E-Commerce: The Second Wave Fifth Annual Edition

1
E-Commerce The Second WaveFifth Annual Edition

• Chapter 12
• Planning for Electronic Commerce

2
Objectives

• In this chapter, you will learn about
• Planning electronic commerce initiatives
• Strategies for developing electronic commerce Web
  sites
• Managing electronic commerce implementations

3
Planning Electronic Commerce Initiatives

• Objectives of electronic commerce
• Increasing sales in existing markets
• Opening new markets
• Serving existing customers better
• Identifying new vendors
• Coordinating more efficiently with existing
  vendors
• Recruiting employees more effectively

4
Linking Objectives to Business Strategies

• Downstream strategies
• Used to improve the value that the business
  provides to its customers
• Upstream strategies
• Focus on reducing costs or generating value
• Work with suppliers or inbound shipping and
  freight service providers

5
Linking Objectives to Business Strategies
(Continued)

• Electronic commerce opportunities can inspire
  businesses to undertake activities such as
• Building brands
• Enhancing existing marketing programs
• Selling products and services
• Selling advertising
• Developing a better understanding of customer
  needs

6
Measuring Benefits

• Tangible benefits of electronic commerce
  initiatives
• Increased sales
• Reduced costs
• Intangible benefits of electronic commerce
  initiatives
• Increased customer satisfaction

7
Measuring the Benefits of Electronic Commerce
Initiatives
8
Managing Costs

• Total cost of ownership
• Includes costs of hardware, software, design work
  outsourced, and salaries
• Change management
• Process of helping employees cope with changes
• Opportunity costs
• Lost benefits from an action not taken

9
Web Site Costs

• International Data Corporation and Gartner, Inc.
• Cost for large company to build and implement
  entry-level electronic commerce site is about 1
  million
• 79 percent of cost is labor related
• 10 percent is the cost of software
• 11 percent is the cost of hardware

10
Starting a Web Business Three Price Tags
11
Web Site Costs (Continued)

• Experts agree that annual cost to maintain and
  improve site will be
• 50 and 200 percent of initial cost
• McKinsey Company study
• Full portal site cost estimate was 2.4 million
  to build and 4.3 million per year to maintain
• Companion site cost estimate was 150,000 to
  build and 270,000 per year to maintain

12
Cost Estimates for Building and Operating
Magazine Publisher Web Sites
13
Cost Estimates for Building and Operating
Magazine Publisher Web Sites (Continued)
14
Comparing Benefits to Costs

• Capital projects (Capital investments)
• Major investments in equipment, personnel, and
  other assets
• Key part of creating business plan for electronic
  commerce initiatives
• Identifying potential benefits
• Identifying costs required to generate benefits
• Evaluating whether benefits exceed costs

15
Cost/benefit Evaluation of Electronic Commerce
Strategy Elements
16
Return on Investment (ROI)

• Techniques provide a quantitative expression of a
  comfortable benefit-to-cost margin
• Built-in biases that can lead managers to make
  poor decisions
• ROI requires that all costs and benefits be
  stated in dollars
• Focus is on benefits that can be predicted
• Tends to emphasize short-run benefits over
  long-run benefits

17
Strategies for Developing Electronic Commerce Web
Sites

• Typical early Web site
• Static brochure not updated frequently
• Seldom had any capabilities for helping the
  companys customers
• Todays Web site includes
• Transaction-processing tools
• Automated homes for business processes of all
  kinds

18
Increasing Complexity of Web Site Functions
19
Internal Development vs. Outsourcing

• Outsourcing
• Hiring another company to provide outside support
  for all or part of a project
• Internal team
• Should include people with enough knowledge about
  the Internet and its technologies
• Should be creative thinkers
• Measuring achievements of internal team is very
  important

20
Early Outsourcing

• Outsource initial site design and development to
  launch project quickly
• Outsourcing team trains companys information
  systems professionals in the new technology
• It is best to have
• Companys own information systems people working
  closely with outsourcing team

