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Interview with Dirk Hoerig, CEO of commercetools on Commerce-as-a-Service



I had a great interview while at Shoptalk 2016 with Dirk Hoerig, CEO of commercetools which is an enterprise e-commerce platform based in Germany and just expanding into USA. commercetools describes itself as a "Commerce-as-a-Service for growth-minded retailers and manufacturers". A key differentiator between commercetools and other commerce platforms is that through its API-first principle its highly flexible and a great fit for new e-commerce approaches such as microservices.


Interview with Dirk Hoerig, CEO of commercetools on Commerce-as-a-Service

Today's guest is Dirk Hoerig, CEO of commercetools.  This interview was recorded at Shoptalk 2016 in Las Vegas.

DV: This is Darius from Retail Tech Podcast here at shoptalk 2016 conference in Las Vegas and I’m speaking with Dirk Hoerig from commercetools which has a very interesting new commerce platform and Dirk thank you so much for giving me this time and why don’t you go ahead and give me a quick into on who you are and what commercetools does.

DH: Sure, thanks Darius for taking the time and for the interview.  Commercetools is an enterprise e-commerce platform provider and and what we do is we provide our technology on a cloud infrastructure as a Platform As A Service concept which means that commercetools is more of a framework than a shop templating system and that means we provide all the commerce functionalities like the product information management, customer management, order management, cart management, and marketing toolsets with an API and on top of that we provide developer tooling and customer tooling to build omni-channel experiences.  So our customer can build international web stores on top of the platform as well as native applications, store experiences connected with car navigation systems, with internet of things (IoT) and button commerce which has become prominent due to the Amazon Dash button.  So you can do all of these things on top of the platform and we can separate the user experience and the functionality with an API.

DV: Ok so would you say that that’s the main distinguishing factor, is that you are basically an API-first platform as opposed to a monolith and you’re focusing mainly from a microservices or API aspect.

DH:  At least to some degree, the API-first part is important but maybe we need to take a step back and look at the whole picture.  So we started commercetools in 2006 focusing on cloud and building cloud-based enterprise ecommerce software but we had a monolithic application in the first years we started.  We figured at the time that the retailers and brands that we were working with were becoming on the one hand more technical in having to compete with the fast changing requirements in the market and are also relying on agencies and integrators and we looked at a few things, one was that most of the platforms out there are not developer friendly enough which means if you’re a integrates  or a customer and you want to jump onto a new platform you have a very long learning curve and experience curve which to some end it can be frustrating and our idea was why can’t a commerce platform be learn to use for a technical person in maximum a week. 

So our goal was that every developer in the market weather they have a php background, java background, dot net or even native applications like iOS can work on our platform thru 8th grade user experiences with a week of on boarding maximum.  that would give us scaling effects and lower the cost of development for the merchants.   The second thing that we have seen is that the whole market already in 2010 had shift to mobile and there was a great article in the Wired magazine with the headline “the Web is dead, long live the Internet” and that actually described the idea that we had at that time so well because when we looked at ecommerce platforms built in the years before they were built for desktop applications and if you look at the market today in 2016, 80% of the traffic is not coming from the desktops. 

So if i were a retailer i would question myself why should i invest in buying a desktop-focused commerce platform while 80% of the business, and more later is not coming from the desktop.  We said ok we need to make a separation so this whole API thing is a technical one and the only reason to have something like that is that you need to separate the channels and your user interface from your core commerce functionality because if you load that down it’s all the same, complex product data, complex pricing structure, with independent customer requirements, personalization, oder management and so on and it doesn’t matter where this is happening and on which device and which user interface but this is all core and with being API-first we separate that and one last point being API-first doesn’t mean we’re API only.  We’re a full stack enterprise commerce platform we have SDK’s, we have front-end toolings, we have integrations to various ERP system, we have back end tooling for business user, category managers, ecommerce managers and so on.  We just see it more as an onion principle and make sure that the different layers are separated from each other and that you can consume these services individually and that they are not dependent on each other and that’s the strong USP.

DV: I agree that’s the key, not sure if I can call it the holly grail but the future that I envision myself from my limited knowledge, definitely not as much as yours, is where you’d be able to go and pick and choose what services you want and plug them in.  It really should be that simple even for non technical people if the software is evolved to that point and the other point is you mentioned API is a technical word now, i really think it needs to be a business word for retailers.  They really need to focus on the API model because it will make their lives so much easier if their system is transitioned to that.

