MI S 207_LECTU RE 9 (B O O K CHA PT ER 12 )

IMPLEMENTING E-
BUSINESS INITIATIVES Md Mahbubul Alam, PhD
Professor
INTENDED LEARNING OUTCOMES (ILOs)

• Measuring the Success of E-Business Initiatives (benefit vs. cost)

• Funding E-Business Initiatives
• Strategies for E-Commerce Websites
• IT Project Management

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IDENTIFYING BENEFITS AND
ESTIMATING COSTS OF
ELECTRONIC COMMERCE
INITIATIVES 3
IDENTIFYING OBJECTIVES
Typical business electronic commerce Linking Objectives to business Strategies
objectives
Downstream strategies
 Tactics to improve the value businesses provide
 Increasing existing market’s sales to customers
 Opening new markets Upstream strategies
 Serving existing customers better  Focus on reducing costs or generating value
 Identifying new vendors
 Coordinating more efficiently with
Web use for businesses
existing vendors  Attractive sales channel for many firms
 Recruiting employees more  Complement business strategies, improve
effectively competitive positions

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MEASURING BENEFITS:
CHALLENGES
Some electronic commerce initiatives Using Web sites to improve customer service
 Obvious, tangible, easy to measure or after-sale support
 Set goals of increased customer satisfaction
 Example: increased sales or reduced costs
 Reduce customer service or support costs
 Example: Philips Lighting
Other electronic commerce initiatives  Provided Web ordering system for smaller customers
 More difficult to measure  Primary goal: reduce cost of processing smaller orders
 Example: increased customer satisfaction or  Built pilot Web site and had smaller customers try it
brand awareness  Results: customer service phone calls from test group dropped by 80
percent
 Supply chain managers
Companies selling goods or services  Measure supply cost reductions, quality improvements, faster
online deliveries of ordered goods
 Measure sales volume in units or dollars  Auction sites
 Set goals for number of auctions, number of bidders and sellers,
dollar volume of items sold, number of items sold, number of
registered participants

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Estimated costs for business Web sites

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RETURN ON INVESTMENT (ROI)
Measures amount of income (return) provided by specific current expenditure
(investment)
 Examples:
 Payback method, net present value method, internal rate of return
 Provides quantitative expression of comfortable benefit-to-cost margin

ROI built-in biases

 ROI requires all costs, benefits be stated in dollars
 Gives undue weight to costs
 ROI focuses on predicted benefits
 Initiatives have returned benefits not foreseen
 ROI tends to emphasize short-run benefits over long-run benefits
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FUNDING E-BUSINESS
INITIATIVES
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FUNDING ONLINE BUSINESS
STARTUPS
Angel investors funded initial startup
 Became stockholders hoping business grows rapidly
 Sell interest to venture capitalist

Venture capitalists
 Very wealthy individuals, investment firms
 Look for small companies about to grow rapidly
 Hope for rapid growth and initial public offering

Initial public offering (IPO)

 Selling stock to public

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FUNDING ONLINE BUSINESS
STARTUPS (CONT’D.)

System of financing startup and initial growth of online businesses

 Benefits
 Access to large amounts of capital early
 Costs
 Investors, capitalists got most profits, pressure to grow rapidly

Decrease need for venture capitalists and angel investors by:

 Relieving pressure to grow rapidly
 Becoming more creative
 Learning from mistakes

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STRATEGIES FOR E-
COMMERCE WEBSITES
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Evolution of Web site functions

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INTERNAL DEVELOPMENT VS. OUTSOURCING

Initiative’s success dependency

 How well initiative integrates into and supports business activities

Internal people leading projects ensures:

 Company’s specific needs are addressed
 Initiative congruent with organization goals, culture

Outside consultants
 Seldom able to learn enough about organization’s culture to accomplish objectives

Key to success
 Finding balance between outside and inside support

Outsourcing
 Hiring another company to provide outside support for all or part of project

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INTERNAL TEAM:
IMPORTANCE
First step in outsourcing decision making is create internal team
 Team members
 People knowledgeable about the Internet and its technologies
 Creative thinkers
 Distinguished within the company
 Project lead
 Mistake: technical wizard, not business knowledgeable, not well known
 Better choice: person with business knowledge, creativity, respect of firm’s operating function managers,
good sense of goals and culture
 Intellectual capital
 Employees’ knowledge about the business and its processes
 Human capital measures
 Include employee competencies
 Include value of customer loyalty and business partnerships
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INTERNAL TEAM:
RESPONSIBILITIES
 Responsible for initiative
 From setting objectives to final implementation

Internal team decides:

 Project parts to outsource
 Outsourcer
 Consultants or partners needed

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OUTSOURCING
Early outsourcing
 Company outsources initial site design and development to launch project quickly
 Outsourcing team trains company’s information systems professionals before handing site operation to them
 Company’s own information systems people work closely with outsourcing team
 Develop ideas for improvements as early as possible in project life

Late outsourcing
 More traditional approach
Company’s information systems professionals
 Perform initial design and development work, implement system, and operate system until stable part of business
operation
Once competitive advantage gained
 Electronic commerce system maintenance outsourced
 Company’s information systems professionals turn attention and talents to developing new technologies, providing
further competitive advantage

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OUTSOURCING (CONT’D.)
Partial outsourcing
 Also called component outsourcing
 Company identifies specific project portions
 Can be completely designed, developed, implemented, and operated by another firm specializing in a
particular function

