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eCommerce Infrastructure (Part 2) – How to select a suitable website infrastructure solution for your eCommerce business

September 20th 2021
Henry Allen | W2Solution
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Introduction

This piece is part 2 in our dive into eCommerce Infrastructure. Part 1, titled "eCommerce Infrastructure (Part 1) – Understanding you options for eCommerce infrastructure solutions" defines and describes the traits of four of the most commonly seen eCommerce website solutions.

In this piece, I cover the rationale behind choosing the correct infrastructure solution in accordance with your business objectives. The goal here is to enable you to make informed decisions when deliberating over the best solution for your eCommerce business. We recommend understanding the realities of each infrastructure solution before researching individual platform providers. Figure 2 illustrates the differentiation between infrastructure solutions and platform providers.

 

What should drive your decision process

Figure 1 is based on conjecture; its purpose is to help visualise points being made throughout the piece. In reality, each plotted point would be subject to a standard deviation that would be dictated by the traits surrounding the business in question. By comparing infrastructure costs against business revenue, we are able to look at the effect company growth, stage of business and other variables have on the decision of which infrastructure solution is most suitable for your business.

Price

Unfortunately, it is common for price to drive the decision process for businesses. This is of course understandable, however, we would recommend shifting your focus away from price at this stage of the process. Doing so allows you to explore your options free of constraints and you may just find that you discover a solution that will better align with your business goals. The options listed in Part 1 although ordered by escalating price, is not definitive. It is surprising how frequently we have discussions with clients who are running bloated infrastructure at a disproportionate cost to the front-end aesthetics and back-end capabilities. These situations arise from a lack of experience in eCommerce strategy which reduces the ability to anticipate future requirements.  

If you refer to Figure 1, you should see that each infrastructure solution has its own setup and ongoing costs. This varies by provider, some allow for flexibility of pricing structure and payment timing others are more ridged. Pricing flexibility gives businesses the option to take a phased approach to development, paying for capabilities as they are required. This reduces the initial investment from eCommerce businesses and allows for the website to scale commensurate to business growth.

The justification for each option’s price tag is touched upon in Part 1 . The pricing and suitability of each solution for your brand changes dependent on a range of variables. If we split the topic area into three Figure 2, infrastructure type, platform provider, and eCommerce brand. At each of these three levels, some variables affect the price and suitability of each. This piece focuses on variables determined by infrastructure types and eCommerce brands, deliberately avoiding variables that platform providers bring.

 

Stage of business

Correctly judging what stage of business you are at, while taking future growth into account is necessary if you wish for your infrastructure to assist your business growth. Having a thorough understanding of which solution corresponds to certain stages of business will save you time, money, and migration headaches in the future.

The reality is that each eCommerce business is different. There are comparisons you can draw with competitors, both indirect and direct. However, even if you find an exact replica of your business there’ll still be room for error. With business and team structure among the many variables influencing the increasingly nuanced decision-making process, it can help to speak to someone with experience. If you are unable to make an informed decision it can pay off to enter discussions and seek advice from a source of experience.

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Alternatively, by referring to the Figure 1 you can begin to see that revenue is one method for justifying your choice of solution. Although revenue should not be the only method for choosing infrastructure, businesses with higher revenue for their eCommerce operations can enjoy the flexibility of justifying more robust solutions. That being said, simply going for the most expensive option just because it’s justifiable may not make strategic sense. We understand that margins matter and so working within your financial means is reasonable.

 

At this point scalability becomes relevant. Think about the growth of your business, do you have forecasts you can refer to? The trick here is to find the balance between not spending your hard-earned money on unnecessary capabilities that are costly, whilst ensuring the solution fulfils current and anticipated business growth, complexities of service and team structure. 

 

Another method for justifying infrastructure choice is ROI. This is a little more tricky for early-stage businesses but for established eCommerce brands is a methodical option that will help solidify the effect of choosing one of the infrastructure solutions in contention.

 

Team - Access and use of technical resources/capabilities

The extent of a business’s access to technical capabilities should play a role in the decision-making process for your website infrastructure. This is best described with examples: Say your business has a full in-house development team, you may wish to consider assigning the project to them over outsourcing and paying the markup. However, take opportunity cost into account here. If the in-house development resources work on revenue-generating roles they may be best utilised there and so outsourcing perhaps becomes a more productive option.

Another example is when eCommerce accounts for a comparatively small proportion of revenue generation when compared to other channels. There may not even be a team designated to managing the eCommerce channel. In these circumstances, it can be a better use of resources to outsource to a form of managed eCommerce solution. Although this is not offered by all providers does enable a business to outsource their eCommerce efforts to those more experienced, acting as an extension of your business. This appeals to corporations who understand the need for digital transformation but do not wish to commit to hiring a new team to do so.

