Znode Whitepaper Total Cost of Ownership

Ecommerce Platform Comparison:Reducing Total Cost of Ownership with Znode®

© 2011 Znode, Inc. | 888.755.5541 | www.znode.com

WHITEPAPER

“When compared to other competing platforms, Znode’s ecommerce solutions offer industry leading flexibility and the ability to create a rich user experience that leads to a significantly higher return on investment. This, in turn, reduces overall total cost of ownership and allows our customers to achieve higher profitability.“ -Travis Williams, Director of Marketing

SK9 - 5.27.11

Table of Contents

Introduction.............................................................................................................................3

Understanding the Total Cost of Ownership Analysis............................................................4

It’s all about the Customer Experience...................................................................................5

Focus on Transaction Quality..................................................................................................6 Ecommerce Business 3 Year Example - Analysis....................................................................7

The Bottom-Line...................................................................................................................10

Benefits of Znode..................................................................................................................11

Conclusion............................................................................................................................12

2Expand Your Online Footprint™ © 2011 Znode, Inc. | 888.755.5541 | www.znode.com

Picking the “ideal” ecommerce platform for your project can be a complex and time consuming task. In this whitepaper, we will illustrate how doing a total cost of ownership (TCO) analysis can help you make the right platform choice for your business.

Understanding why TCO is important for strategic business decisionsIt is a common tendency for businesses to look at the cost of implementing an ecommerce solution as the total cost—

when in reality, it is just a fraction of the cost. At the end of the day, for most businesses, the reason for deploying

ecommerce is to increase revenues, brand loyalty and efficiency. Whatever your key business objectives, doing a TCO

and ROI analysis will help closely align those objectives to your ecommerce solution.

Operating an ecommerce enterpriseEcommerce usually involves a number of components such as software, development, infrastructure, integration,

marketing & merchandising, system administration, reporting, ongoing maintenance, PCI compliance, etc. It is critical for

your management team to have a clear understanding of the full life cycle and eco-system of your ecommerce operation

to achieve the best possible return on investment (ROI).

Selecting an ecommerce platform and understanding of typesEcommerce platforms come in 2 models—licensed software and SAAS (software as a service). Licensed software can

be deployed on your own servers, which may reside in an external hosting facility or in your own data center. Licensed

software platforms are also based on different core technologies such as .NET, Java, PHP, etc., which may be an

important consideration depending on your technical resources. On the other hand, SAAS ecommerce services are

hosted solutions that usually charge a monthly subscription fee and a percentage of your revenues. SAAS services are

intended to be turnkey solutions with very limited customization when compared to licensed software.

Why free isn’t really free: Evaluating the open source modelSome licensed software are marketed and available as open source—which means all the source code is free of cost.

Open source software usually comes with no warranties and often requires significant amount of development work to

ensure reliability—the added cost of development takes away the advantage of “free” software and adds additional

overhead which must be taken into account. Znode® Multifront is sold as licensed software that includes over a million

lines of customizable source code—combining the benefits of an open source platform with the reliability of enterprise-

class software.

3

Introduction

Expand Your Online Footprint™ © 2011 Znode, Inc. | 888.755.5541 | www.znode.com

To perform a TCO analysis for your ecommerce business, you should take into account the following factors:

• Software licensing fees – Software may be licensed on a perpetual or subscription basis and fees are generally

based on your configuration.

• Revenue share – Some SAAS platforms will charge a percentage commission on your gross online sales.

• Additional third party software – Check to see if there are third party software such as databases, operating

systems, etc that would need to be licensed.

• Discovery phase – The most crucial part of the overall project is the requirements gathering phase. Make sure that

you dedicate sufficient time and resources to pin down detailed requirements.

• Developer recruitment and training – Depending on the software platform selected you may need to hire technical

resources and provide for some training to get them up to speed.

• Development – This phase is a typical IT development cycle that needs to be managed closely using project

management best practices to keep costs down.

• Integration cost – Your ecommerce platform may require customized integration with your back-office system (such

as ERP or accounting).

• Performance/stress testing – Before you can switch your ecommerce site live, you should perform a stress testing

under simulated load to ensure that it can handle the traffic.

