demandware tco webinar final 12122012
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TRANSCRIPT
Copyright 2012 Demandware, Inc. - Confidential
Maximizing Commerce Investment: How to Avoid Hidden Technology Costs and Accelerate Growth
Guest Speaker – Peter Sheldon, Forrester Research
November 30, 2012
@peter_sheldon
Copyright 2012 Demandware, Inc. - Confidential
Digital Commerce: The New Way to Web
Powers world-class global ecommerce/ web businesses
Enables amazing branded consumer experiences
Links devices, channels and applications into a cohesive consumer experience
Empowers users to drive business growth
Is always on
2Copyright 2012 Demandware, Inc. - Confidential
Copyright 2012 Demandware, Inc. - Confidential
Digital Commerce Options
Host and manage software
Manage upgrades
Tinker with infrastructure
Stitch and glue integrations
Build It Yourself
Launch new brands and channels
Create innovative consumer experiences
Synchronize devices, channels and apps
Go global
Plug into Demandware
3Copyright 2012 Demandware, Inc. - Confidential
Copyright 2012 Demandware, Inc. - Confidential
Leading Brands Choose Our Model
4Copyright 2012 Demandware, Inc. - Confidential
Copyright 2012 Demandware, Inc. - Confidential5
Survey Objectives
Base: 156 eCommerce, marketing and IT technology leaders
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, September 2012
Forrester Consulting conducted a study of 156 US and European marketing and technology leaders during the summer of 2012 to:
•Uncover most common challenges with ecommerce platforms
•Determine detailed line-item capital and expense costs to maintain ecommerce platforms
•Establish best practices for creating true total cost of ownership analysis
Making Leaders Successful Every DayMaximizing Commerce Investment: How to Avoid Hidden Technology Costs and Accelerate Growth
Peter Sheldon, Forrester Research
November 30, 2012
@peter_sheldon
© 2012 Forrester Research, Inc. Reproduction Prohibited
Demographics
Forrester surveyed 156 US, UK, and German based eCommerce, marketing, and IT leaders responsible for eCommerce technology decisions at their firms.
Retail83%
Consumer Products
9%
Branded Manufacturer selling
direct5%
Brand Manufactu
ring3%
“To which industry would you say that your company belongs? ”
Information Technology
74%
eBusiness/eCommerc
e20%
Marketing6%
“Which of the following most closely describes the department you work in?”
© 2012 Forrester Research, Inc. Reproduction Prohibited
Agenda
Online retailers continue to invest in eCommerce technologies
Supporting eCommerce technology does not come cheap
Cloud solutions represent a viable alternative
Building a realistic TCO model & using it correctly is imperative
Recommendations
8
Across every industry sector, online channel share is growing.
© 2012 Forrester Research, Inc. Reproduction Prohibited
By 2016, Forrester forecasts that online retail sales in the US will reach $327 billion
10Source: Forrester Research Online Retail Forecast, 2012 to 2016 (US)
© 2012 Forrester Research, Inc. Reproduction Prohibited
Online generated over $1.5b revenue on Cyber Monday 2012
11Source: Forrester Research Online Holiday Retail Forecast, 2012 (US)
© 2012 Forrester Research, Inc. Reproduction Prohibited
Investment growth in eCommerce technologies continues in 2012
12Source: May 2012 Global eBusiness & Channel Strategy Professional Online Survey
© 2012 Forrester Research, Inc. Reproduction Prohibited
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
$50M to $100M $100M to $250M $250M +
Home-grown solutiondeveloped andmanaged in-house
Licensed on-premisesolution from a softwarevendor
Open-SourceeCommerce solution
Cloud-basedeCommerce solution
13
Base: 156 US, UK and German eCommerce, marketing and IT technology leaders
Today home-grown and licensed solutions dominate
“Which of the following best describes the eCommerce solution your company currently uses for your B2C eCommerce channel?”
