Don't let software bugs ruin Christmas

Jin Lee | Bloomberg | Getty Images

Storage bins sit on display for sale at a Container Store Group Inc. location in New York.

Head to the Container Store's website ahead of the holidays and you'll see a promotion for "free shipping on stocking stuffers." Items intended to fill stockings include bottle openers, coasters, organizers and bird feeders.

What if a consumer in Boston, taking the company up on its offer, has trouble completing the transaction? Or if it takes an excited buyer in Chicago twice as long as it should to buy the TeaSpoon Tea Infuser?

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That's where AppDynamics comes in. For three years, the Container Store has been using application performance management (APM) technology from AppDynamics to locate bugs in the website, target them immediately and fix them.

Sometimes there's a slowdown in a particular region. Other times it's from a certain database and often from a single line of code. Just this year, the Container Store upped its contract with AppDynamics, buying more software so the company can test new features before deploying them and minimize the number of live fixes necessary.

"We said we want to be more proactive instead of reactive," said A.J. Azzarello, a quality assurance engineer at the Container Store in Dallas. "We can catch errors and slow response times in test prior to production so they never impact our customers."

For this installment of "Powering the holidays," CNBC.com is looking at two companies—AppDynamics and New Relic—that are among the fastest-growing business software developers in San Francisco and are upending the traditional APM market.

AppDynamics said earlier this month that annual revenue increased 200 percent and, based on third- quarter results, the business was generating $160 million in bookings a year. New Relic filed its initial public offering prospectus last week, and reported third-quarter revenue growth of 77 percent to $25.4 million.

Traditional APM vendors like Compuware, CA and IBM built their tools before the days of dynamic websites and mobile shopping. Now, traffic is coming from all devices, and billions of people are demanding rapid response times or else. According to Gartner, APM was a $2.4 billion business in 2013, but "a new class of vendors, with simplified and innovative business models, is altering the market landscape."

The Container Store, a retailer with a $1.1 billion stock market capitalization, is one type of AppDynamics customers. The seller of office supplies, bathroom organizers and toy storage needs a smooth, fast site to compete with Amazon.com and e-commerce alternatives. Other AppDynamics users include travel site Expedia, cable channel HBO and restaurant reservation site OpenTable.

Among New Relic's thousands of customers are Wal-Mart, Groupon and Best Buy, according to the company's website. Another big spender that's counting on New Relic for the holidays is Rent the Runway, a site that lets women rent items like dresses and handbags, which are particularly popular around Christmas and New Year's.

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Rent the Runway, based in New York, has been using New Relic for more than three years to monitor its website and catch the bottlenecks. Heading into the 2014 holiday season, Rent the Runway is moving its inventory into a new 150,000-square foot facility in Secaucus, New Jersey, quadruple the size of its current space, and is deploying New Relic to manage the warehouse.

During the holiday rush, the company gets about 25,000 items returned and sends 50 to 60 percent of its inventory back out, said Camille Fournier, the chief technology officer. Cocktail dresses, silver necklaces and Kate Spade purses all have to get scanned, cleaned, fixed, scanned again, repackaged and shipped. And it all happens against the clock.

Every station in the warehouse is connected by software. When something is slow or not responding, the company needs to be able to fix it, just as it does when a website or mobile checkout page is slow for consumers.

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"You have a very complex process to deal with the inventory management and order life cycle throughout the process," Fournier said. "We have a lot of complex logic that happens every time an item comes in, and it's all very time sensitive."

AppDynamics and New Relic know each other well, and not just because they're located a half mile apart in San Francisco. Jyoti Bansal, founder and chief executive officer of AppDynamics, used to work for New Relic founder and CEO Lew Cirne at Wily Technology, an early web application monitoring company that was bought by CA in 2006. (Both companies are being sued by CA for alleged patent infringement.)

A New Relic spokesperson declined to comment for this story because of the pre-IPO quiet period.

Bansal, operating without such restrictions, though the company is headed for an IPO at some point, said the holidays are a critical time for companies to have the smartest software installed, because they have to be prepared for their site to attract up to 10 to 20 times the normal amount of traffic. The people running technology departments are "measured on how their site performs during the holiday season," he said. (The company also has said that CA's lawsuit has no merit.)

Because it's all software-based, the technology is designed to find the hidden bugs no matter where they are, even if—surprise—your site sees a 100-fold traffic spike on Cyber Monday.

The way Azzarello from the Container Store describes it, AppDynamics can "drill down and figure out the exact line of code that was slow or exact line of code that produced the error, and we can use that to troubleshoot."

With that insight, there's a good reason why Bansal sees his market opportunity as much bigger than just the $2.4 billion APM business described by Gartner.

According to Bansal, "the world will run on code," so he's aiming to develop tools that can read and analyze every line of it.