THE AUSTRALIAN NATIONAL UNIVERSITY

ANU E-Commerce/E-Publishing Issues

Contents

1. Executive Summary
2. Acknowledgments
3. Introduction
4. What is Publishing?
5. What is Electronic Publishing?
6. Current Electronic Publishing Strategies
7. The Economics of Electronic Publishing
• Writing Costs
• Editing and Document Organization Costs
• Production Costs
• Storage Costs
• Sales and Delivery Costs
• Print vs E-publications: A Comparison of Costs
8. The Electronic Commerce
9. Types of E-commerce Activities
10. Is E-Publishing Worth the Effort?
11. E-Publishing and E-Commerce: Current Concerns
• E-Commerce and the Cultural Issues
• Differences In Organizational Philosophies
12. ANU: External Factors
13. ANU: Internal Problems and Issues
• Clarity of Objectives
• Morale
• Tools and Resources
• Initiatives and Assets
• Obstacles
• Available Expertise
• Operational Flexibility
• Co-operation
14. ANU Electronic Publishing: Possible Strategies
15. ANU Electronic Publishing: Optimal Strategies
16. ANU Electronic Publishing: Possible Work Alliances
17. Postscript - Berthier's Dilemma in March 1809
18. Notes and Calculations
19. Sources of Information

A List of Tables

1. Print and Electronic Publishing Operations
2. Locus of Publisher's Control in E-Publishing Enterprises
3. The Cost of Converting Books to Electronic Format
4. Costs of Establishing and Operating Commercial Info Servers
5. Comparison of Costs of Print and Electronic Publications (Scenario 1)
6. Comparison of Costs of Print and Electronic Publications (Scenario 2)
7. ANU Losses of Skilled Personnel, 1995-1997
8. Decline in the ANU's Share of Academic Resources on the Internet, 1993-1997
9. ANU Printed Publications, 1978-1988
10. Number of Volumes Printed Annually by Australian Universities
11. ANU Electronic Publishing Options

1. Executive Summary

1. The sudden emergence of global possibilities afforded by Internet technologies already has produced a dramatic impact on all human activities, including research and tertiary education.
2. A significant and rapidly evolving aspect of Internet-based activities is the electronic commerce (= online sales and collection of money)
3. Main technological barriers to e-commerce are now fully solved, and the social and cultural inhibitions which until now have been hindering the widespread acceptance of electronic commerce are starting to dissipate.
4. A minor, yet rapidly evolving sub-set of e-commerce activities is electronic publishing
   (= online storage, online sales and online delivery of information).
5. Electronic publishing is a pragmatic, complex production-distribution-marketing operation which - in order to succeed - needs to be run with military-like clarity of objectives, vigour and precision - all within an unpredictable, global and dynamic matrix of ever changing opportunities, policies, legislations, economies and technologies.
6. Widespread beliefs and preconceptions that online information should always be accessible free-of-charge in any volume to any online reader continue to slow-down the growth of an online information-market. However, these barriers are also expected to fall down in the forthcoming months and years.
7. In 1996/1997 the typical cost of an information cyberstore was between US$1.2 and US$7 million to launch and operate for the first 12 months.
8. In 1996/1997 the great majority of successful electronic publishing activities were not self-funding (let alone profitable), and had to be supported by money derived from other sources.
9. The 1997/1998 financial and political situation at the ANU does not favour any serious involvement in a fully fledged electronic publishing activity.
10. What is possible, however, under the current ANU circumstances is:
• establishment of a dedicated group of professionals who, if working in a pragmatic and business-like fashion, could (a) harvest, (b) edit, and (c) organize electronic publication of some 1630 titles spread across 130 volumes (26,260 pages of text) generated each year by researchers at the ANU
• hiring by this ANU group of an external agency specifically for the task of producing digital master-copies of ANU's publications;
• hiring by this ANU group of an external agency specifically for the task of electronic selling and world-wide distribution of ANU publications.
11. In the view of emerging competition, as demonstrated by the Internet successes and high international visibility of other - especially US - universities what would be to the ANU's advantage is a quick decision on these issues, and wholehearted commitment to the selected course of action.

