“Magento Community Edition is a free, open Source eCommerce platform which provides businesses with a flexible, digital commerce solution to successfully sell online.” You might be thinking you’d prefer to cut costs on website development by doing it yourself with the free option from Magento. But just how “free” is free really?
Magento Open Source Plan
You may be familiar with the concept of Total Cost of Ownership (TCO) that many companies have increasingly been using to identify the true total cost of their purchase. Essentially, TCO includes the upfront purchase price and additional overhead costs, such as data importing, hosting, security, maintenance, and design costs. As time draws closer to the end of the support of Magento M1, we suggest evaluating your TCO, to be able to make the best-informed decision for your company. In addition to evaluating your TCO, we have also provided additional factors to consider when choosing a eCommerce solution in our eCommerce Buyer's Guide.
With the click of a button, you will have access to the Magento Community Edition open source software. This download will give you access to instant purchase, site search, catalog management, integrated checkout, payment and shipment, mobile shopping, and access to their Marketplace. I know, it probably sounds like you’re getting everything you need to run an eCommerce website, but stay tuned to find out if this is really the case.
The Magento platform is quite sophisticated, and requires highly skilled programmers to understand all its peculiarities. In addition, The Magento platform is complex and ever changing and therefore even Magento itself recommends using a Magento-certified partner to install, set up, and maintain your store. You could probably cut costs if you are a tech-savvy person, however, on average, agencies’ price for Magento implementation range between $30,000 for a very basic eCommerce website(Simple Design Or Theme, access to Magento Community site, no integration with back office systems, and smooth CMS). This can easily increase to as much as $100,000+ for a more sophisticated eCommerce website(custom Magento design, integration with back office systems, customer groups, and migrations to host, extensions). In addition, given the complexity of the customization of the platform and integration with third-party services, you will more than likely need to hire a Magento developer costing about $150/hr.
Hosting is a cost that people typically neglect when planning their budget. Choosing the right hosting company is imperative for your website’s long term success. Magento previously dropped their hosting services in 2014 and allowed their customers to choose their preferred host. Depending on whether or not you prefer to utilize shared hosting or dedicated hosting, the cost varies widely. Shared hosting could start at $20/month, while dedicated servers start at $539.95/month (Nexcess being a server most commonly recommended by Magento). Given Magento’s large codebase, you will have to opt for the higher end hosting options in order to not compromise speed to run a highly performing website.
Of course you could stick with the free theme offered in the basic Magento package if you want something quick to get running. However, I’m guessing essentially in the long run, you would like your store to look as customized, sophisticated, and unique as your brand and product offering. If so, you will have to succumb to yet another incremental cost of themes from Magento’s Marketplace. The cost for themes could range from $29-$499.
Maintenance and Support
When your site is finally up and running, to make sure it runs at its best, you will need active maintenance and support to ensure seamless operation. This cost could vary based on your decision to do it in-house or utilize other services. These costs could include initial setup costs, new store implementation, and continuous monthly costs. On average, with a maintenance team working on your website for 4 hours per week, you can expect an average monthly cost $2500.
The open-source version of Magento offers a range of out-of-the-box features for the basic e-retailers’ needs. If you don’t need much functionality, then this option may just suffice. However, be warned; integrating extra functionality using Magento extensions could be costly. Firstly, using the Marketplace, buying these extensions could either be free or cost up to $10,000. Secondly, extensions has been proven to affect website performance. According to Sean Work, 1 second page delay to result in a 7% reduction in conversions. Therefore, if your eCommerce site is making $100,000 per day, a 1 second page delay could potentially cost you $2.5 million in lost sales every year.
Typically you wouldn’t want to waste money and time on developing software in house, when out-of-the-box solutions are available from third-party providers. Some of the core third-party integration types include: content infrastructure, search engines, sales tax management, product information management, and shipping solutions. Though the cost of integrating these third-party tools could be free, you will also incur the cost of using these different services. To give you an estimate of the cost you can expect, we took into account the monthly pricing of some of the more common third-party providers:
Contentful (Content Infrastructure)
Algolia (Search Engine)
TaxJar (Sales Tax Management)
Salsify (Product Information Management)
Shippo (Shipping Solutions)
These price ranges depend on the size of your company, number of operations, records, and transitions. So, we estimate a median cost of approximately $530/month.
Magento Open Source Estimated TCO
In summary, for the most basic store possible, it could cost you between $22,000 and $40,000. The basic website is accompanied by limited functionality, design, access to a community CMS, and zero integrations with back office systems. On the other hand, a customized Magento website has extra benefits not included in the basic package, like customized design, migration to hosts, and extensions. However, this comes at a much higher price range, starting between $40,000 and $100,000 upwards!
Magento Enterprise Plan
Magento also offers an enterprise plan for larger businesses which provides more functionality and includes all Magento features. So what’s the catch?- Instead of having a free download, you will have to fork over anywhere between $22,000/year and $125,000/year. With this fee, you are promised features such as security, mobile commerce, and free professional customer support. It also includes all the features included in the open-source edition but at a higher cost. These include:
- The implementation of the enterprise edition which starts at a high $60,000.
- The hosting costs of $2,000 on average, as it requires at least one dedicated server.
- The highly suggested Magento Gold Certified Partner costing $10,000/year for maintenance and support.
- The cost of the themes, which remain constant across all editions and the extension integrations, which comes at a higher price for the enterprise edition and can be seen in the Marketplace.
Overall, the estimated TCO for the enterprise plan starts between $100,000/year and $250,000/year upwards. If money is no issue, and you would rather invest in this platform that is still rigid but more customizable than Magento’s open source version, then this may be the right fit for you.
How does the TCO of Elastic Path Compare?
Elastic Path and Magento both allow the ability to leverage third-party components as part of your commerce stack. However, the way that Elastic Path and Magento enable this is very different:
- Choice: Elastic Path provides the flexibility to choose and utilize any third-party provider rather than being constrained to options that Magento offers on their Marketplace. Given the extensibility of the Elastic Path API-first approach, you can quickly and easily integrate any third-party solution - you’re not limited to the options available in a walled-garden Marketplace.
- Customizability: Elastic Path makes it simple and fast to customize your digital commerce experience the way YOU want it with endless functionality, as opposed to Magento’s basic functionality that requires a lot more tools and ends up being expensive and painstaking. Magento’s plugins are designed to expose the basic, vanilla functionality of their third-party solutions of choice, and are extremely complex and cumbersome to customize when you need the third-party integration to work around your business requirements.
If those two points resonate with you, then Elastic Path may be the right fit to put your business in control of your journey and success. An enterprise customer bringing revenues of $6 Million could be looking at a $30,000+ yearly plan.
Magento markets their Community Edition open-source platform as “free”, but your true TCO (total cost of ownership) is far from free. The cost of getting your customized store up and running will start anywhere between $40,000 and $100,000 a year. The Magento enterprise plan does come with more functionality and features to customize but it starts anywhere between $100,000 and $250,000 a year.
Elastic Path offers a transparent pricing plan centered around being simple and scalable. The Pay-As-You-Go plan includes all core commerce services, and offers an add-on option for Flows (the “nervous system” of your commerce stack). You are able to calculate your estimated monthly cost on our website by adjusting your monthly revenue. The Enterprise Plan includes all aforementioned services in addition to services, such as Enterprise-level SLAs, Premium Support, Burst Protection, and more.
Given the TCO of Magento, you may want to reevaluate your yearly costs before upgrading to Magento M1, and consider an alternative like Elastic Path which can help you significantly cut your TCO.