SaaS – or Software as a Service – is an industry which is continuously growing, helping business owners in a variety of ways. Google Apps and Office 365 are finding the benefits of using SaaS platforms in the form of collaboration software, accounting software as well as using it for things like project management and the like. SaaS is also a nifty engine when it comes to ecommerce and has emerged as a useful solution for small retailers who have found the benefits of sites like Bigcommerce, Shopify and Volusion.
In this blog we’ll explore the pros and cons of SaaS as an ecommerce tool and compare it to the different options out there.
So what does Software as a Service really mean, how does it compare to other software delivery models like on-premises/self-hosted platforms?
Most importantly, which one is the best option for your business?
SaaS in a nutshell: A standard SaaS provider is hosted and maintained by a software service company, leaving the merchant or retailer (you) responsible for the platform’s setup and customization. In exchange for a monthly subscription you, as the merchant, get to use the software that hosts your online store while the SaaS provider maintains the infrastructure and deals with the upkeep of the software security, updates, and also analyzes performance, etc…basically, the SaaS provider (eg, Shopify) is doing all the technical heavy lifting.
By comparison, on-premises, and more specifically, an open source platform gives everyone access to the software’s code and allows for endless customization and flexibility. Be aware that open source and on-premises/self-hosted platforms are not the same thing. Open source is usually (but not always) free and the code is available for modification. There are also self-hosted solutions that are not open-source, which means they are most likely not free and modification is limited. In either case, full control is given to the business in where and how they would like to host the software.
On initial perusal some smaller retailers and merchants might shy away from open source platforms. Though it’s usually cheaper than SaaS, it requires all maintenance, security and scaling tasks to be handled independently, forcing merchants to hire a host of professionals from various related industries to help. However, these days, these professionals and their services come at a relatively low cost when comparing it to SaaS. On-premises platforms usually don’t charge per transaction fees, nor will they shut down your store if licensing expires and they offer more flexibility, and input from the merchant (you).
What’s best for you:
SaaS charges fees for hosting, the volume of products included in your shop, staff accounts and additional features and plugins you might want to integrate into your online shop.
While SaaS platforms come with all these things built in, as a merchant you have very little control over how to build your online store in terms of looks, order flow and integrations.
Now that we’ve compared both SaaS andon-premises platforms, let’s take a look at their pricing models.
Some examples of SaaS rates from the top Saas platforms in 2020 give insight into the going market rate.
Shopify’s basic package costs $29.00 per month, its advanced package costs $299.00 per month, while the “Enterprise” level packages can go well over $2000.00 per month. Its competitors Bigcommerce and Volusion have similar pricing. These prices do not include per transaction fixed fees and percentages, nor do they include the price of plugins to modify store functionality.
In comparison on-premises open source software code is usually free or available at a fixed rate. However, as we previously mentioned, maintenance, security, and design must be done independently and if you can’t do it, it will cost you to hire those professionals who do. Here’s a breakdown of some of the costs required when using the biggest open source providers out there:
Open source providers like WooCommerce and OpenCart are free. However a domain name ranges from $10.00- $12.00 US a year, and a hosting service, which is also needed, can range from $5.00-$25.00$ monthly depending on the quality level you’re searching for. These open source software providers can have additional costs like template themes which can cost up to $59.00 a month, as well as plugins and extensions which range from $25.00 each and developer fees, which can range from $20.00-$150.00 per hour, depending on the developer.
So what does the market trend tell you to choose?
Trends in SaaS adoption:
Over the last couple of years, SaaS adoption has seen a continued rise and growth across companies of various sizes. In 2018, the average company spent $343,000 on SaaS tools, a 78% increase from the previous year. Many companies use SaaS platforms as tools for company task management and when it comes to ecommerce, it’s often used for sales optimization.
However, every useful tool will have some glitches.
What are the problems of SaaS?
The fact that SaaS sells itself as a one size fits all solution no longer works in a world of hyper-specialization and customization in the e-commerce sector. In addition, scaling for true growth also becomes an issue when you’re paying a fee for every transaction on your business’s site. That means that the SaaS platform you’re using takes a percentage charge for every sale made on your site. If you’re hoping to grow your business the monetary loss will be significant.
In terms of security and protecting your customer’s personal information there are certain things to watch out for when using SaaS. Since the introduction of strict regulations by the European Union, many big companies with existing SaaS platforms that have been found in breach of these regulations have seen their sites shut down or fined. Yikes.
On the other hand the number of on-premises providers is growing as well. Newer on-premises providers, like FutureEcom, offer a fresh perspective in the ecommerce market. While using this system the merchant has more flexibility and input into building their online business without losing money.
SaaS may be a good starting point, a short term solution to get your business out there. If you’re using it as your first ecommerce platform, it can be a very good introduction into the market trends and growing habits of niche businesses. However, over a longer period of time, costs become too high, security risks increase and the transactions charges that accrue become a huge monetary loss.On-premises, on the other hand, guarantees excellent performance, coupled with flexibility and control, all at a lower cost. Therefore, an on-premises provider, such as FutureEcom, is the best solution for your business in the long run.