January 4, 2021 by Ben Chafetz

How to Choose an eCommerce Platform Based on TCO Total Cost of Ownership

Since we opened our doors in 2014, we’ve seen dozens of projects come to us midstream. 

Many are over budget and their TCO is nowhere near what they were expecting. And many have the same question: “What went wrong?!”

Believe it or not, much of the overspending, delays, and overall frustration can be traced back to a lack of proper planning and due diligence before the project even begins.

Instead of taking the time to scope out every task and set clear expectations to manage (and minimize TCO), too many projects bolt out of the starting gate with a launch date in place but an incomplete plan of how to get there. And this lack of discipline leads to unforeseen roadblocks and additional costs later on.

Because the planning phase is arguably the most important phase of a project, we make a point to get this phase right. 

Our proposals are probably more detailed than most.

We break out every task as its own line item with associated hours to complete and cost so there is a clear expectation of the total cost of ownership and the timeframe it will take to complete the task. This transparency and preciseness have led to an average variance of SOW (scope of work) vs. launch of under 5%. That’s significant when you consider the industry average is around 20%.

What Factors Can Increase Total Cost of Ownership (TCO)?

Avoid making large changes (especially close to launch).

It doesn’t take a rocket scientist to know that extensive changes will increase your TCO.

The time to bring up these changes is during the scoping and discovery phase. Introducing large scale changes mid-project, and especially when you’re close to launch will delay your go live, and increase your TCO.

USE CASE: Wholesale costume feather manufacturer

During our discovery call, we showed the client a demo site that was not too different from the Magento Luma theme out-of-the-box. The client liked it and signed on to create a very similar site with a few changes. Halfway through the project, the client hired a Marketing consultant who insisted on major design changes. 

We told them they had two options:

    1. Stop the project, deliver an estimate, and review the ROI of the proposed changes (our recommendation).
    2. Move forward with the requested changes with a general estimate that was subject to change.

They chose the latter and after seeing the increased cost, complained that the project was overestimate. We politely explained to them that we were not overestimate since they were not in the original estimate. 

Their site ended up being beautiful, but at a price (and TCO) they weren’t expecting.

Don’t bring new people midstream into the project.

Stakeholders must be clearly defined at the outset of a project. These people will be crucial in keeping your project moving forward. And while you may be tempted to include many members of your company, you must be disciplined in including only key decision-makers. And these key decision-makers should be involved from day one. Introducing new stakeholders into your project on day 100 is a recipe for disaster.

USE CASE: Gift card reseller

After confirming the key stakeholders at the start of the project (our protocol with every project), we were surprised when the client brought in the CEO mid-project. While including the CEO as a stakeholder is not unusual, bringing him into the project mid-stream causes problems that could have been avoided had the client clarified their internal processes more rigorously before starting. 

“Done is better than perfect.”

There’s a fundamental axiom you must accept: Your website will never be perfect.

And that’s ok. You don’t need a perfect website. You need a conversion-focused, easy-to-use, money-making website. 

Now…that’s not to say your site won’t be functional AND beautiful..Of course it will! But it’s important not to get hung up on tiny details that don’t affect conversion or UX.

You’ll always have changes you want to make to your site. And that’s ok. As long as you prioritize those changes based on ROI. Like we tell many clients that get hung up on small changes before launch, “A site in staging is not making you a cent. Let’s get you live and transacting. Then we can tackle the minor issues.”

A good rule of thumb to follow is once your site is equal to or better than your current one, launch. That font in the footer? Change it after launch. The missing group photo of your employees? Add it after launch.

Before your site is launched, every small additional task is increasing your TCO. Don’t get caught up. Remember: “Done is better than perfect.”

Not testing credentials early on.

It’s hard to believe but some of the most basic, yet most critical aspects of an online storefront are not tested until close to launch.

Are orders being processed? Are they being processed with correct shipping rates?

Is the payment gateway set up? Is fraud protection in place?

Is inventory being updated with every order?

Are transactional emails being sent out?

We have a list we give early on in the project which asks the client to confirm credentials and to make sure to include any relevant stakeholders when testing key functionality. While these processes and questions may sound trivial and even (gulp) dumb, you’d be surprised how many clients push this off and wait until a week before launch to start testing. 

