Working with Magento for more than 10 years I was absolutely happy when they announced a new version 2 which seems to be a major shift when it comes to technology underlying and usability – but also in regards to their pricing model. Most agencies I talked to have not been satisfied with this move and recommended to use the old 1.9 version instead. So I asked myself what is going on and why is this the case?
During the last months, I have had many discussions with companies in the UK, Switzerland and Germany about using Magento or one of their director competitors, e.g. Shopware. And in case
we decided positively for Magento, which version – the freely available community version (CC) or the enterprise version (EE). And when I tried to make a matrix about the functionality, pricing, services and other stuff, I came into serious troubles as it turned out that there is not too many information out there about the newer 2.x versions.
Also, when I talked to smaller and medium-sized digital agencies, most of them favoured (and thereby offered) the 1.9 version of Magento and when you dig deeper and ask for reasons, you see that they had no references and they were also afraid of starting with Magento 2.x – as this completely re-build version needs a total shift in resources as it requires the use of different skills, e.g. in the development process.
I was asked by many clients about this and how I would decide, therefore I wrote down 10 questions I received most often and based on my personal experience I wrote the answers, i.e. my personal recommendations to them. Please be careful with the answers as this kind of content changes very quickly and with different companies, budgets and skills, you could also come to a different decision. In case anything is not clear, please write a message and we can talk about it personally.
Why do most agencies offer me Magento 1.9 and not the newer 2.x version?
Having had three competitions with agencies within companies recently, 7 out of 9 agencies recommended not to use the new 2.x version of Magento. When you asked them for the reasons, they had many different aspects which made me wonder:
The 1.9 version is tested and works perfect, this is not right with the new version
The community version has everything you need
There are much more external applications on the market for the 1.9 version, so the effort to develop is much lower
The new community (cc) has less functionality as Magento tries to get more money out of their products - I am absolutely in line with this statement, as the spread between CC and EE in the 2.x version gets broader - makes sense when trying to get more money out of the million users
I wasn’t that satisfied with these answers and I digged deeper into this. First of all they are right with the new pricing model, this is not as favourable as the old one (this is handled in another question later on). But, I came to totally different answers why agencies are not recommending the new 2.x version of Magento:
The technology of Magento 2.x is different. It’s not really new, but updated to the current standard and therefore agencies do need other kind of development resources, which the smaller agencies tend not to have at their hand. This means a lot more effort for the agency to build up resources and that means a less profitable project (or even with a loss).
References are not the standard, for most agencies you will be the first client on Magento 2.x and this might not be that funny… We had the same discussion but when you select an agency that is technically speaking used to the new framework underlying Magento, then this is not a problem.
Agencies are right, there are lots of plug-ins that are not working with the newer version right now. The reason is that the provider need to re-develop the whole plug-in, which takes more time. On the other hand, you do not have 10-year-old application running on your system….
In case you need to choose a new agency for a Magento 2.x shop, let them show you how they will handle your project from a technical perspective and what kind of resources they have – fitting to the Magento 2.x underlying technology.
What is the biggest challenge with Magento 1.9?
From my perspective, there is only one thing: The 1.9 solution will be supported probably for another 2-3 years (I was told), but not longer. Starting now with a 1.9 based project you can already think about the shop upgrade. And the next challenge is that the upgrade from 1.9 to 2.x is not that easy as Magento did change the whole platform and infrastructure, so this is a major issue (in regards to time and costs). Keeping this in mind you will either run on a version which is not supported in some years or you will have additional costs for an upgrade.
Coming with that, right now there are not too many companies looking for a 2.x implementation but the number is growing strongly. In case the support end of 1.9 will be communicated, there will be lots of companies starting to upgrade their current version and needing resources for that task…
What is the new Magento 2.x pricing looking like (license fees)?
One more reason I was told not to choose the version 2 was that the pricing will be much more expensive with the new version. Looking at it first you definitely think so and then it’s absolutely hard to find any numbers about this new pricing model, not even on the corporate site.
Generally spoken, the new pricing model goes in the same direction as every other software company: The bigger you are and the more resources you will probably use, the more you have to pay.
When it comes to license fees, Magento has a new 3-tier model:
Community (free, CC)
Enterprise (paid, EE)
SaaS (paid, hosted)
The pricing model for the Enterprise Version EE roughly looks like that (this is not the final version), there are some additional support costs (depending on Gold or Platinum Service Level) and one based on update priority.
