Leading eCommerce Platforms

Gartner's Magic Quadrant is the global authority of the who's who in technology. 

Contact us for a full copy of the report showing each vendor's areas of strengths and caution. See Gartner's analysis of Magento below. Since last year, Gartner has upgraded Magento from a Challenger to a Leader in eCommerce platforms. 

Magento

Magento is a Leader, based on its increasingly growing and flexible commerce platform that is used in many verticals and by companies of various sizes across many countries. Magento provides two solutions: the open-source Magento Community Edition and an open-core but extended commercial product, Magento Enterprise Edition. In 2016 it released Enterprise Cloud Edition with managed hosting (single-tenant SaaS), with an embedded content delivery network (CDN) that allows clients to serve their store's static files via Amazon Web Services. All upgrades and patches for the Enterprise Cloud Edition are provided by Magento and included in the subscription. This research focuses exclusively on Magento and its Enterprise solutions. Magento Enterprise is typically used by organizations with digital commerce digital sales GMV revenue of under $100 million.

Magento is privately held and owned by Permira, a global investment firm. During the production of this research, Magento received an additional $250 million in funding from Hillhouse, a large Hong Kong-based investor. Magento is headquartered in Campbell, California, U.S., with additional offices in Europe and the U.S.

STRENGTHS

·        Flexibility: With an open-core solution and REST APIs, Magento can be heavily customized (e.g., via in-house development and/or extended via its large and mature extension marketplace). This ecosystem makes Magento appropriate for a wide range of transaction types outside traditional retail or digital sales of physical products. The Magento Marketplace app store holds extensions for many verticals beyond retail.

·        Cost-effectiveness: Magento offers a flexible pricing model based on tiers of digital commerce GMV revenue generated through each customer B2C, B2B or B2B2C site(s). This model, coupled with license costs below those of many competitors, makes Magento a cost-effective option. A majority of its reference customers reported high satisfaction with the overall value proposition; all reported extremely high overall satisfaction with both Magento and its digital commerce platform.

·        Speed and architectural improvements: Since Enterprise v.2.0 (released in November 2015), Magento has made performance and architectural improvements in subsequent versions. These include separating databases for customer and product data, and check-out improvements that enable companies to manage increasing transaction volumes.

Market Overview

The digital commerce platform market continues to grow steadily. Gartner forecasts annual growth of 15% from 2015 through 2020, with all regions expected to reach a double-digit CAGR for the next five years. This annual growth includes revenue from SaaS, licenses and maintenance. Worldwide spending on digital commerce platform software is expected to reach $9.4 billion by 2020, in constant currency. The on-premises deployment model will account for 53% of software revenue.

Based on Gartner's latest forecast, North America accounted for 47% share of digital commerce platforms, Western Europe accounted for 28% and Asia/Pacific for 15% in 2015. All regions are expected to reach a double-digit CAGR through 2020, but Asia/Pacific leads with the highest CAGR, at 18.7%. Drivers, inhibitors and partner ecosystems in each country/region are uniquely different. (Note: The digital commerce platform forecast does not include in-house/custom software and professional services — see "Market Trends: Digital Commerce Platforms in Growth Mode, Worldwide." )

The growing demand for digital commerce is also reflected in Gartner's recent end-user survey (see the Evidence section), in which 80% of respondents said they intended to increase their digital commerce IT budget for 2017. Within seven selected verticals in the U.S., the U.K., Germany, China and India, the retail sector is the most aggressive, with 93% of respondents planning a budget increase. Retail also has the second-highest average budget increase of 22% for 2017, followed by services, wholesale and manufacturing.

In the 2016 Gartner CEO Survey of end users, results indicated that digital sales revenue, digital channels and customer experience are currently high priorities in CEO agenda. This sets the stage for growth in the digital commerce platform market. When asked to choose the top three expected outcomes/impacts of digital for their enterprises, CEOs' top two responses were:

·        To generate more revenue/customer value through superior operations

·        To generate a greater proportion of business through digital channels

There are a couple of market patterns we noticed during the research for this Magic Quadrant that are worth mentioning:

1.     Vertical focus — Instead of addressing a wider market and thus being more likely to reach Leader status, many vendors are focusing on gaining market dominance in one or more vertical niches — for example, B2B distribution, brands or telecommunications. The digital commerce market is not consolidating in the way some previous software markets have; it continues to fragment and face disruption. It bears repeating that niche placement does not imply inferior product quality.

