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1 Chapter 12 Planning for Electronic Business: Resource and Implementation Issues.

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1 1 Chapter 12 Planning for Electronic Business: Resource and Implementation Issues

2 2 Learning Objectives In this chapter, you will learn about: Identifying the value of electronic commerce initiatives Aligning implementation plans with strategies Deciding which electronic commerce project elements to outsource

3 3 Learning Objectives (Cont.) Selecting Web hosting services Using incubators and fast venturing techniques to launch Internet business initiatives Using formal project management techniques to plan and control electronic commerce activities Staffing electronic commerce activities

4 4 Planning the Electronic Commerce Project A successful business plan for an electronic commerce initiative should include activities that will: –Identify the initiative’s specific objectives –Link those objectives to business strategies –Manage the implementation of those business strategies –Oversee the continuing operations of the initiative once it is launched

5 5 Identifying Objectives Common objectives include: –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 Resource decisions should consider the expected benefits and expected costs of meeting the objectives.

6 6 Linking Objectives to Business Strategies Businesses can use downstream strategies, which are tactics that improve the value that the business provides to its customers. Businesses can pursue upstream strategies that focus on reducing costs or generating value by working with suppliers or inbound logistics.

7 7 Linking Objectives to Business Strategies (Cont.) The Web is an attractive sales channel. The Web can be used to complement business strategies and improve competitive positions. Electronic commerce opportunities can inspire businesses to undertake many activities.

8 8 Linking Objectives to Business Strategies (Cont.) More companies are taking a closer look a the benefits and costs of their electronic commerce projects. A good business plan will set specific objectives for benefits to be achieved and costs to be incurred. Companies use pilot Web site to test an electronic commerce idea, and then release a production version when it works well.

9 9 Measuring Benefit Objectives Many companies create Web sites to build their brands or enhance existing marketing programs. These companies can set goals in terms of increased brand awareness, as measured by market research surveys. Companies that sell goods or services on their sites can measure sales volumes in units or dollars.

10 10 Measuring Benefit Objectives (Cont.) Companies can use a variety of similar measurements to assess the benefits of other electronic commerce initiatives. Supply chain managers can measure supply cost reductions, quality improvements, etc. A summary of measuring the benefits of electronic commerce initiatives appears in Figure 12-1.

11 11 Measuring Cost Objectives Many changes in the cost of hardware are downward. The increasing sophistication of software provides an ever-increasing demand for newer hardware. The project budget must include the cost of hiring, training, and personnel. Annual cost to maintain and improve a site will be between 50% and 100% of its initial cost.

12 12 Comparing Benefits to Costs If the benefits exceed the cost of a project by a comfortable margin, the company invests in the project. Companies should evaluate each element of their electronic commerce strategies using this cost/benefit approach. Managers often use return on investment (ROI) to evaluate any capital investment.

13 13 Strategies for Web Site Development The evolution of Web site functions: –The static brochures of the early day of electronic commerce –Transaction processing tools –Today’s automated homes for business processes of all kinds

14 14 Internal Development vs. Outsourcing The key to success is finding the right balance between outside and inside support for the project. Hiring another company to provide the outside support for the project is called outsourcing.

15 15 The Internal Team The first step in determining which parts of an project to outsource is to create an internal team that is responsible for the project. Business knowledge and creativity are much more important than technical expertise in establishing successful electronic commerce.

16 16 The Internal Team (Cont.) Measuring the achievement of internal team is very important. Customer satisfaction, number of sales leads generated, and reductions in order- processing time are examples of metrics that can provide the team’s level of accomplishment.

17 17 Early Outsourcing In many electronic commerce projects, the company outsources the initial site design and development to launch the project quickly. The outsourcing team then trains the company’s employees in the new technology before handing the operation of the site over to them. This approach is called early outsourcing.

18 18 Late Outsourcing The company does the initial design, development, implementation, and operates the system until it becomes stable. Once the company has gained all the competitive advantages provided by the system, the maintenance of the electronic commerce system can be outsourced. This approach is called late outsourcing.

19 19 Partial Outsourcing In partial outsourcing, the company identifies specific portions of the project that can be completely designed, developed, implemented, and operated by another firm that specializes in a particular function. E-mail systems, electronic payment systems, and Web hosting are examples of partial outsourcing projects.

20 20 Selecting a Hosting Service The internal team should be responsible for selecting the ISP that will provide the site’s hosting service. For smaller electronic commerce projects, teams can consult an ISP directory such as ‘The List’. For larger Web sites, the team will want to obtain the advice of consultants or other firms that rates ISPs and CSPs, such as ‘Keynote Systems’.

21 21 Selecting a Hosting Service (Cont.) The factors to evaluate when selecting a hosting service include: –Functionality –Reliability –Bandwidth and server scalability –Security –Backup and disaster recovery –Cost

22 22 New Methods for Implementing Partial Outsourcing New ways of implementing the partial outsourcing strategy have evolved for Web businesses. Two of the more popular methods are: –Incubators –Fast venturing

23 23 Incubators An incubator is a company that offers start-up companies a physical location with offices, accounting and legal assistance, computers, and Internet connections at a very low monthly cost. The incubators may offer seed money, management advice, and marketing assistance. In exchange, the incubators receive an ownership interest in the company.

24 24 Fast Venturing In fast venturing, an existing company that wants to launch an electronic commerce initiative joins external equity partners and operational partners to scale up the project rapidly. Equity partners are usually banks or venture capitalists. Operational partners are firms that have experience in moving projects along.

25 25 Managing Electronic Commerce Implementations The best way to manage any complex business software implementation is to use formal project management techniques. Individual projects were becoming so large that it became impossible for managers to maintain control without some kind of assistance.

26 26 Project Management Project management is a collection of formal techniques for planning and controlling the activities undertaken to achieve a specific goal. The project plan includes criteria for cost, schedule, and performance. It helps project managers make intelligent trade- off decisions regarding these three criteria.

27 27 Project Management (Cont.) Project managers use specific application software called project management software to help them manage projects. Microsoft Project and Primavera Project Planner are tools for managing resources and schedules.

28 28 Project Management (Cont.) Project management software can help the team manage the tasks assigned to consultants, technology partners, and outsourced service providers. The Project Management Institute is a not- for-profit organization devoted to the promotion of professional project management practices.

29 29 Staffing the Operation Regardless of outsourcing, an Operation must determine the staffing needs of the electronic commerce initiative. The general areas of staffing include: –Business management –Application specialists –Customer service staff –Systems administration –Network operations staff –Database administration

30 30 Post-Implementation Audits A post-implementation audit is a formal review of a project after it is up and running. The post-implementation audit gives managers a chance to examine the objectives, performance specifications, cost estimates, and schedule delivery dates that were established in its planning stage and compare them to what actually happened.

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