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

COMP2113 COMP2113 E-Commerce/E-business E-Commerce/E-business

ManagementManagement

Richard HensonRichard Henson

University of WorcesterUniversity of Worcester

May 2008May 2008

Week 11: E-commerce Week 11: E-commerce ManagementManagement

Objectives:Objectives:» Explain the issues involved for an SME Explain the issues involved for an SME

thinking about using e-commercethinking about using e-commerce» Provide a rationale for e-commerce Provide a rationale for e-commerce

spendingspending» Provide arguments for and against Provide arguments for and against

outsourcingoutsourcing» Produce a basic e-commerce strategy for a Produce a basic e-commerce strategy for a

known small businessknown small business

SMEs and E-businessSMEs and E-business

E-business has revolutionised the way E-business has revolutionised the way companies do business with:companies do business with:

~ other companiesother companies~ customerscustomers~ internallyinternally

Why then, are many small businesses Why then, are many small businesses still so reluctant to jump for even an e-still so reluctant to jump for even an e-commerce presence?commerce presence?

Questions on whether or not Questions on whether or not to choose full E-business…to choose full E-business…

Where do we want to go?Where do we want to go? Is e-business a safe way to go Is e-business a safe way to go

about it?about it? Will it get out of control?Will it get out of control?

» & does that matter?& does that matter?

What are our desired What are our desired objectives?objectives?

Is this the best way to achieve Is this the best way to achieve them?them?

How will we know if we are?How will we know if we are?

Setting up an Setting up an e-business operatione-business operation

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

Setting up an Setting up an e-business operatione-business operation

When a decision is being made regarding When a decision is being made regarding whether to go for an e-business solutionwhether to go for an e-business solution» VERY important to focus on STRATEGY not VERY important to focus on STRATEGY not

TECHNOLOGYTECHNOLOGY Apart from making sure the business has the Apart from making sure the business has the

required technology, further qualities are required technology, further qualities are needed (list below taken from BCS Bulletin)needed (list below taken from BCS Bulletin)

~ creativitycreativity~ improvisationimprovisation~ flairflair~ intuitionintuition

Setting up an Setting up an E-business StrategyE-business Strategy

This will need to concur with the overall This will need to concur with the overall business strategy of the organisation…business strategy of the organisation…» if not, one or the other will have to changeif not, one or the other will have to change

Starting point should be the current Starting point should be the current Business StrategyBusiness Strategy» look at current blook at current business objectivesusiness objectives

~ may need to be redefinedmay need to be redefined

~ such a step may not be popularsuch a step may not be popular

Developing an Developing an E-Business StrategyE-Business Strategy

First stage therefore is to discuss the First stage therefore is to discuss the proposed strategy to the board!proposed strategy to the board!» no point in starting ANY innovative project no point in starting ANY innovative project

unless it has the FULL backing of Senior unless it has the FULL backing of Senior Management!!!Management!!!

» need to justify the capital spendneed to justify the capital spend~ what will be the what will be the Return on Investment (ROI)?Return on Investment (ROI)?

Strategy and Risk Strategy and Risk ManagementManagement

Part of “selling it to the board” should be a Part of “selling it to the board” should be a detailed report risk assessmentdetailed report risk assessment» how much will it cost to set up?how much will it cost to set up?» how much will it cost to run?how much will it cost to run?» what will be the ROI?what will be the ROI?» how long before the ROI exceeds the investment?how long before the ROI exceeds the investment?

Also a word about the market and competitorsAlso a word about the market and competitors» what what are they are they doing?doing?» how they are doing ithow they are doing it? ? » what will happen if the business doesn’t set itself up what will happen if the business doesn’t set itself up

as an e-business?as an e-business?

E-Commerce StrategyE-Commerce Strategy

Therefore detailed information is Therefore detailed information is needed on current needed on current MarketMarket Information Information & Trends& Trends

~ B2CB2C??~ B2BB2B??~ OverseasOverseas

Technologies?Technologies?» Are they up to the task?Are they up to the task?

All need to be iAll need to be investigated & nvestigated & included included in the reportin the report

E-commerce StrategyE-commerce Strategy Final report should be sufficiently clear Final report should be sufficiently clear

and detailed to enable Senior and detailed to enable Senior Management to decide whether taking Management to decide whether taking that leap into the unknown is really that leap into the unknown is really worth the risk:worth the risk:» Will they go out of business if they carry on Will they go out of business if they carry on

as they areas they are» Will they bankrupt themselves if they make Will they bankrupt themselves if they make

a large investment in IT with no guaranteed a large investment in IT with no guaranteed return? return?