So e-commerce and omni-channel, or online and offline and we’ve been hearing a lot about the store being dead and the store not being dead, where do you see yourself going into that equation in 3-5 years.

DH:  I would say this is customer specific and market specific so the idea that the store is dead or that online e-comemrce pure play is eating it all depends on the industry, it depends on the products and it depends on the customer positioning. What is see happening in the market, even though from my perspective its happening too slow is the CIO’s of the merchants need to become more technical, it’s not enough to understand the ERP, understand the business systems and being able to maintain and update their inshore applications and systems, they really need to be able on a technical level to understand the digital processes of the commerce world and being able to not only talk APIs but also understand APIs.  If we look back in the past 2-3 years, mobile almost is eating it all, and no matter, even in the retail world and 80% of the customers that are making the purchases in the stores, not talking about groceries but fashion, electronics and so on use their mobile phone or smart phone in the store and gather product information and so on and some of them even place a transaction with a competitor at that time so.  Digital transformation happened thru the consumer so no matter if i want to keep up as a brand or a retailer or not this is happening anyway.  So if i want to be able to react to customer requirements that fast, where we have devices coming out almost every 6 months that are making an impact on the customer behavior and the user experience store.  We see great things like the Amazon Echo, the team that worked on Siri is not working on an even improved  artificial intelligence technology that should ease up our life which is new user interfaces and in the end it all comes down to customer convenience which is changing so fast dues to new technologies that they need to be able to keep up, no matter if I’m an online retailer, online pure play company or a brick and mortar retailer i need to be able to adapt to those changes.  And in the last years also we’ve seen customers looking for features but features today don’t count any more from our perspective so much to be able to compete long term, the only thing that is certain is change which is happening faster and faster and if i want to be able to keep up, and the term that I’m going to use some customers are finding unattractive, but they need to be able to develop a technical architecture that is future-proof and that can keep up with that.  The feature becomes a commodity and if I don’t invest in the architecture and and the type of architecture I need to stay ahead then other with more technical knowledge might be running in front of me.

DV:  Technology is definitely a competitive advantage just as product selection or the location of a store used to be, it’s definitely a competitive advantage and that technology really has to be ubiquitous to the user.  The shopper just wants to use their cell phone and they don’t care what happens in the backend, they just don’t want to go home and on their computer have to go thru all of that again.  So when you look at going thru the process of helping customers signup and transition how does that typically happen on the commercetools platform?  It’s one thing for the customer to say this is a great thing and i want to do it, and another to actually do it.

DH:  There are three answers because we see three types of customers coming to our platform.  The small-medium sized ones that are not that technical yet but interested to invest in a technology that’s more future-proven and open to other channels.  They build directly on top of our SDK and out API’s their individual storefronts and they often combine it with best of breed model such as CMS or content management systems that they think are good a, and analytical tools and so on and create the best experience that they can for the customers, and gain a little bit of technical knowledge at first but still kind of a semi-monilytic application on top of the API but know that later on when they want to expand they can increase their architecture to other services.  

Then we have the second type of customer which is already a medium-large organization but not having that high number of developers in house so they rely heavily on integrators and they come to us often and say, we’re coming from the monolithic application world but we see that in the long term a micro service architecture is our goal but for us it’s not a blank and white, or big bang approach, we want to grow there over time and we want to gain knowledge and we want want to work with our partners onto that and they ask how can we built our first level of services and do a type of a hybrid application.  and we say product information management, maybe cart or ordering systems, some applications can be a little bit more monolithic and what we do is we give them consulting support and our solution architects help them or their integrators in finding the right architecture and creating a process but we also provide them support throughout the way because what our goal is and we’ve partnered with the company.  long term we see most of our customers be more successful if they have more technical competence in-house and as you said technology is becoming a differentiator.  Of course not the only differentiator, you need to be great at marketing, that’s probably the most important differentiator and you need to understand your consumers and this is what varies most but technology is part of that and we want them not to have the kind of thinking that we need to outsource our shop because it’s just a shop and this will not work in today’s world so we help them phase the technical knowledge and information into the company over time.

