The e-commerce platform provider debuts software that’s hosted on the web and plans to offer a cloud service geared to smaller merchants later this year.

Magento Commerce today rolls out its first cloud-based service that lets retailers access software hosted on the web instead of licensing the software and operating it from their own data centers.

The e-commerce platform provider aims to convert most of its more than 3,100 paying Enterprise merchants to the new Magento Enterprise cloud service in the next 12 months at the earliest, largely because the majority of those retailers told Magento they want to make the change, says Peter Sheldon, Magento’s head of strategy. Magento’s clients now download the e-commerce platform software and host it on servers and data centers they manage, own or lease.

Retailers that move to the cloud can save money and time by no longer deploying software developers and information technology teams to manage computer servers and data centers, and no longer paying to buy, manage and upgrade their own hardware, says Doug Heise, global product marketing director at CoreMedia AG, which provides retailers with content management tools. CoreMedia provides its online retail clients, including Office Depot Inc. (No. 6 on the 2016 Internet Retailer Top 500 Guide) and Home Retail Group Plc, the U.K. parent company of HomeBase stores, with tools to manage and deploy content on IBM WebSphere Commerce and the IBM Marketing Cloud.

Cloud software lets retailers pay for server capacity they use on any given day, rather than paying for hardware and software sitting idle, and it frees retailers to let the vendor take care of ensuring adequate server capacity, maintenance, upgrades and data security, he says.

The cloud also lets merchants run multiple webstores in several languages without having to operate their own data centers throughout the world. “That kind of flexibility is important now that people are spending more time online; they expect a consistent, always-on experience,” Heise says.


77% of 227 information technology decision-makers surveyed in a global Forrester Research report released in November cited lower costs of computer server ownership and keeping their IT organization competitive as a major reason for adopting cloud software. 75% cited improved disaster recovery and business continuity, and improved speed for their global user base, whether in-house or external customers, and 74% named on-demand capacity and scalability as reasons for moving to the cloud. Percentages totaled more than 100% because respondents could choose more than one answer. The IT leaders surveyed work at companies with more than 1,000 employees.

With Magento’s cloud, retailers manage and upgrade their own code, rather than run the same code as others in the same cloud service or wait for one-size-fits-all updates, Sheldon says. That gives Magento’s retailer clients flexibility to create their own innovations and applications when they want, without depending on the vendor as they do when they use applications delivered as “software as a service,” or SaaS, Sheldon says. Many SaaS vendors provide a single version of their software that the vendors hosts on web servers and all clients access via web browsers.

Magento will benefit by gaining revenue in several ways:

The cloud edition costs more than the Enterprise version, though Magento won’t reveal details.

Retailer clients now paying for Magento’s Enterprise software and the 230,000 merchants who use the free Community edition must pay for and transition to Magento’s latest 2.0 software in order to obtain the cloud service. Later this year, Magento will offer an introductory-priced cloud service for retailers that have yearly online sales of $100,000-$1 million.


More retailers are moving to the cloud. Forrester Research says 26% of the IT decision-makers surveyed in 2015 had already implemented or planned to implement public cloud, up from 18% in 2014. Amazon Web Services is an example of a public cloud, in which a service provider makes resources such as applications and storage available over the Internet. A private cloud refers to a company creating Internet infrastructure for its own use.

Magento, spun off in November from eBay Enterprise, uses the Amazon Web Services cloud and packages it with Magento’s own software and set of tools for developers and system architects to manage Magento’s software in the cloud, Sheldon says. The software lets developers create, test and deploy code quickly, he says. Magento says 30% of its Enterprise clients already host on AWS.

Magento will keep its free Community Edition, but retailers who use it won’t be able to run it on Magento’s cloud, Sheldon says. The retailers may still use another cloud provider, including AWS, to host their Magento websites, he says.

Magento CEO Mark Lavelle says, “With this new platform running on AWS, we ensure that our merchants have the agility to respond to a rapidly changing environment, can continuously deploy innovations, easily scale to meet unexpected demand and don’t have to worry about the day-to-day management of infrastructure.”

Sheldon concedes that Magento is late to the cloud party. Competitors—Demandware Inc., SAP AG, Oracle Corp. and IBM Corp. for big retailers and Shopify Inc. and BigCommerce Pty. Ltd. for smaller retailers—already offer cloud services. But Magento’s focus taking its time to build its 2.0 software worked in the company’s favor because Magento didn’t put money into such hardware as computer servers and data centers that quickly became outdated, Sheldon says. Instead, Magento used AWS hardware and data centers.


IDC Retail Insights research manager Robert Eastman says the key for vendors like Magento that are just moving to the cloud will be to master the costs and pricing for the cloud offering and to communicate the advantages of the change to customers.