Examples
 Smaller Web sites outsource e-mail handling and response functions
 Electronic payment system
 Web hosting activity

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NEW METHODS FOR IMPLEMENTING
PARTIAL OUTSOURCING
New ways of implementing partial outsourcing strategy evolved specifically for
Web businesses
Incubator
 Offers start-up companies physical location with offices, accounting and legal assistance,
computers, Internet connections
 Very low monthly cost
 May offer seed money, management advice, marketing assistance
 Receives ownership interest in company
 Incubator sells all or part of its interest
 Company grows to obtain venture capital financing, launch stock public offering
 First Internet incubators: Idealab
 Helped CarsDirect.com, Overture, Tickets.com
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NEW METHODS FOR IMPLEMENTING
PARTIAL OUTSOURCING (CONT’D.)
Fast venturing
Existing company wants to launch electronic commerce initiative
 Joins external equity partners and operational partners offering experience, skills needed
Equity partners: usually banks, venture capitalists
 Equity partners sometimes offer money
 Equity partners more likely to offer experience
Operational partners: firms
 Systems integrators, consultants, Web portals
 Experienced in moving projects along, scaling up prototypes

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Elements of fast venturing
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IT PROJECT
MANAGEMENT
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PROJECT MANAGEMENT
Project management
 Collection of formal techniques for planning and controlling activities undertaken to achieve specific goal
 Project plan criteria
 Cost, schedule, performance
 Helps management make trade-off decisions involving the three criteria

Project management software

 Specific application software to help project managers oversee projects
 Examples:
 Primavera P6, Microsoft Project
 Open Workbench: open-source project management software package offering many of the same features as the leading commercial
products
 Helps team manage tasks assigned to consultants, technology partners, outsourced service providers

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PROJECT PORTFOLIO
MANAGEMENT
Project portfolio management
 Technique whereby project is monitored like an investment in a financial portfolio
 Allows tradeoffs between cost, schedule, and quality across projects as well as within individual projects
 Provides more flexibility in allocating resources to achieve the best set of benefits from all projects in the most timely manner

Project management software

 Designed to handle individual projects
 Not suited for consolidating activities

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STAFFING FOR ELECTRONIC
COMMERCE
Chief information officer (CIO)
 Organization’s top technology manager
 Responsibilities
 Overseeing all information systems and related technological elements required to undertake and operate online business
activities

Business manager
 Member of internal team setting project objectives
 Responsible for implementing business plan elements, reaching objectives set by internal team

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STAFFING FOR ELECTRONIC
COMMERCE (CONT’D.)
Project manager
 Person with specific training, skills in tracking costs and accomplishment of specific project
objectives

Project portfolio manager

 Usually promoted from the ranks of the project managers
 Responsible for tracking all ongoing projects and managing them as a portfolio

Account manager
 Keeps track of multiple Web sites in use or keeps track of projects combining into larger Web site

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STAFFING FOR ELECTRONIC
COMMERCE (CONT’D.)
Applications specialists
 Maintain accounting, human resources, logistics software

Web programmers
 Design and write underlying code for dynamic database-driven Web pages

Web graphics designer

 Trained in art, layout, composition
 Understands how Web pages are constructed

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STAFFING FOR ELECTRONIC
COMMERCE (CONT’D.)
Content creators
 Write original content

Content managers or content editors

 Purchase existing material and adapt it for use on the site

Social networking administrator

 Responsible for managing virtual community elements of the Web operation

Online marketing manager

 Specializes in specific techniques used to build brands and increase market share
 Uses Web site and other online tools: e-mail marketing

Customer service personnel

 Design and implement customer relationship management activities in electronic commerce
operation

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STAFFING FOR ELECTRONIC
COMMERCE (CONT’D.)
Call center
 Company handling incoming customer telephone calls, e-mails for other companies
 Makes sense for smaller companies

Systems administrator
 Responsible for system’s reliable, secure operation

Network operations staff functions include:

 Load estimation and load monitoring
 Resolving network problems as they arise
 Designing and implementing fault-resistant technologies
 Managing any network operations outsourced to service providers or telephone companies

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STAFFING FOR ELECTRONIC
COMMERCE (CONT’D.)
Database administration function support activities include:
 Transaction processing, order entry, inquiry management, shipment logistics
 Activity requirements:
 Existing database into which site being integrated
 Separate database established for electronic commerce initiative

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POSTIMPLEMENTATION AUDITS
Postimplementation audit (postaudit review)
 Formal review of project
 After up and running

Examine project items established in planning stage

 Compare to what actually happened
 Objectives, performance specifications, cost estimates, scheduled delivery dates

Blame identification approach

 Used more in the past
 Focused on identifying individuals to blame for cost overruns, missed delivery dates

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POSTIMPLEMENTATION AUDITS
(CONT’D.)
Feedback on strategies used more today
 Obtains valuable information
 Useful in planning future projects
 Gives participants meaningful learning experience

Comprehensive audit report

 Analyzes project’s overall performance
 How well project administered
 Appropriate project organizational structure in place
 Specific project team(s) performance
 Should compare actual results to objectives

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CHANGE MANAGEMENT
Information system projects involve change
Employee concerns
 Ability to cope with changes, ability to continue to do good work, job security

Concerns lead to increased stress

Change management
 Process of helping employees cope with changes
 Includes tactics designed to help employees feel involved with change
 Helps employees overcome feelings of powerlessness

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