Electronic Commerce 12-1

Chapter 12
Overview
In setting the objectives for an electronic commerce initiative, managers should consider
the strategic role of a project, its intended scope, and the resources available for executing
it.
1-identify objectives and link business objectives to business strategies.
2- Web site development strategies must be directly connected / planned to its
implementation maangement

Planning Electronic Commerce Initiatives

1. A successful business plan for an electronic commerce initiative should include
activities that identify the initiatives specific objectives and link those objectives to
business strategies.

Identifying Objectives

1. Electronic Commerce Objectives include:

a. increasing sales in existing markets,
b. opening new markets,
c. serving existing customers better,
d. identifying new vendors,
e. coordinating more efficiently with existing vendors,
f. recruiting employees more effectively.

Linking Objectives to Business Strategies

1. downstream strategies
a. seeks to improve value to customers from internal operations
2. upstream strategies.
a. seeks to cut costs or generate value from supplier relationships

TEST / TEST / TEST

1. Create a pilot Web site to test an online business idea
2. Release a production version of the site when ready
3. Specify clear goals for their pilot tests with go live goals and measuring tools.
Electronic Commerce 12-2

Measuring Benefits

1. Identifying benefit objectives

set objectives that are measurable
i. even when those objectives are for intangible benefits (EX. Brand
awareness.. can use surveys to test)

2. Convert the raw activity measurements / Benefits to dollars.

Can compare benefits to costs - the net benefit (benefits minus costs) of other
competing projects. may be just an approximation.

Managing Costs

1. The following topics should also be discussed:

Total Cost of Ownership:

Full cost of all activities related to website project
i. includes the costs of:
1. hardware (server computers, routers, firewalls, and load
balancing devices),
2. software (licenses for operating systems, Web server software,
database software, and application software),
3. design work outsourced,
4. salaries and benefits for employees involved in the project,
5. costs of maintaining the site once it is operational.
Electronic Commerce 12-3

Change Management: communicating the need for change to employees,

including employees in the decision processes leading up to the change, allowing
employees to participate in the planning for the change, and other tactics
designed to help employees feel that they are a part of the change.

Opportunity Costs: managers and accountants use the term to describe lost
benefits from an action not taken. Ex. Implementing a web site

Web Site Costs: Obtain reliable data on startup and maintanece costs. Conulting
fimrs studies may prove useful. See page 556 of text.
annual cost to maintain and improve a site once it is up and runningwhether it
is a small site or a large sitewill be between 50 percent and 200 percent of its
initial cost
.
Trends in Web Site Costs: Startup firms increasingly are able to get their
operations launched for dollar amounts that are in the low end of the range for
each category.

Funding Online Business Startups:

Types of investors:
angel investors may be more patient and be involved for the long term.
venture capitalists- seek quick growth and fast return via an initial public offering (IPO)

Comparing Benefits to Costs

Return on Investment (ROI)

1. In second wave of electronic commerce, more companies have turned to ROI as the
measurement tool for evaluating new electronic commerce projects.

a. Note that one weakness of ROI is that it tends to emphasize short-run benefits
over long-run benefits.

Strategies for Developing Electronic Commerce Web Sites

1. Use Figure 12-5 to discuss the increasing complexity of Web site functions.

2. Note that, as companies begin to see their Web sites as collections of software
applications, they are beginning to use tools to manage the development and
maintenance of their Web sites.
Electronic Commerce 12-4

Internal Development vs. Outsourcing

1. Using internal people to lead all projects helps to ensure that the companys specific
needs are addressed and that the initiative is congruent with the goals and the culture of
the organization.
a. Outside consultants are seldom able to learn enough about an organizations
culture to accomplish needed objectives.- However, useful when a specific skill
is required temporally.

2. Team Typs:

The Internal Team: The first step in determining which parts of an electronic
commerce project to outsource is to create an internal team that is responsible for
the project.

Early Outsourcing: in many electronic commerce projects, the company

outsources the initial site design and development to launch the project quickly.

Late Outsourcing: although for years late outsourcing has been the standard for
allocating scarce information systems talent to projects, electronic commerce
initiatives lend themselves more to the early outsourcing approach

Partial Outsourcing: Note that, in both the early outsourcing and late
outsourcing approaches, a single group is responsible for the entire design,
development, and operation of a projecteither inside or outside the company.

Selecting a Hosting Service

1. No matter what security guarantees the service provider offers, the company should
monitor the security of the electronic commerce operation through its own personnel or
by hiring a security consulting firm.

