The key to success when starting an eCommerce business is choosing the right technology. Depending on how well you choose, your eCommerce platform can either facilitate business growth or stunt it.
While comparing functionalities and design is essential, remember to also take note of the real implementation costs. Don’t rush this decision: setup costs (a one-off expense) are only a fraction of the Total Cost of Ownership.
To give you a general idea, costs for IT systems can consist of:
A one-off fee for customizing the platform to your needs, including design, development and administration costs. No platform is truly off-the-shelf as all businesses have unique needs (such as graphics and visual identification). Costs vary by clients: for dedicated platforms and open-source platforms it’s usually more than10,000 USD, often more.
License Fees/Subscription Plans
Consider license fees in the 2-5 usage period for SaaS platforms or proprietary systems like hybris and IBM. Since that is the lifecycle of standard enterprise software (the value depreciates and the software must be replaced). Pricing varies, with SaaS software from tens to hundreds of dollars monthly (often priced per user, i.e. administrator), while with off-the-shelf solutions costs can add up to many thousands of dollars per year (in the price per server model).
Dedicated platforms, solutions installed on your server and open-source systems alike often charge for support on a monthly basis. Administrator maintenance includes backups, maintaining availability values and incident handling (a SLA). Often, a lump sum is charged which includes a fixed number of hours of team support available and a fee for handling incidents in a specified time. Many companies pay for support based on the time spent on a task (Time & Material), a much more effective solution. Cost is typically under 20,000 USD/monthly.
A site has to be hosted on a server to become available for visitors. If your site is small-sized (up to 10,000 UU/month), you will only need a single all-in-one server (a database and application server, etc.). The cost of is up to 200-300 USD per month. With complex applications that require multiple high-bandwidth servers costs add up to several thousand dollars monthly. Keep in mind that this fee will not usually include full administration support (see maintenance).
Software engineers often say there’s simply no such thing as an end to developing an application. When you look at live stores, it’s hard to disagree. The sites that don’t change and adapt to user and business requirements (promotions, new payment methods, etc.) disappear off the market. Back-end programming often involves enhancing a store to adapt it to higher traffic. Costs are monthly on a Time & Material basis and can sum up to several thousand dollars (depending on the developer team size).
To get a bare-bones webshop running, you will need to:
- Go to a sales meeting, draft an agreement – 4 man-days
- Design system interactions – 1 man-month
- Design visuals – 1/2 man-month
- Slice views to HTML – 1/2 man-month
- Set up store software and integrate it with the enterprise system – 3 man-months
- Test, fix and run the store live – 1 man-month
- Communicate with the client – 1/2 man-month
In total, the time investment is 7.4 man-months. With reasonably-priced outsourcing, the project’s market cost amounts to about 25,000 USD net.
Additional expenses are at about 5-10 thousand USD/month (hosting and simple programming tasks). In practice, if your store grows dynamically with new functionalities added regularly, the monthly costs fluctuate at about at least 15 thousand USD/month (apart from the SLA and hosting, this sum includes a programmer’s full salary and 1/4 FTE for a project manager).
And remember, these calculations don’t cover basic business expenses like the costs of hiring category managers to run the store and other work-related costs.
Published October 8, 2015