Sep 20, 2023
The largest transformations in the world economy have often been the result of network effects. Throughout human history, remarkable progress has been made by networks: railway networks in the 1800s; telephone networks in the 1900s; computer networks in the 1980s; internet networks in the 1990s; and social networks in the 2000s. Networks are so powerful because every new node within a network increases the value of the entire network since the data and capabilities of that new node are discoverable and consumable by all other nodes in the network (Metcalfe’s Law). A few years ago, we at NEA began investing in a new network: the application network. We expect application networks to transform enterprise software and create a tremendous amount of value for businesses, consumers, and users alike.
Our belief in enterprise software platforms was realized early on with our investments in companies like Salesforce (2002) and Workday (2009). Today, these platforms have grown to billions of dollars in revenue as developers have utilized the core engines of Salesforce and Workday to develop totally new software services and applications. As these platforms expanded, it became clear that we were on the brink of a totally new value creation opportunity by powering the ability to connect applications across platforms.
The key enabler for connecting applications is the modern API. APIs allow applications and machines the ability to communicate through an interface. This means that developers no longer need to learn the inner workings of the underlying IT asset to extract, utilize, and reuse data and services from that asset. These standardized interfaces make it easier to consume data. With more than 18,769 open APIs and even more available privately, the network effect means that each new API can add value to all of the others.
However, the process of connecting anything is difficult. APIs alone are insufficient in creating the building blocks that power the new technology operating model. These building blocks require strong connectivity to the underlying systems and applications. In addition, they need to be orchestrated to compose applications that perform useful business functions. Furthermore, the problem is made exponentially more difficult as software platforms begin to diverge from each other in how they allow applications to run on their engines.
As we blogged in early 2013 when we led our initial investment in MuleSoft, Greg Schott, Ross Mason, and the team at MuleSoft had the only platform in the software industry that was built for the world of diverging application and infrastructure paradigms. At the time, our thesis was that MuleSoft would enable a next generation of enterprise software—unleashing the power of application networks that utilize APIs to connect applications, data, and devices within and between an organization and its external ecosystems. Instead of linking applications through point-to-point connections or isolated architectures, the application network combines the power of APIs with connectivity, orchestration, discoverability, and governance to form a network of self-serve programmable building blocks.
Over the past four years, MuleSoft’s platform has gotten even more robust in terms of ease of use and product functionality. Today, MuleSoft is becoming core to how enterprises around the world conduct business. For example, at Unilever, which delivers more than 400 brands including Lipton, Ben & Jerry’s, Dove, Hellmann’s and more to consumers worldwide, MuleSoft is essential to making sure products make it into the hands of more than 2 billion people who use a Unilever product every day. To power Unilever’s in-store and increasingly online sales, MuleSoft provides a platform that connects Unilever’s applications in the cloud and on-premises together in a network across its brands and ensures its business runs seamlessly and securely.
In recent years, Unilever sought to develop a new set of business and technology capabilities that would support business growth and improved business performance. To accomplish this, IT needed to shift to a new operating model that could deliver projects quickly, without teams duplicating work and creating unmanageable custom code. Partnering with MuleSoft, Unilever developed reusable APIs that underpin core business processes and connect various applications and multiple digital asset management systems. Unilever teams self-serve reusable and composable APIs to access valuable data more easily than before to build directly to consumer applications. Unilever is delivering on the vision of a new IT operating model with MuleSoft’s Anypoint Platform, enabling the entire organization to achieve self-reliance in project delivery. As a result, Unilever is able to unlock superior growth and business value.
As MuleSoft continues to expand and grow, we are seeing new companies that are building different types of application networks. For example, Plaid has taken advantage of the network effect by building a developer platform which enables developers to create applications that interact with bank infrastructure. Plaid's APIs give developers the power to authorize and set up ACH (Automated Clearing House) payments with a consumer's bank account without needing routing and account numbers, while also verifying ownership information to satisfy regulatory requirements and decrease fraud. Their tools also access consumers’ bank and transaction data, and process the data into normalized, machine-readable data across transactions, merchants, categories, and locations. Customers of Plaid are able to deliver a truly unique financial experience.
Another example is Forter. Forter provides instant, guaranteed, approve/decline decisions to ecommerce merchants through an API, removing the burden and uncertainty of online fraud. Forter’s APIs give enterprises and developers the power to focus on customer experience without having to build sophisticated fraud teams and tools. Forter’s team collects transaction data across its global customer base to detect malicious actors in real-time. With Forter’s technology, enterprises see a dramatic improvement in chargeback costs as well as immediate increased revenue.
The way in which organizations achieve success has evolved and is fundamentally different than it was a generation ago. Organizations are no longer defined primarily by the physical assets they own and control. Today, they are defined primarily by how they connect and orchestrate a multitude of physical assets, employees, customers, suppliers, software, infrastructure, and devices. Organizations that adapt to become composable will innovate faster, consequently delivering better customer experiences and building superior products. We believe that MuleSoft was the catalyst of the application network avalanche that will revolutionize and redefine enterprise software—now that’s a network effect.