The new enterprise model is a little bit more expensive, depending on the online sales of your company - although Magento says that is cheaper for most companies (which is right in case you're at the upper end of a revenue step). From a percentage perspective, this seems to me quite fair and when you compare it with what you get, it’s a good price. What I do not like is the contract you will have to sign as this allows them the direct access to all your numbers, which I personally do not like. This is standard now for many software providers, but if you can avoid it, you better do – or do you want any kind of comparisons with your figures?
Furthermore, there are of course lots of things you can talk about with Magento in order to get a more interesting pricing model for your company – let me know in case you need help on that.
What is better, the Magento hosted version or the full license?
This is really depending on your strategy and what your company is looking for. Question is here on the one hand the cost for handling all the hosting, including the necessary skilled technical resources you will need. In the last projects we decided with the team not to use the hosted version due to the excessive usage of our own data, which we do not like too much.
Magento API from 1 to 2 has been changed dramatically and there is much more functionality available now
With the new 2.x version of Magento the API has changed a lot, so it is much easier to handle from a technical perspective and the communication with other ERP software etc. is much better to handle.
Do I need to let them have insight into our company data (as they want to have access to all stats)? The new Magento license and the data handling – I don’t want it!
I think that – as with all SaaS solutions – there is a huge problem in using all the data. Of course, the data is anonymised but this does not mean that your competitors might get lots of very valuable information out of it.
The other way round it definitely helps, if you can make use of your anonymised competitive data to make your offerings even better and measure your own performance against it. So to say this is the double-edged sword.
With the recent negotiations with Magento we found a very fair compromise to all of that, so it’s basically on you to fit the terms from the more aggressive US contract version to a much easier European one.
Magento 2.x B2B: Using the B2B version – what’s the advantage?
The idea of Magento to set up an own B2B version is clever. Based on what the companies in the B2B sector are looking for, there is a huge uncovered demand to additional but standardised functionality when it comes to the need of businesses. The tools that are existing in regards to ERP and CRM to not change too much, i.e. there is a lot of room to standardise things.
The B2B version is not published finally (when this article was written) and there is no final scheduling. Although we are on the first user list of Magento for one of our projects, there is no definite timeline available, except somewhen in Q1/2017.
Magento and NAV and why it’s better to use Magento instead of a NAV based shop software
At one of my clients we had looked for a NAV based webshop solution as an alternative, but the shops we have found and the companies presenting them did a great job with the NAV integration but from a feature and performance perspective this was by far not enough to handle a modern e-commerce solution for multiple countries. In the other Magento based projects we then relied on the API of Magento to integrate the NAV as the ERP system.
Magento 2.x and the new Magento store – Availability of add-ons
When it comes to the add-ons, Magento 2.x has still a clear disadvantage in regards to the number of providers. The good thing is that all published add-ons will be completely renewed, not running for several years without any adaptions. This means there is a clear selection for your company when it comes to choosing the most recent developments in the respective area. As many add-on providers have been waiting to see how the new platform will start to grow and to be used by clients, there will be lots of add-ons re-developed in this year – I was also told by Magento – as many publishers waited for first responses and a more final version of Magento 2.
In recent projects, we have been looking for the right add-ons and then talked to the providers about their planned offerings for Magento 2 and most have been very kind in answering and telling us their plans for the month to come.
After changings in the shareholdings of Magento from eBay to private equity, are they still a reliable partner?
Thinking about the communication with them, they are still a very reliable partner. The eBay shareholding brought them – from my personal perspective – a little off their way to become a very strong global e-commerce platform provider. With the new shareholder from the private equity sector they will use the new sources of finance (see here) to invest in becoming the global e-commerce partner. I think the version 2 shows us the potential and when they get their organisation streamlined (which is still a little bit unfocussed and it’s sometimes not comfortable to work with their different contact persons) and all the information about the new strategy updated, it will be a strong partner for the future.
But finally, a private equity company will sell their stakes as soon as Magento gets a high-paying buyer and then it will begin again J.
What I can definitely recommend is to have a look at the (partly) free (and paid) Magento U trainings to get a deeper look into version 2: https://u.magento.com/magento-2
Finally, not depending on your decision in regards to the Magento version, you need a very structured process starting from the RfP, then the pitch presentations of the development service providers and then finally a strong internal project management to drive the project from the start until the end, not depending on the service providers.
As a last mentioning, I have been in the digital business since founding my first digital agency in 1997 and with my second digital agency Interwall I did a lot of Magento projects (we also did all the ERP and logistics stuff) and for the past 5 years I have been doing consulting in international digital transformation projects and part of this was in several cases to roll-out a new international online shop, which was in some cases Magento. So, I can say that I have slightly more experience in that area – but I am not a technician.
In case you have any questions, please do not hesitate to contact me directly.