Why Innovative Commerce Platforms Are Like Spotify
Once upon a time, when you wanted to listen to a song of a particular musical artist, you had to buy her or his vinyl record or CD. The full work contained up to 74 minutes worth of music and was brought to you via a physical data medium. The only other real option was to record this song with a tape recorder when it was played on the radio. This slowly started to change when Napster appeared on the scene in 1999, making it easy to download single MP3 tracks – however illegally. Two years later, with Apple’s iTunes, customers could purchase and download their favorite tracks individually. So a new kind of thinking emerged: away from the bundled music, towards individual tracks.
As the latest innovation in the way we enjoy music, a company called Spotify turned everything upside down once more. In their model, music files are no longer downloaded but streamed to the users’ devices in real-time. Spotify users pay a flat monthly fee to access a 40 million song catalog of music hosted in the cloud. Listeners can choose to listen to single tracks, shuffle them or build their personal playlists. On streaming platforms, music has become a commodity that is available 24/7.
Commerce platforms are unbundled and commoditized
It does not come as a surprise, then, that this method of unbundling business models was and is not limited to the entertainment industry. It’s not even restricted to business models. It also changes the way in which we perceive software such as commerce platforms being at the core of popular commerce websites. Over the years, digital retail has developed features that customers expect when they’re shopping online: presenting the catalog, providing search capabilities, increasing transparency with a my-account section, presenting editorial content, making sure transactions are appropriately recorded, using complex discount systems, and so on.
Traditionally, those were functions of commerce software suites such as ATG, Hybris Commerce, or IBM Websphere. These software products were built as feature-rich, monolithic on-premise platforms. Like with vinyl records or CDs, they came as bundles to be used by brands and retailers. Over time, as customer demands increased and business models became more diverse, more features (i.e., more code) were added to model all those new developments. This lead to platforms which had many domains already covered out-of-the-box, but resulted in inflexible applications which were hard to modify.
But also in the Enterprise commerce platform space, the unbundling phenomenon became popular over the years. The service-oriented architecture (SOA) pattern or the relatively new movement towards microservices all try to do the same thing: unbundle applications in a way that the individual pieces become easier to build, maintain and extend and that the whole network of services becomes more flexible.
Consuming services instead of owning software
Recently, with the wide availability of public cloud offerings by Amazon, Google, or Microsoft, and innovative commerce platforms such as commercetools, we have entered the Spotify phase of commerce technology. Not only have the bundles been split up, but the single parts live in the cloud, are billed depending on usage and can be consumed as services. Following a best-of-breed approach, they are tied together via flexible APIs. Instead of taking care of a monolithic software black box, CTOs and architects orchestrate and integrate those services and substitute individual parts if necessary. They are in full control of all the components. Similar to the Spotify content, commerce functionality has become commoditized. It has turned into one piece of an architecture puzzle (see our blueprint architecture to see how this may look in practice) which is reshuffled continuously and changed to address new business requirements.
The consequence for traditional commerce suites: they are slowly fading away. Oracle’s ATG, which used to run some of the most extensive commerce sites in the world, is now discontinued. Similarly, IBM’s Websphere has been sold to HCL technologies, where the focus is no longer on developing the platform further but keeping the status quo. Organizations across the globe have started to realize that the best way for them to build rich experiences for their customers is to rely on a Spotify-like unbundling model – instead of playing the same old record over and over again.