Chapter 12
Planning for Electronic Business:
Resource and Implementation Issues
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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
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Learning Objectives
• 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
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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
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Identifying Objectives
• Common objectives include:
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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.
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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.
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Linking Objectives to Business
Strategies
• Web is an attractive sale channel.
• Web can be used to complement business
strategies and improve competitive
positions.
• Electronic commerce opportunities can
inspire businesses to undertake many
activities.
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Linking Objectives to Business
Strategies
• 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.
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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.
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Measuring Benefit Objectives
• 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.
Click to see Figure 12-1:
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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.
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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.
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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
Click to see Figure 12-5:
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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.
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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.
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The Internal Team
• Measuring the achievement of internal team
is very important.
• Customer satisfaction, number of sales
leads generated, and reductions in orderprocessing time are examples of metrics
that can provide the team’s level of
accomplishment.
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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.
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Late Outsourcing
• The company do the initial design,
development, implementation, and operate
the system until it becomes stable.
• Once the company has gained all the
competitive advantage provided by the
system, the maintenance of the electronic
commerce system can be outsourced.
• This approach is called late outsourcing.
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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 specialized in a particular function.
• E-mail system, electronic payment system,
and Web hosting are examples of partial
outsourcing projects.
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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.
Click to see Figure 12-6:
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Selecting a Hosting Service
• The factors to evaluate when selecting a
hosting service include:
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Functionality
Reliability
Bandwidth and server scalability
Security
Backup and disaster recovery
Cost
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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
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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 incubator receive an ownership
interest in the company.
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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.
Click to see Figure 12-7:
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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 large
that it became impossible for managers to
maintain control without some kind of
assistance.
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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 tradeoff decisions regarding these three criteria.
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Project Management
• 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.
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Project Management
• 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 notfor-profit organization devoted to the
promotion of professional project
management practices.
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Staffing the Operation
• Regardless of outsourcing, it must determine the
staffing needs of the electronic commerce
initiative.
• The general areas of staffing include:
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Business management
Application specialists
Customer service staff
Systems administration
Network operations staff
Database administration
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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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