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Jan 14, 2021 | 7 min read
TCO(total cost of ownership) for Magento community and Magento enterprise edition
1. QuickRead
Do you plan to create an online presence or just want to migrate to a new platform like Magento? There are many things to keep in mind when launching an online business. However, the Magento cost is one of the crucial aspects for store owners.
How much will it cost to start selling on Magento? That’s one of the most common questions our clients ask. At OSC, we have cooperated with e-commerce owners of different sizes to create advanced e-commerce solutions.
In this article, we’re going to explain what TCO is, detail the cost of running a Magento e-commerce store, and try to help you estimate the Magento Commerce and Open Source Total Cost Of Ownership (TCO). The information here will help you to assess your budget effectively and avoid any surprises in the process.
2. Understanding Different Magento Editions
You can select between three platform versions for developing an e-commerce store: Magento Open Source, Magento Commerce, or Magento Commerce Cloud.
Magento Open Source (former Magento Community) is a free e-commerce solution you can download and access the program code. It’s also open for editing to third-party developers. Due to its restricted functionality, no support, limited scalability, Magento Open Source is a good option for start-ups and small businesses interested in setting up a store fast and with minimal upfront costs.
Magento Commerce Edition (former Magento Enterprise Edition) comes up with advanced features that are not provided by Magento Open Source, and high scalability. It also delivers technical support with configurations and troubleshooting to guarantee that everything operates smoothly. If you need more customized features, flexible scalability, and advanced features, you should go for Magento Commerce.
Magento Commerce Cloud (former Magento Enterprise Cloud) is a cloud-based e-commerce solution that supports all Magento Commerce features and is run on Amazon Web Services (AWS) with some added features. If you are looking for an advanced solution with unmatched functionality, 24/7 support, easy customization, and a hosting solution, consider using Magento Cloud.
Magento Commerce and Commerce Cloud are used by large companies and enterprises with huge website traffic volumes. The cost of running a store on these two editions depends on GMV (gross merchandise value).
To discover more about the main differences between Magento 2 Commerce vs Open Source vs Commerce Cloud check out our recent Magento editions comparison.
3. What Is TCO and How To Assess It?
Now that you know the difference between these three editions, the next question is: what does the TCO mean and how do you calculate it?
TCO (Total Cost of Ownership) is the term used to determine the direct and indirect costs of purchasing and bringing technology in-house. The Total Cost of Ownership includes much more than just the cost of developing the e-commerce store and includes expenses such as:
- License
- Hosting
- Extensions
- Third-party Services
- Maintenance and Support
- Features Development
- Platform Upgrades
- and more
Evaluating the total cost of ownership is aimed to avoid hidden costs by looking at what the product is and its value over time. The most popular way to calculate the TCO is to divide costs into capital expenses (CAPEX) and operating expenses (OPEX). Capital expenditure is the initial cost and operating expenses are ongoing costs for running a product or a system.
For many merchants, it is clear that a large part of their budget will be covered by the initial costs of the e-commerce website development. What they tend to overlook is how much the store maintenance would cost, once it has been launched.
4. How much does Magento Store Cost?
It can be quite challenging to make comparisons of TCO figures across various e-commerce solutions. Many startups expect Open Source to offer the lowest TCO. Of course, at first glance, Magento Open Source seems to be a comparatively cheap solution, since there is no licensing fee, in comparison to Magento Commerce.
However, the development costs for an e-commerce store on Magento Open Source could go up. For instance, you install some third-party extensions with additional functionality, which comes as a standard feature in Magento Commerce.
Not to mention extra costs for coding, support, maintenance, and hosting. For the most part, Magento Open Source is actually more expensive than a packaged solution. Let’s dig into it.
License
Magento Open Source is free of charge. Magento Commerce license cost starts from $22,000 annually and depends on gross sales revenue. $22,000 is a starting price per year even if you don’t have revenue.
For instance, if you get $5 million in revenue annually, the license will cost $25,000 in a year. The cost is nothing compared to the out-the-box-feature and advanced functionality that Magento Commerce provides to its customers.
Magento 2 Commerce Cloud starts from $40,000 per year and is also based on gross sales revenue.
Hosting
Before developing your online store, it’s crucial to decide whether to manage your infrastructure on your own (on-premise) or let a third party manage (cloud-based) it for you.
