A recent Internet Retailer Survey showed over 33% of online retailers are focusing their 2010 technology spending on their eCommerce platform. With over 47% deciding against in-house or internally hosted options, retailers need a way to evaluate hosted vs. Software-as-a-Service (SaaS) eCommerce solutions.This article provides a checklist for retailers who are evaluating SaaS based eCommerce solutions as part of their re-platforming project. These are the characteristics of a true software-as-a-service (SaaS) eCommerce provider.
The platform decision is arguably the most important, complex, and costly part of a retailers 3-5 year investment cycle. It is a decision that is often put off or easily put on hold due to other priorities or the risks involved. And it is a decision that very few online retailers are qualified to make on their own since it has such broad implications across technology, marketing, operations, and sales.
What is SaaS?
A logical place to start. Software-as-a-Service (SaaS) is a delivery model alternative for software companies to license their software "on-demand", typically delivered over the Internet using standard web protocols. In most cases, the SaaS provider has software running their own servers in a data center they manage, along with all aspects of the application. This is opposed to licensing software "off-the-shelf".
eCommerce SaaS Providers are companies that deliver their eCommerce software platform on their proprietary infrastructure. True SaaS eCommerce providers can offer a much higher level of service overall to retailers over in-house or third party hosted models.
The "Service" in SaaS
Beyond the software delivery side of SaaS, and more important for retailers to understand, is the provider's ability to actually provide an ongoing service. The SaaS provider is not coming in, building out a website, charging licensing fees and leaving. A SaaS provider makes their money over a 3-5 year period and is accountable for keeping the website online and fast every second of every minute. A tall order for just plain old software companies and is the fundamental difference with SaaS providers over custom eCommerce solutions or third party hosted systems.
1. Redundant Server Infrastructure
True eCommerce SaaS providers have redundant server farms with no single points of failure. The SaaS platform will offer load balancing, clustering, and automatic fail over for all server tiers. In all likelihood the SaaS platform will house more than one website and Client (called a multi-tenant architecture) - this is not a problem providing they can guarantee performance, security, and availability in a Service Level Agreement.
Beware: We often hear of eCommerce Systems Integrators proposing one or two servers as "ongoing hosting" instead of proposing robust, high-availability architectures.
2. New Features and Upgrades Included
We are not talking about "18% per year maintenance". True eCommerce SaaS providers will deliver several releases per year of new platform features requested by their Clients. These features will be rolled into the software code base and seamlessly released to all Clients avoiding costly "customization fees".
Beware: Software License Maintenance is often used as a placeholder during the sales process for new features, support, service, or other.
3. Service Level Agreement (SLA) Included
True eCommerce SaaS providers have a "service culture". They are used to earning their money over a 3-5 year period of time vs. one-time upfront fees. As a result, they will guarantee Uptime, Performance, Transaction Integrity, and the Support Process in an SLA with the retailer. These SLAs should provide clear monthly reports on the status and a penalty structure for not meeting the targets.
Beware: Companies may try to use the 3rd party hosting company's SLA in place of an agreement with the solution provider.
4. PCI Security
Payment Card Industry compliance is something that all online retailers must understand and be able to demonstrate. True eCommerce SaaS providers will maintain PCI-DSS compliance and provide controls within their platforms to make compliance easier for the merchant.
Beware: Providers should guarantee they will maintain PCI compliance in their Master Services Agreement.
5. eCommerce Account Management
Outside of 24x7 support, true eCommerce SaaS providers will offer a dedicated account management resource to their Clients. This person is named on their account and is available as a single point of contact and is accountable for customer satisfaction at no extra cost.
Beware: It is important the person assigned to your account is not motivated by selling more services.
6. Platform Configuration
True eCommerce SaaS platforms offer rich features that can be turned on or off (configurable) as part of the implementation and by the merchant on-demand. This includes the ability for complex merchandising, search, promotions, shipping, checkout, payment, and other tools to be available to the Client as needed at no extra charge.
Beware: Many eCommerce providers will build a custom platform and website that offers limited configurable parameters after it's delivered.
7. Rapid Deployment
Since a true eCommerce SaaS provider already has existing infrastructure and software running live, this drastically reduces project times and allows the retailer (and the provider) to focus on the most strategic parts of a project (User Experience and Integration).
Beware: To reduce project risk, retailers must provide more time for testing (technology, procedures, etc.) for in-house or third party hosted solutions than with SaaS solutions.
8. NOC Monitoring and Performance
True eCommerce SaaS platforms have a software and hardware architecture that is scalable, allowing for quick provisioning of additional capacity to handle peak demands. To stay on top of capacity, SaaS providers are continuously monitoring eCommerce websites using global availability and performance monitoring tools (Gomez, Keynote, Uptrends) and have a Network Operations Center (NOC) that can proactively stay ahead of load issues.
Beware: Many IT departments are just not staffed to handle 24x7x365 monitoring or have the resources to properly architect a scalable solution.
9. Rental License vs. One-Time Lump Sum
Since SaaS providers license their eCommerce platforms "on-demand" vs. lump sum licensing, most provide a monthly based fee to "rent" the license. SaaS licensing models vary, some which are based on transactions, commissions, users, products, bandwidth or flat monthly fees. In almost every case, the ongoing monthly fees with a SaaS provider will be higher but the one-time fees will be significantly lower (than a licensed / hosted or custom build hosted). Typically the monthly fee is a blend of License and Delivery of the service.
Beware: The monthly fee for SaaS providers is not "hosting", it is a mix of licensing and service delivery (as defined in the plan and SLA). Go back to checklist #1, the managed hosting fees alone for a redundant setup will make the SaaS fees very reasonable.
10. Disaster Recovery - Business Continuity
As a provider of business critical services to online retailers, true eCommerce SaaS providers will maintain a full disaster recovery (DR) and business continuity plan (BCP). This will protect the merchant by reducing possible downtime and data loss caused by a disaster in the data center.
Beware: Backups can be part of a DR strategy, but are not the plan alone. It is critical that the platform provider has a replicated environment to recover service if needed.
For more information contact: Michael Turcsanyi
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