An Amazon Webstore Guide

Evaluating Your Platform OptionsBuild, Buy, or SaaS?

© 2014 Amazon.com, Inc. or its Affiliates

webstore.amazon.com2© 2014 Amazon.com, Inc. or its Affiliates

Once a company has decided to implement a new eCommerce platform, it must determine what type of solution best meets its business goals:

• Built in-house – A custom-made platform created and maintained internally

• Licensed – A license for a platform built by a third-party vendor and maintained internally

• Software as a Service (SaaS) – A subscription-based solution that is built and maintained by a third-party vendor and may be hosted in the “cloud”

Although evaluating these options may seem overwhelming, there are five main characteristics that will determine which platform is a good fit for a business:

• Total cost of ownership (TCO)

• Implementation time

• Integration with the existing system

• Frontend flexibility

• Backend scalability

webstore.amazon.com3© 2014 Amazon.com, Inc. or its Affiliates

TOTAL COST OF OWNERSHIP

The first thing a business decision maker has to determine when considering a new eCommerce platform is its total cost of ownership (TCO) over the course of a typical 3–5 year life cycle.1 When estimating the TCO, it is essential to include costs associated with maintenance in addition to any upfront costs. Time and resources must be accounted for in the calculation of TCO.

• Built in-house – Although a custom-built platform created internally has no purchase price, it is important to consider the time it will take IT resources to create a custom eCommerce platform. Designing and deploying a platform internally also requires hardware resources, which in themselves need to be maintained by IT staff.

• Licensed – Because a licensed platform requires far fewer resources and has a single purchase price, it can be easy to underestimate its long-term TCO. But, with sufficient technical resources, such as data centers and an engineering or IT staff, some of the maintenance costs of the platform will be defrayed, and buying a license for a platform may be the most practical choice.2

• SaaS – If the organization doesn’t already have sufficient technical resources to maintain a platform internally, or wishes to deploy those resources elsewhere, its decision makers should consider outsourcing the design, building, and maintenance of the platform to a SaaS provider for a monthly subscription fee. In such a case, the cost of the subscription over the platform’s life cycle will likely be less than the cost of handling any or all of these tasks internally. Indeed, research has shown that, over a four-year period, the TCO of SaaS solutions can be nearly 50% less than those built in-house or licensed from a third party.3

Tip: Organizations should include financial, technical, and human resources when estimating a platform’s TOC over its lifecycle, and remember to factor in the resources currently at the company’s disposal.

webstore.amazon.com4© 2014 Amazon.com, Inc. or its Affiliates

IMPLEMENTATION TIME

Another characteristic of switching to a new eCommerce platform is the time it takes to implement it. At first glance, the total implementation time may seem to be the same as the time it takes to launch, but research shows that the hidden factors of implementation—such as readying data for the new system, importing the data, establishing process changes, and training staff and any external partners—often take up most of the time required to set up a new platform.4 Not only should decision makers consider the total implementation time of a particular solution but also the importance of getting the new platform tested and live in production within a certain timeframe or by a certain time of year, such as the holiday shopping season.

• Built in-house – Depending on the size of the organization’s engineering staff, designing a custom platform, gaining the buy-in of various stakeholders, and building a custom solution may take a considerable amount of time. This option typically requires 5 to 10 times more work than implementing an outsourced platform.5 Nevertheless, custom-built solutions may eliminate or greatly reduce the resources needed to sanitize data and import it to the new platform.

• Licensed – Although implementing a licensed solution greatly reduces engineering time, the issues of data sanitation and importation as well as

training staff and external partners still require attention. Once a business addresses these issues and completes the initial implementation of a licensed solution, it should upgrade it regularly to stay current with the competition. However, these upgrades are time consuming and should be factored in to the total implementation time of the platform over its lifecycle. In one survey, 67% of eCommerce leaders polled said that each upgrade to their licensed solution took over one month to complete. The time required to upgrade caused 39% of respondents to wait two or three years before implementing an upgrade to their platform. Upgrading at

webstore.amazon.com5© 2014 Amazon.com, Inc. or its Affiliates

this rate puts businesses in danger of falling behind trends and missing out on key user-experience features.6

• SaaS – A SaaS platform is similar to a traditional third-party software solution with regard to data and training. However, SaaS vendors are invested in keeping businesses as long-term customers, which means their support

teams are invariably willing to help businesses implement their software as efficiently and effectively as possible.7 This type of customer service—and the automatic upgrades included in most subscriptions—may be why SaaS solutions have become known for their time-to-market advantages over their custom-built and licensed counterparts.8

INTEGRATION WITH THE EXISTING SYSTEM

When estimating the time it takes to implement a particular solution, consider how that solution integrates with other parts of the existing eCommerce platform. Most retailers have as many as 15 different backend technologies in their data center that work together to power their site.9 Finding a new platform that either integrates well with these components or replaces some of them is no easy task.

