Groupon says its focus is on the bottom line, rather than top-line growth.
Two online retailers deep in the I.T. trenches discuss the relative merits of open source and conventional e-commerce platforms.
With open-source e-commerce software, online retailers can modify the foundation layer of the software, the source code, to suit their needs. Conventional e-commerce software, in contrast, is proprietary, meaning that if retailers want the software to do something it's not already designed to do, they have to rely on the software vendor to build the feature or get its permission before hiring a web developer to build it.
Which is better? Gary Shar, CEO of apparel e-retailer Isaay.com, and Erik Jeffries, information technology manager at software e-retailer RoyalDiscount.com, have experience with both.
Shar operated Isaay.com on the Enterprise edition of eBay Inc.'s Magento open source e-commerce software for six months in 2011, but found it difficult to make changes to the site and struggled to get the support he needed. In July 2011, Shar moved Isaay.com to Demandware Inc.'s closed-source software and pays a web development firm to build everything on Isaay.com. Demandware pricing starts at $60,000 per year, a spokeswoman says, and rises with a merchant's revenue. Typical implementations cost between $200,000 and $600,000. The price of Magento Enterprise Edition starts at $14,420 and Enterprise Premium Edition starts at $49,990.
Jeffries did the opposite. He used closed-source software when managing web development for another business, but when that software provider was acquired the new owner didn't maintain the product. He was left hanging, unable to add features, he says. Today he likes working with osCommerce's open-source software because he's free to add features on his own timetable, and can find help among the 260,000 developers working with osCommerce's code.
Here are their views on key points in the open versus closed-source software debate.
"With open source there's more flexibility without vendor lock-in," Jeffries says. "One of the big advantages is there are no commitments, contracts or maintenance fees. You just have the software to use."
Open-source software can be free to license, but some retailers opt to pay for extra support or built-in functionality, as with Magento Enterprise Edition or Royal Discount's support contract with osCommerce, he says. The large number of software engineers who participate in open-source communities also makes it easier to recruit developers, he adds. "There are a lot more jobs out there that are open source rather than a specific platform, so it can be easier to find staff."
Because many closed-source companies price their software in a model designed to scale as sales grow, Shar says development is the crucial cost consideration. The fees Issay pays his web development firm sometimes exceed Demandware licensing fees, he says, although he declines to share either amount. Shar says hiring the work out means Issay can get by with fewer than 10 information technology staffers, and that ultimately saves money.
"If you don't own the source code and you have no way to modify what you've got, it stifles innovation," Jeffries says. "With open source, you can do whatever you want, you just have to have the expertise," he says. On osCommerce, Royal Discount can make any changes it needs, at any time. "There are just so many more options available," he says. "[Open source] was a game changer."
"While open source, I agree, is great for innovation, I was constantly told [by Magento], 'No, you cannot do that' and 'We could certainly figure it out, but it would take us probably two years,'" Shar says. "At Demandware, I've yet to be told, 'You can't do that.' While I don't get access to their very base code, I'm actually able to modify a lot of the code and do what I please."
Large developer communities ensure the software's quality, Jeffries says. "More eyes on the code make it more secure, versus a couple of engineers building something," he says. The focus of an open-source community is always on the software itself, rather than meeting company deadlines or satisfying shareholders, he adds.
When he used closed-source software, Jeffries says "it was like pulling teeth to get someone to help." But now, even if no one is available to help him directly, he can look to osCommerce forums, chat rooms and documentation from other developers.
Closed-source software providers are accountable for maintaining their code, Shar says, a guarantee he feels is missing in the Wild West of open source. With open source, "you're the pioneer. There is no one who actually wrote the source code to sit down and help you with it," Shar says. "I don't want to go to a forum—I have no idea if these people are knowledgeable."
Nor does Shar know what other types of e-commerce software, such as for order management, those users are connecting to their e-commerce platforms, he says. An integration that works for one retailer might not workfor another. That makes finding answers in in an open-source community less straightforward than it may seem, he says.
Shar and Jeffries agree a retailer can build a successful online business with either type of software. What is most important, they say, is project management and building a capable development team.
"It's about who's building your system and the resources," Shar says. "I like the idea of having people write the code and paying them to do it." Jeffries, Shar says, "doesn't pay, but he has to do everything for himself."
"There's always a trade-off between performance and features," Jeffries says. The key, he says, is to find a developer or a software platform that you trust.