I (Philippe hereafter) had the distinct honour, as an old fella of the Magento community, to get a private interview with Magento’s new CEO Mark Lavelle and Steve Yankovich, Chief product officer. A special thanks goes to Ben Marks, who made this exclusive interview possible and tries to be the link between the community and Magento whenever he can.
Firstly, I’d like to thank Mark & Steve for their transparency and the direct answers they gave to my very direct questions. Nothing to hide, no censorship, no double talk, eye to eye, this is probably the most direct conversation with Magento’s leadership to be published in years.
Secondly, it’s refreshing to see real entrepreneurs taking back Magento in their hands. Since Roy’s & Yoav’s departures, and even after the merger with eBay, the company was under the influence of the bureaucracy of the mega corporation and not agile anymore. Moreover, Steve and Mark created their own business and sold them.
On a personal note, if some people can reboot the Magento adventure, I think it could be this duet!
Quick insights on Magento:
- Magento is now equipped with technologies that were developed at eBay and are already ready to go to market: an OMS (Order Management System) and an ROM (Retail Order Management)
- The OMS and ROM will make Magento an omnichannel platform
- B2B is a very important focus now and will be developed
- Permira is not on a short-term agenda and is investing in Magento
- The Community Edition will stay free, open source and will be continuously updated
- Magento 2 is about quality and is more exigent
- Magento will take responsibility for the partners and their jobs, if they are trained & certified
Philippe: First of all, we would like to introduce you to people who don’t know you. Who are you, where do you come from, what was your journey with Magento?
Mark: I came to eBay as an entrepreneur. I started a company called Bill Me Later in 2000 and grew that business from 4 to 400 people. I sold it to eBay, and I did not really think I’d stay with them all that long. But one of the first companies I bought, when I was in corporate development, was Magento.
Philippe: All right so, you were one of the architects!
Mark: Yes, with Roy and Yoav. You can blame me for all of that! [laughs] We saw Magento as a very interesting company, growing very quickly, and we wanted to make sure we were a part of it. And we were successful! I was with PayPal, so we didn’t have much to do with it after we acquired it. It became part of X.commerce.
Philippe: X.commerce, the screw up?
Mark: I guess it’s what we call the “dark days”. Let’s just say it is over, the Fabric has been put away…
And Magento, as big companies often do, did not get enough attention, obviously. Let’s put it kindly, there was neglect, perhaps. But it still thrived, it still grew, thanks I think to the community, to the power of the original software, and to people internally who did a lot of work to keep the versions going and things up to date. But when I got involved, I was looking to leave eBay and they asked me to help out with what was not going well. And I had this bright idea to try to save Magento out of the bag of eBay, and put it into the B2B business, which has more capabilities and focus.
That’s what happens to SaaS or closed companies. They make one or two good versions and then try to keep up with the innovation. It becomes difficult, your clients become upset with you. That was what was happening there and I said “well, Magento needs more prominence, needs more sales support, needs more marketing and has great technology. We need to get started on Magento 2”. So I went to do that and somewhere between there and getting it done Carl Icahn shows up and decides to invest in eBay with the premise of splitting PayPal and eBay apart.
Mark: I was not behind that. I had left PayPal, I had left eBay, and I was helping to reposition Magento, and found myself part of this spinout as a result. Now I find myself running Magento, and I have the distinct honour and pleasure, an obligation I’d say, of taking it to the next level.
Philippe: You now lead a major e-commerce player. What is your mission as a CEO?
Mark: Well, my mission as a CEO is really, quite simply, to allow Magento to achieve its full potential. I mean, we folks who are on board with this company now, have a deep love, passion, and I’d say responsibility for Magento.
It wasn’t ever obvious that we would get this second chance. It comes from perhaps a little manoeuvring, but a lot of good luck, that we are here today as an independent company. And, as it turns out, a very strong independent company. For all the bad things you might rightly say about our period within eBay, we did get stronger. We added a lot of great people, we got busy on Magento 2 and we stayed dedicated to that because we knew that that needed to happen. And it had to have high quality, and it had to be well received, and it needed to be the platform of the future.
So in 2014 and in 2015, the only thing I ever said was “we need to get Magento 2 right”. I know there are problems, I know people want this or that. But at least the platform is there, or we were going to lose them. And here we are, it’s well received, even some of the real hardened people that did not want to like it are liking it. Sure there are learning curves, and sure we’ve got things to do, but there is a fantastic implementation. 120 000 downloads of the open source version, 3 000 downloads of the Enterprise Edition, dozens of sites in beta… It’s selling, in fact it’s the only thing our sales team is selling right now. We are just very excited about having achieved that important milestone.
Philippe: So as a CEO…
Mark: Well that was number one: you must have a great product, nothing else matters. So, get that done. Now, our objective is to be the leading global omnichannel platform in the world, because you don’t want to be in 2016 selling just web stores. The community and the product have to move on, because the clients and the users have moved on.
[Steve, Chief Product Officer, comes in]
Philippe: So, Magento has to be omnichannel, which has not been a strength of the solution so far. Do you have new things coming?
