THE COSTS & BENEFITS

OF E-BUSINESS
REPORT
TO
SCOTTISH ENTERPRISE
February 2000
JLH Consultn!
"# INTRO$UCTION TO THIS REPORT
Ba%&!roun' to t(s Re)ort
JLH Consulting was commissioned by Nigel Laurie at Glasgow Development Agency
(GDA) in January 2 to develop an investment appraisal model! to "elp managers
ma#e better decisions wit" regard to investing in e$commerce%
&"roug" its e'perience in running t"e e$&rade (ac#age and providing support to
Glasgow companies! GDA "ad )ound t"at it was particularly di))icult )or companies
in business$to$business mar#ets to demonstrate t"e business case )or investing in t"e
implementation o) e$commerce systems%
Ob*e%t+es o, t(e -ss!n.ent
&"e main aim o) t"is piece o) wor# "as been to develop an investment appraisal
model w"ic" can*
Help managers ma#e ob+ective and in)ormed decisions as to w"et"er or not to
invest in e$commerce! so t"at t"ey are aware o) t"e costs! bene)its and opportunity
costs
,e used to convince ,oards and potential )unders to bac# suc" investments
-nable managers to trac# actual against pro+ected costs and revenues
/et(o'olo!y
&"e )ollowing researc" was conducted in t"e course o) t"is assignment*
Des# researc" and .nternet researc" including an e'tensive review o) publications
on investing in e$commerce and articles in +ournals and newspapers
A review o) e'isting investment appraisal models wit"in e$&rade and t"e Digital
Advantage programme
.nterviews wit" /cottis" companies w"ic" "ave implemented e$commerce
systems or are considering w"et"er to invest in e$commerce (Appendi' )
.nterviews wit" some suppliers! to )ind out w"at tools t"ey are using w"en trying
to convince companies to invest in e$commerce systems (Appendi' )
.nterviews wit" potential )unders! suc" as ban#s! angels and venture capitalists
(Appendi' )
0
.nterviews wit" some o) GDA1s e$commerce advisors and accountants! lawyers
and ot"er pro)essional advisors providing assistance to companies (Appendi' )
Contents o, T(s Re)ort
&"is report summarises t"e #ey )indings and conclusions )rom t"e consultancy wor#
carried out by Julian Lawson Hill and Gordon ,rown during January and 2ebruary
2%
&"e remainder o) t"e report is structured as )ollows*
2% 3verview o) Current Appraisal 4odels
5% Development o) t"e -$Commerce 4odel
6% &"e Cost$,ene)it 4odel
7% 8uanti)ying .ntangible ,ene)its
9% :is# and /ensitivity Analysis
;% (ractical &ools
2
2# O0ER0IE1 OF CURRENT -PPR-IS-L /O$ELS
Su..ary
Cost was identi)ied in a <%/% study by Ca"ners .n$/tat as t"e most common and
greatest impediment to e'panding e$commerce% &"ree basic cost concerns were
identi)ied*
Lac# o) )unds )or up$)ront implementation costs
Lac# o) mont"ly cas" )lows to maintain sites
&"e probability t"at t"ere would not be a real return on investment
.n reviewing w"at "as been written in t"e press in t"is area! bot" in t"e <nited /tates
and in t"e <=! we can conclusively say t"at companies on bot" sides o) t"e Atlantic
are )inding it very di))icult to +usti)y t"e investment in e$commerce using current
appraisal models%
.nterestingly! most o) t"ose companies w"ic" "ave implemented or are in t"e course
o) implementing e$commerce solutions "ave not made detailed )inancial calculations
or pro+ections% &"ey "ave +ust )orged a"ead wit" t"eir investments%
&"e general consensus )rom t"ose w"o are in )avour o) investing in e$commerce is
t"at w"ile t"e e'act costs and bene)its are di))icult to measure! a good business case
can be made in terms o) t"e strategic bene)its to companies )rom investing and t"e
