Vista Equity Partners $1 billion acquisition of Acquia this week indicates that the “horizontal integration and acquisitions” in the digital experience/marketing technology software space won’t end anytime soon, leaving buyers with “tough choices” of going best-in-breed or all-in one platform and changing their business operations.
Zach Ettelman, manager of demand generation and revenue marketing for Spire Digital, shared those thoughts with CMSWire on the heels of the DXP/martech space’s latest major private equity investment. Acquia’s $1 billion acquisition pushes private equity investment in the space since 2016 over the $5 billion mark, following similar investments with Sitecore ($1.14B), Episerver ($1.16B) and Marketo ($1.79B).
“The tech giants want to create digital ecosystems where marketers, IT, sales, and C-level teams can have a 360-degree view of prospects and customers, all managed across a suite of tools that integrate seamlessly and work toward creating a singular view of prospect and customer journey data,” said Ettelman, whose company is an Acquia partner. “Hopefully, this leads to more cohesive and seamless experiences for end customers across all the channels they are on and on all the devices they use, but time will only tell which powerhouse can create the best system and build on it for years to come.”
Product, Company Roadmap Uncertainty
But the acquisition also brings to light cautions for marketers and customer experience professionals that use software systems like Acquia's to engage with customers and prospects. For starters, there’s the uncertainty of the product roadmap. Look no further than Vista Equity Partners’ last major acquisition in this space: it bought Marketo for $1.79 billion in 2016, shook up its executive team and two years later sold to Adobe for $4.75 billion, turning a $3 billion profit. Good move financially for the investor, but a lot of change for a technology company — and its users — in a short two years.
What’s ahead for Acquia customers? Anyone’s guess at the moment. Lynne Capozzi, the company’s CMO, said nothing is off the table when CMSWire asked her to comment on Vista’s Marketo playbook and how it relates to Acquia’s road ahead. Customers want to know about the immediate future should know the Vista acquisition is only going to "strengthen" their relationship with Acquia products and related services, according to Capozzi. She told CMSWire they'll still work with their Acquia teams, the Acquia brand name and have continued access to Acquia's "great relationship with Drupal." "None of that from a customer perspective goes away," Capozzi said.
The risk for current and future customers is to make sure Acquia’s roadmap and strategy aligns with their organizational and business goals, according to Irina Guseva, senior director and analyst for web content management and digital experience platforms for Gartner. “There will be increasing complexity,” Guseva said.
Related Article: Vista Equity Partners Acquires DXP Provider Acquia for $1 Billion
'Very Little Innovation' Always a Possibility
Acquia customers and potential customers still need to understand that very little innovation often occurs when a firm is taken over by private investors, in particular from private equity firms, according to Jim Lundy, CEO of Aragon Research. “When Vista bought SumTotal Systems in 2009,” Lundy said, “there was very little money put into engineering and the product was never really updated until after SumTotal was sold. PE firms are very clever in covering up this fact. Customers are the ones who are impacted by this, which is essentially taking money out of the business. They market the story that 'nothing has changed.'”
'Potential Turbulence and Impact' on Drupal
Guseva cautions customers particularly to monitor the impact of the Vista acquisition on the open source Drupal community and the recent Acquia acquisition of open marketing cloud provider Mautic. Acquia Cloud provides a web-hosting to build and manage Drupal-based digital experiences. Dries Buytaert, creator of Drupal, is founder and current chief technology officer at Acquia. “Potential turbulence and impact on the open source Drupal and — as of recently — Mautic communities should also be evaluated,” Guseva said. “The large and vibrant open source community behind Drupal is one of the benefits Acquia has been pitching. The community’s hefty contribution to the Drupal code base and its sustainability is something to think about.”
Drupal Creator: Acquia's Open Source Commitment Not Waning
Buytaert in a blog post about the acquisition noted Acquia’s “deep commitment to Drupal, Mautic and Open Source will be unchanged. In fact, we will continue to increase our current level of investment in Open Source as we grow our business.”
Buytaert said Acquia will:
- Improve the “learnability of Drupal” to help it attract less technical and more diverse people to Drupal.
- Sponsor more Drupal and Mautic community events and meetups.
- Increase the amount of open source code it contributes.
- Fund initiatives to improve diversity in Drupal and Mautic; to enable people from underrepresented groups to contribute, attend community events, and more.
Related Article: Acquia Engage Chatter: DAM-CMS Integrations, Drupal Migrations
Vista's Pre-Existing Drupal Connection a Boost
Vista had a major “in” with Drupal prior to the acquisition, according to Ettelman. Vista's consulting arm has helped dozens of Vista companies get on to Drupal for their digital experience management, Ettelman said, adding most of those companies elected to go with Acquia for their managed hosting services and other digital offerings. He’s work with 10 Vista companies adopting Drupal, Ettelman said. “With this gained Drupal and Acquia momentum, Vista had a firsthand look at Acquia and where the booming tech company stood among the congested DX competitive landscape,” Ettelman said.
