Chapter 12: Planning for Electronic Commerce

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