Managing Electronic Commerce: Assignment 2The CITY.ZA Network

Code for Course: MBL 426-BAssignment Number: 02

Name: Richard ByromStudent number: 750-163-3

Group Code Number: BOT1000

MBL 426-B Student No: 750-163-3

Table of ContentsAssignment task...........................................................................................................4

Introduction...................................................................................................................4

Portal Overview............................................................................................................6

Generation 1.......................................................................................................................... 6

Generation 2.......................................................................................................................... 6

Generation 3.......................................................................................................................... 6

Generation 4.......................................................................................................................... 6

Analysis of the business plan.......................................................................................8

1. Articulate the business strategy.........................................................................................8

a. Framing the Market Opportunity.............................................................................8

b. Determining the appropriate business model........................................................11

c. Customer Interface...................................................................................................12

d. Market Communications and branding..................................................................13

e. Implementation.....................................................................................................13

2. Translate strategy into desired outcome and devise metrics....................................15

a. Market Opportunity................................................................................................15

b. Business Model.....................................................................................................17

c. Customer interface and outcomes............................................................................17

d. Branding and Implementation...............................................................................18

e. Financial................................................................................................................18

Evaluation of Pros and Cons......................................................................................19

Pros..................................................................................................................................... 19

Cons.................................................................................................................................... 19

Recommendations for improvement..........................................................................21

Analysis of the Budget for Income and Expenditure..................................................23

Expectations........................................................................................................................ 23

Findings............................................................................................................................... 24

Revised Budget..........................................................................................................25

Non – monetary indicators/metrics......................................................................................25

Financial Indicators.............................................................................................................26

a. Detailed Sales/ Cost of Sales and Payroll.............................................................26

b. Summary Profit and Loss......................................................................................27

Bibliography................................................................................................................28

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Table of FiguresFigure 1: Evolution of Portals (Source: Sood, R. 2001. Portals and Branding. GartnerGroup.

Available from: http://www.doleta.gov/whatsnew/portals&branding.ppt Accessed [29 July

2002])................................................................................................................................ 7

Figure 2: A framework for electronic commerce (Rayport and Jaworski, 2001: 18)..................8

Figure 3: Framework for Market Opportunity (Rayport and Jaworski, 2001: 27).......................9

Figure 4: Customer Interface (Rayport and Jaworski, 2001: 17).............................................12

Figure 5: Market space evolution and need for continuous improvement (Rayport and

Jaworski, 2001: 215)........................................................................................................14

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Assignment task

Read the business case of the CITY.ZA network. Analyse every aspect of the business plan,

from strategy to finance to the business model to the implementation of strategy. Evaluate the

pros and cons of the Business Plan and give recommendations for improvement. Analyse the

Budgets for both income and expenditure. Provide your own budget based on the knowledge

you have gathered thus far.

Introduction

The word portal means gateway and portals are really information gateways. They open

doors to organisations and people. According to the Net and Digital Media Measurement firm

Media Matrix Inc., seven of the top ten most heavily trafficked Web properties are portals1.

This emphasizes their importance in our newly wired world. The idea is to offer everything

that a surfer needs under one roof so that the surfer is trapped forever. As more users

become trapped, this in turn generates more advertising revenue2.

Since the possession of knowledge and information translates into capabilities and profits the

primary goal of management today is to discover relevant information and knowledge in a

timely manner and convert it into a competitive advantage3. One way of achieving this is via a

Portal. The enterprise portal is one of today’s corporate certainties, a software market that will

have grown from $30 million in 1998 toward US$1.75 billion in license revenue by 2005,

according to the Gartner Group4.

The CITY.ZA network is effectively a community Portal that incorporates B2B and B2C

principles. It is aimed at vertical, horizontal and diagonal market segments. In terms of portal

development it can be classified as a generation 4 portal as seen in figure 1. It contains

elements of the services shown in all generations mentioned in the diagram but still has

plenty of room for growth as service offerings can be extended when new generations

introduce new functionality and capability.

I used the Performance Dashboard and Framework for Electronic Commerce 5 to analyse the

multi-media strategy and implementation from the articulation of the business strategy to the

calculation of current and target performance. This includes market opportunity analysis, the

business model, customer interface, branding and market communications and

implementation.

1 Rao, 2001: 3262 Rao, 2001: 3263 Kotorov, R and Hsu, E. 2001: 864 Ericson, J. 2001. The Portal Comes of Age. Line56. Available from: http://www.line56.com/articles/default.asp?articleid=3175 Accessed [29 July 2002]5 Rayport, JF. and Jaworski, BJ. 2001. e-COMMERCE. Singapore: McGraw-Hill Book Co.

