Transcript Chapter 12: Planning for Electronic Commerce E-Commerce: The Second Wave

E-Commerce: The Second Wave
Fifth Annual Edition
Chapter 12:
Planning for Electronic
Commerce
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
2
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
3
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
4
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
5
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
6
Measuring the Benefits of Electronic
Commerce Initiatives
E-Commerce: The Second Wave, Fifth Annual Edition
7
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
8
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
9
Starting a Web Business: Three Price
Tags
E-Commerce: The Second Wave, Fifth Annual Edition
10
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
11
Cost Estimates for Building and
Operating Magazine Publisher Web Sites
E-Commerce: The Second Wave, Fifth Annual Edition
12
Cost Estimates for Building and
Operating Magazine Publisher Web Sites
(Continued)
E-Commerce: The Second Wave, Fifth Annual Edition
13
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
14
Cost/benefit Evaluation of Electronic
Commerce Strategy Elements
E-Commerce: The Second Wave, Fifth Annual Edition
15
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
16
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
17
Increasing Complexity of Web Site
Functions
E-Commerce: The Second Wave, Fifth Annual Edition
18
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
19
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
20
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
21
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
22
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
23
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
24
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
25
Elements of Fast Venturing
E-Commerce: The Second Wave, Fifth Annual Edition
26
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
27
Tracking Activities in Primavera
Project Planner
E-Commerce: The Second Wave, Fifth Annual Edition
28
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
29
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
30
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
31
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
32
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
33
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
34
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
35
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
36
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
37