Functionality

Requirements for specific functionality and capabilities is a major cause for a jump in cost regardless of the infrastructure solution. The reason platform providers can offer competitive pricing for functionality is due to the ability to spread the development cost of specific functionality across multiple projects. It can be tough to differentiate between platform providers functionality offerings, and thereafter rank the quality of said offering along with how it fits in with your team structure.

Generally, ASP solutions, although offering additional integrations and plugins are known to have limitations surrounding website speed and high reoccurring costs. You’ll likely find yourself hitting a dead end if the provider doesn’t offer the solution in question. Thereafter each solution, generally speaking, should be able to fulfil your requirements with varying levels of flexibility and cost. If you are looking for niche customisations, you’ll most likely be deciding between one of the following solutions: From scratch, Open-source, or Package Cloud eCommerce. The decision between these options will be determined by, budget, access to technical resources, growth trajectory and business goals.

Aligning with business goals

Having touched upon taking business strategy into account it’s equally useful to be aware of your business goals. The majority of the recommendations within this piece pivot on the concept that all businesses have a desire to scale. However, there may be readers who view 1-2 million annual revenue as more than a successful business that they do not wish to scale for a variety of reasons. In this circumstance, the requirement to have room to grow becomes less relevant. The focus shifts towards achieving a great value for money solution that doesn’t pull resources due to issues.

A quick note – Due to the growing nature of the eCommerce industry, those who do not strive to improve their product, service and operations will unfortunately over time see a reduction in market share. 

Business stage and relative infrastructure – Some generalised rules, trendsetc.

Start-ups and early-stage business

Startups, Small and early-stage businesses most commonly gravitate towards the ASP and open-source solutions. For ASP this is due to the relatively low initial investment and simplicity of setup. For open-source those who are rich in time and have the technical resources appeal to the cost to flexibility ratio, open source can offer. Businesses without technical resources will be unable to avoid the costs involved in outsourcing development for open-source construction and maintenance, making it a relatively expensive option. An ASP solution is appealing to new ventures that aren’t looking to reinvent the wheel. These solutions allow businesses to explore selling online quickly and easily. It’s worth noting that when your business scales it’s common to begin experiencing growing pains which it would be wise make yourself aware of and so plan accordingly. These growing pains are discussed in Part 1 and come in a plethora of forms but most commonly a reduction in website speed or a lack of flexibility. That being said ASPs are a great place to start in eCommerce and dependent on what to you looks like success there may be no need to migrate any time soon.

SME and Mid-sized businesses

SME’s and mid-sized businesses tend to utilise one of two solutions, assuming they are yet to migrate from their starting setup.

Firstly, a bloated ASP setup is all to common in growing eCommerce businesses. This comes as a result of eCommerce success while running an ASP solution. As a website gains increased traffic, SKUs, and complexity in service, businesses realise that something needs to change to capitalise on this success. This is when plugins and customisations start to be bolstered onto add specific functionality, capabilities and aesthetics. Therefore, leading to a bloated ASP which although may be a fully functional website is a relatively expensive solution that has systemic issues that limit business growth.

Secondly, businesses that start with open-source solutions.Over time customisation becomes necessary in addition to ongoing maintenance carried out by either in-house or 3rd party development solutions. It’s common to see disproportionate ongoing costs in open-source solutions.  This can take businesses by surprise as isnot the reputation open-source software has in other industries.

Depending on a business’s requirements we recommend package cloud solutions for brands that have established confidence in the eCommerce space and so can justify allocating budget towards a robust system. Package cloud solutions usually offer a tailored solution that has enterprise functionality and room for your business to scale. The issue we frequently see with mid-sized companies using ASP, or open-source solutions isn’t always that they cannot be scaled but more the comparably inflated cost of scaling using this infrastructure. ASP’s utilise plugins which can lead to high reoccurring costs and open-source requires in-house or 3rd party development which can eat into your profit margins. This is illustrated in Figure 2

Corporation

Large corporations usually use package cloud solutions,open-source or they develop their system from scratch. The decision between which solution is most suitable for large businesses is driven by points mentioned throughout this piece. Due to the scale corporations often seek the advice of experienced parties that offer eCommerce consultancy. The cost of doing so is easily justified by the impact making correct decisions makes.

A closing word

Selecting a new eCommerce website infrastructure may seem like a daunting task. The result has repercussions throughout an eCommerce business and so should not be made lightly. My recommendation is to understand that the eCommerce industry can be segmented into the tiers shown in Figure 2. Addressing each tier separately allows you to break down the decision process, reducing the noise and number of variables at each stage.

Concluding with a one size fits all recommendation is, although tempting, unrealistic due to the range of eCommerce businesses out there. There will always be outliers that require alternative solutions. That being said I view Package Cloud eCommerce solutions as the most robust and versatile. Package Cloud eCommerce providers (such as W2Solution) have positioned their solutions appropriately to be the most appealing option for eCommerce brands as they begin experiencing growing pains and are looking to migrate to a new platform.

 

If you have any questions about this piece, please contact us via our contact page.

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