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Chapter14ImplementingECSystems:FromJustificationtoSuccessfulPerformanceLearningObjectivesDescribethemajorcomponentsofECimplementation.DescribetheneedforjustifyingECinvestments.UnderstandthedifficultiesinmeasuringandjustifyingECinvestments.Recognizethedifficultiesinestablishingintangiblemetrics.ListanddescribetraditionalandadvancedmethodsofjustifyingECinvestments.DescribesomeexamplesofECjustification.LearningObjectivesDescribetheroleofeconomicsinECevaluation.DiscussthestepsindevelopinganECsystem.DescribethemajorECdevelopmentstrategies.ListthevariousECdevelopmentmethodsalongwiththeirbenefitsandlimitations.Discussthemajoroutsourcingstrategies.DescribeECorganizationalstructureandchangemanagement.Understandhowproduct,industry,seller,andbuyercharacteristicsinfluencethesuccessofEC.TheImplementationLandscapeTheMajorImplementationFactorsJustification/EconomicsAcquireorSelfDevelopYourE-CommerceSystemOrganizationalReadinessandImpactsofE-CommerceHowtoSucceedTheElementsinECImplementationWhyJustifyE-CommerceInvestments?HowCanTheybeJustified?IncreasedPressureforFinancialJustificationOtherReasonsWhyECJustificationIsNeededECInvestmentCategoriesandBenefitsHowIsanECInvestmentJustified?*Cost–benefitanalysisCost–BenefitAnalysisandtheBusinessCaseWhatNeedstobeJustified?WhenShouldJustificationTakePlace?WhyJustifyE-CommerceInvestments?HowCanTheybeJustified?UsingMetricsinECJustificationMetrics,Measurements,andKeyPerformanceIndicators*Keyperformanceindicators(KPIs)*WebAnalyticsHowMetricsAreUsedinPerformanceManagementDifficultiesinMeasuringandJustifyingE-CommerceInvestmentsTheECJustificationProcessDifficultiesinMeasuringProductivityandPerformanceGainsDataandAnalysisIssuesRelatingECandITSExpenditurestoOrganizationalPerformanceOtherDifficultiesIntangibleCostsandBenefitsTangibleCostsandBenefitsIntangibleCostsandBenefitsManagingIntangibleBenefitsAModelforITProjectJustificationSources:BasedonGunasekaranetal.(2001)andMisra(2006);andtheauthors’experience.DifficultiesinMeasuringandJustifyingE-CommerceInvestmentsTheProcessofJustifyingECandITProjectsTheUseofGartner’sHypeCycleWhatIsGartner’sHypeCycle?*HypecycleThefivestagesofthehypecycleare:TechnologytriggerPeakofinflatedexpectationsTroughofdisillusionmentSlopeofenlightenmentPlateauofproductivityApplicationoftheHypeCycleMethodsandToolsforEvaluatingandJustifyingE-CommerceInvestmentsOpportunitiesandRevenueGeneratedbyECInvestmentsMethodologicalAspectsofJustifyingECInvestmentsTypesofCostsDistinguishbetweeninitial(up-front)costsandoperatingcostsDirectandindirectsharedcostsIn-kindcostsMethodsandToolsforEvaluatingandJustifyingE-CommerceInvestmentsTraditionalMethodsforEvaluatingECInvestmentsTheROIMethodPaybackPeriodNPVAnalysisInternalRateofReturn(IRR)Break-EvenAnalysesTheTotalCostsandBenefitsofOwnership*Totalcostofownership(TCO)*Totalbenefitsofownership(TBO)EconomicValueAddedUsingSeveralTraditionalMethodsforOneProjectBusinessROIVersusTechnologyROIMethodsandToolsforEvaluatingandJustifyingE-CommerceInvestments*ROICalculatorsTheOfferingsfromBaseline

