1.1 INTRODUCTION TO E-COMMERCE 1.1.1 Introduction Two thousand years ago, Roman roads brought trade and commerce to Europe in an unprecedented manner. A thousand years ago, the spice routes linked the cultures of East and West. At the dawn of the second millennium, the Internet, the world’s largest computer network, the network of networks, is making fundamental changes to the lives of everyone on the planet-changing forever the way business is conducted. Internet has become an important medium for doing global business based on the state of the art technology. Global business was conducted in a new way: electronically, using networks and the Internet. The availability of Internet has led to the development of E-Commerce (Electronic commerce), in which business transactions take place via telecommunication networks. E-Commerce has two major aspects: economical and technological. The stress of this course will show you how to get started in the complex and exciting world of Electronic Commerce. New standards and new facilities are constantly emerging and their proper understanding is essential for the success of an operation and especially for those who are assigned a duty to select, establish, and maintain the necessary infrastructure. 1.1.2 Brief History Of E-Commerce The history of E-commerce is a history of how Information Technology has transformed business processes. Some authors will track back the history of E-commerce to the invention of the telephone at the end of last century. The Internet was conceived in



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1969, when the Advanced Research Projects Agency (a Department of Defence organization) funded research of computer networking. The Internet could end up like EDI (Electronic Data Interchange) without the emergence of the World Wide Web in 1990s. EDI (Electronic Data Interchange) is widely viewed as the beginning of E-commerce if we consider E-Commerce as the networking of business communities and digitalization of business information. EDI, which expanded from financial transactions to other transaction processing and enlarged the participating companies from financial institutions to manufacturers, retailers, services, and so on. Many other applications followed, ranging from stock trading to travel reservation systems. Such systems were described as telecommunication applications and their strategic value was widely recognized. With the commercialization of the Internet in the early 1990s and its rapid growth to millions of potential customers, the term electronic commerce was coined, and EC applications expanded rapidly. One reason for the rapid expansion of the technology was the development of networks, protocols, software, and specifications. The other reason was the increase in competition and other business pressures. From 1995 to 1999 we have witnessed many innovative applications ranging from advertisement to auctions and virtual reality experiences. Almost every medium- and large-sized organization in the United States already has a Web site many are very extensive; for example, in 1999 General Motors Corporation offered 18,000 pages of information that included 98,000 links to its products, services, and dealers. 1.1.3 Definition Of E-Commerce: Electronic commerce is an emerging model of new selling and merchandising tools in which buyers are able to participate in all phases of a purchase decision, while stepping through those processes electronically rather than in a physical store or by phone (with a physical catalogue). The processes in electronic commerce include enabling a customer to access product information, select items to purchase, purchase items securely, and have the purchase settled financially. It is an emerging concept that describes the process of buying and selling or exchanging of products, services; and information via computer networks including the Internet. E-commerce is basically, doing business-as-usual, but across the Internet. You advertise your products or services on your Web site, as you would in any other media like newspapers, TV or brochures. Advertising on your Web site can be done in two ways.


The first is by use of a relatively simple Web site consisting of a few pages whereby you tell potential customers who you are, what you do, where you are and how they can contact you ( easiest done by giving them your email address). The second way of enabling world-wide customers to buy from you is to provide them with an On-Line Catalogue of your products which they can browse at their leisure without having to go to your place of business. On-Line Catalogue: On-Line Catalogue is that catalogue where people access via the Internet. OnLine Catalogue is an integral part of website, enabling customers to...       Browse through stock list, read about an item or service; Look at photographs of the products. Select which items they want to purchase And drop them into a shopping cart as they go along. When they have completed their shopping, they go to the Check-Out.


The next step is to request the order by filling in their details and method of payment on a form which is waiting for them at the Check-Out. The form is already partially completed with a breakdown of the items in their shopping cart, prices inclusive of tax, and shipping & handling charges, if any. If they choose to pay by credit card, the form includes a place for them to fill in their credit card number. And then, with one press of a button, they send the order to you. Electronic Commerce under different perspectives: Let’s see how Electronic Commerce (EC) is defined under each perspective. 1. Communications Perspective EC is the delivery of information, products /services, or payments over the telephone lines, computer networks or any other electronic means.



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2. Business Process Perspective EC is the application of technology toward the automation of business transactions and work flow. 3. Service Perspective EC is a tool that addresses the desire of firms, consumers, and management to cut service costs while improving the quality of goods and increasing the speed of service delivery. 4. Online Perspective EC provides the capability of buying and selling products and information on the internet and other online services. 1.1.4 Classifications of E-Commerce Applications Electronic Commerce (e-Commerce) is a general concept covering any form of business transaction or information exchange executed using Information and Communication Technologies (ICTs). E-Commerce takes place between companies, between companies and their customers, or between companies and public administrations. Electronic Commerce includes electronic trading of goods, services and electronic material. E-Commerce systems include commercial transactions on the Internet but their scope is much wider than this; they can be classified by application type: Electronic Markets: The principle function of an electronic market is to facilitate the search for the required product or service. Airline booking systems are an example of an electronic market. Electronic Data Interchange (EDI): Electronic Data Interchange (EDI) is the electronic exchange of business documents in a standard, computer processable, universally accepted format between-trading partners. EDI is quite different from sending electronic mail, messages or sharing files through a network. In EDI, the computer application of both the sender and the receiver, referred to as Trading Partners (TPs) have to agree upon the format of the business document which is sent as a data file over electronic messaging services.


The two key aspects of EDI that distinguish it from other forms of electronic communication, such as electronic mail, are: 1. The information transmitted is directly used by the recipient computer without the need for human intervention is rarely mentioned but often assumed that EDI refers to interchange between businesses. It involves two or more organization or parts of organization communicating business information with each other in a common agreed format. The repeated keying of identical information in the traditional paper-based business. Communication creates a number of problems that can be significantly reduced through the usage of EDI. These problems include:     Increased time Low accuracy High labour charges Increased uncertainty.



To take full advantage of EDI’s benefits, a company must computerize its basic business applications. Trading partners are individual organization that agrees to exchange EDI transactions. EDI cannot be undertaken unilaterally but requires the cooperation and active participation of trading partners. Trading partners normally consists of an organization’s principal suppliers and wholesale customers. Since large retail stores transact business with a large number of suppliers they were among the early supporters of EDI. In the manufacturing sector, EDI has enabled the concept of Just-In-Time inventory to be implemented. JIT reduces inventory and operating capital requirements. EDI provides for the efficient transaction of recurrent trade exchanges between commercial organizations. EDI is widely used by, for example, large retail groups and vehicle assemblers when trading with their suppliers. Internet Commerce The Internet (and similar network facilities) can be used for advertising goods and services and transacting one-off deals. Internet commerce has application for both businessto-business and business to consumer transactions.



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The three categories of E Commerce 1.1.5 Types of e-commerce

There are a number of different types of E-Commerce      B2B - Business to Business B2C - Business to Consumer C2B - Consumer to Business B2E - Business to Employee C2C - Consumer to Consumer



but they usually have a sound commercial structure as well as in-depth experience of running a business something which many dotcoms lacked. insurance quotes.craigs. The supplier may be an existing retail outlet such as a high street store. The user accesses the Internet site http://www. order fulfilment. After reading the tasting notes the user follows the links to place an order along with delivery and payment details directly into the merchants’ inventory system. Typically in the B2B environment. on-line newspapers. Example: A home user wishes to purchase some good quality wine. In the past EDI was conducted on a direct link of some form between the two businesses where as today the most popular connection is the internet.Business to Business E-commerce has been in use for quite a few years and is more commonly known as EDI (electronic data interchange).com start ups. 7 ANNA UNIVERSITY CHENNAI . These businesses may have been slow in gearing-up for E-Commerce compared to the innovative dot. E-Commerce can be used in the following processes:    Procurement.Business to Consumer Business to Consumer e-commerce is relatively new. The two businesses pass information electronically to each other.E-COMMERCE TECHNOLOGY AND MANAGEMENT B2B . NOTES B2C .au and follows the links to read a report on the recommended wines. B2C can also relate to receiving information such as share prices. causing many to fail. This is where the consumer accesses the system of the supplier. B2B e-commerce currently makes up about 94% of all e-commerce transactions. or weather forecasts.com. The wine is then dispatched from the supplier’s warehouse and in theory is delivered to the consumer without delay. It is still a two way function but is usually done solely through the Internet. Managing trading-partner relationships. it has been this type of business that has been successful in using E-Commerce to deliver services to customers.

The consumer lists items for sale with a commercial auction site. are providing their services on-line. Harry places a submission with in a web based C2B facility. Other consumers access the site and place bids on the items.Consumer to Consumer These sites are usually some form of an auction site. Also known as e-Government.DBA 1727 NOTES C2B . In reality this site should be call C2B2C. An intranet is a web site developed to provide employees of an organisation with information. B2A is the least developed area of E-Commerce and it relates to the way that public sector organisations. subcontracts. The UK government is committed to ensuring this country is at the forefront of e-Commerce and it is essential that e-Government plays a significant part in achieving this objective.Consumer to Business Consumer to Business is a growing arena where the consumer requests a specific service from the business. it can and is often extended to an Entrant which uses the Internet but restricts uses by sign on and password. Example: Harry is planning a holiday in Darwin. at both a central and local level. Dodgy Brothers Airways accesses the facility and sees Harry’s submission. 250.Business to Employee Business to Employee e-commerce is growing in use.6   Scope of E-Commerce Selling can be focussed to the global customer Pre-sales. the airline offers Harry a return fare for Rs. The site provider usually charges a transaction cost. He requires a flight in the first week of December and is only willing to pay Rs.1. B2E . 250. The site then provides a connection between the seller and buyer to complete the transaction. C2C . supply 8 ANNA UNIVERSITY CHENNAI . 1. The intranet is usually access through the organisations network. it has the potential to increase the domestic and business use of e-Commerce as traditional services are increasingly being delivered over the Internet. Due to it being a slow period. This form of E-commerce is more commonly known as an ‘Intranet’.

g. payment Product service and maintenance Co-operative product development Distributed co-operative working Use of public and private services Business-to-administrations (e. delivery. customs.E-COMMERCE TECHNOLOGY AND MANAGEMENT             Financing and insurance Commercial transactions: ordering. etc) Transport and logistics Public procurement Automatic trading of digital goods Accounting Dispute resolution NOTES 1.1.Commerce in Action 9 ANNA UNIVERSITY CHENNAI .7 E.

