WHITEPAPER Ecommerce Platform Comparison: Reducing Total Cost of Ownership with Znode When compared to other competing platforms, Znode s ecommerce solutions offer industry leading flexibility and the ability to create a rich user experience that leads to a significantly higher return on investment. This, in turn, reduces overall total cost of ownership and allows our customers to achieve higher profitability. -Travis Williams, Director of Marketing SK9-5.27.11
Table of Contents Introduction...3 Understanding the Total Cost of Ownership Analysis...4 It s all about the Customer Experience...5 Focus on Transaction Quality...6 Ecommerce Business 3 Year Example - Analysis...7 The Bottom-Line...10 Benefits of Znode...11 Conclusion...12 2
Introduction Picking the ideal ecommerce platform for your project can be a complex and time consuming task. In this whitepaper, we will illustrate how doing a total cost of ownership (TCO) analysis can help you make the right platform choice for your business. Understanding why TCO is important for strategic business decisions It is a common tendency for businesses to look at the cost of implementing an ecommerce solution as the total cost when in reality, it is just a fraction of the cost. At the end of the day, for most businesses, the reason for deploying ecommerce is to increase revenues, brand loyalty and efficiency. Whatever your key business objectives, doing a TCO and ROI analysis will help closely align those objectives to your ecommerce solution. Operating an ecommerce enterprise Ecommerce usually involves a number of components such as software, development, infrastructure, integration, marketing & merchandising, system administration, reporting, ongoing maintenance, PCI compliance, etc. It is critical for your management team to have a clear understanding of the full life cycle and eco-system of your ecommerce operation to achieve the best possible return on investment (ROI). Selecting an ecommerce platform and understanding of types Ecommerce platforms come in 2 models licensed software and SAAS (software as a service). Licensed software can be deployed on your own servers, which may reside in an external hosting facility or in your own data center. Licensed software platforms are also based on different core technologies such as.net, Java, PHP, etc., which may be an important consideration depending on your technical resources. On the other hand, SAAS ecommerce services are hosted solutions that usually charge a monthly subscription fee and a percentage of your revenues. SAAS services are intended to be turnkey solutions with very limited customization when compared to licensed software. Why free isn t really free: Evaluating the open source model Some licensed software are marketed and available as open source which means all the source code is free of cost. Open source software usually comes with no warranties and often requires significant amount of development work to ensure reliability the added cost of development takes away the advantage of free software and adds additional overhead which must be taken into account. Znode Multifront is sold as licensed software that includes over a million lines of customizable source code combining the benefits of an open source platform with the reliability of enterpriseclass software. 3
Understanding TCO Analysis To perform a TCO analysis for your ecommerce business, you should take into account the following factors: Software licensing fees Software may be licensed on a perpetual or subscription basis and fees are generally based on your configuration. Revenue share Some SAAS platforms will charge a percentage commission on your gross online sales. Additional third party software Check to see if there are third party software such as databases, operating systems, etc that would need to be licensed. Discovery phase The most crucial part of the overall project is the requirements gathering phase. Make sure that you dedicate sufficient time and resources to pin down detailed requirements. Developer recruitment and training Depending on the software platform selected you may need to hire technical resources and provide for some training to get them up to speed. Development This phase is a typical IT development cycle that needs to be managed closely using project management best practices to keep costs down. Integration cost Your ecommerce platform may require customized integration with your back-office system (such as ERP or accounting). Performance/stress testing Before you can switch your ecommerce site live, you should perform a stress testing under simulated load to ensure that it can handle the traffic. Quality assurance testing Thoroughly testing every part of your ecommerce website can be time consuming and can generate lots of bugs. Plan for enough contingency and resources to handle any issues. PCI compliance You may need to allocate budget for PCI audits which would depend on the amount of online revenues that would flow through your ecommerce website. Infrastructure and hosting Costs depend on the performance, redundancy and level of support you need from your hosting provider. Ongoing maintenance Figure out the costs to make incremental changes to the ecommerce website after it has been deployed to production. You should also consider the costs resulting from deployment downtimes. Adding additional sites Analyze how much it would cost to add more sites incrementally to your ecommerce infrastructure. Future scaling Find out how much it would cost if your website had to handle significantly higher traffic and transaction volumes in the future. 4
