eCommerce TCO for SAP companies
If you’re an executive at an SAP manufacturer, you’re always looking for a cost projection when it comes to new technology adoptions—especially if you’re replacing your current SAP e commerce solution with something better. That projection must be realistic to help you determine which eCommerce solution will provide the most business value with the least cost, both upfront and ongoing.
How much should you spend on an SAP eCommerce solution? In a Forrester study on Total Cost of Ownership for B2B eCommerce solutions, respondents spent an average of 7% of eCommerce revenues on the eCommerce solution.
That number may sound low. It’s actually far too high. Our clients spend about 0.15% of eCommerce revenues on their eCommerce solutions.
Okay, how do you keep your Total Cost of Ownership that low?
Glad you asked. Whether you’re re-platforming or just starting out in SAP B2B eCommerce, here are the 5 cost factors you should minimize to reduce your eCommerce TCO.
1. People costs in the implementation phase
In the SAP world, it’s easy to get sucked into big, people-heavy projects. In fact, I once wrote a blog post called How Many CapGemini Consultants Does It Take To Launch An SAP-Integrated hybris B2B Project? (The post earned me a little notoriety. I was asked to take it down, but I didn’t. Oops!)
The answer is simply stunning: 35.
It took 35 consultants, working over an unspecified period of time, to accomplish what we do in 90 days, with 1 full time equivalent consultant.
In the SAP world, beware the bloat.
In the case of eCommerce implementations for SAP manufacturers, it’s important to step back and start with the business objectives that led you to eCommerce in the first place. Why are you doing eCommerce? Do you need every possible bell and whistle, or perhaps much less? Having answered that—what’s the minimum complexity that you require, and can handle, in an eCommerce solution?
We always bring this up because SAP manufacturers are in danger of overspending for their eCommerce solution—and one of the biggest culprits is people cost in the planning and implementation process.
The number of people required to implement eCommerce is directly tied to the type of eCommerce solution you choose. A good SAP eCommerce solution provides the business value you need without taxing your existing IT staff in the development phase. In other words, you shouldn’t have to make big changes to your SAP to get eCommerce working, and you should put SAP first as the system of record. The right eCommerce solution will mirror what’s already happening in SAP. If your business processes are already working in SAP, why reinvent the wheel and recreate them on an eCommerce platform?
2. Ongoing people costs
I’ll tell you a little secret: SAP eCommerce doesn’t have to eat up IT hours after project launch. In fact, the best SAP eCommerce solutions will require very little maintenance—but they have to be designed that way from the start.
One of our clients handles $25 million a year through the eCommerce site that we built for them. How many IT people does it take to maintain that eCommerce site? Just one.
We accomplish this through 1) efficient solution architecture, and 2) maintenance of our core product.
A solution that’s built right has only the functionality that your business requires. When the eCommerce solution bows to SAP (not vice versa), the solution stays simple. That means it requires very little maintenance.
When you choose a cloud-based SAP eCommerce solution like Corevist, a single core product update is pushed to all clients. Distributing the cost of ongoing maintenance among all clients keeps the cost low for each individual client. It’s the most efficient way to handle maintenance.
You need to budget based on your goals for your B2B eCommerce project. And your goals need to be realistic. If you’re a 3-5 man shop, buying a platform that’s suited for the distributor who bets 50% of their $1B business on eCommerce is not a smart move. Now you’ve bought more than you can handle. Your ongoing support down the road will be expensive.
Of course, not all ongoing people costs are planned. If the eCommerce solution was designed with unnecessary complexity, a lot can go wrong if something stops working. When your 24x7x365 eCommerce site breaks at 5PM on a Friday, that’s a big people cost. Are you prepared to deal with that? Why not make it simple from the start and leave maintenance to a trusted advisor?
3. Software implementation costs
The accuracy of software implementation cost is a function of the fidelity of communication between the software customer and the vendor over the course of the project. In other words, if the two firms are operating on a misunderstanding of what functionality is required, then the cost estimate for the implementation won’t be accurate.
Complete, accurate communication is the key to avoiding unplanned costs in the implementation phase, but it’s difficult to establish without hands-on demonstrations. At Corevist, we establish clear requirements through an ongoing series of highly-targeted focus groups. We demo our software in real time, using real data, for real people. We use these hands-on demos to gather change requests across the life of the project.
4. Ongoing software costs
Every enterprise-class B2B eCommerce solution will have planned ongoing costs. These may come in the form of license renewals or a monthly SaaS (software-as-a-service) fee, depending on the pricing model of the software. These costs are fairly easy to forecast because the vendor will provide quotes up front.
Forrester’s 7%-of-revenue stat comes into play here. If the industry average is to spend 7% of monthly eCommerce revenues on the monthly eCommerce software retainer, then CIOs should be very demanding when it comes to ongoing operating cost vs. eCommerce revenue. If your annual eCommerce revenue is $2 million, are you going to spend $2 million a year on your eCommerce site? A healthy eCommerce business will spend 7% or less of eCommerce revenue on the supporting technology. In fact, we recommend much less, as I mentioned above.
5. Hardware costs
Your eCommerce software needs to be hosted on physical infrastructure. If you adopt a cloud-based solution like Corevist’s, your eCommerce solution will live on remote servers that are accessed through the web.
A cloud-based solution is better for everyone involved. Running an eCommerce solution on your own servers will introduce ongoing costs that only the biggest firms can justify. Most companies aren’t equipped to handle the in-house IT load that in-house servers will bring. Cloud-based eCommerce solves the problem of hardware cost.
Your eCommerce costs should directly reflect the revenue that you plan to get from eCommerce. In other words, you should buy a solution that fits the size of your eCommerce business. You don’t want to create a widget that’s overqualified for your business needs. You want something that meets your business needs and nothing more, while leaving room to scale if necessary in the future.
This is an important distinction to make.
Say you’re a big distributor like Grainger. If your primary revenue will come from the eCommerce channel, then you’ll need all sorts of skills on staff. You’ll need marketing people, analytics people, web commerce people, back office, UI folks, integration folks. There are dozens and dozens of people on staff that you’ll have to manage and coordinate. It’s the heart of your business.
What if you’re an SAP manufacturer just looking to add eCommerce as a sales channel? In that case, you don’t want to make a platform decision that makes eCommerce your business. You don’t want all those bells and whistles and the people required to run them.
You’re trying to become easier to do business with as a manufacturer. You’re not depending on the website to find you new customers. You don’t want to take on platform, responsibility, and cost that a dedicated distributor will take on.
Really, you need to improve the order to cash process.
If that’s you, then don’t get discouraged. There are affordable SAP B2B eCommerce solutions on the market (hint: ours is one of them). You can reduce Total Cost of Ownership by building an eCommerce solution that meets your business needs, and nothing more.