. the credit card being authorized. 10 ANNA UNIVERSITY CHENNAI . The shopping cart application has been setup by the merchant to display all products and services offered. Scenario 2 The consumer’s entire order and credit card information is electronically submitted back to the merchant’s server (usually via email. After choosing to visit the web store. and status on when the product will exactly be shipped. Buy Now. This generally takes place in no more than 5-7 seconds and the consumer is then informed that the order was received. or SSL connection) where the order can be reviewed first and then approved for credit card authorization through a processing network. Scenario 1 The consumer’s credit card information goes directly through a private gateway to a processing network. Shop Online. At the web site. so he enters all pertinent credit card information and a sales order is produced. confirming the order being received. It is at this point that the consumer makes the decision to visit the web store by clicking on a link or button located on the web page (e. the consumer is typically connected to an online transaction server located somewhere else on the internet which runs software commonly referred to as a shopping cart application. From there. or an image of a shopping cart button are common entry points into a web store). Depending on the ecommerce implementation. etc. The consumer then receives an email shortly afterwards. the sales order can now take two totally different paths for confirming to the consumer that the order is officially placed. FTP. the credit card was authorized.DBA 1727 NOTES How E-Commerce Works The consumer first moves through the internet to the merchant’s web site.g. as well as calculate pricing. taxes. the consumer decides that he wants to purchase something. and that the product will ultimately be shipped. where the issuing and acquiring banks complete or deny the transaction. shipping charges. the consumer is briefly given an introduction to the product or services the merchant offers.

you must apply for an account with a credit card merchant account provider. 5. orders submitted after office hours or during holidays. the first scenario is a more simplistic method of setting up a shopping cart application and does not take into consideration any back office issues that may delay shipment (i. items out of stock. However. the process is transparent to the consumer and appears virtually the same. Your merchant account provider must allow you to handle non-swiped credit card transactions. This can be relatively easy or somewhat difficult. This refers to transactions where the customer is not present and only the credit card number and expiration date are being used for approving the charges. and the type of business you are running.Intellicharge Interface) software.e. or AuthorizeNet™ (i. There are several basic steps you will need to accomplish before becoming Commerce enabled. These products are sold separately from ManageMore and eliminate the need for merchant terminal devices or separate time consuming steps to approve credit cards. ManageMore’s eCommerce Manager relies on the second scenario to handle all of its ecommerce orders. you must ensure that your merchant account provider has credit card processors that connect with IC Verify™. 4. PC Charge™. 1. This second scenario keeps the consumer accurately informed throughout the entire ordering process. 11 ANNA UNIVERSITY CHENNAI 2.E-COMMERCE TECHNOLOGY AND MANAGEMENT In both scenarios.. etc. the following should also be noted: 1. Getting a Merchant Bank Account Web Hosting Web Design Considerations Registering a Domain Name Obtaining a Digital Certificate NOTES Getting a Merchant Bank Account In order to be able to accept credit cards. depending on which country you live in. .e. Let us assume an ecommerce implementation that uses the second scenario mentioned above. 3. When choosing a merchant account provider.). In order for credit card authorization to be automatic from within ManageMore. 2. back orders.

Scenario1 involves setting up and maintaining your own web server. You should be able to find a merchant account provider that can offer you discount credit cards rates ranging from 1. Constantly changing to a new merchant account provider when your old one goes out-of business can be costly and time consuming. years in business. Avoid merchant account providers that ask for a non-refundable fee before you get approved. You will need a dedicated phone line or data line for processing credit cards and electronic checks. 5. These fees can come in the form of an application fee. 6. processing fee.75% and no more than . software fee. Avoid merchant account providers that require 1 or 2 year contract terms. it doesn’t make sense to lock your company into a commitment for any period of time. Since there are so many merchant account providers available. and company size. Expect merchant account providers to have some form of a sign up fee after being approved only. An Internet Service Provider (ISP) is a company that provides you with internet access and limited hard drive space on their web servers for hosting your web site. you should do a little research on the company’s reputation.DBA 1727 NOTES 3. 12 ANNA UNIVERSITY CHENNAI . Always try to find an ISP that can provide a local telephone number for you to connect to the internet. When choosing a merchant account provider. There are actually two scenarios that can be used for web hosting.75% to 2. while Scenario 2 involves farming out all web hosting administration to an ISP. etc. The following should be noted when searching for an Internet Service Provider: 1. contact Intellisoft regarding our merchant account provider affiliates and the free Intellicharge Interface just for signing up with them. 4.25 cent per transaction. as this is how you gain a presence on the internet in the first place. a separate data line will not be necessary if you use the Intellicharge Interface for electronic payment. If not. Note: If your computer or local area network is already connected to the internet. Web Hosting Web hosting is a very important step in this process. Typically expect to pay around $100 to $500 for getting an account setup to accept credit cards and sometimes electronic checks. 7. 8.

and the sophistication of the shopping cart application itself. Many small businesses tend to choose CSP’s for creating a web store because it gives them the flexibility of choosing a provider that offers competitive pricing and the best shopping cart application for their needs. Most shopping cart applications. you may want to seek the help of professional web designers to make the look and feel of your web store consistent with the rest of your corporate web site. appearance. 3. However. allow its templates to be modified just for this purpose. 2. Choose an ISP that is known for having few interruptions of service. Online transaction providers will either sell or rent you the use of an online shopping cart application for your business. and they all have varying packages. Be forewarned that purchasing an online shopping cart application is very expensive. NOTES The online transaction providers that offer the actual web store itself can sometimes be hosted by your same ISP or may require a completely different provider. Choose an ISP that is known for good technical support and has knowledgeable people familiar with ecommerce sites.E-COMMERCE TECHNOLOGY AND MANAGEMENT 2. like SoftCart by Mercantec. 13 ANNA UNIVERSITY CHENNAI . and ease of use. Online transaction providers will usually provide one shopping cart solution they feel is better than the many others that exist and differ by price. There are a lot of online transaction providers out there. Web Design Considerations With little knowledge of HTML and a lot of patience. As with any company you do business with. the same ISP or CSP you choose can provide web design and consultation. layout. you can probably create your own corporate web site with the help of products like Microsoft FrontPage™ or DreamWeaver™. Choose an ISP that consistently has fast connection speeds. make sure the ISP is reputable. Most businesses will rent these online web store programs rather than committing to such a steep investment. In many cases. Deciding on a provider’s package that fits your needs is perhaps the most important aspect. when adding a web store to your web site. referred to as a Commerce Service Provider (CSP). 3. number of products listed on the shopping cart application. functionality. Rental pricing for the use of shopping cart programs vary depending on number of transactions generated a month. 5. The following should be noted when dealing with shopping cart applications: 1. 4.

456” or by typing something simple to remember like “www. enables SSL (Secure Socket Layer encryption) on the web server. however. Your domain name says who you are to your clients. software agent based transaction monitors. Select a unique domain name you would like others to use for finding your web site. For a minimal fee.com?” Registering a domain name is one of the most important decisions you can make for your online identity. the architecture should focus on synthesizing the diverse resources already in place in corporations to 14 ANNA UNIVERSITY CHENNAI . will it be important to you. Rather. for customers to find your web site by typing “123. Obtaining a Digital Certificate A digital certificate. If you are a larger company.mybiz.456. There are many to choose from. In layman terms. just do a web search on “domain name registrar” to get you started. 1.1. one can usually use the certificate owned by the web hosting company where your page resides. also known as a SSL Server Certificate. Any ecommerce company that provides you with an online web store will require you to have SSL before you can use their services. SSL protects communications so you can take credit card orders securely and ensure that hackers cannot eavesdrop on you.DBA 1727 NOTES Registering a Domain Name Domain names are the names for computers on the Internet that correspond to IP (Internet protocol) numbers to route information to addresses on the Internet network. 2. your peers .the whole world.8 Architectural Framework of E Commerce A framework is intended to define and create tools that integrate the information found in today’s closed systems and allows the development of e-commerce applications. Domain names serve as a convenient way of locating information and people on the Internet. computer languages. The basics for registering a domain name are: Contact a domain name registrar on the internet to register for a domain name. Thankfully. It is important to understand that the aim of the architectural frame-work itself is not to build new database management systems. or communication protocols. you may want to get your own digital certificate.123. data repository. for most people obtaining a digital certificate is not a problem.

As seen in Fig.1.8a Electronic Commerce: A conceptual framework 15 ANNA UNIVERSITY CHENNAI . Table 1. brokerage services. In the ensuing discussion of each of these layers. support layers” secure messaging.1. 1. NOTES These layers co-operate to provide a seamless transition between today’s computing resources and those of tomorrow by transparently integrating information access and exchange within the context of the chosen application. and. These were discussed extensively earlier and will not be addressed here. electronic commerce applications are based on several elegant technologies. data or transaction management. security and electronic document interchange. We begin our discussion with the application level services. middle ware and structured document interchange. The electronic commerce application architecture consists of six layers of functionality.E-COMMERCE TECHNOLOGY AND MANAGEMENT facilitate the integration of data and software for better applications.8 a). But only when they are integrated do they provide uniquely powerful solutions. we will not elaborate on the various aspects of the network infrastructure that transports information. and network infrastructure and basic communications services (see Table.. interface. or services: 1) 2) 3) 4) 5) 6) applications.

