Last week, Ken Oestreich, WSO2’s VP Product Marketing, and I were at the AGC Growth Conference, where we discussed WSO2’s growth story. WSO2 continues to be relatively unknown in business development circles, and this was a wonderful opportunity to report on our traction and understand how the broader ecosystem views integration.
Here is that presentation in full.
WSO2 is the largest open source integration vendor by revenue and customers.
WSO2 is the largest open source integration vendor by revenue and customers. We are EBIT and cash flow positive, with subscription growth approaching 60%.
Integration turns out to be the hottest market even though it’s the uncoolest thing.
Integration is everywhere, and it’s $30 billion annually dominated by three types of integration. All three segments will have billion dollar growth in the next decade. While iPaaS gets significant market attention, it’s not sufficient for most kinds of integration. iPaaS is a metaphor for the line of business, which is departmental-driven, repeatable forms of integration. There are 150 competitors in this space and is prime for a shakeout. iPaaS vendors template-based approaches are not well suited to app integration as they cannot expand to reach the breadth and depth of integrations required—they only work in templated formats where the same integration can be repeatedly done, which is ideal for some types of SaaS to SaaS workflows.
In app integration, old vendors like Tibco, Software AG, and Oracle will suffer as the rotational movement to microservices and open source accelerates. In order to meet significant demand, software vendors are disaggregating their architecture in order to scale. The approaches to integration that service highly disaggregated architectures are shifting, and pure open source vendors have modern architectures to address this.
For the past 5 years, WSO2 has been engineering our approach to integration, with a focus on highly disaggregated architectures due to the rise of APIs and microservices.
WSO2 uniquely offers a suite of technologies because point solutions do not address the full integration problem.
Integration historically is the movement of data between two points, for which we do exceedingly well with our WSO2 Enterprise Integrator solution, but integrations complexity has increased because:
- every integration is an API—so WSO2 API Manager required,
- every integration must be governed—so federated WSO2 Identity Server required,
- data is moving from at rest to real time in-motion—so WSO2 Stream Processor required,
- as industries understand the power of becoming a digital native enterprise, vertical API solutions for compliance and regulation appear such as WSO2 for GDPR, WSO2 for Open Banking, and WSO2 for Telco.
If software is eating the world, then you can no longer be a software organization with also being an integration organization.
Our integration opportunity increases as 50 billion integratable endpoints grows to 1 trillion over the next decade. Everything will become an endpoint, and when those endpoints are exposed as APIs they will become programmable. Integration becomes a problem for all software integrations as its the discipline for resiliently communicating between these endpoints.
Integration is the unspoken challenge of the cloud, AI, data, and cyber security future.
If you follow Marc Andreesen’s hypothesis of software is eating the world, then you can no longer be a software organization without also becoming an integration org.
Closed source, open core, and iPaaS vendors do not have the community reach or contributions to address the full scope of integration problems.
The protocols, data formats, and APIs of endpoints change frequently. A centralized approach to integration, such as those offered by proprietary or open core vendors, are limited to the support they can provide by the resources they fund themselves. This is limiting and cannot address the full breadth of differences that must be addressed.
Community, collaboration, and shared experiences, such as what we provide with WSO2 open source, are the only way to integrate every type of endpoint that is coming.
WSO2 is one of the largest open source companies. We have received more than 1 million contributions that have lead to improvements in our open source integration runtimes and into connectors and adapters used to integrate the rest of the community.
WSO2 contributes to more than 100 open source projects, which reciprocate by contributing back, making WSO2 the 69th largest contributor to GitHub.
Integration is still waterfall, so we are investing into Ballerina to make integration agile.
Ballerina represents a unique, new, and improved approach from typical EI and iPaaS products. Their either agile or integration simple, but never both. A programming language and platform whose syntax is integration simple, but works with a developer’s favorite tool chain in an iterative flow creates true agility. This makes it impossible for developers to integrate at scale to adapt to changing requirements and deal with increasingly disaggregated architectures.
Open source is the best defense for mega-cloud and proprietary vendor lock-in.