t"reats to businesses o) not investing in e$commerce%
.n /cotland as a w"ole! "owever! t"ere are a lot o) >e$com$sceptics?* 4anaging
Directors and 2inance Directors w"o believe t"at it is only wort" investing in e$
commerce i) t"ere is a demonstrable e))ect on t"e bottom line% &"is scepticism
suggests t"ere is a need )or a sound business model )or e$commerce%
Current In+est.ent -))rasal /o'els
A number o) investment appraisal models "ave been used over t"e years to "elp
managers and directors decide w"et"er to invest in new plant! new processes and new
tec"nologies% -'amples are*
:eturn on .nvestment
:eturn on Capital -mployed
(aybac#
Cas" 2low Analysis
Discounted Cas" 2low
5
However t"ere are problems in using any o) t"ese traditional met"ods wit"out
adaptation w"en considering an investment in e$commerce*
None o) t"ese traditional models is really compre"ensive enoug"% A good model
"as to ta#e into account a wide range o) internal and e'ternal costs and bene)its
&"e )inancial models over$emp"asise t"e )inancial impacts and do not emp"asise
t"e overall impacts on t"e business
/ome o) t"e most important bene)its o) e$commerce are strategic bene)its! w"ic"
are di))icult to @uanti)y
.t is di))icult to put an accurate value on t"e reac" o) e$commerce in terms o)
potential customers
.t is di))icult to measure revenue and pro)itability attributable to t"e Aeb alone
w"en ot"er )actors may also be important in t"e purc"asing or supply c"ain
.t is particularly di))icult to )orecast costs and bene)its wit" a great degree o)
accuracy over time% .t t"ere)ore becomes di))icult to estimate discounted cas"
)lows and ot"er sop"isticated )inancial models
2ut Feel
4ost companies w"ic" "ave decided to invest in e$commerce "ave done so very
muc" based on gut )eelings*
.) companies "ave perceived possible strategic bene)its over t"eir competitors t"ey
"ave invested in t"e e$commerce tec"nology
4any e$commerce investments "ave also been implemented because o) strategic
t"reats )rom competitors
/everal companies "ave +ust )elt t"at it is wort" ta#ing a punt on e$commerce and
are investing in it to see w"at return on investment it will bring! prior to investing
more serious money
T(e E-Co. S%e)t%s
/cottis" businessmen are not generally noted )or t"eir wis" to >ta#e a punt? and t"is
"as been re)lected in t"e GDA1s e'perience in t"e e$&rade (ac#age% .n constructing a
model )or e$commerce! it is important t"at various )actors are included*
A"ere possible! costs and bene)its s"ould be @uanti)ied so t"at t"e e))ects on t"e
bottom line is clear
6
&"e model s"ould be balanced! so t"at it "ig"lig"ts t"e strategic and intangible
bene)its as well as t"e more tangible! )inancial costs and bene)its
A"en t"e bene)its o) investing in e$commerce are not clear! two scenarios s"ould
be considered and wor#ed t"roug"* t"e cost$bene)its o) investing in e$commerce
and t"e impact on t"e business and t"e cost$bene)its o) doing not"ing and t"e
impact on t"e business in t"at case
&"e ne't section o) t"is report goes on to loo# at t"e development o) t"e -$Commerce
model in more detail%
7
3# $E0ELOP/ENT OF THE E-CO//ERCE /O$EL
Cons'eratons n $e+elo)n! t(e /o'el
A"en we were starting wor# on t"is pro+ect t"ere were t"ree considerations w"ic" we
"ad in developing t"e model*
&"at it s"ould ta#e into account t"e "eterogenous nature o) Glasgow companies B
all types o) sectors and siCes o) business! mi'ture o) business$to$business and
business$to$consumer mar#ets
&"at it s"ould be understandable! useable by and use)ul to mar#eting managers!