2. Acknowledgments

Preparation of this report has benefited from discussions with many persons, and especially with Mr Paul Macpherson, ANU Library and Mrs Ann Andrews, ANH, RSPAS. However, any errors of fact, or interpretation are exclusively mine. Also, I am deeply grateful to Mrs Andrews for her generous editorial advice on the first version of this paper.

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3. Introduction

The ANU, like many hundreds of thousands of other organizations, faces a number of dilemmas and challenges while operating in an ever-changing, unfriendly and demanding environment. The University's situation can be likened to that of an army engaged in a variety of tasks and operations, some of which bring about cooperation, and others, fierce competition with other organizations, both in Australia and overseas.

The overall context of these developments change with ever-increasing rapidity, especially since the mid-1990s when the Internet became the major force redefining the paradigms and operating procedures of business, commerce, industry, media, administration, politics, research, education and defence (Rutkowski 1994a, Rutkowski 1994b, Reid 1997). The basic current trends and transformations are that:

• Information (data, analysis, understanding, knowledge, know-how, intelligence) became a valuable resource and a marketable commodity;
• The production of such informational commodities has been immensely accelerated, while results of this work can be disseminated within a matter of seconds to any person or organization in any building anywhere in the world;
• Organizational procedures became saturated with rapidly circulating facts about the institution itself, its past, present and anticipated performance, as well as about its competitors and its overall social and technical environment;
• Organizational structures become flatter because of
• an ever-decreasing need for intermediate layers of administration and management, and
• an ever-increasing demand for short-term, co-operative task-groups involving many horizontal and vertical sections of a given institution
• The well-being, reputation and long-term viability of organizations are now dependent on ready and easy access to the networked communications systems maintained on 24x7 basis by teams of IT professionals installing and maintaining increasingly complex and increasingly intelligent constellations of data, hardware and software;
• Individuals, organizations and countries willy-nilly entered overt or tacit competition and/ or co-operation with each other aimed at attaining informational dominance either globally or within a certain specialist niche;
• An organization without extensive, professional, well publicised and continuously enhanced Internet 'presence' lacks national and international visibility and 'clout' and, typically, inspires doubts about its long-term viability; and
• The all-important Internet 'presence' is created on a daily-basis through the
• provision of a steady, intensive and regular flow of subject-focused, value-enhanced electronic messages coming to and from such institutions;
• systematic and deliberate placement of unique text documents, images and data-bases for international networked access, analysis and further use.

Among the activities bringing various parties into competition and conflict are at least four recognisable layers, each with its own special significance and linkages (Chandler 1996, Earle 1966). These are:

• Policy or the Grand Strategy: the art and science of employing all the resources of an nation or organization - political, social, economic, psychological, and technological - to provide the greatest possible support to national (or institutional) aims and interests, so as to reduce the chances of frustration and defeat and thereby increasing the probability of success.
• Strategy: the planning and execution of major operations in all their complexity in order to achieve, in the area of a given activity, the declared policy objectives and intentions.
• Tactics: the actual methods of employing resources for the purposes of a given operation. Of course, operations are always won or lost at a tactical level. Chandler writes: "The adage 'in strategy there is no victory' makes the point, for strategy and tactics are inextricably related. As the Prussian military philosopher Karl von Clausewitz defined the relationship, 'tactics is the art of using troops in battle; strategy is the art of using battles to win the war'". (1996:8)
• Logistics: the art and science of adequate and timely provision, movement and supply of resources necessary for successful initiation, conduct and completion of operations required by tactical or strategic considerations.

The planning of campaigns; the selection of objectives; the devising of time-tables of movements, reinforcements and supplies, the correct disposition of men and their equipment for their actual day-to-day operations entails repeated calculation and evaluation of both one's own capabilities as well as of those of the enemy's intentions, resources and moves.

This report concentrates on provision of up-to-date intelligence pertaining to the Internet and the world of electronic commerce and electronic publishing. It consciously and deliberately steers away from major ventures into the specialist domains of Policy, Strategy, Tactics or Logistics. Clearly, there are several senior ANU officers far better equipped and trained to offer adequate guidance on these matters.

For a few years from December 1991 onwards, the ANU managed to place itself in an advantageous position on the Internet, and several of its online projects have been greatly successful.

