10th straight year of subscription growth!
WSO2 had a stellar 2018 fiscal year. Continuing with the tradition began last year of financial transparency, I am pleased to share WSO2’s 2018 financial achievements and our 2019 plans.
WSO2 is starting our 14th year of operations. As our technology has become accepted as the best for open source integration, our business has started to grow at an increasing rate.
10th straight year of subscription growth; financial sound operations
WSO2 Subscriptions is our primary business. Customers purchase subscriptions to get support with an SLA, patches, security scanning, and developer query time. Subscriptions are purchased annually and are renewable. We use SaaS-style metrics and Annualized Recurring Revenue (ARR) as the benchmark for measuring the scale of our product sales.
In 2018, we exited with $37M in ARR, an expected growth of over 51% year-over-year. We added over 100 new subscription customers. We have more than 525 customers that have purchased a subscription or other professional services from us.
We now have customers in 65 different countries and in 2018, we crossed a milestone where more than 50% of our product sales originate outside North America. By the end of 2019, 65% of our business will reside outside North America making WSO2 a truly international-first business.
Financially, WSO2 is strong. We increased our balance sheet by $3.5M from operating cash flows while substantially increasing our staffing, opening new offices in Berlin, Mexico, and Australia, and continue long-term investments into next generation technologies like Ballerina.
WSO2 flirts around with GAAP profitability. We have profitable quarters, but don’t get there annually. Subscription businesses recognize revenue ratably over a 12 month period causing the revenue benefit from sales to appear delayed. This behavior is why we emphasize cash flow from operations as a better reflection of our business’ financial profitability.
Last year, WSO2 was the 8th largest pure open source software company. Given our growth rate, WSO2 is now the 6th largest open source company and we anticipate growing into the 5th over the next year!
WSO2 in 2019
In 2018, most of the changes that were made to the business were driven by territory expansion, globalizing our sales organization, expanding our field quality initiatives, and revamping our partner programs to capitalize on the dramatic increase in demand that we have seen in emerging markets.
In 2019, we will accelerate these initiatives while introducing a significant evolution of our product and open source initiatives.
We expect to grow 45–65% in 2019, exiting the year with more than 750 customers across 80 countries. We anticipate Latin America, Africa, and APAC to be the highest growth segments.
We’ll hire ~150 people through the year and expect to have close to 700 full time employees by year’s end.
For 2019, all WSO2 employees contributed to our strategic planning, and we have developed the WSO2 2019 vision; a commitment and description of our values, goals and strategies that will be driving our core efforts.
WSO2 2019: Our internal framework that helps us keep our priorities straight
WSO2’s 2019 Strategies and Priorities
When WSO2 was started, it was an experiment of middleware, integration and open source ideas. Those ideas unlocked a form of unanticipated profitability and prosperous employee base. We look back and then ask:
Could openness be a radical, more scalable, more profitable approach to integration software and business? How would WSO2 practice an open integration business alongside our open source licensing?
We use this mindset to collectively identify our strategic priorities for this year. Internally, we describe these efforts as Unifying Integration, Proving Ballerina, Win In Every Country, Open Everything, Agility Thought Leadership, and Culture of Transparency.
From a customer and investor perspective, we will:
- Launch New, Community-Driven Open Source Projects. We have written extensively on the evolution of integration; the need for the composable enterprise, standardizing reference architectures for integrations, and how microservices are shifting integration into code-first, instead of config-first capabilities. To further these ideas, we have community-driven efforts underway on new open source efforts including Cellery, Siddhi, a micro ESB, and a micro identity server. We will make public introductions as these efforts are readied for enterprise adoption.
- Invest Deeper Into API Management, IAM, and ESB. WSO2 is the industry-recognized leader in open source API management and IAM. We are one of the most widely adopted ESBs and recognized for the 1000s of enterprise integration projects we support. We are significantly expanding our engineering and dedicated support in these domains, effectively doubling our capacity by the end of 2019.
- Open WSO2 Hidden IP. We have pockets of intellectual property that is closed because we have the repositories hidden. This includes our cloud operating IP, certain types of configuration, and internal systems. Technically, our marketing, support, and sales content is not open either. We will open source all of this hidden IP.
- Open More of our Company Practices. We are expanding our partner network and simplifying how outsiders can participate with WSO2 in development, delivery and sales. We expect to grant 1000 certifications throughout 2019 and double the number of outside contributors to WSO2 projects and contributions made by WSO2 to external open source projects.
- Establish WSO2 as Open Source Champions. When outsiders engage in an open process started by someone else, they are joining a community. A community is a collection of people who share similar values. Committing to an open business model, in turn, means that we are advocates for community. We open our doors so that others may walk through. WSO2 will work on programs that make it easier for new developers to become participants in open source, create courses about how to run your own open source projects, and hiring dedicated staff that will be open source community champions within and outside WSO2.
We are working to be the best integration-at-scale provider for layered and cloud native architectures
About Those Lawyers
All this means we can, and will, create a lot more open source that helps IT digitize assets, become increasingly agile, and help turn internal software development into a competitive advantage.
We will be working to turn WSO2 into an IT-household brand, bringing our form of integration into every application and service you are building. If you are new to WSO2 or open source, 2019 will be a great year for you to learn more about how we can help you solve your digitization, integration, identity or API challenges. I’m happy to guide you on your journey and you can get in touch with me directly at firstname.lastname@example.org.
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Since this blog post includes future operating plans, predictions, estimates, and forecasts, this is a good time to point out that we have lawyers, and that our lawyers want you to know that this information represents our current judgment on what the future holds and it is subject to risks, uncertainties, and other nightmares. In other words, don’t draw conclusions that have undue reliance on this blog post and understand that we may revise anything.