SaaS, Cloud-Hosted eCommerce Platforms (vs on-premise) – A Detailed Comparison

Whilst SaaS (software-as-a-service) software has been enthusiastically taken up across various sectors over the last decade, it’s only in more recent times that enterprise eCommerce platform options have been made available to retailers. The SME end of the retail market may have been well served with cloud-based SaaS solutions, with the obvious ones being Shopify and BigCommerce, however, it’s taken longer for most of the enterprise platforms to enter this space, with the exception of Demandware / Salesforce Commerce Cloud.

Today, this is a very different story, with a wide range of relatively new, more enterprise-focused eCommerce platforms on the market, such as SAP CX Cloud (new cloud offering of Hybris), Oracle Commerce Cloud (new more streamlined commerce product), Magento Commerce Cloud Edition (new cloud offering of Magento commerce), Workarea (diversified, cloud-based offering from Weblinq) and Cloudcraze (cloud-based B2B platform newly acquired by Salesforce).

There has been a considerable shift towards this over the last ~2 years, with more and more retailers (including B2B merchants) seeing the advantages of a SaaS approach to eCommerce – with a ‘versionless’, lower maintenance platform often being one of the key drivers going into the project. It’s worth noting too that the platforms have had to adapt – with Salesforce Commerce Cloud (Demandware) having an early advantage and obtaining a lot of forward-thing retailers as a result. Magento, SAP and Oracle are examples of companies that have relatively recently introduced their Cloud-based offering.

Shopify and BigCommerce have been long-standing SaaS eCommerce platforms, but again, they’ve only recently pushed more towards the mid-enterprise market with their Shopify Plus and BigCommerce Enterprise offerings. Shopify Plus has seen significant growth in the last two years, with it now being rumoured to represent over 30% of the company’s turnover.

What is a SaaS eCommerce platform?

SaaS, or software-as-a-service, is a really common model for software of all forms these days, essentially representing software that is delivered on the cloud as part of an on-going subscription. Examples of commonly used SaaS software could be Xero or Salesforce CRM.

A SaaS eCommerce platform is essentially a cloud-based platform provided on an on-going subscription basis. The platform would generally be hosted and maintained by the provider and the merchant would then be responsible for varying levels of customisation and setup. A good example of this variance could be Magento Commerce Cloud vs Shopify Plus – Magento’s Cloud software still requires maintenance in terms of platform upgrades and the application of patches etc, whereas with Shopify, they fully manage the platform aspect and take control of all platform-level upgrades and security considerations.

SaaS-Based eCommerce Platforms vs On-Premise licensing

A lot of retailers still prefer on-premise solutions to cloud-based, as you have a lot more control over the system and customisations. A lot of highly complex retailers would look to use on-premise in order to host another system in the same environment or allow for write access to the server etc.

Most SaaS platforms provide read-only access to the server and don’t allow heavy customisations, allowing them to assure the retailer around security, scalability and stability. Platforms like Shopify Plus and BigCommerce Enterprise are very restrictive around back-end changes and anything requiring writing to the server – whereas platforms like Magento Commerce Cloud and Salesforce Commerce Cloud allow for a lot more customisation, but just apply additional levels of QA and regulation. This is generally why these platforms are both more extensible, scalable and also more expensive.

A lot of the on-premise eCommerce platforms / licenses also allow for upfront licensing – for example with Shopware Enterprise you pay the licensing fee upfront and are then free to use Shopware Enterprise for as long as you need to and there are no GMV limits or commits etc. With Magento’s in-premise license you’d commonly commit to three years and also pay the license upfront, as opposed to monthly agreements with a lot of SaaS platforms (which can often be paid annually).

The Benefits of a SaaS eCommerce Platform

Every retailer that switches to a cloud-based platform will have their own reasons for doing so, but there are a few fundamental benefits that all merchants should appreciate, whatever their retail sector.

Clearer Cost of Ownership (TCO)

It’s all too easy to look at the monthly licensing costs for a SaaS-based eCommerce platform and simply assume that it is a more expensive option than the more traditional on-premise platforms available. However, working out the TCO for an on-premise solution is notoriously difficult, especially when trying to factor in future maintenance, security patches and functional enhancements.

With most of the cloud-based SaaS eCommerce platforms, monthly costs are clear and precise, and, by and large, they do not alter over time, unless your sales volumes go up significantly or you have significant increases in traffic (over the estimates you provide initially). Cloud-based stores are typically much faster to develop on and launch too, with a lot less work required around setting up the platform and the server.

Examples of costs that are generally included within a SaaS eCommerce platform include:

  • Cloud hosting fees (E.g. AWS with Salesforce Commerce Cloud or Google Cloud with Shopify)
  • SSL certificate (although additional fees can be incurred here)
  • CDN (most platforms use CDNs globally across their platform – e.g. Magento use Fastly)
  • Security management (covered at a platform level by an in-house technical team)
  • Platform maintenance (covered at platform level)
  • Platform upgrades (covered at platform level)
  • Integration with commonly used third-party technologies (integrations with commonly used ERPs, email providers, payment gateways etc are often built by the platforms or by the eco-system and released into the app store / module marketplace etc)

It’s worth noting that these are the most common core costs that are factored into a SaaS license, but there are lots of others specific to offerings for the different platforms.