Open source is the best defense for addressing lock-in that comes from data lock-in of clouds, API lock-in of mega-clouds, and vendor lock-in from proprietary licenses. Almost 90% of operators are focused on avoiding lock-in. Open source solutions offer a great way to provide try-before-you-buy and substitution options to those that adopt it. WSO2’s solutions also deploy in any environment, and we deliver WSO2 on any public, hybrid, and private cloud infrastructure.
Wherever you may be on your digital native journey, WSO2’s subscriptions include the practices, methodologies, & technologies to transform you from integration waterfall to integration agile.
Companies and governments engage us through our consulting and subscriptions that accelerate the evolution of any digital native initiative.
We have 450 enterprise customers reflecting the world’s best brands that already process more than 5 trillion transactions through us each year.
Open source is more efficient than closed-source—with growth, net retention, and NPS rates equal to MuleSoft, but higher profitability and employee efficiency.
We have a unique open source software business model that has fueled our growth. We release our code with an Apache license. However, we package and ship support patch binaries with a WSO2 license to those who maintain a subscription. This offers a balance between the best freedoms of open source and measurable added value.
And, wonderfully, our internal teams do not compromise productivity by perpetually wrestling with where the “for free/for pay” line must be drawn. It is expensive for an enterprise vendor to determine the best model of where for-fee options reside. Not only does the vendor have to develop a strategy, but they must communicate this to all their employees and then justify it to the open market. These costs are passed along to customers and require significantly higher forms of capital from investors. This line does not stay static, either. The nature of open source is that is erodes and impedes upon the areas where a vendor is selling their proprietary extensions. This means the “for free/for pay” line must be rethought. This is a continual process, and this is time where inefficiencies are introduced.
- Many companies take credit for open source, but only a few, like WSO2, have all their published software as open source, which allows any company to consume or use the software without first having a relationship with the vendor.
- WSO2’s open source software business model is innovative and unique because of the IP we have built around patch distribution and support engagement. This consequently encourages customers to get and maintain a long term subscription. Customers only maintain a subscription with us through the period where we provide immense value, forcing WSO2 to create business practices that embrace a customer’s needs more wholly.
- The proof of this is that WSO2’s net retention rates are identical to MuleSoft’s, which is an open core vendor, effectively only selling proprietary solutions, while having much higher profitability.
We take our offerings to market with a territory and inbound sales model that combines channel partners, resellers, distributors, and our customer success team.
We take our offerings to market with a sales model that combines channel partners, resellers, distributors, and our territory-based customer success teams to engage, win, expand, and satisfy every customer.
- By swarming the customer throughout their lifecycle, we reduce the chance of churn and help derisk the customer’s initiative. This is why we can maintain a 40 Net Promoter Score (NPS).
- We now have 550 people in Mountain View, Colombo, Manhattan, Sao Paolo, and London. We are opening offices in Australia, Mexico, and Europe this year.
- The forces shifting the sector rotation from proprietary software to open source are strongest in emerging economies, which is why we shortly anticipate opening offices throughout eastern Europe, the middle east, Africa, LATAM, and APAC.
This is an impressive set of financials…
The market has rewarded us with 52% subscription growth, which has been accelerating, and also a dollar-based customer retention rate which is equal to MuleSoft’s, but with a community and business operating model that is more efficient letting us have EBITDA profitability and positive cash flow. If you are an investor, we will be a 58 this year on the rule of 40.
Our success has largely been organic, with a minimum of outbound marketing and a small sales channel. This is going to change as we step on the accelerator in the coming years.
Our growth story is not ours alone, we can work together with you to growth faster, together.
We communicate our growth story to our customers, employees, investors, partners and ecosystem to help us discover ways to have a bigger impact, and potentially grow faster. Our growth story is not ours alone to be had. We can work together with you to grow faster, together.
We are building relationships that more aggressively expand our territory and technology partnerships, while also building upon our strategic initiatives with Ballerina and connectors.
If you are interested in learning more about WSO2 or to potentially become a partner, you can reach me at [email protected]