managing directors and non$accountants
&"at it s"ould be robust in terms o) )inancial analysis and stand up to scrutiny
)rom ban#ers! potential investors and )inancial managers
2las!o4 Co.)anes
Glasgow companies come in all s"apes and siCes*
4edium and large siCed companies! many o) w"om are well establis"ed and in
>traditional? Glasgow sectors suc" as engineering! industry and manu)acturing
/maller! )ast growing companies! many o) w"om are in so)tware! ot"er "ig"
tec"nology and service industries
/tart$ups w"ic" are +ust getting under way
As in ot"er economies! Glasgow "as a mi'ture o) companies servicing business$to$
business and business$to$consumer mar#ets% &"ese companies "ave di))erent
commerce c"aracteristics or attributes (s"own in t"e bo' below)*
9
&"e model we "ave developed tries to ta#e t"ese c"aracteristics into account! as well
as t"e level o) sop"istication o) t"e company wit" regards to e$commerce and its
aspirations*
;
Co..er%e -ttrbutes
Busness-to-Consu.er Busness-to-Busness
3ne$time! 3ccasional Buyn! Patterns :epeat! 2amiliar
/"opping! ,rowsing Buyn! Pro%ess 3rdering! :estoc#ing
(rice! Availability Buyn! Crtera /ervice! 8uality!
Delivery! (rice
&ransitory! /"ort$term Tra'n! Relatons() -stablis"ed!
3ngoing
<sually /imple Sales Transa%ton 3)ten Comple'
Use by /ar&etn! /ana!ers5 /ana!n! $re%tors an' Non--%%ountants
3ne o) GDA1s main re@uirements was t"at t"e model s"ould be understandable and
useable by non$)inancial managers% &"is "as been one o) our main considerations in
developing t"e e$commerce model%
Ae spo#e to a number o) Glasgow companies and also received a great deal o) input
)rom 2irst &"ursday members! many o) w"om are in t"e process o) developing t"eir
own business plans% &"is greatly in)ormed t"e development o) t"e business model%
&"e idea o) costs and bene)its is widely understood by all businesspeople! not +ust
accountants and economists! so t"is is t"e approac" we "ave adopted in developing
t"e model%
D
Clent E-Co..er%e So)(st%aton
Custo.er-Fa%n!
No e'perience o) e$commerce and no web site at all
A basic broc"ure$ware site or on$line catalogue
A simple e$commerce site wit" on$line ordering
A more developed e$commerce site wit" on$line payment
Internal
No networ#ing o) internal systems
,asic networ#ing o) internal systems )or internal issue
Lin#ing o) customers to internal systems
Lin#ing o) suppliers to internal systems
2ull integration o) customers and suppliers wit" t"e company1s systems
3t"er bac#$end )eatures suc" as lin#s to )ul)ilment! despatc"! logistics etc%
Su))ler-Fa%n!
No lin#s to suppliers
,asic in)ormation )or suppliers
2ull e'c"ange o) in)ormation wit" suppliers
A c"ec#list o) t"e #ey costs and bene)its was developed and is s"own in t"e ne't
section o) t"e report%
.nstructions and "elp on considering t"e main costs and bene)its is given so t"at it is
as easy as possible )or a non$)inancial manager to use t"e c"ec#list in "is own
situation%
&"e way in w"ic" t"e model s"ould be used really depends on t"e target audience and
w"at t"ey will be e'pecting% At its simplest! t"e model mig"t "elp t"e owner$manager
consider t"e impact on "is businessE at an intermediate level! t"e c"ec#list mig"t "elp
a manager to develop an outline business case presentationE and at its most
sop"isticated! t"e c"ec#list can be used to "elp a non$)inancial manager develop a
spreads"eet to +usti)y t"e business case more )ormally in )inancial terms%
Robust Fnan%al -nalyss
3ne o) GDA1s ot"er re@uirements was t"at t"e model s"ould be robust and stand up
to scrutiny )rom ban#ers! potential investors and )inancial managers%
Again! t"e cost$bene)it approac" is recognised by accountants! corporate )inanciers
and )unders as being a sensible way )or a company to consider t"e issues and present
its business case%
.n conducting t"e researc" )or t"is pro+ect we "ave spo#en to ban#ers! venture
capitalists! angels! corporate )inanciers and a category o) advisors w"ic" . "ave
termed >)und)inders? )or t"eir input%
As a result! we "ave developed an -'cel spreads"eet cas")low template! based on t"e
cost$bene)it approac"! to "elp managers present a )ormal )inancial business case!
