1. Implementing EC Systems: From Justification to Successful Performance
Chapter 14
Implementing EC Systems:
From Justification to Successful Performance

2. Learning Objectives
Describe the major components of EC implementation.
Describe the need for justifying EC investments.
Understand the difficulties in measuring and justifying EC investments.
Recognize the difficulties in establishing intangible metrics.
List and describe traditional and advanced methods of justifying EC investments.
Describe some examples of EC justification.

3. Learning Objectives Describe the role of economics in EC evaluation.
Discuss the steps in developing an EC system.
Describe the major EC development strategies.
List the various EC development methods along with their benefits and limitations.
Discuss the major outsourcing strategies.
Describe EC organizational structure and change management.
Understand how product, industry, seller, and buyer characteristics influence the success of EC.

4. The Implementation Landscape
The Major Implementation Factors
Justification/Economics
Acquire or Self Develop Your E-Commerce System
Organizational Readiness and Impacts of E-Commerce
How to Succeed

5. The Elements in EC Implementation

6. Why Justify E-Commerce Investments? How Can They be Justified?
Increased Pressure for Financial Justification
Other Reasons Why EC Justification Is Needed
EC Investment Categories and Benefits
How Is an EC Investment Justified?
*Cost–benefit analysis
Cost–Benefit Analysis and the Business Case
What Needs to be Justified? When Should Justification Take Place?

7. Why Justify E-Commerce Investments? How Can They be Justified?
Using Metrics in EC Justification
Metrics, Measurements, and Key Performance Indicators
*Key performance indicators (KPIs)
*Web Analytics

8. How Metrics Are Used in Performance Management

9. Difficulties in Measuring and Justifying E-Commerce Investments
The EC Justification Process
Difficulties in Measuring Productivity and Performance Gains
Data and Analysis Issues
Relating EC and ITS Expenditures to Organizational Performance
Other Difficulties
Intangible Costs and Benefits
Tangible Costs and Benefits
Managing Intangible Benefits

10. A Model for IT Project Justification
Sources: Based on Gunasekaran et al. ( 2001 ) and Misra ( 2006 ); and the authors’ experience.

11. Difficulties in Measuring and Justifying E-Commerce Investments
The Process of Justifying EC and IT Projects
The Use of Gartner’s Hype Cycle
What Is Gartner’s Hype Cycle?
*Hype cycle
The five stages of the hype cycle are:
Technology trigger
Peak of inflated expectations
Trough of disillusionment
Slope of enlightenment
Plateau of productivity
Application of the Hype Cycle

12. Methods and Tools for Evaluating and Justifying E-Commerce Investments
Opportunities and Revenue Generated by EC Investments
Methodological Aspects of Justifying EC Investments
Types of Costs
Distinguish between initial (up-front) costs and operating costs
Direct and indirect shared costs
In-kind costs

13. Methods and Tools for Evaluating and Justifying E-Commerce Investments
Traditional Methods for Evaluating EC Investments
The ROI Method
Payback Period
NPV Analysis
Internal Rate of Return (IRR)
Break-Even Analyses
The Total Costs and Benefits of Ownership
*Total cost of ownership (TCO)
*Total benefits of ownership (TBO)
Economic Value Added
Using Several Traditional Methods for One Project
Business ROI Versus Technology ROI

14. Methods and Tools for Evaluating and Justifying E-Commerce Investments
*ROI Calculators
The Offerings from Baseline Magazine
Other Calculators
Advanced Methods for Evaluating IT and EC Investments
Financial approaches
Multicriteria approaches
Ratio approaches
Portfolio approaches

15. Examples of E-Commerce Metrics and Project Justification
Justifying E-Procurement
Justifying Social Networking and the Use of Web 2.0 Tools
Justifying an Investment in Mobile Computing and in RFID
Justifying Investing in RFID
Justifying Security Projects
Justifying Buying Products or Services from Vendors

16. The Economics of E-Commerce
Reducing Production Costs
Product Cost Curves
*Production Function
* Agency Costs
* Transaction Costs
Search costs
Information costs
Negotiation costs
Decision costs
Monitoring and policing costs
Legal-related costs

