Demandware tco webinar final 12122012

1. Maximizing Commerce Investment: How to Avoid Hidden Technology Costs and Accelerate Growth Guest Speaker – Peter Sheldon, Forrester Research November 30, 2012 @peter_sheldon Copyright 2012 Demandware, Inc. - Confidential

2. Digital Commerce: The New Way to Web Powers world-class global ecommerce/ Empowers users to drive web businesses business growth Enables amazing branded consumer Is always on experiences Links devices, channels and applications into a cohesive consumer experience Copyright 2012 Demandware, Inc. - Confidential Copyright 2012 Demandware, Inc. - Confidential 2

3. Build It Plug into Yourself Demandware Host and manage Go global software Launch new brands Manage upgrades and channels Tinker with Create innovative infrastructure consumer experiences Stitch and glue Synchronize devices, integrations channels and apps Digital Commerce Options Copyright 2012 Demandware, Inc. - Confidential Copyright 2012 Demandware, Inc. - Confidential 3

5. Survey Objectives Forrester Consulting conducted a study of 156 US and European marketing and technology leaders during the summer of 2012 to: •Uncover most common challenges with ecommerce platforms •Determine detailed line-item capital and expense costs to maintain ecommerce platforms •Establish best practices for creating true total cost of ownership analysis Base: 156 eCommerce, marketing and IT technology leaders Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, September 2012 Copyright 2012 Demandware, Inc. - Confidential 5

6. Making Leaders Successful Every Day Maximizing Commerce Investment: How to Avoid Hidden Technology Costs and Accelerate Growth Peter Sheldon, Forrester Research @peter_sheldon November 30, 2012

7. Demographics Forrester surveyed 156 US, UK, and German based eCommerce, marketing, and IT leaders responsible for eCommerce technology decisions at their firms. “To which industry would you say that your “Which of the following most closely company belongs? ” describes the department you work in?” Branded Brand Manufactu Manufactu Marketing rer selling ring 6% direct 3% eBusiness/ Consumer 5% eCommerc Products e 9% 20% Information Retail Technology 83% 74% © 2012 Forrester Research, Inc. Reproduction Prohibited

8. Agenda Online retailers continue to invest in eCommerce technologies Supporting eCommerce technology does not come cheap Cloud solutions represent a viable alternative Building a realistic TCO model & using it correctly is imperative Recommendations © 2012 Forrester Research, Inc. Reproduction Prohibited 8

9. Across every industry sector, online channel share is growing.

10. By 2016, Forrester forecasts that online retail sales in the US will reach $327 billion © 2012 Forrester Research, Inc. Reproduction Prohibited Source: Forrester Research Online Retail Forecast, 2012 to 2016 (US) 10

12. Investment growth in eCommerce technologies continues in 2012 © 2012 Forrester Research, Inc. Reproduction Prohibited Source: May 2012 Global eBusiness & Channel Strategy Professional Online Survey 12

13. Today home-grown and licensed solutions dominate “Which of the following best describes the eCommerce solution your company currently uses for your B2C eCommerce channel?” Today, cloud-based solutions are 90% favored by smaller retailers ($50m - $100m online revenue) 80% 70% Home-grown solution developed and 60% managed in-house 50% Licensed on-premise solution from a software 40% vendor Open-Source 30% eCommerce solution 20% Cloud-based 10% eCommerce solution 0% $50M to $100M $100M to $250M $250M + Base: 156 US, UK and German eCommerce, marketing and IT technology leaders © 2012 Forrester Research, Inc. Reproduction Prohibited Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012 13

