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SaaS set to boom in ecommerce sector - but some concerns remain

31st Jul 2008
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Software as a service (SaaS) is gaining popularity in all kinds of industries, with the ecommerce set to see particular penetration in the coming years. But do some sticky SaaS concerns mean that it's still a case of 'buyer beware'?

By Stuart Lauchlan, news and analysis editor

Software as a service (SaaS) has gained traction in the CRM sector thanks to firms such as and NetSuite, as well areas such as human resources, through SuccessFactors, and billing via the likes of Zuora. The overall message is that SaaS is spreading beyond its 'traditional' markets.

A good example is the ecommerce sector. According to research firm Gartner Group, by 2013, 40% of ecommerce deployments will use a complete SaaS ecommerce solution while 90% of ecommerce sites will subscribe to at least one SaaS-based service. These could include elements such as product reviews, product recommendations or social sales capabilities. Organisations that face challenges such as lack of budget for people, hardware and software and organisations that want ecommerce capabilities without having to obtain hardware and software will find SaaS ecommerce appealing.

"Ecommerce SaaS solutions enable companies that couldn’t afford ecommerce to have these capabilities and compete online."

Gene Alvarez, research vice president, Gartner

“The trend toward SaaS applications has affected CRM and other applications, and ecommerce isn’t exempt from this trend,” says Gene Alvarez, research vice president for Gartner. “Ecommerce SaaS solutions enable companies that couldn’t afford ecommerce to have these capabilities and compete online. It provides organisations with live websites, and enables ecommerce SaaS service providers to provide individual services, such as product reviews or click to call, that can be incorporated into ecommerce SaaS platforms, as well as on sites that are using licensed software.”

Among the SaaS vendors that Gartner ranks as a visionary is NetSuite. “This demonstrates the future of ecommerce,” says Mini Peiris, VP of product marketing at NetSuite. “NetSuite Ecommerce offers etailers a comprehensive system to run their core business operations rather than struggle with integrating a shopping cart with multiple systems that span web analytics, online marketing, customer self-service, inventory management, complex pricing, product catalogue and shipping integration to get a complete view. This allows etailers to focus on serving their shoppers and leverage new emerging trends in ecommerce rather than worrying about their systems.”

Lack of differentiation?

NetSuite cites Suffolk-based Justoffbase - an estore that distributes and sells a wide variety of tools and equipment for gardening, construction, automobile, camping and machinery - as a prime example of SaaS and ecommerce in action. Justoffbase says it has achieved a nearly five-fold sales increase in just four years without any significant increase in operating costs.

Justoffbase previously used multiple software systems to run its business, which couldn’t support the company’s growth and proved to be inadequate. NetSuite’s on-demand business management software suite now automates Justoffbase’s core ecommerce operations from accounting, order management, marketing, customer service and support and inventory management to fulfilment and shipping.

"SaaS ecommerce is a viable solution for some organisations, however, they must make that determination based on the SaaS vendor’s capability to meet their technical and functional requirements, and on the type of subscription payment model that’s offered."

Gene Alvarez, research vice president, Gartner

The firm has seen a fivefold increase in business, generated by automating routine processes and integrating company-wide operations and a reduction in lost capital from billing errors as a result of automated invoice/order reconciliation. Justoffbase staff members have more time to focus on profitable tasks rather than spending time managing different software solutions 24/7 from any location using just an Internet connection. They also have access to up-to-date information for management to make faster business decisions, supported by real-time reporting.
“This has dramatically improved collaboration and enabled our full-time staff to focus on core financial and sales management tasks,” says Tim James-Parker, a partner at Justoffbase. “Every staff member has their own dashboard set-up to display key real-time metrics applicable to their role and responsibilities. The removal of the burden of managing company data contained in local retrieval systems has been one of the biggest advantages.”

But even with such success stories, many ecommerce vendors are more likely to prioritise traditional upgrades to their websites before SaaS investments. One issue is lack of differentiation that can be achieved through SaaS. The SaaS model has a low barrier to entry, which is good for enabling firms to get up and running quickly – but also allows their competitors to do the same thing.

There's also some concern that current SaaS ecommerce offerings favour the business to consumer (B2C) market and don't support business to business (B2B) transactions and requirements, such as quoting, proposal generation, lead management and purchase order payment processes. In some cases, vendors focus on providing commodity ecommerce functions to a large audience, such as enabling organisations to have basic online stores.

Traditional SaaS adoption objections will also come into play with IT staff often resisting its introduction into their technology mix, with some fearing they'll be held responsible for site outages or performance issues when they actually have no control over the SaaS ecommerce application. Organisations that aren't familiar with SaaS offerings are also often concerned about how to integrate SaaS e-commerce with existing applications.

So it's a case of 'buyer beware'. “SaaS ecommerce is a viable solution for some organisations, however, they must make that determination based on the SaaS vendor’s capability to meet their technical and functional requirements, and on the type of subscription payment model that’s offered,” says Gartner's Alvarez. “Before pursuing SaaS for ecommerce, organisations should develop a SaaS strategy that accounts for the scoping, evaluation, selection, operation and different architectures or SaaS solutions, as well as determines the organisations comfort level in leveraging externally provided IT applications.”

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  • Replies (1)

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    By michaels
    02nd Sep 2009 21:14

    They really provided an awesome solution of ecommerce software. Internet has revolutionized our world and there are very best opportunities available for merchants, because nowadays every company is intending to Accept Credit Card. This is the reason why trade and ecommerce is leading ways to earn a lot.

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