Chapter 12: Planning for Electronic Commerce 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  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 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 Measuring Benefits  Tangible benefits of electronic commerce initiatives include:  Increased sales  Reduced costs  Intangible benefits of electronic commerce initiatives include:  Increased customer satisfaction 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  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  Experts agree that the annual cost to maintain and improve a site will be between 50 and 200 percent of the initial cost 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 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 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 Outsourcing 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 Late Outsourcing  Information systems professionals  Do initial design & 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 can be outsourced 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 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 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  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 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 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 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  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 Staffing for Electronic Commerce (continued)  Applications specialists  Maintain accounting, human resources, and logistics software  Web programmers  Design and write underlying code for dynamic databasedriven Web pages  Web graphics designer  Person trained in art, layout, and composition  Understands how Web pages are constructed  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 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  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) 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  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