Sramana Mitra: During this period when you had a lot of users and you didn’t have the model figured out, what experiments did you run to get to the heart of that issue—because the whole business is predicated upon that?
Ross Mason: No one has ever asked me that question and it’s a great question. I like it because we did have to experiment. We might be doing somewhere in the region of $4 million in revenue. It shows promise but we weren’t showing growth. Then the financial market crash got everyone spooked. Some of the analysts were saying, “The model was potentially going to harm our business because people were buying us but doing big architectures like SOA.” We really had to play around with it. What we did was started looking, very early on, at application ecosystems and what was changing there.
Even in 2007, we tried to do Mule On Demand. Salesforce is becoming very interesting, not just as a CRM, but as a way of delivering applications. We started toying around with the idea and that started to shape other things such as the way we would deliver connectors for applications within the cloud. Between the years 2009 to 2010 was when we realized that what we should be doing was to harness the changes that the cloud was bringing to market. If you remember back then, there were naysayers who were saying that enterprises wouldn’t go to cloud. It was a fad. We decided to hang our hand on it and really try to understand how was cloud going to be adopted by enterprises. What problems were they going to need to solve and then run ahead of those problems.
Sramana Mitra: You came to the conclusion that connectors to all these different cloud connectors was going to be the key integration issue of the cloud?
Ross Mason: That was the first thing we did. We started looking at connectors and the APIs. Then, we also realized that if your applications are going to be in the cloud, you actually want to move your integration to the cloud as well because there’s no point of integrating between WorkDay and Salesforce by running something on-premise. We built Cloud Hub, which is our integration platform as a service offering. It’s done very well. It’s widely accepted as the market leader in the space. The reason we’ve done well though is because we saw it early. We were searching around for that business model that you were describing. That was part of the experimentation.
Sramana Mitra: This was not open source. This was premium software, right?
Ross Mason: That’s right. The cloud platform itself is a service. You don’t actually download any source code. We did build graphical tooling which we didn’t have previously. That was open source. We started to play around with the open source premium model trying out which bits need to be open source and which can be closed source. What do people respond to? We did a lot of testing around how we released our software, how we packaged it, mixing commercial open source and cloud-based services. That’s how we’ve shaped our products to how it is today.
Sramana Mitra: What were average deal sizes where you were selling commercial?
Ross Mason: In the early days, we didn’t talk much about commercial. We were subscription-based, by the way. That was another thing that was a bit different because most people in the enterprise space were used to buying perpetual licenses. They had issues with capitalization of assets. It was a challenge. SaaS, in fact, gave our business model some validity. The average selling price back then was small—$25,000.
Sramana Mitra: $25,000 a year?
Ross Mason: Yes. We were doing that run rate and then we did larger deals, but we couldn’t forecast on them. Also, we really didn’t have the diligence. We were still a fairly small company back in 2009. What happened in 2010 is we got the cloud platform going and we also figured out a pretty good go-to market model for the Mule platform itself. We started to build a sales engine and diligence around how we marketed and sold.
You have to sell the right way. You have to sell through architecture and through the outcome that the customer is looking for. We started to build some diligence around the way we spoke about ourselves, the way we aligned marketing and sales, and the way we delivered services.
Sramana Mitra: Your sales model was mostly telesales?
Ross Mason: Yes, inside sales. Certainly, up until 2010, we did most of our deals over the phone.
Sramana Mitra: What percentage of that was coming as inbound—people looking for premium features—from your install base of 100,000 customers?
Ross Mason: All of it.
Sramana Mitra: Excellent.
Ross Mason: Even as late as 2013, a large majority of our demand was inbound. It’s pretty interesting to get to this size with an inbound demand model.
Sramana Mitra: That is the beauty of the commercial open source model. If you can execute that right, then that’s the way it’s supposed to evolve. As you said earlier, very few companies get it right.
Ross Mason: Yes, exactly.
Sramana Mitra: What was the market telling you? Was there any vertical that was particularly strong?
Ross Mason: The market signals that we actually responded to were the big macro trends that were impacting all of our customers and prospects. First, cloud and SaaS completely changed the IT consumption model for applications. Then, right on the heels of that, mobile. Mobile, in the last two years in particular, has had a profound impact on the way IT thinks about their roles inside the business. That trend in itself has really changed the way people think about how they unlock the value of their organization and deliver it to their audiences.
Of course, it’s more than that but that’s been one clear market trend that we’ve attached to. Essentially, our value in these organizations is we help them unlock and realize the value of the assets they own by giving them ways to deliver those assets to as many users as possible through APIs and new applications that are only possible when you unlock data.
Sramana Mitra: You’re essentially able to mash up applications from various vendors and sources and merge data sources to come up with new value.
Ross Mason: Yes, and we do it in a way that scales with the enterprise. I think that’s the key thing here because you can always write things doing custom point-to-point coding, but that disables almost every organization from driving innovation because they spend so long trying to pick apart the tightly coupled systems. What we do is we enable them to decouple everything and make every data source and service fungible and re-composable.