s"ould it be re@uired%
F
6# THE COST-BENEFIT /O$EL
&"e )ollowing two pages s"ow t"e cost$bene)it model w"ic" we developed! based on
our review o) t"e literature and e'tensive testing wit" companies and potential
investors%
As e'plained previously t"is generic model "as been designed wit" t"e )ollowing
)eatures*
&"e model is designed to be mainly used by e'isting businesses wanting to use e$
commerce! but we "ave also tried to ensure it is applicable to dot%com start$ups
.n designing it we "ave tried to consider as many di))erent e$commerce business
models as possible! using tangible and intangible bene)its to build a balanced
business model
At t"e same time! we "ave tried to #eep t"e model relatively s"ort and easy to use
&"e model is supposed to act as a prompt list )or people to consider t"e issues
&"ere is a GHelpG section to guide users and e'plain any complicated issues
Ae "ave developed an -'cel cas"$)low analysis in parallel wit" t"is
Costs
&"e costs "ave been split into two categories as )ollows*
.mplementation costs
3perational costs
Bene,ts
&"e bene)its "ave been split into )ive categories*
/trategic business bene)its
&angible bene)its
&angible but non$)inancial bene)its
.ntangible bene)its
Cost savings and cost avoidance
Rs&s an' Senst+ty -nalyss
&"e )inal section as#s a number o) @uestions related to sensitivity and ris# analysis!
w"ic" s"ould be considered by companies as part o) t"eir consideration o) e$
commerce%
0

T(e E-Co..er%e Cost-Bene,t an' In+est.ent -))rasal /o'el

Costs
Implementation Costs
Hardware costs! so)tware costs! costs o) integration wit" legacy systems
Costs o) site development (in$"ouse or outside consultants)
(ro+ect management costs
/ta)) costs (dedicated sta)) input re@uired)
&raining re@uirements
.nternet access costs! "osting costs! domain registration )ees
.nitial mar#eting costs (traditional mar#eting met"ods! banner ads! registering wit" searc"
engines! printing on literature! public relations)
&ransaction costs
Costs o) translations
Operational Costs
/ite maintenance and development costs (in$"ouse or outside consultants)
Costs o) upgrading and adding capacity
/ta)) costs and costs o) consultancy! i) re@uired
3n$going sta)) training
&rouble$s"ooting
.nternet access costs! "osting costs
-lectricity and telecommunications costs
/ecurity costs
3n$going mar#eting costs (banner ads! e$mail s"ots! traditional mar#eting activities)
2ul)ilment! distribution and delivery costs
&ransaction costs
Costs o) "andling )oreign en@uiries (languages! currencies! HA&! duty)
Bene,ts
Strategic Business Benefits
.mproved relations"ips wit" customers and trading business partners
Company1s image and credibility! meeting and e'ceeding customers1 e'pectations
Access to Global mar#ets and new mar#ets! international mar#ets! new customers
Ability to tie in customers and suppliers
Accelerated product introductions
&"reats o) not investing in e$commerce! pre$empting actions by suppliers and competitors
Halue o) t"e business and creation o) assets w"ic" would be valuable! could be sold on
Tangible Benefits
New customers and new mar#ets
.ncreased mar#et s"are
Cross$sellingI selling up
.ncreased revenues )rom sales
0
0
:evenues )rom advertisers
4ove business into more pro)itable areas
.mproved margin on direct business wit" customers
:educed stoc# lead times
.mproved stoc# control
.mproved speed o) processing
.mproved accuracy o) processing
.mproved e))iciency and productivity o) sta))
