When thinking about launching an online marketplace, there are usually three evaluation criteria applied to available solutions:
- ROI or "when am I getting my money back?"
- Level of effort or "what's the probability of success?"
- Delivery timeline or "how much is it going to slip?"
There are also three types of marketplace solutions to consider:
- Vendo software-as-a-service
- a custom built solution based on an open-source framework
- an enterprise software-as-a-service solution
Let's take a look at each of these options in terms of ROI, level of effort, and delivery timeline.
ROI or "when am I getting my money back"?
Startup companies usually have small or modest budgets and are looking for affordable solutions meeting most of their requirements to be delivered as soon as possible. Time is money, runway is finite and getting traction fast lets them raise followup rounds. They cannot justify a lengthy delivery project of paying for very expensive enterprise solutions. They want an MVP fast and cheap.
Scaleup companies are able to invest a bit more because they are growing an existing business, they know what their customers want and what were the bottlenecks of the legacy solution. Having significant revenue they can justify a bigger delivery budget but cannot wait too long or risk a project failure.
Level of effort or "what's the probability of success"?
Enterprise marketplace solutions require lots of integration work because there is no all-in-one platform out there. So you'd need to hire an enterprise-level development team to put the pieces of the puzzle together. It might take between 4-6 months in a good year. Will it work as expected in the end? That depends on how much you trust the salespeople convincing you to sign on a dotted line and how much you actually check for yourself before you buy. Which is not easy because they don't let you.
Open-source development is like flying a low-cost airline with at family of five and a dog. It looks cheap but once you start using it the costs pile up. Of course, first you'd need to hire a competent team of developers with a good track record in similar projects. And they're not available for the next few quarters. So you pick whomever you can find. Then you're stuck with them because your solution is getting old and obsolete day by day since the moment you launch. If you can convince them to stay and keep taking your money.
Delivery timeline or "how much is it going to slip?"
How much risk of the project slipping are you willing to accept?
- for a project taking 2-3 months a 20% slip is measured in days
- for a project taking 4-6 months a 20% slip is measured in weeks
- for a project taking 6-12 months a 20% slip is measured in months
A Startup scenario
Calculating ROI for a Startup company over a 3 year period, Vendo wins hands down with open-source customization projects. Enterprise SaaS solutions aren't even an option for a Startup - there is no way a Startup is going to shell out $2-3M over a 3 year period for their marketplace platform.
Startups will evaluate open-source options as risky (long timelines, need developers) and explore more affordable, safer options such as Vendo SaaS.
A Scaleup scenario
In a Scaleup scenario ROI calculated over a 3 year period favors Vendo which is 10x more profitable than enterprise solutions and more than 3x profitable than open-source custom development.
It’s much cheaper and safer to buy Vendo instead of alternatives. Custom open-source development is time-consuming and costly ($1M/3yrs). Enterprise solutions are insanely expensive ($2-3M/3yrs) and require lots of integration work.
The winner is: Vendo
Vendo beats the alternatives in terms of ROI over a 3 year period, level of delivery effort, and time to launch.
