Enterprise Times recently spoke to Sanjiva Weerawarana, Founder, Director and CEO of WSO2. Founded in 2005, Colombo, Sri Lanka, WSO2 was initially an open-source middleware company. The firm continues to grow from strength to strength and last raised funding in May 2021 in a US $93 million Series E funding round led by Goldman Sachs and later supplemented by RedStart Labs. The company has evolved a lot since 2005, and I asked Sanjiva to give a thirty-second pitch for WSO2.
“WSO2’s purpose is to help enterprise customers build and deliver digital experiences for their customers. We do that by giving you everything you need to support you from the time your developers write code and commit it to a code repository, to the time that it’s running and delivered to your customers. We give you the technology, we give you the operating environment and everything in our cloud as well.”
Driving towards an IPO
It is no secret that WSO2 is heading for an IPO; as such, it is a bit more open than many private companies about its revenue and other numbers. By the end of 2023, it expects to attain $90 million in ARR with growth of just under 20%. Importantly, and especially in this economic climate, that growth has been achieved with it maintaining around a 10% profit margin.
It still has its largest number of employees in Sri Lanka. Since 2005, it has expanded rapidly with 775 employees across 18 countries. It continues to expand and has offices in Europe, APAC, South America and the US. It recently opened an office in Dubai and plans to open its third European office in Madrid next year.
Importantly for future growth, it has a strong partner ecosystem. There are 150 partners across 70 countries, giving it a global reach. Only about 3% of its revenue comes from services, as it relies on partners, including GSIs such as Tech Mahindra, to conduct implementations.
The customer numbers are impressive. Over 700 are direct subscription customers, and another 5,000 come from vendor partners who OEM the product. There are an additional 25,000 people who are using the solution as open source.
WSO2 last raised funds in 2021, so is it looking to initiate another round of funding before an IPO? Sanjiva noted, “We don’t need money for operating expenses. We are cash flow positive. We do plan to do some M&A as time goes along and we will probably do another round pre-IPO probably next year.”
WSO2’s last acquisition was of Platformer in 2021. Sanjiva revealed that they have looked at and continue to consider other acquisitions. If they do acquire, they are likely to be tech tuck-ins or a small firm that gives it access to, or a presence in, a specific market.
For some founders, an IPO is an exit plan, but not so for Sanjiva. He noted, “Even after the IPO, it is not meant to be a slowdown. It’s a start; it’s an initial public offering at the start of creating a much larger business long-term. My vision is that we will be the strongest technology company for enterprise application development.”
To achieve that aim, he has always seen WSO2 as having a multi-product approach.
Historically, WSO2 was better known as an open-source technology company. In 2014, it described itself as a global enterprise middleware corporation. By 2019, it was describing itself as an open-source integration vendor. Today, it is a leader in digital transformation technology with a suite of solutions that help organisations with their digital transformation, underpinned by its platform, Choreo.
Effectively, WSO2 has three technology businesses:
- API Management
- Identity and Access Management
Each of these businesses supports several solutions, and they are ever improving and extending the solution set. WSO2 recently launched a Kubernetes native API Management product, further adding to its most popular portfolio. The flagship product for API Management is Choreo for API Management, a complete enterprise-grade development platform.
On the integration pillar, it offers Micro Integrator, a lightweight but comprehensive low-code integration solution. For more complex environments, Ballerina, a cloud-native, data-oriented programming language for integration is available, designed for integration challenges.
The Identity Access Management (IAM) capabilities are both mature and comprehensive, addressing market sectors such as B2B, B2C, and government-to-citizen.
Sanjiva explained further, saying, “Our strength is CIAM, customer identity access management, and, in particular, B2B CIAM, which is where we are the first and most advanced in the market.”
Every product WSO2 has, is an open-source product. The IAM capabilities are also available for private cloud and as a SaaS product called Asgardeo. This open-source approach is key to WSO2. Sanjiva commented, “We’re not like Mule(Soft) and a bunch of other open-source companies, which have a Community Edition and an enterprise solution. The entire code base is open-source. Then, we charge for updates to a released version. Those are things we don’t give to non-paying customers.”
Sanjiva shared his ambitions for 2024. Not only does WSO2 expect to open an office in Madrid, it will also expand its footprint across Europe, India and North America. The firm may also look to open up in Africa where it has a strong customer base already.
Expansion costs money, and without funding, I asked Sanjiva how he expected to both grow and increase profit margins simultaneously. Many firms invest in growth at the expense of profitability. He answered, “It’s a combination of things. The reason the margin is not higher right now is that Choreo, our new product, is still not revenue-generating; it was introduced to the market this year. As that starts generating revenue, that’s a little bit of a growth anchor right now, but that will start paying off.”
He also made clear that he would not cut costs. However, he does feel that AI will help increase the productivity of developers. It will mean that the team can do more work with the same number of people.
On looking to the longer term, what is the vision, and has it changed?
Sanjiva answered, “I’m a technologist, fundamentally. We started a company with the technology purpose of saying we want to make development as easy as possible for developers so they can write whatever applications they want. That statement has broadened over time to meet development, deployment, operation, management, and the whole cycle of taking code from the developer’s fingertips to the customer’s fingertips.
Barriers and Bridges
To achieve its vision, WSO2, like many other organisations, has faced immense disruption over the last few years. The pandemic, the war in Ukraine, inflation and other uncertainties have led to hesitation for many organisations. However, as a cash-positive organisation with no need to raise money, WSO2 is now in a strong position to continue its growth.
Helping them with that is a clear and strong technology roadmap. Key to this is AI, though Sanjiva gave a refreshingly honest view about the impact or, rather, the potential impact it will have. As he pointed out. “We don’t know exactly what rate AI is evolving at. What kind of new AI tech will evolve in the next six months or a year. It’s anybody’s guess, for the most part.
To move forward, Sanjiva has two clear priorities: Firstly, investing in building the brand with a focus on North America and the UK. Secondly, he expects to see Choreo take off and earn the promised revenue.
Choreo already has 15 paying customers and another 30-40 in the proof of concept or evaluation stage. He believes that by the end of 2024, they will have a few hundred customers. WSO2 will have fierce competition around this, but Sanjiva believes in the strategy, as it is these revenues that will fuel growth; it will be interesting to see if the growth ambitions are met in 2024.
The book question
As with all interviews I asked Sanjiva about the most recent book he read. Like several others, he has just finished reading Sapiens (by Dr. Yuval Noah Harari – Amazon Aus, UK, US). He has now started reading the follow-up, Homo Deus (Amazon Aus, UK, US).
What was his takeout from it for business?
“The power of the narrative. Whether it’s running a country or running a business, the Sapiens book was all about evolution, the shape of the world, the role of religion, and the role of money is part of the narrative.”
Narrative will be important for building the brand in North America, it will be interesting to see what the brand marketing team create.