The biggest cost drivers of a digital commerce business
Determining the total cost of operation, also known as the total cost of ownership (TCO), is an important part of evaluating an existing e-commerce solution as well as introducing a new one.
Many vendors of e-commerce solutions advertise relatively low base prices for using their software on their websites. These costs are usually just the tip of the iceberg, and information on the costs actually incurred is almost always missing. In fact, this is also the case on Paloma's pricing page. The reason is that an e-commerce solution involves many aspects, and in most cases the software has to be adapted to the company's processes.
This article is meant to help you look behind the scenes, shed some light on the matter and make the actual costs for your company easier to estimate.
Among other things, the following items represent costs that are not immediately apparent:
- Consulting, requirements analysis and solution definition
- Setup costs / commissioning based on given requirements
- Integration of existing systems such as ERP, PIM and CRM
- Integration of B2B partners without their own IT
- Product customizations such as additional features
- Custom shop solutions, in particular the resulting development costs
- Data migration from various systems
- Internal and external training
- Maintenance and operations, including the required hardware and setting up redundancy
Consulting, requirements analysis and solution definition
At the start of an e-commerce project, the desired solution needs to be determined based on the necessary business and technical requirements.
Basically, asking the right questions already gives you an indication of the additional costs the desired solution will incur.
- Which features do I need, and which ones do I get with the product?
- Can I map my processes with the given features?
- Which systems in my system landscape need to be integrated? Can I connect them to the e-commerce system?
- What data needs to be processed, and can the system import and export it using standard mechanisms?
- Does similar data from multiple systems need to be merged and consolidated? Does the software support me in doing so?
- Which specific customizations are needed? Are special processes or features required? Can the system's processes be adapted accordingly?
- How important are technical requirements such as high availability or processing speed, as well as process transparency?
- How important is support from the product vendor? When and for what do I need support?
If the e-commerce solution cannot be used without customization, appropriate consulting is needed.
After your own rough assessment, a concrete definition of the required solution is usually worked out together with the product vendor or partner companies in a dedicated preliminary project.
In our experience, a preliminary project using Paloma takes one to two weeks, depending on the scope of the solution. Depending on the degree of customization, somewhat more time should be planned for this.
Setup costs / commissioning the software
By and large, setup costs arise from setting up and commissioning the e-commerce software. This is done either directly at the vendor or on your own hardware in your own data center. Where possible, a setup at the vendor is preferable, since it usually eliminates a major cost item and also keeps maintenance costs low.
Depending on the degree of customization, additional setup costs may arise, for example for setting up or configuring the interface between systems or for providing the integration of B2B customers.
A setup with Paloma is usually completed within hours or a few days, depending on the required system specifications. For a setup in your own infrastructure, you should allow somewhat more time, in line with the company's internal IT processes.
To be continued
In the second part of the series, we explain the costs of both internal and external integrations and also show which costs can arise when customizing the e-commerce software.
Header image: Photo by Pixabay on Pexels; Figure 2: Photo by Christina Morillo on Pexels; Figure 3: Photo by Flickr on Pexels Note: The images have been cropped and compressed