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My conclusion is that CITY.ZA has implemented a sound business model with strong market

communications and branding. The customer interface is particularly strong as it offers a

number of integration options to the customer and also ensures that retrieval options can be

customised to the particular user. Implementation capability is high due to a strong delivery

system, however ways to innovate need to be established. Access to the site is enhanced via

a number of different mediums, namely Internet, phone and traditional media. Introducing a

transaction-based model can increase the number of different revenue streams. A more

detailed look needs to be taken at the budget and implementation plans together with how

these should be linked together. CITY.ZA has early on identified the key to the success of the

project which is developing strategic partnerships and alliances. It’s first mover advantage

should contribute considerably to it’s success and this advantage should be sustained by

developing long terms contracts with all parties in the supply chain.

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Portal Overview

A portal provides a single point of personalized online access to business information and

knowledge sources. Their central goal remains to filter and provide relevant information to the

users of portals. They are about customisation (push), making timely, useful data available to

the user community; and personalisation (pull), allowing users to filter information in a way

that improves their satisfaction and productivity6.

A Portals main strategy should be to: -

1. Accumulate as many visitors as possible.

2. Keep visitors their for as long as possible7.

In the portal arena the name of the game is market share. The more users, the more money

from advertising. Factors that influence successful execution of the portal strategy include: -

Access route.

Strategic Alliance.

Content Route – content driven portals need to invest heavily in brand building.

Alternative content route.

General versus Specialised portals.

In terms of the progression of portals a number of generations can be recognized as shown in

figure 1.

Generation 1

Homepage on steroids with basis searching capabilities

Generation 2

Introduced more of a customer focus, also contained links to other sites

Generation 3

A more integrated approach was adopted. B2E portals began to develop as well as support

for collaboration like E-mail and chat.

Generation 4

Adds features like contextual personalization, "So I can personalize the context of the

interaction, not just the role of the user," says Pfifer. Other new features coming to market

include better process integration, cascading portals, (portals within portals), federated

portals, (multiple portals working in concert), knowledge management, e-learning, shared

team spaces and proactive notification of problems and offline support.

6 Ericson, J. 2002. PortalCulture. Line56. Available from: http://www.line56.com/articles/default.asp?articleid=3761 Accessed [29 July 2002]7 Ledbetter, 1999: 22.

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Figure 1: Evolution of Portals (Source: Sood, R. 2001. Portals and Branding. GartnerGroup. Available from: http://www.doleta.gov/whatsnew/portals&branding.ppt Accessed [29 July 2002])

The key to portal power lies in two powerful capabilities. The first is as an information

consolidator for data, applications, and geographies that speeds access to information and

enables organisations to put new work processes into play. The second is a contextualiser - a technology, finally, puts data into actionable form specific to the goals of your corporation8.

Some basis services that should be provided by a portal are: -

Management of heterogeneous databases

Structured Access

Customised interfaces.

Collaborative Working

Multi Level security

High Levels of Currency

Future Proof9.

No matter what the goals, the key to a successful portal is to offer an oasis of organization

within the tangled web10.

8 Caruso, 2000: 36.9 White, 2000: 35710 Rao, 2001: 326

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Analysis of the business plan

The Performance Dashboard and the framework for electronic commerce will be used in the

evaluation of the business plan.

The Performance Dashboard consists of five steps: -

1. Articulate Business Strategy

a. Market Opportunity Analysis: Framing the market opportunity.

b. Determining the appropriate Business Model.

c. Customer Interface Design.

d. Branding and market communications.

e. Implementation

f. Evaluation (ties in with steps 2 and 3 mentioned below)

Theses stages of step one form the six interrelated, sequential decisions of the Framework

for Electronic Commerce as seen below in figure 1.

Figure 2: A framework for electronic commerce (Rayport and Jaworski, 2001: 18)

2. Translate Strategy Into Desired Outcomes

3. Devise Metrics

4. Link Metrics To Leading And Lagging Indicators (catered for under the analysis of the

budget and provision of new budget)

5. Calculate Current and Target Performance Indicators (catered for under the analysis of the

budget and provision of new budget)

1. Articulate the business strategy

This corresponds with the six stages of the framework for electronic commerce as in fig. 1

above.

a. Framing the Market Opportunity

Any firm (according to the framework – see figure 2) should satisfy five conditions to

determine the financial, technological and competitive attractiveness before going into an

industry: Seed opportunity in existing or new value system11, identify unmet or underserved

11 Value System: An interconnection of processes and activities within and among firms that create benefits for intermediaries and end consumers. (Rayport and Jaworski, 2001, 419)

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needs (the opportunity nucleus), identify the target segment, declare the company’s resource-

based opportunity for advantage, assess competitive, technological and financial opportunity

attractiveness and make a “Go/No Go” assessment.

