Key new capabilities the Adobe Experience Cloud will gain include:
- The ability to deliver digital commerce enablement and order orchestration for both physical and digital goods across a range of industries including consumer packaged goods, retail, wholesale, manufacturing and the public sector
- The particularly active community of 300,000 Magento developers
- Pre-built extensions which include payment, shipping, tax and logistics
A Summary of the Valtech Take
- The acquisition makes sense for two reasons:
- It fills a clear weaknesses in both platforms—together the platforms address the full spectrum of needs for digital business—separately they did not
- Adobe gains access to an active, vibrant open community that may in the long-term be even more important than the short-term impact of a broader platform offering
- There are challenges to the successful integration of the firms. These challenges range from production rationalization to architectural modernization of the combined products, not to mention combining the firms’ very different partner ecosystems
- The acquisition changes the competitive landscape for digital platforms. Vendors serving the small- and medium-size market, such as Shopify, will be happy to see Magento exist to the enterprise-focused Adobe. Head-to-head competitors in the digital platform space, such as Sitecore, will need to adapt quickly to maintain differentiation in a competitive market.
Filling Gaps – The Product Logic of the Acquisition
Ecommerce technology practitioners have long awaited a move by Adobe into the commerce realm. In recent years, the ecosystem of digital platforms has become concentrated around vendors that focus on customer empowerment, personalization, and experiential digital commerce. The era of sole focus digital platforms—Web Content Management or Commerce Management—is long past.
Digital businesses require a spectrum of capabilities to capture the online opportunity. Over the past decade platforms have sprinted to support this entire spectrum:
- Web Content Management (WCM or CMS)
- Customer Experience Management (CX)
- Personalization, Commerce Management
- Product Catalog Management
- Order Management
- Campaign Management
- Marketing Orchestration
- Data Analytics
These capabilities, supported by an underlying cloud-based infrastructure, a set of robust APIs for connectivity, and a wide range of extensions or connectors with third-parties have become core to a competitive digital platform today.
Adobe faced considerable competitive pressure to add commerce capabilities to the Adobe Experience Cloud. It remained the only serious global player in the WCM / Experience Management platform space without a viable competitive commerce offering.
Adobe had been filling this gap through the Adobe Commerce Program—building and servicing commerce solutions via its partners using the Adobe Experience Manager (AEM)—one of Adobe Marketing Cloud’s components. But the fit was always awkward. The AEM platform’s primary role is as an omnichannel platform. It allows for the authoring, management and delivery of digital assets across multiple channels, including web, mobile, email, print, and social communities. In that role, it does a great job. As a structure for supporting commerce, it has always felt like a temporary fix.
Magento faced the opposite situation. Magento has become a global commerce platform leader, but had severely limited capability to support web content management, customer experience and optimization. Since its departure from eBay three years ago, the company has made significant progress in re-inventing itself. But the focus of this re-invention was global scale, not the addition of non-commerce capabilities. For example, the new architecture of v.2x of the platform has proven itself capable of scaling to support global retailer business volumes. The Magento team’s focus on the enterprise market and their emphasis on the cloud version of the platform, combined with a series of acquisitions added to their momentum in the commerce space. The new offerings in Order Management and Support for B2B complexities entrenched their position as an e-commerce leader. But none of these activities closed the gap with the broader set of capabilities required for digital transformation, and this was becoming particularly apparent as firms shifted to content plus commerce business models or sought to orchestrate engagement with clients throughout the customer journey.
Accelerating Adobe’s Open Platform Opportunity
In addition to filling strategic gaps, the acquisition makes sense given the firms’ shared commitment to commitment to open platforms and diverse creative communities
- Adobe has long been involved with the Apache Software Foundation—it recently launched the Adobe Cloud Platform and relies on some of the industry’s best open source software projects including MongoDB, Apache Kafka, and CentOS other.
- The Magento platform has always been developed by thousands of developers. The Magento community has collectively focused on improving and expanding its core capabilities and worked on improving its performance and scale.
