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

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
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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
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Linking Objectives to Business Strategies

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
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Measuring Benefits
Tangible benefits of electronic commerce initiatives include:
Increased sales Reduced costs 3-Rs (reach, richness, range)

Intangible benefits of electronic commerce initiatives include:

Increased customer satisfaction Improved customer service

Managing Costs
Total cost of ownership (TCO)
Includes costs of hardware, software, design work outsourced, and salaries

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

The annual cost to maintain and improve a site will be between 50 and 200 percent of the initial cost

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Comparing Benefits to Costs

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

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Return on Investment (ROI)

Return on investment techniques provide a quantitative expression of a comfortable benefitto-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

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Strategies for Developing Electronic Commerce Web Sites

Typical early Web site
Static brochure not updated frequently Seldom had any capabilities for helping the companys customers

Current SOA for Web sites include:

Transaction-processing tools Automated homes for business processes of all kinds
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Early Outsourcing
Outsource the initial site design and development to launch a project quickly Outsourcing team trains the companys information systems professionals in the new technology

It is best to have the companys own information systems people working closely with the outsourcing team 18

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
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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
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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
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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

Often negotiate an ownership interest in the company

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New Methods for Implementing Partial Outsourcing

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
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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
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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 projects status Assigns a ranking for each project based on importance and level of risk
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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

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 Business manager

Staffing for Electronic Commerce

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
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Staffing for Electronic Commerce

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
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Staffing for Electronic Commerce

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 systems reliable and secure operation
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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

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Postimplementation Audit
Allows internal team, business manager, and project manager to:
Raise questions about the projects objectives
Provide feedback on strategies

Final report should analyze:

Projects overall performance How well the project was administered Specific performance of the project team(s)
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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
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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
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