Reduced maintenance and simpler deployments

On-premise platforms can often suffer from heavy customisation, which is often unnecessary. I personally would say that this is one of the biggest selling points for the cloud-based, SaaS platforms, as I’ve seen lots of retailers suffer a lot of pain from early customisation. With a SaaS platform, it’s easier to stay within the core guidelines because of the locked-down nature of the core platform. Some of the more rigid platforms, such as Shopify, can often achieve the same functionality, but via native functionality.

I worked with a client on scoping out requirements recently who were using a legacy on-premise system and looking to move to a SaaS platform. They’d built a custom product type which was essentially a parent-configurable product. This was an unnecessary customisation that really impacted other third parties they were using and merchandising. With the SaaS platform they ended up using they using native tagging logic and template variables to achieve the exact same functionality and it was achieved without customisation. This was just one example of this with this client, they were also using custom-built loyalty functionality and had various other unstable custom modules that really impacted their experience with that platform.

Secure Codebase

With one core codebase across all stores on the platform – the core is controlled and protected by the platform’s technical team, resulting in the eCommerce solutions inherently being more secure than on-premise platforms. Retailers are able to get on with operations and merchandising, knowing that platform-level security aspects are being taken care of for them, whereas merchants using an on-premise platform need to invest in a very strong integration partner and hosting company (who have core processes around security in a similar manner to the platforms) and also be alert for security vulnerabilities and checking for patches etc, which can have a fairly big overhead.

Scalability

Of particular interest to new merchants who plan to grow very quickly, the scalability of cloud-based eCommerce platforms cannot easily be matched by on-premise solutions. All of the enterprise level platforms that offer a cloud-based option can cater for even the most demanding merchants, and immense traffic surges, such as on Black Friday events, are never a problem. This benefit is, for many, the single biggest factor influencing their decision to replatform to a cloud-based platform.

Shopify Plus and Salesforce Commerce Cloud have lots of great case studies for this, with retailers such as Adidas, Kate Spade, New Balance, Gymshark, Kylie Cosmetics etc being good examples of high traffic, peak-orientated retailers who are able to scale with their platforms.

That said, retailers like END Clothing, Made.com, Missguided and Harvey Nicholas are examples of retailers who use on-premise Magento licensing and they’ve built very strong infrastructures and processes to allow for huge levels of scale. There’s a considerable overhead in achieving it, but if money / headcount isn’t an issue, this is directly comparable. Hosting companies like Akoova also provide solutions geared for scale and huge peaks – I’ve seen them resolve a lot of issues for retailers using on-premise platforms.

The Main Players in the SaaS eCommerce Market

As we mentioned above, cloud-based ecommerce offerings have largely focused on the SME sector until the last few years, but all that is changing. Some firms have beefed up their SME offering in order to spin off an enterprise version, whilst there have also been some acquisitions to enable other companies to be able to compete in the enterprise eCommerce market. For the purposes of this article, we’ll focus on the five platforms that have the biggest market share, and that are growing the fastest in the SaaS eCommerce marketplace. These are Salesforce Commerce Cloud, Shopify Plus, Magento Commerce Cloud, Oracle Commerce Cloud and BigCommerce Enterprise.

Salesforce Commerce Cloud – Enterprise SaaS platform

Whilst Salesforce is the grandfather of cloud computing, it was only in 2016 that it acquired Demandware, in order to bring an eCommerce offering under its umbrella. Salesforce has brought excellent customer support and massive experience in cloud-based software to the table, and its Commerce Cloud offering is pleasing existing Demandware (as it was previously known) customers and also winning plenty of big-name B2C clients too.

Providing an end-to-end retail solution across online, POS and aspects of fulfilment, Salesforce Commerce Cloud enables merchants to simplify and unify all IT operations and infrastructure, to give a streamlined customer experience. Boasting of built-in personalisation functionality, rapid deployment and AI-driven merchandising (via Einstein, which they acquired a few years ago), on-site search and promotions, this is a platform that lives up to Salesforce’s sterling reputation for world-class functionality and support. Even pre the acquisition, Demandware was arguably the market leader in the enterprise B2C space.

Salesforce Commerce Cloud customers include Adidas, New Balance, PetSmart, PUMA, Lush, Kate Spade and Godiva.

Shopify Plus – Mid-market SaaS platform

Launched in 2014, as the enterprise version of the standard Shopify platform, Shopify Plus has rapidly found favour with some big names, including plenty of pureplay online retailers – such as Gymshark, Dr Axe and Kylie Cosmetics. Pricing is very competitive, with most retailers paying around $2,000 per month as a baseline license unless they have a monthly turnover of over $800,000, when it moves to a GMV model.

Licensing fees for third-party apps can add quite a lot to this baseline monthly figure though, as Shopify Plus does have some functional limitations. For example search, shipping, product filtering and loyalty are either no great natively or non-existent. But with robust performance and scalability, fast deployment times and a strong merchant support programme, Shopify Plus seems to be getting a lot of things right, in terms of making its merchant clients happy.