Figure 3: Framework for Market Opportunity (Rayport and Jaworski, 2001: 27)

Value SystemCITY.ZA will unlock trapped value they will do this firstly by creating more efficient markets in

the sense that will be improving customers and suppliers coming together. Secondly they are

creating more efficient value systems by compressing or eliminating steps in the current

system. The speed at which buyers and suppliers come together should be enhanced by this

system. Thirdly ease of access is promoted by using multiple media channels in which access

to CITY.ZA can be obtained, namely, telephone, Internet, newspaper and CD-ROM. Lastly

they will definitely disrupt current pricing power. The simple fact that customers will be able to

search a wide variety of sites means that they will be able to compare prices amongst a larger

number of suppliers than before. This should effectively drive prices down.

CITY.ZA will also create new value by firstly customising their offerings both to suppliers and

customers. Persons gaining exposure on CITY.ZA can choose the level of exposure that they

want and persons searching for products to purchase can customise their searches. Secondly

they radically extend reach and access by extending the boundaries of existing markets.

Thirdly they are building a virtual community that is centered around a bricks and mortar

community as well as enabling collaboration amongst multiple people, locations and time by

bringing the offering to the internet as well as ensuring that traditional media forms. Lastly

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they are introducing new to the world functionality and experience as this project is one never

seen before in South Africa.

Unmet or undeserved needs (the opportunity nucleus)This usually entails asking yourself a number of questions about your customers or actually

surveying the potential customers and then establishing their needs. There is no evidence in

the case that there has been any market analysis conducted. It looks as though the need has

been assumed based on other similar offerings available in the market.

Target SegmentsWe need to determine what target segment CITY.ZA caters for by looking at their

demographics12, geography13, behavioural14, psychographics15, benefits16, beliefs and

attitudes17. According to the case the target markets can be identified as: -

Horizontal markets – all players in all industries

Vertical markets – specific industries

Diagonal markets – specific players in specific industries

Municipalities

Therefore the market is segmented based on industry and geographic lines with the aim of

reaching 1,200 domains within South Africa.

Resource based opportunity for advantage.At a company level I believe that the resource that CITY.ZA offers is exposure to varying

degrees for its customers. These levels of exposure can be leveraged in such a way that

buyers on the domain can also view or sort their information according to these levels of

exposure. The levels of exposure provided by CITY.ZA are: -

Local exposure

Regional exposure

Provincial exposure

National exposure

International exposure

In terms of partnerships the company is successfully partnering with other portals to enhance

exposure to a national and international level.

12 Demographics: Groupings by age, gender, occupation, ethnicity, income, family status, life stage, Internet connectivity, and browser type. (Rayport and Jaworski, 2001, 40)13 Geography: Country/Region/City, city size, density (urban, suburban, rural), ISP domain, etc. (Rayport and Jaworski, 2001, 40)14 Behavioural: Online shopping behaviour, offline shopping behaviour, web-page/site visited, website loyalty, prior purchases, site, etc. (Rayport and Jaworski, 2001, 40)15 Psychographics: Lifestyle (thrill seekers, fun lovers, recluses), personality (laid-back, Type A, risk takers), affinity (community builders, belongers, outcasts). (Rayport and Jaworski, 2001, 40)16 Benefits: Convenience, economy, quality, ease of use, speed, information, selection. (Rayport and Jaworski, 2001, 40)17 Beliefs and attitudes: Brand beliefs (New economy, old fashioned), attitudes towards the category, channel effectiveness beliefs, beliefs about themselves (technical savvy), etc. (Rayport and Jaworski, 2001, 40)

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Assess Competitive, Technological and Financial Opportunity AttractivenessCITY.ZA is one of the first initiatives of this type within South Africa. Although there are other

portals in existence this is the only one that provides such a high level of exposure for

potential users. Certainly at regional, local, provincial and municipal level there is a lot of

white space. By partnering with other portals at national and international level CITY.ZA has

effectively made sure that it is not competing in the market space. In appropriately

segmenting the market, CITY.ZA has effectively reduced the level of competitive intensity it

will experience at the outset. However, this does not prevent other competitors from entering

the market place and therefore, appropriate barriers to entry for other competitors to enter the

market need to be built.