• Built in-house –If a custom-built solution makes sense in light of the factors outlined in this article, an organization can incorporate various parts of their existing system into the design of their new platform.

Tip: Companies should consider the less obvious aspects of implementation, such as data sanitization and transfer, along with periodic upgrades throughout the platform’s lifecycle when estimating its total implementation time.

webstore.amazon.com6© 2014 Amazon.com, Inc. or its Affiliates

• Licensed – If building a custom platform isn’t practical but the organization has a talented staff of software engineers, the company may consider purchasing a license for a licensed solution and having its engineers design adapters to connect the new platform to parts of the existing system, as necessary.

• SaaS – The alternative is to use a SaaS solution with a ready-made and

comprehensive set of application programming interfaces (APIs).10 Integration through APIs ensures that different parts of the system can communicate with the SaaS platform and vice versa. Although this alternative does require some engineering resources, it doesn’t entail nearly as much engineering work as building a custom platform or even writing code to connect a licensed platform to existing system components.

FRONTEND FLEXIBILITY

The ability to tailor a platform in a way that complements the other parts of the existing system is only one aspect of the flexibility that a new platform should offer. To stay current with mobile and social trends, businesses need a platform that will work for them rather than against them as they try new approaches for reaching specific types of customers and increasing conversion.For example, to gain an edge in its segment, a business may decide to beta test a new site layout with a portion of its customers, allowing it to gather data on the layout’s effect on sales before committing to the new

design. Such practices are not uncommon – in a recent survey of leading retailers and manufacturers, 70 percent of respondents said that they were focused on targeting individual segments of their customer base, and 61 percent reported that testing new brand concepts was one of their company’s goals.11

• Built in-house – If a business builds its own platform, it can change the system to test any new approach provided it has the time, resources, and industry knowledge to do so effectively.

Tip: Business owners should carefully evaluate the components of their systems when choosing a new platform. They may be able to find ones that replace parts of their system or ones that can be configured to work well with the components they need to keep.

webstore.amazon.com7© 2014 Amazon.com, Inc. or its Affiliates

• Licensed or SaaS – Most licensed and SaaS solutions allow a great deal of frontend flexibility. Both may also update their offerings to keep pace with the industry, allowing for greater agility and adoption of new features than is possible from a platform built and maintained entirely in-house.

BACKEND SCALABILITY

The flexibility of a platform depends on how much—and how quickly—the existing system can scale to handle changes in traffic on the site. If the new marketing approach or site structure the company tries results in more customers visiting its site, is that company confident that it can accommodate them all without significant delays in page-loading times? Consider also that it’s not unheard of for customers to view more than 100 items before putting items in their shopping carts, with customers on some sites averaging 500 item views prior to placing items in their carts.12 The database redundancy, or having copies of data available on separate servers,

required to handle this kind of traffic is also a crucial aspect of disaster recovery. If a server malfunctions during a natural disaster, will the other servers be able to compensate for the loss?

• Built in-house or Licensed – If an organization chooses to build its new platform or license third-party software, it must make sure its data center has the capacity to serve a sudden influx of customers, particularly if the company has several sites that target individual segments of its customer base or if the business model is based on flash sales or selling high-demand items.

Tip: Companies should not underestimate the importance of frontend flexibility when evaluating platform options. Platforms need to be agile enough to let businesses stay current and try new approaches, and organizations should make sure they have the human and technical resources available to support this agility.

webstore.amazon.com8© 2014 Amazon.com, Inc. or its Affiliates

• SaaS – In contrast, SaaS solutions handle spikes in site traffic by using a series of servers that would be highly impractical and too costly for most organizations to maintain on their own. This key benefit of SaaS solutions allows them, in effect, to outsource the low-level technical aspects of their business, freeing up their

resources to concentrate on higher-level tasks like merchandising and customer acquisition. The competition may very well be taking advantage of the resources typical of a SaaS solution, with studies showing that almost half of e-retailers have fully or partially outsourced the back-office functionalities of their sites.13

Tip: The effort an organization puts into marketing means little if its eCommerce platform cannot accommodate changes in its site traffic. The backend scalability needed to support an influx of customers requires extensive hardware resources that companies may not have internally.

webstore.amazon.com9© 2014 Amazon.com, Inc. or its Affiliates

SUMMARY

No two eCommerce platforms are identical, but they can be grouped into three categories: custom built, licensed from a third party, or SaaS. When choosing among these options, consider the following characteristics of each platform type:

• Total cost of ownership. The solution with the smallest purchase price may prove to be the most costly over time, particularly if it yields little improvement in conversion and requires a great deal of internal maintenance.