15. Consumers demand integrated, cross-channel brand experiences

16. Online retailers have ambitious global expansion plans

17. Mobile is no longer just about mobile

18. Confidence in existing solutions to support tomorrows online growth is alarmingly low “How would you describe the confidence level your organization has in the ability of your current eCommerce solution to support the future growth of your B2C channel over the next 5 years in respect to:” Order management requirements for order 14% 30% 48% consistency across channels Global expansion requirements 13% 31% 47% Adoption of new eCommerce features and 13% 34% 46% requirements The scalability of the platform to attain corporate 16% 31% 44% growth plans Multi-channel requirements to satisfy consumers' 20% 31% 41% needs Multi-brand expansion requirements 17% 31% 38% Speed to achieve new and fully integrated mobile 20% 41% 34% experiences Managing ongoing cost of ownership to maintain 18% 43% 27% and grow the business 1 (no concern) 2 3 4 5 (Immediate concern/requires change) Base: 156 US, UK and German eCommerce, marketing and IT technology leaders © 2012 Forrester Research, Inc. Reproduction Prohibited Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012 18

19. Consequently, 25% of online retailers plan to re-platform in the next two years “Which of the following best describes the timeline for replatforming your current eCommerce solution?” We have no current plans to re-platform 30% We expect to engage in selection process for re- 29% platforming in the next 2-4 years We expect to engage in selection process for re- 13% platforming within the next 2 years In the next year 12% We have recently started a selection process for re- 8% platforming We have recently selected a new platform, but it is 3% not yet implemented We have selected and implemented a new platform 3% within the last 2 years Don't know 1% Base: 156 US, UK and German eCommerce, marketing and IT technology leaders © 2012 Forrester Research, Inc. Reproduction Prohibited Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012 19

20. As they do so, they seek to align TCO with revenues & improve business agility “How important were the following during the development of your business case for a replacement eCommerce solution?” 5 (Very important factor) 4 (important factor) To align the cost of ownership against our online revenues 51% 37% To support our multichannel initiatives 51% 37% To support mobile and tablets users 45% 41% To improve business agility 58% 27% To reduce the opportunity risks of staying on a legacy or home- grown platform 44% 39% To reduce the technical and operational risks of supporting a legacy or home-grown platform 27% 54% To lower overall operational and ownership costs 56% 24% To increase the speed at which we can deploy new features and functionality 51% 29% To reduce our reliance on in-house IT staff and developers 41% 36% To support our global initiatives 40% 36% To gain access to an ecosystem of value-add solutions that we can leverage 40% 29% Base: 156 US, UK and German eCommerce, marketing and IT technology leaders © 2012 Forrester Research, Inc. Reproduction Prohibited Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012 20

22. The cost of supporting eCommerce tech varies significantly across online retailers “Using your best estimate, what percentage of your online revenue currently goes to supporting your eCommerce technology (software, hardware, maintenance, hosting, redundancy, upgrades, etc.)?” 35% 30% 25% < 1% 1-2% 20% 3-4% 4-5% 15% 5-6% 7-8% 10% 9-10% > 10% 5% 0% $50M to $100M $100M to $250M $250M + Base: 156 US, UK and German eCommerce, marketing and IT technology leaders © 2012 Forrester Research, Inc. Reproduction Prohibited Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012 22

23. Many rely on large technical resource teams to support their eCommerce site(s) “How many technical resources (infrastructure, application development, networking, etc.) are dedicated to supporting your eCommerce business?” $100M to $250M $250M+ $50M to $100M (online revenue) (online revenue) (online revenue) 3% 3% 1% 5% 8% 15% 20% 29% 36% 24% 13% 56% 53% 34% A third of large online retailers 1-5 5-10 10-25 25-50 50-75 75+ employ over 50 technical resources to support their Base: 156 US, UK and German eCommerce, marketing and IT technology leaders eCommerce sites(s) © 2012 Forrester Research, Inc. Reproduction Prohibited Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012 23

24. The fully loaded cost for of these resources is considerable “What is your average annual fully loaded cost for eCommerce technical resources” 50% 45% 40% < $100k 35% 30% $100k-$150k 25% 20% $150k-$200k 15% 10% $200k-$250k 5% > $250k 0% $50M to $100M $100M to $250M $250M + Base: 156 US, UK and German eCommerce, marketing and IT technology leaders © 2012 Forrester Research, Inc. Reproduction Prohibited Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012 24