• Quality assurance testing – Thoroughly testing every part of your ecommerce website can be time consuming and

can generate lots of bugs. Plan for enough contingency and resources to handle any issues.

• PCI compliance – You may need to allocate budget for PCI audits which would depend on the amount of online

revenues that would flow through your ecommerce website.

• Infrastructure and hosting – Costs depend on the performance, redundancy and level of support you need from

your hosting provider.

• Ongoing maintenance – Figure out the costs to make incremental changes to the ecommerce website after it has

been deployed to production. You should also consider the costs resulting from deployment downtimes.

• Adding additional sites – Analyze how much it would cost to add more sites incrementally to your ecommerce

infrastructure.

• Future scaling – Find out how much it would cost if your website had to handle significantly higher traffic and

transaction volumes in the future.

4

Understanding TCO Analysis


To ensure the highest possible ROI from your ecommerce business, your website should deliver a rich experience that is custom-tailored to your audience. Here are some key factors to consider:

Flexible BrandingEvery business has unique branding needs. You should pick a software platform that is flexible enough to address all of

your branding guidelines. Znode Multifront has a Flexible Architecture that enables you to create a completely custom-

tailored website with virtually no constraints.

Navigation & FlowEnabling customers to find the products they are looking for using an easy to navigate website is key to increasing

conversions and customer loyalty. You should pick a software platform that allows you to easily customize the site

navigation based on your customer behavior. Znode Multifront has a completely flexible faceted navigation that enables

you to achieve higher conversion rates.

Personalized Content & LocalizationIt is a well-known fact that personalizing content and promotions can significantly increase ecommerce conversion rates.

You may also need to have localized content (such as languages, taxes, shipping options, etc). Znode Multifront enables

you to easily manage personalized content and promotions based on “customer profiles”.

Marketing Promotions & ManagementMarketing departments need the flexibility to run timely promotions based on a wide variety of parameters such as

customer profiles, geographical location, events and more. Some business specific promotions may not be handled by

ecommerce platforms out of the box—you should make sure that your ecommerce platform is flexible enough to allow

for such customizations.

Multiple Stores Based on Channel/Brand NeedsIt may be more efficient to create multiple storefronts for different channels (B2B, B2C, etc) or your sub-brands. This will

enable you to present completely different catalogs, promotions and content based on clearly defined segments. Znode

Multifront enables you to create multiple stores off a single master catalog thereby significantly reducing costly and time

consuming management effort.

Efficient Fulfillment & Customer ServiceTo ensure a seamless customer experience, products ordered by customers should be transmitted to your ERP system in

real or near-real time for maximum benefit. You should ensure that a tight integration between the ecommerce system

and ERP is part of the overall solution.

5

It’s all about Customer Experience


One of the most overlooked but critical pieces to analyzing TCO is what we define as the “Transaction Quality”. At the end of the day, an ecommerce website should enable customers to purchase products without any issues. Poor Transaction Quality will significantly affect your TCO and lower overall ROI.

Build for 99.995% website uptime Your ecommerce website should have an uptime of 99.995% or more to ensure that no transactions are lost. Znode’s

ecommerce software has been designed for very high performance to achieve these levels.

Handle seasonal traffic spikesDepending on your business, there may be occasional traffic spikes. Your ecommerce website should be built to handle

these spikes seamlessly.

Build the solution to scaleIf your business plans to significantly increase revenues over the next few years, then you should ensure that the

ecommerce website can easily scale to that level with incremental investments in infrastructure. Znode’s platform has

been built to achieve very high levels of scalability.

6

Focus on Transaction Quality


The following TCO analysis was conducted using data obtained from development teams, case studies, market research and customer feedback.

The following parameters were assumed:

• Total period for analysis is 3 years

• Retailer’s annual revenue is $2M

• Blended hourly rate for development resources is $90/hr

• Open Source Platform: Refers to the leading PHP platform

Exhibit 1: Total Cost of Ownership Summary of costs for leading ecommerce platforms over a 3 year period

SAAS

Open Source Platform Enterprise

Microsoft® Commerce Server

Znode® Multifront

*The graph above displays the results of the TCO analysis for the four platforms compared in this whitepaper. See the graphs on the following pages of this document that give a

detailed breakdown of costs.

