A hosted shopping cart versus an installed shopping cart, it’s an age old question and one that can determine the long term fate of your online business.

This might seem to be an extreme position for what some would consider a minor technicality. After all, what difference does it make whether you buy and install a stand alone piece of shopping cart software or if you “rent” your system and use hosted shopping cart software?

The products are the same, the people running the online business are the same so shouldn’t you simply shop for the cheapest cart software and then worry about marketing and sales instead of the software concerns to the techno-geeks? In the past, the answer to this would have been a resounding yes.

But Times Have Changed.

And if you don’t change with the times, you’re going to be left behind with an obsolete system and either be out of business or finding that you need to convert your entire business at some point in the future to an up to date system.

To get a better grasp of what I’m trying to get across to you, I want you to remember back to the year 2000 or before. Before 2000, if you wanted to have an auto responder system, you simply found the best auto responder software and installed it on your PC and started sending thousands or even millions of emails.

But times changed, the Can Spam laws took effect and the ISPs started adding filtering systems that effectively shut down the entire “auto responder on a PC business” and the accompanying software industry that supported this business.

In its place sprouted hosted auto responder companies. These auto responder companies built their businesses on a hosted platform and then “rented” their service to other businesses that desired an auto responder service. Hosted auto responder businesses like Aweber, Mail Chimp, Constant Contact, Get Response etc. were able to do what the stand alone auto responder software could not do…actually deliver emails.

So now you essentially have 2 basic choices in auto responders, stand alone systems that do not work, and hosted systems that do work.

And this is where the hosted shopping cart industry is headed. There will be hosted shopping cart systems that work and the stand alone systems that do not work.

And this is going to occur for one single reason – PCI.

PCI is basically the credit card industry regulations that dictate how online businesses will configure their websites for online eCommerce and credit card acceptance. In a nutshell, PCI dictates that you have separate physical hardware for your shopping cart, your credit card processing, and your credit card storage (necessary if you do any type of recurring billing or trial periods).

To have separate hardware, you’re basically talking about 3 separate servers for 1 online shopping cart application. Simply uploading some software to a shared hosting solution is obviously not going to put you in a position of PCI compliance for the obvious reasons of a single piece of hardware for the entire application. And the fact you’re “sharing” a server with hundreds of others is a 2nd obvious problem and should be a major concern to you even without the PCI rules in effect.

Severe Financial Penalties

So you’re not PCI compliant…so what? You’ve been operating for years with your current software and your credit card company has never said a word. Why then would you ever consider the pain and additional expense of moving to a hosted shopping cart?

As long as you don’t have a problem you’re probably never going to be found if you’re a small business flying under the radar. But this is a lot like driving a car naked through New York city with no insurance. As long as you never get into an accident, nobody will ever know but if you do get into a little fender bender, you’re going to feel awfully exposed both personally and financially

PCI violations can be as much as $10,000 per incident so if you have 10 identities stolen from your online shopping cart you could face a fine of up to $100,000 and lose your ability to process credit cards in the future. For all practical purposes, you’ll be broke and out of business.

Other Benefits of a Hosted Shopping Cart

Besides the extra security and PCI compliance afforded to you by a hosted shopping cart system, you’ll also typically receive these benefits:

  • Free Software Upgrades – As their software gets better, you automatically benefit.
  • Free Maintenance – The browser wars mean that what works today may not work tomorrow so you need to have constant maintenance to ensure complete browser compatibility.
  • Complete Feature Set – Hosted shopping carts are typically much more complete with all applications needed under one software umbrella.
  • Powerful Up Sell Functions – Maximizing your revenue per customer is a “must do” item to stay in business and profit in this competitive environment.
  • Free Support – If a system does not have free and unlimited support then avoid it like the plague. Too many companies put out a non-friendly user interface and then charge you for a “support” call when you cannot figure it out.

With all the risks associated with an installed shopping cart and the obvious advantages of a hosted shopping cart, the industry shift is inevitable and coming faster as the PCI deadline of June 2010 approaches. Is your business ready for the new era?

By lita

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