Adobe announced that it will acquire the popular eCommerce software vendor Magento. What does this mean?
- For Magento: this deal ends the "pass the parcel" game it found itself playing in recent years
- For Adobe: this represents a continuation of their M&A strategy to round out their content and marketing platforms
- For Enterprise Customers: nothing much changes, at least in the near term
Let's dive right in.
Adobe will buy Magento from private equity player Permira Funds. Permira itself acquired Magento from EBay. EBay itself was an acquirer of Magento. Ownership change was not the only constant for Magento. A Herculean platform overhaul from Magento 1.0 to Magento 2.0 was also underway. Overall, lots of moving parts.
Don't expect too much change for customers in the near term
Any acquisition will involve a degree of transition and more change, but in my view Adobe has a reasonable track record of absorbing acquired companies, though integration is always slower than what the vendor's marketing messages portray. On the plus side, Adobe tends to retain key talent of acquired companies — an important consideration for you as an enterprise customer. Magento may have lost momentum in the recent years, but may find stability now.
RSG currently evaluates Adobe products in three digital marketing streams:
- AEM Sites in Web Content & Experience Management
- AEM Assets in Digital Asset Management
- Adobe Marketing Cloud in Marketing Automation & Campaign/Lead Management
Each one of these products/suites came to Adobe via an acquisition and has followed a familar trajectory of gradual integration. I expect a similar arc for Commerce software / Magento. However, unlike other Adobe acquisitions, Magento has open source / community software editions and a large developer / third-party ecosystem (both of which are arguably the USP of Magento). It remains unclear how a commercial software vendor like Adobe will cultivate the community and whether the ecosystem in turn will embrace Adobe.
Adobe adds Commerce capabilities but will jostle with IBM, Oracle, Salesforce, and several others
There are hundreds of vendors in each of the three interconnected software segments - WCM, Marketing Automation, and eCommerce. Below I show only the largest such vendors, and those targeting large enterprise customers. Just a glance at this matrix will make it apparent why Adobe is acquiring Magento: to bring eCommerce capabilities (thus far only offered via partners — more on that below) under its own umbrella now.
(There are several other nuggets and insights in this chart but we will discuss them another day)
Figure 1: RSG Matrix of Vendor Offerings for WCM, Commerce and Marketing Automation (prior to Adobe acquisition of Magento)
Adobe has new "frenemies" now
While many Ecommerce software suites provide content management functionality, customers often opt for a best-of-breed strategy and choose WCM and Commerce from different vendors. As you can see from the below picture, Adobe AEM Sites had connectors to several commerce tools such as SAP, IBM, and Salesforce Demandware. Will these partners become "frenemies" now that Adobe will have its own horse in the race? How will the partners react to this new competitive dynamic? I don't expect any immediate changes but customers would be wise to keep an eye on the roadmaps of their vendors.
Figure 2: Adobe AEM Sites eCommerce Connectors. Image Source: Adobe
Private Equity owners only provide temporary housing to vendors
In several enterprise software sectors (e.g. marketing automation) we see increased acquisition activity by private equity players. As I noted in one such instance, this has implications for you as a customer, and has to be carefully considered in the vendor-risks section of your software procurement projects. As we see in the case of Magento here, private equity ownership can frequently constitute a temporary phase. For such PE-owned vendors you can expect significant changes down the road in a few years and it may not always prove to be a happy ending.
The Commerce space is "happening" again.
I'm seeing a lot of re-platforming projects in this segment, as customers want to modernize their legacy commerce platforms to cater to omnichannel customer journeys, deliver best-in-class user experiences, and leverage artificial intelligence and machine learning techniques for personalization and better customer engagement.
In the last few years, SAP acquired Hybris, Salesforce acquired Demandware (and more recently, B2B Commerce vendor CloudCraze). Beyond acquisitions, vendors are trying to update their products for today's omnichannel requirements. For instance, IBM recently rebuilt the monolithic IBM Commerce Server to support microservices and container architectures.
The components that I've explored in this post — commerce, content, and marketing — pertain to the front-end of the user experience. A similar flurry of activity is happening across the full-stack of commerce technology such as back-end inventory management, order management, logistics and fulfillment, customer service, and support. Watch this space for announcements about our new vendor evaluations research on Omnichannel Commerce Technology as you navigate the changing landscape.