COMP2113 E-Commerce/E-business Management

COMP2113 E-Commerce/E-business Management Richard Henson University of Worcester May 2008

Week 11: E-commerce Management • Objectives: • Explain the issues involved for an SME thinking about using e-commerce • Provide a rationale for e-commerce spending • Provide arguments for and against outsourcing • Produce a basic e-commerce strategy for a known small business

SMEs and E-business • E-business has revolutionised the way companies do business with: • other companies • customers • internally • Why then, are many small businesses still so reluctant to jump for even an e-commerce presence?

Questions on whether or not to choose full E-business… • Where do we want to go? • Is e-business a safe way to go about it? • Will it get out of control? • & does that matter? • What are our desired objectives? • Is this the best way to achieve them? • How will we know if we are?

Setting up an e-business operation • The simple answer is that producing a successful full e-business solution, like any daunting new endeavour, is not at all easy...

Setting up an e-business operation • When a decision is being made regarding whether to go for an e-business solution • VERY important to focus on STRATEGY not TECHNOLOGY • Apart from making sure the business has the required technology, further qualities are needed (list below taken from BCS Bulletin) • creativity • improvisation • flair • intuition

Setting up an E-business Strategy • This will need to concur with the overall business strategy of the organisation… • if not, one or the other will have to change • Starting point should be the current Business Strategy • look at current business objectives • may need to be redefined • such a step may not be popular

Developing an E-Business Strategy • First stage therefore is to discuss the proposed strategy to the board! • no point in starting ANY innovative project unless it has the FULL backing of Senior Management!!! • need to justify the capital spend • what will be the Return on Investment (ROI)?

Strategy and Risk Management • Part of “selling it to the board” should be a detailed report risk assessment • how much will it cost to set up? • how much will it cost to run? • what will be the ROI? • how long before the ROI exceeds the investment? • Also a word about the market and competitors • what are they doing? • how they are doing it? • what will happen if the business doesn’t set itself up as an e-business?

E-Commerce Strategy • Therefore detailed information is needed on current Market Information & Trends • B2C? • B2B? • Overseas • Technologies? • Are they up to the task? • All need to be investigated & included in the report

E-commerce Strategy • Final report should be sufficiently clear and detailed to enable Senior Management to decide whether taking that leap into the unknown is really worth the risk: • Will they go out of business if they carry on as they are • Will they bankrupt themselves if they make a large investment in IT with no guaranteed return?

Setting up an e-business operation • Analysis • This is about about actually doing business more efficiently, not just managing an aspect of that business • much more information needs to be gathered to successfully make it all happen than for a conventional IT project: • What information will be needed? Over to you…

Answer… • Essential background information includes: • an understanding of what is technically achievable as a result of going e-business • this requires technical IT skills • if such skills are not available internally a consultant will certainly be needed • an understanding of the business and its market place • this requires good business analysis and information gathering skills which SHOULD be available internally otherwise the business would probably not have been a success in the first place…

Providing that E-business solution • Just the e-commerce site is not a matter for the faint-hearted! • plenty of examples already of failed trading sites • Putting the business and its information into universal formats that can be accessed by 3rd parties is again a potentially scary thing to do! • If IT expertise is lacking it is certainly best to work with someone who can be trusted, start with a small pilot system, & get experience first • e.g. collaboration with a partner, KT with a university

E-commerce and SMEs • Many STILL reluctant to even use the Internet as a market place • scared by horror stories of £1000s spend on a site that never delivers any new customers • Why do E-commerce websites fail? • don’t attract enough customers • don’t attract the right customers! • too much focus on the technology (i.e. producing glossy web sites) rather than the business objectives of the organisation… • Why does this happen? • usually, the lack of a proper business plan…

Establishing an e-commerce presence/e-business solution that suits the needs (and pocket) of the SME… • Start with staged development of trading website… • “we are here” presence • product pages • option to email orders • dynamic content and an online database • all portal type content to ensure the site is regularly changing… and therefore worth revisiting

Establishing that E-commerce presence • Even with all the right ingredients in place, producing a successful “all singing, all dancing” e-commerce solution is quite a challenge: • takes a great deal of time and resources... • also includes the time of the critical staff who are best able to advise on content

What if there is no time for a pilot website? • Maybe it is already too late? • A business shouldn’t even think about rushing to “for real” implementation until that strategy, including changes to business practices and the “start-up” costs, have been cast “in stone” as part of the business plan!