Today, cloud-based solutions are favored by smaller retailers ($50m - $100m online revenue)
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012
© 2012 Forrester Research, Inc. Reproduction Prohibited 14
eCommerce leaders are concerned that their existing
solutions won’t scale for tomorrow’s needs
Consumers demand integrated, cross-channel brand experiences
Online retailers have ambitious global expansion plans
Mobile is no longer just about mobile
© 2012 Forrester Research, Inc. Reproduction Prohibited
Confidence in existing solutions to support tomorrows online growth is alarmingly low
18
18%
20%
17%
20%
16%
13%
13%
14%
43%
41%
31%
31%
31%
34%
31%
30%
27%
34%
38%
41%
44%
46%
47%
48%
Managing ongoing cost of ownership to maintainand grow the business
Speed to achieve new and fully integrated mobileexperiences
Multi-brand expansion requirements
Multi-channel requirements to satisfy consumers'needs
The scalability of the platform to attain corporategrowth plans
Adoption of new eCommerce features andrequirements
Global expansion requirements
Order management requirements for orderconsistency across channels
1 (no concern) 2 3 4 5 (Immediate concern/requires change)
“How would you describe the confidence level your organization has in the ability of your current eCommerce solution to support the future growth of your B2C channel over the next 5 years in respect to:”
Base: 156 US, UK and German eCommerce, marketing and IT technology leaders
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012
© 2012 Forrester Research, Inc. Reproduction Prohibited
Consequently, 25% of online retailers plan to re-platform in the next two years
19
1%
3%
3%
8%
12%
13%
29%
30%
Don't know
We have selected and implemented a new platformwithin the last 2 years
We have recently selected a new platform, but it isnot yet implemented
We have recently started a selection process for re-platforming
In the next year
We expect to engage in selection process for re-platforming within the next 2 years
We expect to engage in selection process for re-platforming in the next 2-4 years
We have no current plans to re-platform
“Which of the following best describes the timeline for replatforming your current eCommerce solution?”
Base: 156 US, UK and German eCommerce, marketing and IT technology leaders
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012
© 2012 Forrester Research, Inc. Reproduction Prohibited
As they do so, they seek to align TCO with revenues & improve business agility
20
40%
40%
41%
51%
56%
27%
44%
58%
45%
51%
51%
29%
36%
36%
29%
24%
54%
39%
27%
41%
37%
37%
To gain access to an ecosystem of value-add solutions that wecan leverage
To support our global initiatives
To reduce our reliance on in-house IT staff and developers
To increase the speed at which we can deploy new features andfunctionality
To lower overall operational and ownership costs
To reduce the technical and operational risks of supporting alegacy or home-grown platform
To reduce the opportunity risks of staying on a legacy or home-grown platform
To improve business agility
To support mobile and tablets users
To support our multichannel initiatives
To align the cost of ownership against our online revenues
5 (Very important factor) 4 (important factor)
“How important were the following during the development of your business case for a replacement eCommerce solution?”
Base: 156 US, UK and German eCommerce, marketing and IT technology leaders
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012
© 2012 Forrester Research, Inc. Reproduction Prohibited
Agenda
Online retailers continue to invest in eCommerce technologies
Supporting eCommerce technology does not come cheap
Cloud solutions represent a viable alternative
Building a realistic TCO model & using it correctly is imperative
Recommendations
21
© 2012 Forrester Research, Inc. Reproduction Prohibited
The cost of supporting eCommerce tech varies significantly across online retailers
22
0%
5%
10%
15%
20%
25%
30%
35%
$50M to $100M $100M to $250M $250M +
< 1% 1-2%
3-4% 4-5%
5-6% 7-8%
9-10% > 10%
“Using your best estimate, what percentage of your online revenue currently goes to supporting your eCommerce technology (software, hardware, maintenance, hosting,
redundancy, upgrades, etc.)?”
Base: 156 US, UK and German eCommerce, marketing and IT technology leaders
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012
© 2012 Forrester Research, Inc. Reproduction Prohibited
5%
56%
36%
3%
$100M to $250M
(online revenue)
1-5 5-10 10-25 25-50 50-75 75+
3%
29%
53%
15%
$50M to $100M
(online revenue)
23
Many rely on large technical resource teams to support their eCommerce site(s)
“How many technical resources (infrastructure, application development, networking, etc.) are dedicated to supporting your eCommerce business?”
1%
8%
24%
34%
13%
20%
$250M+
(online revenue)
Base: 156 US, UK and German eCommerce, marketing and IT technology leaders
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012
A third of large online retailers employ over 50 technical resources to support their eCommerce sites(s)
© 2012 Forrester Research, Inc. Reproduction Prohibited
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
$50M to $100M $100M to $250M $250M +
< $100k
$100k-$150k
$150k-$200k
$200k-$250k
> $250k
24
“What is your average annual fully loaded cost for eCommerce technical resources”
The fully loaded cost for of these resources is considerable
Base: 156 US, UK and German eCommerce, marketing and IT technology leaders
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012
© 2012 Forrester Research, Inc. Reproduction Prohibited
The financial and opportunistic cost of upgrading on a regular basis is significant
25
“How frequently would you say you upgrade your licensed or open source eCommerce solution to the
latest version available from the vendor?”
