Commerce platforms — past, present, and future
Today, I listened to the Jason & Scot Show Episode 270 — Microservice based commerce platforms with Kelly Goetsch, an insightful podcast on a topic that is near and dear to my heart.
The podcast touched on the past and current trends around the [enterprise] Commerce platforms; I believe it is evidence to the thesis that
Business used to drive technology but now technology is driving the business.
Thanks, Kelly for sharing your expertise and Jason & Scot for covering this important topic.
Below are my three key observations:
1. Commoditization: Commerce platform core features are unbundled, commoditized, and available as modular building blocks (think Legos) in a SaaS model. This allows retailers to choose best-of-the-breed components off the cloud and combine them with their brand secret sauce to compose unique shopper experiences i.e., composable commerce. This is the present state, but how we got here is #2 below.
2. Packaged application to components
- The enterprise Commerce platform market was essentially a three-horse race between IBM, Oracle, and SAP hybris roughly till 2015, give or take (and I was fortunate to be riding two of them during their glory years.) These platforms are packaged applications with guard rails and require SIs to customize and implement brand-specific processes. Several large retailers in the Internet Retailer Top 500 list drove billions of dollars in GMV each year. The platforms were successful but their time has come.
- The cloud happened! There is an old saying in the cloud world —
Either you’re born in the cloud or not :)
- Very few software platforms successfully made the transition from on-premise to cloud.
- The cloud revolution was followed by microservices, APIs, headless, and now composable. The platform capabilities got decomposed into API-first, stateless and scalable components following MACH principles which are built bottoms-up by several newer Commerce platforms and component vendors that specialize in one thing really well that is antithetical to the notion of platform as offered by the enterprise vendors.
3. Competing on architecture, not on capabilities
- The newer platform/component vendors are now competing on the underlying architecture vs capability. This is an important shift! In my view, this is the shift of power from CMO to CTO and a driving force behind the above two points.
- Online commerce is roughly a 20-year-old market with most of the features and processes well-defined to be commoditized. The idea of cart, catalog, content, campaigns, payments, returns, and so on are commoditized and are not expected to change. What will change though is how they will surface in the shopper experience and where it will interface with the backend business processes enabling retailers to innovate new experiences rapidly. Naturally, the focus now is on agility and not on functionality.
Now, where this is all going is even more interesting. With major cloud vendors already offering some of the Commerce components, it may not be surprising if they expand to offer full platform capabilities.
In the early days of Commerce, retailers built custom applications, then came enterprise platforms, and now retailers into “composing” custom platforms but using well-defined, off-the-shelf SaaS components. The cycle reminds me of the following quote by T.S. Eliot,
We shall not cease from exploration, and the end of all our exploring will be to arrive where we started and know the place for the first time.