Business-to-business transactions include the use of EDI and electronic mail for purchasing goods and services. checks. buy them differently using electronic cash and secure payment systems. and other transactions. Most of the documents are in electronic form at their point of origin but are printed and key-entered at the point of receipt. 16 ANNA UNIVERSITY CHENNAI . In light of this. and error-prone. The current manual process of printing. time consuming. Examine this scenario. the organization itself has to adapt to a world where the traditional concepts of brand Differentiation no longer hold-where “quality” has a new meaning.” Where “distribution” may not automatically mean “physical Transport. business-to-business.1. financial reports. Each year the trading partners exchange millions of invoices. buying information and consulting services. and intra organization Consumer-to-Business Transactions We call this category marketplace transaction. governments. Here.DBA 1727 NOTES 1. and a dependable way to conduct business’ transactions. Three distinct classes of electronic commerce application can be distinguished: customer to business. customers learn about products differently through electronic publishing. In a marketplace transaction.8. where “content” may not be equated to “product. and have them delivered differently. Also. The current accounts payable process occurs through the exchange of paper documents. brand equity can rapidly evaporate forcing firms to develop new ways of doing business Business-to Business Transactions We call this category market-link transaction. businesses. submitting requests for proposals. an economical.to-computer communication as a fast. mailing is costly. purchase orders. how customers allocate their loyalty may also be different.” In this new environment. Small companies are also beginning to see the benefits of adopting the same methods. and receiving proposals.1 Electronic Commerce Application Services The application services layer of e-commerce will be comprised of existing and future applications built on the innate architecture. and other organizations depend on computer .

for example. or profit maximization for a client. are rapidly becoming necessary in dealing with the voluminous amounts of information on the networks. fast service. As on-line databases migrate to consumer information utilities. We use the notion of information brokerage to represent an intermediary who provides service integration between customers and information providers. NOTES 1. small businesses are looking toward electronic commerce as a possible savior. given some constraint such as a low price. marketing.2 Information Brokerage and Management The information brokerage and management layer provides service integration through the notion of information brokerages. and owner-ship of all these systems. and advertising. Most professionals have enough trouble keeping track of files of 1 interest on one or two database services. management must pay close attention to service. Information brokers. if it is impossible to expect humans to do the searching. A company becomes market driven by dispersing throughout the firm information about its customers and competitors. by spreading strategic and tactical decision making so that all units can participate.8. cross-functional coordination through enterprise integration. and customer service. both before and after sales. a market-driven business develops a comprehensive understanding of its customers’ business and how customers in the immediate and downstream markets perceive value. To maintain the relationships that are critical to delivering superior customer value. It 17 ANNA UNIVERSITY CHENNAI .E-COMMERCE TECHNOLOGY AND MANAGEMENT Given this situation and faced with the need to reduce costs. Three major components of market-driven transactions are    customer orientation through product and service customization. Intra-organizational Transactions We call this category market-driven transactions. With all the complexity associated with large numbers of on-line databases and service bureaus. In essence. consumers and information professionals will have to keep up with the knowledge. the development of which is necessitated by the increasing information resource fragmentation.1. and by continuously monitoring their customer commitment by making improved customer satisfaction an ongoing objective.

service integration allows one to link the hedging program (offered on a time-sharing basis by a third party) with the search program (could be another vendor) that finds the currency rates from the cheapest on-line service to automatically send trades to the bank or financial services company. service integration becomes critical. your agent can either choose a different bouquet or find a different store by consulting an online “Yellow Pages” directory. 30. in foreign exchange trading. software agents are used to implement information brokerages. Another aspect of the brokerage function is the support for data management and traditional transaction services. it will take a while to solve the problems of interregna 18 ANNA UNIVERSITY CHENNAI . In other words. distributed query generator. Information brokerages dispatch agents capable of information resource gathering. Brokerages may provide tools to accomplish more sophisticated. The agents are intelligent because they have contingency plans of action.DBA 1727 NOTES will have to be software programs-information brokers or software agents. Taking the same foreign exchange example further. suppose you send an agent to an on-line store with a request to order a bouquet of roses for Rs. These tools include software agents. This is just one example of how information brokerages can add value. the act of retrieving the information is the input to other transactions. 25 or less. Software agents are mobile programs that have been called “healthy viruses. They examine themselves and their environment and if necessary change from their original course of action to an alternative plan. the distributed transaction generator. negotiating deals. In effect. time-delayed updates or future compensating transactions. and performing transactions.” Agents are encapsulations of users’ instruction that perform all kinds of tasks in electronic market places spread across networks. If the shop offers roses starting at Rs. to use the more popular term-that act on the searcher’s behalf. a personalized automated trading system can be created without having to go to any financial institution. Although the notion of software agents sounds very seductive. It addresses the issue of adding value to the information that is retrieved.” “digital butlers/” and “intelligent agents. For example. and the declarative resource constraint base which describes a business’s rules and-environment information. For instance. depending on prior instructions. With multiple transactions being the norm in the real world. information is retrieved about the latest currency exchange rates in order to hedge currency holdings to minimize risk and maximize profit. Information brokerage does more than just searching. At the heart of this layer lies the work-flow scripting environment built on a software agent model that coordinates work and data flow among support services. As pointed out earlier.

8. on the other hand. Interactive catalogs are the customized interface to consumer applications such as home shopping. The primary difference between the two is that unlike interactive catalogs. A classic example of a directory is the telephone White Pages. To some critics. which deal with people. directories would play an important role in information management functions. operate behind the scenes and attempt to organize the enormous amount of information and transactions generated to facilitate electronic commerce. interoperable agents. Yet until electronic commerce services are up and running on a large scale. and other headaches that come with distributed computing and net-working. These two concepts are very different. From a computing perspective. take the case of buying an airline ticket with several stopovers with the caveat that the time between layovers be minimized.1. Directory services databases make data from any server appear as a local file.E-COMMERCE TECHNOLOGY AND MANAGEMENT communication. be coordinated with the amount of time spent in the air-port terminals. the “self-destruct” mechanism built into their codes. interface and support services will provide interfaces for electronic commerce applications such as interactive catalogs and will sup-port directory servicesfunctions necessary for information search and access. the prospect of a single-agent language like Telescript as a world standard is disturbing. it is impossible to know how well software agents will work. but graphics and object manipulation will definitely dominate. which instead of running errands may run amok. which allows us to locate people and telephone numbers. Directories. In the case of electronic commerce. For instance. This search would require several queries to various online directories to-find empty seats on various airlines and then the avail-ability of seats would. Vendors such as General Magic go to great lengths to explain the precautions it has taken to make this impossible: the limits placed on the power of agents.3 Interface and Support Services The third layer. they need not have the multimedia glitter and jazz generally associated with interactive catalogs. Tool developers 19 NOTES ANNA UNIVERSITY CHENNAI . directory support services interact directly with soft-ware applications. we can expect that there will be no one common user interface that will glaze the surface of all electronic commerce applications. They worry that agents sound a bit too much like computer viruses. 1. An interactive catalog is an extension of the paper-based catalog and incorporates additional features such as sophisticated graphics and video to make the advertising more attractive. For this reason.

20 ANNA UNIVERSITY CHENNAI . secured messaging. and invoices. Messaging is gaining momentum in electronic commerce and seems to have many advantages. is clear. Broadly defined.DBA 1727 NOTES and designers might incorporate common tools for interface building. Unstructured messaging consists of fax. It’s called Integrated Messaging: a group of computer services that through the use of a network send.This allows the transfer of messages through store-and-forward methods. shipping notices.4 Secure Messaging and Structured Document Interchange Services The importance of the fourth layer. Or. Examples of structured document messaging include EDI. enhanced fax. What happened? The line was busy and he thought he’d try again later. 1. and reports as weft asformatted (structured) data such as purchase orders. messaging products are not applications that solve problems. Structured documents messaging consist of the automated inter-change of standardized and approved messages between computer applications. and large data files. and electronic data interchange. via telecommunications lines. e-mail. but he forgot to let you know. There is a solution to these common and frustrating problems. not tomorrow when the courier service would deliver. Consider a familiar business scenario: You hand over an urgent fax Monday and find out Tuesday that it’s still sitting on your fax operator’s desk. when a message is sent. Some better-known examples are electronic mail.1. memos. faxes. work continues (software doesn’t wait for a response). Everyone in business knows that electronic messaging is a critical business issue. Messaging services offer solutions for communicating non formatted (unstructured) data-letters. they are more enablers of the applications that solve problems. masking the peculiarities of the environment. With asynchronous messaging. and combine messages. and form-based systems like Lotus Notes. Or you’re in London and you need to send a spreadsheet that details a marketing plan for a product introduction strategy to a co-worker in New York. In general.8. This must be done today. messaging is the software that sits between the network infrastructure and the clients or electronic commerce applications. It supports both synchronous (immediate) and asynchronous (delayed) message delivery and processing. Others define messaging as a frame-work for the total implementation of portable applications. but the shape of catalogs or directories will depend on the users’ desires and functional requirements. the number was wrong. divorcing you from the architectural primitives of your system. receive.

and all other forms of communicating between/among unlike platforms. the problems of getting all the pieces to work together grew from formidable to horrendous. there is often no interoperability between different messaging vendors leading to islands of messaging. delivered homogeneous systems that worked. Users in the 1970s. networks that permitted shared resources and applications that could be accessed by 21 NOTES ANNA UNIVERSITY CHENNAI . and the pressure was overwhelming. and interpretation problems that were driving application developers crazy. The ability to access the right information at the right time across diverse work groups is a challenge.8. people can communicate and work together more effectively-no matter where they are located. With the growth of networks. Today. when vendors. mail it to the next. the backlog was enormous. Like so many other innovations. client-server technology. the users were dissatisfied. This is known as message-enabled work-flow solutions. especially to traditional programmers and the jungle of standards it involves. it came into being out of necessity. the information travels along with the form. Something was needed to solve all the interface. with the messaging tools. Also. and confidentiality through data encryption and authentication techniques are important issues that need to be resolved for ensuring the legality of the message-based transactions themselves. In distributed systems. transformation. security. Because of the lack of standards. 1. Messaging is central to work-group computing that is changing the way businesses operate. Messaging is well suited for both client server and peer-to-peer computing models. users demanded interaction between dissimilar systems.E-COMMERCE TECHNOLOGY AND MANAGEMENT Another advantage of messaging is that it is not associated with any particular communication protocol. No pre-processing is necessary. As the cry for distributed computing spread. although there is an increasing need for programs to interpret the message. fill it in/ sign it. the messages are treated as “objects” that pass between systems. The main disadvantages of messaging are the new types of applications it enableswhich appear to be more complex. translation. and so on. didn’t have a need for middleware3&heR conditions changed-along with the hardware and the software the organizations couldn’t cope: The tools were inadequate. When an employee sends an electronic mail form. So one person can start the form. mail it to the next person.1.5 Middleware Services Middleware is a relatively new concept that emerged only recently. And. privacy.

middleware provides the qualities expected in 22 ANNA UNIVERSITY CHENNAI . remote data controls all of the applications in the network instead of applications controlling data. Nor should application developers have to code into their applications the exact locations of resources over the network. At the transaction security level. two broad general categories of security services exist: authentication and authorization. and distributed object management and services. Some commercial sites have had gigantic centralized TP systems running for years. which then satisfies the request any way it can. using remote information. enterprise. middleware is the ultimate mediator between diverse software pro-grams that enables them talk to one another. In simple terms. Security and management are essential to all layers in the electronic commerce model. and inter enterprise LANs that appears to the end user or client application to be a seamless and easily accessed whole. Users need not spend their time trying to understand where something is. and other resources across collections of multi-vendor. This gives users and applications transparent access to data. Transaction integrity must be a given for businesses that cannot afford any loss or inconsistency in data. middleware services focus on three elements: transparency. To achieve data-centric computing. That is. Transaction Security and Management Support for transaction processing (TP) is fundamental to success in the electronic commerce market. transaction security and management. Transparency is essential for dealing with higher-level issues than physical media and interconnection that the underlying network infrastructure is in charge of. computation. For electronic commerce. The goal is for the applications to send a request to the middleware layer. The strategic architectures of every major system vendor are now based on some form of middleware. Another reason for middleware is the computing shift from application centric to data centric. The ideal picture is one of a “virtual” network: a collection of workgroup. Transparency is accomplished using middleware that facilitates a distributed computing environment. departmental. heterogeneous systems. The key to realizing the theoretical benefit of such architecture is transparency.DBA 1727 NOTES multiple software programs. Transparency Transparency implies that users should be unaware that they are accessing multiple systems.