1%
1%
3%
3%
10%
36%
44%
Don't know
We have never upgraded our…
Once every 3 years
Every 3 months
Every 6 months
Once every 2 years
Once per year
* (including requirements development , software development, QA and release activities)
v
“How long does it typically take to upgrade your eCommerce platform to the latest
version? *”
0%
2%
2%
5%
6%
10%
21%
53%
Don't know
Longer than 9 months
Less than 2 weeks
3 to 6 months
6 to 9 months
2 to 3 months
2 to 4 weeks
1 to 2 months
Base: 156 US, UK and German eCommerce, marketing and IT technology leaders
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012
Fifty seven percent of online retailers upgrade their eCommerce platform at least once per year
© 2012 Forrester Research, Inc. Reproduction Prohibited
On-premise eCommerce platform owners pay additional licensing costs as they grow
26
“Thinking about the contract you have in place with the vendor of your current licensed eCommerce solution, which of the following triggers would require you to purchase additional
licenses?”
39%
49%
54%
67%
76%
78%
Reaching a defined threshold of online revenue
Reaching a defined threshold of concurrent visitorvolume
Launching additional sites (e.g. brands or micro-sites)
Reaching a defined threshold of order volume
Adding more business users (e.g. users of theadministration tools)
Launching additional markets (e.g. new Europeansites)
Base: 156 US, UK and German eCommerce, marketing and IT technology leaders
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012
© 2012 Forrester Research, Inc. Reproduction Prohibited
Agenda
Online retailers continue to invest in eCommerce technologies
Supporting eCommerce technology does not come cheap
Cloud solutions represent a viable alternative
Building a realistic TCO model & using it correctly is imperative
Recommendations
27
Today cloud-based eCommerce solutions vie head-to-head with
on-premise platforms
© 2012 Forrester Research, Inc. Reproduction Prohibited 29
15%
26%
29%
29%
33%
35%
35%
37%
40%
44%
47%
49%
62%
66%
69%
Product recommendations
Live chat
Guided product navigation
CRM
Contact center support management solution
Order mgmt
Tax calculation
Customer ratings & reviews
Site product search
Rich media (rotating images, video etc)
PIM
Mobile commerce
WCM
Email marketing
Web analytics
Few online retailers are entirely new to cloud-based solutions
“Do you currently use third-party (vendor) products to provide any of the following eCommerce related functions on your site”
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012
Base: 156 US, UK and German eCommerce, marketing and IT technology leaders
© 2012 Forrester Research, Inc. Reproduction Prohibited
And thus confidence in moving everything to the cloud is increasing
30
“Which of the following types of eCommerce solution is/did your company considering/consider for inclusion in your selection process for a new eCommerce platform?”
41%
41%
49%
49%
56%
76%
Open-Source eCommerce solution, managed andsupported by a services provider or vendor
Cloud-based eCommerce solution
Licensed on-premise solution from a software vendor,managed in-house
Open-Source eCommerce solution managed in-house
Licensed on-premise solution from a software vendor,managed and supported by a services provider or…
Home-grown solution developed and managed in-house
Base: 156 US, UK and German eCommerce, marketing and IT technology leaders
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012
© 2012 Forrester Research, Inc. Reproduction Prohibited
22%
39%
44%
50%
56%
56%
61%
67%
72%
78%
Our TCO analysis did not favor cloud basedsolutions
The costs of cloud are higher than with on-premise or build-in-house
We perceive that cloud eCommerce solutionsare not mature enough for our business
We were worried that cloud solutions are notcustomizable
We were worried about security and privacyissues
We were worried about integration with otherapplications
The migration to cloud based applications will bea lengthy and complex process
The pricing of cloud solutions is complicated ordidn't fit our business model
We were worried about scalability
We were worried about long-term vendor lock-inwith cloud
31
“Thinking about cloud-based eCommerce platforms, why did you dismiss these during your selection process?”
