In 2021, Tesla became the fastest-growing brand worldwide. It also became the most valuable automotive brand. So many things set Tesla apart from other car brands that helped it achieve this glory. And one of the - probably less known - aspects is its online sales model.
Tesla maximized and optimized its online ecommerce experience and internal operations by creating an ERP software of its own. This ERP software includes the ecommerce software that powers Tesla’s online sales model.
This put Tesla ahead of its competitors, as in many countries around the world including Spain and Italy it’s the only car brand that operates online in those countries.
But why did Tesla decide to create this custom system? And how does it prove the case of the need for open source tools in 2022?
A Brief Look at Tesla’s Success
Tesla had major success in 2021. Their production rate jumped from 367K vehicles in 2019 to almost 1M vehicles per year at the end of September 2021.
This is reflected in Tesla’s revenue. In 2021, Tesla’s revenue for automotive sales surpassed 44 U.S. billion dollars. It’s a huge rise compared to its revenue in 2019 which was 19 U.S. billion dollars.
Tesla’s total revenue combining all its streams reached 54 billion dollars in 2021. This made it the best-selling electric vehicles brand worldwide.
It should be noted with this major difference between 2019 and 2021 that Tesla announced in 2019 that they would be closing all of their stores and selling online only.
This success in their online sales model majorly had to do with the ERP software that they created early on in 2013. It allowed them to provide better customer service and have all departments in Tesla connected using the same system.
Why did Elon Musk Choose to Build Tesla’s Own Software?
Existing Proprietary Software Weren’t Enough
In 2013, Tesla did try using proprietary enterprise software for their ERP and ecommerce software. However, they quickly realized it wouldn’t work for their use case.
“Something that people don't really know much about is our internal applications team that writes the core technology that runs the company. We are not dependent on [third party] enterprise software. Like for those who understand what this means, this is a very big deal. And my hat is off to the great work of the internal applications team. They are like the nervous system, the operating system of the company, the Tesla operating system. They are extremely fundamental.” — Elon Musk
If you’re not familiar with Tesla’s online sales model, they allow customers to customize their cars such as choosing different materials or colors. It also, after its shift to online sales in 2019, started providing same-hour customer support and even same-day service. It also gave customers a week to refund their cars if needed.
In short, Tesla’s mission was to have customizable cars, reliable customer service, and an almost automated delivery and refund process, among other operations in the company.
Most existing platforms wouldn’t have all these features built-in. It would require you to use custom plugins and integrations to add those features, but it would still be restrictive for companies that have a custom business model like Tesla.
Tesla Needed a Solution Specific to Them
Tesla needed a solution that they can dig into and make changes to make it completely fit their use case.
In fact, most businesses need a solution like that even if they’re not as big as Tesla or have similar business requirements. Almost all businesses have unique operations based on their products and communication with customers, among other operations.
Elon Musk realized that early on and decided to invest in a team that would build this solution for Tesla from scratch.
So, Tesla hired a new CIO Jay Vijayan who, along with a technical team of more than 250 people, in 4 months built the ERP system, called Warp, which currently is an essential part of Tesla’s operations and online sales platform. Warp is now the foundation of Tesla.
Warp was a unique solution for Tesla that allowed them to manage different aspects of their operations and departments, ecommerce sales, customer relations, and more all from one system.
Managing Information Flow
Another aspect that a lot of businesses struggle with is managing communication between different departments under its wings and how the information flows between and to them.
This proves to be difficult as, again, most existing solutions to manage this connection wouldn’t fit the business’s requirements. Businesses invest a lot in trying to make this work and put as much control on how the information is flowing among their systems, but often fail or don’t have a flexible and optimized solution for their use case.
In Tesla’s case, their ERP system enabled all departments to be connected just using that system. They didn’t need any custom or external connectors to make this happen. They were also able to route the necessary information to the correct people that need to see or handle them.
“...the way we built it is we were able to show the feedback coming from customers to the right people in the right department instantly. That never existed in the automotive world before Tesla” — Jay Vijayan, interview with Techfest
They realized they had a specific use case, and they made sure to incorporate that in their development of the ERP system.
This, again, emphasizes how this ERP system is Tesla’s foundation. It was built in a way to cater to the ecommerce part but also eliminate the need for external tools to manage other operations in different departments. All departments can work together through this same software.