Current clients include Gymshark, Victoria Beckham, Dr Axe, Kylie Cosmetics, MVMT, Chubbies, Skinny Dip and Bombas.

Magento Commerce Cloud – Mid-market & Enterprise, Cloud-Hosted platform (not really SaaS)

Magento was first launched as an open-source, on-premise solution back in 2007, and there have been a few reincarnations of the platform since then (particularly with Magento 2.0), with the cloud-based offering launching in 2016. Built with all of Magento’s rich native functionality, and hosted in the cloud on Amazon Web Services (AWS), Magento Commerce Cloud is perhaps a natural evolution for a company that had plenty of long-time on-premise customers who were looking around at a market that was increasingly moving towards the SaaS model. Although the Cloud edition didn’t have the best start and developed a bad reputation quite quickly, it’s improved a lot since then and the users I’ve spoken to recently are a lot happier with stability and deployments.

Magento’s cloud offering differs somewhat from most of the other cloud eCommerce platforms – rather than being a wholly proprietary solution that is hidden from view, technologically-speaking, Magento Commerce Cloud is pieced together from third-party components – the cloud hosting is via AWS, Fastly provides CDN services and New Relic is used for performance monitoring. The offering also still requires users to take ownership of platform upgrades and the application of security patches, unlike solutions like Salesforce Commerce Cloud and Shopify Plus.

This cloud-based solution uses Magento 2, giving a rich functional base that includes strong visual merchandising tools, content staging and preview capabilities, advanced content management (as of 2.3.x), Magento BI and a comprehensive and intuitive admin interface.

Current Magento Commerce Cloud customers include Helly Hansen, Oliver Sweeney, Osprey London and Soak & Sleep.

Oracle Commerce Cloud – Mid-market & Enterprise SaaS

Another fairly late entrant into the cloud-based eCommerce market, Oracle’s offering launched in 2015, and rapidly built a customer base from clients that were already using Oracle’s other eCommerce applications, such as ATG and Endeca. Oracle Commerce Cloud customers include Moleskine, Lenox, Motorola and Enerpac.

Designed to compete with the mid-enterprise SaaS products like Salesforce Commerce Cloud and Magento Commerce Cloud, the Oracle’s latest platform has strong native functionality, as well as quite a good offering around pre-built integrations. I’ve not seen much of Oracle Commerce Cloud, but they do appear to be getting traction and their biggest opportunity will be migrating ATG customers over to the platform.

Key features highlight by Oracle when comparing against some of their rivals include an API-first architecture, native split testing features, advanced search and merchandising capabilities (as you’d expect from the company who built Endeca) and native machine-learning features. I don’t know much about the pricing of the platform, but I know that it’s a clean, all-in structure.

BigCommerce Enterprise – Mid-market SaaS

Just like Shopify, BigCommerce initially targeted the SME sector, before launching its Enterprise version in 2015. Clients of BigCommerce Enterprise include Skullcandy, TUMI, Andie Swim, Carolina Panthers, Camelbak and Paul Mitchell.

BigCommerce’s enterprise solution has a very similar offering to Shopify Plus – but with a few native additional features, such as more advanced B2B and built-in subscriptions, however, it doesn’t have the same eco-system presently and there also some features that Shopify Plus have that BigCommerce doesn’t, such as Flow. BigCommerce is a very recent entrant to the UK market, but I’m intrigued to see how they grow as they do have a very compelling offering in terms of cost and agility.

Depending on the licensing plan selected, merchants have access to various levels of technical and strategic account management. Pricing is very competitive and is likely to be the lowest out of the SaaS platforms on this list.

 

There was a time when enterprise merchants wouldn’t really have considered a SaaS approach for their eCommerce platform, but  that has changed over the last few years and cloud-based platforms are currently one of the biggest changes happening in eCommerce. The market currently has a good mix of vendors who have come to eCommerce from a SaaS background and vendors who have come to the cloud from an eCommerce background, which makes for a healthy level of competition and a strong environment for innovation and improvement.

There’s definitely still a place for the on-premise solutions and I frequently find myself recommending Magento’s on-premise solution over the various cloud-based competitors (mostly very complex projects) – but the SaaS market s definitely getting more and more compelling – particularly in the B2C market.

It’s worth pointing out that I’ve stuck to largely mainstream platforms here and also those that I’ve become more familiar with – but there are a lot more! Some of the other SaaS platforms that I’ve been looking at recently include Workarea, VTEX and Cloudcraze – Salesforce’s latest acquisition, likely to make big moves in the B2B market.

Other resources:

 

Paul Rogers

Paul is an experienced eCommerce Solutions Consultant, specialising in all aspects of replatforming, requirements gathering and platform selection projects.

Paul has worked with most mainstream eCommerce platforms and has supported complex replatforming projects with retailers from all over the world. Paul also works on functional customer experience projects and solutions work with various platforms - primarily Magento and Shopify Plus.