Hosted vs. Licensed Shopping Cart Software – which is better for your online store?

By Jordan Foutz, eCom expert of
October 22, 2012

In the realm of eCommerce software there are two basic options to decide between: lease a hosted solution or purchase the licensed version. For those that don’t know, licensed shopping cart users pay a one-time fee to “license” the software and then install it on a web server so they can run their store.  With hosted solutions, the online merchant pays a monthly fee for both the software and the hosting environment it resides in. Every business is unique in its needs so our goal to help you decide which version is better for your online store.

There are positives and negatives to both solutions; today we’re going to look at both to help you better understand what solution works best for you.

First let’s look at the advantages a licensed solution provides.

Licensed Benefits:

  • You control the hosting environment so you can customize your cart as necessary.
  • You can choose when and how to keep updated with current applications and code.
  • It is more portable and can be moved to hosting companies of your choice.

Licensed Drawbacks:

  • You are responsible for the hosting environment. This can be a good thing or a bad thing depending on your level of technical expertise or the level of expertise of the hosting company you select. But generally speaking, you are responsible for technical aspects of your store.
  • Licensed software typically has a higher start-up cost than hosted does.  This may not be the best for those just starting out but when you look at the big picture, it has a much better overall value as your only paying for the software once and will continue to use it for year.

Hosted shopping cart packages give you the following benefits:

  • Reputable ecommerce solution providers will provide you a PCI compliant hosting environment, free of charge.
    DO NOT consider any solution that isn’t PCI compliant.
  • If you are trying to reduce costs during your first year of business, the overall costs of a hosted solution are less than the one-time fees of licensed software.
  • Everything is included in a hosted set-up as the site and shopping cart are bundled together under one server.  From email hosting to customer support, you’re covered.  That means less troubleshooting for you!

Hosted shopping cart packages give you the following drawbacks:

  • You do not have much control over the design of your store front.
  • Generally speaking, you are very limited on the amount of customizations you can make to the feature set. Most hosted solutions update the software globally which can wipe out any code changes you make.
  • Your business is tied into the offerings of the ecommerce provider you select. As your business grows you will need additional server space, bandwidth and more.  You selected provider will control these costs and you’ll have to pay the fees they charge.
  • Over time, hosted solutions never stop charging their monthly fees (and transaction fees, where applicable).  To get out of monthly fees, you will need to upgrade to a licensed solution.

Both solutions have their advantages and disadvantages. Hosted eCommerce (sometimes called SaaS) are a fantastic way to start an ecommerce store. The cost of start-up is much lower, when compared to licensed solutions, and most of the technical aspects of the store are managed by the provider, allowing you to spend your time on the things that matter most, like making money.  Licensed solutions provide greater freedom and flexibility, which you’ll need as business grows.

Choosing between licensed and hosted eCom software will depend on you business needs… but there may be a 3rd option!

So what should you do?

My suggestion is to use an eCommerce solution that can offer you both. Selecting a company that offers both hosted and licensed provides your business the maximum flexibility and allows your business to grow without constraint or limitations. While it’s true that most shopping cart companies fall on only offer one type of solution, either hosted or licensed, if you do your research (or use a site like, which does it for you ) you’ll find a couple of companies that offer both, such as Pinnacle Cart and CoreCommerce.

Remember this is a fundamental decision that could dramatically affect the outcome of your business for years to come. Make sure you plant your business in soil that will allow it to germinate and flourish and help you achieve the success and lifestyle you seek.


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