How to calculate the total cost of ownership for an eCommerce platform implementation
When you make the crucial decision to choose an eCommerce solution, it is important that there are no hidden fees or surprises during implementation. The cost of third-party apps, ongoing maintenance, optimization and other services goes beyond the licensing fee.
This post will walk you through the various aspects of your eCommerce solution. We’ll also give insight into how to achieve a lower total cost of ownership (TCO).
What is TCO?
TCO refers to the total cost of purchasing, implementing and managing an eCommerce solution. This includes hosting, extensions, third party apps, feature development, design and ongoing maintenance. As a business grows, it is not unusual for licensing fees to change. Ask potential platforms about their pricing structure and how it changes as online revenue grows.
You need to think about the skills required to launch and maintain an eCommerce platform. To keep costs down and avoid surprises, calculate the TCO of each possible eCommerce platform.
The TCO analysis also includes the opportunity cost. The opportunity cost measures the potential loss in choosing one platform over other. One platform might be less expensive, but it has a history that is declining, which can lead to lost revenue. You might find a platform that works well for you now, but is not scalable as your business grows.
Understanding Your Options
They will be classified into one of three types when evaluating eCommerce platforms: on-premise, cloud or SaaS.
* On-premiseThe eCommerce platform will be installed on your company’s existing hardware. The upfront costs for the infrastructure such as servers, and the licensing fee are included. This option comes with ongoing costs such as 24/7 maintenance and support and data storage, security backups and software updates.
* CloudThe platform vendor hosts and maintains the software and customer data in a cloud environment. They also manage the infrastructure and distribute updates and bug fixes. Magento Commerce Cloud, for example, is a cloud-based solution which runs on Amazon Web Services.
* SaaSSoftware as a Service (or SaaS) is a model for software licensing and delivery. A third party hosts and maintains the software and can be accessed via the Internet. The monthly subscription is usually required to pay the licensing fee.
Open-source eCommerce platforms are available on-premise and cloud-based. SaaS commerce options, however, can only be used in the cloud. It is up to the merchant whether the extension is cloud-based or on-premise. It is a good idea to involve key stakeholders such as sales, marketing, and operations in the selection process. You can avoid potential problems down the road by working together to define the project strategy, platform requirements, and functionality must-haves.
*These questions will help narrow down your options as you explore platforms: *What is the future potential growth of the platform?
*What are the native features of out-of-the box (OOTB)?
*Is the platform capable of allowing us to customize it to our specific business needs?
*What support is available?
*How does the platform manage peaks in our company?
*Is the platform able to meet both B2B as well as B2C market business requirements?
Third-Party Applications and Out-of-the Box Functionality
Many brands attempt to reuse third-party apps without fully understanding the functionality that comes with an eCommerce platform. It can cost more to duplicate the same applications in new eCommerce platforms. Magento Commerce Cloud, for example, has OOTB features such as gift cards and loyalty, and over 150 extensions that can be used to solve any business problem.
You should first evaluate which third-party apps you require based on the revenue they generate. This will allow you to determine which third-party applications are best for your business. A certified solutions specialist can help you to understand native features and help you find the right application for your eCommerce solution. It is important to remember that third-party applications are constantly being evaluated. Ecommerce platforms change, so you need to ensure that your applications do not overlap with native functionality.
There are many pricing options for third-party apps. Some applications are free but will require recurring monthly payments. Others will charge a one-time fee. If you wish to modify any of the modules, there will be an additional charge.
Selecting a Certified Solutions Partner
You will need to have unique skills in order to replatform your eCommerce site or launch a new eCommerce venture. These include project management, front and back-end development and UX design, optimization, and business analysis. You will need to decide whether you will bring these skills in-house, or hire a certified solution partner to accurately calculate your TCO.
There are many benefits to working with a solution partner. Partner who specialize in Magento Commerce will have certified developers who are familiar with the platform. They are familiar with processes that will ensure you keep on budget and time. They also have years of experience, which they can use to provide both technical and strategic advice.
You may end up paying more if you choose a partner for solutions solely on price. Ask the right questions when you are evaluating partners:
*Are they certified platform partners?
*Are they able to meet your long-term and immediate needs?
*Are they familiar with similar engagements to yours?
*What is their typical timeline?
*Are they successful?
*Where can they be found?
*What type of quality assurance and testing does each one do?
You can use staff augmentation to hire front-end developers and project managers if you don’t have the time or desire to build an eCommerce team. You can hire skilled staff to quickly scale up your project and add value. Your TCO will be affected by either staff augmentation or solutions partners.
Strategies for the Long-Term
The final step is to create a five-plus year roadmap and define how the eCommerce platform fits into that vision. Will the platform scale if you want to increase online traffic and sales in the next five year? Does the platform have enough flexibility to adapt to changing customer behavior? What is the frequency of new functionality being released by the platform? It will be more expensive to customize or replatform if a platform doesn’t fit your long-term vision.
After you have chosen your platform and launched the site, you need to think about the resources that you will need in order to optimize the customer experience. Optimizing the user experience and design is an ongoing task that requires constant evaluation, testing and updating. An A/B testing platform, or a partner, may be necessary to run tests and analyze the results.
It is difficult to calculate the TCO of an eCommerce solution. It is important to understand all the factors that affect the cost of implementing an eCommerce solution. This will allow you to make informed decisions and eliminate any ambiguities.