Five Considerations When Measuring An Ecommerce Platform’s TCO
As manufacturers and distributors continue to evolve to a digital world, many are replacing legacy ecommerce software as business needs change, technology stacks get old or frustrations with old platforms run high.
Cost is always a factor when choosing a new ecommerce platform; however many companies limit measurement of Total Cost of Ownership (TCO) to a few common questions:
- Annual license subscription
- Fees based upon GMV or sales revenue that runs through the platform
- Hosting (if not included in the license or the platform is not a SaaS product)
- Ongoing maintenance and support
Yes, and...
While these questions are common and necessary, they tend to focus on the platform, not the business. To avoid sins of the past, buying committees should look past platform costs alone and look at how the business currently operates, what future possibilities need to be considered, and think in terms of channels and eco-systems.
The following five considerations provide a bigger and smarter approach to TCO:
- What will the company need in five years? This question typically is a starting point for many more questions. Companies should engage leadership on vision discussions, study business trends, audit competitors, study aspirational companies, and speak with analysts and thought leaders. However, these conversations should not be about a platform, they should be about digital transformation and inform what channels may be open in the future, what digital business models to pursue, and more. These answers will inform future needs. Now the business is thinking about future proofing its investment in ecommerce and managing multi-channel ecommerce are now part of the TCO conversation.
- Speaking of multi-channel… How is multi-channel commerce being managed today? If a company is considering a new ecommerce platform, why not look for efficiencies and manage more channels and stores from one platform?
- Speed to market. Need to quickly launch a new ecommerce store or support a new channel? What is the opportunity cost of not moving fast?
- Upgrades. How often are upgrades needed and what is the effort? For many monolithic platforms, an upgrade is almost like a complete replatform. What is the investment in upgrading and what is the cycle? Often this can be another six figure investment every three years.
- How does this affect human capital? Think an ecommerce platform can’t affect employee morale and turnover? Think again. Bad technology choices can have an impact on technology teams, ecommerce teams, and particularly inside sales and customer service teams that assist customers with online ordering, returns and more.
Total cost of ownership is a significantly bigger consideration than software license costs and maintenance. Thriving progressive organizations approach digital investments from an enterprise perspective.