You are not the only ones who have experienced a constant rise in license costs. The trend has been the same for many years. The largest software providers are phasing out – or have already phased out – one-time payments that last forever.
Instead, everyone is moving towards subscription models, where the annual price often equals a third of a so-called 'one-time fee.' However, prices exceed the annual maintenance costs.
The result? Your 'Total Cost of Ownership (TCO)' increases.
So how can you better plan these costs, and just as importantly, reduce the costs?
Here are five possible strategies that can help reduce your costs for your overall e-commerce solution.
5 ways to reduce software costs and TCO
Based on our experience, we have identified several effective strategies to reduce software costs and TCO. Here are the top five:
1. Software consolidation
2. Open-source software
3. Negotiation of current fees
4. Cloud-based solutions
5. Further training, support, and skill development
1. Software consolidation
To keep it concise: Stop buying new software without evaluating your current tech stack!
Most businesses only use a fraction of the software they pay for. Start by reviewing the following:
➡️ Inventory: Make a list of all the software you currently use.
➡️ Contracts: Review your contracts and note the due dates to avoid unwanted, automatic renewals.
➡️ Features: Get an understanding of what each piece of software does. Is there overlap in functionality?
➡️ Business needs: Identify your company's needs. Both now and in the near future.
By conducting this exercise, you will often find overlapping systems that no one really uses. Instead of adding new software, consider leveraging your existing tools. Maybe you already have what you need?
💡 Key Takeaway: Consolidating your tech stack reduces software expenses while supporting new business initiatives.
2. Open-source software
Open-source solutions are gaining increasing acceptance in many e-commerce businesses – and for a good reason. They often cost only a fraction compared to enterprise software.
In e-commerce, platforms like Medusa are becoming more popular due to their flexibility and cost-effectiveness. Professional hosting options also make open-source a good alternative for reducing license costs.
Advantages of open-source software:
Lower license costs.
Flexibility to tailor a solution to your business needs.
Access to a growing community of developers and support resources.
Be aware: Open-source solutions differ from standard solutions, so make sure they fit your development skills, resources, and security requirements.
3. Negotiation of current fees
Is there a good negotiator in you? Then you know never to underestimate the power of smart negotiation.
Prepare by researching alternatives and understanding your current usage patterns. Use insights from your software inventory to identify redundant tools or negotiate for a better price.
💡 Key Takeaway: Negotiation can be your secret superpower to reducing software costs. By preparing with insights into alternatives, usage patterns, and redundant tools, you can secure significant savings without negatively impacting your business.
4. Cloud-based solutions
Cloud-based solutions are often considered cost-saving, but they require careful monitoring and configuration to fully exploit their potential.
The biggest advantage of cloud systems is scalability, allowing you to adjust your resources as needed.
Example:
If your systems are not used on weekends or holidays, it's beneficial to scale down during those periods.
Maybe you have services that you don't use at all? That's money wasted, which you can save by turning them off.
💡 Key Takeaway: Intelligent monitoring and configuration can make cloud systems a cost-effective solution for businesses of all sizes.
5. Training, support, and skill development
Systems and software that are not used as intended will never be a great success. So, do not forget the people who use the systems every day and who may be busy just handling daily operational tasks.
Invest time and money in system training. It provides a good return through improved productivity, use of more tools and features, and more insights into your business. Moreover, skill development often leads to greater employee satisfaction.
Win-win-win.
