SaaS E-commerce Services on the Rise

By 2013, 90 percent of e-commerce sites will use at least one product from software as a service, or SaaS vendors, according to a Gartner report released today. And 40 percent of e-commerce sites will use a complete SaaS solution.

These sites will be put up mainly by SMBs and smaller companies, although some large enterprises will use SaaS as a way to experiment in new markets. “You’ll have new entrants who will help grow the market, and you’ll also have experimentation by the bigger companies,” Gartner analyst Gene Alvarez told

The bigger e-commerce players, however, will not use SaaS because they’ll want to preserve the uniqueness of their sites, Gartner said. They also have concerns about the viability of SaaS to drive e-commerce on a large scale.

As a result, according to Gartner, the more profitable and more high-end e-commerce sites will choose to either use a custom-built solution, which others can’t copy without breaching trademarks. Another group of e-commerce sites — those that use licensed software and combine it with custom code or other products to deliver custom capabilities — will also not be too keen on SaaS.

The SaaS approach will be viable for those who don’t have enough human or hardware resources or both, Alvarez said. “We believe the increase in SaaS usage will come from the mid-market or below,” he added.

Some of the top enterprises will use SaaS e-commerce to experiment in new markets, Alvarez said. “If I’m launching a new line or entering a new market and am not sure how I’m going to do there, it behooves me to try SaaS for, say, the first three years, and, if it doesn’t work, I can shut it off,” he explained.

“Do I see Nike or Amazon going into SaaS? No,” Alvarez said. “But they can adopt SaaS to take some of their products and put them in a new store under a new name, and price them differently to test the market.”

This is where SaaS in e-commerce will impact the skunk works many departments in large corporations are setting up by leveraging Amazon’s EC2 and S3 cloud computing services to run their Web sites on. “SaaS e-commerce makes it even easier for user departments to make an end run around IT for a Web site,” Alvarez said. “They don’t have to understand S3 or EC2 and, for a few hundred dollars a month, they can launch an e-commerce site.”

E-commerce delivered in SaaS form may also overtake cloud computing as a quick and easy way for departments of large companies to set up their own Web sites, Alvarez said.

Departmental users “will get tried and proven technology so they can focus on the business model and see if their idea works,” instead of wrestling with the technology as well, Alvarez said.

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