Unfortunately, for a variety of reasons, both organizational and political, this early lead is now lost. Yet, the strong corporate interest in online activities continues to be alive, and since January 1997, RSPAS and the Library have considered embarking on a project which would enable selected, if not all, ANU publications to be marketed, sold and distributed via the Internet.

This paper looks at the ANU's electronic publishing situation, major strengths and weaknesses and, finally, available options. It focuses chiefly on the first two components of the 'holy trinity' of the 20th century: Production-Distribution-Marketing, leaving issues of the third one (Marketing) largely uncommented upon.

Intelligence presented here comes from a number of sources:

• Interviews and discussions with officers of the ANU,
• Seminars and briefings provided to ANU by various IT businesses and enterprises,
• Online information on networked information systems and e-commerce,
• Published technical and general literature,
• Newspaper clippings,
• Unpublished ANU documents, memoranda and other written materials, and
• Unpublished documents and memoranda of other organizations

All this information has been identified, collated and evaluated in the light of this author's unique expertise involving 10 years of work as a social anthropologist, 12 years as an IT specialist and 6 years of intensive work with the Internet (Ciolek 1997a).

A colourful bazaar of data has been pieced together from a variety of sources, trustworthy or otherwise. The object of the exercise was the construction of a general model indicating what can and cannot be accomplished at the ANU. In preparing this report a number of simplifications and assumptions have been made regarding developments, organizational structures and IT systems at The Australian National University. These observations or comments try to be as factual as possible and are not intended to offend or criticise The Australian National University and its staff. Therefore, the reader is kindly invited to

• treat any calculations or numbers as illustration of the order of magnitude/trends in the phenomena under investigation, and not as the absolute measurements,
• exercise his/her critical faculties, and
• be aware of unavoidable lacunae, circumlocutions and understatements in the assembled material.

Finally, the bulk of this report was written between 16 and 31 July 97 while I was crippled by a nasty back problem. It is due to those inauspicious circumstances that I did not have enough time to turn stacatto sentences into a pleasingly flowing prose.

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4. What Is Publishing?

The Shorter Oxford English Dictionary (Little 1973:1702) defines the word "publication" as

• "A work published; a book or the like printed or otherwise produced and issued for public sale."
• "The issuing, or offering to the public, of a book, map, engraving, piece of music, etc."
• "The work or business of producing and issuing copies of such works."

In all three cases, whether they focus on the product, technical procedure aimed at making the product, or the business established around that procedure, there is implied the existence of:

• some piece of useful or interesting information
• an agent owning that piece and working to make it widely available to
• an audience, the public, customers

In other words, placing a piece of information in the hands of the public requires that some body, an individual or a team (conventionally referred to as the publisher) orchestrates and interlinks at least seven sequential steps, abstracted here as:

(1) Writing => (2) Editing => (3) Organization => (4) Production => (5) Storage => (6) Selling => (7) Delivery

Each of these steps, of course, consists of its own sequence of subsidiary operations. For instance, Yelland (1997b) discussing new developments in the printing world (Step 4, Production) points to a distinction between:

• 'Collection' of all parts of the material so that it is ready for,
• 'Formatting' suitable for a given type of output, and the
• 'Manufacturing' itself.

A parallel view is expressed by developers of contemporary Web-publishing software who point to the need of maintaining at least three hardware/software systems (Anonymous 1997a), each taking care of a separate stage of publishing operations:

• content creation (= installation of new documents)
• testing linkages and layouts
• proofing the new product and integrating it with the rest of the web site

Similarly, Rowley (1996:90) suggests that, the penultimate step, (Step 6, Selling) consists, of a four highly specialized sub-sequences:

• 'Promotion', or marketing, leading to
• 'Merchant-customer contact', which culminates in
• 'Closing the deal', which in turn leads to completion of
• 'Transaction' (= processing of the payment).

Finally, Rowley (1996:90) observes that the last sequence (Step 7, Delivery) involves two distinct operations:

• 'Fulfillment' (product delivery into the hands of the customer), and
• 'Order processing' (updating inventory, financial and tax records)
  For an extended discussion of these steps see Note 1
  

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5. What Is Electronic Publishing?

Clearly, not every online activity constitutes an act of electronic publishing. Similarly, not everybody with enthusiasm coupled with a videocorder, editing-table and a TV-set is into the film-making or TV business.

