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e - Commerce
Session – 6
What’s in the Store Today?
• Planning for E – Commerce Website
• Strategies for Developing an E –
Commerce Website
Planning E-commerce Initiatives
• A successful business
plan should include
activities that:
– Identify objectives
– Link objectives to
business strategy
Identifying Objectives
• Objectives businesses strife to achieve using e-
commerce include:
– Increase sales in existing markets
– Launching out into new markets
– Improve service to existing customers
– Identifying new vendors
– Coordinating more efficiently with existing vendors
– More effective recruiting
Types of Objectives
• Vary with the size of the organisation, for
example:
– Small companies might want to build a Web site to
encourage customers to do business using existing
channels.
• A site offering only product or service information is less
costly do design and implement
– Larger companies that might want to build sites that
offer transaction handling, bidding, communication
and other capabilities have to pay much more
SMART Objectives
• Objectives must be:
– Specific
– Measurable
– Achievable
– Results-based
– Time-bound
Linking Objectives to Business
Strategy• After identifying objectives a company
must
– identify business strategies that will help to
realise these objectives
• E.g. a small company’s objective might be to
become a global player within a year and as a
result one of its activities is to build a brand
Linking Objectives to Business
Strategy (II)• E-commerce can inspire businesses to partake
in activities such as:
– Build brands
– Enhance existing marketing programs
– Sell products and services
– Sell advertising
– Develop a better understanding of the customer’s
need
– Improve after sales support and service
Linking Objectives to Business
Strategy (III)• E-commerce can inspire businesses to partake
in activities such as:
– Purchase products and services
– Manage supply chains
– Operate auctions
– Build virtual communities
• However, these can not be done in an ad hoc
manner. It is important to measure the benefit
and cost of each activity
Measuring Benefit
• Some benefits are tangible and easy to
measure, for example increase sales, decrease
cost
• Others are intangible thus difficult to measure,
for example increased customer satisfaction
• Managers need to try to set objectives that are
measurable even for intangible benefits
– E.g. increased customer satisfaction might be
measured by counting the number of first-time
customers who return to the Web site and buy
Measuring Benefit (I)
Build brand Surveys or opinion
polls that measure
brand awareness
Enhance existing
marketing program
Change in per-unit
sales volume
Improve customer
service
Customer satisfaction
surveys, quantity of
customer complaints
Measuring Benefit (II)
Reduce cost of
after-sale
support
Quantity and type (telephone,
fax, e-mail) of support
activities
Imply supplier
chain operation
Cost, quality and on-time
delivery of materials or
services purchased
Hold auctions Quantity of auctions, bidders,
sellers, items sold, registered
participants, dollar value of
items sold
Provide portals Number of visitors
Managing Cost
• IT projects are often difficult to estimate and control
– E.g. web development technologies change rapidly, thus it is difficult for managers to estimate cost
• These cost include hardware and software
• Even though hardware cost tend to decrease, new software often demands new hardware, thus increase cost
Total Cost of Ownership
• The project budget must include
– Hardware and software cost
– Costs of hiring, training and paying personnel
• Web site designers, developers, content providers,
operators and maintainers
• Organisations tend to track cost by activity
Total Cost of Ownership (I)
• The total cost of ownership (TCO) includes– Cost of hardware (servers, routers, firewalls and load
balancing devices)
– Cost of software (licenses for operating systems, Web server software, database software, and application software)
– Cost of outsourced design work
– Salaries and benefits for employees
– Cost of maintaining the site once operational
• A good TCO will include cost of future redesign
Change Management
• Every project involves change
• Change management is the process of
helping employees cope with change
• Change management techniques include
– Communicating the need for change
– Inclusion in the change decision process
– Inclusion in the planning for the change
Opportunity Cost
• Opportunity cost is the benefit that will be
lost if a company chooses not to initiate an
e-commerce initiative
• This is of great concern to management
and accountants
Web Site Costs
• The cost required for a large company to
build an entry-level e-commerce site is
approx 2,50,000
– 79% is labour cost
– 10% software cost
– 11% hardware cost
– Source: International Data Corporation and Gartner Inc.
