The commoditization of eCommerce platforms, pioneered by firms like Salesforce, commercetools, and Shopify, has helped to rapidly drop the cost of software licenses for eCommerce. However, we haven’t seen a large drop in the cost to drive ROI from a platform for $1B+ Enterprises. Where is that money going, and how can we avoid spending it? Let’s take a look.
Lack of Attention to Change Management
Lack of attention to change management remains to be the #1 driver of hidden eCommerce costs within organizations. Why does this cost enterprises so much? The #1 driver of eCommerce development costs is the misalignment of business requirements between stakeholders.
Often, eCommerce evaluations are kicked off by one group defining a list of 150+ features in an Excel sheet. In mature organizations, this list will have been contributed to by leadership across lines of businesses (LOBs). In others, it is simply a guess by the IT organization. Neither is adequate, and two things will happen.
- This list is not looked at again by those LOBs until the testing phase of a project. Inevitably, needs will have changed, dependencies weren’t properly accounted for, or the leadership in the LOB itself didn’t consult with the operations teams that will be impacted, all leading to significant increases in eCommerce costs for large companies.
- The list of 150+ features was never vetted against the real needs of the users of the eCommerce platform, only by the supporters of it. This leads to hundreds of thousands, if not millions, being spent on features that will never drive ROI for an organization.
In fact, I see this expense (and problem) as growing, not decreasing! As the pace with which enterprises adopt digital channels increases, siloed lines of businesses are being left further behind, and the more we rush this part of the process, the more we pay for it in A) increased project costs and B) poor return on capital investment.
Wages in Technology are Increasing Almost as Fast as Platform Prices are Dropping
We are seeing year-over-year wage inflation of 10%-40% across the globe for proven software developers and architects with eCommerce and related experience. For example, React developers are getting sucked up by private equity-backed firms, as well as by Enterprises who have brought 3 years of IT to spend forward in response to the pandemic. Also, remote work has allowed for Silicon Valley companies (and their foreign bases) to extend their reach into previously lower-wage areas of countries, driving up prices there rapidly (while not lowering costs in their core geographies).
Backend Data Governance Not Ready
The #2 driver of costs for eCommerce implementations (other than wages) is integrating data sources, and the largest challenge for integrating systems is not coding the integration, but the integrity of the data from the source system. In eCommerce product, pricing, order, customer, and inventory data are the core pillars of a Company’s data strategy.
The lowered price of commerce systems does not help improve the quality of the data from source transactional systems. In order to help keep eCommerce implementation costs under control, an organization must ensure that the right data attributes and structure are agreed upon and set up, allowing eCommerce implementations to occur much more smoothly.
Large eCommerce enterprises are struggling to drive ROI from a platform, even as the commoditization of eCommerce solutions has dropped costs significantly.
A poor - or missing - change management strategy often leads to siloed lines of business, which in turn causes increased project costs and decreased return on capital investment.
Additionally, technology wages have drastically increased, inflating up to 40% globally and making it challenging to secure affordable talent.
Finally, many enterprises fail to properly prepare their data governance. You’ve heard the phrase, “garbage in, garbage out,” and unfortunately this proves true all too often when businesses don’t take the time to improve the quality of their data before migrating it to a new or improved system.
The good news is that with proper awareness and strategy, all of these issues can be mitigated, and enterprises can keep eCommerce implementation costs low enough to drive meaningful ROI.