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Beyond Coconuts and Beaches: The Island Innovating Middleware Technology

WSO2 has raised funds from Intel, fought off many acquisitions, and created its own programming language; most of it was done on the isle of Sri Lanka.

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Once upon a time there was a middleware development company that wanted to be the number one in the industry. It’s a Sri Lankan company –  its headquartered in Sri Lanka, it employs Sri Lankan talent and even has a Sri Lankan cofounder and all that ‘Sri Lankan-ness’ representing it. WSO2 first earned respect of the corporate world when eBay said parts of its transaction processing software used services by WSO2. The company gets extra street credibility for trying to build an IT services company that had little to do with traditional BPO services the region is famous for and for succeeding so much so it has offices in California, London and Sao Paulo.

WSO2 launched in 2005 and the name refers to Web Services Oxygenated. It’s called the, “only 100 percent open source, cloud ready middleware available on the market. Two IBM peers, Sanjiva Weerawarna and Paul Fremantle, and a third undisclosed founder started the company. They had the chops and the passion. Weerawarna was an IBM researcher and an influencer of the Apache Software Foundation. Fremantle was an author of the IBM Web Services Gateway.

Now would be an opportune moment to define middleware. Mitra Innovation says, “[Middleware] enables different types of software to ‘talk’ to each other when they might not necessarily speak the same language. In just the same way that a translator enables a person that speaks French to speak with a person that speaks Russian, middleware performs the same function for software. This is important because in today’s world we’ve become more connected than ever before, and new applications and new software are being developed all the time. Without middleware, each new application would have to be specifically designed to ‘talk’ to each application that it needs to operate alongside. These kinds of bespoke options would be time-consuming and expensive.”

WSO2 has raised approximately $45 million from Intel Capital, Toba Capital, Cisco, Quest Software, and Pacific Systems Control Technology. After 12 years, in 2017, they are “cash flow positive and profitable”.

Over the years, multiple acquisitions have been fought off. One acquisition price was for $127 million dollars; the deal was at an advanced stages when it was called off.

“Few years later we had to fight off an acquisition offer. It was a big fight to not sell the company. I did not want to sell the company, but Intel wanted to sell the company,” said Weerawarna at ABAF 2017 Sri Lanka. Intel was their first investor and had considerable power. “But we managed to do a deal and get the other shareholders. Toba basically bought the Intel shares and Intel left the picture. Cisco is still a shareholder in the company.”

Weerawarna says the funding raised is, “a tiny amount compared to our competitors. We compete with Apigee Corp., MuleSoft, ForgeRock - everybody you can think of who does management of integration.

Apigee had raised about $200 million before they went public. They got $40 million in revenue and were losing $40 million a year.”

It’s not necessarily because WSO2wanted to raise less. It could be that large investment rounds were not an imperative because the company was mostly operating out of Sri Lanka and partly because it was difficult to raise money. “It was hard for people to understand that we could build a company from here [Sri Lanka]”.

Marketing before Sales

Weerawarna says WSO2 has an “unusual” marketing and sales model. And he uses the two terms marketing in that order for a reason.

“A month after we started the company, we started another website. It was content site around the web services space we were operating in. At its peak, it was the number one place we would go to, to find information about that space. That’s how we got customers. People learn about technology from us and became our customers.

Every one of the customers like eBay, Boeing, [even Uber] they all came to us. We didn’t go out and sell to them. They came to our website filled in the form saying, ‘We’d like to come and evaluate you’.”

Inbound sales only, no commissions

“We have an inside only sales format. We don’t have field sales service. We don’t have people who go and cold call and sell stuff to people who are not interested. It’s primarily driven by people saying they want the stuff – and us helping them buy it.

And we do so right here from Sri Lanka. We do a demo if we have to then go through an evaluation process sometimes lasting 6 months depending on how complicated the requirements are and how large the customer is.”

Weerawarna continued, “Also I doubt there are many other software companies that don’t do commission sales. We don’t do commission sales because it would incentivize one part of the company and would misalign other parts of the company…if we had one guy getting commissions and the other people who are also working hard but not getting commissions for ‘making money’ for the company, it’s not going to be good for the wellbeing of the company in general.”

Onward and Forward

This neologist of software languages endeavours to keep innovating enterprise application platforms. 

Their newest offering is Ballerina. This is WSO2’s own programming language and so called because it’s “flexible, powerful and beautiful”.

Weerawarna writes, “Ballerina will end integration as we know it.”

WSO2 got a new CEO in 2017 – Tyler Jewell. Weerawarna stepped down as founder CEO after 12 years to spend more time with tech development and focus on the role of Chief Architect. It was Weerawarna’s decision; he felt the “rocket ship” known as Ballerina will need more potent marketing prowess than he could offer. He also felt it’s time the company establish a stronger US presence and Jewell isn’t a complete stranger to WSO2. He was part of the company board and head of investment at Quest Software when Quest invested in WSO2.

Being from a small island and becoming the number one middleware company in the world are disparate in scale. But it’s a long term opportunity.

“[W]e have the legs and stamina to take on the market in a marathon and beat them.”

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