In their frantic rush to bring their ebusiness or ecommerce strategies to market, many companies are neglecting the reason they are in business to make a profit. However, IDC warns this is a dangerous practice and in a new report outlines a return on investment (ROI) process for companies contemplating an ebusiness or ecommerce initiative.
"Many e-initiatives are not being approached in a businesslike manner. The concept of achieving an ROI from the initiative is being lost in the enthusiasm for being first to market," said Tom Oleson, research director for IDC`s IT Advisor research program. "Because they are overly concerned about being left behind, many ecommerce executives are forgetting that ecommerce is a business and the goal of any business is to make money, not adopt the latest delivery channel for goods and services. The application of an ROI process at the initial planning phase of e-initiatives will keep top management`s mind on the bottom line."
Because IT executives are critically important to the success of ecommerce initiatives, IDC believes they should conduct ROI evaluations on these projects. They will need input from others within the organization, however.
To estimate the ROI, several aspects of development need to be addressed at the feasibility stage of the project. Elements to consider include the cost of integrating the legacy systems with the Web front end. Another factor to consider is whether the company will host its own Web site or turn over those responsibilities to an Internet service provider. "Many issues surround the question of in-house development versus outsourcing, and the correct choice depends on the circumstances within the company," Oleson said. "This issue needs particular attention from not only IT but also the business units and human resources."
IDC recommends the ecommerce ROI process include issues that typically aren`t evaluated in IT ROI projects. The amount of increased revenues expected should be carefully analyzed as well as the impact of these revenue claims on the productivity on the traditional sales staff.
"Instead of placing so much emphasis on generating revenues by being first to market, ecommerce executives should work on identifying sources of income and savings in the areas of organizational impact and greater process efficiency," Oleson suggested.
IDC`s new report, The Return on Investment Associated with eBusiness and eCommerce outlines the process for companies considering an ebusiness or ecommerce initiative. The report identifies concerns that must be addressed in the early planning phases of a project and discusses calculating the project`s ROI. The major IT issues in the design of an ebusiness or ecommerce initiative are discussed.
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