Sitecore's announcement on Tuesday of its new e-commerce offering, Sitecore Commerce 8 powered by Microsoft Dynamics, at the NRF Big Show made waves in the e-commerce world for a number of reasons. The launch integrates the Sitecore Experience Platform, its highly regarded content management system, with Microsoft Dynamics to more effectively merge content management with commerce systems.
A little background is in order: Sitecore took over Microsoft’s Commerce Server in Q4 of 2013. Now called Sitecore Commerce, the initial integration with the Sitecore Experience Platform was announced in fall of 2014. Let's try to shed some light on what this release signifies for the future direction of both companies.
A Lot of Moving Parts
A big reason why this development is of interest relates to Microsoft's relationship with Digital River.
Microsoft has used Digital River as its e-commerce platform since its sale of Commerce Server in early 2010. Microsoft represents approximately one third of Digital River’s annual $390 million revenue and in December extended its agreement with the company through March 2017 with a possibility of extension, that could potentially continue the relationship until March 2019. A final note, Digital River is in the process of being acquired by SIRIS Capital for $840 million.
All of the moving parts make this feel like a game of three-card Monte. No .Net/SQL e-commerce platform is currently ranked highly by any of the major (e.g. Forrester, Gartner, etc.) analyst groups, but with this week's announcement, Sitecore is aiming to change that.
A Math Problem
Sitecore was co-located in Microsoft’s booth at the show. A conversation with Sitecore (no Microsoft representative was available to speak at the time) confirmed the details in the press announcement. Sitecore Experience Platform is now integrated with Microsoft Dynamics, the goal being to ensure content can drive commerce regardless of on which sales channel(s) a consumer chooses to engage and transact.
While Sitecore clearly provides the content management system, it's interesting to note that the commerce components of the solution consist of Sitecore Commerce for e-commerce and Microsoft Dynamics for in-store and call center. For the first time there’s now a comprehensive .Net/SQL omnichannel retail solution. And it’s a joint effort between Sitecore and Microsoft, where each is mutually dependent upon the other. So if this works -- and it appears that it does -- does it make sense for Sitecore to be an independent company? And if not, where does this leave Digital River?
This places Microsoft in a somewhat precarious position. It is partnering and selling the solution of one vendor, Sitecore, using its technology stack while at the same time on the e-commerce front it's using a solution from a different vendor, Digital River, which currently supports the competition’s technology stack. However this dynamic could change as Sitecore's answers to two questions revealed at least some of its ambition.
In asking whether Microsoft had plans to migrate to Sitecore Commerce, the response was that that question would be best answered by Microsoft. Unfortunately, no one was there from Microsoft -- even though it was its booth -- who could answer that question. This wasn’t a surprise. In response to the question was Sitecore looking to enable software downloads, the answer was that that was being evaluated and pursued as we spoke.
Given the responses, it's not out of the realm of the possible to see Sitecore Commerce closing the gap on Digital River’s capabilities over time -- it's a matter of how quickly that can be done. Microsoft has bought itself at least two more years with Digital River and is including some breathing room with the four to six month extensions. If Microsoft were truly committing to Digital River, why not just extend the contract four years rather than two plus the additional two broken into four to six month periods?
One could see the four to six month periods serving as a buffer for a transition off something. While no one will state this directly, it will be worth watching how this plays out. If it does come to pass, Microsoft will be back in the e-commerce platform that it pursued for more than 15 years, in addition to being well positioned for helping companies reach their omnichannel retailing objectives. If that comes to pass, where does that leave Digital River? While that can’t be predicted, I am certain the folks at SIRIS Capital have their plans and it covers this scenario. All we can do at this point is wait and see how things play out.