E-Business and the Bottom Line: E-Business and the Bottom Line 2001 International Hotel/ Motel & Restaurant Show AH&LA E-Business Committee Sunday, November 11, 2001 10:30 am - 12:00 pm Jacob Javitz Center


Developing an E-Business Strategy: Developing an E-Business Strategy Frank Nardozza Managing Director and Hospitality Industry Leader KPMG Consulting


What is E-Business?: What is E-Business? “The collective business strategies and business processes influenced or enabled by the Internet and electronic technologies” Source: AH&LA E Business Committee


Why is E-Business Important to my Hotel or Hotel Company? : Why is E-Business Important to my Hotel or Hotel Company? Increase Profit Reduce Investment


E-Business Evolution: E-Business Evolution Breakthrough Strategies New Fundamentals Operational Excellence Rational Experimentation Current New Current New KPMG Consulting / Cisco Systems


What is Your E-Business Strategy?: What is Your E-Business Strategy? Three Steps to Developing an E Business Strategy: Step 1- E Business Visioning Step 2 – High Level Transition Strategy and Business Case Step 3- E Business Implementation Plan


Step 1 - E-Business Visioning: Step 1 - E-Business Visioning Objective Define a very clear and articulate e-business vision for your hotel or company Approach Conduct research and analysis to crystallize a web vision across its core business areas, given the state of technologies. Results e-Business Vision Statement and Vision map Identification of high prospect opportunities Points to Address: Business goals and objectives Competitive Market Position Product/Service Strategy Core Competencies Key Customer and Supplier Needs Current technology enablers Current technology inhibitors High level—e-initiatives review


Step II – High Level Transition Strategy And Business Case: Step II – High Level Transition Strategy And Business Case Objective Develop high level strategy to migrate the company to the Web Further develop priority opportunities. Approach Analyze key business drivers to determine requirements Develop High level business case analysis of priority projects – ROI. Results Summary of business requirements, priorities, and business case metrics. What You Need To Review : E-business initiatives planned, underway, proposed Internet influences on key business drivers/value chains High level e-Business requirements


Step III – E-Business Implementation Plan: Step III – E-Business Implementation Plan Objective Define and validate the technology blueprint Develop a tactical implementation plan. Approach Assess current and future state technology and applications Determine gaps and develop detailed implementation plan Results Technology blueprint and detailed implementation plan. Several components should be analyzed: Web architecture Business application architecture Systems and Networks Data architecture Technology components Web technology strategy and integration Technology organization


Common E-Business Initiatives For Lodging: Common E-Business Initiatives For Lodging Customer Supply Chain Web bookings E-Contact Center E-Marketing E- PMS E-loyalty E-Mtg. Planner Customer self service High Speed Access On-line catalogs E-Procurement Vendor Sourcing On-line auctions Digital Market Place Back Office HR Self Service Web Hosted Accounting Corporate Intranet / Portal Email Wireless networks Systems Integration


E-Business Priority Areas For the Changed Lodging Industry: E-Business Priority Areas For the Changed Lodging Industry Web Enabled Customer Relationship Management On-Line Reservations Web Based Self Service Applications Centrally Hosted Applications – ASPs E Procurement Web enabled Security


E-Business Readiness : E-Business Readiness D. Lee Davis Director e-Business Services – Hospitality Practice Unisys Corporation


E-Business Readiness Technological Considerations: E-Business Readiness Technological Considerations Television Telephone Radio PPV TV Fax Dataport ISDN line Web TV Fully Integrated & Interactive Information/ Entertainment Offerings 10 9 8 7 6 5 4 3 2 1 0 Single Purpose Hardware Solution Multimedia In-room Entertainment/ Information Centers Scale Perceived Added Value (on a 10 Point Scale) 1950 1970 1990 1950 1995 2000+


E-Business Readiness Technological Considerations: E-Business Readiness Technological Considerations


E-Business ReadinessHigh Speed / Bandwidth: A minimum of a T-1 line ensures sufficient bandwidth from an Internet Service Provider A burstable T-1 may be used to reduce costs Cat5 is over 50 times faster than traditional dial up Cat5 can provide 100 Mb bandwidth for data transfer and multi-media service Cat3 and wireless options are available E-Business Readiness High Speed / Bandwidth


E-Business Readiness Infrastructure and Cost: High-speed Internet Access NOC Hardware Help Desk Intranet integration Drop costs and local loop Service and maintenance E-Business Readiness Infrastructure and Cost


E-Business Readiness Infrastructure and Cost: E-Business Readiness Infrastructure and Cost MAY 15, 2001 - Jan Kalanda, the managing partner of a group of Manhattan hotels, grimaces when he remembers how a company reserved eight rooms at one of them, the Casablanca, sold on the spacious suites, Moroccan decor and Internet access. When the company learned that the Casablanca's Internet access was gone, it canceled and picked another hotel. And each week that passes costs his hotel group $2,000 in refunds and lost reservations, he said "This is unbearable," Mr. Kalanda said. "We have a lot of technology companies as clients, and they check out when they find out our Internet service is not working."


