This post was originally published on June 30, 2019 and has been updated for accuracy and extended context surrounding the topic.
When it’s time to choose an eCommerce platform, everyone wants to know which solution will be the best one for their business. But more often than not, the next question is “How much does it cost?” Ideally, we all want the best bang for our buck, but it’s easy to get distracted by the displayed pricing on a website, or the lack thereof. Sometimes we end up jumping for a cheaper priced solution and shying away from those vendors that don’t display their pricing on the website, because we think it’ll be too costly. Only to find out, your “cheaper” solution is more expensive, because you were unaware of all of the additional cost you would incur.
At Elastic Path, we happen to be one of the vendors without upfront pricing because our pricing is truly customized to a business’ needs. However, to help you understand how your total cost of ownership would compare to other vendors on the market, we will outline all the factors that you should be taking into consideration when evaluating your eCommerce solution. We’ll also make reference to some of the the top eCommerce vendors on the market such as Salesforce Commerce Cloud, Big Commerce, Magento and Commercetools to give you a better idea of where Elastic Path is positioned in comparison.
To get a true understanding of your total cost of ownership you will need to take into account both your first year costs as well as your future costs. These costs include but aren’t limited to:
- Base software fee / Licensing fee
- Hosting cost
- Implementation cost
- Third party integrations cost
- Cost of changes
In this article, we will first dissect each category of cost you should be considering followed by a breakdown of the total cost you can expect over a typical contract period for the aforementioned vendors.
Base Software Fee/ Licensing Fee
The base software fee or licensing fee is what we like to refer to as the “upfront” pricing. These fees tend to reflect either monthly or yearly licensing fees, which can be: Tier based, continuous revenue based or percent of sales based.
Tier-based means that there is a predefined price that your company will get locked into based on your current and expected revenue. Elastic Path and Commercetools are examples of vendors that do tier pricing by revenue. The Elastic Path model is based on your transaction volume, which can be structured by Gross Merchandise Volume(GMV) or by the number of orders processed(used more regularly for B2B companies). For example our pricing starts at $50,000 for companies who are just getting started and have revenue under $10 Million. Our pricing strategy allows you to plan your estimated growth over the next three years, lock in pricing, and allow you to plan for your spend in the future. This promises guaranteed pricing and clarity year over year so you can make plans for the future.
By continuous revenue, we mean the strategy by which vendors price their customers based on the revenue tier that they’re in, but automatically bump them up to the next pricing tier as soon as they go over. We’ve seen vendors such as BigCommerce and Magento use this type of strategy. For Magento customers with revenue between $5-$10 Million, you can expect a licensing fee of about $50K for Magento Enterprise Edition and $80K for Magento Enterprise Cloud Edition.
By percent of sales based pricing, we mean the strategy by which vendors take a small percentage of your Gross Merchandise Volume. Salesforce Commerce is an example of a vendor that uses this type of model. For example, Salesforce Commerce Cloud takes 1-2% of your GMV annually. So at $10 Million in revenue, you can expect to pay around $100K to $200K. This type of model can be quite attractive because there’s no immediate upfront cost and it scales based on how your business performs. However, there is also an additional annual fee of $150K that is mandatory to begin. This is a great example of hidden costs that you may not be aware of upfront.
Implementation costs are usually the most feared by businesses as it is perceived as the highest costs they will incur. These will usually be dependent on the cost of your developer and the time it takes to build the frontend and backend of your system. However, if you’re in the market for an out-of-the-box solution, the majority of your cost will be dependent on the changes and customizations you will need to alter your pre-built solution. For brands with a unique brand vision and requirements, there will most likely always be customizations needed, and therefore, we recommend working with an agency or systems integrator. Here are a few of the tasks you can expect an agency to complete, that will determine your implementation costs:
- Frontend development
- Backend development
- UI/UX design
- Software systems integrations
- Omnichannel design
Hosting costs are typically overlooked by teams when planning their yearly budget, but happens to be one of the most important costs you want to consider. Not because it’s overly expensive, but because the hosting provider you choose will determine the performance of your website. Some platforms offer hosting on premise or in the cloud within their platform, while others allow you to choose an outside hosting vendor to be integrated with their solution.
