Planning for Electronic Commerce (CH-12)
Objectives
In this chapter, you will learn about:
• Planning electronic commerce initiatives
• Strategies for developing electronic commerce Web sites
• Managing electronic commerce implementations
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
Measuring Benefits
• Tangible benefits of electronic commerce initiatives
– Increased sales
– Reduced costs
• Intangible benefits of electronic commerce initiatives
– Increased customer satisfaction
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
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
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 (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
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
Starting a Web Business: Three Price Tags
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
Cost/benefit Evaluation of Electronic Commerce Strategy
Elements
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
• 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
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
Selecting a Hosting Service
• Factors to evaluate when selecting a hosting service
– Functionality
– Reliability
– Bandwidth and server scalability
– Security
– Backup and disaster recovery
– Cost
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
Increasing Complexity of Web Site Functions
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
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
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
 New Methods for Implementing Partial Outsourcing Managing Electronic Commerce Implementations
(Continued) • Project management
• Fast venturing – Formal techniques for planning and controlling activities
– Existing company that wants to launch an undertaken to achieve a specific goal
electronic commerce initiative joins external • Project plan
equity partners and operational partners – Includes criteria for cost, schedule, and performance
• Equity partners • Project management software products
– Banks or venture capitalists – Microsoft Project
• Operational partners – Primavera Project Planner
– Firms that have experience in moving projects
along and scaling up prototypes Project Portfolio Management
• Each project is monitored as if it were an investment in a financial
portfolio
Tracking Activities in Primavera Project Planner • 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

General Areas of Staffing

• Business manager
– Should be member of internal team that sets objectives for
project
Staffing for Electronic Commerce • Project manager
• General areas of staffing – Person with specific training or skills in
– Business managers • Tracking costs and accomplishment of specific
– Project managers objectives
– Account managers • Account manager
– Applications specialists – Keeps track of multiple Web sites in use by a project
– Web programmers
– Web graphics designers
– Customer service
General Areas of Staffing (Continued)
• Customer service personnel
– Systems administration
– Help design and implement customer relationship
General Areas of Staffing (Continued) management activities
• Applications specialists • Call center
– Maintain accounting, human resources, and logistics – Company that handles incoming customer telephone
software calls and e-mails for other companies
• Web programmers • Systems administrator
– Design and write underlying code for dynamic – Responsible for the system’s reliable and secure
database-driven Web pages has increased operation
• Web graphics designer
– Person trained in art, layout, and composition Postimplementation Audit (Continued)
– Understands how Web pages are constructed • Allows internal team, business manager, and project manager to
– Raise questions about the project’s objectives
Postimplementation Audit – Provide feedback on strategies
• Formal review of a project after it is up and running • Final report should analyze
• Gives managers a chance to examine – Project’s overall performance
– Objectives – How well the project was administered
– Performance specifications – Specific performance of the project team(s)
– Cost estimates
– Scheduled delivery dates Summary
• Project management
Summary – Formal way to plan and control specific tasks and resources
• Plans for electronic commerce implementations used in a project
– Set objectives • Project portfolio management techniques
– Benefit and cost objectives should be stated in measurable – Used to track and make trade-offs among multiple ongoing
terms projects
• Project evaluation technique • Critical staffing areas
– Return on investment – Business management
• Determining an outsourcing strategy – Application specialists
– Form internal team that includes knowledgeable individuals – Systems administration
from within company