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Adobe Acquires Magento Commerce Platform, But, What Does That Mean Exactly?

On May 21, 2018, Adobe announced there was a deal to acquire Magento Commerce. For many in the commerce genre, this announcement was not unexpected. There were those who thought Amazon might take a shot at Magento Commerce. Partly because of Amazon’s interest in Nordstroms.

Adobe’s Acquisitions

Adobe has acquired Magento commerce from a European private equity fund, Permira. Permira had obtained Magento Commerce from eBay in 2015. Adobe has some experience in purchasing since about every product Adobe is known for was acquired. In Adobe’s 35-years of existence, it has made over 25 significant acquisitions. The original PostScript was the only format that wasn’t bought.

Roughly 200,000 sites are running Magento, and these mid-sized to small companies are the bulk Magento’s customer base. They are no doubt going to feel the most significant impact from this acquisition. The average AEM transaction involves upfront license costs of about one half million dollars. Implementation costs will run 3 to 4 times that of the license fees.

Open Source

This might seem quite high to many of those who use Magento as they mainly rely on open source alternatives such as Drupal, Joomla and WordPress to manage digital content (FYI: Open source software is free to download). Magenta has amassed a community of 300,000 developers due to its original beginnings being in open source. Magento recently increased its licensing costs and killed off their open source community with the release of Magento 2.0. Adobe to have a fit for their pricing structure will most likely raise the license costs. Which could be a move to recover some the acquisition costs.

Adobe was without commerce experience for its platform, with Magento Commerce as its newest acquisition, Adobe can become competitive against the big boys, Salesforce, Oracle, and SAP. Adobe, along with the large platform companies is trying to take hold of the customer experience market.

Who Gets Hurt?

Magento’s current users could be priced out of the market and leave them to choose a lower cost alternative. Many of Magento’s installed 1.0 users were already suffering from the shock of the cost to upgrade to Magento 2,0. Those who already updated to 2.0 will suffer from the increase in maintenance costs.

Adobe will most likely tempt current Magento users with other products by reducing their (Adobe’s) support to Magento plugins and adaptations to products that compete with in-house offerings from Adobe. It is a risky move that could have Magento’s current customers giving pause to consider other e-commerce choices.

Adobe and Magento have been in a partnership before, but the instances of the two running in an integrated fashion side-by-side are few. Sap hybrid, a Java-based competitor of Magento, is often the choice for Adobe customers for transactional eCommerce.

The Adobe/Magento merge likely to create a ripple effect across the broad software market. Shopify, one of Adobe rivals that have seen its share price take a dip of 5%, as a result of the acquisition announcement (while still remaining up 40% for the year). Some analysts may have second thoughts because the Adobe/Magento marriage may slow Shopify’s up-market move.

Magento’s eco-system of integrators, plugin vendors, and agency partners will feel the impact of the acquisition. The vetting and bureaucracy that will most likely come from Adobe could already have some of the partners looking elsewhere.

It’s Risky

Uncertainty in the market is a likely result that could create an opportunity for Adobe’s competitors. After missing out to Salesforce for Demandware and to SAP for hybris, Adobe’s move to acquire Magento is a risk they felt was necessary to round out their offering with eCommerce. Time will tell if Adobe made the right choice to acquire Magento Commerce. A lot is riding on how well the two can integrate and sync regarding operational energy and momentum of sales.

If you’re looking for a new eCommerce solution or want to learn more about Magento, get in touch with us today.

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