Stay with E-commerce or go for full E-business approach • Another crucial decision for the board • More pressure for e-business with B2B trading • 3rd parties will expect to have secure access to some of the company data… • B2C companies don’t HAVE to impress other businesses so much • may see the main need being to focus on the consumer… • but without e-business can’t be so efficient…

Three Possible Approaches to E-business Implementation • Outsource Everything… • In-house everything • Continue to manage internal IT systems including changes and use an external consultant for linking to customers and business partners: • local network contains internal corporate information • a separate service company organises all Internet-based aspects, including on-line trading

Which e-business solution? • Two important questions: • what are the needs of the organisation? • how well does the e-business solution address them? • If the organisation does not have human resources who are: • enthusiastic and confident about an e-commerce project • prepared to focus on organisation need • They should look at SOME degree of outsourcing

Whether to outsource an e-business solution? • Plenty of consultancies available that will do the whole job… • often e-business solution providers in their own right • have a vested interest • likely also to be creating websites for other organisations • could include competitors... • If getting external advice, businesses should look for experience and independence

More Analysis Required… • Board will need to have the information to systematically decide the degree of outsourcing that THEIR COMPANY needs • every organisation is different! • Required Outcome: • based on extent of existing IT resources and other factors within the organization, make a choice from: • outsourcing the solution (NOT recommended, for B2B businesses) • doing it all “in-house” • adopting a “middle way” between out and in

What “other factors” may be important to the business? • Over to you again…

The “in house” solution • Expensive… • but secures existing investment in IT • Attractive only for a company that has, or aspires to, maintaining its own IT expertise and responsibility… • enables company organisation to securely and confidently become available to 3rd parties via the Internet • Resulting system should enable employees out in the field and in the office to function in a similar way as regards access to information • same business process model in each case…

“In House” Solution (continued) • All internal and Internet systems managed from within the organisation: • Local network connected to the Internet in a secure way using firewall technology • Company website hosted on local servers • All aspects of on-line trading handled internally • All development work by internal IT staff • All security therefore handled locally • Gives the organisation full responsibility for its own data...

Complete Outsourcing • Attractive proposition for the company with few specialist IT staff • Advantages • saves a lot of money on IT equipment and salaries of expensive IT staff • puts responsibility for security and Data Protection onto someone else (!) • But… • also puts responsibility for all the organisation’s on-line trading data in someone else’s hands • can external IT providers fully understand the local business processes and needs of the business?

Partial Outsourcing • Popular with organisations that: • have an existing internal IT infrastructure • lack confidence that their network is really secure • have grave doubts about security on the Internet • Strategy: • external provider looks after the Internet side of the business, including communication with 3rd parties • most of the corporate network kept physically well away from the Internet, data subset only replicated • allow secure communication between organisational databases and the managed website, to display e.g. up to date product availability

Partial outsourcing • Builds on existing infrastructure • internal corporate information kept physically away from the Internet • Organisation still in complete control of local information • but data subset for Internet needs to be kept up to date • failure of updating on-line data sources will be highly embarrassing to the business

Problems with Partial Outsourcing • Who has responsibility for what? • Needs to be clear demarcation lines between what is the responsibility of • the business • the outsourcer • No data either in storage or “en route” should fall outside either one or other of these • outsourcer should have this written down clearly so no ambiguity

Infrastructure for Managing Local & Online Presence • A Router (usually a server computer) • diverts data between the Internet and the local network • A Firewall or Proxy Server • software - possibly held on the router, could be a separate server • makes sure that: • Internal users do not access unauthorised sites • Unauthorised remote Internet users do not access the local network

More about Firewalls • Used to defend networksagainst external attack - first line of defence • Provides the basis of system to defend and detect attacks on the network - can notify network administrator/manager of attempted breaches of security... • should be chosen on basis of system and network security needs of the organization • needs to be appropriately configured & managed • hence the attractiveness of outsourcing

More Technical Issues in going on-line • Correct configuration of all servers • Secure Internet connections with International Banking network • Regular monitoring of the network to ensure that unauthorised users are not trying to gain access • Effectiveness of digital connection between the router and a computer that is part of the Internet

Dealing with Security Threats • Can be from outsiders • Most likely hackers… • Can be from employees • disgruntled? • not properly trained? • not thinking clearly? • More difficult if partly outsourced… • security policy has to be shared with outsourcer • needs to be done carefully and systematically

The Law, and changes afoot? • Any EU organisation has a Legal responsibility to look after confidential and private data • Under the 1998 Data Protection Act, UK organisations must have a “data controller” • held responsible for data breaches • UK legislation generally regarded as being too relaxed • new charge of “data recklessness” proposed • would carry prison sentence for a data controller found guilty of negligence in this respect…

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COMP2113 E-Commerce/E-business Management