MagazineOtherCalculatorsAdvancedMethodsforEvaluatingITandECInvestmentsFinancialapproachesMulticriteriaapproachesRatioapproachesPortfolioapproachesExamplesofE-CommerceMetricsandProjectJustificationJustifyingE-ProcurementJustifyingSocialNetworkingandtheUseofWeb2.0ToolsJustifyinganInvestmentinMobileComputingandinRFIDJustifyingInvestinginRFIDJustifyingSecurityProjectsJustifyingBuyingProductsorServicesfromVendorsTheEconomics

ofE-CommerceReducingProductionCostsProductCostCurves*ProductionFunction*AgencyCosts*TransactionCostsSearchcostsInformationcostsNegotiationcostsDecisioncostsMonitoringandpolicingcosts

Legal-relatedcostsAverageCostCurveof

(a)Regularand(b)DigitalProductsTheEconomicEffectsofEC:TheProductionFunctionandAgencyCostsTheEconomicEffectsofEC:TransactionCostsTheEconomics

ofE-CommerceIncreasedRevenuesReachVersusRichnessFacilitatingProductDifferentiation*ProductdifferentiationECIncreasesAgilityValuationofECCompanies*

ValuationReachvs.RichnessE-CommerceSystemLifeCycleAFive-StepApproachto

DevelopinganE-CommerceSystemTheEssentialsoftheSDLC:AnECApplicationTheFiveTraditionalStepsStep1:Identifying,justifying,andplanningECsystemsStep2:CreatinganECarchitectureStep3:SelectingadevelopmentoptionStep4:Installing,testing,integrating,anddeployingECapplicationsStep5:Operations,maintenance,andupdatesManagingtheDevelopmentProcessTheECApplicationDevelopmentProcessDevelopmentStrategiesforE-CommerceProjectsTherearefourpopularoptionsfordevelopinganECwebsite:Developthesitein-houseBuyapackagedapplicationOutsourcethesystemdevelopmentLeasetheapplicationDevelopmentStrategiesforE-CommerceProjectsIn-HouseDevelopment:Insourcing*InsourcingBuytheApplications(Off-the-ShelfApproach)*

TurnkeyapproachAdvantagesandLimitationsofReadyMadePackagesOutsourcingECSystemsDevelopmentandApplicationsTypesofOutsourcingOptionsDevelopmentStrategiesforE-CommerceProjectsLeasingECApplications:CloudComputingandSoftwareAsAService(Saas)*CloudComputingAdvantagesofCloudApplicationsOtherDevelopmentOptionsJoinane-marketplaceJoinaconsortiumJoinanauctionorreverseauctionthird-partysiteFormjointventures

UseahybridapproachDevelopmentStrategiesforE-CommerceProjectsSelectingaDevelopmentOptionBeforechoosinganappropriatedevelopmentoption,youneedtoconsiderthefollowingfactors:CustomersMerchandisingSalesservicePromotionTransactionprocessingMarketingdataandanalysisBrandingOrganizationalImpactsofE-CommerceImprovingDirectMarketingandSalesTransformingOrganizationsandWorkTechnologyandOrganizationalLearningTheChangingNatureofWorkDisintermediationandReintermediationRestructuringBusinessProcessesRedefiningOrganizationsNewandImprovedProductsandServices*MassCustomizationand*On-DemandManufacturingTheOn-DemandRevolution*3DPrintingHowCustomizationIsDoneOnline:TheCaseofNikeShoesOrganizationalImpactsofE-Commerce*ChangeManagementHowtoOrganizeanECUnitinaCompanyOptionsforOrganizingtheECWorkforceReporttotheMarketingDepartmentReporttotheFinanceDepartmentReporttotheChiefOperatingOfficerDistributetheECWorkforceinSeveralDepartmentsReporttotheITDepartmentCreateaNew,PossiblyAutonomousECDepartmentNoFormalStructureforECExistsCreateanAutonomousDivisionoraSeparateOnlineCompanyOpportunitiesForSuccessIn

E-CommerceandAvoidingFailureFactorsThatDetermineE-CommerceSuccessE-CommerceFailuresE-CommerceSuccessesStrategiesforECSuccessCulturalDifferencesinECSuccessesandFailuresCanECSucceedinDevelopingEconomies?ManagerialIssuesHowshouldthevalueofECinvestmentsbejustified?WhichinvestmentanalysismethodshouldweadoptforECjustification?Whoshouldconductthejustification?Shouldweusethehypecycle?ShouldweembarkoncloudcomputingproductsforourECinitiati

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