A document carries data and often carries instructions about the actions to be performed on the data. Advertising done well on the web can get even a small firm’s promotional message out to potential customers in every country in the world. Electronic Commerce increases the speed and accuracy with which businesses can exchange information. pictures. the trend is to move away from single data-type documents such as text. The best example of this approach is an active document. A natural instance of an object in electronic commerce is a document. Last but not the least is the Network Infrastructure. Objects are an evolution of the more traditional programming concept of functions and procedures. Today. or video toward integrated documents known as com-pound document architectures. which will be dealt in this unit later. isolation. the term object is being used interchangeably with document resulting in a new form of computing called document oriented computing.1. the tool bar will automatically change from a spreadsheet too bar. Objects are defined as the combination of data and instructions acting on the data. These applications will also be able to access and retrieve data from any file in the computing network. word processor. consistency. Distributed Object Management and Services Object orientation is proving fundamental to the proliferation of network-based applications for the following reasons: It is too hard to write a net-work-based application without either extensive developer retraining or a technology that camouflages the intricacies of the network. which reduces costs on both sides of transactions. 23 NOTES ANNA UNIVERSITY CHENNAI .9 Advantages of E-Commerce     Electronic Commerce can increase sales and decrease costs. Businesses can use electronic commerce to identify new suppliers and business partners. to a presentation package tool bar. Here. and durability). 1. what you’ll see in the next generation of operating systems is that as you scroll through your document. If you create a new document that is an integration of the spreadsheet. to a word processing tool bar.E-COMMERCE TECHNOLOGY AND MANAGEMENT a standard TP sys-tem: the so-called ACID properties (atomicity. and presentation package.

Consumers are fearful of sending their credit card numbers over the Internet and having online merchants. can change dramatically even during short-lived electronic commerce implementation projects because the technologies are changing so rapidly. 1. 1.DBA 1727 NOTES   E-Commerce provides buyers with a wider range of choices than traditional commerce because buyers can consider many different products and services from a wider variety of sellers. unique items such as custom-designed jewelry might be impossible to inspect adequately from a remote location. Consumers are simply resistant to change and are uncomfortable viewing merchandise on a computer screen rather than in person. Electronic payments of tax refunds. Companies that offer software design and consulting services to tie existing systems into new online business systems can be expensive. Costs. it is worthwhile to examine today’s business environment so let us understand the pressures it creates on organizations and the responses used by organizations. which are a function of technology. Firms facing difficulty of integrating existing databases and transactionprocessing software designed for traditional commerce into the software that enables electronic commerce. Many firms have trouble recruiting and retaining employees with the technological. public retirement and welfare support cost less to issue and arrive securely and quickly when transmitted over the Internet.      24 ANNA UNIVERSITY CHENNAI . design and business process skills needed to create an effective electronic commerce presence.2 DRIVING FORCES OF E-COMMERCE E-Commerce is becoming popular.10 Disadvantages of E-Commerce  Some business processes such as perishable foods and high-cost.1.

These factors change quickly. economical. Internal integration is best exemplified by corporate intranets. Internal integration. Lower sales costs: increase in the customer volume do not need an increase in staff as the sales function is housed in the computer and has virtually unlimited accessibility Lower ordering processing cost: online ordering can be automated with checks to ensure that orders are correct before accepting. and cheaper customer service alternatives. creating new products or providing superb customer service. is the networking of the various departments within a corporation. thus reducing errors and the cost of correcting them.2.1 Environmental factors that create Business Pressures: Market. customers/clients. NOTES   Economic integration is either external or internal. Categories of Economic Forces   Lower marketing costs: marketing on the Internet maybe cheaper and can reach a wider crowd than the normal marketing medium. low-cost technological infrastructure. lower global information sharing and advertising costs. and of business operations and processes. Economic Forces One of the most evident benefits of e-commerce is economic efficiency resulting from the reduction in communications costs. 25 ANNA UNIVERSITY CHENNAI . New sales opportunities: the website is accessible all the time and reaches the global audience which is not possible with traditional storefront. This allows critical business information to be stored in a digital form that can be retrieved instantly and transmitted electronically. suppliers.E-COMMERCE TECHNOLOGY AND MANAGEMENT 1. societal and technological factors are creating a highly competitive business environment in which consumers are the focal point. External integration refers to the electronic networking of corporations. and independent contractors into one community communicating in a virtual environment (with the Internet as medium). on the other hand. sometimes in an unpredictable manner and therefore companies need to react frequently not only in the traditional actions such as lowering cost and closing unprofitable facilities but also innovative activities such as customizing products. speedier and more economic electronic transactions with suppliers.

DBA 1727 NOTES Among the companies with efficient corporate intranets are Procter and Gamble. The Internet is likewise used as a medium for enhanced customer service and support. For instance. 26 ANNA UNIVERSITY CHENNAI .NET: Linking Asian Markets through B2B Hubs SESAMi. From the standpoint of firms/ businesses and consumers. The e-hub serves as the centre for management of content and the processing of business transactions with support services such as financial clearance and information services. the world’s largest network of trading communities on the Internet. SESAMi. faster. medium or large) to trading partners. This in turn has made communication more efficient. vertical and industry-specific interoperable B2B e-markets across the globe. television broadcast. Technology Forces The development of information and communications technology (ICT) is a key factor in the growth of ecommerce. SESAMi reaches an extensive network of regional. extremely low labor cost in some countries. It is a lot easier for companies to provide their target consumers with more detailed product and service information using the Internet. Market Forces Corporations are encouraged to use e-commerce in marketing and promotion to capture international markets. easier. and Internet access is eliminated. a virtual exchange integrating and connecting businesses (small. and more economical as the need to set up separate networks for telephone services. Strong competition between organizations. IBM. compression and the promotion of open systems technology have paved the way for the convergence of communication services into one single platform. buying and selling goods and services online in real time. Because of this very important link.NET is Asia’s largest B2B e-hub. having only one information provider means lower communications costs. frequent and significant changes in markets and increased power of consumers are the reasons to create market forces. e-marketplaces and internal enterprise systems for the purpose of sourcing out supplies. It is strategically and dynamically linked to the Global Trading Web (GTW). cable television. both big and small. Nestle and Intel. technological advances in digitizing content. EG.

but also include cable TV and Internet charges.E-COMMERCE TECHNOLOGY AND MANAGEMENT Moreover. Strategic Systems Strategic systems provide organizations with strategic advantages.2. These several responses can be interrelated and Ecommerce can also facilitate the other categories. it becomes necessary to review the factors that create societal and environmental forces. the principle of universal access can be made more achievable with convergence. business alliances and EC.2 Critical response activities by Organizations: A response can be a reaction to a pressure already in existence. better negotiate with their suppliers. At present the high costs of installing landlines in sparsely populated rural areas is incentive to telecommunications companies to install telephones in these areas. continuous improvement efforts. It can also be an activity that exploits an opportunity created by changing conditions. business process reengineering (BPR). Organizations’ major responses are divided into five categories: strategic systems for competitive advantage.       Changing nature of workforce Government deregulations Shrinking government subsidies Increased importance of ethical and legal issues Increased social responsibility of organizations Rapid political changes NOTES 1. The four categories are described below. thus enabling them to increase their market share. or it can be an initiative that will defend an organization against future pressures. Installing landlines in rural areas can become more attractive to the private sector if revenues from these landlines are not limited to local and long distance telephone charges. or prevent 27 ANNA UNIVERSITY CHENNAI . This development will ensure affordable access to information even by those in rural areas and will spare the government the trouble and cost of installing expensive landlines Societal and environmental forces To understand the role of E-commerce in today’s organizations.

Continuous Improvement Efforts In order to improve the company’s productivity and quality. and determining production schedules and deliveries accordingly. Business Process Reengineering (BPR) Business Process Reengineering refers to a major innovation in the organization’s structure and the way it conducts business. reducing the time from the inception of an idea until its implementation— 28 ANNA UNIVERSITY CHENNAI . Similarly. However. manufacturers and retailers. using its extranets.) into the just-in-time assembly operation. Intel is taking its products’ consumption in 11 of its largest customers.DBA 1727 NOTES competitors from entering into their territory. Electronic Commerce provides flexibility in manufacturing. Dell Computer takes its orders electronically and improved moves them via Enterprise Resources Planning software (from SAP Corp. many companies continuously conduct innovative programs. almost in real time. Information technology and especially EC play a major role in BPR. There is a variety of EC supported strategic systems. Most of FedEx’s competitors have already mimicked the system. the competitors quickly followed and now FedEx is introducing new activities. For example. So FedEx moved the system to the Internet. An example is FedEx’s overnight delivery system and the company’s ability to track the status of every individual package anywhere in the system. permits faster delivery to customers and supports rapid and paperless transactions among suppliers. The major areas in which E-Commerce supports BPR are  Reducing cycle time and time to market: Reducing the business process time (cycle time) is extremely important for increasing productivity and competitiveness. The efforts taken by companies for continuous improvement are       Improved productivity Improved decision making Managing Information Change in management Customer service Innovation and Creativity.

2. items are produced in a large quantity but are customized to fit the desires of each customer. limited-time mission. In mass customization. Electronic commerce is an ideal facilitator of mass customization. it’s community. integration with business processes. a company produces a large quantity of identical items. the Internet and the intranets enable empowered employees to access data. This can be done in part by changing manufacturing processes from mass production to mass customization. Some knowledge bases are open to the public for a fee over the Internet. There are several types of alliances. information and knowledge they need for making quick decisions. And. attributes such as viable application design. We certainly have the technology to build great business-to-consumer and business-tobusiness ecommerce applications into our business models. enjoy a distinct competitive advantage. Management delegates authority to teams who can execute the work faster and with fewer delays. or who can provide customers with a service faster than competitors. NOTES Business alliances Many companies realize that alliances with other companies. For example. Knowledge management: Employees can access organizational know-how via their company’s intranet. in which companies form a special organization for a specific.E-COMMERCE TECHNOLOGY AND MANAGEMENT    time to market—is important because those who can be first on the market with a product. such as sharing resources. and overall performance matter. One of the most interesting types is the temporary joint venture. establishing permanent supplier-company relationships and creating joint research efforts. Empowerment of employees and collaborative work: Empowerment is related to the concept of self-directed teams. yes. even competitors can be beneficial. In mass production. Information Technology allows the decentralization of decision making and authority but simultaneously supports a centralized control.3 E-Commerce Communities What it is that will drive e-commerce in the future? — in a word. Customer-focused approach: Companies are becoming increasingly customer oriented. 29 ANNA UNIVERSITY CHENNAI . 1. generating income.