2.     API-based commerce — Although Elastic Path is the only pure commerce API in this Magic Quadrant, several other vendors now provide full API access to their commerce functions, and this is a growing trend.

Inclusion and Exclusion Criteria

This Magic Quadrant evaluates vendors of digital commerce platforms that support B2C, B2B, B2B2C and combination business models across multiple industries, including retail, branded manufacturing, distribution and wholesaling, industrial manufacturing, high technology, telecommunications, publishing and media, and travel and hospitality — regardless of IT delivery model.

Inclusion criteria are used to determine which vendors are covered in a Magic Quadrant. It is important to note that criteria change from year to year, due to innovation and business changes in the market. Vendors' inclusion and positions in any Magic Quadrant may change over time, due to changes in the vendors themselves, the evolution of the industry, and changes to Gartner's inclusion and evaluation criteria.

To be considered for this Magic Quadrant, the vendors and their products or services had to meet the inclusion criteria described below. The vendors with the highest aggregated evaluation scores in the inclusion criteria have been included.

The cutoff date for considering product enhancements, mergers and acquisitions or other potentially noteworthy company activities was 31 December 2016.

Market Presence and Company Viability

Vendors must demonstrate both company viability and market presence, as indicated below:

·        Have a strong or dominant presence within a market sector in a minimum of one geographic region (U.S., Europe, Asia/Pacific, Latin America), and have a viable product or a large presence in two or three geographic regions, based on the number of customers or revenue within each region.

·        Have engaged a minimum of 10 new and nameable customers over the past four quarters, and shown significant year over year (YoY) growth.

·        Show YoY financial improvements in cash flow and total company revenue as well as product revenue or digital commerce GMV revenue of products or services being sold on the platform.

·        Indicate a sufficient number of paying customers to prove product maturity (e.g., has moved from beta to mainstream).

·        Be of interest to Gartner clients — identified by the number of inquiries in which the vendor was on clients' vendor shortlist, plus activity on Gartner's website.

·        Have demonstrated sufficient support for the commerce ecosystem of technology (different application types) and service provider partners (partner name), by having either expanded functionality or a robust partner network of vendor-certified partners for the greater digital commerce ecosystem and the level of the partnership. In the case of external partners, the vendor must have demonstrated the number of partners, type and level of relationship, longevity of the relationship, and the tightness of the relationship.

Product Functionality

Vendors must offer a digital commerce platform that includes the following capabilities:

·        Baseline commerce functionality such as storefront, product catalog, shopping cart and check-out, or corresponding APIs that enable client flexibility and promote customization for the clients' customers, or both (showing a shift to the API economy) for organizations supporting B2C, B2B, B2B2C or any combination.

·        Internationalization and localization, meaning the ability to support multiple languages and currencies natively or by proven integration with an ecosystem partner.

·        Personalization — the ability to personalize the customer's shopping experience based on market or segment requirements natively or by proven integration with an ecosystem partner.

·        Support for an expanded commerce ecosystem natively or by a proven integration with an ecosystem partner, including those identified in "Leverage the Gartner Digital Commerce Technology Ecosystem to Optimize IT Decisions," such as WCM, OM, commerce search, merchandising and analytics.

Product Agility

Vendors must offer a solution that reduces time to market and TCO for clients, as indicated below:

·        A business-facing user interface API or web service availability for customizing clients' customer experiences.

·        Preintegration with back-office applications, giving the ability to easily integrate with back-office applications such as ERP, OM, CRM or warehouse management/logistics applications, and to provide documented and supported APIs or equivalent integration tools.

·        An API/SDK or app development framework approach for multichannel, giving the ability to support multiple mobile device types or operating systems, including mobile phones, tablets, kiosks, digital displays and other store/consumer-owned devices.

