SBA * Consulting LTD

Starting an E-Business From Scratch: Part 3
Budget preparation for our journey into e-commerce

By Wayne Spivak, SBA Consulting LTD

4:23 PM EST Fri., June 01, 2001

In parts one and two of "Starting an E-Business From Scratch," we covered hardware and software, and installation hints and the reasoning behind each. What we haven't covered--which is paramount to any endeavor--is the budget.

As businesspeople, the mighty dollar weighs heavily on any decision we make. To borrow part of a quote from Gene Rodenberry, "To boldly go where no man has gone before," and not know what it will cost is tantamount to professional suicide.

Free Software?
There really is no such thing as free software. Somehow, somewhere, you will pay for the use of any software product. Whether in a loss of productivity, configuration, migration or implementation, all software has a cost in human hours and, thus, is not free.

So before providing some dollar figures about software, let's discuss what open-source and free software and shareware are all about. Your decision on which software to use is not only based on money, but, in the corporate setting, on whether you can get technical assistance.

Open Source
The term open source refers to a program whose source code is made available free of charge to anyone who wants it. This enables users to modify programs according to their particular needs. The Open Source Initiative (www.opensource.org) is succinct about the benefits of open source: "When programmers on the Internet can read, redistribute and modify the source for a piece of software, it evolves."

By contrast, the infamous "Halloween" Microsoft white paper displays a less charitable view: "OSS [open-source software] poses a direct, short-term revenue and platform threat to Microsoft, particularly in server space. Additionally, the intrinsic parallelism and free idea exchange in OSS has benefits that are not replicable with our current licensing model and therefore present a long-term developer mind share threat. Recent case studies (the Internet) provide very dramatic evidence that commercial quality can be achieved/exceeded by OSS projects."

Free Software
The GNU project (www.gnu.org) and Free Software Foundation (www.gnu.org/fsf/fsf.html) says, "'Free software' refers to the users' freedom to run, copy, distribute, study, change and improve the software. More precisely, it refers to four kinds of freedom for the users of the software:
The freedom to run the program for any purpose (freedom 0).
The freedom to study how the program works and adapt it to your needs (freedom 1). Access to the source code is a precondition for this.
The freedom to redistribute copies so you can help your neighbor (freedom 2).
The freedom to improve the program and release your improvements to the public so that the whole community benefits (freedom 3). Access to the source code is a precondition for this."

Shareware
Shareware is distributed on the honor system. Most shareware is delivered free of charge, with the author often asking for a small registration fee. The major difference between shareware and free software is the copyright. Shareware can not be modified or sold, whereas free software or open source may be modified, and those modifications may be sold and copyrighted separately from the generic copyright of the original software.

Our Budget
Now that we've defined our software terms, we can look at the costs involved in our exercise. Assuming we're going to primarily use the free software available for the Unix market, we can begin our project with a software cost of somewhere between $500 and $1,200--try doing that using any other operating system!

I've created a small table to help explain our costs:

Software

Hardware costs can be whatever you want them to be. Theoretically, all the software we've discussed could work on a 486 machine with 32 MB of RAM, albeit very slowly. A 486 machine with 128 MB of RAM would run nicely. A Pentium 866 with 256 MB of RAM would be a speed demon.

The speed of your computer could also be enhanced by the hard disk system (integrated drive electronics or IDE vs. SCSI). The LAN connection actually makes no difference. Most people forget, but the fastest speed that you will obtain is the slowest part of the link. This being the case, it makes no difference if you use a 10Base-T or 100Base-T network card, since most users are still using 56K modems.

All in all, the largest expense for this project will be the human resource cost. Loading, configuring and testing the software should take the better part of the day, maybe two if you're still a novice. Creating your e-commerce site, depending on how complex you make your Web pages and how many products you have, can be done in hours.

In our final installment of "Starting an E-Business From Scratch" we'll look at a case study of a small company that successfully implemented ShopSite on a shared computer.

Wayne Spivak is the president of SBA Consulting in Bellmore, N.Y.