Web Site Costs (I)
• The cost required for a large company to build a
site that is comparable to leading sites is approx
3,50,000
• To build a Web site that is noticeably better than
competitors will cost a minimum of 30,00,000
• 10 of the top 100 e-commerce sites spent over
15,00,000 for Web site development and
implementation• Source: International Data Corporation and Gartner Inc
Web Site Costs (II)
• A small company can put a Web site online for 10,000
• For a business with full transaction and payment processing capabilities, it is difficult to keep it under 50,000 per year
• Construction of new Web sites for small businesses actually averages 2,40,000
Web Site Costs (III)
• Web site costs include
– Start-up cost
– Ongoing costs (between 50% - 200% of initial
cost)
Web Site Costs (IV)
• The cost for a full portal magazine site
– To build: $2.4 million
– $4.3 million per year to maintain with a staff of
35 people
• The cost for a more limited site
– To build: $150,000
– $270,000 per year to maintain with a staff of 2
people
Web Site Costs: A Final Word
• The high cost of creating e-commerce Web sites can serve as a discouragement to small businesses
• Smaller organisations can control costs by:– Using a combination of third party hosting services
and packaged e-commerce software
– Sign up for mall-style service providers
• This provides low initial cost and controls annual TCO, however cost of related activities can not be ignored, e.g. creating and maintaining a product catalog
Comparing Benefits to Costs
Identify
benefits
Identify
costs
Determine value
of benefits
Determine value
of costs
Compare value
of benefits to
value of cost
Return On Investment (ROI)
• Return on Investment techniques measure the amount of income (return) that will be provided by a specific expenditure
– ROI requires that all costs are stated in a dollar amount
– ROI focuses on benefits that can be predicted• Many benefits are often hidden
– ROI tends to emphasize short-term benefits over long term benefits
ROI Hidden Benefits Example
• CISCO systems created an on-line customer
forum to discuss product issues
• The intended benefits were to
– Reduce customer service costs
– Increase customer satisfaction regarding the
availability of product information
• Additional (hidden) benefit
– Cisco engineers were able to get feedback on new
products
ROI Problems
• If managers rely only on ROI incorrect
decision may be made
– Due to biases towards short term cost and
benefits rather than long term
Strategies For Developing E-
commerce Web Sites• 1994-1996 Static Brochures
– Contact information
– Logos and or other branding
– Some product information
– Financial statements
Strategies For Developing E-
commerce Web Sites (I)• 1996 – 1999 Transaction Processing
– Static brochures plus
• Complete product catalog
• Shopping cart
• Secure payment processing
• Other information queries
• Shipment tracking
Strategies For Developing E-
commerce Web Sites (II)• 1992 – Present Full Range of Automated
Business Processes
– Transaction processing, plus
• Personalisation
• Interactive capabilities
• Frequently updated content
• Customer relationship
• Management tools
Internal Development v. Outsourcing
• Definition:
– Outsourcing is the hiring of outside support to do all or part of a project
• E-commerce site development problems can not be avoided by outsourcing
• Success depends on how well the e-commerce initiative is integrated into and supports business activities
Internal Teams
• In determining which parts of an e-project
to outsource first create an internal team
– Include people:
• With technical know-how about the Internet
• Creative thinkers
• Already successful employees
Internal Teams (III)
• Set aside between 5-10% of a project’s budget for
– quantifying the projects value and measuring the achievement (e.g using metrics)
• More and more companies are realising the importance of their staff’s knowledge about the business and its processes
– These resources do not appear in companies financial statements
Internal Teams (IV)
• The internal team decides
– Which part of the project to outsource
– Who the parts will be outsourced to
– Which partners the company needs to hire for
the project
Types of Outsourcing
• There are three types of outsourcing
– Early outsourcing
• E-commerce initiatives lend themselves more to
early outsourcing
– Late Outsourcing
– Partial outsourcing
Early Outsourcing
• The initial site design and development is outsourced in order to launch it quickly– An e-commerce site can rapidly become a source of
competitive advantage for a company
• Outsourcing team trains company information system professionals in the technology and hands over the operation of the site
• It is best for the company’s own information systems people to work closely with the outsourcing team and develop ideas for improvements as early as possible
Late Outsourcing
• This is the more traditional way
• The company’s information system professionals
do the initial design and development work,
implement the system and operate it until it
becomes a stable part of the business
• After the competitive advantage is gained, the
system is outsourced, allowing the team to
pursue new technology projects
Partial Outsourcing
• The company identifies specific portions of
the project that can be completely
designed, developed, implemented and
operated by another firm that specialises
in a particular function
– In both early and late outsourcing a single
group is responsible for the entire design,
development and operation of a project
Partial Outsourcing (I)
• E-commerce initiatives can benefit from
partial outsourcing
• Partial outsourcing is also called
component outsourcing
Partial Outsourcing Example
• Many smaller Web sites outsource their email
handling and response functions
• Electronic payment systems
– A company may use an external vendor to take care
of payment processing
• When the customer is ready to pay, he/she is taken to
another site and then returned to the original site
– The most common part of an e-commerce project that
is outsourced is the web-hosting activity
Managing Electronic Commerce
Initiatives• To manage complex e-commerce
implementations formal management
techniques should be used:
– Project management
– Project portfolio management
– Specific staffing
– Post-implementation audits
Project Management
• A collection of formal techniques for planning and controlling the activities undertaken to achieve a specific goal
• The project plan includes cost, schedule and performance
• Applications such as Microsoft Project and Primavera Project Planner help with project planning
• These type of projects (e-commerce projects) have a reputation for failing
Project Portfolio Management
• A technique used to manage multiple projects
– Each project is monitored as if it is an investment in a financial portfolio
– Each project is assigned a rank based on its importance to the strategic goals of the business and level of risk
– E-commerce projects are viewed as investments in assets
Staffing for E-Commerce
• The internal team must determine the staffing needs for the e-commerce initiatives
• The general areas of staffing required are:– Business, project and account managers
– Application specialists
– Web programmers and graphic designers
– Content creators, managers or editors
– Customer service
– System, and database administration
– Network operations
Business Manager
• Should be a member of the internal team
• Sets objectives for the project
• Responsible for implementing the elements of
the business plan and reaching the objectives
set
• Develops proposal for plan revisions and
funding
• Should have the required domain knowledge
(e.g. retail knowledge if a retail Web site is being
built)
Project Manager
• Specific training or skills in tracking costs
and accomplishing project goals
• Certification might be useful (e.g. Project
Management Institute) or MBA
• Skills in the use of project management
software
Account Manager
• Keeps track of multiple Web sites in use by a project
• Or keeps track of projects that will combine to make a larger Web site
• The account manager supervises the location of specific Web pages and related software installations as they are moved from test, to demonstration, to production
• In smaller companies they handle the project and account management functions
Application Specialist
• Maintain accounting, human resources,
and logistics software
• Must maintain e-commerce software, e.g.
catalogs, payment processing
Other Roles
• Web programmers– Design and write code for Web site
• Web graphics designers– A person trained in art, layout, composition and
understands how Web pages are constructed
• Content creators– Write original content
• Content managers/editors– Purchase existing material and adapt it
Post-Implementation Audits
• A formal review of a project after it is up
and running
• Managers compare the the objectives,
performance specifications, cost
estimates, and scheduled delivery dates
plans with the actuals