Elastic Path allows you to choose from a variety of hosting vendors that will best fit your business such as Netflify and Amazon AWS. Your hosting cost is commonly determined by the bandwidth and the seats you require. For example, for a mid-sized company with $10 Million in revenue, you can expect to pay around $1000/month for Netlify.
Platforms like Magento also utilize outside vendors such as Nexcess to provide dedicated hosting. For one dedicated server it says you could pay between $700 and $800/month. However, due to Magento’s large code base, many customers have informed us that they have had to opt in for higher end hosting options in order to not compromise on speed. On average they have spent around $2000/ month on hosting. Other out-of-the-box platforms such as Salesforce Commerce Cloud and Big Commerce will typically have hosting included in their licensing cost.
Third party costs are a little bit more intricate. When we think about this cost, we think about either plugins that are supplied by your platform as an application, or api integrations from third party vendors. The purpose of these integrations are to essentially extend your existing platform with other functionality. Some of the core third-party integrations include: content infrastructure, search engines, sales tax management, product information management, and shipping solutions. These costs will differ from vendor to vendor depending on if you leverage the third party as a plugin to your out-of-the-box solution, or buy a specific vendor solution for your Composable Commerce solution.
Cost of Changes
One of the most important costs that are often neglected or forgotten are the costs associated with making changes to your solution. Most times we tend to plan and make decisions for “now,” but when the time comes and you are faced with costly changes that you weren’t prepared for, it can be very detrimental to your fiscal budget planning. In addition, if you’re the type of brand that wants to keep up with the ever changing times, updates and changes are inevitable and therefore it is imperative you understand what those costs will look like in the future.
Typical changes you will need to prepare for include:
- Upgrades to your commerce software
- Maintenance of your system
- Upgrades or changes to your third party technology partners
- Changes in the backend functionality to fit your business requirements
- Addition of new user experiences to keep up with customer expectations
These changes can become costly very quickly with traditional legacy platforms, as their rigid structure makes changes more difficult, thus driving up developer costs. Composable Commerce solutions on the other hand are more flexible by nature and therefore will end up lowering your overall total cost of changes in the future. As each business’ requirements will be different, we will not be able to provide an estimate of these costs across each vendor. However, from feedback from past customers, on average, Composable Commerce solutions like Elastic Path and Commercetools, lower cost of changes by 40% when compared to rigid legacy platforms like Salesforce Commerce Cloud and Magento.
Now that we've dissected the various cost categories, we have provided an overview of the total costs you can expect either on a monthly or annual basis for a few of the top legacy and Composable Commerce solutions on the market.
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Elastic Path offers Composable Commerce-as-a-Service, an API-First headless commerce microservices solution. Composable Commerce is a modern approach to eCommerce that is built on the concept of composability, where core commerce functionality and partner integrations can be selected and assembled in various combinations to satisfy specific business requirements, at the speed digitally driven brands need to succeed. Composable Commerce were built on three main tenets:
- Modular architecture
- Open Ecosystem
- Business Centric Solutions
And it’s with these tenets that Elastic Path has been able to reduce business’ overall total cost of ownership by 25%.
As mentioned before, Elastic Path provides a tier based pricing based on Gross Merchandise Revenue. Overall based on a 10 Million revenue, pricing would be around $50K for Elastic Path. Elastic Path also offers Composable Commerce Experience Assurance that de-risks the management of multi-vendor solutions by providing an expert 24x7 global support team for all issues. This cost of the feature will be 25% of your annual contract value and capped at $25,000 USD/ year.
Additional costs will include: implementation costs, hosting costs and third party costs which will lie in the same range of costs for Magento. Where you will end up seeing the greatest cost savings are in the phases of customizations and changes. To get a better understanding of how cost of changes will compare across traditional legacy platforms and Composable Commerce solutions visit our Total Cost of Ownership Guide.
If you have more specific questions regarding Elastic Path costs, please refer to the pricing page here.
Understanding your total cost of ownership is not straight forward and often times we prioritize certain categories of costs and lose overall sight on our expected total cost in the future. As each vendor has different offerings, it will never be easy to compare them across the board. However, if you follow the guide of assessing each category of cost, this will give you and your team a good understanding to make an informed decision. If you have any questions, we are always happy to help - Just reach out to us.