“For Vista to invest in a company that has its backbone on open-source software, and is the largest contributor to the Drupal project, means that the investment team working with (Vista CEO) Robert Smith sees an opportunity to clean up Acquia from an operational standpoint, help them in making future acquisitions and get them earning 10x than they currently are," he said.
Acquia's current CEO, Mike Sullivan, was brought in to take the company public, Ettelman noted, “and this move by Vista supports Sullivan's efforts and gets the company's valuation increased significantly in the next three to five years.”
Drupal’s Security Vulnerabilities a Concern?
Drupal is also not immune to security vulnerabilities, according to Lundy. The same, of course, can be said for any cloud or Software-as-a-Service (SaaS) in the world. Nonetheless Lundy said Acquia is built on Drupal which still is a victim of security attacks, adding Wordpress is also subject to the same issues.
“While Acquia offers its own cloud service which wraps the service, this will continue to be an area to watch," Lundy said. Imperva in its State of Web Application Vulnerabilities Report for 2018 found WordPress leads the pack in sheer vulnerabilities numbers, but “Drupal vulnerabilities had a larger effect and were used in mass attacks that targeted hundreds of thousands of sites during 2018.” Drupal also had a security issue early this year.
Related Article: Website Shutdown Averted? WordPress, Drupal Release Security Updates
DXP Blossoming Beyond WCM
In the big picture of the DXP software market, the acquisition of Aquia by Vista Equity accentuates the increasing awareness and importance of the evolving DXP market, according to Guseva. Global organizations of all sizes are realizing the value and "absolute business need of managing digital experience elegantly and efficiently."
Guseva said that means that in the next three to five years buying — or selling — solely a Web Content Management (WCM) system “will make you obsolete.” She cited Acquia as “reinventing itself as a DXP and evolving from a WCM player.”
But that doesn’t mean they don’t have existing gaps in the tech stack: Customer Data Platform (CDP), digital commerce, AI and omni-experience delivery are holes to plug, according to Guseva. “I expect Vista Equity’s checkbook to go toward product investments to make Acquia Cloud Platform more competitive and profitable, in preparation for the next steps of the journey,” Guseva said.
Ettelman contends that with recent acquisitions of Mautic and Cohesion, Acquia is moving to a DX tech stack that includes a drag-and-drop friendly/componentized content management experience, marketing automation, digital asset management, server storage/cloud services, cross-channel personalization and journey orchestration, and ecommerce.
Related Article: What's the Playbook for $Billion-Plus Martech Private Equity Acquisitions?
Who Gets the Next Billion?
The common denominator of three of the big four digital experience/martech acquisitions by private equity firms since 2016 is content management. Episerver, Sitecore and Acquia are all WCM vendors at their core. Marketo is a different animal, having buttered its bread with its B2B marketing automation capabilities that Adobe now sells.
If you combine the four of them, you’re talking digital experience software. Here’s who the two major research firms in the DXP space feel are the most significant providers:
- Forrester: Salesforce, Oracle, Adobe, SAP, Episerver, Sitecore, Acquia, BloomReach, OpenText, Liferay (these were the vendors included in Forrester’s Digital Experience Platform Wave this year)
- Gartner: Microsoft, CoreMedia, SDL, Crownpeak, Kentico Software, Squiz, IBM and all the same ones Forrester included (these were vendors in Gartner Magic Quadrant for Digital Experience Platforms this year).
Some of these providers are not exactly acquisition targets; more like acquirers, if you’re talking Salesforce, Adobe, Oracle, SAP and Microsoft. And take IBM out of this game. They sold off their marketing software in two separate occasions in the past year: Centerbridge Partners announced a definitive agreement in April this year to acquire IBM’s marketing platform and commerce software offerings. IBM in December of 2018 also sold on-premises and single-tenant hosted technologies to HCL for $1.8 billion.
So who’s the next DXP/martech provider to rake in a billion-dollar-plus investment from private equity? HubSpot, not included in the DXP reports from Gartner and Forrester, could be an acquisition candidate with its powerful inbound marketing story. Its valuation as of Thursday, Sept. 26 is at $6.51 billion. “The next stage is who will Vista Equity sell to,” Lundy said. “The big cloud vendors who have invested in CRM: many will need to spend more to invest in marketing. Likely suitors would be Salesforce, Microsoft and Google. Thomas Kurian at Google in particular needs to make some moves.”