By John Seasholtz, Seasholtz Consulting

Organizations increasingly use Web sites in more complex, business-critical situations. Yet the Web is a relatively new tool and many people find it difficult to understand the budgeting impact of Web initiatives, such as how costs and benefits should be forecasted, and how costs should be allocated across the organization. This article provides guidance on how you can incorporate Web initiatives into your budgeting and planning process.

Types of Web initiatives

Web sites play varied roles in businesses. Some of the more common types of Web initiatives you may be exploring or may have already implemented in your organization include:

• Brand sites   Unique, branded sites where customers can access product information, advice, community features, frequently asked questions (FAQs), and promotional items, such as coupons or contests. Companies with multiple brands often have a separate site for each brand. For example, the Web sites for Diet Coke and Minute Maid each have a very different look and feel, yet they are both owned by the Coca-Cola Company.
• Extranets   These password-protected sites allow customers and suppliers access to specific or confidential information. For example, a bank may build an extranet that enables mortgage brokers to process applications more quickly, which results in improved efficiency and customer satisfaction.
• Intranets   These sites on internal company networks allow employees easy access to proprietary information and provide a forum for better communication within the organization. For example, a salesperson based in Boston can post a proposal on a company intranet. Colleagues from across the country can review the proposal and provide feedback in a timely manner.
• Commerce sites   These business sites take the form of direct-to-consumer sites, such as Amazon.com, or business-to-business sites, such as a plastics company that sells parts to auto manufacturers. Commerce sites often incorporate elements of brand sites along with the ability to browse a catalog and purchase products and services.

Web challenges

Web initiatives are new to many companies. As a result, you may find it difficult to incorporate Web investments into the budgeting process. Here are just a few of the challenges that you may face:

• Lack of executive understanding about costs and benefits   There can be a mystery around Web costs and potential benefits, many of which are indirect and difficult to measure. Executives may be unfamiliar with how the organization uses the Web to drive business value.
• Lack of clear accountability   Often, IT department staff members own the Web budget, while other workers, such as marketers and sales managers, drive the Web site's requirements. Although the site's benefits might affect multiple departments, the costs often hit only the IT department. As a result, managers outside the IT department might not feel accountable because they aren't hit with the site's costs. And IT department managers can become frustrated because they don't receive credit for any of the site's benefits.
• Significant indirect benefits   Many of the benefits realized by Web sites are hard to evaluate. For example, enhancing the value of your brand is a key benefit of an effective Web site. But it's difficult to gauge how well a site helps a brand. Similarly, it is difficult to measure a Web-influenced sale, such as when customers use a Web site's store locator to find a nearby retail store where they make a purchase.
• Inability to measure effectiveness   You may have assumptions about how well your Web site will benefit your company but have no data that supports your assumptions. Sometimes, the company that hosts your Web site provides statistics that measure, for example, how many hits your site receives. But these statistics might not provide the data you need to evaluate indirect benefits and costs.
• Unknown risks   Web sites have a number of inherent risks for which it is difficult to plan. Perhaps foremost is security — computer viruses and hackers are just some of the threats regularly facing Web sites. Another unknown risk is your site's technology — how long until it becomes outmoded?

Tips for budgeting

Your budget is a quantitative expression of your organizational strategy and incorporates all major strategic projects and goals. Despite the many challenges posed by Web initiatives, your Web site offers a potentially strategic asset that should be included in the budget.

Use these tips to help you effectively incorporate Web initiatives into your budgeting process:

• Appoint a site owner with clear accountability   Although multiple departments will likely benefit from your Web site, it is important to have one owner responsible for coordinating and prioritizing related projects, reporting on performance, and troubleshooting. To run the Web site, many companies appoint a separate manager who reports to the marketing or corporate strategy department.
• Discuss the Web site in your budget committee   As part of your budgeting process, you will likely have a budget committee. Make sure that the committee evaluates the net benefits of the organization's Web initiative and how it supports overall strategy.
• Require business cases   A business case provides a framework for discussing the potential costs and benefits of a Web initiative. The owner of the Web site gathers data about organizational needs, costs of building and maintaining a site, and forecasted benefits. These components are rolled up into a report or spreadsheet that can be presented to the budget committee.
• Allocate costs to departments that receive Web benefits   Department managers will feel a greater sense of ownership if site costs are allocated to their departments based on the benefits the departments receive. The methodology for allocating these costs should be discussed by the budget committee and approved by the relevant department managers.
• Measure performance   Put a plan in place to track how your Web site performs against the budget — in terms of both costs and benefits. Questions that you'll need to answer include: Are you receiving the site visits you expected? How satisfied are users? How many products are sold through the site (or how many sales are directly influenced by the site)? You may need to use customer surveys or hire a consultant that specializes in Web site analysis.

Web sites are an increasingly important part of company strategy. By appointing a site owner, allocating resources, and measuring the site's performance, you can make your site an integral part of the budgeting process. You'll benefit from a more robust budget that better meets your organizational strategy.

About the author   John Seasholtz is the founder and principal consultant of Seasholtz Consulting, Inc., in Seattle, Washington. Seasholtz Consulting provides strategic and operational planning services to clients in the consumer products, high-tech, financial services, and retail industries.