30 ANNA UNIVERSITY CHENNAI . we believe community solutions will soon become more integrated and far-reaching. instant messaging. Production processes. Online conversation with business partners will also give net positive results.2. A private discussion area or secured online meetings can go a long way toward building stronger relationships between companies. A more comprehensive definition of e-business is: “The transformation of an organization’s processes to deliver additional customer value through the application of technologies. on the other hand. audio. However. It includes any process that a business organization (either a for-profit. electronic links with suppliers. information and communications technology (ICT) is used in inter-business or inter-organizational transactions (transactions between and among firms/ organizations) and in business-to-consumer transactions (transactions between firms/ organizations and individuals). among others. The tools that form online communities include discussion or forum software. In e-commerce. You may choose to invest slowly at first and increase your community commitment over time. Such a strategy currently requires multiple technical approaches.DBA 1727 NOTES A successful community strategy must embrace the idea of moving the one-onone communication that occurs offline into the virtual world of e-commerce. video. Building community has to be at the heart of any successful ecommerce strategy. philosophies and computing paradigm of the new economy. governmental or non-profit entity) conducts over a computer-mediated network.4 Is e-Commerce the Same as e-Business? While some use e-commerce and e-business interchangeably. In e-business. and production control processes. they are distinct concepts. 1. and more. chat functions. ordering and replenishment of stocks. online collaboration tools. two-way mailing lists. which include procurement. processing of payments.” Three primary processes are enhanced in e-business: 1. This will also serve to potentially drive new business opportunities for both parties. ICT is used to enhance one’s business.


2. Customer-focused processes, which include promotional and marketing efforts, selling over the Internet, processing of customers’ purchase orders and payments, and customer support, among others; and 3. Internal management processes, which include employee services, training, internal information-sharing, videoconferencing, and recruiting. Electronic applications enhance information flow between production and sales forces to improve sales force productivity. Workgroup communications and electronic publishing of internal business information are likewise made more efficient. The Internet economy pertains to all economic activities using electronic networks as a medium for commerce or those activities involved in both building the networks linked to the Internet and the purchase of application services such as the provision of enabling hardware and software and network equipment for Web-based/online retail and shopping malls (or “e-malls”). 1.3 BENEFITS AND LIMITATIONS OF E-COMMERCE Few innovations in human history encompass as many potential benefits as EC does. The global nature of the technology, low cost, opportunity to reach hundreds of millions of people (projected within 10 years), interactive nature, variety of possibilities, and resourcefulness and rapid growth of the supporting infrastructures (especially the Web) result in many potential benefits to organizations, individuals, and society. These benefits are just starting to materialize, but they will increase significantly as EC expands. 1.3.1 The Benefits of EC       The new markets could be accessed through the online and extending the service offerings to customers globally. Internet shrinks the globe and broaden current geographical parameters to operate globally Marketing and promotional campaigns can be done globally at the reduced cost. Retaining the customer and the customer services could be improved drastically. Strengthen relationships with customers and suppliers ? Streamline business processes and administrative functions



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No added sales staff A catalogue which is quickly and easily updateable. This means that when prices or stocks are changed, you don’t have to have hundreds or thousands of obsolete catalogues lying around. You don’t have to wait for the printer to deliver the catalogue before the new prices can come into effect. The facility to advertise daily, weekly or monthly ‘specials’ and sales, or any special discounts - and they can be changed within minutes, when and if necessary. You can also add a marketing message which highlights your strengths, such as the range and quality of your products or services - or anything else you want to tell your customers. Benefits to Organizations  Electronic commerce expands the marketplace to national and international markets. With minimal capital outlay, a company can easily and quickly locate more customers, the best suppliers, and the most suitable business partners worldwide. Electronic commerce decreases the cost of creating, processing, distributing, storing, and retrieving paper-based information. For example, by introducing an electronic procurement system, companies can cut the purchasing administrative costs by as much as 85 percent. Ability for creating highly specialized businesses. For example, dog toys which can be purchased only in pet shops or department and discount stores in the physical world, are sold now in a specialized www.dogtoys.com Electronic commerce allows reduced inventories and overhead by facilitating “pull”-type supply chain management. In a pull-type system the process starts from customer orders and uses just-in-time manufacturing. Electronic commerce reduces the time between the outlay of capital and the receipt of products and services. Electronic commerce initiates business processes reengineering projects. By changing processes, productivity of salespeople, knowledge workers, and administrators can increase by 100 percent or more. Electronic commerce lowers telecommunications cost-the Internet is much cheaper than VANs.

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Other benefits include improved image, improved customer service, newfound business partners, simplified processes, compressed cycle and delivery time, increased productivity, eliminating paper, expediting access to information, reduced transportation costs, and increased flexibility.

NOTES Benefits to Consumers   Electronic commerce enables customers to shop or do other transactions 24 hours a day, all year round, from almost any location. Electronic commerce provides customers with more choices; they can select. Electronic commerce frequently provides customers with less expensive products and services by allowing them to shop in many places and conduct quick comparisons. In some cases, especially with digitized products, EC allows quick delivery. Customers can receive relevant and detailed information in seconds, rather than days or weeks. Electronic commerce makes it possible to participate in virtual auctions. Electronic commerce allows customers to interact with other customers in electronic communities and exchange ideas as well as compare experiences. Electronic commerce facilitates competition, which results in substantial discounts.

     Benefits to Society  Electronic commerce enables more individuals to work at home and to do less travelling for shopping, resulting in less traffic on the roads and lower air pollution. Electronic commerce allows some merchandise to be sold at lower prices, so less affluent people can buy more and increase their standard of living. Electronic commerce enables people in Third World countries and rural areas to enjoy products and services that otherwise are not available to them. Electronic commerce facilitates delivery of public services, such as health care, education, and distribution of government social services at a reduced cost and/or improved quality. Health-care services, for example, can reach patients in rural areas.

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1.3.2 The Limitations of EC The limitations of EC can be grouped into technical and non-technical categories. Technical Limitations of EC       There is a lack of system security, reliability, standards, and some communication protocols. Insufficient telecommunication bandwidth. The software development tools are still evolving and changing rapidly. It is difficult to integrate the Internet and EC software with some existing applications and databases. Vendors may need special Web servers and other infrastructures, in addition to the network servers. Some EC software might not fit some hardware, or may be incompatible with some operating systems or other components. Non-technical Limitations Of the many non-technical limitations that slow the spread of EC, the following are the major ones.  Cost and justification: The cost of developing EC in-house can be very high, and mistakes due to lack of experience may result in delays. There are many opportunities for outsourcing, but where and how to do it is not a simple issue. Furthermore, to justify the system one must deal with some intangible benefits (such as improved customer service and the value of advertisement), which are difficult to quantify. Security and privacy: These issues are especially important in the B2C area, especially security issues which are perceived to be more serious than they really are when appropriate encryption is used. Privacy measures are constantly improved. Yet, the customers perceive these issues as very important, and, the EC industry has a very long and difficult task of convincing customers that online transactions and privacy are, in fact, very secure. Lack of trust and user resistance: Customers do not trust an unknown faceless seller (sometimes they do not trust even known ones), paperless


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transactions, and electronic money. So switching from physical to virtual stores may be difficult. Other limiting factor:. Lack of touch and feel online. Some customers like to touch items such as clothes and like to know exactly what they are buying. Many legal issues are as yet unresolved, and government regulations and standards are not refined enough for many circumstances. Electronic commerce, as a discipline, is still evolving and changing rapidly. Many people are looking for a stable area before they enter into it. There are not enough support services. For example, copyright clearance centres for EC transactions do not exist, and high-quality evaluators, or qualified EC tax experts, are rare. In most applications there are not yet enough sellers and buyers for profitable EC operations. Electronic commerce could result in a breakdown of human relationships. Accessibility to the Internet is still expensive and/or inconvenient for many potential customers. (With Web TV, cell telephone access, kiosks, and constant media attention, the critical mass will eventually develop.) Despite these limitations, rapid progress in EC is taking place. For example, the number of people in the United States who buy and sell stocks electronically increased from 300,000 at the beginning of 1996 to about 10 million in fall 1999. As experience accumulates and technology improves, the ratio of EC benefits to costs will increase, resulting in a greater rate of EC adoption. The potential benefits may not be convincing enough reasons to start EC activities


1.4 DATA MINING 1.4.1 Introduction to Data Mining Data mining, the extraction of hidden predictive information from large databases, is a powerful new technology with great potential to help companies focus on the most important information in their data warehouses. Data mining tools predict future trends and behaviours, allowing businesses to make proactive, knowledge-driven decisions. The automated, prospective analyses offered by data mining move beyond the analyses of past events provided by retrospective tools typical of decision support systems. Data mining tools can answer business questions that traditionally were too time-consuming to resolve. They scour databases for hidden patterns, finding predictive information that experts may miss because it lies outside their expectations.

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Most companies already collect and refine massive quantities of data. Data mining techniques can be implemented rapidly on existing software and hardware platforms to enhance the value of existing information resources, and can be integrated with new products and systems as they are brought on-line. What is Data Mining? Data mining is the semi-automatic discovery of patterns, associations, changes, anomalies, rules, and statistically significant structures and events in data. That is, data mining attempts to extract knowledge from data. Data mining differs from traditional statistics in several ways: formal statistical inference is assumption driven in the sense that a hypothesis is formed and validated against the data. Data mining in contrast is discovery driven in the sense that patterns and hypothesis are automatically extracted from data. Said another way, data mining is data driven, while statistics is human driven. The branch of statistics that data mining resembles most is exploratory data analysis, although this field, like most of the rest of statistics, has been focused on data sets far smaller than most that are the target of data mining researchers. Data mining also differs from traditional statistics in that sometimes the goal is to extract qualitative models which can easily be translated into logical rules or visual representations; in this sense data mining is human centered and is sometimes coupled with human-computer interfaces research. Data mining is a step in the data mining process, which is an interactive, semiautomated process which begins with raw data. Results of the data mining process may be insights, rules, or predictive models. The field of data mining draws upon several roots, including statistics, machine learning, databases, and high performance computing. Here, we are primarily concerned with large data sets, massive data sets, and distributed data sets. By large, we mean data sets which are too large to fit into the memory of a single workstation. By massive, we mean data sets which are too large to fit onto the disks of a single workstation or a small cluster of workstations. Instead, massive clusters or tertiary storage such as tape are required. By distributed, we mean data sets which are geographically distributed.



