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This post was written by Phillip Jackson, Chief Commerce Officer, Rightpoint
There is an interesting new device that caught my attention last week. “The Helm” is a beautifully designed home computing appliance that acts as a personal secure server. This $199 device gives you private email, a secure VPN for browsing anonymity, and file storage.
Their key message: get off the cloud. The fact that consumers are becoming more aware that their personal lives and information are being managed by a handful of cloud providers means that there is a concentration of risk.
Interestingly enough, consumers aren’t the only ones considering a migration away from the cloud.
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SaaS runs the world … is it a problem?
VC’s infatuation with SaaS-based anything continues, and investors are willing to fund a wide range of SaaS companies. It’s understandable. SaaS companies provide predictable and recurring revenue, so investors have a good idea of the returns they’ll get from their investments. And outside of customer acquisition costs, adding new customers since the infrastructure is in place, a SaaS company can keep adding customers at an even lower cost.
They’re also capital efficient. “You can build a large, profitable business for less than $10m in funding,” as seed investment manager for Northzone, Sarah Nöckel explained to Sifted.
So it comes as no surprise that every sector has moved to the cloud, from healthcare and financial services to national security and national energy supply. What could possibly go wrong?
Concentration of risk
Full disclosure: I’ve spent most of my career in ecommerce, helping businesses build or optimize their sites on Shopify, Magento, BigCommerce and many other SaaS-based platforms. I recommend that our clients plug in other SaaS-based products to extend their functionality and to create immersive experiences for their customers. I can’t see myself changing course anytime soon. But I am beginning to wonder: are we taking on too much risk?
SolarWinds, a company that helps businesses manage their networks, systems, and information technology infrastructure, experienced a massive cyber attack, ultimately spreading to its clients via software update patches. The affected clients include some of the world’s largest companies and government agencies. The attack went undetected for months.
In early July, AltoIRA CEO Eric Satz took to Twitter to warn customers not to sign into their accounts as its site had been hacked (an attack that occurred just a few months after the company raised $17 million in series A funding).
In May, consumers were hit with escalating costs for gasoline, a result of a sudden and unexpected shortage of fuel. The culprit? A ransomware attack that shut down one of the nation’s largest pipelines.
But it’s not just bad actors that are the source of risk. This past June, the content delivery network Fastly experienced an outage, temporarily taking down the White House website, Reddit, and Shopify. DTC brands built on Shopify went dark for over an hour, leading to untold losses of revenue.
It’s time for us to admit that there’s a lot of risk in concentrating all of our data into these ubiquitous cloud services. Much of the economy relies on these monolithic cloud-based servicers, making it costly and painful when they go down. Don’t expect this problem to go away: the ubiquity of certain cloud-based companies make them irresistible targets for hackers. There’s too much upside for these nefarious players to get inside one of these monoliths, so they willingly spend every waking hour hacking away. It’s a shame, but it’s the reality we live in.
In defense of monolithic ecommerce platforms
No other sector benefited from turnkey cloud-based platforms than ecommerce. Platforms like Shopify, with its templated approach to building a website, enabled thousands of entrepreneurs to launch and grow their businesses very quickly. There’s no question Shopify, BigCommerce, WooCommerce, and others democratized entrepreneurialism in the retail space.
So it’s telling that 2PM, a media company that tracks direct to consumer brands, reported that one in four of the top 50 DTC brands are on custom platforms. This isn’t the “normal” progression. DTC brands typically stay on a well-known platform until they outgrow it, and yet, half of the DTC leaders are going custom, despite the monumental effort and expense that requires.
What’s the attraction? The compelling argument of a monolithic ecommerce platform is that of control. By removing Big SaaS from their infrastructure, brands aren’t subject to their attacks and outages.
In addition to the enhanced security, there’s something to be said for building an ecommerce site on a custom platform. Brands can set up their infrastructure and workflows in ways that make sense for their business model, customers and products. They can enhance their platforms on their own schedules, and never worry about platform sunsets (unless they chose to replatform for their own reasons).
Do the added security and flexibility outweigh the downsides of pulling the plug on Big SaaS, with their huge security teams and SLAs? This is a question I expect to be hotly debated in the press and in Board rooms over the next year or two, especially now that healthcare companies are adopting DTC models. Hacking retirement accounts and shutting down pipelines inflict a lot of pain on consumers, and it’s only a matter of time before they demand action from the regulators and Congress. SaaS enjoyed an upward trajectory over the past 22 years, but don’t be surprised to see customer preference go full circle.
As Chief Commerce Officer at Rightpoint, Phillip acts as head of Commerce strategy, partnerships, and evangelism. With over 15 years of experience creating unique online customer experiences, he has both built and managed ecommerce for some of the world’s most recognizable brands.
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