Evaluation Criteria

Ability to Execute

Enterprises evaluating digital commerce applications have wide-ranging requirements depending on their industry, business and revenue model, sales strategy, and geographic focus. Breadth of product and service functionality, company viability, market responsiveness, and customer experience are all highly weighted criteria (see Table 1).

It should be noted that no weights changed this year.

Table   1.   Ability   to Execute Evaluation Criteria

Evaluation Criteria

Weighting

Product or Service High

Overall Viability High

Sales Execution/Pricing Medium

Market Responsiveness/Record High

Marketing Execution Medium

Customer Experience High

Operations Medium

Completeness of Vision

Vendors demonstrating an understanding of their customers' evolving needs, incorporating new customer demands into their product strategies, and exhibiting technological innovation in their digital commerce products exhibit Completeness of Vision in this market. Market understanding, offering strategy, vertical/industry strategy, innovation and geographic strategy are all highly weighted criteria (see Table 2).

It should be noted that three weights changed this year in order to better reflect client needs:

·        Business model — Changed from medium to high in order to depict market demand for alternative IT delivery methods such as SaaS and multiple pricing options.

·        Vertical/industry strategy — Changed from high to low in recognition that most clients seek a digital commerce platform for a specific industry versus multiple industries.

·        Geographic strategy — Changed from high to medium in recognition that not all clients seek global solutions.

Table   2.   Completeness   of Vision Evaluation Criteria

Evaluation Criteria

Weighting

Market Understanding High

Marketing Strategy Medium

Sales Strategy Medium

Offering (Product) Strategy High

Business Model High

Vertical/Industry Strategy Low

Innovation High

Geographic Strategy Medium

Quadrant Descriptions

The following sections summarize the general characteristics of vendors in each of the four quadrants. Companies seeking digital commerce platforms are, however, best-served by matching the functionality, industry expertise and cost of solutions offered by vendors to their requirements, irrespective of the quadrant in which the most suitable platform's vendor appears.

Leaders

Leaders demonstrate the ability to:

·        Provide depth and breadth of commerce functionality

·        Deliver commerce capabilities across multiple industries and business models

·        Deliver commerce platforms that can scale up to support large transaction volumes and high levels of digital commerce GMV revenue

·        Provide sales and support services both directly and through an ecosystem of application, services and integration partners

·        Deliver additional application functionality that integrates with their core commerce platform

Leaders also have financial, technical and organizational viability, and they appear consistently on client evaluations of digital commerce vendors. They often set the competitive benchmark against which other vendors compare themselves.

Challengers

Challengers provide commerce functionality that may be narrower in scope than those of Leaders, or that focuses on fewer industries, geographies or business models. These vendors are often highly respected within a narrow range of industries, business models or deployment options. They invest in technology innovation that is central to their targeted markets, but often find it challenging to expand into new industries and regions, and to provide functionality beyond that of their core products. Challengers are often innovators that use their R&D resources, access to investment, profits and market reputation to grow quickly.

Visionaries

Visionaries demonstrate the ability to disrupt established commerce markets through the use of new technologies or pricing strategies, or by focusing on a narrow market segment. Visionaries often win new customers quickly because they have identified an underserved niche in the market, not addressed by Leaders or Challengers. Visionaries often find it challenging to communicate their competitive advantage effectively, and to compete with larger companies that have more resources or a much broader sales, support and partner network. Visionaries are often still funded by venture capital or private equity companies, which provide the capital that enables them to invest in technology and sales resources.

Niche Players

Niche Players address a narrow band of the market, defined by industry, digital commerce GMV revenue, company size, region, technology capability, or a combination of these. Niche Players frequently provide a cost-effective solution and often target smaller or emerging-market opportunities, or smaller end-user companies. Niche Players often:

·        Lack geographical or transactional scale

·        Attract a significantly smaller range of technology, implementation or service partners

·        Lack the financial viability of Leaders and Challengers

Clients should not assume that Niche Players or their products perform poorly or cannot address core technology needs; Niche Players often provide an appealing combination of product functionality and cost that can address specific, core technology requirements effectively. Niche Players have to meet the same inclusion criteria as Leaders, Challengers and Visionaries do.

Rob Duxter

President & CEO Business analyst, strategist & traveler.

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