What is the Cost of On-Premise vs. Cloud-Based eCommerce?

September 25, 2018

Category: Best Practices

What’s the difference between on-premise eCommerce platforms and cloud-based eCommerce platforms? How do they stack up in terms of costs and scalability over time?

On-premise eCommerce platforms are installed locally on a company’s hardware system and managed by the IT staff. They typically involve larger upfront investments to purchase the infrastructure, servers, facilities, software and software licenses. Ongoing costs can include hardware maintenance, data storage, security, backups, power and cooling, and software upgrades.

Cloud-based eCommerce platforms are provided as a service. The vendor hosts and manages the software and customers’ associated data in the cloud, maintains the IT infrastructure and is responsible for all data security, upgrades, bug fixes, new feature development, and ongoing support and maintenance. Initial costs are typically much lower because it’s built into a subscription that you pay over time. Cloud-based eCommerce platforms allow your IT staff to focus on strategic initiatives and innovation, instead of maintenance and management of on-premise systems and servers.

Budgeting: CAPEX (Capital Expenditures) vs. OPEX (Operating Expenditures)

With on-premise eCommerce platforms, you typically have a large capital purchase to make up-front for both hardware and software. This often worries CFOs as it puts a strain on corporate finances and cash, which takes away from their ability to support and fund initiatives that may arise and require budget that wasn’t planned for. With cloud-based eCommerce platforms, the cost is typically an OPEX amount paid and expensed monthly. This allows cash reserves to be used for pressing initiatives and investments.

Implementation and Upgrade Costs

After you purchase an on-premise eCommerce platform, you’re often not prepared for the added hardware, hosting and resource (staff) costs required to implement it. The data center itself is a large expense as it takes up valuable floor space, requires proper heating and cooling, additional equipment and staff to support and maintain it. Plus, when it comes time to upgrade, if you haven’t budgeted money and people resources to complete the upgrade, you’ll experience a huge disruption to the business.

Growth & Agility

On-premise eCommerce platforms make it hard to scale and grow because they are hard to customize. Cloud-based eCommerce platforms make it easier and faster for you to make changes and evolve over time because it’s easier and less risky to deploy changes. You’re able to more quickly respond to market opportunities by developing and deployment enhancements.

Selecting the right type of eCommerce platform for your business is an important decision. If you need help weighing your options, Four51 is here to help!