Then we have the 3rd type of customer which is large enterprise organization that have been through all of the knowledge implementing large monolithic applications and maybe they themselves have developed their shop solutions and now they will say for the 3rd generation of our e-commerce application we’ll develop micro services and they create digital labs for digital transformation internally and they hire hundreds of developers and these type of customers we also work with and for them the micro services architecture sits on top of our platform.  These applications have 100-200 micro services which also become challenging because you have to  orchestrate them, manage them and so on and that comes with a specific size and an organizational structure that you need to have and you need to support.  So these are the 3 types of customers we see in the market and not everyone who comes to us say micro services are great and how can we start now. 

There is a great fit for micro services and API because if you have very low functional requirements for you commerce platform and low level of complexity targeting that with a microservices architecture would be too much and it would be too high a cost and too long a project so in that case a more monolithic application is probably better but what we see is if you have high level of complexity, multiple touch points and fast changing requirements from your consumers and business models that you want to roll out quickly and play around with and probably throw away and come up with other ones, then you’re actually long term faster and maybe even cheaper with a microservice architecture because it gives you the agility to be able to act that way.

DV: I think that's a really good point at the end there.  Anyone that’s not thinking that way is in danger of not being in business, unfortunately in retail because the world is changing from under our feet so you’ve got to be agile and you have to really think about that.  One of the nice things that I see is that a lot of companies are really innovating even from a lower revenue retailers using shopify and what they’re doing going from ecommerce only and adding the POS side and there are definitely other companies that do the same and the market is so big and the individual needs of retailers are so varied that i think this innovation is really going to turn out good for all of us.

DH:  I see many platforms going in the path that we went thru and saying OK we’ve gained a lot of experience in the past years on our platform but now we need to be more flexible and provide more features and you have more commerce API’s coming out and API-first models.  Also important is to know that every commerce application can have API's but just putting API’s on top of a monolithic application would not work and probably can do a separate podcast on it’s own why this can't work.

We are here at the Shoptalk event which is having a great line up of speakers and companies and a lot of retailers and brands and not all of them but many of them are innovating and created digital labs and re-invented the wheel internal and no matter if you call it microservices or API-centric almost all of them share the same topics and going to the same direction, and at the end this is good for the consumer because she is driving that so and that’s reason for all of us saying how can we adapt technology to the demands of the consumer and the demands are obviously changing and we will have some exciting years in front of us.

DV:  So what do you think about the wearable market and the wearable technologies that are coming out specially like the Apple Watch, is that something that you’ve looked at at all?

DH:  Definitely, we look at wearables and IoT in general all the time and we also have a bunch of customers that use that.  on the typical wearables or lets say watch side i don’t see so many real business cases so i see interesting and fun cases just for playing around with this kind of things but its still relying very strongly on the smart phone and the watch is just giving it a different ui.  i think in the next 2-3 years this whole internet of things and wearable technologies will at least to some degree disrupt the smart phone market and i like what Amazon is doing with echo because it’s obvious and i think other retailers will keep up with that and will come up with own ideas that are better fitting for them.  why should i for example navigate on a small screen for a product catalog if i can just tell any kind of digital assistant and say hey i like that product please figure out where i can get it for the cheapest price maybe just around the corner or maybe i can get it shipped the same day and let the computer do the rest of that and i don’t need to get thru boring checkout processes and enter my address again and all these kinds of things you can automate that and with improved machine learning and algorithms and smart tooling i think we’ll see a lot of innovation there not only on the watches and wrist bands and also from glasses.  i believe strongly that augmented reality will have a huge change on everything that we do.  I'm not talking so much about virtual reality which is great but augmented reality, i think that augmented shopping maybe not in 2 or 3 years, we have Google glass which is fun but not everybody is using it but once these technologies get easier and once we get into the context of these things they will get smarter and faster and I don’t need any kind of screen or device in my hand any more and that will have an impact on everything but there for sure also on commerce.

DV:  And voice as well as chat, SMS and chat commerce is picking up.