25. The financial and opportunistic cost of upgrading on a regular basis is significant “How frequently would you say you upgrade your “How long does it typically take to upgrade licensed or open source eCommerce solution to the your eCommerce platform to the latest latest version available from the vendor?” version? *” Once per year 44% 1 to 2 months 53% Once every 2 years 36% 2 to 4 weeks 21% Every 6 months 10% 2 to 3 months 10% Every 3 months v 3% 6 to 9 months 6% Once every 3 years 3% 3 to 6 months 5% We have never upgraded our… 1% Less than 2 weeks 2% Don't know 1% Longer than 9 months 2% Fifty seven percent of online Don't know 0% retailers upgrade their eCommerce platform at least * (including requirements development , software development, once per year QA and release activities) Base: 156 US, UK and German eCommerce, marketing and IT technology leaders © 2012 Forrester Research, Inc. Reproduction Prohibited Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012 25

26. On-premise eCommerce platform owners pay additional licensing costs as they grow “Thinking about the contract you have in place with the vendor of your current licensed eCommerce solution, which of the following triggers would require you to purchase additional licenses?” Launching additional markets (e.g. new European 78% sites) Adding more business users (e.g. users of the 76% administration tools) Reaching a defined threshold of order volume 67% Launching additional sites (e.g. brands or micro- 54% sites) Reaching a defined threshold of concurrent visitor 49% volume Reaching a defined threshold of online revenue 39% Base: 156 US, UK and German eCommerce, marketing and IT technology leaders © 2012 Forrester Research, Inc. Reproduction Prohibited Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012 26

28. Today cloud-based eCommerce solutions vie head-to-head with on-premise platforms

29. Few online retailers are entirely new to cloud- based solutions “Do you currently use third-party (vendor) products to provide any of the following eCommerce related functions on your site” Web analytics 69% Email marketing 66% WCM 62% Mobile commerce 49% PIM 47% Rich media (rotating images, video etc) 44% Site product search 40% Customer ratings & reviews 37% Tax calculation 35% Order mgmt 35% Contact center support management solution 33% CRM 29% Guided product navigation 29% Live chat 26% Product recommendations 15% Base: 156 US, UK and German eCommerce, marketing and IT technology leaders © 2012 Forrester Research, Inc. Reproduction Prohibited Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012 29

30. And thus confidence in moving everything to the cloud is increasing “Which of the following types of eCommerce solution is/did your company considering/consider for inclusion in your selection process for a new eCommerce platform?” Home-grown solution developed and managed in-house 76% Licensed on-premise solution from a software vendor, managed and supported by a services provider or… 56% Open-Source eCommerce solution managed in-house 49% Licensed on-premise solution from a software vendor, managed in-house 49% Cloud-based eCommerce solution 41% Open-Source eCommerce solution, managed and supported by a services provider or vendor 41% Base: 156 US, UK and German eCommerce, marketing and IT technology leaders © 2012 Forrester Research, Inc. Reproduction Prohibited Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012 30

31. Although concerns about cloud-based solutions continue to linger “Thinking about cloud-based eCommerce platforms, why did you dismiss these during your selection process?” We were worried about long-term vendor lock-in with cloud 78% We were worried about scalability 72% The pricing of cloud solutions is complicated or didn't fit our business model 67% The migration to cloud based applications will be a lengthy and complex process 61% We were worried about integration with other applications 56% We were worried about security and privacy issues 56% We were worried that cloud solutions are not customizable 50% We perceive that cloud eCommerce solutions are not mature enough for our business 44% The costs of cloud are higher than with on- premise or build-in-house 39% Our TCO analysis did not favor cloud based solutions 22% Base: 156 US, UK and German eCommerce, marketing and IT technology leaders © 2012 Forrester Research, Inc. Reproduction Prohibited Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012 31