17. Average Cost Curve of (a) Regular and (b) Digital Products

18. The Economic Effects of EC: The Production Function and Agency Costs

19. The Economic Effects of EC: Transaction Costs

20. The Economics of E-Commerce
Increased Revenues
Reach Versus Richness
Facilitating Product Differentiation
*Product differentiation
EC Increases Agility
Valuation of EC Companies
* Valuation

21. Reach vs. Richness

22. E-Commerce System Life Cycle

23. A Five-Step Approach to Developing an E-Commerce System
The Essentials of the SDLC: An EC Application
The Five Traditional Steps
Step 1: Identifying, justifying, and planning EC systems
Step 2: Creating an EC architecture
Step 3: Selecting a development option
Step 4: Installing, testing, integrating, and deploying EC applications
Step 5: Operations, maintenance, and updates
Managing the Development Process

24. The EC Application Development Process

25. Development Strategies for E-Commerce Projects
There are four popular options for developing an EC website:
Develop the site in-house
Buy a packaged application
Outsource the system development
Lease the application

26. Development Strategies for E-Commerce Projects
In-House Development: Insourcing
*Insourcing
Buy the Applications (Off-the-Shelf Approach)
* Turnkey approach
Advantages and Limitations of Ready Made Packages
Outsourcing EC Systems Development and Applications
Types of Outsourcing Options

27. Development Strategies for E-Commerce Projects
Leasing EC Applications: Cloud Computing and Software As A Service (Saas)
* Cloud Computing
Advantages of Cloud Applications
Other Development Options
Join an e-marketplace
Join a consortium
Join an auction or reverse auction third-party site
Form joint ventures
Use a hybrid approach

28. Development Strategies for E-Commerce Projects
Selecting a Development Option
Before choosing an appropriate development option, you need to consider the following factors:
Customers
Merchandising
Sales service
Promotion
Transaction processing
Marketing data and analysis
Branding

29. Organizational Impacts of E-Commerce
Improving Direct Marketing and Sales
Transforming Organizations and Work
Technology and Organizational Learning
The Changing Nature of Work
Disintermediation and Reintermediation
Restructuring Business Processes
Redefining Organizations
New and Improved Products and Services
*Mass Customization and *On-Demand Manufacturing
The On-Demand Revolution
* 3D Printing

30. How Customization Is Done Online: The Case of Nike Shoes

31. Organizational Impacts of E-Commerce
*Change Management
How to Organize an EC Unit in a Company
Options for Organizing the EC Workforce
Report to the Marketing Department
Report to the Finance Department
Report to the Chief Operating Officer
Distribute the EC Workforce in Several Departments
Report to the IT Department
Create a New, Possibly Autonomous EC Department
No Formal Structure for EC Exists
Create an Autonomous Division or a Separate Online Company

32. Opportunities For Success In E-Commerce and Avoiding Failure
Factors That Determine E-Commerce Success
E-Commerce Failures
E-Commerce Successes
Strategies for EC Success
Cultural Differences in EC Successes and Failures
Can EC Succeed in Developing Economies?

33. Managerial Issues How should the value of EC investments be justified?
Which investment analysis method should we adopt for EC justification?
Who should conduct the justification?
Should we use the hype cycle?
Should we embark on cloud computing products for our EC initiatives?
Which strategy should we choose for vendor selection: the inside-out or outside-in approach?
What kinds of organizational changes may be needed?
Is it possible to predict EC success?

34. Summary The major components of EC implementation.
The need for EC justification.
The difficulties in justifying EC investment.
Difficulties in establishing intangible metrics.
Traditional methods for evaluating EC investments.
Describe the justification of representative EC projects.

35. Summary EC economic evaluation.
The major steps in developing an EC system.
The major EC development strategies, along with their advantages and disadvantages.
The variety of EC application development methods, along with their benefits and limitations.
EC application outsourcing strategies.
Organizational structure and change management.
Reasons for EC success and failure.