September 1, 2009, 12:00 AM

Shopping for SaaS

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"Some of our new items sell out in a day, and we built the presentation layer to show how many are left when the total gets down to a few remaining," Baker says. "And if a shopper puts the last remaining item in a shopping cart and another shopper buys it first, we`ll show a message in the cart saying, `Sorry, you missed out this time,` and present images of related items for her to consider."

Controlling data
Industry experts say that several SaaS platform vendors, including Venda, Demandware Inc. and MarketLive Inc., have improved in recent years their level of service and the tools they provide to clients for directly customizing the appearance of their web sites.

Still, retailers should clarify in their SaaS contracts their access to site data—such as information that reveals how customers are using their sites—they`ll need to manage their e-commerce merchandising and marketing strategies.

"In the world of SaaS, make sure you specify with the vendor how you can get to your data and how frequently," says Jeff Muscarella, a partner at technology investment consultants NPI Financial. "A SaaS vendor may say you own your own data, but it doesn`t mean they`ll make it easy for you to get to it."

A retailer that demands a lot of data reports from a SaaS platform is likely to tie up more processing time than the vendor had expected under the contract; the vendor, in turn, may respond by asking the client to modify the contract terms and pay more, Muscarella says.

In case things don`t work out as expected, contracts should cover termination terms—stipulating, for instance, that a client is free to terminate a SaaS contract should the vendor fail to meet predefined performance goals such as for site up-time, Muscarella adds.

SaaS à la carte
While TJX went with Venda because it wanted a feature-rich platform that it could deploy quickly and customize to its needs, other retailers take a more ˆ la carte approach to SaaS deployments.

Summit Sports Inc., for example, decided to re-architect its own in-house e-commerce platform after considering proposals in recent years from six e-commerce platform providers, two of which build licensed software to a retailer`s specifications, and four SaaS. In each case, the proposal was either too costly or could not provide Summit the functionality it wanted within the retailer`s desired timeline and cost range.

"We found out that we need more functionality and control over site development than the SaaS model could offer," says Andy Schepper, vice president of operations and director of e-commerce.

Summit, which sells skis, kayaks, rollerblades and other sports equipment through 11 e-commerce sites, decided that re-architecting its PHP e-commerce software infrastructure was the best way to provide new functionality key to its strategy of using a single electronic product catalog to present different merchandise displays on each of its web sites, Schepper says. PHP is a software programming language that supports dynamically generated web pages, such as those Summit displays with different merchandising offers from the same back-end catalog database.

The retailer figured the re-architecting also offered the best way to build a package configurator that, for example, would let shoppers on customize an equipment package from among the retailer`s array of skis, ski bindings, boots, poles and accessories—each available in multiple brands.

"We needed this package configurator to be completely flexible to apply to product categories like kayaks as well as skis, and it didn`t seem that it would work in a SaaS environment," which didn`t offer the same technology and level of service Summit could get through its in-house I.T. operations, Schepper says.

For other web site features and functions, however, Summit has integrated its in-house platform with third-party SaaS applications. It chose Adobe Systems Inc.`s Scene7 online image management application, which Adobe tweaked for Summit`s image display preferences, including the ability to present alternative colors on the inside and outside of ski jackets. The application also is designed to ensure that images would load fast, Schepper says.

Freeing up I.T.
Summit also went with SaaS applications from MyBuys Inc. for a product recommendation engine, and Nextopia Software Corp. for site search and navigation. In each of these cases, Summit realized it could get the functionality it wanted more quickly than building something in-house, Schepper says.

With Nextopia, for example, shoppers on a Summit site can get better search results with misspelled words or with combinations of brand and generic terms that its former site search function couldn`t recognize, resulting now in higher conversion rates among shoppers who use site search, Schepper says.

Although Summit`s in-house I.T. experts also could have built a similar system, it would have taken longer and the SaaS option has freed them up to work on the package configurators and other projects the retailer prefers to build in-house, he adds.

Leaving the heavy technology work to SaaS vendors can make life easier for e-retailers in the short run; retailers must make sure their contract terms protect them in the long run.

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