DH:  We see a lot of startups that integrate into whatsapp and Facebook messenger and so on to directly figure out what products were talking about and creating offers out of that and being able to buy straight out of an whatsapp chat and these kind of things and its getting more and more integrated and so shopping is more of a process of ourself that can be more integrated and we don’t need an external devices and say now i jump into a shopping process and select something, i think it becomes more intuitive over time and if we look at the last 10 years this is what is happening so if we chaekcwhat commerce was 10 years ago which is not too long back, 2006 and the whole responsive design concept came up with the iPhone around 2010 and now everybody is looking into native apps and into apple watch apps integrating their digital shopping weindow, we talk a lot about beacons and all this kind of things and all that happened in 6 years which is a shot time and if you try to adapt that to the next 6 years and assume that we will have that kind of speed and innovation to keep up with that or maybe even would accelerate then i think the smart phone may get less relevant and other devices like wearables, voice and integrations to other toolings might play a significant role .

DV:  Great points.  The other point that come to my mind is the fact that change is happening happening at such a speed it makes the API model even more relevant to keep up with changes because keeping up is a lot simple if you have an API-enbled platform or ecosystem in your company as opposed to if you’re working on a monolith.  And the other point I wanted to go back is that the hole concept of microservices and API, I had a great talk with Kelly Goetsch and what he’s is doing over at Oracle on microservices and it’s really more of an organizational change and not just technology.  I'm sure that’s something you’ve learned also.

DH:  Oh definitely, so at the end it’s about the organization, because the organization determines the architecture, more or less this what everybody that’s getting into microservices is learning and if you have the opportunity what we’re currently seeing is that if the organization is setup, of the teams and companies that are successful implementing microservies it’s defined by architecture.  So they define the micro service architecture first and then look at ok how do our teams need to look like how do we handle communication and knowledge exchange and all these things to not fall back into a type of a monolithic approach in a top down model.  this is quite important and also challenging because it requires a lot of new skills where is still very little knowledge around, of course there are companies like netflix sharing a lot if great information but each organization or company needs to adapt that at least to some degree to an indigivual level so you can’t just copy something that works for someone else and you might have to adapt it to your organization and the most challenging part that i see in this is the recruiting.  we’re all looking for the same skills, not matter if we as a software vendor our partners as integrators and agencies and out customers as they are becoming more digital we are all having the same kind of requirements on devops knowledge, on agile development, scrum process, on team cultures and so on where there is a huge job market and it’s already there and everyone is having double as many jobs open as they currently can find applicants for but this is one of the challenging parts that I see.

DV:  Yes that another great topic which we can do at least 1 episode on it.  Retraining people coming from other industries that are being disrupted, even in retail there is great pool of potential people that can be trained and it will be one of the challenges.  We’re coming up on time so quickly what are your goals for commerce tools in terms of what you’d like to see happen in Europe, other countries and the US ?

DH:  For the next 12 months it’s establishing our presence here in the US, we started opening our US office about 9-10 months ago and we have a strong focus on the US market and a strong commitment from the whole company where we’re over 100 people of course most of them are in Munich and Berlin and we are currently growing the team here in the US and setting up development offices and we’re getting great customer feedback and rolling out more and more customers on our platform.  overall and not so market specific we try to stay ahead of the curve our focus is first always on the product and second on the marketing and i think we have made a good move and also have been lucky on the timing with our API and mircoservice approach.  But now we want to go further.  We think that as you said everybody, sooner or later, will have to use API’s or stick to API model platforms so API might become a commodity and we don’t want to wait till everybody is using API’s to say ok now what’s the next thing?

So we’re already providing container development frameworks so that our customers and partners can quickly deploy their docker containers to make it even easier for them to run their microservices on top of our platform.  we’re also think about how we can use more smart algorithms on our platform so to understand what our customers are doing and giving them automated recommendations on how they can improve on their environments and talking about predictive analytics, machine learning and we’ll probably launch some great features next year.

Dv:  Thank you so much, we’ll have more information on the website and commerce tools.  One additional point, i mentioned Kelly working at Oracle on micro service but I’m sure there is a team of very professional expert there working with Kelly on this.  We look forward to seeing more exciting news from commerce tools and best of luck to you.  

Links:

https://commercetools.com

Contact information in the US:

Contact info for our US office (NYC): commercetools, Inc. 404 5th Avenue New York, New York 10018 212.220.3809 mail@commercetools.com