New Methods for Implementing Partial Outsourcing

1. The following topics should be discussed:

Incubators:
a company that offers start-up companies a physical location with offices,
accounting and legal assistance, computers, and Internet connections at a very
low monthly cost. In exchange for 10 -50% Equity

Fast Venturing: Dynami immediate partnership between Website/venture

creator, Equity partners and operational partners.
Electronic Commerce 12-5

Managing Electronic Commerce Implementations

1. Project management, project portfolio management, specific staffing, and

postimplementation audits are methods businesses use to efficiently administer their
electronic commerce projects.

Project Management

1. Software products, such as Microsoft Project and Primavera P6, give managers an array
of built-in tools for managing resources and schedules.

2. Development times for most electronic commerce projects are relatively short; often
they are accomplished in less than six months.

Project Portfolio Management

1. In project portfolio management, the CIO assigns a ranking for each project based on its
importance to the strategic goals of the business and its level of risk (probability of
failure).

Staffing for Electronic Commerce

1. Regardless of whether the internal team or outsourcing, determine the staffing needs of
the electronic commerce initiative.

2. Key people; business manager, project manager, account manager, applications

specialists, Web programmers, Web graphics designer, content creators, content
managers, customer service, call center, systems administrator, network
operations, and database administration.

Postimplementation Audits

1. Allows the internal team, the business manager, and the project manager to raise
questions about the projects objectives and provide their in-the-trenches feedback on
strategies that were set in the projects initial design.
Electronic Commerce 12-6

Key Terms
24/7 operation: operates 24 hours a day, seven days a week.
Account manager: keeps track of multiple Web sites in use by a project or keeps track
of the projects that will combine to create a larger Web site.
Angel investor: investor that funds the initial startup of a business.
Applications specialist: maintain accounting, human resources, and logistics software.
Business manager: should be a member of the internal team that sets the objectives for
the project.
Call center: a company that handles incoming customer telephone calls and e-mails for
other companies.
Capital investment: major investments in equipment, personnel, and other assets.
Capital project: major investments in equipment, personnel, and other assets.
Change management: the process of helping employees cope with these changes.
Component outsourcing: the company identifies specific portions of the project that
can be completely designed, developed, implemented, and operated by another firm that
specializes in a particular function.
Content creator: writes original content.
Content editor: purchases existing material and adapts it for use on the site.
Content manager: purchases existing material and adapts it for use on the site.
Customer service: helps design and implement customer relationship management
activities in the electronic commerce operation.
Database administration: supports activities such as transaction processing, order
entry, inquiry management, or shipment logistics.
Downstream strategies: improve the value that the business provides to its customers.
Early outsourcing: training the companys information systems professionals in the
new technology before handing the operation of the site over to them.
Fast venturing: an existing company that wants to launch an electronic commerce
initiative joins external equity partners and operational partners that can offer the
experience and skills needed to develop and scale up the project very rapidly.
Incubator: a company that offers start-up companies a physical location with offices,
accounting and legal assistance, computers, and Internet connections at a very low
monthly cost.
Initial public offering (IPO): stocks are sold to the public.
Late outsourcing: once the company has gained all the competitive advantage provided
by the system, the maintenance of the electronic commerce system can be outsourced so
that the companys information systems professionals can turn their attention and talents
to developing new technologies that will provide further competitive advantage.
Metrics: measurements that companies can make to assess the value of benefits.
Network operations: include load estimation and load monitoring, resolving network
problems as they arise, designing and implementing fault-resistant technologies, and
managing any network operations that are outsourced to service providers or telephone
companies.
Electronic Commerce 12-7

Opportunity cost: lost benefits from an action not taken.

Outsourcing: hiring another company to provide the outside support for all or part of
the project.
Partial outsourcing: the company identifies specific portions of the project that can be
completely designed, developed, implemented, and operated by another firm that
specializes in a particular function.
Postimplementation audit (postaudit review): a formal review of a project after it is
up and running.
Project management: a collection of formal techniques for planning and controlling
the activities undertaken to achieve a specific goal.
Project management software: used to help manage projects.
Project manager: a person with specific training or skills in tracking costs and the
accomplishment of specific objectives in a project.
Project portfolio management: a technique in which each project is monitored as if it
were an investment in a financial portfolio.
Return on investment (ROI): measure the amount of income (return) that will be
provided by a specific current expenditure (investment).
Systems administrator: responsible for the systems reliable and secure operation.
Total cost of ownership (TCO): tracking costs by activity and calculating a total cost
for each activity.
Upstream strategies: focus on reducing costs or generating value by working with
suppliers or inbound shipping and freight service providers.
Venture capitalist: wealthy individuals or, more often, investment firms, that look for
small companies that are about to grow rapidly.
Web graphics designer: a person trained in art, layout, and composition; understands
how Web pages are constructed.
Web programmer: designs and writes the underlying code for dynamic database-
driven Web pages.