• Implementation time. The less obvious, related aspects of implementation can take more time than the actual implemen-tation, but SaaS providers want compa-nies to extend their subscription and will be more than willing to help them imple-ment their system as quickly and correctly as possible.

• Integration with the existing system. Engineering effort can make a custom-built or licensed solution fit with the exist-ing components of a company’s eCom-merce system, but a good SaaS provider will have APIs that the platform can use to communicate with these components.

• Frontend flexibility. Although a custom-built solution affords a great deal of flex-ibility up front, consider how quickly and effectively the organization’s staff will be able to configure the company’s platform to keep up with industry trends and new marketing approaches.

• Backend scalability. Unless the company has the data centers and IT staff neces-sary to accommodate sudden spikes of traffic to its site, SaaS is likely the best option when it comes to scalability.

webstore.amazon.com10© 2014 Amazon.com, Inc. or its Affiliates

Amazon Webstore is a complete commerce platform that enables companies to leverage Amazon technology and expertise in building and managing their direct-to-consumer business.

Commerce sites built on the Amazon Webstore platform utilize Amazon’s powerful cloud infrastructure and payment processing technology to deliver a scalable, secure online shopping experience to customers. Amazon Webstore also integrates seamlessly with selling on the Amazon Marketplace and using Fulfillment by Amazon, Amazon Prime, and other Amazon Services.

To get started with Amazon Webstore, visit the website at webstore.amazon.com or contact the Amazon Webstore team directly.

webstore.amazon.com11© 2014 Amazon.com, Inc. or its Affiliates

1 “Special Report: How to Evaluate e-Commerce Platforms.” Internet Retailer. Sept 4, 2013. Accessed Nov 18,

2013. http://www.internetretailer.com/2013/09/04/sponsored-supplement-how-evaluate-e-commerce-platforms.

2 McBeath, Bill. “SaaS vs. Licensed Software: How to Choose What’s Right for Your Needs.” ChainLink Research.

March 30, 2010. Accessed Nov 18, 2013. http://www.chainlinkresearch.com/research/detail.cfm?guid=9B49970D-

3048-79ED-9955-CA7D4E122954.

3 “The Compelling TCO Case for Cloud Computing in SMB and Mid-Market Enterprises.” Hurwitz & Associates.

2009. Accessed March 12, 2014. http://www.netsuite.com/portal/pdf/wp-hurwitztco-study-dynamics.pdf

4 McBeath, “SaaS vs. Licensed Software: How to Choose What’s Right for Your Needs.”

5 Budz, John. “The Benefits of a Pre-Packaged Ecommerce Solution, Part 2.” Gorilla Group. May 21, 2013.

Accessed Dec 3, 2013. http://blog.gorillagroup.com/the-benefits-of-a-prepackaged-ecommerce-solution-part-2/.

6 “Understanding TCO When Evaluating eCommerce Solutions.” Forrester Research. November 2012.

7 Ryan, Shaun. “SaaS vs. On-Premise Solutions.” SLI Systems. Aug 6, 2013. Accessed Nov 18, 2013. http://

newsletter.sli-systems.com/2013/08/saas-vs-on-premise-solutions.html.

8 “Understanding TCO When Evaluating eCommerce Solutions.”

9 Dusto, Amy. “E-retailers Navigate Through Vendor Consolidations.” Internet Retailer. Sept 4, 2013. Accessed Nov

18, 2013. http://www.internetretailer.com/2013/09/04/consolidation-effect.

10 “Special Report: How to Evaluate e-Commerce Platforms.”

11 Ibid.

12 Martin L. Abbott and Michael T. Fisher. Scalability Rules: 50 Principles for Scaling Web Sites. (Boston: Addison-

Wesley Professional, 2011), 81.

13 “The Agility Imperative : Embracing Software-as-a-Service to Drive Customer Intimacy in a Fast-Changing

World.”