33. Few firms can acquire enterprise software without developing a business case and TCO model “Does your corporate sourcing/procurement group mandate either of the following for enterprise software purchases?” Yes, this is a mandatory part of our 72% formal procurement process 82% Investment business case No, we are able to procure 22% enterprise software without 13% 3-5 year total cost of ownership analysis Base: 156 US, UK and German eCommerce, marketing and IT technology leaders © 2012 Forrester Research, Inc. Reproduction Prohibited Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012 33

34. Unsurprisingly, the ROI from eCommerce technology investments is clear “Which of the following best describes the reality of the investment business case for your platform versus the predictions of your model?” The ROI has been significantly higher than our analysis predicted 34% The ROI has been in line with our analysis predications 31% The ROI has been higher than our analysis predicted 22% The ROI has been lower than our analysis predicted 9% The ROI has been significantly lower than our analysis predicted 1% We have never measured the ROI versus the analysis developed during selection 1% Base: 134 US eCommerce, marketing and IT technology leaders who developed a TCO model during their eCommerce solution evaluation © 2012 Forrester Research, Inc. Reproduction Prohibited Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012 34

35. But the actual TCO is often higher than online retailers had projected “Which of the following best describes the reality of owning and operating your platform versus the predictions of your total cost of ownership analysis?” The actual cost of ownership has been in line with our analysis predications 50% The actual cost of ownership has been higher than our analysis predicted 26% The actual cost of ownership has been significantly higher than our analysis 17% predicted The actual cost of ownership has been lower than our analysis predicted 3% We have never measured the real cost of ownership versus the analysis developed 1% during selection The actual cost of ownership has been significantly lower than our analysis predicted 1% Base: 134 US eCommerce, marketing and IT technology leaders who developed a TCO model during their eCommerce solution evaluation © 2012 Forrester Research, Inc. Reproduction Prohibited Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012 35

37. Base: 156 US, UK and German eCommerce, marketing and IT technology leaders Software licensing for OS's, RMDB's, app servers etc 52% 27% 19% 2% Software licensing for eCommerce platform 51% 34% 12%3% Hardware acquisitions 38% 38% 17% 5% Additional software licenses to support growth 28% 29% 22% 20% Initial costs Additional software license costs for deploying new commerce sites 27% 29% 38% 4% Facility upgrades 23% 30% 37% 8% Annual recurring/maintenance fees for OS's, RMDB's, app servers etc 47% 30% 18% 3% Annual disaster recovery 44% 33% 17% 4% Annual recurring/maintenance fees for eCommerce platform 42% 37% 17% 3% Annual data backups 42% 34% 18% 4% ongoing Annual Hardware repairs and replacement 42% 31% 22% 3% annual Annual ISP/bandwidth rental 42% 30% 22% 4% infrastructure and software Annual infrastructure and server upgrades 40% 37% 16% 6% costs Annual hardware leases 27% 30% 16% 26% Annual platform monitoring and support 26% 36% 36% 1% Annual power consumption 24% 33% 17% 24% IT support and development headcount training 29% 32% 19% 19% operations, Platform upgrades 28% 34% 17% 21% training and Ongoing development 25% 35% 32% 6% support costs Interoperability 39% 33% 21% 4% We already use in our Extensibility 37% 39% 15% 6% TCO analysis opportunity Critical Reliability and availability 28% 32% 34% 4% costs and Opportunity 26% 35% 35% 3% risk Nice to have Capacity 25% 37% 35% 1% mitigation Not important Security 23% 56% 16% 3% costs Scalability 21% 37% 20% 19% © 2012 Forrester Research, Inc. Reproduction Prohibited Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012

38. Agenda Online retailers continue to invest in eCommerce technologies Online retailers seek nimble, open & cost effective solutions Cloud solutions represent a viable alternative Building a realistic TCO model & using it correctly is imperative Recommendations © 2012 Forrester Research, Inc. Reproduction Prohibited 38