Tangible but non financial benefits
.mproved communication between sta))! customers and suppliers
.mproved in)ormation on customers
.mproved management in)ormation
.mproved manu)acturing in)ormation
.mproved procurement in)ormation
2aster speed to mar#et
.ncrease routes to mar#et
.mproved @uality and accuracy o) documents! reduced errors
8uic#er turnaround o) @uotations and business proposals
Intangible Benefits
.mproved customer service
Customer product trac#ing
.mproved in)ormation on customers and )eedbac# )rom customers
.mproved customer satis)action
.mproved customer loyalty
.mproved sales )orecasting
,etter materials re@uirements planning
.mproved purc"asing in)ormation
.mproved production sc"eduling
Cost Savings and Cost Avoidance
:educed communication costs (telep"one! )a' and postage)
:educed costs o) supplies
:educed costs o) procurement (sta)) time)
:educed costs o) sales literature and documentation
:educed costs o) trade e'"ibitions
:educed costs o) travel and time spent )ace$to$)ace wit" customers
:educed costs o) stoc#
:educed costs o) ware"ousing
:educed costs o) en@uiry "andling! order processing and administration
Rs& an' Senst+ty -nalyss
How li#ely are t"e pro+ected resultsJ
,y "ow muc" can t"ey be wrongJ
A"at are t"e ris#s to ac"ieving t"ese resultsJ
0
2
A"at can we do to ma'imise t"e resultsJ
Ability to ramp up or s"ut down activities as conditions dictate
&"reats o) not investing in e$commerce
Danger o) alienating e'isting customers! agents! distributors! suppliers
0
5
7# 8U-NTIF9IN2 INT-N2IBLE BENEFITS
Turnn! Intan!ble Bene,ts nto Tan!ble Bene,ts
3ne o) t"e most power)ul tec"ni@ues )or strengt"ening t"e business case o) an e$
commerce investment is to attempt to convert intangible bene)its (wit" no measurable
monetary value) into tangible ones (wit" a de)ined monetary value)%
$o 9ou Nee' To 8uant,y T(e.:
&"e #ey problem wit" t"e approac" adopted by accountants and )inancial directors is
t"at t"ey loo# only at "ard numbers suc" as costs! revenues! pro)itability and return on
investment% However! t"e main bene)its o) investing in e$commerce may simply not
be tangible%
,y )ocusing in on t"e bottom line! t"ere is a danger t"at t"e bigger! strategic picture is
missed% .t t"ere)ore ma#es sense to "ig"lig"t t"e strategic issues as part o) a balanced
business case rat"er t"an prepare a line$by$line )inancial analysis% .) t"ere are
particularly compelling business reasons w"y t"e company s"ould be underta#ing t"e
investment! even t"oug" t"ere is a negative or unacceptably low return on investment!
t"ese reasons s"ould be stated%
&"e )irst @uestion is t"ere)ore* do you need to @uanti)y t"e strategic and intangible
bene)its at allJ
0
6
T(e Intan!ble-Tan!ble 0alue Contnuu.
K KKKKK
<n@uanti)ied 8uanti)ied
,ene)its uncertain ,ene)its clear
No valueIlow value :eal value
.N&ANG.,L- &ANG.,L-
8uant,y t(e 0alue o, t(e Bene,t;s E,,e%ts
.) you do "ave to attempt to @uanti)y t"e intangibles! one met"od t"at may be used is
to @uanti)y t"e value o) t"e bene)it1s e))ects%
2or e'ample! >improved relations"ips wit" customers? may "ave a "ig"ly @uanti)iable
e))ect on suc" t"ings as customer loyalty and retention rates% 3ne bene)it may be to
reduce t"e cost o) salesE anot"er may be to reduce mar#eting costsE anot"er may be to
increase t"e average order valueE and new customers may be attracted by positive
word o) mout"%
&"e important t"ing is t"at t"e lin# between t"e e))ects is logical! t"e assumptions