7

Ecommerce Business - 3 Year Example

$0 $50 $100 $150 $200 $250 $300 $350 $400 $450

Thousands


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Exhibit 2: TCO Comparison among leading ecommerce platforms (3 years)Part 1/2. Detailed breakdown of expense and cost

TCO Comparisons Znode® Multifront Microsoft® Commerce Server

Startup and operational costs

Software Licensing $30,0002 CPU/Server, 1 Production Server, 1 Test Server

$40,0002 CPU/Server, 1 Production Server, 1 Test Server

Annual Maintenance $18,000 20% per year $30,000 25% per year

Yearly Subscription $0 $0

Additional Software Required $9,000Microsoft SQL Server Standard Ed., 1 CPU license

$15,000Microsoft SQL Server Standard Ed., 1 CPU license, Sharepoint

Implementation Costs (1 store, medium complexity) $45,000 Avg. 500hrs development time $73,800 Avg. 820hrs

development time

Advanced Custom Integration $3,600 Avg. 40hrs integration effort $10,800 Avg. 120hrs

integration effort

Add 2 Additional Branded Stores $2,160 Avg. 24hrs UI customization $8,000 Avg. 80hrs UI

customization

Performance Testing/Validation $0Not necessary - Load test provided out of the box

$15,000

Hosting/Infrastructure Costs $28,000 2 servers at Rackspace $43,200

3 servers at Rackspace (seperate Sharepoint server)

SEO Management Costs $9,360Can be managed easily by onsite resource, 4hrs/mo

$37,440

Training Cost (Tech + Marketing) $10,800 1 week average per year $21,600 2 weeks avg. per year

Ongoing Maintenance $51,840 1 .NET resource for 16hrs/mo @ $90/hr $144,000 1 .NET resource for

40hrs/mo @ $100/hr

Total Cost (3 Years) $208,560 $438,840


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Exhibit 2: TCO Comparison among leading ecommerce platforms (3 years)Part 2/2. Detailed breakdown of expense and cost

TCO Comparisons Open Source Platform Enterprise SAAS

Startup and operational costs

Software Licensing $02 CPU/Server, 1 Production Server, 1 Test Server

$02 CPU/Server, 1 Production Server, 1 Test Server

Annual Maintenance $0 $0

Yearly Subscription $42,000 Enterprise Edition, 3 years, 1 server $126,000 3% Revenue share

Additional Software Required $0 $0

Implementation Costs (1 store, medium complexity) $73,800Avg. 820hrs development time, $90/hr blended rate

$30,600Does not offer much flexibility and hence lower dev. cost

Advanced Custom Integration $10,800 Avg. 120hrs integration effort

Does not allow for advanced integration

Add 2 Additional Branded Stores $3,600 Avg. 40hrs branding customization $36,000

Significant effort for branding customization

Performance Testing/Validation $15,000 $0 Not necessary - built to scale

Hosting/Infrastructure Costs $28,800 2 servers at Rackspace $0 Includes hosting

SEO Management Costs $37,440 $37,440

Training Cost (Tech + Marketing) $21,600 2 weeks average per year $21,600 2 weeks avg. per year

Ongoing Maintenance $129,600 1 PHP resource for 40hrs/mo @$90/hr $129,600 1 tech resource for

40hrs/mo @$90/hr

Total Cost (3 Years) $362,640 $381,240


The following analysis compares the TCO based on investments in each of the four platforms being compared.

Exhibit 3: TCO Comparison among leading ecommerce platforms (3 years)Summary of findings

TCO Comparisons Znode® Multifront Microsoft® Commerce Server

Open Source Platform Enterprise SAAS

Online Revenue

Total Cost (3 years) $208,560 $438,840 $362,640 $381,240

Expected Total Cost of Ownership compared to Znode Multifront

+110% +73% +83%

As demonstrated on the previous pages, the total cost expected from each platform is derived from extensive analysis

conducted through customer feedback, case studies, market research and discussions with several development teams.

