Chapter 12 Key Concepts

Planning Ecommerce Initiatives:
Identifying Objectives
-Examples of objectives include: increasing sales in existing markets, opening new markets, serving existing customers better, identifying new vendors, coordinating more efficiently with existing vendors, or recruiting new employees more effectively.

Linking Objectives to Business Strategies
-Downstream Strategies: improve the value that the business provides to its customers
-Upstream Strategies: focus on reducing costs or generating value by working closely with suppliers, etc,
-other activities/initiatives include: building brands, enhancing existing marketing programs, selling products and services, selling advertising, managing supply chains, operating auctions, building virtual communities and Web portals.

Measuring Benefits
Tangible benefits of Ecommerce include increased sales and reduced costs. An example of an intangible benefit is increased customer satisfaction.

Managing Costs
-total cost of ownership: hardware/software costs, costs of hiring & training, paying the Web design, those who write or customize the software, create, operate and maintain the website.
-change management: process of helping employees cope with changes by communicating the need for change, including employees in the decision process, and allowing them to participate in the planning for the change.
-opportunity costs: the forgone benefits that a company could have obtained/lost benefits from an action not taken.
-web site costs: a basic entry-level site costs around $1 million, whereas a true differentiator would cost upwards of $15 million. Costs of maintaining and improving the site will be between 50-200% of the initial startup cost.

Comparing Benefits to Costs
-Major investments in equipment, personnel, or other assets are called capital projects or capital investments.
-If the benefits of a project exceed the costs by a considerable margin, the company invests in the project.
-Need to identify potential benefits, identify costs required to generate those benefits, and then evaluate whether or not those benefits exceed the costsàthe cost/benefit approach

Return on Investment
-measures the amount of income that will be provided by a specific current expenditure. Some of these techniques include: net present value method (NPV), internal rate of return (IRR), and the payback method.
-ROI techniques provide quantitative expressions of a comfortable benefit-to-cost margin for a specific company.

Strategies for developing Ecommerce Web Sites:
Internal development vs Outsourcing
-Using internal people to lead all projects ensures that the company’s specific needs are addressed and that the initiative is congruent with the goals and culture of the org.
-Outsourcing: hiring another company to provide the outside support for all or part of the project.
-The internal team: must have knowledge about the Internet & technologies, be creative thinkers, have business knowledge and the respect of the firm’s operating management. Also, a good sense of the company’s goals and culture is important. Measuring achievements can be non-monetary such as increased customer satisfaction, number of sales leads generated, etc. The company must recognize the value of its human capital, even though such assets do not show up on financial statements.
-Early outsourcing: when a company outsources the initial design and development to launch the project quickly. The outsourcing team then trains the company’s IS team in the new technology before handing the operation of the site over to them.
-Late outsourcing: the company’s IS team do the initial design & development work, implement the system until it becomes a stable part of operations. The maintenance of the system is then outsourced so that the IS team can develop new technologies to further their competitive advantage.
-Partial outsourcing: the company identifies portions of the project that can be completely designed, developed, implemented and operated by another firm that specializes in a particular function.

Selecting a hosting service
The most important factors to evaluate when selecting a hosting service:
-functionality
-reliability
-bandwidth and server ability
-security
-backup and disaster recovery
-cost

New methods for implementing partial outsourcing
-Incubators: companies that offer start-up companies a physical location with offices, accounting and legal assistance, computers, and Internet connections at a very low cost. Sometimes they offer seed money, management service, and marketing assistance as well. In exchange, they receive an ownership interest in the company, typically between 10 and 50 percent. Once the company is ready to go out on its own, the incubator sells its shares and invests in a new start-up company.
-Fast Venturing: an existing company that wants to launch an electronic commerce initiative, joins external equity partners (banks or venture capitalists) and operational partners (firms such as systems integrators, consultants, and Web portals) that can offer the experience and skills to develop be project very rapidly.

Managing Ecommerce implementations:
Project management
-The collection of formal techniques for planning and controlling the activities undertaken to achieve a specific goal.

Project portfolio management
-Each project in monitored as if it were an investment in a financial portfolio.

Staffing for Ecommerce
The general areas of staffing that are most important to the success of e-commerce initiatives include:
-business managers (sets objectives, implements business plan, makes adjustments)
-project managers (tracks costs/accomplishments of project objectives)
-account managers (keeps track of multiple Web sites in use by a project)
-applications specialists (maintenance of specific functional software programs)
-web programmers (designs and writes the underlying code for database driven sites)
-web graphics specialists (art, layout, composition, visual appeal/ease of use of Web site)
-content creators (writes original content for a Web site)
-content managers or editors (purchases and adapts existing material for Web site use)
-customer service reps (managing customer relationships in the ecommerce operation)
-systems administrators (responsible for the system’s reliable & secure operation)
-network operators (resolve network problems, developing fault resistant technologies)
-database administrators (defining data elements in database design, & DMBS operation)

Post-implementation Audits
-A formal review of a project after it is set up and running. It gives managers a chance to examine the objectives, performance specifications, cost estimates, and scheduled delivery dates of the project in its planning stage and compare it to what actually happened.