Open Source vs SaaS vs On-Premise e-Commerce

Some more sensational research from Gartner. While each solution has it's pros and cons, there are a few key drivers that will help any size company make the best decision for their business requirements.

OPEN-SOURCE COMMERCE PLATFORMS

Definition: Open-source digital commerce platforms can support the creation of an entire commerce application or its components (for example, a shopping cart) for integration. This software has features such as shopping cart functionality and product catalogs that enable store owners to set up, run and maintain online stores. OSS is generally available free under a GNU general public license or similar license types. Fees may exist for varying types of membership and support.

Trend Analysis: Clients' concerns about using open source for a digital commerce center primarily on this question: "Is digital commerce OSS scalable, secure and robust enough for large-scale transactional sites, given that many startup companies that use open source are not highly transactional?" Two solutions with the largest installed bases are Magento Community Edition and WooCommerce (for WordPress). Some solutions are mature, others may take up to two years to mature to the standards of today's licensed software, and longer to match the capabilities of the current SaaS digital commerce offerings. All current OSS solutions are, fundamentally, freely available code, so software is download-based rather than provided as SaaS platforms. Most OSS for commerce is managed by a vendor selling support, managed service hosting and/or a commercial enterprise edition, which can all help with scaling as a business grows.

Time to Next Market Phase: Two to five years.

Business Impact: The adoption of OSS for certain aspects of digital commerce — such as application servers, OSS and databases (for example Linux, Apache, Nginx, MySQL, MongoDB, PHP and Java) — has been mainstream for more than five years. However, many large enterprises are wary of adopting open source for large-scale digital commerce sites, because of concerns over product support scalability. Where OSS is used, there is often a system integrator managing delivery and maintenance as a managed service. In addition, newer low-cost SaaS cloud platforms are becoming more attractive than OSS to smaller businesses, because the infrastructure management issues are removed.

User Advice: Organizations with IT resources that are well-versed in web development and digital commerce often gravitate toward OSS to customize and develop. However, scalability should be a major point to explore, as is the investment of dedicated resources to build, run and develop these platforms versus simply buying best-of-breed functionality from an on-premises or SaaS vendor. If digital commerce is not considered an organization's core business, or if budget is extremely limited, carefully weigh the cost of customizing an OSS solution against buying or renting a SaaS solution.

Sample Vendors: AgoraCart, Apache, Broadleaf Commerce, Commerce Guys, CubeCart, JadaSite, Hotwax, DS Data Systems, Magento Commerce, OpenCart, osCommerce, OXID eSales, PrestaShop, Shopizer, Shopware, SoftSlate, Solveda, Spree Commerce, TomatoCart, Ubercart, VirtueMart, WooCommerce, Zen Cart, Zeus Cart.

SAAS COMMERCE PLATFORMS

Definition: Digital commerce SaaS is a suite of shared software applications that enable online selling and are delivered uniformly to client subscribers in two primary variations: private (single-tenant or instance) or community (shared or multitenant) plus hybrids between them. All the applications leverage sharing the application stack and are based on a common architecture, code and data definitions. These applications are owned, delivered and managed remotely by providers and are most commonly priced as operational costs to customers rather than as traditional capital expense for software.

Trend Analysis: SaaS digital commerce platforms are popular among SMBs and an increasing number of large enterprises. SaaS platforms are also popular selections for brands and manufacturers selling directly to consumers for the first time, or for organizations that are expanding to new, international markets. SaaS platforms are less popular with organizations facing complex content management, vertical-specific or other issues that would usually require significant platform customization. For more information on cloud platform options and pricing, see"Digital Commerce Platforms Moving to the Cloud: The Steps to Take and the Benefits You Can Expect."

Time to Next Market Phase: Two to five years.

Business Impact: Choosing between on-premises or hosted and among SaaS digital commerce platforms means choosing between a capital expense "ownership" model and an operational expense "usage" model, with differences in terms of budget ownership and balance sheet effects. Hybrid solutions are also available, whereby SaaS commerce engines can be a service integrated to a more traditionally hosted platform, or single-tenant SaaS solutions can have multitenant SaaS components.

Additionally, owning a software license generally entitles an organization to customize its digital commerce environment as it sees fit, whereas SaaS platforms are delivered as pure functionality, with variable scope for customization and third-party integration, depending on the vendor. At the extreme end of this trade-off, highly customized platforms can quickly become "orphaned" if vendors do not support the organization's modifications in future versions, while SaaS platforms, which use templates that may or may not be customizable, can limit an organization's ability to innovate.

User Advice: Key drivers for SaaS are:

·        The "hands-off" style of IT enables redirection of limited in-house staff to other responsibilities, because the SaaS provider is responsible for continuous operations and ongoing support.

·        Deployment can be rapid and feature and functionality enhancements can be delivered more rapidly, because SaaS vendors are able to continually update their platforms.

·        Upfront costs are typically lower with a pay-as-you-go pricing model, but overall costs may not be less expensive than on-premises alternatives in the long run. Monthly minimum pricing is also beginning to appear in contracts.