Internet activities involving placement of electronic information into readers' hands fall into one of the four general groups:

• electronic messaging (email, listservs, IRC (internet relay chat), USENET postings)
• electronic information (placement on personal and corporate home-pages, announcements of forthcoming conferences, etc.
• electronic cataloging and directory services (placement of directory pages for an institution or for a group of Internet resources etc.)
• electronic publishing proper

For the purposes if this report I propose that we define electronic publishing as an activity which is:

• intentional
  [people know what they intend doing, the material is carefully selected, processed and packaged]
• accountable
  [there is an identifiable person/organization responsible for (a) quality in the content of disseminated materials; (b) legal and financial implications of such material]
• sustainable
  [the activity does not lead to an instantaneous bankruptcy of the protagonists, and it is not based on a series of happy-go-lucky, ad-hoc arrangements]
• systematic
  [all seven publishing steps are smoothly inter-linked, with equal emphasis placed on the quality of operations taking place in the course of each of those steps as well as between them]
• cumulative
  [operating procedures are gradually refined, improved and optimised, while previously issued materials are easily retrievable in one form or another]

In other words, electronic publishing activities are aimed at systematic harvesting, processing and delivery of substantial chunks of information (scholarly/factual materials, news, software, entertainment, games etc.) in electronic format to the public (users, purchasers)

The resultant electronic information can be distributed either:

• via a network (LAN, WAN, Internet, intranet) or
• on physical media such as computer diskettes, tapes, CD-ROM disks,

and can be made available either free-of-charge or at some cost to the user.

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6. Current Electronic Publishing Strategies

The key role in the electronic publishing cycle is played by those in charge of Step 3, ORGANIZE.

The publisher, that is, a person or an organization who orchestrates and oversees the capture, value-adding and dissemination of information, may or may not have administrative/financial control over all seven steps of the publishing cycle. Publishing is a rich mosaic of many interlocking endeavours and there are multiple ways for delineation of responsibilities for handling and coordinating these tasks.

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In short, there are many possible approaches to electronic publishing.

At the one extreme an attempt can be made to bring under a single organizational umbrella all seven (7) steps of creation, manufacture and dissemination of a piece of information, of a product. In such case the publishing houses employs in-house writers, editors, publishers, digital conversion bureaux and web-based storage/sales/delivery systems.

At the other extreme, arrangements can be made for a system comprising seven separate, independently managed but collaborating expert units, each taking care of its own specialized step withing the complete publishing cycle.

Between these two poles, there is a place for organizational arrangements involving four basic groups of people:

• author [= creator, inventor, artists];
• editor and publisher [= organizer and designer of the prototype of the distributable product];
• page master [= manufacturer of the product] and
• cybershop operator [= info-keeper, info-seller and info-distributor]

Each these various models of e-publishing has its own organizational, political, technological, financial advantages as well as disadvantages.

On the whole, large-scale umbrella-like electronic publishing projects offer the greatest stability, online visibility, and continuity to electronic publication operations. They do so at a large financial cost, however, being slow to exploitopportunities presented by frequent and rapid changes in technology.

Similarly, small-scale operations are the nimblest and quickest in seizing opportunities and niches created by new technologies, processes and business models.

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7. The Economics of Electronic Publishing

All available evidence confirms that publishing is a capital and labour intensive activity. Each of the seven steps of the publishing cycle has its own cost. These costs fall into two groups:

• initial set-up costs (structures, equipment, licenses, tools, etc.) and
• recurrent operating costs (rent, repairs, salaries, insurances, taxes, etc.)

The sections below summarize intelligence gleaned from a variety of sources:

WRITING COSTS

• Researching and Writing - AU$28.6/hr + 35% overheads
  For calculation details see Note 2
• The purchase cost of information - approx. AU$0.12/word or AU$66.0/page
  or AU$19800, say AU$20,000 per a 300 page book
  For calculation details see Note 3
• The cost of an item of visual information - approx. US$2.66
  For calculation details see Note 11

EDITING and Document ORGANIZATION COSTS

• Typing - $??/hr
• Editing - $??/hr
• Proof-reading - $??/hr
• Marketing - $??/hr
• Legal & copyright advice - $??/hr

Until adequate data are located, one can assume that, on average, these costs resemble those of Writing Costs listed above.

