ECommerce The Second Wave Fifth Annual Edition Chapter

E-Commerce: The Second Wave Fifth Annual Edition Chapter 12: Planning for Electronic Commerce E-Commerce: The Second Wave, Fifth Annual Edition

Objectives In this chapter, you will learn about: • Planning electronic commerce initiatives • Strategies for developing electronic commerce Web sites • Managing electronic commerce implementations E-Commerce: The Second Wave, Fifth Annual Edition 2

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 E-Commerce: The Second Wave, Fifth Annual Edition 3

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 E-Commerce: The Second Wave, Fifth Annual Edition 4

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 E-Commerce: The Second Wave, Fifth Annual Edition 5

Measuring Benefits • Tangible benefits of electronic commerce initiatives – Increased sales – Reduced costs • Intangible benefits of electronic commerce initiatives – Increased customer satisfaction E-Commerce: The Second Wave, Fifth Annual Edition 6

Measuring the Benefits of Electronic Commerce Initiatives E-Commerce: The Second Wave, Fifth Annual Edition 7

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 E-Commerce: The Second Wave, Fifth Annual Edition 8

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 E-Commerce: The Second Wave, Fifth Annual Edition 9

Starting a Web Business: Three Price Tags E-Commerce: The Second Wave, Fifth Annual Edition 10

Web Site Costs (Continued) • Experts agree that annual cost to maintain and improve site will be – 50 and 200 percent of initial cost • Mc. Kinsey & 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 E-Commerce: The Second Wave, Fifth Annual Edition 11

Cost Estimates for Building and Operating Magazine Publisher Web Sites E-Commerce: The Second Wave, Fifth Annual Edition 12

Cost Estimates for Building and Operating Magazine Publisher Web Sites (Continued) E-Commerce: The Second Wave, Fifth Annual Edition 13

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 E-Commerce: The Second Wave, Fifth Annual Edition 14

Cost/benefit Evaluation of Electronic Commerce Strategy Elements E-Commerce: The Second Wave, Fifth Annual Edition 15

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 E-Commerce: The Second Wave, Fifth Annual Edition 16

Strategies for Developing Electronic Commerce Web Sites • Typical early Web site – Static brochure not updated frequently – Seldom had any capabilities for helping the company’s customers • Today’s Web site includes – Transaction-processing tools – Automated homes for business processes of all kinds E-Commerce: The Second Wave, Fifth Annual Edition 17

Increasing Complexity of Web Site Functions E-Commerce: The Second Wave, Fifth Annual Edition 18

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 E-Commerce: The Second Wave, Fifth Annual Edition 19

Early Outsourcing • Outsource initial site design and development to launch project quickly • Outsourcing team trains company’s information systems professionals in the new technology • It is best to have – Company’s own information systems people working closely with outsourcing team E-Commerce: The Second Wave, Fifth Annual Edition 20

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 E-Commerce: The Second Wave, Fifth Annual Edition 21

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 E-Commerce: The Second Wave, Fifth Annual Edition 22

Selecting a Hosting Service • Factors to evaluate when selecting a hosting service – Functionality – Reliability – Bandwidth and server scalability – Security – Backup and disaster recovery – Cost E-Commerce: The Second Wave, Fifth Annual Edition 23

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 E-Commerce: The Second Wave, Fifth Annual Edition 24

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 E-Commerce: The Second Wave, Fifth Annual Edition 25

Elements of Fast Venturing E-Commerce: The Second Wave, Fifth Annual Edition 26

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 E-Commerce: The Second Wave, Fifth Annual Edition 27

Tracking Activities in Primavera Project Planner E-Commerce: The Second Wave, Fifth Annual Edition 28

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 project’s status – Assigns ranking for each project based on importance and level of risk E-Commerce: The Second Wave, Fifth Annual Edition 29

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 E-Commerce: The Second Wave, Fifth Annual Edition 30

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 E-Commerce: The Second Wave, Fifth Annual Edition 31

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 E-Commerce: The Second Wave, Fifth Annual Edition 32

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 system’s reliable and secure operation E-Commerce: The Second Wave, Fifth Annual Edition 33

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 E-Commerce: The Second Wave, Fifth Annual Edition 34

Postimplementation Audit (Continued) • Allows internal team, business manager, and project manager to – Raise questions about the project’s objectives – Provide feedback on strategies • Final report should analyze – Project’s overall performance – How well the project was administered – Specific performance of the project team(s) E-Commerce: The Second Wave, Fifth Annual Edition 35

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 E-Commerce: The Second Wave, Fifth Annual Edition 36

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 E-Commerce: The Second Wave, Fifth Annual Edition 37