Setting up an Setting up an e-business operatione-business operation

AnalysisAnalysis» This is about about actually doing business more This is about about actually doing business more

efficiently, not just managing an aspect of that efficiently, not just managing an aspect of that businessbusiness

» much more information needs to be gathered to much more information needs to be gathered to successfully make it all happen than for a successfully make it all happen than for a conventional IT project:conventional IT project:

What information will be needed? Over to What information will be needed? Over to you…you…

Answer… Answer… Essential background information includes:Essential background information includes:

» an understanding of what is technically an understanding of what is technically achievable as a result of going e-businessachievable as a result of going e-business

~ this requires technical IT skillsthis requires technical IT skills

~ if such skills are not available internally a consultant will if such skills are not available internally a consultant will certainly be neededcertainly be needed

» an understanding of the business and its market an understanding of the business and its market placeplace

~ this requires good business analysis and information this requires good business analysis and information gathering skills which SHOULD be available internally gathering skills which SHOULD be available internally otherwise the business would probably not have been a otherwise the business would probably not have been a success in the first place…success in the first place…

Providing that Providing that E-business solutionE-business solution

Just the e-commerce site is not a matter for the Just the e-commerce site is not a matter for the faint-hearted!faint-hearted!» plenty of examples already of failed trading sitesplenty of examples already of failed trading sites

Putting the business and its information into Putting the business and its information into universal formats that can be accessed by 3universal formats that can be accessed by 3 rdrd parties is again a potentially scary thing to do!parties is again a potentially scary thing to do!

If IT expertise is lacking it is certainly best to If IT expertise is lacking it is certainly best to work with someone who can be trusted, swork with someone who can be trusted, start tart with a small pilot system, & get experience firstwith a small pilot system, & get experience first» e.g. collaboration with a partner, KT with a universitye.g. collaboration with a partner, KT with a university

E-commerce and SMEsE-commerce and SMEs Many STILL reluctant to even use the Internet Many STILL reluctant to even use the Internet

as a market place as a market place » scared by horror stories of £1000s spend on a site scared by horror stories of £1000s spend on a site

that never delivers any new customersthat never delivers any new customers Why do E-commerce websites fail?Why do E-commerce websites fail?

» don’t attract enough customersdon’t attract enough customers» don’t attract the right customers!don’t attract the right customers!» too much focus on the technology (i.e. producing too much focus on the technology (i.e. producing

glossy web sites) rather than the business glossy web sites) rather than the business objectives of the organisation…objectives of the organisation…

Why does this happen?Why does this happen?» usually, the lack of a proper business plan…usually, the lack of a proper business plan…

Establishing an e-commerce Establishing an e-commerce presence/e-business solution presence/e-business solution

that suits the needs (and that suits the needs (and pocket) of the SME…pocket) of the SME…

Start with staged development of trading Start with staged development of trading website…website…1.1. ““we are here” presencewe are here” presence2.2. product pagesproduct pages3.3. option to email ordersoption to email orders4.4. dynamic content and an online databasedynamic content and an online database5.5. all portal type content to ensure the site is all portal type content to ensure the site is

regularly changing… and therefore worth regularly changing… and therefore worth revisitingrevisiting

Establishing that Establishing that E-commerce presenceE-commerce presence

Even with all the right ingredients in place, Even with all the right ingredients in place, producing a successful “all singing, all producing a successful “all singing, all dancing” e-commerce solution is quite a dancing” e-commerce solution is quite a challenge:challenge:» takes a great deal of time and resources...takes a great deal of time and resources...» also includes the time of the critical staff who also includes the time of the critical staff who

are best able to advise on content are best able to advise on content

What if there is What if there is no time for no time for

a pilot website?a pilot website? Maybe it is already too late?Maybe it is already too late? A business shouldn’t even think about A business shouldn’t even think about

rushing to “for real” implementation until rushing to “for real” implementation until that strategy, including changes to that strategy, including changes to business practices and the “start-up” business practices and the “start-up” costs, have been cast “in stone” costs, have been cast “in stone” as part of as part of thethe business plan! business plan!