39. #1 Don’t get stuck in the CAPEX ditch

40. #2 Factor in the hidden costs

41. #3 Encourage cross-functional ownership of the TCO model

42. #4 Recognize that TCO is not always the be-all and end-all. Agility is key

43. Thank you PETER SHELDON psheldon@forrester.com blogs.forrester.com/peter_sheldon @peter_sheldon

44. Maximizing Commerce Investment: How to Avoid Hidden Technology Costs and Accelerate Growth Guest Speaker – Peter Sheldon, Forrester Research November 30, 2012 @peter_sheldon Copyright 2012 Demandware, Inc. - Confidential

45. Digital Commerce: The New Way to Web Powers world-class global ecommerce/ Empowers users to drive web businesses business growth Enables amazing branded consumer Is always on experiences Links devices, channels and applications into a cohesive consumer experience Copyright 2012 Demandware, Inc. - Confidential Copyright 2012 Demandware, Inc. - Confidential 2

46. Build It Plug into Yourself Demandware Host and manage Go global software Launch new brands Manage upgrades and channels Tinker with Create innovative infrastructure consumer experiences Stitch and glue Synchronize devices, integrations channels and apps Digital Commerce Options Copyright 2012 Demandware, Inc. - Confidential Copyright 2012 Demandware, Inc. - Confidential 3

48. Survey Objectives Forrester Consulting conducted a study of 156 US and European marketing and technology leaders during the summer of 2012 to: •Uncover most common challenges with ecommerce platforms •Determine detailed line-item capital and expense costs to maintain ecommerce platforms •Establish best practices for creating true total cost of ownership analysis Base: 156 eCommerce, marketing and IT technology leaders Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, September 2012 Copyright 2012 Demandware, Inc. - Confidential 5

49. Making Leaders Successful Every Day Maximizing Commerce Investment: How to Avoid Hidden Technology Costs and Accelerate Growth Peter Sheldon, Forrester Research @peter_sheldon November 30, 2012

50. Demographics Forrester surveyed 156 US, UK, and German based eCommerce, marketing, and IT leaders responsible for eCommerce technology decisions at their firms. “To which industry would you say that your “Which of the following most closely company belongs? ” describes the department you work in?” Branded Brand Manufactu Manufactu Marketing rer selling ring 6% direct 3% eBusiness/ Consumer 5% eCommerc Products e 9% 20% Information Retail Technology 83% 74% © 2012 Forrester Research, Inc. Reproduction Prohibited

52. Across every industry sector, online channel share is growing.

53. By 2016, Forrester forecasts that online retail sales in the US will reach $327 billion © 2012 Forrester Research, Inc. Reproduction Prohibited Source: Forrester Research Online Retail Forecast, 2012 to 2016 (US) 10

55. Investment growth in eCommerce technologies continues in 2012 © 2012 Forrester Research, Inc. Reproduction Prohibited Source: May 2012 Global eBusiness & Channel Strategy Professional Online Survey 12

56. Today home-grown and licensed solutions dominate “Which of the following best describes the eCommerce solution your company currently uses for your B2C eCommerce channel?” Today, cloud-based solutions are 90% favored by smaller retailers ($50m - $100m online revenue) 80% 70% Home-grown solution developed and 60% managed in-house 50% Licensed on-premise solution from a software 40% vendor Open-Source 30% eCommerce solution 20% Cloud-based 10% eCommerce solution 0% $50M to $100M $100M to $250M $250M + Base: 156 US, UK and German eCommerce, marketing and IT technology leaders © 2012 Forrester Research, Inc. Reproduction Prohibited Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012 13

58. Consumers demand integrated, cross-channel brand experiences

59. Online retailers have ambitious global expansion plans

60. Mobile is no longer just about mobile

61. Confidence in existing solutions to support tomorrows online growth is alarmingly low “How would you describe the confidence level your organization has in the ability of your current eCommerce solution to support the future growth of your B2C channel over the next 5 years in respect to:” Order management requirements for order 14% 30% 48% consistency across channels Global expansion requirements 13% 31% 47% Adoption of new eCommerce features and 13% 34% 46% requirements The scalability of the platform to attain corporate 16% 31% 44% growth plans Multi-channel requirements to satisfy consumers' 20% 31% 41% needs Multi-brand expansion requirements 17% 31% 38% Speed to achieve new and fully integrated mobile 20% 41% 34% experiences Managing ongoing cost of ownership to maintain 18% 43% 27% and grow the business 1 (no concern) 2 3 4 5 (Immediate concern/requires change) Base: 156 US, UK and German eCommerce, marketing and IT technology leaders © 2012 Forrester Research, Inc. Reproduction Prohibited Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012 18