PRODUCTION COSTS

• Page-setting and printing costs

- data to be collected -

• Page duplication costs
• Commercial rates in Australia (MacLean 1997)
  Minimum printing cost - AU$0.0427 ; Minimum sell price - AU$0.051 (= min. printing cost + 20% profit)
  For calculation details see Note 4
• In house rates charged by the ANU's University Printing and Duplicating Service (Welling 1997)
  Minimum printing cost - AU$0.0239
  For calculation details see Note 8
  
• Digital processing costs fall into five groups:
• (a) data acquisition (scanning, input)
• (b) data format conversion
• (c) document design, construction and markup
• (d) installation of such information on the info-server
• (e) design of an info-server
• (f) maintenance of an info-server
  
  
• Costs of image scanning
• 80,000 historical posters, 1996 Harvard Univ. US$2.0/item, production rate 1000 posters/day (hardware/software/labour costs) (Lesk 1997)
• 27,000 images of art and architecture, 1994-1997 ArtServe, ANU, $3.22 per image of 527Kb (hardware/software costs only), production rate 24 images/day
  For calculation details see Note 5
• 1 million images comprising Microsoft's Corbis collection (corbis.www.com), US$3.00 per image of 35Mb (hardware/software costs only), production rate 40,000 images/day
  For calculation details see Note 12
  
• Costs of digitizing books:

Table 3
Summary of Costs of Converting Books to Electronic Format

OPERATION	Place, Date	Cost per 300 pages book	Cost per page
graphics scanning	Cornell Univ. 1992	US$35.00	US$0.12
text scanning, proofreading, correction	A.Mellon Foundation, 1996	US$120.00	US$0.39
keying *	USA, 1996	US$600.00	US$2.00
html markup	USA, 1995	US$900.00	US$3.00
Src: Lesk (1997)

* The EBTI (1996) project reports that for critical editions of electronic religious texts the same text is keyed twice, by two different teams, so that errors and mistakes can be spotted by an appropriate software. It is a costly operation which can be sustained only through contracts with text input bureaux in the South and South East Asia.

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• Electronic conversions costs
• Electronic format conversions - $?/hr
• Graphics file processing - AU$70/hr *
  
• Electronic document design, construction and markup costs
• HTML markup - AU$25/hr *
• Indexing a digital document - $?/hr
• Providing metadata and semantic-tags - $?/hr
• Web programming - AU$80/hr
  
• Info-system design, construction and system maintenance costs
• Systems analysis - AU$286/hr
  (Roger Clarke, personal information 1997)
• Systems analysis - AU$145/hr
  (Michael Greenhalgh, personal information 1997)
• E-commerce site design - US$71.50/hr
  For calculation details see Note 14
  
• Info-system maintenance costs
• CGI programming - AU$80/hr
  [short term contract, Jul 97]
• Unix system programming - AU$80/hr
  [short term contract, Jul 97]
• Unix system programming - AU$35/hr
  [long term contract, Jul 97]
• Unix system programming - AU$22.8/hr
  [1 year contract, Jul 97]
• 24x7 Web-maintenance - US$3000-US$5000/month
  (Yesil 1997:65)

STORAGE COSTS

There are three types of costs involved in storage of information:

• Construction of the storage facilities
• hard copy storage -
  US$30.0 per 300 page book or US$0.10 per page (Lesk 1997)
[in a library or a bookshop environment]

• hard copy storage -
  US$3.0 per 300 page book or US$0.01 per page
  [estimated for a warehouse environment, construction costs being 10% of construction of the bookshop]
  
• digital storage -
  AU$0.32 per 300 page book or AU$0.001 per page (ArtServe 1997)
  For calculation details see Note 5
  However, please note that (Lesk 1997) gives the following values: US$2.0 per 300 page book or US$0.07 per page. This estimation most likely includes annual maintenance costs.
  
