B2B
Blog

B2B Integration Costs: How to Reduce Commerce TCO

27 September 2024

Business-to-business integration is the process of digitally connecting the systems of a business with those of its trading partners to automate data and information exchange. This integration streamlines supply chain operations, improves collaboration, and minimizes human errors. The two most popular B2B integration methods are application programming interfaces (APIs) and electronic data interchange (EDI). 

Many businesses focus on upfront costs such as the purchase price, subscription, or licensing fees when budgeting for B2B integration solutions. But over time, they realize that the total cost of ownership (TCO) of these solutions extends far beyond initial expenditure.  

Here’s everything you need to know about TCO in B2B integration, including why it matters, and more importantly, what you can do to reduce it. 

Read on to learn: 

What Is the Total Cost of Ownership in B2B Integration?

In B2B commerce, total cost of ownership (TCO) describes the costs of acquiring, implementing, and maintaining B2B integration solutions throughout their entire lifecycle.

A significant portion of TCO consists of hidden costs that many businesses overlook. Yet, these can substantially impact their operations and bottom line.

These costs include:

  • Data migration costs: The expenses for transferring existing data to a new system.
  • Software configuration or customization: The cost of adjusting the integration software to fit your specific workflows or business processes.
  • Staff training and onboarding: The cost of training employees to use new systems effectively.
  • Security updates or patches: Ongoing expenses for updates or patches to address security vulnerabilities.
  • Software maintenance costs: The expenses for ongoing support and upkeep to ensure the integration system functions optimally.
  • Customer support: The cost of resolving or troubleshooting issues that customers face.
  • Data center costs: The cost of hosting integration IT infrastructure at a data center, including floor rack space, power, and cooling.
  • Future scaling costs: Expenses related to expanding the B2B integration system as your business grows.
  • Lost sales due to downtime: Potential revenue losses due to integration failures or outages.
    Identifying the above expenses which make up B2B TCO and finding ways to reduce them is critical for companies seeking to optimize their integration strategy and ensure long-term financial stability.

Why Does TCO Matter in B2B Integration?

TCO in B2B integration can affect your profitability, competitive position in the market, and even your day to day operations. Here’s a breakdown of the consequences of a high B2B integration TCO.

Consequences of a High TCO

  • Low profit margins: The expenses associated with operating or maintaining B2B integration systems can eat into your revenues, leaving you with less profit.
  • Low operational efficiency: High TCOs often mean that less budget is available for process improvements and operational optimization. When too much of your financial resources are tied up in running or maintaining integration systems, it hinders your ability to invest in enhancements that drive efficiency and productivity across your organization.

  • Competitive disadvantage: High TCOs often means higher prices for customers (to make up for the high operational expenses) or reduced investments in critical areas like marketing, innovation, and customer service. This can make your business less competitive in your market, particularly against rivals with leaner operations, better customer experience, or more efficient cost structures.
  • Limited innovation: High TCOs can stifle innovation by consuming the budget that could otherwise be invested in research and development or adopting new technologies. This may lead to a stagnation in product offerings and services, reducing your company’s appeal in the marketplace.
  • Challenges in scaling: Integration systems with high TCOs can become a barrier to scaling business operations efficiently. Expanding such systems may require disproportionately high investments, making it difficult to scale up without a significant increase in costs.
  • Poor decision making: Without a clear understanding of the total costs involved, decision-makers in your organization might lack the necessary data to evaluate the return on investment (ROI) accurately. This can lead to poor strategic decisions, like investing in the wrong technologies, entering into unfavorable vendor contracts, or scaling the integration prematurely.

How to Reduce TCO in B2B Integrations

1. Invest in Automation Tools

Automation streamlines manual and repetitive tasks within B2B integrations, thereby decreasing labor costs and minimizing the likelihood of errors which can otherwise lead to expensive corrections and operational delays.

For instance, automation tools can also handle routine maintenance tasks, like software updates and data backups, decreasing the need for dedicated IT resources or staff. This can translate to a lower TCO in B2B integrations.

2. Invest in Cloud Solutions

Cloud services eliminate the need for on-premises IT infrastructure, which requires substantial upfront investment and ongoing maintenance.

Cloud platforms are also scalable, allowing you to easily adjust your integration capabilities as your needs change. This flexibility removes the need for costly upgrades or overhauls of physical infrastructure. Some cloud solutions also offer pay-as-you-go options, which means you only pay for what you use.

What’s more, many service providers offer built-in features such as automatic updates and security patches. These extra features reduce the need for extensive in-house IT support and maintenance, reducing the TCO of B2B integrations.

3. Plan for Scalability

When selecting B2B integration solutions, consider how well they can scale with your business.

Scalable systems are those that can accommodate increasing transaction volumes, additional data sources, and expanding partner networks without requiring a complete overhaul.

Invest in B2B integration providers or solutions that support modular upgrades or incremental expansion. This will help you lower the costs of completely replacing systems as your needs evolve.

A scalable B2B integration system can also help you adapt more quickly to changing marketing conditions.

4. Stay Updated on Current Technology Trends

Technology evolves rapidly, and if you fail to keep pace, you may find yourself still relying on outdated systems that are costly to maintain, difficult to integrate, or prone to security vulnerabilities. Staying current with technology trends and advancements enables you to proactively replace or upgrade obsolete systems before they turn into financial liabilities.

What’s more, new and emerging technologies — like artificial intelligence (AI) and machine learning — present opportunities to optimize B2B integration processes. For example, AI-powered analytics can provide deeper insights into integration performance and help identify areas for efficiency improvement, which can ultimately lower your operating costs, reducing the TCO of B2B integrations.

5. Consolidate Suppliers

Consolidating suppliers means reducing the number of suppliers you work with, focusing on those that offer the best value and reliability.

Fewer suppliers mean fewer points of integration, which simplifies the technical and operational aspects of B2B integration. More specifically, this streamlining reduces the time and financial resources required to manage integrations, including setup, monitoring, and troubleshooting. The ultimate outcome is a lower B2B integration TCO.

Final Thoughts: Reducing TCO in B2B Integration

Managing the TCO of B2B integration is crucial for maintaining your business’s financial health. As we’ve seen, there are several methods of TCO reduction. Some of the top options are investing in automation tools and cloud solutions, consolidating suppliers, and future-proofing integration solutions for scalability.

Additionally, choosing a B2B ecommerce solution that integrates seamlessly with your ERP system can further enhance internal efficiency, ensuring that data flows smoothly between your systems. This internal streamlining can in turn support external B2B integrations, lower costs, and improve overall business performance.

k-ecommerce provides such an ecommerce solution, with features designed to enhance organizational efficiency and lower costs.

Schedule a demo today to learn more.