Data mining automates the process of finding predictive information in large databases. 1. in turn. Both processes require either shifting through an immense amount of material. Data mining tools sweep through databases and identify previously hidden patterns in one step. and can be implemented on new systems as existing platforms are upgraded and new products developed. data mining technology can generate new business opportunities by providing these capabilities:  Automated prediction of trends and behaviours. Given databases of sufficient size and quality. Other pattern discovery problems include detecting fraudulent credit card transactions and identifying anomalous data that could represent data entry keying errors. Larger databases. statistical and machine learning principles suggest the need for substantial user input (specifying meta-knowledge necessary to acquire highly predictive models from small data sets).E-COMMERCE TECHNOLOGY AND MANAGEMENT The focus on large data sets is not a just an engineering challenge. Automated discovery of previously unknown patterns. 37 NOTES   ANNA UNIVERSITY CHENNAI . When data mining tools are implemented on high performance parallel processing systems. Data mining techniques can yield the benefits of automation on existing software and hardware platforms. and identifying segments of a population likely to respond similarly to given events. Faster processing means that users can automatically experiment with more models to understand complex data. Other predictive problems include forecasting bankruptcy and other forms of default. or intelligently probing it to find exactly where the value resides. it is an essential feature of induction of expressive representations from raw data.2 The Scope of Data Mining Data mining derives its name from the similarities between searching for valuable business information in a large database — for example. An example of pattern discovery is the analysis of retail sales data to identify seemingly unrelated products that are often purchased together. It is only by analyzing large data sets that we can produce accurate logical descriptions that can be translated automatically into powerful predictive mechanisms. Data mining uses data on past promotional mailings to identify the targets most likely to maximize return on investment in future mailings. Otherwise. A typical example of a predictive problem is targeted marketing. yield improved predictions. finding linked products in gigabytes of store scanner data — and mining a mountain for a vein of valuable ore. they can analyze massive databases in minutes. High speed makes it practical for users to analyze huge quantities of data.4.

3 Techniques used in Data Mining The most commonly used techniques in data mining are:   Artificial neural networks: Non-linear predictive models that learn through training and resemble biological neural networks in structure.    Many of these technologies have been in use for more than a decade in specialized analysis tools that work with relatively small volumes of data.4 How Data Mining Works The technique that is used to perform these feats in data mining is called modeling. These decisions generate rules for the classification of a dataset.4. Specific decision tree methods include Classification and Regression Trees (CART) and Chi Square Automatic Interaction Detection (CHAID) . if you were looking for a sunken Spanish galleon on the high seas the first thing you might do is to research the times when Spanish treasure had been found by others in the past. You note these similarities and build a model that includes the characteristics that are common to the locations of these sunken treasures.4. Decision trees: Tree-shaped structures that represent sets of decisions. Genetic algorithms: Optimization techniques that use processes such as genetic combination. Nearest neighbour method: A technique that classifies each record in a dataset based on a combination of the classes of the k record(s) most similar to it in a historical dataset (where k ³ 1).DBA 1727 NOTES 1. mutation. and certain routes that have likely been taken by the ship’s captains in that era. 1. Modeling is simply the act of building a model in one situation where you know the answer and then applying it to another situation that you don’t. and natural selection in a design based on the concepts of evolution. You might note that these ships often tend to be found off the coast of Bermuda and that there are certain characteristics to the ocean currents. With these models in hand you sail off looking for treasure where your model indicates it most likely 38 ANNA UNIVERSITY CHENNAI . Rule induction: The extraction of useful if-then rules from data based on statistical significance. These capabilities are now evolving to integrate directly with industry-standard data warehouse and OLAP platforms. For instance. Sometimes called the k-nearest neighbour technique.

you could use your business experience stored in your database to build a model.4. Once the model is built it can then be used in similar situations where you don’t know the answer. You could just randomly go out and mail coupons to the general population . you find your treasure.4.4. is not much different than the way people build models. In neither case would you achieve the results you desired and of course you have the opportunity to do much better than random . What happens on computers. sex. As the marketing director you have access to a lot of information about all of your customers: their age.just as you could randomly sail the seas looking for sunken treasure.E-COMMERCE TECHNOLOGY AND MANAGEMENT might be given a similar situation in the past. credit history and long distance calling usage. Table 1. For example. Your problem is that you don’t know the long distance calling usage of these prospects (since they are most likely now customers of your competition). credit history etc.Data Mining for Prospecting NOTES 39 ANNA UNIVERSITY CHENNAI . You can accomplish this by building a model.   Table 1.(a) . Hopefully. sex.(a) illustrates the data used for building a model for new customer prospecting in a data warehouse.4. certainly before the advent of computers or data mining technology. Computers are loaded up with lots of information about a variety of situations where an answer is known and then the data mining software on the computer must run through that data and distil the characteristics of the data that should go into the model. This act of model building is thus something that people have been doing for a long time. however. say that you are the director of marketing for a telecommunications company and you’d like to acquire some new long distance phone customers. You’d like to concentrate on those prospects who have large amounts of long distance usage. if you’ve got a good model. The good news is that you also have a lot of information about your prospective customers: their age.

the results can be tested against the data held in the vault to confirm the model’s validity. Table 1. Once the mining is complete.4. Test marketing is an excellent source of data for this kind of modeling. Table 1.4. 40 ANNA UNIVERSITY CHENNAI . With data mining.where you already knew the answer.DBA 1727 NOTES The goal in prospecting is to make some calculated guesses about the information in the lower right hand quadrant based on the model that we build going from Customer General Information to Customer Proprietary Information. Mining the results of a test market representing a broad but relatively small sample of prospects can provide a foundation for identifying good prospects in the overall market.(b) .4.Data Mining for Predictions If someone told you that he had a model that could predict customer usage how would you know if he really had a good model? The first thing you might try would be to ask him to apply his model to your customer base . If the model works. its observations should hold for the vaulted data. the best way to accomplish this is by setting aside some of your data in a vault to isolate it from the mining process.4.(b) shows another common scenario for building models: predict what is going to happen in the future.

Using a small test mailing. this company can build a unique segmentation identifying the attributes of high-value prospects. While early adopters of this technology have tended to be in information-intensive industries such as financial services and direct mail marketing.E-COMMERCE TECHNOLOGY AND MANAGEMENT 1. A large consumer package goods company can apply data mining to improve its sales process to retailers. campaign management. well-integrated data warehouse and a well-defined understanding of the business process within which data mining is to be applied (such as customer prospecting. The results can be distributed to the sales force via a wide-area network that enables the representatives to review the recommendations from the perspective of the key attributes in the decision process. the technology is applicable to any company looking to leverage a large data warehouse to better manage their customer relationships. Applying this segmentation to a general business database such as those provided by Dun & Bradstreet can yield a prioritized list of prospects by region. The data needs to include competitor market activity as well as information about the local health care systems. Using data mining to analyze its own customer experience. and 41 NOTES    ANNA UNIVERSITY CHENNAI . and so on). the attributes of customers with an affinity for the product can be identified. A credit card company can leverage its vast warehouse of customer transaction data to identify customers most likely to be interested in a new credit product. Two critical factors for success with data mining are: a large. dynamic analysis of the data warehouse allows best practices from throughout the organization to be applied in specific sales situations. retention. The ongoing. shipments.5 Profitable Applications A wide range of companies have deployed successful applications of data mining. Data from consumer panels. A diversified transportation company with a large direct sales force can apply data mining to identify the best prospects for its services.4. Some successful application areas include:  A pharmaceutical company can analyze its recent sales force activity and their results to improve targeting of high-value physicians and determine which marketing activities will have the greatest impact in the next few months. Recent projects have indicated more than a 20fold decrease in costs for targeted mailing campaigns over conventional approaches.

For example.D. The increasing memory and processing speed of workstations enables the mining of data sets using current algorithms and techniques that were too large to be mined just a few years ago. Through this analysis. during this same period the number of scientists. the amount of data probably has grown between six to ten orders of magnitude. in part. the manufacturer can select promotional strategies that best reach their target customer segments. and extract meaningful knowledge.’s in statistics graduating each year has remained relatively constant during this period. Data Trends. 42 ANNA UNIVERSITY CHENNAI . Data mining requires numerically and statistically intensive computations on large data sets. must be developed. During this period.4. filter irrelevant information. the analysis of this data. engineers. In addition. On the other hand. Hardware Trends. such as data mining. and other analysts available to analyze this data has remained relatively constant. Only one conclusion is possible: either most of the data is destined to be write-only. or techniques. These organizations can now focus their efforts on the most important (profitable) customers and prospects. and design targeted marketing strategies to best reach them. which can automate. Much of this data is accessible via networks. the number of new Ph. Each of these examples has a clear common ground. the commoditization of high performance computing through SMP workstations and high performance workstation clusters enables attacking data mining problems that were accessible using only the largest supercomputers of a few years ago.6 Trends that Effect Data Mining In this section.DBA 1727 NOTES  competitor activity can be applied to understand the reasons for brand and store switching. 1. They leverage the knowledge about customers implicit in a data warehouse to reduce costs and improve the value of customer relationships. Perhaps the most fundamental external trend is the explosion of digital data during the past two decades. we describe five external trends which promise to have a fundamental impact on data mining.

In addition. A data warehouse is a subject-oriented repository designed with enterprise-wide access in mind. and languages are being developed to facilitate distributed data mining using current and next generation networks.5. With these types of expectations and constraints. but as general facility for getting quick.1 What Is Data Warehousing? The primary concept of data warehousing is that the data stored for business analysis can most effectively be accessed by separating it from the data in the operational systems. Business Trends. As mentioned above. and do it all using fewer people and at lower cost. The next generation internet (NGI) will connect sites at OC-3 (155 MBits/sec) speeds and higher. 1. especially for those cases in which the experiment or simulation results in large data sets. Scientific Computing Trends. This is over 100 times faster than the connectivity provided by current networks. react quicker. new protocols. data mining becomes a fundamental technology. A data warehouse is more than an archive for corporate data and more than a new way of accessing corporate data. It provides tools to satisfy the information needs of the employees organizational levels-not just for complex data queries. A data warehouse is a collection of computer-based information that is critical to successful execution of enterprise initiatives. scientists and engineers today view simulation as a third mode of science. and offer higher quality services than ever before.E-COMMERCE TECHNOLOGY AND MANAGEMENT Network Trends. Data mining and knowledge discovery serves an important role linking the three modes of science: theory. experiment and simulation. With this type of connectivity. accurate and often insightful 43 NOTES ANNA UNIVERSITY CHENNAI . enabling businesses to more accurately predict opportunities and risks generated by their customers and their customers’ transactions. algorithms. it becomes possible to correlate distributed data sets using current algorithms and techniques.5 DATE WAREHOUSING 1. Today businesses must be more profitable.

