Balancing Act
There’s always an element of risk when deciding on a software solution for your e-commerce project. Weigh up your options carefully to get the most out of your investment
Evaluating the raft of e-commerce options can be daunting, and making the wrong choices can be costly in terms of time, finance and performance. So which route should you take?
Here, we examine some of the technology options available and find out how one retailer, Habitat, chose to go online.
Choosing the right technology
Beyond building your website from scratch, software options for e-commerce fall broadly into two types:
- ‘Out-of-the-box’ software platforms that can be purchased, installed and integrated with a selection of add-on packages
- ‘Software as a Service’ (SaaS) solutions, where the website is set up and managed by a third party on an externally hosted platform.
Both have their merits and limitations. The crucial decision is finding out which one is most appropriate for your business.
Out-of-the-box
The out-of-the-box option offers the greatest flexibility after custom build, allowing you to pick and choose the component packages that best suit your needs.
The e-commerce market is very immature, however, compared with more established software markets, like ERP, where you are likely to be able to fulfil most of your functional needs through one product.
With e-commerce, it is not so much out of the box, as out of several boxes. In other words, once you’ve purchased the basic platform (e.g. MS Commerce or IBM WebSphere), you will probably have to buy and integrate a range of additional products from other vendors in order to handle functions such as search engine, website analytics, content management, image handling and visualisation, and marketing campaign management.
Integrating a selection of different packages can be costly and complex to implement, but there a number of other challenges too.
Firstly, having to use several ‘back end’ interfaces can make day-to-day website management and maintenance more difficult and time-consuming for both IT and the business.
Secondly, having to keep a number of different packages integrated can result in higher ongoing IT development costs, due to your requirements or the packages themselves changing. Given the degree of fragmentation in the marketplace today and the likelihood of ongoing product development and market consolidation, the scale of ongoing IT development may not be trivial.
Berkeley consultant Mark Bryant says: “If you buy IBM WebSphere or MS Commerce, you may have to plug in seven or eight other packages to achieve your requirements. I wouldn’t underestimate the overhead involved in integrating these in the first place – and then keeping them integrated as things change over the life of the website.”
Software as a Service
Software as a Service (SaaS) is growing rapidly. A recent Gartner report indicated that, by 2013, 90% of e-commerce sites will use at least one product from SaaS vendors and that 40% of e-commerce sites will use a complete SaaS solution. This rise is due to the fact that SaaS offers several advantages.
SaaS websites can typically be implemented more quickly and at a lower cost than out-of-the-box solutions. This is because they are created by configuring the provider’s platform, rather than by acquiring and integrating several separate packages. In fact, many SaaS offerings can be implemented with no capital outlay at all, since any upfront costs incurred can be rolled into the ongoing management fees.
In addition, SaaS websites alleviate the resourcing and cost burden of maintaining and operating your own software and supporting infrastructure. They also typically allow for more consistent and transparent ongoing ownership costs.
There are drawbacks, however. Firstly, you are likely to have less functional flexibility, because your website will typically be configured using the same standard platform that the provider uses to host websites for all of its customers. Many platforms do come with a significant amount of flexibility built in, but it is a point worth bearing in mind, particularly for well-established providers who already have many customers on their platform – and may therefore be less willing to change in order to accommodate individual customers.
Secondly, if you don’t invest enough effort in contract and commercials, then, rather than saving you money, the SaaS approach may actually result in higher costs over the long term. With most providers, payment is typically through an ongoing fee for service or a cut of online revenue. Before agreeing terms, it is important to fully understand the implications of the provider’s proposed payment model and what it covers, compared with your other options. Then, armed with this understanding, carefully negotiate a deal and contract that not only provides the service level you need, but that makes good commercial sense for your business over the expected life of the website.
Finally, because your website will be managed externally, you need to have particular confidence in the third party hosting it. Are they a strong organisation? Are they committed to continuing in this line of business? What would happen to your website if their business were to be wound up? Conducting external due diligence and speaking to existing customers in order to develop this confidence is particularly important when going down the SaaS route.
One retailer’s experience
High street furniture retailer Habitat had to evaluate these options when it set up a new e-commerce channel in 2007. The retailer had observed significant online growth in its core product categories and saw that its competitors were already exploiting the medium. With Berkeley’s help, Habitat defined an e-commerce strategy and decided to pilot the new channel in France. It wanted to move online quickly, with limited investment and with limited impact on, or risk to, its current operations.
Jacques Dekock, Habitat’s Head of Business Information Systems, reflects on some of the most important aspects of their technology decision.
He says: “We wanted to maintain a high-quality visual identity in line with our brand and product positioning, but integrate it into a site that could dovetail with our existing back-end systems. We also needed a fast turnaround – there was a six-month set-up time – and the site needed to be user-friendly so existing back office staff across four countries could perform basic activities like activating online promotions. The main decision for us was: did we buy a solution that was top-end in terms of graphics and capability, or did we allow some degree of compromise for something that would be implemented quickly, integrated easily and easy to use by non-technical staff?”
Ultimately, Habitat went down the SaaS route with Fresca.
“They could meet all the key functional requirements, as well as some specific technical features we needed, such as being able to show 360-degree views of products. They were able to incorporate some of that rich visual material without needing lots of add-ons.”
Crucially, says Dekock, it offered sufficient flexibility in the software without costing a prohibitive amount. “We now have the capability to switch on new countries quickly. With our e-commerce model, we have worked out what needs doing and how much it will cost.”
Even with a strong e-commerce system in place, Habitat still encountered challenges. The ability to showcase products effectively in a commercial manner is not only affected by the functionality of your website software. Equally, if not more, important is the strength of the back-end systems and processes that are used to provide the site with its information.
Habitat wanted to present its products in a highly commercial way that appealed to customers: presenting ‘roomsets’ that grouped together complementary products. To do this, it needed to get to grips with and strengthen how the back-end product data would be created, maintained and plugged into the site. This is something Habitat continues to improve, as it is key to achieving the right level of commerciality to support the company’s online sales objectives.
There is one final consideration that helped Dekock make his decision: personal chemistry. “It is partly about liking the people, knowing that you can work with them and believing that they are making deliverable service promises,” he says.
Habitat’s site went live in September 2007, with an e-commerce pilot for selected products going live on the new site in France two months later. The pilot products are trading well and Habitat is now looking at options to roll out more widely.
For Habitat, SaaS and partner Fresca were the right choice, offering a cost-effective route online that fitted well with its particular business needs. But there is never a standard approach to e-commerce. Every retailer is different and has distinct requirements. By carefully evaluating all the available options and tailoring your solution, you can make sure your site brings the right net returns.