62. Consequently, 25% of online retailers plan to re-platform in the next two years “Which of the following best describes the timeline for replatforming your current eCommerce solution?” We have no current plans to re-platform 30% We expect to engage in selection process for re- 29% platforming in the next 2-4 years We expect to engage in selection process for re- 13% platforming within the next 2 years In the next year 12% We have recently started a selection process for re- 8% platforming We have recently selected a new platform, but it is 3% not yet implemented We have selected and implemented a new platform 3% within the last 2 years Don't know 1% Base: 156 US, UK and German eCommerce, marketing and IT technology leaders © 2012 Forrester Research, Inc. Reproduction Prohibited Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012 19

63. As they do so, they seek to align TCO with revenues & improve business agility “How important were the following during the development of your business case for a replacement eCommerce solution?” 5 (Very important factor) 4 (important factor) To align the cost of ownership against our online revenues 51% 37% To support our multichannel initiatives 51% 37% To support mobile and tablets users 45% 41% To improve business agility 58% 27% To reduce the opportunity risks of staying on a legacy or home- grown platform 44% 39% To reduce the technical and operational risks of supporting a legacy or home-grown platform 27% 54% To lower overall operational and ownership costs 56% 24% To increase the speed at which we can deploy new features and functionality 51% 29% To reduce our reliance on in-house IT staff and developers 41% 36% To support our global initiatives 40% 36% To gain access to an ecosystem of value-add solutions that we can leverage 40% 29% Base: 156 US, UK and German eCommerce, marketing and IT technology leaders © 2012 Forrester Research, Inc. Reproduction Prohibited Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012 20

65. The cost of supporting eCommerce tech varies significantly across online retailers “Using your best estimate, what percentage of your online revenue currently goes to supporting your eCommerce technology (software, hardware, maintenance, hosting, redundancy, upgrades, etc.)?” 35% 30% 25% < 1% 1-2% 20% 3-4% 4-5% 15% 5-6% 7-8% 10% 9-10% > 10% 5% 0% $50M to $100M $100M to $250M $250M + Base: 156 US, UK and German eCommerce, marketing and IT technology leaders © 2012 Forrester Research, Inc. Reproduction Prohibited Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012 22

66. Many rely on large technical resource teams to support their eCommerce site(s) “How many technical resources (infrastructure, application development, networking, etc.) are dedicated to supporting your eCommerce business?” $100M to $250M $250M+ $50M to $100M (online revenue) (online revenue) (online revenue) 3% 3% 1% 5% 8% 15% 20% 29% 36% 24% 13% 56% 53% 34% A third of large online retailers 1-5 5-10 10-25 25-50 50-75 75+ employ over 50 technical resources to support their Base: 156 US, UK and German eCommerce, marketing and IT technology leaders eCommerce sites(s) © 2012 Forrester Research, Inc. Reproduction Prohibited Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012 23

67. The fully loaded cost for of these resources is considerable “What is your average annual fully loaded cost for eCommerce technical resources” 50% 45% 40% < $100k 35% 30% $100k-$150k 25% 20% $150k-$200k 15% 10% $200k-$250k 5% > $250k 0% $50M to $100M $100M to $250M $250M + Base: 156 US, UK and German eCommerce, marketing and IT technology leaders © 2012 Forrester Research, Inc. Reproduction Prohibited Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012 24

