E-commerce site construction averages $US1m

The average cost of developing and launching an enterprise Web electronic commerce site is $US1 million, market research company Gartner Group has concluded in a new research study released last week.

The report, "Survey Results: The Real Cost of E-Commerce Sites," estimates that 79 per cent of the total development cost is labour-related, while 10 per cent is spent on software and 11 per cent on hardware. The report also says that the cost will rise by 25 per cent annually.

Survey participants discovered that everything -- from organising time and money to the hiring of professional service companies -- was more involved than expected, Gartner said. While some survey participants spent less than $350,000 on their Web sites, others spent more than $2 million. Regardless of cost, no survey participants claimed to be on budget for their projects, the report said.

According to the report, the average time to complete an e-commerce site was five months, although some took up to a year to launch on the Web. The goal for some enterprises was to create a Web e-commerce presence quickly and inexpensively, while others built Web sites that create market differentiation.

These Web sites built by the survey participants fell into three cost categories based on function. They included:

* $300,000 to $1 million to "Get on the Map". This site is adequate but it is functionally behind most industry participants.

* $1 million to $5 million to "Run with the Pack". This site is functionally equivalent to most industry participants.

* $5 million to $20 million to achieve "Market Differentiator". This site raises the industry competitive bar and changes the nature of online competition.

The report said that the biggest surprise to survey participants was that they did not get "almost everything they needed" from their e-commerce application vendor. On average, most organisations used two or more external companies, usually including a nationally recognised media company as well as local systems integrators to help control costs.

According to the report, "a great deal of effort was needed to build the front and back ends of the e-commerce sites", which resulted in various delays and additional costs.

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