Mark: I think you’ll see at Imagine, when we talk about the brand and who we are, that it is all about commerce. It is all about going to where customers are, and helping merchants do that with softwares. Magento did some things very well and made it successful. What we’ve noticed overtime is that a lot of folks were using Magento as their Order Management System, or even as their CRM system. But as these things got more complex, they started to use third-parties and to do more customization.
One of the pieces of technology we spun out with eBay was a grounds-up, recently built, cloud-based multi-tenant Order Management System that handles complexity very well and allows for complex order taking, complex payment rules, complex inventory management, situations to be handled, managed and tuned continually. It was one of the nice parting gifts we took from eBay. It was built in Barcelona, Spain, it’s already used by seven clients. It just got integrated with Frankfurt Airport, the third largest airport, I think, in Europe, handling extremely complex omnichannel multiple order scenarios and millions of transaction.
Philippe: Yes, that’s a hold-up !
Steve: Point of Sales are really getting commoditized, there’s a lot of people doing it so you can hook in any number of methods on a device for it to be a Point of Sales. The hard part is that in Frankfurt, where there are all these different stores in the airport, they allow you on your phone to buy from multiple vendors in one cart and one checkout, and get all that product together. It also involved Heinemann, the famous duty free company, with over 300 stores.
Philippe: I’m editing a Benchmark of e-commerce solutions, and found during my research that many software vendors companies start to get a revenue from the Points of Sale, by for instance having everyone in the physical store order for tablets.
Mark: You’ll be happy to know that we have a retail order management platform, Steve actually built it. We acquired it out of eBay when we spun out.
Philippe: Again a hold up ?
Mark: Yes! It’s implemented in large stores in the US, like DSW PetSmart. They use it, it has PoS capabilities. Because we believe the same thing, we think those ugly grey boxes and all these wires will go away. The store of the future will be built on the Magento platform, whether it’s virtual or physical, that’s our goal. Payment gets integrated into that, CMSs are integrated into that… I know that a lot of folks are building PoSs, but what they don’t have is a massive global Magento ecosystem of developers who, if we open that platform up, will bring brilliance in service and innovation…
Philippe: And what about B2B?
Mark: We’re the largest B2B digital frontend in the Internet Retailer top 1 000. They did a study where they asked this: “how many self-designated B2B companies are online? What platform are they using?”. Number 1, by far, in terms of number of users, was Magento. From a size perspective, the ones that are using it get 400 million to 800 million dollars a year. So this whole thing that Magento doesn’t scale to size is over, because we have extremely large clients.
Philippe: But B2B needs specific features. Are you ready for that?
Mark: Here’s what we did: we did an extensive market study, went through an extensive competitive studies, and we did first-hand customer research with our developers and partners who were already doing B2B. “If Magento Entreprise had a B2B version of it, what would it have to look like?”. The answers were a dozen features or so. Hybris and Insight checked the boxs, Magento didn’t. But version 2.3 will be a B2B version that does all that. Our partners actually loved it because they used to have to customize it before. Yes, they made money out of it but they wanted to win more. And now with Magento B2B out of the box, it is as good as, if not better than, Insight. Plus it has the extendibility and all the offers of Magento.
Steve: Keep in mind that for now, roughly 30% of our Enterprise customers are B2B. So they may be using just the power of Magento out of the box, they may have extensions they’ve created, to achieve functionalities you don’t necessarily need in B2C
Mark: Like Pfizer Animal Health. They just spun out from Pfizer as a separate company. It’s the largest animal health drug provider in the world, and it uses Magento for their sales agents to go up to a veterinarian and do reorders.
Philippe: Next question… You said in your press release that Magento was free, and that the competition feared that day…
Mark: “Those who loved Magento waited for it, the ones who competed against Magento feared.”
Philippe: Exactly. So what does this independent state means, what degree of freedom did it give you that you didn’t have before?
Mark: Any degree, really. As a bigger company, I didn’t have a say in everything, neither did Steve. Now we make decisions like a start-up. We empower people to do things without asking, tell them “look, you’re not gonna get fired for doing the right thing”. Now we get to more directly invest our capital in focused ways in the areas that we want to go after. And we get to invest in the Magento brand, and to be with our customers more. Every aspect of the business is better.
Steve: There was conflicting agendas inside of eBay Enterprises and eBay overall. All that goes away for us. Plus the large company stuff happens in every big companiy: politics, bureaucracy, you try to do your job but things go slow… it’s gone.
Mark: Most of us C-level staff, we came from the start-up area, we’re like you!
Philippe: But you’re a start-up fuelled by Permira, nothing less! So you have a big fund backing you up, does it change things or are you independent from them? How is it working with them?
Mark: It’s working very well. Keep in mind, we’re a start-up, but a pretty big start-up. We keep that start-up mentality but we have formidable revenues, we have significant financial resources, a huge global workforce, an enterprise-scale company. What’s typical is any company that we compete with has some capital structure to it. And the capital structure has a life to it, right?
