.svg)
Before signing up for any e-commerce solution, businesses must read all the fine print to understand the platform’s total cost of ownership (TCO) from A to Z. A fatal mistake for any business would be to ignore what that involves, including potential concealed opportunity and recurring costs. Over 80% of companies polled stated that they mandate a three to five-year TCO breakdown before committing to any solution purchase. This post exposes why TCO has become a prerequisite for firms involved in SaaS dealings.
This step is a no-brainer, but the first cost to factor in your total TCO calculation is the initial capital expenditure of acquiring and setting up the digital solution.
These costs may involve platform licensing, customization costs, etc., and may change depending on the size of your business, e-commerce strategy, or the pricing structure set up by the software.
You’ll also have to consider development costs, including all the expenditures necessary to market the software online to your target audience.
Once you have completed the development stage, the next headache is figuring out how to integrate the software with existing e-commerce platforms.
Even with experienced IT support, integrating ERP programs, CRMs, PIM systems, and others poses several challenges, including data migration, integration management, and application transformation.
Since integrations closely follow the development stage, pricing may depend on the required complexity and number of integrations.
You’ll likely be required to onboard new users and retrain existing ones when migrating to a new software solution.
This undertaking is usually expensive and comprehensive and may involve cross-department collaboration to make it successful.
That’s why you must account for all the training costs from pre-launch to post-launch.
When calculating TCO costs, it‘s critical to consider infrastructure costs, operational costs, and fees associated with maintaining a software solution.
You need to be very careful about sneaky transaction fees, which are usually included in the license agreement and recur throughout the life of the solution.
Each time you make a transaction, the platform vendor takes a percentage of revenue from the company’s total income. Shopify, for instance, charges 0.5% – 2.0% for each successful purchase.
Furthermore, if you integrate third-party payment gateways like Stripe, Square, and PayPal, you will be charged additional transaction fees, reducing your share of the profits.
When choosing an e-commerce solution, you can opt for a cloud-based option, which will allow you to transfer a significant portion of the running expenses to a third-party vendor.
No matter how well you care for your e-commerce product, it will eventually succumb to functionality waste and depreciation. That’s where warranty updates come in. Although many providers of e-business solutions bundle support, maintenance, and upgrades with the initial subscription, these packages are often limited and have time constraints.
Maintenance is critical to ensure your platform is healthy, and you must be aware of the costs involved. As the proverb goes, “The devil’s in the details.” Likewise, before signing on the dotted line, you need to examine the e-commerce SaaS support costs and check if they are lumped in with the subscription fees.
It’s important to remember that 43% of e-business solutions have their actual cost of ownership higher than anticipated by TCO models. When determining your total TCO calculations, it is prudent to choose a three- to five-year period. Any window shorter than this risks creating an incomplete TCO view that doesn’t account for future upgrades and maintenance.
Running a successful e-commerce store is more difficult than you think, and things can get even trickier as the business scales and evolves. However, the TCO isn’t the be-all and end-all for e-businesses; other metrics must be considered to inform purchasing decisions. Any SaaS TCO undertaking should shed light on the short—and long-term costs, allow businesses to identify potential pitfalls, and accurately project the life cycle of a digital solution.
Before signing up for any e-commerce solution, businesses must read all the fine print to understand the platform’s total cost of ownership (TCO) from A to Z. A fatal mistake for any business would be to ignore what that involves, including potential concealed opportunity and recurring costs. Over 80% of companies polled stated that they mandate a three to five-year TCO breakdown before committing to any solution purchase. This post exposes why TCO has become a prerequisite for firms involved in SaaS dealings.
This step is a no-brainer, but the first cost to factor in your total TCO calculation is the initial capital expenditure of acquiring and setting up the digital solution.
These costs may involve platform licensing, customization costs, etc., and may change depending on the size of your business, e-commerce strategy, or the pricing structure set up by the software.
You’ll also have to consider development costs, including all the expenditures necessary to market the software online to your target audience.
Once you have completed the development stage, the next headache is figuring out how to integrate the software with existing e-commerce platforms.
Even with experienced IT support, integrating ERP programs, CRMs, PIM systems, and others poses several challenges, including data migration, integration management, and application transformation.
Since integrations closely follow the development stage, pricing may depend on the required complexity and number of integrations.
You’ll likely be required to onboard new users and retrain existing ones when migrating to a new software solution.
This undertaking is usually expensive and comprehensive and may involve cross-department collaboration to make it successful.
That’s why you must account for all the training costs from pre-launch to post-launch.
When calculating TCO costs, it‘s critical to consider infrastructure costs, operational costs, and fees associated with maintaining a software solution.
You need to be very careful about sneaky transaction fees, which are usually included in the license agreement and recur throughout the life of the solution.
Each time you make a transaction, the platform vendor takes a percentage of revenue from the company’s total income. Shopify, for instance, charges 0.5% – 2.0% for each successful purchase.
Furthermore, if you integrate third-party payment gateways like Stripe, Square, and PayPal, you will be charged additional transaction fees, reducing your share of the profits.
When choosing an e-commerce solution, you can opt for a cloud-based option, which will allow you to transfer a significant portion of the running expenses to a third-party vendor.
No matter how well you care for your e-commerce product, it will eventually succumb to functionality waste and depreciation. That’s where warranty updates come in. Although many providers of e-business solutions bundle support, maintenance, and upgrades with the initial subscription, these packages are often limited and have time constraints.
Maintenance is critical to ensure your platform is healthy, and you must be aware of the costs involved. As the proverb goes, “The devil’s in the details.” Likewise, before signing on the dotted line, you need to examine the e-commerce SaaS support costs and check if they are lumped in with the subscription fees.
It’s important to remember that 43% of e-business solutions have their actual cost of ownership higher than anticipated by TCO models. When determining your total TCO calculations, it is prudent to choose a three- to five-year period. Any window shorter than this risks creating an incomplete TCO view that doesn’t account for future upgrades and maintenance.
Running a successful e-commerce store is more difficult than you think, and things can get even trickier as the business scales and evolves. However, the TCO isn’t the be-all and end-all for e-businesses; other metrics must be considered to inform purchasing decisions. Any SaaS TCO undertaking should shed light on the short—and long-term costs, allow businesses to identify potential pitfalls, and accurately project the life cycle of a digital solution.