Although concerns about cloud-based solutions continue to linger
Base: 156 US, UK and German eCommerce, marketing and IT technology leaders
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012
© 2012 Forrester Research, Inc. Reproduction Prohibited
Agenda
Online retailers continue to invest in eCommerce technologies
Supporting eCommerce technology does not come cheap
Cloud solutions represent a viable alternative
Building a realistic TCO model & using it correctly is imperative
Recommendations
32
© 2012 Forrester Research, Inc. Reproduction Prohibited
Few firms can acquire enterprise software without developing a business case and TCO model
33
13%
82%
22%
72%
No, we are able to procureenterprise software without
Yes, this is a mandatory part of ourformal procurement process
Investment business case
3-5 year total cost of ownershipanalysis
“Does your corporate sourcing/procurement group mandate either of the following for enterprise software purchases?”
Base: 156 US, UK and German eCommerce, marketing and IT technology leaders
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012
© 2012 Forrester Research, Inc. Reproduction Prohibited 34
“Which of the following best describes the reality of the investment business case for your platform versus the predictions of your model?”
Unsurprisingly, the ROI from eCommerce technology investments is clear
1%
1%
9%
22%
31%
34%
We have never measured the ROI versus theanalysis developed during selection
The ROI has been significantly lower than ouranalysis predicted
The ROI has been lower than our analysispredicted
The ROI has been higher than our analysispredicted
The ROI has been in line with our analysispredications
The ROI has been significantly higher than ouranalysis predicted
Base: 134 US eCommerce, marketing and IT technology leaders who developed a TCO model during their eCommerce solution evaluation
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012
© 2012 Forrester Research, Inc. Reproduction Prohibited
But the actual TCO is often higher than online retailers had projected
35
“Which of the following best describes the reality of owning and operating your platform versus the predictions of your total cost of ownership analysis?”
1%
1%
3%
17%
26%
50%
The actual cost of ownership has beensignificantly lower than our analysis predicted
We have never measured the real cost ofownership versus the analysis developed
during selection
The actual cost of ownership has been lowerthan our analysis predicted
The actual cost of ownership has beensignificantly higher than our analysis
predicted
The actual cost of ownership has been higherthan our analysis predicted
The actual cost of ownership has been in linewith our analysis predications
Base: 134 US eCommerce, marketing and IT technology leaders who developed a TCO model during their eCommerce solution evaluation
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012
© 2012 Forrester Research, Inc. Reproduction Prohibited 36
So what’s going wrong?
© 2012 Forrester Research, Inc. Reproduction Prohibited
21%
23%
25%
26%
28%
37%
39%
25%
28%
29%
24%
26%
27%
40%
42%
42%
42%
42%
44%
47%
23%
27%
28%
38%
51%
52%
37%
56%
37%
35%
32%
39%
33%
35%
34%
32%
33%
36%
30%
37%
30%
31%
34%
37%
33%
30%
30%
29%
29%
38%
34%
27%
20%
16%
35%
35%
34%
15%
21%
32%
17%
19%
17%
36%
16%
16%
22%
22%
18%
17%
17%
18%
37%
38%
22%
17%
12%
19%
19%
3%
1%
3%
4%
6%
4%
6%
21%
19%
24%
1%
26%
6%
4%
3%
4%
3%
4%
3%
8%
4%
20%
5%
3%
2%
Scalability
Security
Capacity
Opportunity
Reliability and availability
Extensibility
Interoperability
Ongoing development
Platform upgrades
IT support and development headcount training
Annual power consumption
Annual platform monitoring and support
Annual hardware leases
Annual infrastructure and server upgrades
Annual ISP/bandwidth rental
Annual Hardware repairs and replacement
Annual data backups
Annual recurring/maintenance fees for eCommerce platform
Annual disaster recovery
Annual recurring/maintenance fees for OS's, RMDB's, app servers etc
Facility upgrades
Additional software license costs for deploying new commerce sites
Additional software licenses to support growth
Hardware acquisitions
Software licensing for eCommerce platform
Software licensing for OS's, RMDB's, app servers etc
We already use in ourTCO analysisCritical
Nice to have
Not important
Initial costs
ongoing
annual
infrastructure
and software
costs
operations,
training and
support costs
opportunity
costs and
risk
mitigation
costs
