and cloud services," Natis says.
Getting to an IPO is the ambition, but for now, the focus at Pivotal remains on changing the way the world develops software. "That's a challenge that I don't think I could have dreamed of," Mee says. "It's the opportunity of a lifetime."