Magento clearly fills a clear gap in the Adobe Experience Cloud offering, but the larger long-term effect of the acquisition may be the addition of the Magento ecosystem. It presents Adobe with a very significant and very real opportunity to differentiate from competitors, particularly as flexible, innovative support of customer experiences becomes the key criteria for online success.
For all the potential of the acquisition, make no mistake: this will be a complex integration. The firms face key technical, operational and strategic integration challenges including:
- Dealing with Magento Community Edition. The Magento Community Edition (CE) of the platform has been a major source of innovation for Magento over the years. But as Magento shifted to a focus on the enterprise, the relationship with the Community became tendentious; in fact, Magento sales reps internally considered the CE platform to be a competitive product. How will Adobe navigate this tension, given their play is even more clearly in the enterprise segment than Magento? How will they do this and still take advantage of the creativity of the open community? Or can they?
- Rationalizing the product offering. How will Adobe treat the Magento capabilities that make little sense in the new structure? Magento’s recent acquisition of BlueFoot CMS (now rebranded as Magento Page Builder) is a case in point. Will Adobe maintain it as part of the Magento Community Platform version? Or quietly eliminate it to prevent market confusion?
- The headless architecture opportunity. Magento has recently taken initial steps towards embracing a Microservices-based or “headless” architecture, a trend in digital platform architecture that is quickly gaining momentum. Adobe will almost certainly want to accelerate this shift. The Magento platform will need to be integrated with the rest of the Adobe Marketing Cloud products as well as support truly global top-notch customers who are likely to build 100% custom experiential unified solutions. The headless opportunity is front and center in this acquisition—how well will the shift be executed?
- Machine learning, AI and Self-Optimizing Recommenders. These are the battle ground of the near future for digital firms. Magento has fallen behind in these areas. Its numerous integrations with third-party personalization systems and services do little to address this gap—the RJMetrics acquisition notwithstanding. Can Adobe bring its considerable capabilities in applied machine learning to bear on Magento and close this gap? Or will the blocking and tackling of platform integration push this further down the road? The answer will determine the mid-term relevance of the combined platform.
- Merging Solution Partner Ecosystems. This sometimes proves more difficult than integrating the technology itself. Both companies rely heavily on their solution partners. Integrating the two partnership programs and enabling the partner ecosystem to sell and implement the combine offering will take time and effort, particularly given the different profiles of their current solution partner base. To give a sense of the scale of the challenge, today there is zero overlap between Magento Global Elite partners and Adobe Global Alliance partners. We anticipate that firms like Valtech—who have implementation experience with both partners—will rapidly move to deepen partnership relationships with Adobe.
Impact on the Competitive Environment
Assuming Adobe can work through these challenges, the merger has the potential to significantly upend the digital platform competitive space. Once the sound and fury of the acquisition calms, we expect:
- Many small and medium size Magento clients will no longer be candidates for the combined offering. Expect players like Shopify and BigCommerce to aggressively step in and fill the gap;
- Competitors such as Sitecore have played on Magento’s lack of competitive WCM and personalization capabilities as one road to differentiation. The acquisition removes this point of differentiation. Expect Sitecore to speak to the benefits of a fully integrated content plus commerce management solution, and present the Adobe Experience Cloud as a “Frankenstein” of acquired parts. The jury is out on whether prospective clients will buy this take.
Both companies will continue to operate independently until Q3 of this year. When they do join forces and assuming they can address the challenges we’ve identified, they will be a potent new tandem competing head-to-head with the best-of-breed digital platform vendors for global business.
At Valtech, we share Adobe’s vision for experience-driven commerce. People buy experiences, not products. And much like content and data, commerce has become integral to the customer experience. Consumers and businesses now expect almost every interaction to be shoppable—whether on the web, mobile, social, or in-store. This is one of the key aspects of the future of commerce. We are proud of our history partnering with both Adobe and Magento, supporting clients who are part of both ecosystems, and look forward to exploring the much stronger new offering.