Find out which will work best at the initial stage of your business, which ones to steer clear of, and which are suitable for a rapidly growing business.
Which ecommerce technology to choose (SaaS, Open-Source, or a Dedicated solution)?
The problem with choosing the right solution
What is SaaS?
What is Open-Source?
What is a Dedicated solution?
Which Solution to Choose?
What are the limiting factors that will make you not choose SaaS?
The simple answer is this: choose a SaaS (Software as a Service) solution. But only because none of the five SaaS-eliminating factors apply to you.
The first is a limitation in functionalities that may be necessary, which cannot be achieved with a given SaaS ecommerce engine.
The second factor is integrations—perhaps SaaS cannot provide the required integrations.
The third is a potential limitation resulting from dependence on a single ecommerce platform provider, which may be too great a risk, especially for large companies.
The fourth factor is the desire to build intellectual property within the organization or requirements from the company management regarding technology choice, which leans towards open source.
The last factor is the desire for intensive optimization of conversion rate or SEO in an online store, which also inclines towards open source.
Open source would be a better choice if any of these limiting factors apply to your case. In all other cases, SaaS will do.
I’ve noticed a significant issue in the ecommerce market. There are so many different technological solutions available that those managing online stores or B2B ecommerce often struggle to select the technology that will be optimal for their business.
Choosing technology can be divided into two main stages.
In the beginning, we should choose the technological and billing model. This is the first stage. Here, we should decide whether we want SaaS, open-source, or a dedicated solution.
Then, within this ecommerce model, we should choose a specific solution. This is the second stage. For example, we decided to go with SaaS. We have options such as Shoper or Shopify.
In this article, I will describe how to make the best choice within the first stage.
This is a key question for directors or ecommerce managers who are transitioning from another solution and looking for something that will allow them to grow their business, and for those who are just entering the ecommerce market and their online store, or B2B ecommerce will be the first technological solution of its kind in their organization.
So, we have identified the problem: the multitude of these solutions and the difficulty of choice. But do not worry. I have a simple solution for you.
This solution will save you tens, or even hundreds of hours that you would otherwise need to spend educating yourself about ecommerce engines and technological solutions.
Let’s start by briefly explaining what SaaS, a dedicated solution, and open source are. Some of you may be new to ecommerce and these concepts are unfamiliar.
SaaS stands for Software as a Service, meaning an online store as a service. In short, when we pay a subscription, the store works, when we don’t—the store stops working.
We don’t have access to the source code of the entire online store. We get access to an administrative panel through which we manage the store’s operations, order fulfillment, and product additions, as well as the configuration and administration of the online store.
If we want to replace a small advertising banner, we do it from this admin panel.
Larger changes are generally not possible. If they are, we still have to contact technical support or the customer service desk of the ecommerce engine provider. Examples of such solutions could be IdoSell or Shopify.
The second solution is Open Source. Open Source is a license allowing us to use an online store’s open code freely. We own the skeleton of an online store, to which we have access to all source code.
We can expand this standard skeleton. An important aspect is that we manage the store code and have access to every single line of code. This gives us the ability to change any part of the store.
However, this solution also has some inconveniences, such as higher maintenance costs and the implementation of an online store. We must also remember that the full responsibility for ensuring the security of the store or platform rests with us.
Finally, we have dedicated solutions. They involve developing a store from scratch for us. We don’t use a ready-made online store skeleton but build it from zero.
So, we can build a system perfectly tailored to our requirements. The downside is the highest implementation and maintenance costs and complete dependence on the company implementing this technological solution.
In my opinion, dedicated solutions are currently the worst choice. It was okay in the past when Open Source and SaaS models offered less functionality and were less developed.
Now, SaaS and Open Source solutions offer such capabilities and functionalities that building something from scratch is unnecessary.
Dedicated solutions come with high implementation costs, especially for you, since you are creating something from scratch and high maintenance costs. We are also completely dependent on one company that coded the online store or B2B ecommerce.
Why? Because no other software houses or ecommerce agencies will want to work on code, they are unfamiliar with.
In short. A dedicated solution is out of the question.
What to choose? Start with the assumption that you need SaaS. This is quite an unconventional approach, but it makes life easier. If none of the five SaaS-eliminating factors are present, it will always be the best choice (I will return to these eliminating factors in a moment).
Why do I suggest choosing SaaS? Because in 90% of cases, both implementation and maintenance costs will be lower than for Open Source.
Another benefit is a shorter time to market (the time from the decision to implement an online store to when the store is operational and users can place orders).
Considering these factors, choosing Open Source seems to make no sense.
Of course, there are different SaaS’s that vary in terms of flexibility and implementation cost. On one end, we have Shoper; on the other, Shopify Plus.
The costs and times to implement these solutions vary, as do their capabilities and degree of flexibility. For example, Shopify is a more flexible and open solution than IdoSell.
If you opt for SaaS, choose the smallest available solution and check if it meets your business and functional requirements.
If it does, confidently choose it; if not, you should move on to a better SaaS solution and go through the various engines until you find one that meets your business and functional expectations.
The most advanced SaaS solution you will likely settle on is Shopify Plus.
If these solutions do not meet your expectations or you encounter one of the five factors limiting the choice of SaaS, you should consider transitioning to Open Source.
