Chapter 12: Planning for Electronic Commerce

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

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 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

Measuring Benefits Tangible benefits of electronic commerce initiatives include: Increased sales Reduced costs Intangible benefits of electronic commerce initiatives include: Increased customer satisfaction

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 International Data Corporation and Gartner, Inc. estimate that the cost for a large company to build and implement an 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 Experts agree that the annual cost to maintain and improve a site will be between 50 and 200 percent of the initial cost

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

Return on Investment (ROI) Return on investment 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

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

Internal Development vs. 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

Outsourcing Late Outsourcing Information systems professionals Do initial design & development work Implement the system Operate the system until it becomes a stable part of the business operation Once a company has gained a competitive advantage, maintenance can be outsourced 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 Early Outsourcing Outsource the initial site design and development to launch a project quickly Outsourcing team trains the company’s information systems professionals in the new technology It is best to have the company’s own information systems people working closely with the outsourcing team

Selecting a Hosting Service Factors to evaluate when selecting a hosting service include: Functionality Reliability Bandwidth and server scalability Security Backup and disaster recovery Cost

New Methods for Implementing Partial Outsourcing 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 Incubators Company that offers start-up companies a physical location with: Offices, accounting, and legal assistance Computers and Internet connections Receive ownership interest in the company

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

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 the list with current information about each project’s status Assigns a ranking for each project based on importance and level of risk

Staffing for Electronic Commerce General areas of staffing include: Business managers Project managers Account managers Applications specialists Web programmers Web graphics designers Customer service Systems administration Business manager Should be a member of the internal team that sets objectives for a 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

Staffing for Electronic Commerce (continued) Applications specialists Maintain accounting, human resources, and logistics software Web programmers Design and write underlying code for dynamic database-driven Web pages Web graphics designer Person trained in art, layout, and composition Understands how Web pages are constructed 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

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 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)

Summary Plans for electronic commerce implementations include: Setting objectives Determining benefit and cost objectives which should be stated in measurable terms Project evaluation technique Return on investment Determining an outsourcing strategy Form an internal team that includes knowledgeable individuals from within the company 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