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012
Base: 156 US, UK and German eCommerce, marketing and IT technology leaders
© 2012 Forrester Research, Inc. Reproduction Prohibited
Agenda
Online retailers continue to invest in eCommerce technologies
Online retailers seek nimble, open & cost effective solutions
Cloud solutions represent a viable alternative
Building a realistic TCO model & using it correctly is imperative
Recommendations
38
#1 Don’t get stuck in the CAPEX ditch
#2 Factor in the hidden costs
#3 Encourage cross-functional ownership of the TCO model
#4 Recognize that TCO is not always the be-all and end-all. Agility is key
Copyright 2012 Demandware, Inc. - Confidential
Maximizing Commerce Investment: How to Avoid Hidden Technology Costs and Accelerate Growth
Guest Speaker – Peter Sheldon, Forrester Research
November 30, 2012
@peter_sheldon
Copyright 2012 Demandware, Inc. - Confidential
Digital Commerce: The New Way to Web
Powers world-class global ecommerce/ web businesses
Enables amazing branded consumer experiences
Links devices, channels and applications into a cohesive consumer experience
Empowers users to drive business growth
Is always on
2Copyright 2012 Demandware, Inc. - Confidential
Copyright 2012 Demandware, Inc. - Confidential
Digital Commerce Options
Host and manage software
Manage upgrades
Tinker with infrastructure
Stitch and glue integrations
Build It Yourself
Launch new brands and channels
Create innovative consumer experiences
Synchronize devices, channels and apps
Go global
Plug into Demandware
3Copyright 2012 Demandware, Inc. - Confidential
Copyright 2012 Demandware, Inc. - Confidential
Leading Brands Choose Our Model
4Copyright 2012 Demandware, Inc. - Confidential
Copyright 2012 Demandware, Inc. - Confidential5
Survey Objectives
Base: 156 eCommerce, marketing and IT technology leaders
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, September 2012
Forrester Consulting conducted a study of 156 US and European marketing and technology leaders during the summer of 2012 to:
•Uncover most common challenges with ecommerce platforms
•Determine detailed line-item capital and expense costs to maintain ecommerce platforms
•Establish best practices for creating true total cost of ownership analysis
Making Leaders Successful Every DayMaximizing Commerce Investment: How to Avoid Hidden Technology Costs and Accelerate Growth
Peter Sheldon, Forrester Research
November 30, 2012
@peter_sheldon
© 2012 Forrester Research, Inc. Reproduction Prohibited
Demographics
Forrester surveyed 156 US, UK, and German based eCommerce, marketing, and IT leaders responsible for eCommerce technology decisions at their firms.
Retail83%
Consumer Products
9%
Branded Manufacturer selling
direct5%
Brand Manufactu
ring3%
“To which industry would you say that your company belongs? ”
Information Technology
74%
eBusiness/eCommerc
e20%
Marketing6%
“Which of the following most closely describes the department you work in?”
© 2012 Forrester Research, Inc. Reproduction Prohibited
Agenda
Online retailers continue to invest in eCommerce technologies
Supporting eCommerce technology does not come cheap
Cloud solutions represent a viable alternative
Building a realistic TCO model & using it correctly is imperative
Recommendations
8
Across every industry sector, online channel share is growing.
© 2012 Forrester Research, Inc. Reproduction Prohibited
By 2016, Forrester forecasts that online retail sales in the US will reach $327 billion
10Source: Forrester Research Online Retail Forecast, 2012 to 2016 (US)
© 2012 Forrester Research, Inc. Reproduction Prohibited
Online generated over $1.5b revenue on Cyber Monday 2012
11Source: Forrester Research Online Holiday Retail Forecast, 2012 (US)
© 2012 Forrester Research, Inc. Reproduction Prohibited
Investment growth in eCommerce technologies continues in 2012
12Source: May 2012 Global eBusiness & Channel Strategy Professional Online Survey
© 2012 Forrester Research, Inc. Reproduction Prohibited
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
$50M to $100M $100M to $250M $250M +
Home-grown solutiondeveloped andmanaged in-house
Licensed on-premisesolution from a softwarevendor
Open-SourceeCommerce solution
Cloud-basedeCommerce solution
13
Base: 156 US, UK and German eCommerce, marketing and IT technology leaders
Today home-grown and licensed solutions dominate
“Which of the following best describes the eCommerce solution your company currently uses for your B2C eCommerce channel?”
