Magento TCO (Total Cost of Ownership) – How Much Does It Cost to Own A Magento Store?
By Ambab Infotech
Before establishing an eCommerce business, the first question in any merchant’s mind is, “How much will it cost to build my online store?” It’s crucial to know the costs ahead of time to assess the risks and calculate your Return on Investment (ROI). Unfortunately, knowing the cost of construction will not provide you with a complete solution to your issue. “How much will it cost to own an online store?” is a better question to ask.
In this post, we’ll go through some of the features of your eCommerce system and offer tips for lowering your total cost of ownership (TCO).
What Exactly Is TCO and What Does It Involve?
The total cost of ownership (TCO) is the sum of all costs and expenses associated with purchasing, deploying, and managing an eCommerce solution. This includes the licensing price, hosting, extensions, third-party apps, feature development, design, and continuous maintenance from a technical and monetary standpoint. Platform licensing prices are known to fluctuate as a company grows. Inquire about each potential platform’s pricing structure and how it changes as online sales grow.
From a resource standpoint, think about the skillsets you’ll need to successfully launch and sustain the platform. Calculating the total cost of ownership (TCO) for each potential eCommerce platform can help you stay on budget and avoid any unpleasant surprises later on.
In the TCO study, opportunity cost is equally important. The opportunity cost is a measure of the potential loss when one platform is chosen over another. One platform, for example, maybe less expensive, but it has a history of breaking down, resulting in revenue loss. Alternatively, you can find a platform that works for your firm now but won’t scale as your company grows.
Why is Total Cost of Ownership in eCommerce important?
The Total Cost of Ownership in eCommerce is sometimes underestimated at first. Merchants are more concerned with development expenditures and moving closer to the go-live date when they can begin selling and generating income. On the other hand, TCO should be considered early in the planning process to provide deeper insights and better planning. TCO also clarifies longer-term costs and dangers. Let’s take a closer look at the advantages of TCO:
- To begin, Total Cost of Ownership aids in the evaluation of return on investment (ROI) or return on investment (ROI) (Return on Time Invested). This indicator is critical for every organization since it shows how profitable an investment is and whether or not the time commitment will pay off.
- TCO also assists the merchant in deciding between several eCommerce systems. Calculating the Total Cost of Ownership over three or five years may reveal considerable platform disparities.
- TCO allows you to see what costs are hidden and what costs are continuing. Many costs are hidden and can have a substantial influence on profitability. When these charges are factored in, they help to clarify your financial condition.
- TCO can have an impact on your complete eCommerce strategy or perhaps serve as a starting point for developing one. How quickly should the company expand? When do you reach the break-even point? TCO is able to provide solutions to these questions.
- TCO is frequently calculated as part of a larger strategy that includes creating a project checklist of tasks. You will have a clear grasp of milestones and how to prioritize investments once the process is completed.
Best Practices to calculate TCO:
The term TCO (Total Cost of Ownership) is used to calculate the direct and indirect expenses of purchasing and implementing technology. The Total Cost of Ownership encompasses a lot more than just the cost of building an eCommerce store. It also includes costs like:
- Third-party Services
- Maintenance and Support
- Features Development
- Platform Upgrades and more
The goal of calculating the total cost of ownership is to uncover hidden costs by examining the product and its value over time. The most common method for calculating the TCO is to divide costs into capital and operating expenses (CAPEX and OPEX, respectively) (OPEX). The original cost of a product or system is capital expenditure, whereas recurring costs are known as operating expenses. The early costs of eCommerce website construction will consume a significant portion of their budget for many businesses. They often ignore how much it will cost to maintain the store once it is up and running.
Understanding Magento’s Different Editions
For building an eCommerce store, you can choose from three platform versions: Magento Open Source, Magento Commerce, or Magento Commerce Cloud.
Magento Open Source (formerly Magento Community) is a free eCommerce system that allows you to obtain the source code and modify it. It’s also available for third-party developers to edit. Magento Open Source is a suitable alternative for start-ups and small businesses interested in setting up a store quickly and with little upfront expenses due to its limited functionality, lack of support, and limited scalability.
Magento Commerce Edition (previously Magento Enterprise Edition) offers enhanced functionality not available in Magento Open Source and increased scalability. It also provides technical assistance with setups and troubleshooting to ensure that everything is running correctly. Magento Commerce is the way to go if you want more customized options, scalability, and sophisticated functionality.
Magento Commerce Cloud (previously Magento Enterprise Cloud) is a cloud-based eCommerce solution that runs on Amazon Web Services (AWS) and includes additional functionality. Consider Magento Cloud if you want an advanced system with unrivaled features, 24/7 support, easy customization, and a hosting solution.
In-House vs. Agency Website Development
There are several compelling reasons to design and operate your Magento store in-house. You can keep track of the process every day if you have an in-house development staff. Your in-house team can move quickly if you decide to tweak something or find a flaw in the code. You can also avoid paying commissions to agencies. If you want to know factors to consider for choosing the best Magento-agency, then you can visit https://www.ambab.com/blog/factors-to-consider-for-choosing-the-best-magento-agency/.
In addition, your in-house staff must be able to set up servers, establish payment gateways and product information management (PIM) systems, as well as integrate third-party extensions or design bespoke ones. As a result, you must be capable of conducting interviews for your eCommerce project. Overall, it can be pretty costly.
This is one of the areas where the agency model excels. The development firm has previously employed certified developers, built a methodology, and dealt with the issues you’ll confront. Because they have experience and competence, the development team is more likely to complete your project on time and create an efficient search engine and conversion rate optimization plan, as well as other marketing methods, once the site is launched.
The firm may maintain and support your Magento store once the project is completed, including installing the latest security patches, developing new functionality, and everything in between. It will, of course, cost a little more, but it is a long-term investment.
Ambab provides a wide range of Magento development services, so email us if you need an exact price or assistance with eCommerce store development. While delivering Magento services at a competitive price, we never compromise on quality.