used are credible and t"ere)ore t"e target audience will )ind t"e case believable%
Ae "ave listed some o) t"e most important o) t"e bene)it1s e))ects under t"e >tangible
bene)its? section o) t"e model%
Loo& ,or Ln&s to Tan!ble Bene,ts
A second way is to loo# t"e ot"er way round )or lin#s between strategic and
intangible bene)its to tangible bene)its! using t"e "eadings outlined in t"e model%
0alue t(e Cost o, Not In+estn! n E-Co..er%e
A t"ird met"od o) attempting to present t"e cost$bene)its in a way in w"ic" t"e
intangible elements are "ig"lig"ted may be to consider two scenarios*
0% &"e value o) investing in e$commerce and t"e impact on t"e business
2% &"e value and impact o) carrying on business wit"out ma#ing t"e investment
&"is may "elp tease out a @uanti)iable value )or some o) t"e strategic and intangible
bene)its! w"ic" can t"en be incorporated into t"e )inancial analysis%
Use a S%orn! /atr<
A scoring matri' is anot"er met"od w"ic" can be used to present a balanced business
case by ta#ing into account strategic and intangible bene)its as well as )inancial
criteria%
3ne met"od o) scoring mig"t be to consider t"e importance o) eac" strategic or
intangible attribute as )ar as t"e company is concerned and t"en t"e li#ely impact in
terms o) cost or bene)it o) implementing t"e e$commerce solution%
.n using a scoring matri' to build t"e business case! members o) t"e ,oard would
probably "ave to be involved in agreeing t"e importance o) eac" attribute and t"e
impact e$commerce would "ave% .t would ma#e little sense to develop t"e scoring
matri' wit"out ta#ing into account t"e belie)s o) t"e ,oard at an early stage%
0
7
3n t"e ot"er "and! using a scoring matri' may "elp t"e person ma#ing t"e business
case to )ocus in on t"ose strategic and intangible bene)its w"ic" are li#ely to be o)
most importance and interest to t"e company%
-'ample
.n t"e )ollowing e'ample! t"e importance o) eac" attribute to t"e company is scored
out o) 0 ( L not at all important to 0 Le'tremely important) and t"e potential
impact o) e$commerce )rom B0 to M0 ($0 L negative impact! L neit"er positive
nor negative impact and M0 L very positive impact)
.mproved relations"ips wit" customers and trading business partners
.mportance FI0
.mpact o) e$commerce MD
/core* F ' D L M;2
Company1s image and credibility! meeting and e'ceeding customers1 e'pectations
.mportance 9I0
.mpact o) e$commerce M7
/core* 9 ' 7 L M5
Access to Global mar#ets and new mar#ets! international mar#ets! new customers
.mportance 2I0
.mpact o) e$commerce MF
/core* 2 ' F L M0D
/o! in t"is case! t"e presenter s"ould "ig"lig"t t"e importance o) improved
relations"ips wit" customers and trading business partners%
Con%luson
2irst! managers responsible )or preparing t"e business case )or investing in e$
commerce s"ould consider t"eir target audience%
A"ile a )inancial analysis is important! t"e 4anaging Director! t"e ,oard and
potential investors s"ould consider t"e strategic bene)its o) e$commerce )or t"eir
company and t"e e'tent to w"ic" e$commerce will "elp ac"ieve t"e company1s
strategic ob+ectives%
.) t"ere is still a need to prepare a more detailed business case! t"ere are several
tec"ni@ues w"ic" can "elp t"e manager to value t"e most important strategic and
intangible bene)its in )inancial terms%
0
9
=# RIS> -N$ SENSITI0IT9 -N-L9SIS
Un%ertanty an' Rs&
3ne o) t"e biggest di))iculties in preparing a good business case to +usti)y an
investment in e$commerce surrounds t"e uncertainty o) )uture costs and bene)its!