Today, cloud-based solutions are favored by smaller retailers ($50m - $100m online revenue)
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012
© 2012 Forrester Research, Inc. Reproduction Prohibited 14
eCommerce leaders are concerned that their existing
solutions won’t scale for tomorrow’s needs
Consumers demand integrated, cross-channel brand experiences
Online retailers have ambitious global expansion plans
Mobile is no longer just about mobile
© 2012 Forrester Research, Inc. Reproduction Prohibited
Confidence in existing solutions to support tomorrows online growth is alarmingly low
18
18%
20%
17%
20%
16%
13%
13%
14%
43%
41%
31%
31%
31%
34%
31%
30%
27%
34%
38%
41%
44%
46%
47%
48%
Managing ongoing cost of ownership to maintainand grow the business
Speed to achieve new and fully integrated mobileexperiences
Multi-brand expansion requirements
Multi-channel requirements to satisfy consumers'needs
The scalability of the platform to attain corporategrowth plans
Adoption of new eCommerce features andrequirements
Global expansion requirements
Order management requirements for orderconsistency across channels
1 (no concern) 2 3 4 5 (Immediate concern/requires change)
“How would you describe the confidence level your organization has in the ability of your current eCommerce solution to support the future growth of your B2C channel over the next 5 years in respect to:”
Base: 156 US, UK and German eCommerce, marketing and IT technology leaders
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012
© 2012 Forrester Research, Inc. Reproduction Prohibited
Consequently, 25% of online retailers plan to re-platform in the next two years
19
1%
3%
3%
8%
12%
13%
29%
30%
Don't know
We have selected and implemented a new platformwithin the last 2 years
We have recently selected a new platform, but it isnot yet implemented
We have recently started a selection process for re-platforming
In the next year
We expect to engage in selection process for re-platforming within the next 2 years
We expect to engage in selection process for re-platforming in the next 2-4 years
We have no current plans to re-platform
“Which of the following best describes the timeline for replatforming your current eCommerce solution?”
Base: 156 US, UK and German eCommerce, marketing and IT technology leaders
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012
© 2012 Forrester Research, Inc. Reproduction Prohibited
As they do so, they seek to align TCO with revenues & improve business agility
20
40%
40%
41%
51%
56%
27%
44%
58%
45%
51%
51%
29%
36%
36%
29%
24%
54%
39%
27%
41%
37%
37%
To gain access to an ecosystem of value-add solutions that wecan leverage
To support our global initiatives
To reduce our reliance on in-house IT staff and developers
To increase the speed at which we can deploy new features andfunctionality
To lower overall operational and ownership costs
To reduce the technical and operational risks of supporting alegacy or home-grown platform
To reduce the opportunity risks of staying on a legacy or home-grown platform
To improve business agility
To support mobile and tablets users
To support our multichannel initiatives
To align the cost of ownership against our online revenues
5 (Very important factor) 4 (important factor)
“How important were the following during the development of your business case for a replacement eCommerce solution?”
Base: 156 US, UK and German eCommerce, marketing and IT technology leaders
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012
© 2012 Forrester Research, Inc. Reproduction Prohibited
Agenda
Online retailers continue to invest in eCommerce technologies
Supporting eCommerce technology does not come cheap
Cloud solutions represent a viable alternative
Building a realistic TCO model & using it correctly is imperative
Recommendations
21
© 2012 Forrester Research, Inc. Reproduction Prohibited
The cost of supporting eCommerce tech varies significantly across online retailers
22
0%
5%
10%
15%
20%
25%
30%
35%
$50M to $100M $100M to $250M $250M +
< 1% 1-2%
3-4% 4-5%
5-6% 7-8%
9-10% > 10%
“Using your best estimate, what percentage of your online revenue currently goes to supporting your eCommerce technology (software, hardware, maintenance, hosting,
redundancy, upgrades, etc.)?”
Base: 156 US, UK and German eCommerce, marketing and IT technology leaders
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012
© 2012 Forrester Research, Inc. Reproduction Prohibited
5%
56%
36%
3%
$100M to $250M
(online revenue)
1-5 5-10 10-25 25-50 50-75 75+
3%
29%
53%
15%
$50M to $100M
(online revenue)
23
Many rely on large technical resource teams to support their eCommerce site(s)
“How many technical resources (infrastructure, application development, networking, etc.) are dedicated to supporting your eCommerce business?”
1%
8%
24%
34%
13%
20%
$250M+
(online revenue)
Base: 156 US, UK and German eCommerce, marketing and IT technology leaders
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012
A third of large online retailers employ over 50 technical resources to support their eCommerce sites(s)
© 2012 Forrester Research, Inc. Reproduction Prohibited
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
$50M to $100M $100M to $250M $250M +
< $100k
$100k-$150k
$150k-$200k
$200k-$250k
> $250k
24
“What is your average annual fully loaded cost for eCommerce technical resources”
The fully loaded cost for of these resources is considerable
Base: 156 US, UK and German eCommerce, marketing and IT technology leaders
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012
© 2012 Forrester Research, Inc. Reproduction Prohibited
The financial and opportunistic cost of upgrading on a regular basis is significant
25
“How frequently would you say you upgrade your licensed or open source eCommerce solution to the
latest version available from the vendor?”