21
Late Outsourcing

• Information systems professionals
• Do initial design and development work
• Implement system
• Operate system until it becomes a stable part of
  business operation
• Once company has gained competitive advantage
• Maintenance of electronic commerce system can be
  outsourced

22
Partial Outsourcing

• Company identifies specific portions of the
  project that can be completely
• Designed, developed, implemented, and operated by
  another firm
• Many smaller Web sites
• Outsource their e-mail handling and response
  functions

23
Selecting a Hosting Service

• Factors to evaluate when selecting a hosting
  service
• Functionality
• Reliability
• Bandwidth and server scalability
• Security
• Backup and disaster recovery
• Cost

24
New Methods for Implementing Partial Outsourcing

• Incubators
• Company that offers start-up companies a physical
  location with
• Offices, accounting and legal assistance
• Computers, and Internet connections
• Receive ownership interest in company

25
New Methods for Implementing Partial Outsourcing
(Continued)

• Fast venturing
• Existing company that wants to launch an
  electronic commerce initiative joins external
  equity partners and operational partners
• Equity partners
• Banks or venture capitalists
• Operational partners
• Firms that have experience in moving projects
  along and scaling up prototypes

26
Elements of Fast Venturing
27
Managing Electronic Commerce Implementations

• Project management
• Formal techniques for planning and controlling
  activities undertaken to achieve a specific goal
• Project plan
• Includes criteria for cost, schedule, and
  performance
• Project management software products
• Microsoft Project
• Primavera Project Planner

28
Tracking Activities in Primavera Project Planner
29
Project Portfolio Management

• Each project is monitored as if it were an
  investment in a financial portfolio
• Chief Information Officer
• Records projects in a list
• Updates list with current information about each
  projects status
• Assigns ranking for each project based on
  importance and level of risk

30
Staffing for Electronic Commerce

• General areas of staffing
• Business managers
• Project managers
• Account managers
• Applications specialists
• Web programmers
• Web graphics designers
• Customer service
• Systems administration

31
General Areas of Staffing

• Business manager
• Should be member of internal team that sets
  objectives for project
• Project manager
• Person with specific training or skills in
• Tracking costs and accomplishment of specific
  objectives
• Account manager
• Keeps track of multiple Web sites in use by a
  project

32
General Areas of Staffing (Continued)

• Applications specialists
• Maintain accounting, human resources, and
  logistics software
• Web programmers
• Design and write underlying code for dynamic
  database-driven Web pages has increased
• Web graphics designer
• Person trained in art, layout, and composition
• Understands how Web pages are constructed

33
General Areas of Staffing (Continued)

• Customer service personnel
• Help design and implement customer relationship
  management activities
• Call center
• Company that handles incoming customer telephone
  calls and e-mails for other companies
• Systems administrator
• Responsible for the systems reliable and secure
  operation

34
Postimplementation Audit

• Formal review of a project after it is up and
  running
• Gives managers a chance to examine
• Objectives
• Performance specifications
• Cost estimates
• Scheduled delivery dates

35
Postimplementation Audit (Continued)

• Allows internal team, business manager, and
  project manager to
• Raise questions about the projects objectives
• Provide feedback on strategies
• Final report should analyze
• Projects overall performance
• How well the project was administered
• Specific performance of the project team(s)

36
Summary

• Plans for electronic commerce implementations
• Set objectives
• Benefit and cost objectives should be stated in
  measurable terms
• Project evaluation technique
• Return on investment
• Determining an outsourcing strategy
• Form internal team that includes knowledgeable
  individuals from within company

37
Summary

• Project management
• Formal way to plan and control specific tasks and
  resources used in a project
• Project portfolio management techniques
• Used to track and make trade-offs among multiple
  ongoing projects
• Critical staffing areas
• Business management
• Application specialists
• Systems administration