68. The financial and opportunistic cost of upgrading on a regular basis is significant “How frequently would you say you upgrade your “How long does it typically take to upgrade licensed or open source eCommerce solution to the your eCommerce platform to the latest latest version available from the vendor?” version? *” Once per year 44% 1 to 2 months 53% Once every 2 years 36% 2 to 4 weeks 21% Every 6 months 10% 2 to 3 months 10% Every 3 months v 3% 6 to 9 months 6% Once every 3 years 3% 3 to 6 months 5% We have never upgraded our… 1% Less than 2 weeks 2% Don't know 1% Longer than 9 months 2% Fifty seven percent of online Don't know 0% retailers upgrade their eCommerce platform at least * (including requirements development , software development, once per year QA and release activities) Base: 156 US, UK and German eCommerce, marketing and IT technology leaders © 2012 Forrester Research, Inc. Reproduction Prohibited Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012 25

69. On-premise eCommerce platform owners pay additional licensing costs as they grow “Thinking about the contract you have in place with the vendor of your current licensed eCommerce solution, which of the following triggers would require you to purchase additional licenses?” Launching additional markets (e.g. new European 78% sites) Adding more business users (e.g. users of the 76% administration tools) Reaching a defined threshold of order volume 67% Launching additional sites (e.g. brands or micro- 54% sites) Reaching a defined threshold of concurrent visitor 49% volume Reaching a defined threshold of online revenue 39% Base: 156 US, UK and German eCommerce, marketing and IT technology leaders © 2012 Forrester Research, Inc. Reproduction Prohibited Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012 26

71. Today cloud-based eCommerce solutions vie head-to-head with on-premise platforms

72. Few online retailers are entirely new to cloud- based solutions “Do you currently use third-party (vendor) products to provide any of the following eCommerce related functions on your site” Web analytics 69% Email marketing 66% WCM 62% Mobile commerce 49% PIM 47% Rich media (rotating images, video etc) 44% Site product search 40% Customer ratings & reviews 37% Tax calculation 35% Order mgmt 35% Contact center support management solution 33% CRM 29% Guided product navigation 29% Live chat 26% Product recommendations 15% Base: 156 US, UK and German eCommerce, marketing and IT technology leaders © 2012 Forrester Research, Inc. Reproduction Prohibited Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012 29

73. And thus confidence in moving everything to the cloud is increasing “Which of the following types of eCommerce solution is/did your company considering/consider for inclusion in your selection process for a new eCommerce platform?” Home-grown solution developed and managed in-house 76% Licensed on-premise solution from a software vendor, managed and supported by a services provider or… 56% Open-Source eCommerce solution managed in-house 49% Licensed on-premise solution from a software vendor, managed in-house 49% Cloud-based eCommerce solution 41% Open-Source eCommerce solution, managed and supported by a services provider or vendor 41% Base: 156 US, UK and German eCommerce, marketing and IT technology leaders © 2012 Forrester Research, Inc. Reproduction Prohibited Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012 30

74. Although concerns about cloud-based solutions continue to linger “Thinking about cloud-based eCommerce platforms, why did you dismiss these during your selection process?” We were worried about long-term vendor lock-in with cloud 78% We were worried about scalability 72% The pricing of cloud solutions is complicated or didn't fit our business model 67% The migration to cloud based applications will be a lengthy and complex process 61% We were worried about integration with other applications 56% We were worried about security and privacy issues 56% We were worried that cloud solutions are not customizable 50% We perceive that cloud eCommerce solutions are not mature enough for our business 44% The costs of cloud are higher than with on- premise or build-in-house 39% Our TCO analysis did not favor cloud based solutions 22% Base: 156 US, UK and German eCommerce, marketing and IT technology leaders © 2012 Forrester Research, Inc. Reproduction Prohibited Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012 31

76. Few firms can acquire enterprise software without developing a business case and TCO model “Does your corporate sourcing/procurement group mandate either of the following for enterprise software purchases?” Yes, this is a mandatory part of our 72% formal procurement process 82% Investment business case No, we are able to procure 22% enterprise software without 13% 3-5 year total cost of ownership analysis Base: 156 US, UK and German eCommerce, marketing and IT technology leaders © 2012 Forrester Research, Inc. Reproduction Prohibited Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012 33

