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Tough times drive Web projects inside

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To save money and realize efficiencies, marketing organizations of all shapes and sizes are bringing more Web functions in-house, reallocating resources to make Web development more efficient, and re-evaluating how overall Internet efforts should be managed.

B-to-b companies are still investing heavily in Internet technology and marketing—a July report from Forrester Research Inc. puts e-commerce investment between $3 million and $52 million in start-up costs. But how they’re spending on the Web is being carefully scrutinized, with much more emphasis on proving the return on investment for every project.

"With the economy the way it is, all clients are looking at how they can run their businesses in a leaner fashion and be more cost-efficient with their budgets," said Susan Goodman, exec VP at Answerthink Inc., a New York-based interactive marketing firm whose clients include IBM Corp. and Agilent Technologies Inc. "The wild, crazy budgets of a year ago don’t exist anymore," she said. "Today, they have to build a business case first. The justification is, we have to do it because it will save X dollars or drive X revenues."

Goodman said Answerthink is seeing clients bring more "commodity" Web functions in-house, such as HTML coding and content management, but they’re still outsourcing strategy, user experience (including design and architecture) and creative development.

Barbara Bacci-Mirque, executive director of the Association of National Advertisers, said this budget scrutiny affects not only which Web services clients farm out to agencies, but also how organizations select and work with their various agencies.

"In the beginning [of Web development efforts], some brand people had the freedom to go out and find technical skills by using boutique agencies," she said. "As companies try to get more efficiencies out of their agencies, particularly in hard times, there seems to be more consolidation."

On the client side, marketers have witnessed an evolution in the ways which Web development and maintenance are managed and budgeted and how that impacts staffing, money and other resources. There’s been a shift over the years from Web development being spearheaded by marketing back to IT, and in many cases new separate units created to handle Web efforts.

At Electronic Data Systems Corp., Plano, Texas, until last year Web development had been decentralized throughout the organization, with each business unit responsible for budgeting for and developing its own site. This approach resulted in thousands of Web sites within the corporate domain, some with as few as one or two pages, and little consistency among sites.

There was also no cohesive budgeting or management of the Web development effort, said Keith Kuehn, VP-online marketing and communications at EDS, who was hired a year ago to form one group to manage Web development across the organization.

"It had been pretty much a rob-Peter-to-pay-Paul [effort] before that," Kuehn said. "There wasn’t even a strategic plan on enabling technology." He said if a group in Detroit wanted to put up a site, they did so, with virtually no corporate input.

While Kuehn declined to disclose corporate spending for Web development, he said EDS’ Web budget grew between 30% and 35% over 2000, and will continue to grow at a similar pace. Since the new structure was put in place, Web development costs have been cut by roughly 75%, he said.

Other companies, such as National Starch and Chemical Co., Bridgewater, N.J., have gone a completely different route, shifting their online efforts to a decentralized operating structure.

National Starch began its Web development efforts five years ago via its marketing communications department. Then, as various business units began to develop e-commerce sites, the company decided it needed a specialized team to consult with each unit to develop a unified look and feel. Today, the "e-team" has dedicated marketing and IT specialists who work with the units on e-commerce implementation, with funding coming from each unit’s sales budget.

"The e-businesses have an opportunity to do selling, ergo the movement into the sales-expense area," said Marc E. Green, marketing communications manager at National Starch, and former chairman of the Business Marketing Association. "IT sets the standard, but the costs are spread around among the users," he added.

Three stages

For most companies, budgeting for Web activity is still evolving. Answerthink’s Goodman said there have been three stages of Web budgeting and management.

In stage one, Web development was handled by marketing or IT, on disparate platforms with no unification, and efforts were funded out of these departments, she said. In stage two, companies consolidated Web development and set up stand-alone, corporate-funded organizations to oversee e-commerce and other Web activity across the organization.

"The problem with this stage was the expertise the divisions had and the expertise the brands had in marketing or sales or service weren’t as well understood by the centralized organization," Goodman said.

Now, many companies are having success with the third stage, Goodman said. Technology and infrastructure decisions are centralized and corporately funded, she said, but brands are given power and budgetary discretion about how to develop Internet strategy to further their goals.

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