Yesterday the digital experience world and the Drupal community received the long awaited answer to the question: What’s going to happen with Acquia? when it was announced, first on Bloomberg that Vista Equity Partners would be buying a majority stake in Acquia which it values at $1B.
Many were caught off guard by the timing, but an event like this had been expected for a long time. After receiving nine rounds of venture funding totaling $173.5M, it was time. As the leader and largest company in the Drupal space, Acquia has a center of gravity that leaves many asking a new question: What Now for Drupal?
What Are the Angles?
Before I attempt to answer what I think this means for Drupal and the Drupal community, I think it is worthwhile to at least speculate on the strategy Acquia plans to pursue as a part of Vista. It seems that everyone I have heard from both offline and online since the announcement yesterday are speculating on the Vista angle (i.e. why did they want Acquia?). As TechCrunch led with “Vista Equity Partners...likes to purchase undervalued tech companies and turn them around for a hefty profit…” Well that’s pretty much what a PE firm does. And to me less interesting than asking: What does Acquia want from Vista?
What I believe Acquia wanted to get out of this is a heavy weight partner with capital and connections that could help develop Acquia into a more formidable competitor to Adobe, Sitecore and other digital experience platforms (“DXP”). It was just last week that Salesforce Ventures made a very sizeable $300M investment in Automattic, the parent company of WordPress. Things are heating up with all of the top digital experience platforms and no one is going to survive, let alone stay in the front of the pack, without some serious capital behind them.
I believe Acquia plans to use Vista’s investment and resources to continue making targeted acquisitions and investments to become a more robust and powerful digital experience platform. I would expect them to grow their suite of products, invest even more heavily in sales and marketing to increase revenue and grow its installed base of customers.
Vista will then have a more valuable asset from which to pursue either an IPO or a strategic acquisition. It is possible this will follow the pattern of Marketo, which Vista bought and then sold to Adobe for a $3B profit or Ping, which they recently took public in an IPO.
So there are mutual interests being met and a fair valuation that gets the necessary attention - so both parties win. I also think customers win from increased product development, competition, and a more robust ecosystem.
What Does This Mean For Drupal?
I think this is the best of all possible scenarios for both Drupal (the product) and the Drupal community. While many will bemoan the intrusion of a large private equity firm into the sacred space of an open source community, change was inevitable and it comes with predictable tradeoffs that have to be measured in the context of a new reality for the space. The community needs the indirect investment that this deal provides and it far outweighs the alternatives. If you assume that there were only a few possible scenarios for Acquia that were going to play out sooner or later, they would be:
Organic growth / status quo - In my opinion, the worst scenario due to the dynamics of the market converging. Without a huge infusion of capital like the Vista deal into Acquia, Drupal simply wouldn’t be able to compete fast enough to stay in the top DXP category against Adobe, Sitecore, Salesforce and WordPress.
IPO - As a liquidation event for VC investors, this could be perhaps the most lucrative, but the public markets are fickle and I believe that would be very hard on a large open source community and product like Drupal due to the dynamics of control for a public company. This may yet come to pass as the end game for Vista, but I think it is good it was not the immediate play.
Strategic Acquisition - Salesforce, Amazon, Google, IBM and others of this size would be likely acquirers. Again, this may yet come to pass, but it would not have been an ideal immediate short term play for Drupal because of the weight of influence it would add to the community and open source dynamic.
PE - Obviously, what did happen. This deal brings the financial strength and strategic opportunities without the messiness of the public markets or a new giant controlling the ecosystem.
As for the direct benefits to the Drupal project, I take Dries at his word in the personal statement he made on his blog that this strategy will allow Acquia to provide even more for Drupal and the community including:
Sponsor more Drupal and Mautic community events and meetups.
Increase the amount of Open Source code [sic] contributed.
Fund initiatives to improve diversity in Drupal and Mautic; to enable people from underrepresented groups to contribute, attend community events, and more.
Those are all things that directly benefit the community and make open source Drupal better in addition to the opportunities that the deal affords Acquia to better compete against its rivals.
How Things Line Up From Here…
Consolidation and funding in the digital experience platform (“DXP”) space are going to make for a wild ride as the top players continue to unveil pieces of their strategy.
Adobe - With Magento and Marketo neatly tucked up, Adobe remains the most competitive player both in terms of market share and the comprehensiveness of the offering, though cost and proprietary lock-in into a single homogenous platform are continued weaknesses.
Acquia / Drupal - Recent acquisitions of platform components like Mautic and Cohesion are likely to continue or increase after the Vista deal in an effort to bring an open and more heterogeneous alternative to bear against the others.
Sitecore - The recent acquisition of a top service provider, Hedgehog followed by the subsequent announcement that Sitecore was laying off 7% of its workforce can’t be interpreted as strong signs of health, but the enterprise market is full of Microsoft ecosystems that will be partial to Sitecore’s underlying technology.
Automattic / WordPress - I have a less insight into the WordPress space than I do Drupal, but the SalesForce Ventures investment doesn’t feel like an attempt to gain a CMS for its own offering (sidenote: Salesforce does have a “CMS” and its Ventures has invested in other CMS’s like Contentful). Founder Matt Mullenwig told TechCrunch that Automattic doesn’t want to change course. With the new influx of cash, there won’t be any big departure from the current lineup of products and services. “The roadmap is the same. I just think we might be able to do it in five years instead of 10,” Their recent acquisition of Tumblr is part of a strategy I don’t fully understand, but seems to be a continued volume market move into the larger media space and less about competing with the other platform providers. However, $300M could go a long way in tooling the platform for lots of purposes.
I also think there is a lot more to watch on the related martech front surrounding customer data. In April, Salesforce and Adobe announced (in the same week) that they were acquiring competing Customer Data Platform (CDP) products. So this is about the whole digital experience stack; where we are likely going to see more acquisitions and consolidation is beyond the CMS.
What Does This Mean For our Clients?
Despite the race to create the killer platform, most of our clients have consciously, or organically, adopted heterogenous digital experience platforms. This means they rely on many different components to “weave” together solutions that meets their unique requirements. As Forrester explains, DX is both a platform and a strategy and despite the influence of these major software and cloud players, a “digital experience” needs to be created - that includes strategy, customer research, UX, design, content, brand and the integration of custom and legacy software, and data sources in addition to purchased software. Still, we believe our customers do need to be aware of the changing dynamics in the market and in particular how consolidation will affect their platform investments.
What Does This Mean For Phase2?
At Phase2, this news comes with much interest. We were one of the very first Acquia partners named after the company was founded in 2008. Over the last 10+ years, we have shared, and continue to share, numerous clients. We are also prolific contributors and implementers in the Drupal space who have been a part of some of the biggest and most impactful Drupal moments over the last ten years. We ourselves, once invested heavily in creating many products that extended and enhanced the capabilities of Drupal because we believe it is a powerful platform for creating digital experiences.
We will continue to monitor the trends and prepare and enable ourselves to create digital experiences that advance our clients goals and we fully expect Drupal will remain a key component of building those experiences well into the future.