The Value Proposition: planning your ecommerce spend

If you have been tracking the size of your IT budget for the last decade, you will have seen it increase year after year.

First, the data warehouse boom, followed by client/server, then Y2K and finally the race to the Internet. It's no good sporting a Web site advertising your products - mere first generation stuff: you must have a fully interactive, self-service, customer-centric portal with one-to-one marketing capability. But who says so, and who whips up these spending sprees?

Every IT consulting company and most system integrators are now recruiting heavily for a major push into the ecommerce/dot-com-everything market. And there is a whole industry geared up to making sure you get on that band wagon.

The professionals you will hire in from these ecommerce specialists will be similar to your employees who put together the early versions of Web commerce for your plc and then left after they had cut their teeth at your expense.

With their first system behind them, they are this year's sought-after experts. They will be technically skilled individuals you will turn to for answers to the "how?" and "what?" questions - but will almost certainly steer clear of putting the "why?" question to them.

But watch out. The really successful Web/CRM projects are the ones that take a whole company's IT infrastructure, align it with some key corporate initiatives and then present a fully integrated organisation to the world.

You will need more than a team of outsiders skilled in Siebel and Active Server pages to achieve this. You need people who understand your products and your existing systems inside out. Products, legacy systems, working practices and attitudes may have to be reassessed and you will have to empower your existing staff if the thing is to be successful.

If you expect the IT department to head-up these projects, think again. Treat the task just like a traditional business investment. Create a case which assumes that selling over the Web is the norm. The quality of the Web site will clearly be important, but we can take it as read that you and your competitors will all have a similar offering. The really crucial thing is the quality of the organisation behind it - just as it is now.

It's time to integrate the old legacy systems properly, to ensure that help desk personnel can get instant access to customer data and that the products and services are easy to understand and simple to sell. Only then will a Web portal show a healthy return on investment.

The Web commerce model provides customers with direct access to your IT systems in a way that was never possible before. Your challenge is to make sure they don't find those messy bits that your best people used to hide from the outside world.

So how much should you be spending on IT this year? Strassmann's analysis of budgets over the past decade puts IT at around eight per cent of the total information management budget. He predicts no increase this year following the Y2K renovation effort.

The Web server and the Web development effort will be small compared with the investment you will need to create a customer-centric organisation with state-of-the-art products and services to sell.

Make sure your IT budget doesn't become loaded up with unrelated business costs. Also, make sure that the business has some clear and measurable goals for its ecommerce initiative. For example, what is the volume of trade projected for the new sales channel?

Ecommerce is still new and customers will compare your products with others available via more conventional channels. Strassmann's analysis of the most innovative companies in areas such as ecommerce, CRM and other fashionable IT methods, has shown no discernable link to company profits.

In fact, current evidence suggests the technology laggards tend to be leading in economic value generation. Could this be because they have concentrated on product innovation, organisational effectiveness and sound investment practice before rushing into blue-sky innovation?

** If you would like to know more about Butler Group's Strassmann assessment services, please visit the http://www.ButlerGroup.com Web site or email Jonathan.Stephenson@ButlerGroup.com.

Jonathan Stephenson
Information Productivity Consultant
Butler Group