The level’s of technology adoption in South Africa are sufficient to ensure success of their

strategy. Where technology adoption is not high CITY.ZA has also put in place measures to

deal with the non-technology aspects such as using newspapers and CD-ROMs. The

continued deregulation of the telecoms industry in South Africa should also ensure that

customers which were previously unreachable can now be attracted. This deregulation should

also enable improved growth in the telecoms infrastructure which forms the backbone of the

internet upon which CITY.ZA’s strategy is built.

The market size is very large with a potential customer base of eleven million by 2005. This is

as a result of the market space being in all geographical regions. Although profitability should

initially be low due to high costs and slow customer adoption all signals indicate that the

margins should be very high once a large customer base has been established.

Make go/no-go assessmentBased on the assessments made above it is clear that CITY.ZA has a unique offering with

massive potential to create new markets by ensuring that each person or company can be a

given any level of exposure they require.

b. Determining the appropriate business model

“The New Economy business model requires four choices on the part of senior management

that include the specification of (1) a value proposition or a value cluster for targeted

customers, (2) a market space offering – which could be a product, service, information or all

three, (3) a unique, defendable resource system, and (4) a financial model.” “Construction of

a value proposition requires management to specify the following three items: (1) Choice of

target segment, (2) choice of focal customer benefits, and (3) rationale why the firm can

deliver the benefit package significantly better than competitors in the same space18.”

CITY.ZA falls into Business-to-Business (B2B) and Business to Consumer (B2C) category by

giving customers exposure at provincial, regional, local, national and international level so

that they can compete in the vertical, horizontal, diagonal and municipal market space.

18 Rayport and Jaworski, 2001: 71

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CITY.ZA also ensures that they maximise the value of their business model by providing a

variety of different channels to access their network, namely Internet, Phone (mobile and

land), Newspaper, CD-ROM and call centres. The revenue model used is an advertising and

subscription based model. There is also potential to include a transaction-based model.

c. Customer Interface

Figure 4: Customer Interface (Rayport and Jaworski, 2001: 17)

Fit refers to the extent to which each of the 7Cs (context19, content20, community21,

customisation22, communication23, connection24 and commerce25) individually supports the

business model (see figure 5). Reinforcement refers to the degree of consistency between

each of the Cs26.

The CITY.ZA site is structured in such a way that it superbly supports the business model and

also interacts with the various access channels. Customers wanting exposure are provided

with a variety of options and integrated offerings for coming on line. These options ensure that

the site maintains it’s structure and that hosted sites are not arbitrarily integrated into the

CITY.ZA infrastructure.

19 Context: Captures the site’s aesthetic and functional look and feel. (Rayport and Jaworski, 2001, 410)20 Content: All digital subject matter on the site. (Rayport and Jaworski, 2001, 410)21 Community: The interaction that occurs between site users. (Rayport and Jaworski, 2001, 410)22 Customisation: The site’s ability to tailor itself or to be tailored by each user. (Rayport and Jaworski, 2001, 410)23 Communication: Communication refers to the dialogue that unfolds between the site and its users. (Rayport and Jaworski, 2001, 409)24 Connection: The extent of formal linkages between the site and other sites. (Rayport and Jaworski, 2001, 410)25 Commerce: The sale of goods, products, or services on the site. (Rayport and Jaworski, 2001, 409)26 Rayport and Jaworski, 2001: 117

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The establishment of such standards ensures data integrity and allows for a better interface to

be built. The site structure also supports a high level of customisation in terms of such

services as searches. One can search the site using a variety of different parameters and

categories. It is also clear from the site appearance whether all functionality is operable or not

e.g. whether electronic payments are enabled for a particular supplier.

The site also makes use of appropriate aesthetics such as maps to indicate its emphasis in

the geographical infrastructure that it employs.

d. Market Communications27 and branding28

The marketing of the service provided by CITY.ZA is cleverly linked to the distribution of their

services. i.e. when distributing the service they are effectively marketing. This means that

there is a direct relationship between the distribution and marketing of the service. Therefore,

when the distribution of the service grows so does the marketing reach. CITY.ZA uses a

combination of three of the four types of marketing communications, namely traditional mass

marketing, direct and general online. At this stage their most powerful marketing mechanism

are the agents. In future I believe that personalised marketing will be a viable option as users

will most likely have the ability to customise their web site when retrieving the information they

require.

I believe that the CITY.ZA brand is very powerful for two reasons, firstly, the name and

secondly, the wide array of services attached to their initial service offering.

