Chapter 12: Planning for Electronic Commerce

1. Chapter 12:Planning for Electronic Commerce Electronic Commerce, Seventh Annual Edition

2. Objectives In this chapter, you will learn about: • Planning electronic commerce initiatives • Strategies for developing electronic commerce Web sites • Managing electronic commerce implementations Electronic Commerce, Seventh 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 Electronic Commerce, Seventh 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 Electronic Commerce, Seventh 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 Electronic Commerce, Seventh Annual Edition

6. Measuring Benefits • Tangible benefits of electronic commerce initiatives include: • Increased sales • Reduced costs • Intangible benefits of electronic commerce initiatives include: • Increased customer satisfaction Electronic Commerce, Seventh Annual Edition

7. Electronic Commerce, Seventh 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 Electronic Commerce, Seventh Annual Edition

9. Web Site Costs • International Data Corporation and Gartner, Inc. estimate that the cost for a large company to build and implement an 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 Electronic Commerce, Seventh Annual Edition

10. Electronic Commerce, Seventh Annual Edition

11. Web Site Costs (continued) • Experts agree that the annual cost to maintain and improve a site will be between 50 and 200 percent of the initial cost Electronic Commerce, Seventh Annual Edition

12. Comparing Benefits to Costs • Capital projects (capital investments) • Major investments in equipment, personnel, and other assets • Key part of creating a business plan for electronic commerce initiatives includes: • Identifying potential benefits • Identifying costs required to generate benefits • Evaluating whether benefits exceed costs Electronic Commerce, Seventh Annual Edition

13. Electronic Commerce, Seventh Annual Edition

14. Return on Investment (ROI) • Return on investment 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 Electronic Commerce, Seventh Annual Edition

15. 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 Electronic Commerce, Seventh Annual Edition

16. Electronic Commerce, Seventh Annual Edition

17. 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 Electronic Commerce, Seventh Annual Edition

18. Early Outsourcing • Outsource the initial site design and development to launch a project quickly • Outsourcing team trains the company’s information systems professionals in the new technology • It is best to have the company’s own information systems people working closely with the outsourcing team Electronic Commerce, Seventh Annual Edition

19. Late Outsourcing • Information systems professionals • Do initial design and development work • Implement the system • Operate the system until it becomes a stable part of the business operation • Once a company has gained a competitive advantage, maintenance of the electronic commerce system can be outsourced Electronic Commerce, Seventh Annual Edition

20. 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 Electronic Commerce, Seventh Annual Edition

21. Selecting a Hosting Service • Factors to evaluate when selecting a hosting service include: • Functionality • Reliability • Bandwidth and server scalability • Security • Backup and disaster recovery • Cost Electronic Commerce, Seventh Annual Edition

22. 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 the company Electronic Commerce, Seventh Annual Edition

23. 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 Electronic Commerce, Seventh Annual Edition

24. Electronic Commerce, Seventh Annual Edition

25. 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 Electronic Commerce, Seventh Annual Edition

26. Electronic Commerce, Seventh Annual Edition

27. 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 the list with current information about each project’s status • Assigns a ranking for each project based on importance and level of risk Electronic Commerce, Seventh Annual Edition

28. Staffing for Electronic Commerce • General areas of staffing include: • Business managers • Project managers • Account managers • Applications specialists • Web programmers • Web graphics designers • Customer service • Systems administration Electronic Commerce, Seventh Annual Edition

29. Staffing for Electronic Commerce (continued) • Business manager • Should be a member of the internal team that sets objectives for a 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 Electronic Commerce, Seventh Annual Edition

30. Staffing for Electronic Commerce (continued) • Applications specialists • Maintain accounting, human resources, and logistics software • Web programmers • Design and write underlying code for dynamic database-driven Web pages • Web graphics designer • Person trained in art, layout, and composition • Understands how Web pages are constructed Electronic Commerce, Seventh Annual Edition

31. Staffing for Electronic Commerce (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 Electronic Commerce, Seventh Annual Edition

32. 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 Electronic Commerce, Seventh Annual Edition

33. 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) Electronic Commerce, Seventh Annual Edition

34. Summary • Plans for electronic commerce implementations include: • Setting objectives • Determining benefit and cost objectives which should be stated in measurable terms • Project evaluation technique • Return on investment • Determining an outsourcing strategy • Form an internal team that includes knowledgeable individuals from within the company Electronic Commerce, Seventh Annual Edition

35. Summary (continued) • 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 Electronic Commerce, Seventh Annual Edition