SaaS versus on-premise eCommerce software: it’s a hot question. The typical answer you get is “it depends,” with several follow up questions. During our sales conversation, we tackle this question on a regular basis and through those dialogues we created three questions that will help guide your decision. The bottom line is that both have benefits and either can work for your business, but you have to do your homework about which will fit your needs.
note: the intention of the article is not present a pro or con or show one in better than other but more so to provide tools to define your strategy
What is your budget? It’s usually the first question when you’re in the market for a product or service. In general, the initial investment for a SaaS is relatively inexpensive. You sign up for the services you need and the vendor is responsible for all operations, maintenance, and software upgrades. For on-premise, the initial investment is higher because you have to buy the software license and invest in infrastructure to install and setup the system. The common item in both SaaS and on-premise solutions is the implementation cost. Implementation cost depends on several factors: customer experience, operations/fulfillment, and the business roadmap. One last point to consider when determining your budget is the total cost of ownership (TCO). We recommend comparing a TCO for three, five, and seven years.
What is your business road map? The business roadmap is tightly coupled with the budget because it defines what the goals are and key milestones you are planning to achieve over the next 12 to 36 months. This is applicable for any business, whether you’re a startup or an established enterprise. Two key aspects to define this are:
How does the eCommerce channel fit in the overall ecosystem? A general trend in the industry how revenue growth impacts procurement i.e. higher growth leans towards ownership and lower growth leans towards SaaS.
Where are you in the business lifecycle? Timing your investments is critical to success and gaining an advantage over your competitors.
In the long run, your company will need a platform to scale with your business. If you plan to add a CRM or ERP, on-premise might be a better route because you can integrate these solutions.
What is your goal for customer experience? Customer experience is not just the look and feel of your site. Your business’s fulfillment (i.e. how orders are processed, communication with the customer, shipping of goods) is as important as the shopping experience the consumer has on your site. On-premise software allows for the most customization because you typically have the most control over the system and integration with 3rd party systems like ERP, CRM, WMS, OMS, marketing automation, etc. It allows you to quickly respond to changes in the market and offer tailored customer experiences, which is great to meet the demands of the market. SaaS solutions offer extensions to fit similar demands. The key takeaway is who owns the customer experience — you or your vendor. Do you want a framework that along with the base features allows you to customize your solution or work from a template?
Shopping for an eCommerce platform can be overwhelming because the options are endless. A strategy defined by the state of your business and where you want to be will move you in the right direction. Both SaaS and on-premise are viable solutions delivering results of all types and size of business. Your choice will ultimately depend on your budget, business roadmap, and customer experience goals.