Test early, test often is a good modus operandi to follow. You won’t be disappointed. 

What Factors Can Decrease Total Cost of Ownership (TCO)?

Learn the basics of managing your store.

It’s crucial that someone on your team learn how to manage the backend of your eCommerce platform.

This can lower your TCO as you will now be able to perform many tasks/changes you once asked your developer to do. Now, you don’t need to hire a full-time manager. Just appoint someone on your team (and let your solution partner know) who will be the point person for managing your store during development and post-launch.

Most eCommerce platforms have a knowledge base with tutorials, how-to videos and articles that can help your staff get educated and depend less on developer support.

Magento Commerce, for example, provides many resources for store owners to learn how to manage their Magento store:

View the full catalog of Magento courses

USE CASE: Manufacturer of mattresses for heavy people

This client was constantly asking us to complete simple tasks that he could easily learn to do. Multiple people at 121eCommerce repeatedly explained that with just a few hours of his time, he could manage many of these tasks himself. The response was always the same, “Just take care of it.” While this creates billable hours for us, we would really prefer not to do this work, more for the client’s sake than ours. While every task is small and doesn’t take many man-hours, over time, these add up and can increase TCO.

Choose your third-party vendors carefully

During the lifecycle of your project, you will inevitably need the services of third-party vendors, whether for the integration of the platforms you use, like your ERP; or added functionality, like reviews.

For example, if you use NetSuite as your ERP, you will need to connect it to your storefront. This will require the services of a third-party integrator. Now, you would think common sense would tell you that the third party integrator you choose should have extensive experience connecting NetSuite with your eCommerce platform. But as we’ve learned, common sense often takes a backseat to tight deadlines and impatient stakeholders. Unfortunately, some integrators take on projects without first scoping out the requirements and deciding if they can deliver.

This is exactly what happened with a client of ours that supplies suspension components to the heavy, medium, and light-duty truck and trailer parts industry.

They were using NetSuite as their ERP and needed to connect it to Magento. While this is a common integration, theirs had a few complexities. Their chosen third-party integrator took on the project without fully understanding the deliverables. The integrator kept saying, “We almost got it. Just need a few more hours.” The merchant kept saying, “I keep paying you more money, and my solution partner more money, and the two systems are still not connected.” In the end, the integrator couldn’t find a solution, and the merchant’s TCO had ballooned.

It’s also vital to inform your solution partner of all the third-parties involved in your business, whether they have direct involvement in the project or not.

USE CASE: Online retailer of beauty products and body care 

Everything was going fine with this client until one of our developers noticed some bugs appearing in the code and the front end as well. When we asked the merchant if any other partner was touching the code, they said, “Oh yeah. We hired an SEO firm to do some work for us.” Again, common sense would dictate for the merchant to let the solution partner know that another partner is working on the site, especially if they’re adding in code! But alas, common sense was set aside for the hopes of higher search rankings. 

What was the result? 

The bad code cost our client many hours of consulting time, development time, and additional payment to their SEO agency. 

Review your scope carefully 

Don’t be satisfied if you receive a proposal that describes your project in general terms. You need to drill down and map out each requirement. 

Let’s take this statement as an example: “Once orders are placed, they will be sent to the backend for processing.” This statement is too vague and needs explanation. How will the orders be sent? What systems are involved? What integrations need to take place?

Review your proposal as if you were Sherlock Holmes. 

If it looks suspicious, investigate. If you’re not happy with the answer, investigate. It will create transparency with your solution partner, peace of mind for yourself, lower your TCO, and minimize surprises mid-project.

Perform a proper discovery on custom tasks

Custom tasks are bound to come up mid-project. And that’s OK. What’s not OK is to move forward with them without performing a proper discovery. 

Yes. This may put your project on hold and push out your launch date. But, taking a few days to map out the exact requirements will help ensure a smooth development process for your custom task and keep your TCO under control.

LET’S GET STARTED

Choosing an eCommerce platform is a big decision with a big investment.

However, you can make the decision easier when you compare platforms based on TCO.

Need help choosing an eCommerce platform?

Contact us. We have experience in multiple platforms and can help you choose the right platform to fit your business needs.

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