Chris FletcherHere in New England fishermen use lobster traps to catch, no surprise, lobsters. If you’re not from New England, a lobster trap is essentially a box filled with bait (e.g. fish offal) with a one-way net that covers the opening. The lobster goes in to get the bait, but can’t get out again. For companies that have chosen to build their e-commerce platform, rather than license a packaged or SaaS solution, I wonder whether the build route is a sort of lobster trap. Once you are in it you can’t get out again: the financial investment has been made, the site is generating revenue, and the organizational structure needed to maintain it has been created.
Of the 500 largest e-commerce retailers in the industry, about 52% have built their own e-commerce systems. Of more interest, over the past 3-4 years there appears to have been very little migration away from these internally developed e-commerce systems, even given the challenges of keeping these systems current in the face of rapid technology change (Smart phones, tablets, Cloud, and social networking to name a few). Companies we talk to regularly cite the cost, complexity, and organization scale needed to maintain these home-grown systems, but few migrate to licensed or SaaS alternatives even as these packaged e-commerce solutions gain functionality, scale, and partner ecosystems.
Build vs. Buy decisions for e-commerce often focus on technology comparisons, but the issues extend beyond architecture and feature/function.
Buy: Consider buying a licensed or hosted e-commerce solution when your company:
- Lacks the internal technical and management resources required to build, deploy, and support an e-commerce system;
- Cannot keep up with the pace of innovation in e-commerce, particularly in areas such as mobile and tablet support, integration with social software, or managing billing and payments processing in-house;
- Competes in a market that requires rapid response to market changes and has short “time to productivity” requirements that cannot be met with in-house development.
Build: Consider building an e-commerce solution when your company:
- Has a complex product, a broad and complex distribution chain, or unique market requirements that can be addressed only by with a custom-built application;
- Believes that its own e-commerce design will provide a unique competitive advantage;
- Has made a large investment in e-commerce early on, and now finds converting to a licensed or hosted solution too costly or too disruptive to their business;
- Has depreciated much of its investment in its e-commerce environment, and the incremental investment required for innovation and ongoing support is less costly than starting over with a licensed or SaaS alternative;
- Has built up a large IT organization and has legal, financial, or organizational limitations on how quickly it can reduce the size of that staff.
Has your company gone Build or Buy? Are you satisfied with the results, and if not, are you able to make a change?
Category: Uncategorized Tags: E-Commerce; CRM; SaaS; Hosted; Cloud; Mobile; Social; Tablets
1 response so far ↓
1 Craig Vodnik December 7, 2011 at 8:33 pm
Hi Chris – Nice summary of the high-level view of build-vs-buy.
I think that when companies really have to focus on an international shopping audience, and all the complexity that goes along with it, the risk of falling behind with an internally built solution reaches a new level that makes globally focused SaaS solutions a very attractive option for companies that view e-commerce as a competitive advantage.
Unless you are a company with dedicated e-commerce focused resources in at least 3 regions of the world, it’s unlikely that an internally built solution would ever catch up to the functionality of a SaaS solution.
Of course, I am a bit biased being a SaaS e-commerce provider, but I think that I can make a compelling case for almost any size company.
Keep on fishing!
cheers,
craig.