Mark: We happen to be at a multi-year private growth cycle, where we are able to not have to report bottom- and top-line, not worry about short-term results. We worry about the long-term value creation, and we do that by doing what’s right for our customers. And so we feel very fortunate that in the next 3 to 5 years, we will have all the running room we need to make Magento great.
Philippe: So my quick take on this is there’s no short term plan, there’s an investment horizon of 5 to 10 years, to push you to grow…
Steve: They let us manage business in the company, they have suggestions, they give us some resources occasionally, it’s very different from private equity firms.
Philippe: Are they investing?
Mark: Yes, they’re investing. We’ve always operated in the last couple of years with financial discipline, we continue to do that, but now we have the ability to do what we need to do.
Philippe: Because they know that you’re profitable, so it’s not a big deal. So now, Magento 2 is a big reboot in Magento’s history, long awaited for. What are the main business channels you want to put together in the ecosystem? It needs to regain vitality, confidence, and now is the most brilliant moment to do it, with the reboot of Magento 2. Is there any plan to it?
Mark: There is a lot of opportunity. We’re changing a lot, we’re keeping a lot the same. Magento 2 will keep the same flexibility, ecosystem-driven, partner-driven type of go to market and innovation that we’ve already had. Really, the core of Magento 2 was about quality, it was about not really tolerating bad implementations of Magento. And that was a business system decision.
We’re going to have partners: if they need to fly the Magento flag, they need to be certified, trained, and able to do the jobs that they signed up for. We need to take more responsibility for that. If you’re gonna write code, that you put into our marketplace and said “this work”, it needs to work, to play nice with other extensions, to be able to be upgraded. We’ve invested a lot and it’s still ahead of us as we put out our new Connect strategy called marketplace to assert for that quality.
The people we put on the field, the partners, the management team, the certification group that we’re putting together to look at the code, the ECG team that we’re expanding, to make sure that we can perform governance and do code reviews… Everything on Magento 2 is about making sure that the end user has quality, scalable, secure time to market, fast time to market.
Philippe: We’ll have to talk about security later on…
Mark: Well let’s talk about security. Magento 2 is a refactored code base so we made sure that all of the upgrades and all the security features are there. We are looking at places where we can provide scale to the Magento movement. For instance, your business: Cloud, computing, has changed dramatically in the last 5 years, and a lot of time we see that that’s a soft point for both performance and security. So, if you are diligent about the code, and you’re diligent about the patches that you put in, that’s one thing, but if you leave the servers exposed or you don’t upgrade, you will leave a lot of problems.
Philippe: You’re taking it around. But last year, we saw 7 major flaws in Magento 1, and 1 this year, which is also a major one. So there is a security issue in Magento, and not a small one. So what is the quality process of Magento 2? Are you going to audit Magento 1? Because there are still a lot of shops at large using it…
Philippe: So a bug bounty program, an expert team looking at it, etc. missed 7 bugs in a row? Really?
Steve: We’ve patched them.
Philippe: You’ve patched all of them, and it’s been done in the proper way. You’ve been a very proactive editor. But 7 flaws?
Mark: Show us the flaws, we’ll fix it. We have a track record of doing that. We’re investing, we’ve been very very focused on Magento 2 from a security standpoint. We’ve also been in focus and dedicated to making sure the Magento 1 deployments are great. We have a global network of folks who are always working on Magento, and when they find something they tell us and we fix it. I think that a lot of this has to do with the fact that also deployments, even when we fix them, don’t get patched.
And so we’re looking at ways to make sure that that goes away, because we do feel that the brand is really harmed when we put patches out and people don’t upgrade them. Certainly we always have to write better code, it’s a complex process and there’s a lot of extension that are involved, but. That’s our job, we don’t do it perfectly, but security is everybody’s issue and there is not one company on the planet that doesn’t have security, even Google or Microsoft. So we try to hold ourselves to a high standard, we are making investments… Out of eBay, Steve had to rebuild his own security team because the security that we had was really a central eBay entity. So we’re hiring our own Magento security folks.
Ben: One of the big changes from 1 to 2 is that there parts of static code tests that are part of the two. They are actually designed to catch things…
Steve: It’s better. It’s frustrating because on almost all points, Magento 2 is superior to previous versions, security included. We don’t have any umbilical attachment to Magento 1. We wish to see everyone migrating as soon as possible to Magento 2, even if we know it will take time. In open source code, the bad guys can look at it and find how to infiltrate it when the environment it sits in is unprotected, and in fact it is unprotected a lot, it’s part of the problem.
Philippe: I go on with one last question. Is is the CE version still going to exist on the long term?
Mark: The biggest decision we made, and this team made it, was to open source Magento 2. That was tens of millions of dollars of development we gave away. So if there’s anybody questioning the commitment to open source in the community, I’ll point them to that donation. You may still prefer other parts of Magento 1, but I think the reviewers of Magento is getting, there’s been 120 000 downloads so far in the open source version. So the CE version is there, and it’s there for ever.
Steve: but we’ll differentiate CE from EE overtime, we’re gonna add B2B functionalities.
Philippe: Thank you for your time!