The brand is immediately established in a persons mind just by the name CITY.ZA. The name

automatically implies that it has something to do with cities in South Africa. The key elements

of a brand namely differentiation, relevance and perceived value can all be rated as high at

the time of doing this study.

e. Implementation

This is really important to CITY.ZA since the idea is good, but many good ideas fail or never

come to fruition through lack of implementation. It is also important to CITY.ZA to implement

very quickly so that they obtain a first mover advantage. The implementation process can be

divided into two phases as displayed in fig.5. First, the firm is concerned with the delivery of

the offering or delivery system29. In the second phase, the firm is concerned with the extent to

which the offerings and infrastructures are modified to fit the evolution of the market or the

innovation process. CITY.ZA’s delivery system is extremely effective simply because it uses

an already existing infrastructure of people and is well integrated in that it utilizes online and

offline resources. The obvious advantage here is that all the costs and disadvantages of 27 Market Communications: Refers to all the points of contact that the firm has with its customers. This includes the obvious offline communications such as television advertising, promotions, and sales calls as well as the emergent advertising approaches of the Internet. (Rayport and Jaworski, 2001, 414)28 Brand: A name, term, design, symbol or any other feature that identifies one seller’s good and service as distinct from other sellers. (Churchill, GA Jr. and Peter, JP. 1998, 240)29 Delivery System: The most detailed and concrete expression of the company’s value proposition. The delivery system translates the resource system from a conceptual structure into a concrete configuration of resources, processes, and supply chains. (Rayport and Jaworski, 2001, 411)

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setting up distribution channels are avoided. Particularly in this instance the idea works well

because there are so many different areas of distribution that it would be impossible for

CITY.ZA to maintain an effective distribution system if they kept it in house. The systematic

approach for bringing new customers on line and integrating them into existing structures is

also well thought out. There are a number of different offerings available to a customer as to

how they can join CITY.ZA which should enhance the chances of the organisation gaining

new customers.

Figure 5: Market space evolution and need for continuous improvement (Rayport and Jaworski, 2001: 215)

Although I am sure CITY.ZA will continue to innovate the business plan does not specifically

say what procedures will be put in place to ensure that they do. One small way of doing this

would be to put into place structures and procedures that will ensure the data and information

collected on the site is used in a way that it continues to enhance the service offerings offered

by the organisation. An analogy is that of Amazon.com. The value that this site delivers is not

in selling books but is rather how they leverage their huge database of information to ensure

that the shopping experience is fast and convenient. The same can be said of CITY.ZA. They

need to appropriately leverage the information that the have access to and deliver new

offerings to customers based on this information

In this particular instance it is difficult to tell whether the actual implementation has been

successful as there is only a high level project plan and this does not indicate actual vs.

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budget for resource and cost. Certainly the implementation strategy is sound, however, it’s

just not clear at this stage whether the implementation can be regarded as successful.

2. Translate strategy into desired outcome and devise metrics

The metrics that should be evaluated relate to opportunity, business model, customer

interface and outcomes, branding and implementation, and financial. I will establish possible

future metrics as well as current metrics. Whether these metrics can be measured within the

South African context was not considered.

a. Market Opportunity

Opportunity (within South Africa)# of web sites and type.

Average # of pages per web site.

# of hosted sites by type and by host.

Average number of pages per hosted site by host

# of portals.

Total population

Of total population how many have internet access, how many have phones, how many can

be accessed by traditional media.

Total number of organisations/businesses

Of total number of organisations/businesses how many have internet access, how many have

phones, how many can be accessed by traditional media.

How all of the above change annually

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Target Segment# of industries within vertical markets

Potential number of diagonal markets

# of people/organisations within horizontal market.

# of municipalities

Within all the segments above should identify: -

# of web sites

# of portals

How many of these people/organisations have phones, internet access or can be reached

via traditional media.

What our market share is

How these numbers change annually

Resource Based# of national domains and people/organisations within this domain

# of provincial domains and people/organisations within this domain

# of regional domains and people/organisations within this domain

# of local domains and people/organisations within this domain

Within all the segments above should identify: -

# of web sites

# of portals

How many of these people/organisations have phones, internet access or can be reached

via traditional media.

What our market share is

How these numbers change annually

Financial attractiveness% of customers in target segment versus other segments

% of customers in target areas versus other areas

Intensity of competition# of competitors at local, regional, national and municipal level and their market share

# of competitors in vertical, horizontal and diagonal markets and their market share

Rate of competitors entering and leaving the market

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b. Business Model

Perceive value proposition versus competition.# of competitors offering any combination of CITY.ZA’s benefits

Customer’s perception of CITY.ZA’s performance versus the competition.

Users perception of CITY.ZA’s performance versus the competition.

Advertisers perception of CITY.ZA’s performance versus the competition.

Attractiveness of offer versus competitionImportance to target customers of innovative products, high quality information, service and

low price.

Extent to which customers perceived that CITY.ZA was outperforming competition on the

stages of the customer decision process.