1%
1%
3%
3%
10%
36%
44%
Don't know
We have never upgraded our…
Once every 3 years
Every 3 months
Every 6 months
Once every 2 years
Once per year
* (including requirements development , software development, QA and release activities)
v
“How long does it typically take to upgrade your eCommerce platform to the latest
version? *”
0%
2%
2%
5%
6%
10%
21%
53%
Don't know
Longer than 9 months
Less than 2 weeks
3 to 6 months
6 to 9 months
2 to 3 months
2 to 4 weeks
1 to 2 months
Base: 156 US, UK and German eCommerce, marketing and IT technology leaders
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012
Fifty seven percent of online retailers upgrade their eCommerce platform at least once per year
© 2012 Forrester Research, Inc. Reproduction Prohibited
On-premise eCommerce platform owners pay additional licensing costs as they grow
26
“Thinking about the contract you have in place with the vendor of your current licensed eCommerce solution, which of the following triggers would require you to purchase additional
licenses?”
39%
49%
54%
67%
76%
78%
Reaching a defined threshold of online revenue
Reaching a defined threshold of concurrent visitorvolume
Launching additional sites (e.g. brands or micro-sites)
Reaching a defined threshold of order volume
Adding more business users (e.g. users of theadministration tools)
Launching additional markets (e.g. new Europeansites)
Base: 156 US, UK and German eCommerce, marketing and IT technology leaders
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012
© 2012 Forrester Research, Inc. Reproduction Prohibited
Agenda
Online retailers continue to invest in eCommerce technologies
Supporting eCommerce technology does not come cheap
Cloud solutions represent a viable alternative
Building a realistic TCO model & using it correctly is imperative
Recommendations
27
Today cloud-based eCommerce solutions vie head-to-head with
on-premise platforms
© 2012 Forrester Research, Inc. Reproduction Prohibited 29
15%
26%
29%
29%
33%
35%
35%
37%
40%
44%
47%
49%
62%
66%
69%
Product recommendations
Live chat
Guided product navigation
CRM
Contact center support management solution
Order mgmt
Tax calculation
Customer ratings & reviews
Site product search
Rich media (rotating images, video etc)
PIM
Mobile commerce
WCM
Email marketing
Web analytics
Few online retailers are entirely new to cloud-based solutions
“Do you currently use third-party (vendor) products to provide any of the following eCommerce related functions on your site”
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012
Base: 156 US, UK and German eCommerce, marketing and IT technology leaders
© 2012 Forrester Research, Inc. Reproduction Prohibited
And thus confidence in moving everything to the cloud is increasing
30
“Which of the following types of eCommerce solution is/did your company considering/consider for inclusion in your selection process for a new eCommerce platform?”
41%
41%
49%
49%
56%
76%
Open-Source eCommerce solution, managed andsupported by a services provider or vendor
Cloud-based eCommerce solution
Licensed on-premise solution from a software vendor,managed in-house
Open-Source eCommerce solution managed in-house
Licensed on-premise solution from a software vendor,managed and supported by a services provider or…
Home-grown solution developed and managed in-house
Base: 156 US, UK and German eCommerce, marketing and IT technology leaders
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012
© 2012 Forrester Research, Inc. Reproduction Prohibited
22%
39%
44%
50%
56%
56%
61%
67%
72%
78%
Our TCO analysis did not favor cloud basedsolutions
The costs of cloud are higher than with on-premise or build-in-house
We perceive that cloud eCommerce solutionsare not mature enough for our business
We were worried that cloud solutions are notcustomizable
We were worried about security and privacyissues
We were worried about integration with otherapplications
The migration to cloud based applications will bea lengthy and complex process
The pricing of cloud solutions is complicated ordidn't fit our business model
We were worried about scalability
We were worried about long-term vendor lock-inwith cloud
31
“Thinking about cloud-based eCommerce platforms, why did you dismiss these during your selection process?”