• Cost per publication/per year for the storage

assuming annual operating costs are 5% of the setup-cost

• hard copy storage (bookshop) - US$1.50 per 300 page book
• hard copy storage (warehouse) - US$0.15 per 300 page book
• digital storage - AU$0.016 per 300 page book
  
• Value of the stored (waiting to be sold) inventory
• the value Co-op Bookshops inventory in June 1997
  in excess of AU$8 mln
  (Moles, personal communication 1997)
• the value of ANH Division Bookshop inventory in June 1997
  AU$80,000
  (Andrews, personal communication 1997)
• on average, 40% of the printed inventory is pulped (National Capital Printing - NCP 1997 estimate). Draper (1996:10) determined very similar figures for several of the ANU's print operations.
  For calculation details see Note 13

SALES and DELIVERY COSTS

• Selling and distribution of paper publications:
• Estimated annual salary costs of a medium size Australian bookshop employing 5 floor staff and another 5 persons in administration and support areas are at least AU$350,000. Together with overheads, the annual cost appears to be in the vicinity of AU$420,000
  For calculation details see Note 7
• Australian banks report (Wood 1997:46) that the average operating cost is
• approx. AU$3.50 per each over-the-counter transaction
• approx. AU$0.25 per each electronic transaction
• The relevant figures from the USA (Anonymous 1996:32) are as follows:
• customer-teller interaction US$1.10 per transaction;
• electronic operation US$0.27 per transaction
• Draper (1996:10) reports that issues of the Indo-Pacific Prehistory Association Bulletin and the Pacific Economic Bulletin are being distributed through Bibliotech at a cost of AU$5.0 per volume distributed, or 20% and 28.6% of their RRP respectively.
• Selling and distribution of electronic publications:

Small to medium-scale operations costs between AU$20,000-$130,000 to launch and a large amount of money every year to maintain.

• American Society for Biochemistry and Molecular Biology is charged by Stanford's HighWire Press (Young 1997:A21) between US$35,000 and US$125,000 for development of an online journal, and pays several thousand dollars per month in maintenance costs.
• Proposed plans for the joint Stanford/Griffith University electronic publishing project envisage (Griffith University, 1996) the following HighWire Codebase Access Pricing schedule:
• One-time learning fee payable to Stanford U.: AU$70,000
• Annual maintenance/support: AU$70,000 + travel costs
  [These costs refer to the price of e-commerce software and expertise and do not include costs of the hardware itself nor costs of the systems maintenance staff].

Medium-size and larger operations require huge investments in software, hardware and communication systems.

• Industrial strength, high-capacity software for placing electronic documents online and for online collection of revenue can cost in excess of AU$250,000 (Picozzi 1997). This price excludes the cost of equipment, additional software, telecommunication charges, insurance, salaries, overheads and other business expenses.
• The US$800,000 revenue generated in fiscal year 1996 from electronic activities of the Stanford's HighWire Press was not sufficient to cover fully the costs of operations which in Nov 1995 employed 15 people (not all full-time) (Salisbury 1996). By May 1997 HighWire's staff has grown by 20%, that is, to 18 persons.
• Horey (1966:37) notes that "The Australian" newspaper site (www.australian.aust.com) costs between AU$150,000-AU$200,000 a year to maintain, and the costs of running Fairfax (www.fairfax.com.au) web site are close to AU$500,000 a year.
• Jones (1997) reports that Media General, the parent company of Penthouse (penthouse.www.com) plans to spend US$10 million (AU$12.5 million) over the next three years to bring high-quality video to its Web site.
• Colin L. Richardson and Peter B. White, La Trobe Univ. in their 1997 report on Electronic Commerce and the Australian Taxation System wrote: "We believe that costs of creating a functional and attractive electronic commerce site to be in the vicinity of AU$500,000 to AU$1 million and that consumers will seek out those providers who can offer a range of value-adding services over and above the simple supply of goods and services" (Megalogenis 1997).
• According to the January 1996 Forrester Research report (Hilvert 1996) professionally built WWW sites with commercial objectives cost between US$300,000 (AU$411,000) and US$3 million a year to launch and maintain:

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Table 4
Costs of Establishing and Operating Commercial Info Servers

TYPE OF THE COMMERCIAL SITE	FUNCTION	STAFF	COSTS - Launch	COSTS - Operation per annum	CONTENT DETAILS
PROMOTIONAL site	creates awareness, stimulates demand, promotes brands or encourages customer loyalty (prime goal is marketing)	data not avail.	US$98,000	US$206,000	250 HTML pages, interactive forms and e-mail links
CONTENT site	designed to entertain or inform. Usually updated each day like a newspaper, with revenues coming from advertising	about 10	US$419,000	US$893,000	2000 HTML pages of updatable content
TRANSACTION site	offers online transactions to sell goods, conduct financial business or provide customer service.	about 30 to operate efficiently	US$593,000	US$2.8 million	Up to 1 mln records. To respond to viewers' requests, nearly every page is composed dynamically on a transaction site, using product and pricing information from a back-end database
Src: Hilvert (1996)

