Magento builds momentum by leveraging the power of open source

“It had, you know, the characteristics of communism that people love so very, very much about it. That is, it’s free.” – Steve Ballmer, CEO of Microsoft, speaking in 2000 about the competitive threat posed by Linux.

magento_logoThe open source software movement has evolved a great deal since Ballmer famously likened Linux to communism. One need not look far to find mainstream examples of open source software implementations. For example, the White House uses open source content management system Drupal. Blogs at the New York Times run on WordPress. And Apache Hadoop is used by the likes of LinkedIn, Facebook, A9.com and Yahoo! (the project’s largest contributor). Open source software is now so fundamental in technology that it touches the lives of most web users on a daily basis.

This reach extends to the realm of online shopping, where an increasing number of eCommerce companies are adopting open source software – software that manages everything from catalogs and multiple websites, to search engine optimization and marketing promotions – to facilitate their operations. One example of a rapidly-growing open source eCommerce platform solution is Magento Commerce, which is developed by L.A.-based Varien.

Magento was built from the ground up by Varien – it is not a derivative work of pre-existing open source projects – and first launched in April 2007. The company incorporated its extensive experience in developing custom systems for clients into the Magento development effort, with the objective of introducing something into market that would meet the demands of eCommerce companies not being met by incumbents like osCommerce. Roy Ruben, President of Varien, declared at the time of launch that Magento provides “the control of a proprietary system without the 6-digit price tag.”

Since launch, the solution has evolved to a considerable degree, offering increased functionality and a richer feature set. Like other instances of enterprise software being made on an open source basis – some in the industry refer to this as commercial open source – Varien has delineated two versions of its software (i.e. the company uses dual-license model). This consists of the Community Edition, made available for free on an Open Source License 3.0 basis, and the Enterprise Edition, which provides paying customers with a commercial license. Pricing for the Enterprise Edition varies but annual licenses start at $8,900. While the different licenses share a common software base, the Enterprise Edition includes some advanced features – for example, strong data encryption and modules for connecting Magento to world-class ERP and CRM systems – which are not included with the Community Edition.

Comparison of Magento Enterprise and Magento Community editions

Comparison of Magento Enterprise and Magento Community editions

The open source model has helped Magento to build a presence in the highly competitive market for eCommerce software. And the company has achieved extraordinary levels of adoption, logging over 1 million downloads of the Community Edition to date.  (This is an incredible feat, given that it was only launched in 2007, and reached 500,000 downloads in January of this year.) Of course, there is a major difference between free downloads and paying customers, and only a fraction of Community Edition users upgrade to a commercial license. Nonetheless, the open source model enables Magento to exert greater influence and access a larger pool of potential customers than a firm of Varien’s size would be able to achieve if it pursued an exclusively proprietary route.

A key challenge of open source is fostering the growth and productivity of a loyal and motivated development community. Varien addresses this with its Magento Community portal, and provides transparent access to the issue roadmap which outlines the future development directions of the software. Further, through Magento Connect, the company provides a marketplace for the exchange of commercial and community extensions of Magento.

At first glance, a curious tension exists within the open source movement between pure open source and commercial open source. Some advocates of pure open source would go so far as to argue that the model adopted by Varien – and others in the enterprise software market pursuing a commercial open source operating model, such as Sugar CRM – is not really open source at all. But by leveraging the work done by developers, and providing in return a high degree of openness and customizability, Magento has proven that its approach has appeal for eCommerce companies and developers alike. Forrester Research went so far as to indicate that Magento is an “emerging player to watch”. Since publication of the Forrester report in January of this year, Varien has more than doubled the total number of times its Magento software has been downloaded. For this reason alone it is hard not to view Magento as operating on an upward trajectory.

By Geoffrey Mugliston

gmugliston

Geoffrey Mugliston (mer-gliss-ton) is a London-based Australia-born entrepreneur, strategist and blogger. He began writing for VC Cafe in 2009 with the objective of showcasing promising Israeli startups to the global startup and investment community. He is co-founder of a consumer internet company with its development team based in Haifa (currently in stealth-mode). He also serves as adviser to a pan-European startup which develops software for print service providers. Prior to his current projects, Geoffrey worked in management consulting with a focus on the infrastructure sectors. When not working (though sometimes while working) he enjoys coffee, running and engaging in intense debate. He holds an undergraduate degree in finance from the University of Sydney.

gmugliston

Geoffrey Mugliston (mer-gliss-ton) is a London-based Australia-born entrepreneur, strategist and blogger. He began writing for VC Cafe in 2009 with the objective of showcasing promising Israeli startups to the global startup and investment community. He is co-founder of a consumer internet company with its development team based in Haifa (currently in stealth-mode). He also serves as adviser to a pan-European startup which develops software for print service providers. Prior to his current projects, Geoffrey worked in management consulting with a focus on the infrastructure sectors. When not working (though sometimes while working) he enjoys coffee, running and engaging in intense debate. He holds an undergraduate degree in finance from the University of Sydney.

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