E-Business ReadinessVendor Solvency: October 22, 2001, Ardent and MobileStar Network “pull plug” on HSIA May 21, 2001, Darwin Networks files bankruptcy Wayport and STSN go to new revenue model and require venture capital funding in 2000 HITEC ISPs/returns: 1999(19), 2000(43/13), 2001(11/6) 2002 (5/3?) E-Business Readiness Vendor Solvency


Return on Web Investment:Measuring E-Business: Return on Web Investment: Measuring E-Business Clay B Dickinson Principal IBM Global Services Travel and Transportation


Slide20: Why is ROI different in the Internet Economy? e-Business Changes Business Business Strategies Business Models Markets Technology Business Measurements ROWI Background


Leveraging e-Business ahead of competition requires convergence of business, I/T and e-business strategies.: e-Business becomes the Strategy Strategies evaluated & changed in web time IT becomes a strategic weapon 1996 2003 1999 IT IT Strategy Strategy Business Business Strategy Strategy e-Business e-Business Strategy Strategy e-Business e-Business Strategy Strategy Leveraging e-Business ahead of competition requires convergence of business, I/T and e-business strategies.


Traditional ROI Methodologies: Traditional ROI Methodologies ROWI Methodology focuses on how a company creates value


Common issues arise when traditional ROI methodologies are applied to e-business: Common issues arise when traditional ROI methodologies are applied to e-business Focus - traditional ROI business casing "gating" process is often very detailed, but obtaining data for this business case is unstructured, and not necessarily related to business strategy Deployment - often mathematically complex and difficult to convey; require a great number of assumptions to produce useful results and specialized knowledge to "maintain" Use - they do not assess how well a given project supports the strategy of a firm entering e-business space Prescriptive - doesn't tell you why it happened, nor do they provide clues as to where efforts should be directed Limitations of Financial Measures - tend to favor investments when returns are easily measurable; which often leads to under-investment in more ‘intangible’ assets Over-investment in ‘tangible’ assets (mergers, acquisitions)


ROWI uses a Balanced Scorecard approach to focus on how a firm creates tangible, measurable business results: ROWI uses a Balanced Scorecard approach to focus on how a firm creates tangible, measurable business results Financials Business Model Creation of business value to the customers through execution of powerful business ideas Process & Governance Mitigation of business risk through structure and effective and efficient business processes Organizational Capability Creation of organizational capability through learning, acquisition or alliances Creation of financial value to the firm and its shareholders


The Balanced Scorecard provides the model for value assessment in the new Customer Economy: The Balanced Scorecard provides the model for value assessment in the new Customer Economy


The ROWI methodology has three mutually reinforcing components that produce a better understanding the "real return" of eBusiness investments: The ROWI methodology has three mutually reinforcing components that produce a better understanding the "real return" of eBusiness investments


Slide27: Determine the risk rating of e-business projects or ventures with the measures used by VCs, finance companies, and successful project managers. Use the risk rating to identify the volatility of your expected cash flow using the Black-Scholes option model. ROWI Risk Tool ROWI Option Tool Adjusted Cash Flow Project Priorities Option Theory can be used to further evaluate and prioritize alternative e-Business investments


Slide28: Summary Comparison of Traditional ROI vs. ROWI ROI ROWI Relevant to corporate strategy No Yes Simple to understand and easy to convey Sometimes Yes Aligns IT and business ("Strategic Match") No Yes Identifies focus areas for future improvement No Yes Efficient - focuses on key success factors No Yes Provides structured organization and process No Yes Encourages consistency across the business No Yes Deals consistently with "soft factors" No Yes Requires understanding of "the business" Sometimes Yes


Cost effective E-Business solutions for Small to Mid-sized Owners and Operators : Cost effective E-Business solutions for Small to Mid-sized Owners and Operators Scott W. Anderson President & CEO SWAN, Inc. (Service World Network)


Where to spend your time in the hard times: Where to spend your time in the hard times Distribution Purchasing ASP’s


How a reservation shows up: How a reservation shows up Central Res System(s) Flag Pegasus WizCom Sceptre Voice GDS Internet PTU Consumer Travel Agent Hotel


Types of sites: Types of sites QOTC’s Expedia Travelocity Orbitz Demand Sites Hotwire Priceline Wholesale sites HRN Expedia Special Interest Sites Fishing.com Ski.com


You need two plans fore-bookings: You need two plans for e-bookings Offensive-Ubiquity Defensive-Your own site


Purchasing: Purchasing Don’t overlook simplicity Measure the pain vs. the reward Keep it VERY simple


Players: Players


ASP’s Why and What: ASP’s Why and What Typical Configuration in house system PMS Server Desk Top Computers Desk Top Computers Desk Top Computers Desk Top Computers PTU PABX Yield POS Wan or LAN CRS In House Off Site


Slide37: Typical ASP Configuration Desk Top Computers Desk Top Computers Desk Top Computers Desk Top Computers Desk Top Computers In House Off Site Wan or LAN Server All Applications High Speed Pipe Other Hotels Common Databases


ASP- To do or not To do - Is a Math Question: ASP- To do or not To do - Is a Math Question Total cost of ownership Capital preservation In house talent cost What is your time worth


Slide39: Be careful of the “Next Great Thing”


Questions?: Questions?