Magento: Reaching the Tipping Point?
Magento (formerly known as Varien), the company behind an open source ecommerce platform aptly named Magento, relaunched their Solution Partner Program in April 2009. And in last year’s Open Source 50 report, Magento was listed in the “Best of the Rest” section based on limited information and feedback from solution partners about the partner program. Fast forward to the present, and the company is showing some partner momentum. Magento’s story offers some important lessons for other open source partner programs. Here’s why.
The partner program relaunch coincided with the release of Magento Enterprise Edition – their commercial open source solution. The objective was to partner and work more closely with system integrators, VARs, development firms, and design/creative/advertising agencies with the experience, knowledge, and competency to develop and deliver Magento Enterprise Edition based ecommerce solutions to larger customers. Their Enterprise product allowed Magento to move upstream and become more attractive to larger companies looking to update their online presence but needed a different type of partner with the presence, skills, and reputation to work with those larger customers to be successful. The opportunity for these partners was significant service revenue when implementing Magento not only from customization and integration but also front-end design and ongoing marketing services.
The goal was very simple – create a business opportunity for partners and for Magento to make money and invest in those partners who were driving revenue to ensure successful projects with customers.
At the end of 2009, Magento had over 120 Solution Partners around the world with over half of those being new relationships since May 2009. In the US, where the partner channel was less developed, they saw the greatest growth with over 80% of the partners in the US being new. More importantly, over 70 partners committed to including Magento’s commercial, Enterprise Edition product, in new ecommerce projects, which resulted in a significant new revenue stream for Magento. Over 80% of their top partners were successful selling Enterprise Edition based projects to their customers which was quite an accomplishment given that the product was only launched in May. Better yet, the implementation services that partners provide has steadily increased to over $100k with many projects now over $250k encouraging many partners to invest in dedicated Magento practices.
While there are many factors that helped drive this type of success, there are a few key take-aways that apply more broadly to other open source companies.
1. Commercial Open Source – at the core is a well architected product that can scale and be extended. While a free community product encourages rapid adoption and use, it is difficult to move beyond developers and small businesses. A commercial product with a solid product strategy and direction that provides customers with advanced functionality and a predictable/consistent product roadmap along with professional support to fix problems when they occur is critical to moving upstream and selling to larger customers who have more money to spend. Magento released their Community Edition two years ago and their commercial Enterprise Edition a year later, and have continued to enhance both solutions.
2. Market Demand – providing a solution that people want at a lower TCO is critical but not enough. Active involvement and support of the community along with the use of social media to communicate ongoing advancement and success will drive greater visibility and adoption in the market. This increase in market demand causes adjacent players to rush in to fulfill that demand and create more on their own. In two years, Magento has seen over 1.5 million downloads and 60,000 merchants actively using Magento to drive their online sales.
3. The Big Picture – taking a macro view of this evolving ecosystem and having a strategy that attracts more players to get involved, work together, and make money creates rapid growth and opportunity for everyone. This ecosystem involves customers, developers, implementation partners, and companies offering complimentary products and services who all have a stake in your success. Magento has recently adopted the goal of “enabling the eCommerce ecosystem” demonstrating that they understand that their success is focused on driving the success of the entire community and a willingness to share in the opportunity.
4. Formal Partner Strategy – capitalizing on this evolving ecosystem requires a structured and managed approach to working with a wide range of partners, a commitment to ensuring win-win relationships, and demand initiatives with key influencers in the market. This requires investment and resources but encourages partners to also invest and promote the solution to their customers and prospects creating even greater demand for everyone. Not only has Magento rolled out partner programs for solution, hosting, and industry partners, but they now dedicate sales and technical resources to help partners ramp up to win new business, and a set of specialized service offerings that ensure project success and help partners improve their Magento competency.
There are many other open source success stories but Magento has taken key steps to drive a sustainable open source business model that others could learn from.
Contributing blogger Scott Dahlgren is an independent consultant helping small and mid-size technology companies extract greater value from their partner and channel relationships. And he also runs marathons through the woods of Connecticut. Here are all of Scott’s blog entries. Follow The VAR Guy via RSS; Facebook; Identi.ca; Twitter; and via his Newsletter; Webcasts and Resource Center.