Organizations using SaaS:

·        Have urgent, short launch timelines

·        Are brand manufacturers experimenting with direct-to-customer commerce

·        Seek to expand to new international markets

·        Have limited IT resources for digital commerce initiatives

·        Are not interested in the larger upfront costs that often accompany on-premises or hosted solutions

When considering SaaS versus on-premises or hosted packages, organizations should consider their business model requirements, internal resources available and, especially, the total cost of ownership over five years. Done well, SaaS platforms enable organizations to focus on managing commerce capabilities instead of applications and infrastructure, which is why many organizations choose this model. Others seeking highly differentiated capabilities, with IT teams or digital consultancies able and willing to deliver them, will choose on-premises solutions or build their own in-house solutions. In the latter case, developers often leverage open-source code (see the Open-Source Commerce Platforms section).

As the popularity of SaaS platforms has grown, the functionality of the platforms has improved. Organizations that are outgrowing, or are unhappy with, their on-premises or hosted platforms should evaluate a SaaS offering.

Sample Vendors: Aptos, Apttus, Avangate, Avetti, BigCommerce, cleverbridge, CloudCraze, commercetools, Corevist, Salesforce, Digital River, EKM, Elastic Path, IBM, Intershop, Insite, Jagged Peak, MyWebGrocer, Oracle, Shopify, ShopWired, Volusion, VTEX, Wix, Kooomo.

ON-PREMISES COMMERCE PLATFORMS

Definition: On-premises digital commerce platforms support all the basic functionalities required to support a digital commerce site. Some vendors also offer hosting services for their commerce applications, either directly or through third-party infrastructure as a service providers.

Digital commerce platforms facilitate online transactions or purchases, as well as the creation and fostering of a continuing online relationship between seller and buyer, whether B2B, B2C or B2B2C. Digital commerce platforms provide basic and enhanced functionality that supports both web and mobile commerce for the selling of products and services via multiple digital storefronts, and the ability to manage multiple subsites, brands or markets centrally.

Trend Analysis: The digital commerce platform market is highly fragmented — with megavendor suites each representing an 8% to 9% market share, followed by a long tail of midmarket and entry-level pure players. In-house implementations, usually based on open-source software, make up a significant percentage of users.

Commercial platforms suitable for very large implementations usually feature ease of integration with back-end operations and financial systems; flexibility and robustness of store management tools and reporting; and the ability to scale and manage multiple store instances across multiple brands, business units, geographies and customer sets.

Many vendors of mature on-premises platforms have embraced the cloud and SaaS as a strategic direction and are beginning to migrate their platforms or look to replace them. For the next few years some platforms will be hybrid on-premises/SaaS, as newer components (for example, customer analytics, marketing campaigns or search) make more sense to take directly to SaaS rather than providing them as software. Additionally several vendors are now able to cloud host their platforms as a managed service (in other words using the SaaS model), meaning that some of the benefits of cloud are realized (faster set up, simpler contracts, managed services) but without the efficiencies (for the vendor) of multitenancy or true autoscaling. These vendors are seeing very few traditional on-premises sales.

For this reason, on-premises commerce platforms are likely to move around the IT Market Clock more rapidly, as products evolve toward SaaS and leave the definition of this asset. Although the platforms differ in many ways, at a high level their capabilities are now equivalent, and cost (alongside compatibility with other parts of the IT estate) has become a primary motivation for investment.

Time to Next Market Phase: Less than two years.

Business Impact: Choosing the right digital commerce platform directly impacts efficiency and effectiveness. Efficient catalog management interfaces can drastically reduce implementation times and costs when launching sites and enable digital commerce managers to react more easily to changes in promotions, branding and experience design. Effective merchandising management can impact average order value, while good cart and check-out processes help to reduce abandoned carts.

Platforms that are too simple or with overly constrained templates will hamper an organization's ability to innovate and deliver a differentiated commerce experience; platforms that are overscaled for an organization's internal capabilities will result in cost overruns and paralysis as organizations struggle to harness complex tools and technology. In addition, the delivery model (from on-premises to multitenant SaaS) has a direct impact on an operational profit and loss (see the SaaS Commerce Platforms section).

User Advice: Organizations should start with a holistic vision for customer experience, and identify critical commerce management capabilities as a part of that larger whole in order to support their business model (physical goods versus services and content; direct versus indirect selling; and transactional selling versus considered purchases). They should also clearly work out the desired operational model between their internal IT teams, vendor service organizations and third-party providers (such as web agencies or system integrators). Additionally, organizations should consider the ecosystem of products that will work with the core digital commerce platform before beginning their selection process. Based on this, organizations can more easily find a good fit for their business and operational models (on-premises versus. SaaS; product versus service delivery; and the mix of internal versus outsourcing).

Sample Vendors: Active Commerce, Avetti Commerce, Broadleaf Commerce, Emeldi Group, Episerver, Exact Abacus, HotWax Systems, IBM, Intershop, k-eCommerce, Kentico, DS Data Systems, Magento Commerce, Nexternal, Oracle (Commerce), Oracle (iStore), Ovata, OXID eSales, Sana Commerce, SAP, Shopware, Sitecore, SoftSlate, Spryker, uCommerce, Unilog, WebLinc. 

Check out the complete article here: https://www.gartner.com/doc/reprints?id=1-3NI5VCD&ct=161208&st=sb

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