44 ANNA UNIVERSITY CHENNAI . extraction / transformation programs. graphical user interfaces. Integrated: Data that is gathered into the data warehouse from a variety of sources and merged into a coherent whole. One of the principal reasons for developing a data warehouse is to integrate operational data from various sources into a single and consistent architecture that supports analysis and decision-making within the enterprise.DBA 1727 NOTES information. time-variant and nonvolatile collection of data in support of management’s decision making process”.5. Some of those parts are summarised into information ‘components’ and are stored in the warehouse.2 Definitions Data Warehouse: The term Data Warehouse was coined by Bill Inmon in 1990. integrated. A data warehouse is analogous to a physical warehouse. Operational systems create. Operational systems create data ‘parts’ that are loaded into the warehouse. He defined the terms in the sentence as follows: Subject Oriented: Data that gives information about a particular subject instead of about a company’s ongoing operations. 1. client/ server architecture. A data warehouse is typically a blending of technologies. which he defined in the following way: “A warehouse is a subject-oriented. Time-variant: All data in the data warehouse is identified with a particular time period. A data warehouse is designed so that its users can recognize the information they want and access that information using simple tools. Data warehouse users make requests and are delivered information ‘products’ that are created from the components and parts stored in the warehouse. update and delete production data that feed the data warehouse. and more. including relational and multidimensional databases.

a single-subject data warehouse is typically referred to as a data mart. if three years of data are decided on and loaded into the warehouse. Better enterprise intelligence . every month the oldest month will be “rolled off” the database. This enables management to gain a consistent picture of the business.  More cost effective decision making . only a certain number of periods of history are kept in the warehouse. Guaranteed data accuracy and reliability result from ensuring that a Data Warehouse contains only ‘trusted’ data.E-COMMERCE TECHNOLOGY AND MANAGEMENT Non-volatile Data is stable in a data warehouse. It is the process of creating. NOTES  45 ANNA UNIVERSITY CHENNAI .level summary information.Increased quality and flexibility of enterprise analysis arises from the multi .3 ADVANTAGES OF DATA WAREHOUSE Implementing a Data warehouse provides significant benefits many tangible. For instance. However. Data warehousing is essentially what you need to do in order to create a data warehouse. while data warehouses are generally enterprise in scope.5. Having a Data Warehouse also eliminates the resource drain on production systems when executing long . and what you do with it. (multi-terabyte data warehouses are not uncommon). More data is added but data is never removed. and then querying a data warehouse and can involve a number of discrete technologies such as: 1. Ralph Kimball provided a much simpler definition of a data warehouse. some intangible. Inmon’s.running. This definition provides less insight and depth than Mr. Also.tired data structures of a Data Warehouse that supports data ranging from detailed transactional level to high . data warehouses can be volatile. complex queries and reports.A Data Warehouse allows reduction of staff and computer resources required to support queries and reports against operational and production databases. and the newest month added. populating. but is no less accurate. Due to the large amount of storage required for a data warehouse. This definition remains reasonably accurate almost ten years later. A data warehouse is “a copy o f transaction data specifically structured for query and analysis”. This typically offers significant savings.

results in better enterprise goals and measure.4 Types of Data warehouses: The term data warehouse is currently being used to describe a number of different facilities each with diverse characteristics. it contains the information required to find and access the actual data. organize. the organization builds a series of data libraries over time and eventually links them via an enterprise wide logical data warehouse. and pre-process the data. Data Warehouse development can be an effective first step in reengineering the enterprise’s legacy systems. 1. In addition. Typically. package. Information systems reengineering . wherever it actually resides.wide data requirements provides a cost .5. As part of the data warehouse process.effective means of establishing both data standardization and operational system interoperability. Knowing what information is important to an enterprise will provide direction and priority for reengineering efforts.An enterprise can maintain better customer relationships by correlating all customer data via a single Data Warehouse architecture. physical database into which all the corporate data for the data warehouse are gathered. business rules and processing logic required scrub. Just defining the requirements for Data Warehouse. Business reengineering . or functional data warehouse. regional.DBA 1727 NOTES    Enhanced customer service . Physical data warehouse: This is an actual. They are also called executive information systems (EIS) 46 ANNA UNIVERSITY CHENNAI . package and pre-process the data for end user access.A Data Warehouse that is based upon enterprise. along with schemas (information about data) and the processing logic used to organize. Data library: This is a subset of the enterprise wide data warehouse.Allowing unlimited analysis of enterprise information often provides insights into enterprise processes that may yield breakthrough ideas for reengineering those processes. it performs the role of departmental. Logical data warehouse: This contains all the metadata. Decision support systems (DSSs): These systems are not data warehouses but applications that make use of the data warehouse.


1.5.5 Aspects of Data Warehouse Architecture This list of aspects of architecture that the data warehouse decision maker will have to deal with themselves. There are many other architecture issues that affect the data warehouse, e.g., network topology, but these have to be made with all of an organization’s systems in mind (and with people other than the data warehouse team being the main decision makers.) Data consistency architecture This is the choice of what data sources, dimensions, business rules, semantics, and metrics an organization chooses to put into common usage. It is also the equally important choice of what data sources, dimensions, business rules, semantics, and metrics an organization chooses not to put into common usage. This is by far the hardest aspect of architecture to implement and maintain because it involves organizational politics. However, determining this architecture has more to do with determining the place of the data warehouse in your business than any other architectural decision. In my opinion, the decisions involved in determining this architecture should drive all other architectural decisions. Reporting data store and staging data store architecture The main reasons we store data in a data warehousing systems are so they can be: 1) reported against, 2) cleaned up, and (sometimes) 3) transported




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Data modeling architecture This is the choice of whether you wish to use demoralized, normalized, objectoriented, proprietary multidimensional, etc. data models. As you may guess, it makes perfect sense for an organization to use a variety of models. Tool architecture This is your choice of the tools you are going to use for reporting and for what I call infrastructure. Processing tiers architecture This is your choice of what physical platforms will do what pieces of the concurrent processing that takes place when using a data warehouse. This can range from an architecture as simple as host-based reporting to one as complicated. Security architecture If you need to restrict access down to the row or field level, you will probably have to use some other means to accomplish this other than the usual security mechanisms at your organization. Note that while security may not be technically difficult to implement, it can cause political consternation. In the long run, decisions on data consistency architecture will probably have much more influence on the return of investment in the data warehouse than any other architectural decisions. To get the most return from a data warehouse (or any other system), business practices have to change in conjunction with or as a result of the system implementation. Conscious determination of data consistency architecture is almost always a prerequisite to using a data warehouse to effect business practice change.




1.6 NETWORK INFRASTRUCTURE REQUIREMENTS The network infrastructure is the underlying foundation of the system. It forms the services that create the operating makeup of your network. In a Communications Services deployment, determining your network infrastructure from the project goals ensures that you will have an architecture that can scale and grow. 1.6.1 The Existing Network We need to understand our existing network infrastructure to determine how well it can meet the needs of our deployment goals. By examining our existing infrastructure, we identify if we need to upgrade existing network components or purchase new network components. We should build up a complete map of the existing network by covering these areas: 1. Physical communication links, such as cable length, grade, and so forth 2. Communication links, such as analog, ISDN, VPN, T3, and so forth, and available bandwidth and latency between sites 3. Server information, including:  Host names  IP addresses  Domain Name System (DNS) server for domain membership 4. Locations of devices on your network, including:  Hubs  Switches  Modems  Routers and bridges  Proxy servers 5. Number of users at each site, including mobile users




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After completing this inventory, you need to review that information in conjunction with your project goals to determine what changes are required so that you can successfully deliver the deployment. 1.6.2 Network Infrastructure Components The following common network infrastructure components have a direct impact upon the success of your deployment:      Routers and switches Firewalls Load balancers Storage Area Network (SAN) DNS

Routers and Switches Routers connect networks of your infrastructure, enabling systems to communicate. You need to ensure that the routers have spare capacity after the deployment to cope with projected growth and usage. In a similar vein, switches connect systems within a network. Routers or switches running at capacity tend to induce escalating bottlenecks, which result in significantly longer times for clients to submit messages to servers on different networks. In such cases, the lack of foresight or expenditure to upgrade the router or switch could have a personnel productivity impact far greater than the cost. Firewalls Firewalls sit between a router and application servers to provide access control. Firewalls were originally used to protect a trusted network (yours) from the untrusted network (the Internet). These days, it is becoming more common to protect application servers on their own (trusted, isolated) network from the untrusted networks (your network and the Internet). Router configurations add to the collective firewall capability by screening the data presented to the firewall. Router configurations can potentially block undesired services


(such as NFS, NIS, and so forth) and use packet-level filtering to block traffic from untrusted hosts or networks. In addition, when installing a Sun server in an environment that is exposed to the Internet, or any untrusted network, reduce the Solaris software installation to the minimum number of packages necessary to support the applications to be hosted. Achieving minimization in services, libraries, and applications helps increase security by reducing the number of subsystems that must be maintained. The Solaris™ Security Toolkit provides a flexible and extensible mechanism to minimize, harden, and secure Solaris systems. Load Balancers Use load balancers to distribute overall load on your Web or application servers, or to distribute demand according to the kind of task to be performed. If, for example, you have a variety of dedicated applications and hence different application servers, you might use load balancers according to the kind of application the user requests. If you have multiple data centers, you should consider geographic load balancing. Geographic load balancing distributes load according to demand, site capacity, and closest location to the user. If one center should go down, the geographic load balancer provides failover ability. For load balancers on Web farms, place the hardware load balancers in front of the servers and behind routers because they direct routed traffic to appropriate servers. Software load balancing solutions reside on the Web servers themselves. With software solutions, one of the servers typically acts a traffic scheduler. A load balancing solution is able to read headers and contents of incoming packets. This enables you to balance load by the kind of information within the packet, including the user and the type of request. A load balancing solution that reads packet headers enables you to identify privileged users and to direct requests to servers handling specific tasks. Storage Area Networks (SANs) Understanding the data requirements of the storage system is necessary for a successful deployment. Increasingly, SANs are being deployed so that the storage is



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independent of the servers used in conjunction with it. Deploying SANs can represent a decrease in the time to recover from a non-functional server as the machine can be replaced without having to relocate the storage drives. Use these questions to evaluate if your deployment storage requirements would be best served through a SAN:     Are reads or writes more prevalent? Do you need high I/O rate storage? Is striping the best option? Do you need high uptime? Is mirroring the best option? How is the data to be backed up? When is it going to be backed up?

