Over the past couple years, the buzz in retail and e-commerce has been all about optimization — everything from optimizing your Web site for natural search, to pricing and inventory optimization, and even getting optimized motion-control shoes for running.
Now, the hot buzz word is “on-demand,” often mixed freely with Software as a Service (SaaS). However, just what does this all really mean? Why is it so important?
E-commerce is at a point of inflection. The e-commerce channel continues to grow at a staggering pace (up to 30 percent annually) and consumers, influenced by the latest Web 2.0 capabilities, continue to expect a better shopping experience from e-commerce sites.
A witness to this fact: According to a September 2006 Forrester Research report, 34 percent of North American retailers planned to purchase and/or upgrade sell-side e-commerce capabilities.
The challenge then, is this: Given all the change and rising expectations from consumers, how do retailers keep pace? More particularly, how do retailers balance the competing priorities of platform currency with the IT budget?
With so many vendors claiming to be on-demand or SaaS, how do you differentiate true SaaS offerings from imposters? I will outline the advantages on-demand e-commerce platforms offer — merchandising control, automatic seasonal upgrades and on-demand scalability — and outline seven ways to help distinguish on-demand providers versus pretenders.
Isn’t all Software the Same?
When applied to e-commerce, on-demand, SaaS models offer three distinct advantages over other software models. These are:
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- Merchandising Control The platform allows highly sophisticated customization and navigation without dependence on technical resources, saving time and money that can be focused on merchandising. Also, merchants and Web designers can manage the merchandising and design of a best-in-class e-commerce site, improving the timeliness and relevance.
- Automatic Seasonal Upgrades Free, automatic, hands-free upgrades several times a year provide additional e-commerce capabilities and functionality on a frequent basis without user intervention or additional cost. Retailers consistently improve the user experience, stay current with e-commerce best practices and focus a greater portion of time and resources on creating brand differentiation rather than building and maintaining commodity functionality.
- On-Demand Scalability True on-demand must include a grid architecture that delivers capacity when a retailer needs it. This function automatically provisions additional server capacity as needed to handle increased traffic loads, all the while maintaining seamless, optimal performance. Also, retailers no longer have to anticipate peak traffic volumes and always carry the associated costs of maximum capacity.
Digging Deeper
Here are seven questions to ask in order to spot the wolf in sheep’s clothing:
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- Do I need hardware or software? No. Don’t be tricked into buying more than you need. In an on-demand Software as a Service model, no hardware or software is necessary. This eliminates the costly process of selecting, maintaining and renewing hardware and software, removing the traditional upfront capital investment. Simple hosted commerce is different. Often mislabeled on-demand and SaaS, retailers still actually buy the software and hardware, but it’s financed in monthly payments.
- Do I have to pay for upgrades? No. Retailers never have to pay for additional e-commerce features with true on-demand e-commerce. New functional upgrades are made available — for free — several times per year and provide additional e-commerce capabilities and functionality.
- Do I have to guess my peak load? No. A big challenge for retailers is scaling according to customer demand and making sure they can handle the holiday rush. However, with SaaS, you’ll never have to guess at your peak load again because the unique on-demand architecture allows load to be scaled as needed for increased Web traffic, especially during busy times.
- Am I working off of versions of software, or a single instance? This is a question that IT and e-commerce directors at retailers often ask. On-demand Saas e-commerce models are built and run on a single instance of software with a multitenant architecture. This is important because this structure enables grid computing which dynamically allocates IT resources to meet changing customer demand.
- Can I really customize and upgrade seamlessly? Yes. On-demand, Software as a Service e-commerce allows retailers and manufacturers to customize their sites without building their own code. New features and functionality can be made available continuously as best practice features are identified and made available. The key benefit of this service-oriented architecture (SOA) approach is decoupling the use of functionality from the delivery of functionality.
- Can I easily integrate? Yes. True on-demand e-commerce eliminates the hassles of custom coding and development during integration. Instead, Web services are made available from a Web server to a Web user and the integration can be with a back-end system or an external service. With an open API (application programming interface), all functionality is exposed which leads to easier integration.
- Will I need to migrate for more functionality and knock out my budget? No. Too often vendors hit you up for more money after they make the initial sale, claiming that “you need to migrate to a newer version.” With the Software as a Service e-commerce model, you will never be asked to migrate to a purchased application for more functionality. In fact, with an on-demand model, the total cost of ownership is lowered because there is no hardware or software expense, less staff and support is necessary and you don’t have to pay for functionality upgrades.
Best of Both Worlds
That’s the attraction of on-demand e-commerce. In this model, the platform is continually living, kept current and maintained by the software vendor and runs on hardware optimized for serving e-commerce.
Done right, this frees the retailer to focus on how they differentiate in the consumer’s eyes — how the retailer presents and merchandises their brand, and the unique features and functions they incorporate into the e-commerce experience.
What retailers get with on-demand e-commerce is the best of both worlds — a platform that is kept current with e-commerce best practices and ability to differentiate with customized functionality.
This combination of continual platform currency and value-added differentiation is the essence of how retailers stay ahead of the pack.
Jamus Driscoll is vice president of marketing for Demandware, an on-demand e-commerce platform provider.
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Hi There
This article was really well written. Thanks for the information. It is really helpful. I was very interested in the concept of grid computing which you spoke about. To refernce point number three in your article, you mentioned true on-demand must include a grid architecture. My current ecommerce provider which is http://www.orderdynamics.com claims to have an on-demand platform but they don’t mention grid computing specifically.
However during January, which is traditionally our peak season, they are able to handle our order volumes which grow from an average of 400 per day to as high as 1000 orders per day during our peak.
How can I be certain that they offer Grid computing, and are there any alternative ways in wich an On-demand Ecommerce provider could handle additional load without using a grid architecture?
Thanks again,
Sandor