On-premises service (“on-prem”) is a type of service delivery model that is installed and managed from a customer’s in-house server and computing infrastructure. Most small businesses don’t have on-premises infrastructure as it can be quite costly to scale and manage.
In Magento Open Source, the price for hosting ranges from vendor to vendor and depends on the type of hosting. Costs of unmanaged hosting start from $20 to $300 monthly and from $200 to $1,000 for dedicated servers.
The Magento Commerce Cloud version is hosted on AWS (Amazon Web Service). Actually, many large companies decide to maintain their e-commerce platforms in the cloud. With the cloud solution, you can scale your service up and down smoothly with minimal upfront costs.To learn more about the features and benefits of Magento Cloud, check out our article here.
Development and Design
To launch a user-friendly online store, you will need to hire professional Magento front and back developers, designers, project managers, and SEO experts. Design and development could cost you anywhere between $10,000 to $200,000+ based on your business requirements. The more customizations you implement, the more it will cost you. You pay for a superior user experience that will result in boosting your sales.
Getting started with Magento Open Source can be a daunting task for your IT team, as it requires a profound knowledge of Magento development and wide expertise. Your development team should keep the code up to date and perform day to day maintenance tasks. So, be sure to hire a certified Magento Partner Agency.
On the other side, Magento Commerce includes unmatched functionality out of the box. It’s much easier and faster to start selling online and spend less money on maintenance and updates.
Maintenance and Support
Maintenance and support of the store help to evade potential problems that occur during the course of daily operation. Maintenance typically involves the integration of security patches, updates, technical fixes, design refreshing, and more.
Support is crucial when you face questions regarding your code. With Magento Open Source, you can ask the advice of a community of developers, however, you need to support your store by yourself. You can hire a development team who can provide maintenance and support packages. How much does it cost to maintain an e-commerce website? The cost of Magento support and maintenance varies from $1,000 to $10,000 per month.
Magento Commerce offers the merchants technical support 24/7 to address issues instantly and eliminate hard and soft downtime. When your online store is down, your retail business is losing revenue.
If you want to find out how to achieve zero-downtime deployment with Magento, feel free to read our blog post.
5. Magento Open Source vs Commerce Total Cost of Ownership
The table below shows a Magento 2 Commerce vs Open Source TCO comparison.
| Monthly Cost | Magento Open Source | Magento Commerce |
| Platform Subscription | Nonexistent | Higher |
| Development | Higher | Lower |
| Maintenance | Higher | Lower (especially on the cloud) |
| Support | Higher | Lower |
| Infrastructure | Higher | Lower (especially on the cloud) |
If you want to find out all the costs involved in launching and maintaining e-commerce websites, you will find our e-commerce Development Cost article useful.
6. Website Development: In-house vs Agency
There are some strong arguments regarding developing and maintaining your Magento store in-house. With an in-house development team, you can control the process every day. If you decide to change something or detect a bug in the code, your in-house team can act on it immediately. You can also evade paying agency fees.
Magento has a complex architecture that demands decent programming skills and profound knowledge of its features and functionality. For a fully operational store, you should team up with front/back developers with excellent CSS and HTML skills, JavaScript, PHP, MySQL knowledge.
Your in-house team also needs to know how to set up servers, implement payment gateways, and product information management (PIM) systems, integrate third-party extensions or develop custom ones, and more. Thus, you need to be skilled enough to interview candidates for your e-commerce project. It can be quite expensive overall.
This is where the agency model has more advantages. The development agency has already hired the certified developers, established the process, and faced the challenges you’re likely to run into. They have experience and expertise, so it’s more likely that the development team finishes your project on time, creating an effective search engine and conversion rate optimization plan and other marketing strategies when the site goes live.
After project completion, the agency can continue to maintain and support your Magento store and install the latest security patches, develop new functionality, and everything in between. Of course, it’ll cost a little more, however, it’s your long-term investment.
Looking at agency prices, you might find various hourly rates. According to Clutch, the average rate per hour for Magento developers ranges from $50 to $250. North American Magento specialists have the highest prices ($150-250), followed by Western European ($100-200), and South American and Eastern European ($50-100) developers. The cheapest rate per hour is in Southeast Asia ($10-20).
OSC offers a full range of Magento development services, so drop us an email if you need an in-depth quote on your project or help in developing e-commerce stores. We never compromise the quality while providing Magento services at an affordable price.
