Acquia's Story

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Acquia is the commercial entity behind the Drupal open-source project. Dennis Morgan, the CFO, describes it: Acquia is based in Burlington, just outside Boston, and leverages Drupal, the largest open-source platform in the world (bigger, as an open-source project, than Linux), which is a programming system for running websites, a web content management platform. There are around 28,000 people in active development on Drupal (Drupal 7 had a thousand contributors, Drupal 8 had 2,000), while Acquia itself has around 50 engineers. That community drives innovation you cannot get with a 400-person organization that has 50 engineers.

The challenge is building a business model around free software. Acquia enables organizations to run Drupal at industrial strength: a cloud platform to run the website, developer tools, add-on software, professional services such as training, and insights into what is happening on the website. The result: if you are a big organization running a Drupal website, it runs much better on Acquia than anywhere else.

Why do people pay for service and support around free software?

• New York MTA (Superstorm Sandy): Acquia moved the New York Metropolitan Transportation Authority’s website onto Drupal a matter of weeks before Superstorm Sandy hit. When everything went down in New York City, Acquia kept the MTA website running all through the storm and its aftermath, telling people what they needed about their commute.
• Warner Music: the music industry has hundreds of artists, each wanting a custom, cool website reflecting who they are as an artist, while the label needs governance and control over all of them. Using Drupal and hosting on Acquia, Warner Music runs 300 artist websites on one infrastructure while each artist gets creative freedom.
• Other customers include GE.com, for whom being up all the time and getting sub-millisecond response times is critical.

The flywheel and land-and-expand. 70 percent of Acquia’s prospects have already selected Drupal to build their websites before they arrive. GE became a client because a GE employee who was a Drupal developer built a quick website (the folks at GE said “if I’d called IT it would take two months, let’s do more of that”), but a big company like GE is still reluctant to fully adopt open source without anyone to call, which is where Acquia’s industrial-strength support comes in. The community is the multiplier and the lever: those 28,000 developers constantly innovate the product at a scale Acquia cannot replicate (Microsoft has a few hundred engineers on SharePoint and can never compete with nearly a million people constantly innovating around Drupal), and the levers show up as inbound sales leads (at an AWS partner conference, numerous people came to the Acquia booth saying “I have a client running Drupal, please help us,” which is the best sales lead you can get). Customers usually start with one or two websites, see how well it works, and put more and more on the platform (large pharmaceutical companies have literally thousands of websites), so a couple of sites become everything they are doing, across web, mobile, and social. Government even contributes back its open-source code (WhiteHouse.gov and more run on Drupal), so it is a virtuous circle.

The culture drives the business model. Two of Acquia’s core values: “committed to awesomeness” (because in order to get you to pay for something that is free, what we do has to be awesome) and “give back more” (charity, but also that providing industrial-strength support further spreads Drupal and gets companies like GE to use open source in production).

The numbers. Acquia was named the second-fastest-growing private company in America (in the Deloitte Fast 500, two years running), doing north of $50 million in revenue, having grown at a 250 percent compound annual growth rate over three years, with almost 4,000 customers and over 400 employees. Drupal is used in 238 countries, so international expansion is easy: look for where there is heavy Drupal usage and put people there (Singapore, Sweden, London, Australia), a flywheel business. The SaaS model: 70 percent of each quarter’s bookings are subscriptions (to support, tools, and platform), and about 30 percent are professional services. Acquia is careful about professional services (there are thousands of companies with Drupal expertise, so Acquia acts as the architect, designs and oversees the project, and gives the actual coding to smaller shops in the community, giving business back). The renewal rate is about 85 percent on a contract-by-contract basis for non-project work, but the dollar-based renewal rate is well north of 100 percent, because customers come back and buy more (land and expand: one website becomes 300, add security, add commerce). Growth levers: new geographies, new partners (consultancies bringing more business), new verticals (a commerce solution for Drupal; emerging pharma, healthcare, and financial services), and tuck-in acquisitions to increase the stickiness of subscriptions. On the P&L, Acquia has driven cost of goods sold down (from over 62 percent toward a target of about 25 percent of revenue) and R&D down (from almost 50 percent to below 20 percent, helped by leveraging open-source software), while sales and marketing spend as a percentage of revenue stays roughly the same even as revenue grows 50 percent-plus, which means actual sales and marketing dollars are growing dramatically as they invest in penetrating the enterprise market. As Dennis put it, most business you lose is where you were not in the door because you did not know about the opportunity. (At Salesforce, for many years, the goal was that 25 percent of the company’s employees would be quota-carrying salespeople, not counting sales engineers or support. That is what it takes to drive software businesses.)