revenues and pro)itability% .t t"ere)ore ma#es it very di))icult to determine t"e return
on investment wit" any accuracy%
<ncertainties w"ic" mig"t "ave ma+or impacts on )uture pro+ections include*
-stimated transaction volumes
(redicted )uture prices
Competitors1 actions
C"anged mar#et conditions
3ne ot"er )eature o) e$commerce is t"e speed o) c"ange% 4anagers need to consider
t"e )le'ibility o) t"e business to respond and "ow @uic#ly production and sales can be
eit"er ramped up or scaled down! depending on business generated t"roug" e$
commerce%
8uestons 1(%( /!(t Be -s&e'
/enior managers and t"e ,oard mig"t as# @uestions li#e t"ese*
How li#ely are t"e pro+ected resultsJ
,y "ow muc" can t"ey be wrongJ
A"at are t"e ris#s in ac"ieving t"ese resultsJ
A"at can we do to ma'imise t"e resultsJ
-n -))ro)rate Res)onse
&"e danger is t"at wit"out some sort o) ris# and sensitivity analysis! senior managers
and t"e ,oard may set "ig"er >"urdle rates? or re@uire s"orter paybac# periods )or e$
commerce because o) w"at t"ey see as t"e in"erent ris#s%
&"ere are many comple' met"ods o) conducting ris# and sensitivity analysis! but t"e
most important t"ing to do is to identi)y t"ose assumptions w"ic" "ave t"e most
impact on t"e bottom line% &"ese can t"en be varied and plausible pessimistic and
optimistic scenarios produced%
At its most simple! a best caseIworst case scenario can be produced% A"en placed
alongside t"e assumptions! t"is will enable ot"er managers to consider an e$commerce
investment in t"e same way as any ot"er business investment and decide accordingly%
0
;
<se o) ris# and sensitivity analysis can t"ere)ore improve t"e plausibility o) t"e
business case to sceptical business managers%
0
D
?# PR-CTIC-L TOOLS
T(e /o'el
:eturning to GDA1s ob+ectives! we "ave tried to develop a model w"ic"*
&a#es into account t"e "eterogenous nature o) Glasgow companies
.s understandable! useable by and use)ul to mar#eting managers! managing
directors and non$accountants
.s robust in terms o) )inancial analysis and can wit"stand scrutiny )rom ban#ers!
potential investors and )inance managers
2or ease o) use! we "ave split t"e generic cost$bene)it model in two*
A model )or e'isting businesses loo#ing to implement e$commerce
A model )or new dot%com start$ups
&"e cost$bene)its )or bot" are t"e same! but we "ave attempted to "ig"lig"t w"at we
believe to be t"e most important attributes )or eac" group%
Hel) Se%ton
A >Help? section "as been developed to provide assistance to business managers
un)amiliar wit" any terms covered in t"e model%
Use o, t(e /o'el
As indicated in one o) t"e previous sections! we would see t"e model being used
potentially in t"ree ways*
&o aid managers in t"e t"in#ing process and to "elp t"em consider t"e costs and
bene)its o) e$commerce )or t"eir business
As an outline )or presentations to senior managers and t"e ,oard
As t"e basis o) calculations )or a spreads"eet w"ic" will present t"e )inancial data
simply and concisely
T(e S)rea's(eets
&wo cas" )low spreads"eets "ave been developed in line wit" t"e two versions o) t"e
generic model* one )or e'isting businessesE t"e ot"er )or dot%com start$ups%
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F
.n developing t"e spreads"eets we "ave attempted to stay as close to t"e cost$bene)it
model as possible so t"at managers can slot in values @uic#ly and easily%
Alt"oug" normally a cas" )low analysis would be re@uired over t"ree years )or
business planning purposes! many o) t"ose we spo#e to )elt t"at it would be very
di))icult to pro+ect more t"an two years a"ead% Conse@uently! t"e spreads"eets cover
two years%
A )eature o) t"e spreads"eets is a one page )inancial summary w"ic" can be used )or
discussions wit" senior managers and directors% &"e detail be"ind t"is summary page
lies wit"in t"e two pages o) mont"$by$mont" analysis%
S.)le @uestonnare
3ne ot"er tool w"ic" we "ave developed is a simple )inancial @uestionnaire w"ic" is
designed to prompt users at t"e beginning o) t"e process and "elp t"em determine t"e
level o) dept" o) )inancial analysis needed%
2$-;s e-Tra'e 1ebste
Ae would recommend t"at GDA puts up t"e )ollowing elements on its e$&rade
website*
&"e )inancial @uestionnaire
&"e -$commerce 4odels
&"e >Help? /ection
&"e -'cel /preads"eets
&"is report ()or users w"o re@uire more bac#ground)
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