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Planning e-commerce initiatives - scitec.uwichill.edu.bb Planning e-commerce initiatives - scitec.uwichill.edu.bb Presentation Transcript

  •  
  • Electronic Commerce COMP3210 Dr. Paul Walcott
  • Contents
    • Part I
      • Planning E-commerce Initiatives
    • Part II
      • Strategies for developing e-commerce Web sites
    • Part III
      • Managing Electronic Commerce Initiatives
  • 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
  • Example of Objectives 10% (Icon 5.01), 25% (Icon 5.02) ACTUAL 25% (Icon 5.01), 75% (Icon 5.02). MUST 50% (Icon 5.01), 100% (Icon 5.02). PLAN Percentage completed at the specified milestone SCALE To create a comprehensive tester's guide to the Icon Income system. GIST
  • 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 object 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 (I)
    • Businesses can use downstream strategies to improve the value that the business provides to customers
    • Or can pursue upstream strategies that focus on reducing cost or generating value by working with suppliers or inbound shipping and freight service providers
  • 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) Customer satisfaction surveys, quantity of customer complaints Improve customer service Change in per-unit sales volume Enhance existing marketing program Surveys or opinion polls that measure brand awareness Build brand
  • Measuring Benefit (II) Number of visitors Provide portals Quantity of auctions, bidders, sellers, items sold, registered participants, dollar value of items sold Hold auctions Cost, quality and on-time delivery of materials or services purchased Imply supplier chain operation Quantity and type (telephone, fax, e-mail) of support activities Reduce cost of after-sale support
  • 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
  • Change Management (I)
    • If change is not properly managed, employees feel
      • Uncomfortable
      • Inadequate
      • Stressed which leads to reduced work performance
      • Unable to do the job properly
      • Powerless
  • 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 $1 million
      • 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 $2 - $5 million
    • To build a Web site that is noticeably better than competitors will cost a minimum of $15 million
    • 10 of the top 100 e-commerce sites spent over $10 million 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 $5000
    • For a business with full transaction and payment processing capabilities, it is difficult to keep it under $10,000 per year
    • Construction of new Web sites for small businesses actually averages $140,000
    • Minimum amount to open a complete e-commerce Web site is $150,000
  • 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 Example
    • Kmart ( http://www.kmart.com/ )
      • >$140 million to create online retail website
      • Much of the site’s cost is hidden from the user
        • Cost of customising middleware that connects the Web site to Kmart’s vast inventory and logistics databases
  • 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 Development v. Outsourcing
    • Using internal people to lead e-commerce initiatives helps to ensure that the companies specific needs are addressed and that the plan fits the culture
      • Outside consultants are seldom able to learn enough about the culture (in the contract period) in order to accomplish all the objectives
  • Internal Development v. Outsourcing Example
    • Few companies are large enough or have sufficient expertise to launch an e-commerce project without external help
      • E.g. Wal-mart (with annual sales of $150 billion) in 2000 hired another company for outside support
  • 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 (II)
    • Do not select a technical wizard as project leader if he/she
      • does not have the necessary business skills
      • Is not well-known and respected by the operating function managers
      • Is not creative
  • 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
  • Selecting a Web Hosting Service
    • The internal team should be responsible for selecting the ISP to host the site
      • For smaller e-commerce projects teams can consult an ISP dictionary (for ISPs, web hosting services or ASPs (application service provider))
      • Larger companies should use consultants or other firms that rate service providers
  • Selecting a Web Hosting Service (I)
    • The most important factors to use when evaluating a hosting service are:
      • Functionality
      • Reliability
      • Bandwidth and server scalability
      • Security
      • Backup and disaster recovery
      • Cost
  • New Methods for implementing Partial Outsourcing
    • In the past five years new ways of implementing partial outsourcing have been creating
      • Incubators
      • Fast venturing
  • Incubators
    • A company that offers start-up companies a physical location with offices, accounts and legal assistance, computers, and Internet connections at a very low monthly cost
      • Some also offer seed money, management advice an marketing assistance
    • In exchange the company gives 10-50% ownership of the company to the Incubator
  • Incubators (I)
    • When the company grows and can obtain venture capital financing or can publicly offer stock, the Incubator sells all or part of its interest and re-invests in a new incubator candidate
    • Example:
      • Idealab ( www.idealab.com/ ) was one of the first Internet incubators and helped www.carsdirect.com/home
  • Internal Incubators
    • Internal incubators are incubators that are set up by a company (using internal staff),
      • e.g. Kodak internal venturing program of the 1980s
    • Most of these were unsuccessful because employees found it difficult to maintain an entrepreneurial spirit when what ever they developed would be taken away and controlled by the parent company
  • Internal Incubators (I)
    • A new internal incubator model has emerged were the resulting technology is left under the control of the team, who forms a company
    • The parent company and the new company that become strategic partners
    • This new internal incubator model promises to be more successful that the traditional model
  • Fast Venturing
    • An existing company that wants to launch an e-commerce initiative joins with external equity and operational partners that can offer the experience and skills that can scale up the project rapidly
      • Equity partners are usually banks or venture capitalist that can offer money or expertise
      • Operational partners are firms, such as system integrators, consultants and Web portals who have the experience in moving projects along and scaling up prototypes
  • Fast Venturing (I) Operational partners Turn ideas into a business plan. Provide financial, technical and operations expertise. Provide industry best practice knowledge. Scale up prototype to an operating model. Equity partners Review and refine ideas. Provide advice. Evaluate prototype. Provide contacts (including operational partners). Venture sponsor Develop ideas. Staffs internal team. Create prototype. Provide all or most of the start-up funds.
  • 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
  • Other Roles (I)
    • Customer service personnel
      • Help design and implement customer relationship management activities, e.g. issue passwords, design customer interface features, handle customer e-mail and telephone requests for service and conduct telemarketing for the site
        • Some companies hire a call centre to handle phone calls and e-mail
  • Other Roles (I)
    • Systems administrator
      • Responsible for system reliability and security
    • Network operation staff
      • Load estimation and monitoring, resolving network problems and managing network operations
    • Database administration
      • Support activities such as transaction processing, order entry, inquiry management or shipment logistics
  • 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
  • Post-Implementation Audits
    • The purpose is not to lay blame but to:
      • Provide project and business managers to raise questions about the objectives and use the feedback in other projects
    • The audit should result in a comprehensive report that analyses the project performance, the administration, organisational structure and the performance of the project team
    • Some audits contain a confidential section which evaluates the performance of individual team members – to help when choosing teams in future