77. Unsurprisingly, the ROI from eCommerce technology investments is clear “Which of the following best describes the reality of the investment business case for your platform versus the predictions of your model?” The ROI has been significantly higher than our analysis predicted 34% The ROI has been in line with our analysis predications 31% The ROI has been higher than our analysis predicted 22% The ROI has been lower than our analysis predicted 9% The ROI has been significantly lower than our analysis predicted 1% We have never measured the ROI versus the analysis developed during selection 1% Base: 134 US eCommerce, marketing and IT technology leaders who developed a TCO model during their eCommerce solution evaluation © 2012 Forrester Research, Inc. Reproduction Prohibited Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012 34

78. But the actual TCO is often higher than online retailers had projected “Which of the following best describes the reality of owning and operating your platform versus the predictions of your total cost of ownership analysis?” The actual cost of ownership has been in line with our analysis predications 50% The actual cost of ownership has been higher than our analysis predicted 26% The actual cost of ownership has been significantly higher than our analysis 17% predicted The actual cost of ownership has been lower than our analysis predicted 3% We have never measured the real cost of ownership versus the analysis developed 1% during selection The actual cost of ownership has been significantly lower than our analysis predicted 1% Base: 134 US eCommerce, marketing and IT technology leaders who developed a TCO model during their eCommerce solution evaluation © 2012 Forrester Research, Inc. Reproduction Prohibited Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012 35

80. Base: 156 US, UK and German eCommerce, marketing and IT technology leaders Software licensing for OS's, RMDB's, app servers etc 52% 27% 19% 2% Software licensing for eCommerce platform 51% 34% 12%3% Hardware acquisitions 38% 38% 17% 5% Additional software licenses to support growth 28% 29% 22% 20% Initial costs Additional software license costs for deploying new commerce sites 27% 29% 38% 4% Facility upgrades 23% 30% 37% 8% Annual recurring/maintenance fees for OS's, RMDB's, app servers etc 47% 30% 18% 3% Annual disaster recovery 44% 33% 17% 4% Annual recurring/maintenance fees for eCommerce platform 42% 37% 17% 3% Annual data backups 42% 34% 18% 4% ongoing Annual Hardware repairs and replacement 42% 31% 22% 3% annual Annual ISP/bandwidth rental 42% 30% 22% 4% infrastructure and software Annual infrastructure and server upgrades 40% 37% 16% 6% costs Annual hardware leases 27% 30% 16% 26% Annual platform monitoring and support 26% 36% 36% 1% Annual power consumption 24% 33% 17% 24% IT support and development headcount training 29% 32% 19% 19% operations, Platform upgrades 28% 34% 17% 21% training and Ongoing development 25% 35% 32% 6% support costs Interoperability 39% 33% 21% 4% We already use in our Extensibility 37% 39% 15% 6% TCO analysis opportunity Critical Reliability and availability 28% 32% 34% 4% costs and Opportunity 26% 35% 35% 3% risk Nice to have Capacity 25% 37% 35% 1% mitigation Not important Security 23% 56% 16% 3% costs Scalability 21% 37% 20% 19% © 2012 Forrester Research, Inc. Reproduction Prohibited Source: A commissioned study conducted by Forrester Consulting on behalf of Demandware, Inc September 2012

81. Agenda Online retailers continue to invest in eCommerce technologies Online retailers seek nimble, open & cost effective solutions Cloud solutions represent a viable alternative Building a realistic TCO model & using it correctly is imperative Recommendations © 2012 Forrester Research, Inc. Reproduction Prohibited 38

82. #1 Don’t get stuck in the CAPEX ditch

83. #2 Factor in the hidden costs

84. #3 Encourage cross-functional ownership of the TCO model

85. #4 Recognize that TCO is not always the be-all and end-all. Agility is key

86. Thank you PETER SHELDON psheldon@forrester.com blogs.forrester.com/peter_sheldon @peter_sheldon

Demandware tco webinar final 12122012

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