The selection process starts with the smallest available solutions, such as WooCommerce, and will probably end with Magento (if previous, smaller, and simpler Open Source options do not meet your needs).
I’ve identified five factors that make SaaS unsuitable for certain businesses. If you come across at least one, immediately forget SaaS and choose Open Source.
The first limitation is the absence of a unique functionality in the SaaS solution, which is key to your business.
For example, suppose you have devised a specific way of creating offers with products available in your ecommerce, which must be provided in a certain process, and you cannot replicate this functionality in Shopify. In that case, you should consider choosing Open Source.
In open source, you can access every line of code and build even very non-standard functionality from scratch. You are not limited by what is available in SaaS.You can build something from the ground up if something needs to be added.
If you can replicate unusual functionality in the SaaS model, opt for SaaS. If it’s impossible or requires complicated workarounds, you should choose open source.
The second limitation is the lack of integrations. Some SaaS models offer limited integration capabilities and do not allow unusual connections with other systems. Sometimes it happens that integration with a particular version of an ERP is not supported (and SaaS forces you to continuously update the ERP to the latest version).
If you are a large ecommerce operation and most of your order fulfillment processes are automated because your ecommerce engine is integrated with ERP, WMS, PIM, etc., and you are unable to connect the SaaS solution to such a structure, you should choose the Open Source model. After all, you will not adjust the processes to the engine’s limitations.
Integrations in the Open Source model are more flexible and can be freely built, provided that the given Open Source solution has a sensible API.
The third limiting factor is dependence on a single technological partner, which large businesses cannot afford.
What do I mean? If you are a business generating, for example, 10.000.000 EUR/USD in revenue, you should not allow your business to be fully dependent on a single SaaS solution provider.
Why? Because company strategies change. Even large technology providers change their strategy. You would want to have full control over the direction of your software development, especially when it generates 10.000.000 EUR/USD in revenue annually.
In such cases, Open Source is a better solution. If you are not using an Open Source model, only for example using SaaS, unfortunately, you have limited influence on the development direction of this SaaS and the costs (the provider can change your costs by 100% overnight, and your negotiation capabilities will be very limited).
A tech company can be sold to an investment fund, which will decide to change its strategy and target a different type of customer. In such a situation, we may be forced to rapidly change the ecommerce engine, because, with a business of, say 10.000.000 EUR/USD, it is not a simple and quick project.
💡 Find out what you should do if the Software house is not a proactive business partner!
The fourth limiting factor is company requirements and management strategy, wishing to build intellectual value.
We cannot overly rely on SaaS models for important parts of our business because they do not build the company’s value. Large public companies, listed on various stock exchanges, care to ensure the company’s share price is high because the management must deliver value to the company’s owners. A business has greater value when it owns intellectual property.
If our store is based on Open Source, that intellectual property is yours. Maybe not entirely, since you are using Open Source software and licenses, but the store is more yours than the SaaS model.
The last limiting factor that may make the SaaS model unsuitable arises when you plan to intensively optimize the conversion rate or your service for SEO.
In both of these cases, the rigidity of the platform and the lack of access to every line of code in the SaaS model make optimization difficult.
For example, conversion rate optimization usually starts with the checkout process, the shopping cart, and later the product page. Changing the checkout process and shopping cart in an online store operating in SaaS is extremely difficult.
Changes there are very limited, which is understandable since this process (transaction process) is the most complicated. If everyone could freely change this process, the SaaS provider would not be able to guarantee correct operation in every case.
However, if we want to optimize the conversion rate, we should be able to modify any part of the service flexibly.
For this purpose, an Open Source solution can be helpful, which allows for changes, such as adding information about security during order placement, removing the lower or upper menu in the checkout process, or adding information about the promotion or availability of a product added to the shopping cart. Of course, these are just examples. The point is that this is possible with Open Source solutions.
Typical modifications are in principle simpler to implement in the case of Open Sources than in the case of SaaS’s. In the context of SaaS, certain things are impossible to implement.
We know this because we have optimized conversion rates for large online stores, including those that use SaaSs. When we dealt with Open Source, optimization was much easier. We achieved higher increases in conversion rates. Meanwhile, in the case of stores using SaaS engines, the possibilities for change were limited. Thus, we could not implement good changes to provide solid revenue growth.
Are SaaS Costs Lower Than Open Source?
In conclusion, it’s worth remembering that choosing Open Source usually involves higher costs during implementation and later maintenance. The exception may be when running a very large business.
For example, when I compared the maintenance and development costs of Magento to Shopify Plus, it turned out that for online store revenue exceeding 14.000.000 EUR/USD annually, the costs of maintaining and developing Magento were already lower than for Shopify Plus.
In this post, I presented a simple way to decide on choosing the ecommerce engine model for your business.
I use this process daily when talking with ecommerce directors or company owners considering changing or implementing ecommerce.
If you’re wondering which ecommerce engine model to choose, my answer is simple: choose SaaS. Unless one of the five limiting factors is present, it will be the best choice.
In such a case, instead of SaaS, choose Open Source. Do not opt for a dedicated solution.
The five limiting factors that may make SaaS insufficient are:
In all other cases, if none of these five factors are present, choose SaaS. You will certainly appreciate the lower implementation and maintenance costs.
If you are considering implementing B2B ecommerce and are not sure which ecommerce engine would be best, reach out to me on LinkedIn, or write to us using the form here. We will do our best to help you.