E-Commerce: The Second Wave Fifth Annual Edition

1. E-Commerce: The Second WaveFifth 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 • 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 • 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 e-mail 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 e-mails 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 • 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