As market conditions shift unpredictably, the pressure to control technology costs while staying competitive has never been more critical. Businesses are constantly balancing the need for scalability, adaptability and innovation with the challenge of optimizing technology expenditure. This blog post explores a comprehensive cost management framework for digital commerce and analyzes how composable commerce can significantly reduce eCommerce total cost of ownership (TCO).
A comprehensive framework for cost management in digital commerce
Managing costs in digital commerce requires a nuanced approach, as it involves multiple layers of investment across various stages. We can break this down into four key stages: Initial set-up, change, run and indirect costs. Each stage comes with its unique set of cost components that businesses must evaluate to maximize their investment while remaining agile.
The initial costs of a digital commerce solution are significantly impacted by the organization's digital maturity — that is, the existing infrastructure and the skills within the business. Companies with higher digital maturity levels may already have foundational platforms in place and skilled personnel, resulting in lower initial setup costs. Conversely, less mature organizations may face larger investments in modern architecture, operations and the development of necessary skills.
Key cost factors in this stage include:
Digital foundations: Higher digital maturity reduces setup costs, while companies with lower maturity might invest heavily in foundational infrastructure and skills.
License/subscription fees: Software licensing costs vary depending on user numbers and required functionality.
Implementation costs: Both internal resources and external consultancy fees must be considered for successful integration.
The API-driven approach of composable commerce provides the flexibility needed in managing these initial costs. Businesses can adopt only the components they need, scaling infrastructure and features as their digital maturity increases. This reduces the upfront expense of building a complete system from scratch and allows for a more tailored implementation based on current business needs.
As businesses evolve, the need for constant innovation drives change costs. These expenses are necessary to ensure the solution remains adaptable, scalable and efficient in a competitive environment.
Innovation costs: Expenses related to customization and adding new capabilities.
Development platform costs: The need for automated tools for testing, continuous integration and deployment.
Integration costs: Ensuring smooth interoperability with other business systems.
Composable commerce facilitates easier, more cost-effective updates due to its modular structure. Businesses can update individual components without overhauling the entire system, leading to faster innovation at lower costs./p>
Ongoing operational expenses, or run costs, are the regular fees needed to keep the digital commerce solution functional. Modern, cloud-native platforms like commercetools offer significant cost efficiencies through scalability and automated processes.
Key components of running costs include:
Recurring license/subscription fees: Standard fees for continued use of the platform.
Maintenance costs: Regular updates and support.
Infrastructure costs: Cloud-native solutions scale dynamically, reducing infrastructure expenses.
Training costs: Ongoing education to maximize system capabilities.
Composable commerce ensures that businesses can dynamically allocate resources, scaling as needed, leading to lower run costs and operational flexibility. True composable solutions are cloud-native, which make product updates continuous and seamless, thereby reducing maintenance costs.
Indirect costs can accumulate over time, significantly affecting a business’s competitiveness and efficiency.
These often-overlooked costs include:
Downtime and productivity leakage: System failures or maintenance affecting productivity.
Technical debt: Unaddressed technical debt can lead to larger expenses in the future.
Vendor lock-in: Limited flexibility with core providers can lead to reduced commercial freedom.
Opportunity cost: Inability to quickly respond to market trends may lead to missed opportunities.
Composable commerce’s modular design minimizes these hidden costs, enabling rapid response times and lower technical debt by allowing individual components to be replaced or updated independently.
How composable commerce reduces eCommerce TCO
There’s a misconception that composable commerce may increase TCO due to the need for multiple solutions. However, businesses often find that legacy all-in-one platforms require additional solutions to fill feature gaps, leading to higher integration and maintenance costs. Composable commerce provides a strategic alternative, optimizing TCO across the four cost stages.
While the initial investment for composable commerce solutions like commercetools Composable Commerce may be comparable to traditional platforms, it is typically lower for businesses transitioning from long-term monolithic vendors. The flexibility of composable commerce allows for modular infrastructure, reducing setup and subscription costs over time.
Composable commerce excels in minimizing change costs. Its modular nature allows for updates to individual components without disrupting the entire platform, enabling faster value creation and innovation cycles. This design also supports scaling specific capabilities based on business performance, optimizing both costs and profitability.
Ongoing run costs are significantly reduced in composable commerce systems. Unlike monolithic platforms, composable commerce avoids forced upgrades and offers automated, seamless maintenance. The license model is often simpler and cloud-native solutions allow businesses to scale resources based on current demand, leading to cost-efficient operations.
The modular architecture of composable commerce minimizes indirect costs, including downtime, technical debt and vendor lock-in. Businesses also enjoy greater freedom in selecting best-of-breed solutions and payment providers, ensuring flexibility, cost optimization and easier entry into new markets.
How replatforming to commercetools helps reduce TCO
Replatforming to commercetools Composable Commerce offers measurable financial benefits by reducing eCommerce TCO.
For example:
The Salling Group saw a 75% reduction in operating costs.
APG & Co. experienced a 35% decrease in operating expenses and a 60% reduction in technical support time.
Cargo Crew saved 700,000 AUD in raw development costs, surpassing the total investment in its eCommerce platform.
These real-world examples highlight how migrating to a modern, composable commerce platform can lead to substantial savings across all stages of cost management.
Conclusion: Embrace the future with composable commerce
In the fast-paced world of digital commerce, composable commerce isn’t just a hot new buzzword — it’s a strategic decision for businesses seeking agility, scalability, and cost efficiency. By reducing TCO across setup, change, run and indirect costs, composable commerce provides a path to sustained competitive advantage, empowering organizations to innovate while optimizing their technology investments.
Are you interested in learning even more about how to optimize the TCO of your eCommerce platform? Then download our white paper Unlocking Value: A Framework for Composable Commerce TCO.