Evaluating the Long-Term Viability and True Costs of E-Commerce Solutions
According to a Forrester Consulting study that evaluated the true total cost of ownership (TCO) of e-commerce solutions, 81 percent of online retailers use either a homegrown or licensed on-premise solution from a software vendor. Over the years, these solutions have served a purpose, but many e-commerce professionals are now realizing that they come with a level of operational and opportunity risks capable of keeping them up at night.
These on-premise solutions have evolved over the years, becoming more deeply integrated into legacy back-end systems and corporate processes. As a result, they're so integrated that even the mere thought of replatforming sends supporting IT teams running. While these solutions may appear to be cost effective at first, in the end they're actually inhibiting the ability of businesses to innovate and keep pace with consumer demands. And because the original business case and TCO models lack rigor as uncovered within the Forrester study, many of the additional costs aren't included. The result? Forty-three percent of retail respondents underestimate the actual TCO.
When evaluating the long-term viability of your existing e-commerce solution, be sure to take a close look at these top five considerations:
1. True cost of growth: With the need for technical resources to support the platform and manage lengthy upgrades, hardware maintenance expenses and the cost of additional licenses to support growth, retailers incur significant costs with traditional on-premise solutions. The average retailer surveyed for the Forrester study spends 7 percent of their online revenues supporting the technology that underpins their commerce operations, while 88 percent believe it's important or very important to align ownership costs with online revenue.
Sixty-seven percent of online retailers using a licensed on-premise solution report that they're contractually obligated to acquire additional licenses anytime traffic reaches a predetermined threshold. Furthermore, 78 percent of retailers report that the contract they have in place with their vendor inhibits their ability to launch into new markets, while 54 percent said they cannot launch additional branded sites without purchasing more licenses. As online retail grows, and as retailers pursue global expansion, leveraging their existing solution becomes increasingly expensive.