Stroller maker and retailer Maclaren decided in mid-2014 it was time to outsource technology hosting responsibility. The annual cost of hosting and maintaining e-commerce, order management and enterprise resource planning software running on Microsoft Dynamics technology—about $290,000—was a wash compared with annual fees for the vendor-hosted service, says Jim Ramsey, head of technology for Maclaren. But that wasn’t the issue.

“Our first goal was to reduce internal staff,” Ramsey says. “It took a big load off I.T. staff.”

How big? Maclaren eliminated 30 developers and other application support positions as a result of the switch to NetSuite’s SuiteCommerce software. “We got rid of the entire team and rolled it all into the I.T. department,” he says. “We have four now.”

Maclaren sells directly to consumers online at Maclarenbaby.com, but 80%-90% of its revenue comes from sales to 2,100 retailer clients in 50 countries. It now uses SuiteCommerce by NetSuite Inc. to power its business-to-business and business-to-consumer e-commerce, inventory management, order management, marketing, warehouse management, manufacturing, customer support and financials.

Previously, Maclaren ran its business on multiple systems, which were costly and time-consuming to maintain and resulted in complex integrations and customizations. That complexity limited growth and prevented the business from keeping up with customer expectations, Ramsey says.

Since implementing SuiteCommerce in February, Maclaren is managing warehouses in the United Kingdom, the United States and France, and running country-specific websites for France, Germany, Spain, the U.K. and the U.S. Maclaren also provides a mobile-optimized website that displays across all devices and is able to run its business around the world from a single platform, eliminating integrations between separate systems, Ramsey says.

Maclaren is just one of a growing number of converts who have turned to vendor-hosted technology to reduce costs and improve website and business functions. These and other vendors are among 1,737 company listings in Internet Retailer’s new 2016-17 Guide to E-Commerce Technology. The guide, includes 10 data points on each vendor across 30 technology categories and provides insight into their products, services, key customers, entry level or typical pricing, key executives and company contact information, and a concise profile of who they are and what they do.

Retailers like Maclaren are part of a trend toward replacing software they run in their own data centers with vendor-hosted applications delivered in a software-as-a-service format via the Internet. Software-as-a-service, or SaaS, refers to an application that is “owned, delivered and managed remotely by one more providers,” according to Robert Desisto, an analyst with technology advisory and research firm Gartner Inc.

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SaaS technology typically means all of a software supplier’s retailer clients are using the same application. There is another form of vendor-hosted technology called cloud computing that is also gaining traction. In that setup, the retailer licenses and owns the software, but server maintenance is outsourced and the cloud provider manages the hardware and operating system.

In terms of cost structure, SaaS is subscription-based and the fee for an e-commerce platform typically ranges from 1%-5% of revenue, says Penny Gillespie, director of e-commerce research at Gartner.

Cloud-based software is purchased by the customer, but there are no upfront costs and no hardware to maintain. Costs can range from $29 up to thousands per month, and annual cost savings for retailers can range in the tens of thousands of dollars, experts say.

Retailers are gravitating to vendor-hosted applications, particularly the SaaS model. A recent report from Forrester Research Inc. indicated that 73% of North American and European retailers, wholesalers and manufacturer respondents to a Q4 2013 survey expected to make a full or partial shift to SaaS-based commerce technologies.

The “Forrester Foresights Software Survey” said that, among 439 respondents, 32% already were using or planning to move to a SaaS e-commerce environment within two years, 28% were using some SaaS tools to complement existing software and 13% planned to complement existing software with SaaS technologies within two years.

And a June technology spending survey by Internet Retailer revealed that of respondents who planned to replace their e-commerce platform within two years, 24.4% said they would opt for a SaaS, multi-tenant platform from a vendor and 14.1% would choose a platform hosted and managed by a vendor. A SaaS multi-tenant platform is a vendor-hosted model in which one application is accessed by multiple customers.

Outdoor sports gear retailer Rock/Creek Outfitters took an unexpected journey to a SaaS-based e-commerce platform in 2015. The retail chain had been running RockCreek.com on a platform by ATG, which Oracle acquired in 2010. Rock/Creek, with 2014 web sales of $10.3 million, was not endowed with the support staff or budget to properly maintain the ATG system, says Mark McKnight, e-commerce and marketing director.

“We had to be one of the smallest clients using such a big product,” McKnight says. “We were running it on maybe 10 machines in our data center. There was a lot of complicated code that needed heavy lifting by engineers who needed Java-specific skills. It was difficult for a company our size to keep up with the new releases.”

Rock/Creek wanted to make some major improvements in time for the 2015 holiday season, such as moving to a responsive website, McKnight says. Sites built with responsive design techniques adapt to the smaller screens of smartphones and tablets as well as rendering properly on PCs, which allows a retailer to operate a single site that serves all devices.

To gain new technology, Rock/Creek went to Oracle to add Endeca, a site search technology provider that Oracle had acquired in 2011. “They said we should wait for a new product they were working on, which would be ready in time for this holiday season,” McKnight says. The product, which Rock/Creek deployed, is Oracle Commerce Cloud. The SaaS platform, which Oracle introduced in May, marks a departure for Oracle from providing licensed software that retailers deploy on their own servers. The hosted, SaaS software is aimed at midmarket retailers with $50 million or less in yearly online revenue, Oracle says.

Rock/Creek was able to shed the services—and associated costs—of an unnamed hosting company and no longer needs to worry about the system infrastructure because it’s maintained by Oracle, McKnight says. In addition, the retailer cut ties with external site search and content delivery network providers because those tools are part of the Oracle product.

Cost savings for Rock/Creek, from reducing the number of vendors and running a more intuitive system, will be big. “We did the math and in two years we’re going to save well over $1 million in costs,” McKnight says. “When you think of that going to the bottom line, it’s just huge savings for us.”
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