A Beginner’s Guide: DIY or SaaS for Your Online Marketplace

Written by Arcadier, 16 Jun 2016

A long time ago everyone created their own websites. Then they had to update it, maintain it and patch the security for it. After a while hosting companies who provided the core technology started offering these services to their regular customers, and thus the market of serviced websites was born.

Today this has progressed to SaaS websites like WIX and Shopify, such that now users can focus on uploading the items they want to sell and connecting this with their bank account. They are no longer worried if their website renders properly on one browser or another, or if a particular worm will attack their site.

It’s hard to find someone that doesn’t want to a quality product at a cheaper price. When it comes to running a marketplace, having a reliable and efficient infrastructure is fundamental. There are countless of reasons why people should start an online marketplace, and once it has started transacting there’s a high chance it’ll be successful too. For one, it’s a prime time for the world’s tech innovators to test their ideas and technology is helping create markets for various products.

Millennials are leading the trend with their increased openness to try unique and funky sites. Often these markets are more efficient than traditional avenues and hence allow for a healthy margin thus helping the new marketplace to flourish. But a great business idea will go stale without proper execution. It’s probably worth noting that many startups fail, with one of the main reasons being that they run out of cash before building up enough momentum.

So it’s important to be diligent about strategic spending, startups should be conscious of spending less so they maintain their longevity. That’s when using a Software as a Service model (SaaS) can be lifesaving for entrepreneurs who don’t have a lot of money but still want to have a top quality online platform to run their marketplace.

What is SaaS?

Simply put, SaaS is a service model that moves the burden of technical deployment from the entrepreneurs to the SaaS provider. Businesses have the option of avoiding the hassle of creating their own e-commerce platforms. They can avoid the difficult task of deploying and maintaining their infrastructure.

A secure and stable platform require highly skilled talent and resources. Other factors such as hosting fees, system backups, SSL certificates and compliance audits need trained and specialized personnel that is often unreachable for smaller scale business. SaaS helps startups reduce their cost by. SaaS providers centralize their systems to and take on this task of implementing all technical aspects so that their customers can achieve their desired economic targets, i.e. lower costs.

Alternatively organizations might take on a Do-It-Yourself (DIY) approach, but are then forced to achieve the same economies of scale as the SaaS company internally, and this might never be achievable.

Benefits of SaaS for ecommerce

Choosing a SaaS provides prompt and scalable Return of Investments (ROI; profitability ratio resulting from an investment of some resource) while taking care of all technical aspects of deployment and setup. Efficient integration is guaranteed with the prevalent usage of API (Application Program Interface) which provides a set of routines, protocols, and tools for building software applications in multiple channels.

Depending on the package, SaaS providers also offer front-end customization tailored to the business characteristic and style.  The short period of platform implementation in SaaS is a deciding factor in keeping an online business current and fresh. Above all, cost effectiveness is the main draw card for many young businesses which results in significant deployment cost reduction and cheaper ongoing maintenance.

Significant SaaS systems can be setup and maintained for less than US$ 100k in the first year, while on the other hand, using a DIY approach can costs millions of dollars and not produce a guaranteed outcome. Accordingly they SaaS model allowed customers to enjoy on-demand application availability, certainty of features all with lower upfront and ongoing costs. All the while leaving the entrepreneur with the majority of their time focusing on their business model and growth, which more certainly guarantees operational success.

Some things to know before choosing SaaS

SaaS solutions require mutual understanding between the provider and customer to achieve desired outcome. A clear overview of the startup marketplace operators’ business model, and the targets it aims needs to be laid out for SaaS provider to deliver something that’s viable.

SaaS providers do their best to provide a core set of features and reports for clients, but will require commitment to a contract term, if more flexibility is requested. On the same note, when you use a SaaS service, you’re entering some else’s house and you need to respect their rules. Figuring out the level of customization they will provide and what changes are allowed is as important as understanding the concerns that may arise from the model such as: data migration, compatibility of specific integration and reliable infrastructure in web connectivity.

A trust based relationship needs to be established especially when handing verticals and rigorous data-security and real-time information in sensitive markets such as financial services, public sector and mission-critical manufacturing.

In conclusion

There is no one-size-fits-all when it comes to choosing a tech development model to build your business. Both SaaS and DIY possess unique and valuable points as well as challenges. The SaaS model drastically lower cost of all technical aspects which will be apparent when the cost of creating, configuring, modifying, sustaining and operating the software are accounted for.

The amount of time required to create the platform is also significantly shorter with SaaS—in the order of weeks, even days compared to months with DIY. The benefits of SaaS has allowed businesses to focus more on their core business model and strategies. As with any emerging markets, SaaS is constantly evolving and improving to deliver the best service to the right customer groups. It definitely serves as an appealing and smart option for young entrepreneurs with a limited budget who wants to make a low-risk entrance in the world of online marketplaces.

About: Paul Cascun is a co-founder of Arcadier, a SaaS company that powers next generation marketplace ideas. Follow Arcadier on Twitter, Facebook, and LinkedIn for news and updates.

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