It s all about Customer Experience To ensure the highest possible ROI from your ecommerce business, your website should deliver a rich experience that is custom-tailored to your audience. Here are some key factors to consider: Flexible Branding Every business has unique branding needs. You should pick a software platform that is flexible enough to address all of your branding guidelines. Znode Multifront has a Flexible Architecture that enables you to create a completely customtailored website with virtually no constraints. Navigation & Flow Enabling customers to find the products they are looking for using an easy to navigate website is key to increasing conversions and customer loyalty. You should pick a software platform that allows you to easily customize the site navigation based on your customer behavior. Znode Multifront has a completely flexible faceted navigation that enables you to achieve higher conversion rates. Personalized Content & Localization It is a well-known fact that personalizing content and promotions can significantly increase ecommerce conversion rates. You may also need to have localized content (such as languages, taxes, shipping options, etc). Znode Multifront enables you to easily manage personalized content and promotions based on customer profiles. Marketing Promotions & Management Marketing departments need the flexibility to run timely promotions based on a wide variety of parameters such as customer profiles, geographical location, events and more. Some business specific promotions may not be handled by ecommerce platforms out of the box you should make sure that your ecommerce platform is flexible enough to allow for such customizations. Multiple Stores Based on Channel/Brand Needs It may be more efficient to create multiple storefronts for different channels (B2B, B2C, etc) or your sub-brands. This will enable you to present completely different catalogs, promotions and content based on clearly defined segments. Znode Multifront enables you to create multiple stores off a single master catalog thereby significantly reducing costly and time consuming management effort. Efficient Fulfillment & Customer Service To ensure a seamless customer experience, products ordered by customers should be transmitted to your ERP system in real or near-real time for maximum benefit. You should ensure that a tight integration between the ecommerce system and ERP is part of the overall solution. 5
Focus on Transaction Quality One of the most overlooked but critical pieces to analyzing TCO is what we define as the Transaction Quality. At the end of the day, an ecommerce website should enable customers to purchase products without any issues. Poor Transaction Quality will significantly affect your TCO and lower overall ROI. Build for 99.995% website uptime Your ecommerce website should have an uptime of 99.995% or more to ensure that no transactions are lost. Znode s ecommerce software has been designed for very high performance to achieve these levels. Handle seasonal traffic spikes Depending on your business, there may be occasional traffic spikes. Your ecommerce website should be built to handle these spikes seamlessly. Build the solution to scale If your business plans to significantly increase revenues over the next few years, then you should ensure that the ecommerce website can easily scale to that level with incremental investments in infrastructure. Znode s platform has been built to achieve very high levels of scalability. 6
Ecommerce Business - 3 Year Example The following TCO analysis was conducted using data obtained from development teams, case studies, market research and customer feedback. The following parameters were assumed: Total period for analysis is 3 years Retailer s annual revenue is $2M Blended hourly rate for development resources is $90/hr Open Source Platform: Refers to the leading PHP platform Exhibit 1: Total Cost of Ownership Summary of costs for leading ecommerce platforms over a 3 year period SAAS Open Source Platform Enterprise Microsoft Commerce Server Znode Multifront $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 Thousands *The graph above displays the results of the TCO analysis for the four platforms compared in this whitepaper. See the graphs on the following pages of this document that give a detailed breakdown of costs. 7
Exhibit 2: TCO Comparison among leading ecommerce platforms (3 years) Part 1/2. Detailed breakdown of expense and cost TCO Comparisons Znode Multifront Microsoft Commerce Server Startup and operational costs Software Licensing $30,000 2 CPU/Server, 1 Production Server, 1 Test Server $40,000 2 CPU/Server, 1 Production Server, 1 Test Server Annual Maintenance $18,000 20% per year $30,000 25% per year Yearly Subscription $0 $0 Additional Software Required $9,000 Microsoft SQL Server Standard Ed., 1 CPU license $15,000 Microsoft SQL Server Standard Ed., 1 CPU license, Sharepoint Implementation Costs (1 store, medium complexity) $45,000 Avg. 500hrs development time $73,800 Avg. 820hrs development time Advanced Custom Integration $3,600 Avg. 40hrs integration effort $10,800 Avg. 120hrs integration effort Add 2 Additional Branded Stores $2,160 Avg. 24hrs UI customization $8,000 Avg. 80hrs UI customization Performance Testing/Validation $0 Not necessary - Load test provided out of the box $15,000 Hosting/Infrastructure Costs $28,000 2 servers at Rackspace $43,200 3 servers at Rackspace (seperate Sharepoint server) SEO Management Costs $9,360 Can be managed easily by onsite resource, 4hrs/mo $37,440 Training Cost (Tech + Marketing) $10,800 1 week average per year $21,600 2 weeks avg. per year Ongoing Maintenance $51,840 1.NET resource for 16hrs/mo @ $90/hr $144,000 1.NET resource for 40hrs/mo @ $100/hr Total Cost (3 Years) $208,560 $438,840 8
