In an era marked by geopolitical unrest, supply chain disruptions and economic uncertainties, wholesalers are facing some unprecedented challenges. Persistent inflation in major economies, combined with a jump in commodity prices caused by the Russia-Ukraine conflict, has left the wholesaler market scrambling to manage costs and maintain margins.
This squeeze on the retail sector was most notable as we emerged from the pandemic, with top and bottom lines repeatedly challenged by slow sales growth, reduced consumer spending power, higher fuel and freight costs, and supply chain challenges. It follows that retailers and wholesalers are now looking for ways to reduce their cost burden in order to sustain their profit margins.
One often overlooked area when it comes to reducing costs is the total cost of ownership (TCO) of software. TCO refers to the comprehensive evaluation of all direct and indirect costs associated with owning and operating software throughout its lifecycle. It encompasses not only the initial purchase or licensing costs, but also factors in expenses such as implementation, integration, training, maintenance, support, upgrades, and potential downtime. Reducing TCO can lead to huge savings, but requires a strategic approach that balances the minimizing of unnecessary expenditure with the need to optimize efficiency and improve business outcomes. For businesses that get it right, taking control of their software in this way is a win-win scenario.
This blog aims to shed light on the cost inefficiencies associated with sticking to legacy digital solutions and advocates for a composable approach that provides flexibility, responsiveness, and freedom of choice.
The Drawbacks of Off-the-Shelf Solutions
With traditional off-the-shelf software, pricing is relatively easy to define in the beginning. Some of these solutions might seem perfect at the time of purchase, but will they be perfect a year from now? Two years? Five years? Investing in traditional software often involves multi-million-figure contracts, drawn-out decision-making processes, and an inability to change or flex with evolving business requirements. This results in a spiraling TCO as businesses invest in more and more software to plug the gaps and keep pace with competition.
Off-the-shelf software is an on-the-rails solution at a time when businesses need to grab the wheel and carve out their own path. Composable architecture puts businesses in the driving seat, allowing them to mix and match modular components and services based on their specific needs, avoiding the constraints of long-term contracts and fixed options.
Here are some key areas where a composable approach outshines legacy systems:
Avoiding vendor and feature lock-in
One of the downsides of traditional software solutions is that wholesalers end up "locked in" with a specific set of software providers. These long-term agreements with vendors restrict a wholesaler's ability to adapt and respond to changing market demands, and they remain stuck with the same set of features for years at a time. A composable approach offers total freedom, giving companies the ability to select individual vendors and developers for specific applications, or even build their own.
Reducing TCO with flexible price models
Fixed pricing structures and long-term contracts can impede wholesalers from making cost-effective decisions. The inability to respond swiftly to evolving demand patterns leaves them unable to compete in a rapidly changing world. Composable solutions provide elasticity, enabling businesses to scale resources up or down as required, ensuring optimal utilization and cost-efficiency. Individual services can be upgraded or downgraded in line with demand, enabling more granular control over costs and ensuring resources are allocated appropriately.
Building a best-of-breed solution
Traditional software often confines businesses to fixed options, limiting their ability to leverage the latest innovations and advancements. For instance, if a business wants to roll out a new e-commerce feature, it is at the mercy of its chosen software provider, often waiting years for a new feature to be added while its competitors are already forging ahead. An alternative might be to try and code a new feature on top of the monolith using inhouse resources. Of course, this then signs the team up for ongoing testing and maintenance throughout all version updates of the monolith to make sure their own feature remains compatible, but there's no guarantee that this will be the case with all future versions, so it's a risky approach. With a composable approach, on the other hand, organizations have the freedom to choose and invest in best-of-breed microservices that align with their specific requirements, unlocking a competitive advantage while keeping TCO in check.
Focus only on the core commerce features
Sometimes, wholesalers need to streamline operations and focus on essential commerce capabilities to sustain their operations. A composable solution allows businesses to break away from the rigid templates of legacy software, allowing them to go into "efficiency mode" when needed in order to maintain business continuity and protect their margins.
The need for a composable approach is underscored by the evolving business landscape and the desire for greater agility and cost control. By adopting a composable architecture, wholesalers can effectively future-proof their businesses, leveraging modular components and microservices that can be easily adapted and reconfigured.
As uncertainty in the market continues, regaining control over TCO is a wholesaler's best shot at not only reducing costs and maintaining business continuity, but building a flexible, scalable software foundation that will stand the test of time. The question all wholesalers should be asking themselves is — do they own their software, or does their software own them?
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