Having been in mobile software since 1991, I enjoy watching and tracking the companies that drive innovation in our space. One pattern stands out: the rules of gravity eventually prevail; you either reach escape velocity or fall back to earth.
With this in mind, Xamarin devised a brilliant strategy and executed it to a remarkable exit. On the surface some say that this was inevitable given Microsoft’s vested interest, but their success goes deeper than that. They navigated the complex market for mobile application development platforms (MADPs) with sound strategy and discipline. Let’s take a closer look.
Briefly, Xamarin enables C# developers to cross-compile their native applications for iOS, Android and Windows. The ability to share code across devices while enabling a native user experience has proven to be an exceptionally powerful value proposition, as evidenced by their rapid growth to over 15,000 customers since their founding in 2011.
After raising a total of $85 million in funding, Microsoft is reportedly paying $400-500 million for Xamarin. Their most recent $54 million round reportedly valued the company at $278 million. All rounds apparently were up rounds, so everyone should have made money: founders, employees and investors.
I believe that the “secret” to Xamarin’s success was that they stuck to tried and true fundamentals of strategy: they addressed a compelling market need, delivered and sustained a valuable competitive advantage, and went to market with a sound business model that they executed extremely well.
Basic, almost too simple, right? Then why do many in the MADP space struggle where only a few others have succeeded? We know this is hard, but why?
First, let’s look at Xamarin’s strategic positioning:
Compelling market need: With such a huge market demand for mobile applications, most MADPs broadly address a need for simple and cost-effective mobile application development. Xamarin chose to focus on one well-defined segment of this market: the millions of C# developers who need to develop native cross-platform mobile applications.
Competitive advantage: Xamarin’s differentiation centered on making it possible to tailor the user experience for the device while sharing most of the code across platforms, unlike their HTML5/web competitors who offer lowest-common-denominator user experiences. Xamarin further strengthened their edge by securing a strategic partnership with Microsoft, gaining the inside track to the entire Microsoft infrastructure, applications, tools and ecosystem.
Business model: Focusing strictly on developers as their customer, Xamarin chose a pricing model appropriate and common for developers: they license the platform and support for $1,000 to $1,900 per year, per developer, per device and royalty-free for an unlimited number of applications and end users. They also built a large ecosystem of partners to complete the solution by avoiding channel conflict and creating a revenue opportunity for partners. Xamarin focused on developer support and training, while technical partners offer add-ons and consulting partners assist in solution development and delivery.
Let’s put this in the context of the broader MADP market landscape. Every MADP makes positioning decisions about whether to:
- target enterprise and/or consumer apps;
- deliver HTML5/web and/or native apps;
- target developers, IT, and in some cases, the business side (each with different needs);
- integrate with a plethora of enterprise / cloud infrastructure and applications or focus on being the best at one or two strategic integrations and owning those partnerships;
- offer mobile device management (can they ever be as advanced and secure as the pure MDM plays?);
- offer application lifecycle management (including test clouds and analytics)
- offer vertical applications (an entirely different market); and
- increase the professional services mix to supplement revenue and control deployment (while competing with partners).
MADPs must also choose a customer segment size (large, medium, small) and a pricing model, which can range from a “developer” pricing of less than $10,000 per year to an enterprise model of over $100,000 per year.
We can peel back more layers of the positioning onion, but even at this high level the complexity and consequences of the choices start to emerge. The analysts rightly advocate that a complete MADP vision covers all these bases and more, but that does not mean that you need to check all the boxes to succeed. You just need to find some real estate that you can own and defend – a complete solution that you can repeat and scale. Unfortunately, many MADPs tried or are trying to do too much, resulting in marginalized value propositions and largely undifferentiated positions in highly contested segments – and unprofitable exits.
Lastly, a few formidable MADPs remain independent so the end of this story is yet to be written. I will also add that even those that failed to reach escape velocity have brought an amazing amount of innovation to the MADP market. This is small consolation to the visionary founders and hardworking employees, but they left their customers and the industry much better off.