Keep in mind that this only covers TCO, which is only one component of achieving maximum ROI.

10

The Bottom-line


Overview of business benefits

Rich Customer Experience: Using Znode’s Flexible Platform, you can build an ecommerce solution is unique and custom

tailored to your brand, allowing an exceptional experience for your target audience. Target customers more effectively

and faster with relevant products which increases conversions and ROI.

Beat the Competition with a Multi-Store Strategy: With Znode Multifront, there is no limit to the number of stores

you can run from a single system. You can create distinct stores for brands, products sets, employee stores, B2B, B2C,

affiliates, franchises, co-branded stores and more.

Significantly Increase Speed-to-Market: The ability to quickly create micro-stores gives marketers the ability to launch

new products and promotional campaigns faster than ever before. Znode makes this possible by sharing attributes and

objects across different stores. Once the master catalog is setup, you have complete control.

Increase Traffic with 20 SEO Best Practices: Multifront’s platform was built from the ground up to ensure that all aspects

of the code and generated stores are SEO friendly and has been tested and certified by a leading SEO agency.

Increase Operational Efficiency with Seamless Integration: Quickly integrate your storefront with back-office systems,

suppliers, and 3rd party services. This effectively eliminates manual processes improving operational efficiency.

Reach Millions of New Customers: Push products to places your customers frequent including Facebook, Mobile

Phones, Store Kiosks and more.

Reduce Total Cost of Ownership: Reduce the total cost of ownership compared to other competing platforms by

accelerating store deployment and significantly reducing the cost of ongoing maintenance.

Go with a Trusted Brand: Leading global brands such as Waste Management, Berkshire Hathaway, Wawa, Kimberly

Clark, and LoJack, trust Znode to power their mission-critical ecommerce.

Overview of technology benefits

Flexible Architecture: Multifront’s innovative architecture allows it to be easily customized to virtually any business

requirement no matter how complex.

Integrate Seamlessly: The Integration Middleware™ allows you to easily integrate your storefront with virtually any back-

office system or 3rd party services.

Scale Quickly for high traffic: Multifront has been tested to scale for high traffic and mission critical ecommerce

requirements exceeding 4+ Million unique users per month.

Reduce IT Risk: Eliminate the risk of being “boxed-in” by proprietary software by providing a best practices framework

instead of black-box software.

Follow Ecommerce Best Practices: Multifront has been built meticulously to follow ecommerce best practices, leaving

you to focus on your business specific requirements.

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Benefits of Znode


As demonstrated in this whitepaper, it is important to carefully consider your overall business objectives before picking

an ecommerce platform. Using Znode® Multifront, you can significantly lower your TCO compared to other platforms

and build an ecommerce solution that delivers a rich customer experience, high transaction quality and higher overall

ROI. Leading brands worldwide have placed their trust in Znode to run mission-critical ecommerce applications. We look

forward to working with you on your next ecommerce project and becoming the platform of choice to run your online

enterprise. If you would like to learn more about achieving lower TCO and maximizing your ecommerce ROI, please

contact us today!

12

Conclusion


Znode® is a leading provider of innovative ecommerce software solutions trusted by global brands. Our ecommerce platform’s extreme flexibility enables companies to build online storefronts with rich customer experiences and high transaction quality thereby maximizing their online effectiveness.

Contact Us

Znode, Inc.

8760 Orion Place, Suite 120

Columbus, Ohio 43240, USA

Tel: 1.888.755.5541

Intl: 1.614.768.1150

Web: www.znode.com

Resources

Product Overview: www.znode.com/znode-multifront

Live Demo: www.znode.com/demo

Customer Portfolio: www.znode.com/portfolio

Notices

1. Znode does not guarantee the results presented in this TCO analysis. Results may vary depending on your

individual business needs. We advise you to use this document as a guideline and perform your own TCO and

ROI analysis.

2. Microsoft® is the registered trademark of Microsoft Corporation

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About Znode, Inc.


Znode Whitepaper Total Cost of Ownership

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