A closer analysis of these summary figures reveals that:

• For promotional and content sites the annual running cost of the site is 2.1 times greater than construction costs (It is 4.7 times greater for technology-intensive transaction sites)
• Running costs at content sites are approx. US$42,000 per staff member
• Running costs at transaction sites are approx. US$19,700 per staff member

All those costs were estimated to rise (Hilvert 1996) between 50 and 230 percent by early 1998 due to the:

• increased volumes of on-line traffic, and hence need for more powerful hardware and software
  [A typical large-scale commercial web system in 1997 is capable of handling up to 10 million connections a day, or 116 simultaneous 'hits' per second. A Digital Equipment Co. web server which mirrored NASA/JPL information site on Pathfinder's explorations of Mars in early July 1997 could handle 350 simultaneous inquiries/second]
• fast servers
  [Howe (1997) estimates that an average web page loses 20% of the viewers for every 10 seconds it takes to load]
• fast communication lines
  [i.e. operating at the level of T1 (= approx. 1500 Kb/sec or better)]
• rising consumer expectations, and hence need for contracting extra programmers and graphic designers
• increasing staff costs
• need for minimal downtime of the merchant system
  [on the Internet acceptable downtime for a server is less than 0.01 percent or 1 minute of outage once a week (Yesil 1997:69)]
• need for improved disaster-recovery and both complete & incremental backup plans
• need for improved Web security
  [firewalls, encryptions, secure servers, anti-snooping devices, etc.)
• emergence of new interactive technologies and hence need for contracting extra consultants and programmers

These trends have been confirmed in mid-1997 (Anonymous 1997a). The prices for a large-scale web publishing system now range between US$1.2 and US$7 million

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PRINT vs E-PUBLICATIONS: A COMPARISON OF COSTS

On the basis of information collected so far, it is possible to compare the costs of the two main publication technologies. The model below assumes two scenarios

• A single book of 300 pages is written, edited, organized, produced and warehoused. Also, a shop (bookshop as well as a cybershop) handling 2000 titles is established and staffed.
• One hundred books of 300 pages each are written, edited, organized, produced and warehoused. Also, a shop (bookshop as well as a cybershop) handling 2000 titles is established and staffed.

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Therefore, one can conclude that:

• There are no differences in the costs of the WRITE, EDIT and ORGANIZE stages of publishing operations;
  
• "PRODUCTION" of a master copy of an electronic publication is approximately 100 times less expensive than those of an equivalent paper edition;
  
• Establishing electronic "STORAGE" for a single publication is approx. 60 to 90 times less expensive than physical STORAGE;
  Moreover, for storage of large volumes of information, the setup costs for electronic warehousing can be 500-1000 times less expensive than construction of a physical facility.
  
• Running electronic "STORAGE" for a single publication is approx. 7 times less expensive than running a physical warehouse;
  Moreover, for maintenance of large volumes of information, the operating costs for electronic warehousing can be 500-1000 times less expensive than the running of a physical facility.
  
• Establishing a "Cybershop" is approx. 2 times more expensive than a traditional bookshop capable of handling the same number of titles.
  
• Running a "Cybershop" is approx. 2 times more expensive than running a traditional bookshop.
  
• DISTRIBUTION of electronic publications, regardless of the distance involved, is approx. 14 times less expensive than the distribution of paper publications.
  
• If only one 300 page book is published, then the total publishing cost of one electronic copy of such a book is 1.8 times greater than that of a paper publication. However, if 100 books are being published, then the total publishing cost of one electronic copy of a book is 3.8 times smaller than that of a paper publication.
  
• In sum, if electronic publishing is conducted as a medium to large-scale operation, then the publication costs per unit of information are approximately one-quarter of the cost per unit of an equivalent paper-based operation.

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Copyright (c) 1997 by T. Matthew Ciolek.

URL http://www.ciolek.com/PAPERS/ECOMM/e-issues97.htm