Stay with E-commerce or go Stay with E-commerce or go for full E-business approachfor full E-business approach

Another crucial decision for the boardAnother crucial decision for the board More pressure for e-business with B2B More pressure for e-business with B2B

tradingtrading» 33rdrd parties will expect to have secure access to parties will expect to have secure access to

some of the company data…some of the company data… B2C companies don’t HAVE to impress other B2C companies don’t HAVE to impress other

businesses so muchbusinesses so much» may see the main need being to focus on the may see the main need being to focus on the

consumer…consumer…» but without e-business can’t be so efficient…but without e-business can’t be so efficient…

Three Possible Approaches to Three Possible Approaches to E-business ImplementationE-business Implementation

1.1. Outsource Everything…Outsource Everything…2.2. In-house everythingIn-house everything3.3. Continue to manage internal IT systems Continue to manage internal IT systems

including changes and use an external including changes and use an external consultant for linking to customers and consultant for linking to customers and business partners:business partners:

• local network contains internal corporate local network contains internal corporate informationinformation

• a separate service company organises all Internet-a separate service company organises all Internet-based aspects, including on-line tradingbased aspects, including on-line trading

Which e-business solution?Which e-business solution? Two important questions:Two important questions:

» what are the needs of the organisation?what are the needs of the organisation?» how well does the e-business solution how well does the e-business solution

address them?address them? If the organisation does not have human If the organisation does not have human

resources who are:resources who are:» enthusiastic and confident about an e-enthusiastic and confident about an e-

commerce projectcommerce project» prepared to focus on organisation needprepared to focus on organisation need

They should look at SOME degree of They should look at SOME degree of outsourcingoutsourcing

Whether to outsource an e-Whether to outsource an e-business solution?business solution?

Plenty of consultancies available that Plenty of consultancies available that will do the whole job…will do the whole job…» often e-business solution providers in their often e-business solution providers in their

own rightown right» have a vested interesthave a vested interest» likely also to be creating websites for other likely also to be creating websites for other

organisationsorganisations» could include competitors...could include competitors...

If getting external advice, businesses If getting external advice, businesses should look for experience and should look for experience and independenceindependence

More Analysis Required…More Analysis Required…

Board will need to have the information to Board will need to have the information to systematically decide the degree of systematically decide the degree of outsourcing that THEIR COMPANY needsoutsourcing that THEIR COMPANY needs» every organisation is different!every organisation is different!

Required OutcomeRequired Outcome::» based on extent of existing IT resources and other based on extent of existing IT resources and other

factors within the organization, make a choice from:factors within the organization, make a choice from:~ outsourcing the solution outsourcing the solution (NOT recommended, for B2B (NOT recommended, for B2B

businesses)businesses)~ doing it all “in-house”doing it all “in-house”~ adopting a “middle way” between out and inadopting a “middle way” between out and in

What “other factors” may be What “other factors” may be important to the business?important to the business?

Over to you again…Over to you again…

The “in house” solutionThe “in house” solution Expensive…Expensive…

» but secures existing investment in ITbut secures existing investment in IT Attractive only for a company that has, or Attractive only for a company that has, or

aspires to, maintaining its own IT expertise aspires to, maintaining its own IT expertise and responsibility…and responsibility…» enables company organisation to securely and enables company organisation to securely and

confidently become available to 3confidently become available to 3rdrd parties via the parties via the InternetInternet

Resulting system should enable employees Resulting system should enable employees out in the field and in the office to function in a out in the field and in the office to function in a similar way as regards access to informationsimilar way as regards access to information» same business process model in each case…same business process model in each case…

““In House” Solution (continued)In House” Solution (continued)

All internal and Internet systems managed All internal and Internet systems managed from within the organisation:from within the organisation:» Local network connected to the Internet in a Local network connected to the Internet in a

secure way using firewall technologysecure way using firewall technology» Company website hosted on local serversCompany website hosted on local servers» All aspects of on-line trading handled internallyAll aspects of on-line trading handled internally» All development work by internal IT staffAll development work by internal IT staff

All security therefore handled locallyAll security therefore handled locally Gives the organisation full responsibility for its Gives the organisation full responsibility for its

own data...own data...

Complete OutsourcingComplete Outsourcing Attractive proposition for the company with Attractive proposition for the company with

few specialist IT stafffew specialist IT staff AdvantagesAdvantages

» saves a lot of money on IT equipment and salaries saves a lot of money on IT equipment and salaries of expensive IT staffof expensive IT staff

» puts responsibility for security and Data Protection puts responsibility for security and Data Protection onto someone else (!)onto someone else (!)

But…But…» also puts responsibility for all the organisation’s on-also puts responsibility for all the organisation’s on-

line trading data in someone else’s handsline trading data in someone else’s hands» can external IT providers fully understand the local can external IT providers fully understand the local

business processes and needs of the business?business processes and needs of the business?

