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Newly Independent Magento Targets the Enterprise

Magento’s annual Imagine conference last week in Las Vegas followed the standard format for today’s software vendor conferences: new product announcements, break-out sessions, executive presentations, and partner awards. Where it diverged from the norm was that it was also a kind of unofficial independence party.

The gathering of partners, customers, employees, and community members was decidedly celebratory: the conference opened at 8:30 AM with some fierce drum-heavy band music, perhaps a statement about how the open source commerce company is once again marching to the beat of its own drummer. The reason? Magento is once again an independent company after several years of operating as part of eBay. And the mood among Magento-ites was that this is overwhelmingly a good thing all around.

The eBay backstory

It seemed like a good idea at the time. eBay acquired Magento in 2011, with the aim of having Magento function as a core of a new open commerce platform that could leverage the global developer community. eBay was seeing a slowdown in its core marketplace business, and believed that being able to offer a combination of commerce and payment solutions (it had also acquired PayPal as well as GSI Commerce) would be key to its future growth. Magento, in turn, would get access to new customers and resources in order to continue its growth and mature as an organization.

However, though Magento did grow over the period, the fit between the two companies never quite worked. As Magento’s current CEO put it, “It was like putting a bushel basket over a candle – it was dimmed within eBay.” Four years later, eBay sold off its entire enterprise unit, of which Magento was a part, to a consortium of private equity investors. That consortium then spun out Magento as an independent company, backed by Permira Funds.

What’s next

So what does the newly independent Magento want users to know? 

  • Since its release in November 2015, Magento 2 has had 228,000 downloads of Magento Community Edition (CE) and Magento Enterprise Edition (EE), over 800 sites live, and 100+ Magento 2 Trained Partners
  • Now available are Magento Enterprise 2.1 and the new Magento Enterprise Cloud Edition, a Platform-as-a-service solution running on AWS
  • The Magento Marketplace, an online store for Magento extensions, has been launched

In other words, Magento 2 has been gaining traction despite the multi-year delay that preceded its availability, the Magento developer community has an expanded resource to tap to enhance its implementations, and the company is serious about investing in products that better serve the needs of enterprises.

Let’s focus on that last point. It’s worth noting here that Magento defines an enterprise as a merchant with over $75 million in gross merchandise volume. This means that Magento sees its key competitors as other vendors who serve that market segment such as Demandware, Intershop, Digital River, and Insite. It thus makes sense that Magento also developed a cloud edition of enterprise: this enables it to be more in line with those vendors.

More importantly, over 90% of Magento’s current users are on the free Community Edition rather than the Enterprise one. Being backed by a private equity firm, Magento will need to show financial growth and fast, and it will need to come from those $75 million-plus firms. That level is also getting into territory of e-commerce platform giants hybris, IBM, and Oracle as well as the many newer players like commercetools, Ally Commerce and Unilog. Not to mention WCM vendors who have commerce capabilities such as EPiServer and the newly acquired and enriched Sitecore. Magento may be among the most widely deployed platforms worldwide thanks to its open-source heritage and the success of CE. But does the company now have the understanding of the complex needs of enterprise customers and the ability to provide the support necessary for those customers over the longer term?

Enter solution partners

This is where Magento solution partners come into play. Solution partners, such as digital agencies, systems integrators, and others, will be absolutely crucial to the growth of Magento going forward. To its credit, partners did feature prominently in Magento’s success stories at Imagine – which is not always the case at these types of vendor events. Yet Magento currently has hundreds of solutions partners within its three main tiers across the globe (Gold, Silver, and Bronze), and will need to have the right incentives and support in place to enable those partners to recommend and implementation the new versions of EE.

As my colleague Alan Pelz-Sharpe noted recently, “service providers … are taking control and leading the sales opportunities out there.” Magento does seem to understand the importance of its partners to its success, but it’s ability to thrive as an independent company – and provide Premira with returns on its investment in the company – will be heavily dependent on how it manages those partner relationships.


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