On Monday, Adobe announced its $1.68 billion acquisition of Magento. By adding eCommerce capabilities, Adobe is better able to compete with SAP Hybris, Salesforce, and Oracle. Why Magento? A number of commerce-centric offerings exist on the market — but none of them are like Magento. Magento has not only demonstrated growth, but it also boasts a vibrant community of developers and customers and is one of the most bullish on innovative areas like support for progressive web applications (PWAs). Most importantly, Magento released Magento 2.2 late last year, in which it made a concerted effort to embrace B2B with native platform capabilities. Adobe is positioned well to benefit from Magento’s newfound credibility in the B2B world, where Adobe has been lacking.
Magento is more than just commerce; over the past three years, it established a broader portfolio of products and delivery and technology partners, including: business intelligence (BI), a lightweight content management system (CMS), order management system (OMS), shipping, and social, in addition to its ISV and services ecosystem. Magento’s digital experience (DX) platform must either merge or hold its own against Adobe in the following areas*:
- Products. With little overlap in the portfolio — Magento’s BI and lightweight CMS infringe on Adobe Analytics and AEM territory only somewhat — the likelihood for a complementary and fruitful relationship is high. However, in the first area of BI and analytics, a common customer ID for a multiproduct platform, Magento’s efforts are almost guaranteed to falter before Adobe’s initiative. In the second area, CMS and web front ends, Magento’s solutions are clearly inferior, but many commerce customers will find AEM overbuilt and too complex for their needs. Where there is little familiarity, such as in logistics and fulfillment capabilities, the foreignness to Adobe’s “experience” mantra may strangle R&D efforts.
- Platform foundations. Magento’s open source PHP heritage — and the 250,000 Magento Community Edition installs — will find itself at risk given that Adobe’s flavor of “open” is typically built behind closed doors and “opened” up to the community (e.g., Apache) at the 11th hour. Conversely, Adobe now has the opportunity to embrace a sizable development community — something it has lacked. Adding some additional friction, Magento’s cloud offering is built via Platform.sh on AWS, thus making Adobe’s in-progress pivot to Azure awkward. With many commerce solutions opting for Azure as their preferred cloud partner, this was likely the detail that raised the most eyebrows prior to the acquisition.
- Technology ecosystem. Magento rebuilt its marketplace, but Adobe also rebuilt its partner program, Exchange. While it shares three tiers, the top two being paid, the fundamentals are different, and the pricing is higher. Now, this is the beginning of the end where competitors are concerned. Adobe’s more than 10 eCommerce partnerships — which it states it will continue to support — will most assuredly be starved of new leads, and future technical support will likely be limited as the strategic focus shifts to Magento. In parallel, Magento’s partnerships with CMS (e.g., Acquia), analytics (Google), marketing automation, and so on will wither on the vine.
What It Means: Adobe Should Take Lessons From Magento, Rather Than The Other Way Around
Adobe created and then saturated the enterprise market for digital marketing capabilities, whereas Magento thrived in the SMB and midmarket and now is steadily marching into the enterprise realm. Adobe’s track record with developers has been touch and go for years as it embraced and later neglected developer tools. Whereas Magento’s open source roots and community developers (especially those not employed by services partners) bring nimbleness and a vitality that Adobe desperately needs. Finally, Adobe’s focus on AI-driven personalization is akin to magic compared to the pragmatic and midmarket commerce flavor of personalization that allows for practical improvements that merchandisers understand (e.g., promotions and product recommendations). In the end, Magento is just the answer Adobe needs to relearn midmarket values.
*Forrester actively evaluated Adobe and Magento head-to-head in The Forrester Wave™: Digital Experience Platforms, Q3 2017.