Hosted vs Open-Source: Which is Better?

With digital commerce increasingly vital in retail, continuous technology enhancement is crucial. This article outlines significant insights from our thorough migration trend analysis in 2024. Using our in-house database, LitExtension - #1 eCommerce Migration Service will reveal merchants' preferences for eCommerce platforms and delve into the hosted versus open-source debate.

Analysis of User's Preferences

In 2023, our data shows that 68.4% of retailers have chosen a hosted, cloud-based, fully managed platform. Popular choices include Shopify, BigCommerce, and Wix. These platforms offer simplified usability, allowing businesses to focus on core operations without extensive technical knowledge.

In contrast, only 31.6% of merchants have opted for open-source solutions like Magento, Prestashop, or WooCommerce. These are typically preferred by larger corporations seeking highly customizable options at lower long-term costs, often with an in-house development team managing the website.

The increasing market share of hosted platforms reflects their advantages in constant innovation, all-in-one functionality, and the absence of upfront expenses. This trend indicates that for many merchants, ease of use and rapid deployment outweigh the need for flexibility.

Open-Source vs Hosted: Into the Details

1. Total Cost of Ownership

Many open-source eCommerce platforms are free to download and install, allowing you to upgrade your website without worrying about monthly or annual fees. This helps keep initial investment costs low, although you'll still need to pay for essentials like a domain name ($14.99/year), web hosting ($100-300/month), and an SSL certificate ($70/year, excluding VAT) to start your online store.

Hosted eCommerce platforms typically operate on a tier-based subscription model, with monthly fees ranging from $30 to over $2000, depending on your revenue or platform requirements. Leading SaaS companies offer enterprise versions of their core software, such as Shopify Plus and BigCommerce Enterprise, tailored for businesses with annual revenue exceeding $500,000.

2. Setting Up

Open-source eCommerce platforms, such as Magento, require technical expertise for installation and setup, involving tasks like hosting, security, and theme development. This complexity often necessitates assistance from web agencies or developers.

In contrast, hosted eCommerce solutions enable online retailers to swiftly enter the market and begin selling. These platforms usually feature user-friendly interfaces and pre-designed themes, facilitating rapid store setup. With platforms like Shopify, for example, you can create and launch an online store within minutes, without the need for coding expertise. Simply sign up, navigate to the setup options, and make selections or fill in the necessary information.

3. Maintenance and support

Open-source eCommerce platforms are free to download, requiring users to install and develop their sites independently. This means there's often limited support available, with users typically resorting to online resources like community forums or live chat for assistance.

Most SaaS solutions offer exceptional customer support, accessible even before signing up for a plan. They provide round-the-clock assistance via phone, instant messaging, emails, and more, ensuring quick resolution of any issues you encounter.

Hosted eCommerce platforms also stand out because they outsource the bulk of website maintenance to the provider. They handle security patches and updates, minimizing downtime and keeping your site current. Consequently, SaaS solutions require far less maintenance compared to open-source alternatives.

4. Security

Most SaaS eCommerce platforms offer Level 1 PCI compliance by default, eliminating the need for additional investment in securing your site. They handle annual on-site compliance assessments and risk management to safeguard your store's security. Additionally, automatic updates for new website versions and security patches are provided.

In contrast, while self-hosted software like Magento or WooCommerce can achieve similar security levels, the responsibility for ensuring security falls entirely on you. Creating PCI-compliant sites on these platforms can be costly, along with ongoing security maintenance expenses.

Final Thoughts

There are approximately 500 eCommerce platforms in the market. Thus, store owners can opt for either open-source shopping carts or hosted platforms based on their needs and budget. Yet, selecting the right platform is crucial for improving business operations and enhancing the customer experience.

For more info on what platform you should go for, check out our LitExtension blog today!