By Sonja Keerl, President, MACH Alliance
The MACH architecture boom has captured the attention of the investor community. It was only a matter of time.
Case in point: Vendor members of the MACH Alliance, a group of technology companies formed to help drive the principle from a nascent concept to a globally-accepted tech standard, have accumulated over $2.5 billion in funding.
MACH stands for Microservices-based, API-first, Cloud-native SaaS, Headless. MACH architecture represents a modern, composable software strategy defined by working with smaller solutions that seamlessly integrate with one another. These best-of-breed solutions work together and function as a single unit, yet each part is interchangeable. That makes it easy to replace something if a component isn't working or not longer suits the business' needs.
The opposite is monolithic platforms. These legacy solutions are cumbersome, difficult to maintain and don't integrate well with other applications. Developers and administrators know all too well the complexity they represent when it comes to software development, maintenance and the operation of the application. Upgrades cause significant downtime and often put a major strain on resources from a time, cost and resources perspective.
A category boom
MACH Alliance's vendor members have accumulated over $2.5 billion in funding. Those companies bring the estimated valuation of the category to nearly $20 billion. The Alliance has also seen a number of exits: Three so far from M&A and two from IPOs. Vendors are getting up to 30-40x multiples.
Acknowledging the sizzle of the category and the Alliance's push for a better, more modern tech standard, Forrester analyst Joe Cicman said about the group in a July write-up, "They’re the bouncers controlling the velvet rope at the entrance of the Coolest Tech in Town Club. They boldly proclaim to carry the flag of a new order in enterprise experience tech. And the wind is at their backs."
Further, TechCrunch has covered the popularity of the headless commerce category, highlighting the growth of the e-commerce segment throughout the pandemic as a driver of it. Ingrid Lunden noted in her September article, "E-commerce was already growing at a steady pace before 2020, by some estimates representing more than half of all commerce transactions. The COVID-19 pandemic turbo-charged that proportion, with many retailers switching exclusively to internet sales, and consumers stuck at home happy to shop with a click."
An extensive and flexible API-driven approach enables brands to modernize their legacy platforms in a matter of weeks versus months. And as consumers rely more heavily on the digital presence of brands, those who aren't suited to quickly adapt and innovate won't stay afloat. This goes for commerce and other industries, like media and publishing, where the delivery of cross-channel content that provides a rich experience for readers is equally important.
Spending on flexible infrastructure to rise in 2022
A recent Gartner survey of more than 2,000 CIOs found that IT budgets are expected to grow globally at the fastest rate in over ten years with an average growth of 3.6% in overall IT budget for 2022. The report emphasized the importance for enterprises to embrace business composability, defining it as "the mindset, technologies and set of operating capabilities that enable organizations to innovate and adapt quickly to changing business needs."
Gartner also noted that high-composability enterprises expect more significant increases in revenue and IT budget next year compared to their moderate-or low-composability peers. Tech leaders at the former expect their revenue and IT budgets to grow by an average of 7.7% and 4.2%, respectively. That's compared to low-composability enterprises that expect increases of only 3.4% and 3.1%.
The role of composable technology in future proofing a business cannot be understated and is crucial for investors for many reasons. Having a future-proof digital backbone in place to more readily adapt in a challenging and evolving business climate has been a large part of valuations of companies or the value creation programs investors run in portfolio companies. It is also a dividing attribute between businesses that have suffered during the pandemic and those who've succeeded. It's a sign of more likely long-haul success that shows a business is able to make fast decisions to innovate, adapt and scale.
Sonja Keerl is President of MACH Alliance, the independent non-profit organization dedicated to advocating for open, best-of-breed technology ecosystems.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.