How Tesla’s Ecommerce Choice Shows the Need for Open Source Solutions
Tesla decided to create their ERP and ecommerce software from scratch internally. However, at that time open source solutions were much less mature than they are now that it wasn’t an existing option. Businesses now can instead utilize open source solutions to create the system they need.
Open Source Allows You to Customize Everything
Open source solutions can be used in any type of project. You can use it as-is if it fits your use case, but what’s special about it is that you can modify it and change it into whatever you want.
This allows businesses to avoid starting from scratch when building their systems and go for an open source solution that already has the groundwork finished. They can then take it apart and make the changes as they see fit for them.
This would remove them from the shackles of enterprise software that prevent them from truly owning their tech stack and allow them to have ultimate control over their solution.
Open Source Alternatives are More Compelling Than Ever
As opposed to enterprise solutions not being enough, you can always find an open source solution to either make an integral part of your system or integrate it into your existing system.
Compared to the time Tesla needed to create their ERP and ecommerce software, there are much more reliable and mature open source solutions that have been changing the market and are used by many. Some examples of these open source solutions include Odoo and Strapi.
These open source choices are coming to offer a more customizable alternative to a lot of existing enterprise and commercial solutions that can be fitted to individual business needs.
Being able to use multiple open source solutions and integrate them together eliminates the need to reinvent the wheel and instead gives you a good starting point to build your own custom setup.
More Control Over Different Components
In most cases with enterprise solutions, businesses will need to integrate other enterprise or commercial solutions into the mix to try and provide them with the perfect solution they need. However, they still won’t have full control of the implementation which leads to more obstacles and restrictions.
On the other hand, as you have full ownership of your open source tech stack, you are free to control your system, its different components, and how they work together.
This is basically what Tesla did with their ERP software: they took control of the different components that would be used by different departments in Tesla and put them together in a way that no mediator is needed for the communication.
Going specifically into headless commerce platforms like Medusa, the abstraction in its architecture allows for better integration among different components in your system. This abstract and headless approach opposed to the traditional monolithic architecture makes it even easier for your business to customize the open source solution even further.
How Proprietary Ecommerce Tools Got the Thesis Right But the Product Wrong
Proprietary ecommerce software has been pushing towards providing businesses with customization capabilities through either headless solutions like combining Shopify and Commercetools or through a micro-services approach like Fabric. Depending on the software, this would include customizations more related to the frontend.
However, as you can see from Tesla’s use case customizations to the frontend aren’t enough. Most businesses would need to customize the backend to provide custom and more complex features, which proves challenging to do with proprietary software as they generally don’t provide customization capabilities to the backend.
These platforms are also often advertised as platforms that businesses can use without any technical knowledge. This sounds appealing to a lot of businesses, especially the ones starting fresh and are excited to start selling.
However, what proprietary tools don’t realize is that as long as the businesses don’t have full control over their technical stack, as long as they need external third-party apps or solutions to make their vision come to life, and as long as the businesses have to implement hacky solutions to introduce custom features specific to their use case, they’ve got the product wrong.
Proprietary tools put a lot of restrictions on businesses because they try to create a one-size-fits-all solution. Ecommerce platforms and software are generally envisioned as just a platform you use to buy and sell online. However, there’s much more to that. There are logistics and operations that are most of the time very specific to each business. In short: there’s no one-size-fits-all approach to ecommerce.
Using open source solutions, on the other hand, is an option that is best for businesses, especially in the long run. Businesses would be investing in a platform that is capable of growing with them and can be customized and extended as needed. They would be investing in a platform with no shortcomings or restrictions.
Get Started with Open Source Commerce
Open source solutions prove time and time again that they’re the future of ecommerce, if not technology in general. They give businesses and individuals alike more freedom and flexibility to implement their visions and dreams.
More businesses are coming to realize that the only way they can set themselves apart and bring their vision to life is either through a system they build entirely themselves as Tesla did or through open source solutions that can facilitate the process.
Medusa is one open source ecommerce solution that aims to provide developers and businesses alike with a great experience creating their ecommerce platform. Out of the box, Medusa provides many essential features for businesses including RMA flows, multi-currency and multi-region support, highly customizable promotions and discounts, and an intuitive admin that allows you to use these features and much more.
Most importantly, Medusa’s headless architecture makes it easily extendable and customizable. You can also add any payment or shipping providers, CRM, CMS, and other types of features and third-party services hassle-free.
If you’re interested in starting with Medusa, be sure to check out our Quickstart guide.
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