Extent to which site’s products, services and information were viewed as superior to the

competition.

# of web sites on which customers will be exposed as opposed to competition.

Capabilities and partnerships versus competitionMoney invested in technology relative to competition.

Customer brand awareness relative to competition.

Number of distribution channels relative to competition (this includes agents).

Number of strategic alliances relative to competition.

Sustainability of value proposition versus competition. Exclusivity and length of partnership agreements

Number of remaining duration of patents held for offered products and services.

Average switching costs for customers.

c. Customer interface and outcomes

Effectiveness and efficiency of customer acquisition Customer Acquisition costs

Money spent on marketing (percent offline and online)

Churn (turnover between competing sites)

Level of integration of commercial information into website.

Number of clients drawn into deeper levels of involvement through web site

Transition of customers onlineNumber of transactions per year by transaction type, by area and by market

% of CITY.ZA customers using both online and offline offerings compared to just offline.

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Perception of online customer experienceCustomer valuation of the 7C’s versus competition.

Site usability metrics (number of users, page views, average time spent per person etc.)

Number of occurrences of critical failures.

% of click through’s on banners or advertisements

sell through rate

Satisfaction and loyalty of customers versus competition.Overall customer satisfaction relative to competition

Score on key attributes (quality of information, price, reliability and quality of service)

Percent of return advertisers and web users.

d. Branding and Implementation

Brand perception in the marketCustomer unprompted brand awareness

Customer associations with the CITY.ZA brand.

Customer perceptions of CITY.ZA brand

IT InfrastructureTrade capacity to volume ratios.

Number of possible simultaneous web sessions that the system can handle

Uptime of system (versus competition)

Cutover time (time to route information between all the servers)

Number of security breaches.

OrganisationAverage time to respond to and solve problem

Advertising sell-out ratio (compared to competitors)

Number/type of advertiser compared to competitors

Advertiser attrition in comparison to competitors.

Advertiser growth in comparison to competitors

Advertiser rate trends

Advertising contract length

e. Financial

Outperforming competition in financial metrics

Revenue (total revenue and total growth, revenue breakdown by area by market)

Profit (total profit and profit growth)

Cost (total cost, cost per advertising transaction, cost per impression on web)

Gross margin trends

Sales/marketing expense per incremental customer and against revenue ratio

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Evaluation of Pros and Cons

Pros

Offers high levels of exposure this will tend to attract more customers.

Strategic alliances – “without a strong network of alliances, no portal can survive30”

Brand reflects portal capabilities.

Longevity

First Mover Advantage.

Exceptional distribution channel. Makes use of existing distributions infrastructures

Wide array of service offerings.

Benefits of the business case were comprehensively listed. Revenue generating

examples were well documented.

The target audience in terms of markets was well defined.

The various geographical areas in which CITY.ZA have been well defined and care has

been taken not to compete in market space that is already well occupied like

accommodation and tenders

Having multiple access channels to CITY.ZA i.e. phone, internet and traditional media.

Providing a wide variety of offerings for bringing customers online.

Components and players within the value chain were well identified and a comprehensive

solution was created. This looked at suppliers, potential partners, consumer interest and

the integration of all the above.

Good web site architecture allows users to customise their retrieval options in a variety of

ways.

Cons

Integration effort underestimated - Integration is the Holy Grail of e-business. In

generating a single view of customers and suppliers, the portal will become a

centerpiece." IBM's own hope is that customers will increasingly choose portals from

application infrastructure specialists (the ranks of which include IBM rival BEA Systems)

over products from pure-play portal companies31. There is very little mention of how the

integration with other portals will be handled as well as between different systems.

Software architecture not clearly defined. There are a number of different solutions

which CITY.ZA can go for. Firstly the decision must be made whether to build or buy,

here there are a number of different options which need to be considered. In South Africa

it may work out cheaper to build as the cost of labour can work out cheaper than the cost

of software (which is mostly priced in $US). In most instances nowadays packaged

solutions are preferred. Portal software packages generally fall into one of the four

following categories: digital dashboard, pure-play, application, or infrastructure portals. A

30 Mougayar, W. 2000. The New Portal Math. Business2.0.com. Available from: http://www.business2.com/articles/mag/0,1640,13381,FF.html Accessed [22 August 2002].31 Barlas, D. 2002. Consultant’s Push IBM’s portal. Line56. Available from: http://www.line56.com/print/default.asp?ArticleID=3936 Accessed [15 August 2002]

