What Happened at GitHub

Underlying the exodus of several GitHub executives over the past few months has been a key strategic debate: whether the company should focus on the needs of its millions of users or a small group of companies that write big checks, say several people with knowledge of GitHub’s inner workings.

It’s a debate with echoes in the struggles of companies like Dropbox, Evernote and Square to straddle both the consumer and enterprise worlds. In this case, after a three-year enterprise effort, GitHub’s leaders decided last fall to refocus on winning the “hearts and minds” of its individual users by revamping its core product, the people said.

The Takeaway
Some of the executive departures at GitHub in recent months reflect a renewed focus by the company on the core product aimed at individual developers over efforts to sell directly to big businesses.

Several executives responsible for marketing and selling the enterprise product have left recently, such as David McJannet and Brian Doll. They were among nine prominent employees to leave GitHub over the past few months, although not all of those departures were connected with the broader strategic debate, said people close to the company. GitHub declined to comment on specific departures.

The product revamp will be overseen by an executive with long experience in consumer tech, Kakul Srivastava, a former Yahoo and Flickr executive who joined GitHub last July as product chief. In an interview, she dismissed the idea there was an inherent tension selling to businesses and individual developers.

“We’re trying to build a new kind of enterprise company where the playbooks of old won’t always work,” she said. “A focus on the developer helps us grow the enterprise,” she added. Even within GitHub’s largest customers with thousands of users, most developers work in small teams.

Founded in 2008, GitHub has long been the ultimate social network for coders, the place where about 10 million developers from around the world come together to collaborate on building software. Developers can host code on GitHub for free as long as they don’t mind it being publicly viewable. For a small fee, they can host their code in a private cloud repository, an option that is also used by small companies and startups.

That presence with developers makes GitHub one of “maybe three or four companies that make the IT world go around,” said Lenny Pruss, who invests in developer-focused companies at Redpoint Ventures. “When GitHub goes down, the software world stops. That is an incredibly strategic position.”

GitHub began to diversify in 2012, when the company raised $100 million to build out a version of GitHub that could be sold to big businesses that, for security or strategic reasons, want to keep their code out of the public cloud. It raised $250 million more at a $2 billion valuation last year, setting high expectations for profits.

The company had some success. GitHub’s revenue is growing and is expected to be more than $25 million this quarter, and it is cash-flow positive, according to a person familiar with its finances. The free service remains extremely popular among open-source software developers, who have become key to building modern applications.

GitHub has long been the ultimate social network for coders, the place where about 10 million developers from around the world come together to collaborate on building software.

Behind the scenes, though, the enterprise push involved hiring dozens of sales and marketing personnel whose backgrounds at times clashed with the developer-centric mindset of many GitHub veterans.

“Everything started to get sold kind of how IBM would be sold. There was less and less contact with the development community,” said a former member of the enterprise sales team at GitHub. Given the company’s longstanding focus on its community, bringing in a traditional direct sales team “really bucked hard with a lot of people in GitHub.”

The tensions pitted executives such as Mr. McJannet who wanted to pursue an enterprise sales approach that had worked well at companies like VMware against those more focused on individual users. The latter group wanted to follow the consumer tech playbook of focusing on product improvements to build a groundswell of demand.

The staffing expansion also had an impact on the corporate culture. GitHub had prided itself on taking the same sort of open, collaborative approach with its organizational chart that coders take when building software together. But such an approach stops working at a certain company size. GitHub now has nearly 500 employees and has had to impose a more traditional company structure, with managers and bosses. The cultural shift hasn’t always gone smoothly. “They very explicitly had to install a hierarchy. This person who used to be your peer is now your manager. You can imagine how that ruffled feathers,” said one former employee.

At the same time, GitHub’s product had stagnated. Some users weren’t happy. Last month, a group used GitHub to publish a “Dear GitHub” letter complaining that their calls for improvements to the service had been ignored.

The turmoil has given the competition an opportunity to gain ground, at least in terms of selling private code-hosting software to enterprises. One rival is Bitbucket, for instance, owned by Atlassian, which is cheaper than GitHub and is increasing its market share. Another startup called GitLab has been downloaded nearly two million times. Neither competitor has anywhere near the popularity of the cloud version of GitHub, but they are making headway selling a private version to big businesses who want to run it in their own data centers, or “on-premises” in industry parlance.