Exhibit 2: TCO Comparison among leading ecommerce platforms (3 years) Part 2/2. Detailed breakdown of expense and cost TCO Comparisons Open Source Platform Enterprise SAAS Startup and operational costs Software Licensing $0 2 CPU/Server, 1 Production Server, 1 Test Server $0 2 CPU/Server, 1 Production Server, 1 Test Server Annual Maintenance $0 $0 Yearly Subscription $42,000 Enterprise Edition, 3 years, 1 server $126,000 3% Revenue share Additional Software Required $0 $0 Implementation Costs (1 store, medium complexity) $73,800 Avg. 820hrs development time, $90/hr blended rate $30,600 Does not offer much flexibility and hence lower dev. cost Advanced Custom Integration $10,800 Avg. 120hrs integration effort Does not allow for advanced integration Add 2 Additional Branded Stores $3,600 Avg. 40hrs branding customization $36,000 Significant effort for branding customization Performance Testing/Validation $15,000 $0 Not necessary - built to scale Hosting/Infrastructure Costs $28,800 2 servers at Rackspace $0 Includes hosting SEO Management Costs $37,440 $37,440 Training Cost (Tech + Marketing) $21,600 2 weeks average per year $21,600 2 weeks avg. per year Ongoing Maintenance $129,600 1 PHP resource for 40hrs/mo @$90/hr $129,600 1 tech resource for 40hrs/mo @$90/hr Total Cost (3 Years) $362,640 $381,240 9
The Bottom-line The following analysis compares the TCO based on investments in each of the four platforms being compared. Exhibit 3: TCO Comparison among leading ecommerce platforms (3 years) Summary of findings TCO Comparisons Znode Multifront Microsoft Commerce Server Open Source Platform Enterprise SAAS Online Revenue Total Cost (3 years) $208,560 $438,840 $362,640 $381,240 Expected Total Cost of Ownership compared to Znode Multifront +110% +73% +83% As demonstrated on the previous pages, the total cost expected from each platform is derived from extensive analysis conducted through customer feedback, case studies, market research and discussions with several development teams. Keep in mind that this only covers TCO, which is only one component of achieving maximum ROI. 10
Benefits of Znode Overview of business benefits Rich Customer Experience: Using Znode s Flexible Platform, you can build an ecommerce solution is unique and custom tailored to your brand, allowing an exceptional experience for your target audience. Target customers more effectively and faster with relevant products which increases conversions and ROI. Beat the Competition with a Multi-Store Strategy: With Znode Multifront, there is no limit to the number of stores you can run from a single system. You can create distinct stores for brands, products sets, employee stores, B2B, B2C, affiliates, franchises, co-branded stores and more. Significantly Increase Speed-to-Market: The ability to quickly create micro-stores gives marketers the ability to launch new products and promotional campaigns faster than ever before. Znode makes this possible by sharing attributes and objects across different stores. Once the master catalog is setup, you have complete control. Increase Traffic with 20 SEO Best Practices: Multifront s platform was built from the ground up to ensure that all aspects of the code and generated stores are SEO friendly and has been tested and certified by a leading SEO agency. Increase Operational Efficiency with Seamless Integration: Quickly integrate your storefront with back-office systems, suppliers, and 3rd party services. This effectively eliminates manual processes improving operational efficiency. Reach Millions of New Customers: Push products to places your customers frequent including Facebook, Mobile Phones, Store Kiosks and more. Reduce Total Cost of Ownership: Reduce the total cost of ownership compared to other competing platforms by accelerating store deployment and significantly reducing the cost of ongoing maintenance. Go with a Trusted Brand: Leading global brands such as Waste Management, Berkshire Hathaway, Wawa, Kimberly Clark, and LoJack, trust Znode to power their mission-critical ecommerce. Overview of technology benefits Flexible Architecture: Multifront s innovative architecture allows it to be easily customized to virtually any business requirement no matter how complex. Integrate Seamlessly: The Integration Middleware allows you to easily integrate your storefront with virtually any backoffice system or 3rd party services. Scale Quickly for high traffic: Multifront has been tested to scale for high traffic and mission critical ecommerce requirements exceeding 4+ Million unique users per month. Reduce IT Risk: Eliminate the risk of being boxed-in by proprietary software by providing a best practices framework instead of black-box software. Follow Ecommerce Best Practices: Multifront has been built meticulously to follow ecommerce best practices, leaving you to focus on your business specific requirements. 11
Conclusion As demonstrated in this whitepaper, it is important to carefully consider your overall business objectives before picking an ecommerce platform. Using Znode Multifront, you can significantly lower your TCO compared to other platforms and build an ecommerce solution that delivers a rich customer experience, high transaction quality and higher overall ROI. Leading brands worldwide have placed their trust in Znode to run mission-critical ecommerce applications. We look forward to working with you on your next ecommerce project and becoming the platform of choice to run your online enterprise. If you would like to learn more about achieving lower TCO and maximizing your ecommerce ROI, please contact us today! 12
About Znode, Inc. Znode is a leading provider of innovative ecommerce software solutions trusted by global brands. Our ecommerce platform s extreme flexibility enables companies to build online storefronts with rich customer experiences and high transaction quality thereby maximizing their online effectiveness. Contact Us Znode, Inc. 8760 Orion Place, Suite 120 Columbus, Ohio 43240, USA Tel: 1.888.755.5541 Intl: 1.614.768.1150 Web: www.znode.com Resources Product Overview: Live Demo: Customer Portfolio: www.znode.com/znode-multifront www.znode.com/demo www.znode.com/portfolio Notices 1. Znode does not guarantee the results presented in this TCO analysis. Results may vary depending on your individual business needs. We advise you to use this document as a guideline and perform your own TCO and ROI analysis. 2. Microsoft is the registered trademark of Microsoft Corporation 13