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digital dashboard portal package creates a centralized starting point for various

applications and provide a summary of information pertaining to those applications, just

as a car's dashboard provides centralized access to summarized information about

various aspects of the car's critical details. A pure-play portal package concentrates on

creating a portable interface for a specific portal offering across multiple platforms. Pure-

play provides more functionality than the digital dashboard in a centralized access point

for various business productivity applications, such as e-mail, collaboration tools, and

resource planning tools. An application portal package includes a wide variety of tools -

such as workgroup software - that have been adapted to go with a portal interface. Most

common applications now fall into this category, since most are built to work in a portal

environment. An infrastructure portal package is similar to a pure-play package, but is

specifically geared towards technologies developed within the company rather than

towards portability; for example, Oracle's portal product is geared toward Oracle

technologies. My personal recommendation would be to choose a pure play solution, as

this is more open. It can sit on any particular platform and this should also ease

integration efforts.

Hardware architecture not well outlined and should be linked to the software

infrastructure that is chosen.

Technology architecture not based on open standards – the database of choice is SQL

server. This runs ONLY on Windows NT. Both of these systems are proprietary and do

not support open standards, secondly their total cost of ownership is high. A more

appropriate database to choose, for example, is Oracle or an open source database as

these can run on any platform. Once an open standards database is chosen the software

sitting on top of those databases should also support open standards.

Insufficient assessment of existing hardware, software and technology infrastructures

used by the existing players in the market. This may hamper integration efforts.

Legal, ethical and tax issues do not appear to have been addressed. Legal needs to be

considered from the point of view that there are bound to be lots of contractual

agreements taking place.

Does not have an appropriate culture and language strategy in order to extend the reach

of the portal this will be essential – this is especially the case in South Africa where there

are a number of different cultures and official languages.

No market analysis has been conducted to assess the demand for this portal and what

customers really want.

Measures to continually innovate have not been outlined. As part of the implementation it

is essential to identify how the organisation will continually innovate so that they can

introduce new products and services and come up with better ways of running the

organisation.

Implementation project plan is high level and does not contain enough detail.

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MBL 426-B Student No: 750-163-3

No effort to assess the volume of transactions that will be traded through the portal and

the associated impact on hardware, software and technology infrastructure.

No performance metrics have been identified which means it will be hard to assess

whether the site has been a success or not.

Revenue model is too simplistic, it only includes the option to make revenue based on

subscriptions and advertising revenue. Another possible revenue channel is based on

transaction volumes

Recommendations for improvement

Successful portals are built on brands, scale, scalability, technology and crucially, quality

content32. The two most common portal pitfalls are lack of user acceptance and lack of

supporting infrastructure33. During 2002/03, the emphasis on ROI will cause the biggest pitfall

to be cancellation of portal projects/expansions due to failure to prove business value, rather

than their technical failure. By 2004, inappropriate product choices will become apparent, as

many B2E portals fail to gain traction among employees and are deemed unable to handle

B2C duties. Through 2007, the overall portal failure rate will decrease to 10% (from an

estimated 30% in 2001) due to maturity of products and dissemination of best practices34.

Based on these comments and the pros and cons mentioned above my recommendations are

as follows: -

Action Reason Impact on CITY.ZA and other comments

Build Barriers to entry This will help maintain and

sustain the competitive

advantage of CITY.ZA

The best way to do this is via

contracts. CITY.ZA should

contract with municipalities,

ISP’s and Asp’s. They should

also try and lock customers

into contracts to prevent

switching. Contracts should

also be negotiated with

advertisers so as to ensure

long terms revenue streams.

Improve Collaboration services

by providing e-mail and chat

Enhances sense of community This should give users a good

reason to also return to the

32 Rao, 2001:32733 Roth, C. 2002. Top 10 Portal Pitfalls. MetaGroup. Available from: http://www.metagroup.com. Accessed [29 July 2002].34 Roth, C. 2002. Top 10 Portal Pitfalls. MetaGroup. Available from: http://www.metagroup.com. Accessed [29 July 2002].

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MBL 426-B Student No: 750-163-3

Action Reason Impact on CITY.ZA and other comments

site.

Create a membership function Improves tracking of users This will enable better

measurement of activities on

the web site and enhance

CITY.ZA’s use of personal

advertising which is currently a

weakness.

Partner with the world or other

city domains

This will extend CITY.ZA’s

reach and will also ensure that

it is part of a greater network.

New revenue streams will be

built and improves chances of

obtaining new customers. Also

enhances existing customers

levels of exposure.

Establish a set of performance

metrics

To establish whether the portal

has been a success.

Will be clear to stakeholders

what is needed to achieve

success.

Develop a more detailed

project plan and ensure

usability testing is included

Will be able to better manage

the implementation. Usability

testing should to some extent

counter one of the main pitfalls

which is lack of user

acceptance.

