Executive Summary
There has been a great deal written about determining the total cost of ownership (TCO) of implementing a wholesale B2B system. These complex systems often take a great deal of development, configuration, and integration, so stakeholders require more assurances and metrics for evaluating the project’s ROI, and rightly so.
Not all wholesale B2B systems are implemented the same, however, and the model under which they operate can greatly affect their TCO over different lengths of time. The two extremes of this are the on-site or managed framework deployment model and the Software as a Service (SaaS) model.
The most immediate difference is the initial cost of rollout. Implementing an on-site framework solution requires purchasing and setting up expensive equipment, whereas implementing a SaaS solution does not. While the licensing fee may be somewhat lower for on-site deployments, the lower fees will not make up the difference of the initial cost over the life of implementation. And while a managed framework implementation may have fewer up-front costs because there is no need to purchase server equipment, there is still the development needs of implementing a fully functional system from a framework.
Another cost difference - one that is often overlooked by buying managers - is the cost and effort of continued innovation of the platform. SaaS providers have a very strong incentive to continuously maintain and improve their offering. In order to achieve the same results in an framework deployment, an organization must invest heavily into either custom development (either in-house or outsourced) or contract with a 3rd party consultant. The cost for these services and staff often bring the TCO of an on-site implementation significantly higher than management ever expected.
Yet another hidden cost of on-site deployment is an extended rollout time. Since so many features need to be customized to any particular organization, companies often find themselves going live with a minimum viable product (MVP) and scrambling to rollout much-needed features in the subsequent months or years. While a full SaaS rollout can take 3 - 9 months, on-site rollouts regularly are measured in years.
Introduction
When an organization is considering implementing a wholesale B2B solution, there are 2 basic directions they go: licensing a framework (within which they develop their solution) or subscribing to a SaaS provider.
Many organizations feel that they need to implement a framework solution to ensure that they have access to all the features that they need. They wrongly assume that a SaaS solution could not be feature-rich enough to meet their needs while underestimating the costs and effort involved in building out a framework system. Because of this, many organizations choose to start with a framework solution before realizing their error and seeking out a SaaS provider. Following are some of the causes for their changing course:
Cost of development, implementation, and maintenance
It’s tempting for an organization to try to build a custom solution on top of one of the B2B frameworks on the market today. Custom development can seem like the only way to get every feature that’s been requested, to get a solution that is truly tailored to your organization’s unique needs. Unfortunately, many organizations underestimate the cost of that development and then realize they also underestimated the cost of implementing it fully into their existing systems and maintaining that system over time.
Time to Rollout
Though many wholesale B2B frameworks claim that they can be rolled out in 3 - 6 months, these are minimum viable product (MVP) rollouts which delay many key features’ development until after initial rollout. The true time for a full enterprise rollout can actually be up to 3 - 5 years.
Lack of Platform Innovation
Software platforms need to be more than just maintained. They need to be innovated and improved to take advantage of new hardware and infrastructure (think: responsive design for mobile devices) and service new business needs. Without this lack of innovation, organizations risk finding themselves in the same situation they are currently trying to fix: a legacy system that meets fewer and fewer needs each year.
Need for Continued Global Support
When organizations realize that they are rolling out a complex platform to hundreds or thousands of users and that these users will need continued support, they realize that they will either need to build out a new IT support department or greatly increase the bandwidth of their existing support infrastructure. This can be a significant increase in the TCO for the platform.
Industry Specificity
Many framework options offer modules that can help an organization shape a platform to their needs, but at some point, every company considering implementing one of these systems realizes that if they want a solution tailored to their industry they are going to have to build it themselves.
Cost
Determining TCO on a wholesale B2B system can be a complex problem, regardless of whether you implement an onsite framework solution or a SaaS solution. It’s hard to know what you don’t know and it’s hard to predict, for example, all the personnel adjustments that will need to take place.
SaaS implementations are much simpler in this way. Because so much of the burden of implementation has been delegated to the SaaS provider, there are simply fewer moving parts. In short, not only are SaaS implementations less expensive, they are easier to evaluate on a TCO basis.
B2B Framework Costs
- Cost of Software License
- Cost of Infrastructure
- Cost of Implementation
- Cost of Software Maintenance
- Cost of Software Innovation
- Cost of Infrastructure Management
- Cost of Channel Management
- Cost of User Support
B2B SaaS Costs
- Cost of Software License
- Cost of Implementation
- Cost of Channel Management
- Cost of User Support
Continued Innovation
Continued innovation is the lifeblood of your B2B system over its long-term deployment. Without it, your system will stagnate and features will eventually become less efficient, leading to user frustration. Worse, it significantly increases the risk to the system’s ROI, which accrues over time.
With traditional framework solutions, that innovation can be accomplished in house but requires a dedicated team to manage, plan, execute and test any new features. A third party vendor or consultant can be used, but this still requires a small in-house team to act as “product owners” - the people that collect, document and priorities any feature requests or updates.
With SaaS providers, the need for continued innovation is shared between the organization and vendor, which allows for greater efficiencies for both parties. The SaaS provider has obvious incentives for improving the platform while the organization has obvious incentives for continuing to license it. In other words, the software developers get to do what they do best and the manufacturers and wholesalers get to do what they do best.
Rollout Timeline
When building a rollout timeline for a traditional framework, companies often have to choose between features and deadlines. In fact, most B2B framework vendors offer recommendations for which features are mission critical (e.g. branding, payment provider integration) and which can probably wait until post-deployment (e.g. complex pricing rules, PIM & ERP integrations).
SaaS solutions don’t suffer from this issue because, aside from integration, there is very little correlation between feature set and rollout timeline. Features that would need to be custom built within a framework are usually available out of the box with a SaaS solution.
The advantage here is that having a full suite of features ready to go after integration will allow you to come to market fully prepared. There will be no need for overlapping systems, recurring training sessions as new features roll out, or compromised transitional seasons. You’ll be able deploy one system, train your users, and use a fully implemented system.
Industry Specificity
It is important, regardless of the B2B model being implemented, that the vendor be familiar with your industry or segment. This is doubly important for SaaS providers. Because SaaS solutions are inherently more streamlined, it should be a priority to find a provider that offers a solution that fits your needs.
Industry knowledge is important. Cars are sold differently from houses and jewelry. From product segmentation to seasonality to buyer expectation, any wholesale B2B system that you choose must not only be able to accommodate these unique need, but understand them, be able to anticipate them and have a solution ready when you need it.
Conclusion
Organizations that are choosing a wholesale B2B provider are increasingly faced with the choice of implementing a framework solution or SaaS solution. Traditionally, this was an easy choice - SaaS solutions were not seen as mature enough, so if you wanted a robust system, you implemented a framework, developed your B2B system on top of it, and hoped for the best. But as SaaS solution have matured, the decision has become more difficult. SaaS solutions can match features with framework solutions, or even exceed them if the SaaS solution is tailored to your particular industry. In addition, they are more cost effective, even at scale, while providing a shorter, more predictable rollout timeline and continued innovation of the platform.
In short, the days of wholesale B2B SaaS solutions being considered not-ready-for-enterprise are ending. And some of the world’s largest wholesalers and manufacturers are leading the way, discovering that enterprise scale does not need to be exclusive of ease of use, predictability or cost.
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