1. Chapter 12: Planning for Electronic Commerce

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

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
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

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

6. 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

8. 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

9. 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

10. 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

11. 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

12. 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 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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 s for other companies
Systems administrator
Responsible for the system’s reliable and secure operation

19. 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)

20. 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