RSG could have used the

Systems Development Life

Cycle (SDLC)35 or

prototyping36 to develop the

new system or systems. The

SDLC consists of system

investigation, systems

analysis, systems design

(including feasibility

analysis37), systems

implementation and systems

maintenance and review

Sell CITY.ZA’s data The organisation will have

large volumes of data that has

been organised at their

disposal

Additional revenue stream and

improved analysis of what is

actually going on in the

company.

Conduct an infrastructure To counter one of the most This will ensure that all the 35 Systems Development Life Cycle (SDLC): The steps of systems development of computer systems; also, the activities that together make up the SDLC. (Stair, RM. 1992, 674)36 Prototyping: An approach to systems design that develops a preliminary working model of the system then changes that model as more information about requirements and operations develop. (Stair, RM. 1992, 669)37 Feasibility Analysis: An investigation into the technical, economic, operational, and schedule possibilities that a systems design can be carried out successfully. (Stair, RM. 1992, 657)

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MBL 426-B Student No: 750-163-3

Action Reason Impact on CITY.ZA and other comments

impact assessment common portal pitfalls being

lack of supporting

infrastructure

appropriate hardware,

software and technology

infrastructures are put in place.

Conduct a market and industry

analysis

To counter one of the most

common portal pitfalls which is

lack of user acceptance

The market analysis should

increase the awareness of the

types of products and services

that need to be delivered to

our customers. The industry

analysis will amongst other

things enhance integration

efforts as well as give an

indication of what volume of

transactions can reasonably

be expected

Develop a revenue model for

transactions going through

CITY.Za

Since transactions will be

going through this site this will

potentially increase the costs

involved in managing these

transactions and therefore

revenue should be earned to

cover these costs.

New revenue stream with

huge profit potential if

managed carefully.

Analysis of the Budget for Income and ExpenditureExpectations

My expectations for a project of this nature are as follows: -

Low initial sales with a large increase in the first years – expectation met.

High initial costs that eventually come down as the years progress – expectation met.

High initial software cost followed by an annual licensing charge on software purchased –

expectation not met.

High initial hardware cost followed by a maintenance/depreciation charge on this

hardware – expectation was not met. Initial hardware investment appears to be low and

there is no maintenance component on this.

Revenue should be calculated from all the different revenue streams mentioned to date

mainly subscription/hosting fees and advertising – expectation not met.

High initial integration costs followed by a maintenance charge – expectation partially

met. There does not appear to be a huge initial investment cost in integration. There is

only an annual maintenance cost of two integration specialists.

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MBL 426-B Student No: 750-163-3

Heavy initial investment in advertising/marketing which should become a more stable

value over time – Expectation met

Findings

Budget not appropriately linked to any project plan with appropriate phases through the

years.

Revenue stream is to simplistic, should include more detail on this.

Revenue bears no relation to growth in customers.

Relationship between Costs of sales and revenue is not clear i.e. does cost of sales

contain a large fixed or variable component? Does cost of sales increase in relationship

to sales and transactions/no. of customers or does it remain stable over time?

Initial hardware investment is too small for such a large project.

No estimation of potential income and costs from the different markets and areas

Integration costs underestimated. No effort has been made to put an appropriate cost to

the level of integration required.

Staff costs do not indicate break up between contract staff and full time equivalents (FTE)

although it looks like most are FTE. However, I would expect that there is some contract

work involved.

Very few non-monetary indicators – specifically what are the expected volumes of

transactions that we anticipate will be generated through the site. Secondly no mention of

no. of advertisers, advertising contracts

No industry assessment of what ratios can be expected in terms of GP% and in terms of

the cost relationships i.e. what % of our total costs should be advertising, what % should

be administrative and so on. The industry assessment should also include expected

averages in terms of staff costs for the different areas, namely admin, integration etc.

No relationship between costs and number of transactions – one would expect costs to

rise with an increase in the number of transactions and customers as the cost of

managing all this information increases.

No indication of how payroll burden is determined as well as creditors in cash flow.

No assessment of cost of outsourcing as opposed to running the operation in house was

performed. In assessing this one must look at what organisations core competencies are.

Those competencies which are core should be maintained in house whilst the remaining

competencies should be outsourced.

Negative tax charge incurred in first two years. This is not possible unless it is to do with

tax allowances.

Revised Budget

Non – monetary indicators/metrics

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Financial Indicators

a. Detailed Sales/ Cost of Sales and Payroll

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MBL 426-B Student No: 750-163-3

b. Summary Profit and Loss

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MBL 426-B Student No: 750-163-3

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