1. E-Commerce: The Second Wave Fifth 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
E-Commerce: The Second Wave, Fifth Annual Edition

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
E-Commerce: The Second Wave, Fifth Annual Edition

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
E-Commerce: The Second Wave, Fifth Annual Edition

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
E-Commerce: The Second Wave, Fifth Annual Edition

6. 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

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

8. Managing Costs Total cost of ownership Change management
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

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
E-Commerce: The Second Wave, Fifth Annual Edition

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

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
E-Commerce: The Second Wave, Fifth Annual Edition

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

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

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
E-Commerce: The Second Wave, Fifth Annual Edition

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

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
E-Commerce: The Second Wave, Fifth Annual Edition

17. 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

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

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

20. 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

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
E-Commerce: The Second Wave, Fifth Annual Edition

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 handling and response functions
E-Commerce: The Second Wave, Fifth Annual Edition

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
E-Commerce: The Second Wave, Fifth Annual Edition

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
E-Commerce: The Second Wave, Fifth Annual Edition

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
E-Commerce: The Second Wave, Fifth Annual Edition

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

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
E-Commerce: The Second Wave, Fifth Annual Edition

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

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

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
E-Commerce: The Second Wave, Fifth Annual Edition

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
E-Commerce: The Second Wave, Fifth Annual Edition

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
E-Commerce: The Second Wave, Fifth Annual Edition

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 s for other companies
Systems administrator
Responsible for the system’s reliable and secure operation
E-Commerce: The Second Wave, Fifth Annual Edition

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
E-Commerce: The Second Wave, Fifth Annual Edition

35. 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

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
E-Commerce: The Second Wave, Fifth Annual Edition

37. Summary Project management Project portfolio management techniques
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