Partial OutsourcingPartial Outsourcing Popular with organisations that:Popular with organisations that:

» have an existing internal IT infrastructurehave an existing internal IT infrastructure» lack confidence that their network is really securelack confidence that their network is really secure» have grave doubts about security on the Internethave grave doubts about security on the Internet

Strategy:Strategy:» external provider looks after the Internet side of the external provider looks after the Internet side of the

business, including communication with 3business, including communication with 3rdrd parties parties» most of the corporate network kept physically well most of the corporate network kept physically well

away from the Internet, data subset only replicatedaway from the Internet, data subset only replicated» allow secure communication between organisational allow secure communication between organisational

databases and the managed website, to display e.g. databases and the managed website, to display e.g. up to date product availabilityup to date product availability

Partial outsourcingPartial outsourcing

Builds on existing infrastructureBuilds on existing infrastructure» internal corporate information kept physically away internal corporate information kept physically away

from the Internetfrom the Internet

Organisation still in complete control of local Organisation still in complete control of local informationinformation» but data subset for Internet needs to be kept up to but data subset for Internet needs to be kept up to

datedate» failure of updating on-line data sources will be failure of updating on-line data sources will be

highly embarrassing to the businesshighly embarrassing to the business

Problems with Partial Problems with Partial OutsourcingOutsourcing

Who has responsibility for what?Who has responsibility for what? Needs to be clear demarcation lines between Needs to be clear demarcation lines between

what is the responsibility ofwhat is the responsibility of» the businessthe business» the outsourcerthe outsourcer

No data either in storage or “en route” should No data either in storage or “en route” should fall outside either one or other of thesefall outside either one or other of these» outsourcer should have this written down clearly outsourcer should have this written down clearly

so no ambiguityso no ambiguity

Infrastructure for Managing Infrastructure for Managing Local & Online PresenceLocal & Online Presence

A Router (usually a server computer) A Router (usually a server computer) diverts data between the Internet and the diverts data between the Internet and the

local networklocal network

A Firewall or Proxy ServerA Firewall or Proxy Server» software - possibly held on the router, software - possibly held on the router,

could be a separate servercould be a separate server» makes sure that:makes sure that:

~ Internal users do not access unauthorised sitesInternal users do not access unauthorised sites

~ Unauthorised remote Internet users do not access Unauthorised remote Internet users do not access the local networkthe local network

More about FirewallsMore about Firewalls UUsed to defend networksed to defend networkss againstagainst external external

attack - first line of defenceattack - first line of defence Provides the basis of system to defend and Provides the basis of system to defend and

detect attacks on the network - can notify detect attacks on the network - can notify network administrator/manager of attempted network administrator/manager of attempted breaches of security...breaches of security...» should be chosen on basis of system and network should be chosen on basis of system and network

security needs of the organizationsecurity needs of the organization» needs to be appropriately configured & managedneeds to be appropriately configured & managed

~ hence the attractiveness of outsourcinghence the attractiveness of outsourcing

More Technical Issues in More Technical Issues in going on-linegoing on-line

Correct configuration of all serversCorrect configuration of all servers Secure Internet connections with Secure Internet connections with

International Banking networkInternational Banking network Regular monitoring of the network to Regular monitoring of the network to

ensure that unauthorised users are not ensure that unauthorised users are not trying to gain accesstrying to gain access

Effectiveness of digital connection Effectiveness of digital connection between the router and a computer between the router and a computer that is part of the Internetthat is part of the Internet

Dealing with Security ThreatsDealing with Security Threats Can be from outsidersCan be from outsiders

» Most likely hackers…Most likely hackers…

Can be from employeesCan be from employees» disgruntled?disgruntled?» not properly trained?not properly trained?» not thinking clearly?not thinking clearly?

More difficult if partly outsourced…More difficult if partly outsourced…» security policy has to be shared with outsourcersecurity policy has to be shared with outsourcer» needs to be done carefully and systematicallyneeds to be done carefully and systematically

The Law, and changes afoot?The Law, and changes afoot? Any EU organisation has a Legal Any EU organisation has a Legal

responsibility to look after confidential and responsibility to look after confidential and private dataprivate data» Under the 1998 Data Protection Act, UK Under the 1998 Data Protection Act, UK

organisations must have a “data controller”organisations must have a “data controller”» held responsible for data breachesheld responsible for data breaches

UK legislation generally regarded as being UK legislation generally regarded as being too relaxedtoo relaxed» new charge of “data recklessness” proposednew charge of “data recklessness” proposed» would carry prison sentence for a data controller would carry prison sentence for a data controller

found guilty of negligence in this respect…found guilty of negligence in this respect…

The EndThe End