Although concerns about cloud-based solutions continue to linger
Base: 156 US, UK and German eCommerce, marketing and IT technology leaders
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012
© 2012 Forrester Research, Inc. Reproduction Prohibited
Agenda
Online retailers continue to invest in eCommerce technologies
Supporting eCommerce technology does not come cheap
Cloud solutions represent a viable alternative
Building a realistic TCO model & using it correctly is imperative
Recommendations
32
© 2012 Forrester Research, Inc. Reproduction Prohibited
Few firms can acquire enterprise software without developing a business case and TCO model
33
13%
82%
22%
72%
No, we are able to procureenterprise software without
Yes, this is a mandatory part of ourformal procurement process
Investment business case
3-5 year total cost of ownershipanalysis
“Does your corporate sourcing/procurement group mandate either of the following for enterprise software purchases?”
Base: 156 US, UK and German eCommerce, marketing and IT technology leaders
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012
© 2012 Forrester Research, Inc. Reproduction Prohibited 34
“Which of the following best describes the reality of the investment business case for your platform versus the predictions of your model?”
Unsurprisingly, the ROI from eCommerce technology investments is clear
1%
1%
9%
22%
31%
34%
We have never measured the ROI versus theanalysis developed during selection
The ROI has been significantly lower than ouranalysis predicted
The ROI has been lower than our analysispredicted
The ROI has been higher than our analysispredicted
The ROI has been in line with our analysispredications
The ROI has been significantly higher than ouranalysis predicted
Base: 134 US eCommerce, marketing and IT technology leaders who developed a TCO model during their eCommerce solution evaluation
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012
© 2012 Forrester Research, Inc. Reproduction Prohibited
But the actual TCO is often higher than online retailers had projected
35
“Which of the following best describes the reality of owning and operating your platform versus the predictions of your total cost of ownership analysis?”
1%
1%
3%
17%
26%
50%
The actual cost of ownership has beensignificantly lower than our analysis predicted
We have never measured the real cost ofownership versus the analysis developed
during selection
The actual cost of ownership has been lowerthan our analysis predicted
The actual cost of ownership has beensignificantly higher than our analysis
predicted
The actual cost of ownership has been higherthan our analysis predicted
The actual cost of ownership has been in linewith our analysis predications
Base: 134 US eCommerce, marketing and IT technology leaders who developed a TCO model during their eCommerce solution evaluation
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012
© 2012 Forrester Research, Inc. Reproduction Prohibited 36
So what’s going wrong?
© 2012 Forrester Research, Inc. Reproduction Prohibited
21%
23%
25%
26%
28%
37%
39%
25%
28%
29%
24%
26%
27%
40%
42%
42%
42%
42%
44%
47%
23%
27%
28%
38%
51%
52%
37%
56%
37%
35%
32%
39%
33%
35%
34%
32%
33%
36%
30%
37%
30%
31%
34%
37%
33%
30%
30%
29%
29%
38%
34%
27%
20%
16%
35%
35%
34%
15%
21%
32%
17%
19%
17%
36%
16%
16%
22%
22%
18%
17%
17%
18%
37%
38%
22%
17%
12%
19%
19%
3%
1%
3%
4%
6%
4%
6%
21%
19%
24%
1%
26%
6%
4%
3%
4%
3%
4%
3%
8%
4%
20%
5%
3%
2%
Scalability
Security
Capacity
Opportunity
Reliability and availability
Extensibility
Interoperability
Ongoing development
Platform upgrades
IT support and development headcount training
Annual power consumption
Annual platform monitoring and support
Annual hardware leases
Annual infrastructure and server upgrades
Annual ISP/bandwidth rental
Annual Hardware repairs and replacement
Annual data backups
Annual recurring/maintenance fees for eCommerce platform
Annual disaster recovery
Annual recurring/maintenance fees for OS's, RMDB's, app servers etc
Facility upgrades
Additional software license costs for deploying new commerce sites
Additional software licenses to support growth
Hardware acquisitions
Software licensing for eCommerce platform
Software licensing for OS's, RMDB's, app servers etc
We already use in ourTCO analysisCritical
Nice to have
Not important
Initial costs
ongoing
annual
infrastructure
and software
costs
operations,
training and
support costs
opportunity
costs and
risk
mitigation
costs
Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012
Base: 156 US, UK and German eCommerce, marketing and IT technology leaders
© 2012 Forrester Research, Inc. Reproduction Prohibited
Agenda
Online retailers continue to invest in eCommerce technologies
Online retailers seek nimble, open & cost effective solutions
Cloud solutions represent a viable alternative
Building a realistic TCO model & using it correctly is imperative
Recommendations
38
#1 Don’t get stuck in the CAPEX ditch
#2 Factor in the hidden costs
#3 Encourage cross-functional ownership of the TCO model
#4 Recognize that TCO is not always the be-all and end-all. Agility is key