Domain Name System (DNS) Servers which make heavy usage of DNS queries should be equipped with a local caching DNS server to reduce lookup latency as well as network traffic. When determining your requirements, consider allocating host names for functions such as mailstore, mail-relay-in, mail-relay-out, and so forth. You should consider this policy even if the host names all are currently hosted on one machine. With services configured in such a way, relocation of the services to alternate hardware significantly reduces the impacts of the change. 1.6.3 Planning Your Network Infrastructure Layout In deriving your infrastructure topology, you need to consider the following topics:       DMZ Intranet Internal network Proxies Firewall Configuration Mobile users

Demilitarized Zone (DMZ) These days, most company networks are configured for a DMZ. The DMZ separates the corporate network from the Internet. The DMZ is a tightly secured area into

However. However. the DMZ still remains segmented from the internal networks. internal DNS. DNS and mail). and external DNS on a DMZ segment. You should continue to locate all machines hosting Web servers. and so on) that are meant solely for internal users. DMZ implementations have moved the segment behind the firewall as firewall security and facilities have increased in robustness. Apply the same approach to DNS servers. Intranet The DMZ provides a network segment for hosts that offer services to the Internet. A simpler network design might only define separate DMZ segments for Internet services. limit outbound initiated traffic to the Internet to those machines requiring access to the Internet to carry out the service they are providing (for example. as they do not reside on the same segment as hosts that could be compromised by an external attack. You need to separate appropriate connections of these types from the rest of the network. mail. FTP servers. 53 NOTES ANNA UNIVERSITY CHENNAI . file serving. To limit exposure in case of a security breach from such attacks. so too. Progressively. these servers typically contain no information about the internal network. are the internal services. security issues exist with VPN and remote access traffic. you also have similar services to offer (Web. These machines are hardened to withstand the attacks they might face. inbound email can still be received. For example. However. Just as the Internet services are segmented. VPN access. Also. The firewall providing the DMZ segmentation should allow only inbound packets destined to the corresponding service ports and hosts offering the services within the DMZ. given the potential of a denial-of-service attack interrupting DNS or email. consider creating separate inbound and outbound servers to provide these services. mail servers. Separation of services in this manner also permits tighter controls to be placed on the router filtering. Should an email-based Trojan horse or worm get out of control and overrun your outbound mail server. You might want to segment an inbound-only DMZ and an outbound-only DMZ. Internally. and remote access. This design protects your internal hosts. web servers).E-COMMERCE TECHNOLOGY AND MANAGEMENT which you place servers providing Internet services and facilities (for example. with respect to the type of connection requests. the name server facilities only include the server and the routers to the Internet.

these machines avoid direct communication with machines in the DMZ.DBA 1727 NOTES Just as you separate the Internet-facing services into the DMZ for security. Place a proxy on an internal network segment. The firewall rules providing the segmentation should be configured similarly to the rules used for the DMZ’s firewall. or. Inbound traffic should come solely from machines relaying information from the DMZ (such as inbound email being passed to internal mail servers) and machines residing on the internal network. this creates a problem based on your previous topology decisions. Internal Network The segments that remain make up your internal network segments. 54 ANNA UNIVERSITY CHENNAI . your private internal services should reside in their own internal DMZ. which in turn makes the request on the machine’s behalf. In this situation. A host on the intranet can in turn communicate with a host in the DMZ to complete a service (such as outbound email or DNS). an intranet segment. If users require Internet access. proxies become helpful. though. Development. These machines request information from hosts residing on the intranet. Proxies Only the machines directly communicating with machines on the Internet should reside in the DMZ. This indirect communication is acceptable. the services they require should reside on hosts in the intranet. Use a firewall between each internal network segment to filter traffic to provide additional security between departments. These segments house users’ machines or departmental workstations. Identify the type of internal network traffic and services used on each of these segments to determine if an internal firewall would be beneficial. and test network segments are also included in this list. better yet. just as multiple DMZs can be beneficial—depending on your services and your network’s size—multiple intranets might also be helpful. lab. This relay out to the Internet helps shield the machine from any potential danger it might encounter. Preferably. In addition. A machine requiring access to the Internet can pass its request onto the proxy. Machines on internal networks should not communicate directly with machines on the Internet. Ultimately.

1. which in turn makes the actual connection out on the Internet. Will there be any facilities they cannot access? What kind of security policies do you need to address? Will you require SSL for authentication? Also. When there were too many of them. most firewalls provide features to prevent IP spoofing. and the potential for bypassing IP address-based authorization and the other firewallfiltering rules is reduced. it was likely spoofed. people realized that stand . it should reside in the DMZ.E-COMMERCE TECHNOLOGY AND MANAGEMENT Because the proxy communicates directly with machines on the Internet. examine whether your mobile user population is stable or is expected to increase over time. if there is only one entry point into your network from the Internet and a packet is received from the Internet with a source address of one of your internal machines. By preventing IP spoofing.1 Introduction to TCP/IP: The realization that stand . use a double proxy system.alone computers made no sense made the network possible. To keep this communication indirect. Mobile Users When you have remote or mobile users. Use IP-spoofing protection whenever possible. Use the same IP-spoofing protection on any internal firewall as well.alone networks 55 NOTES ANNA UNIVERSITY CHENNAI . pay attention to how you will provide them access to the facilities. this possibility is eliminated. A second proxy residing in the intranet passes connection requests of the internal machines to the proxy in the DMZ.7 TRANSMISSION CONTROL PROTOCOL/INTERNET PROTOCOL TCP / IP 1. For instance. not from the Internet. Firewall Configuration In addition to the typical packet-filtering features. Based on your network’s topology. this conflicts with the desire to prevent internal machines from directly communicating with DMZ machines.7. However. the only packets containing a source IP address from your internal machines should come from within the network itself.

1. networks. However. network problems can go undiagnosed and uncorrected for long periods of time. TCP and IP were developed to connect a number different networks designed by different vendors into a network of networks (the “Internet”). Rather than surrender to the monopoly of vendors. and that they also needed to talk to one another. This design allows the construction of very large networks with less central management. electronic mail. because of the automatic recovery. It became so successful that both the Internet and the World Wide Web adopted it is their protocol. so the DOD designed TCP/IP to be robust and automatically recover from any node or phone line failure.  Interoperable-the system supports computers and software from different vendors. This was the problem confronting the US Government and the academic community in the late 60s. remote logon) across a very large number of client and server systems. this means that the customers or businesses are not required to buy specific systems in order to conduct business. the US Department of Defence (DOD) initiated work on a project with a simple objective: develop a set of standard rules (Protocols) which could be used by all machines and networks to communicate. The solution had to be vendor . On the battlefield a communications network will sustain damage. Something had to be done. Everything they had was heterogeneous-computers. operating systems and networking software. For EC.DBA 1727 NOTES made little sense either. and finally to the global Internet. Several computers in a small department can use TCP/IP (along with other protocols) on a single LAN. The solution they found was TCP/IP/.7. and even the geographical location. then to regional networks. Connecting these networks was either impossible or done using expensive proprietary network devices.2 Internet Protocols: A protocol is a set of rules that determines how two computers communicate with one another over a network. This layered architecture is shown in  56 ANNA UNIVERSITY CHENNAI . The protocols around which the Internet was designed embody a series of design principles. Layered-the collection of Internet protocols works in layers with each layer building on the layers at lower levels.neutral. The IP component provides routing from the department to the enterprise network. It was initially successful because it delivered a few basic services that everyone needs (file transfer. independent of the hardware or the operating system.

7. TCP and IP are two of the protocols in this suite. NOTES 1.e the sending and the receiving side) and not at the network layers. It is much like the post office. It was developed by a community of researchers centered around the ARPAnet. The job of the post office is to deliver the mail. This means that application programmers are hidden from the complexities of the underlying hardware. This means that the interpretation of the data happens at the application layer(i.the Internet is based on end-to-end protocols. Certainly the ARPAnet is the best.known TCP/IP network. End-to end.E-COMMERCE TECHNOLOGY AND MANAGEMENT   Simple-each of the layers in the architecture provides only a few functions or operations. it has become common to use the term TCP/IP or IP/ TCP to refer to the whole family. 57 ANNA UNIVERSITY CHENNAI . Because TCP and IP are the best known of the protocols. only the sender and the receiver are concerned about its contents.3 What is TCP/IP? TCP/IP is a set of protocols developed to allow cooperating computers to share resources across a network. The most accurate name for the set of protocols are describing is the “Internet protocol suite”.

These include IP. and UDP. Thus the most important “traditional” TCP/IP services are: File transfer. or to send files to another computer. in the right order. or finding out who is logged in on another computer. IP forwards each packet based on a four byte destination address (the IP number). e. although this is unsuitable for some applications. whether they ever made it to their destination.is responsible for verifying the correct delivery of data from client to server. Because it doesn’t need to keep track of the sequence of packets. These machines had their own disks. 58 ANNA UNIVERSITY CHENNAI .is responsible for moving packet of data from node to node. sending mail.   Others are protocols for doing specific tasks. TCP adds support to detect errors or lost data and to trigger retransmission until the data is correctly and completely received. The Internet authorities assign ranges of numbers to different organizations. and is thus considered “unreliable. The file transfer protocol (FTP) allows a user on any computer to get files from another computer. etc. Data can be lost in the intermediate network. it does have much more applicability in other applications than the more reliable and robust TCP. and generally were self. One of the things that makes UDP nice is its simplicity. TCP.4 TCP/IP Services Initially TCP/IP was used mostly between minicomputers or mainframes.  IP . The organizations assign groups of their numbers to departments. UDP (User Datagram Protocol) is a simple transport-layer protocol.DBA 1727 NOTES TCP/IP is a family of protocols. IP operates on gateway machines that move data from department to organization to region and then around the world..7.” Again. Security is handled by requiring the user to specify a user name and password for the other computer. 1.g. This is another reason why it’s more suited to streaming-data applications: there’s less screwing around that needs to be done with making sure all the packets are there. TCP . It does not provide the same features as TCP. A few provide “low. transferring files between computers. it has lower overhead than TCP.contained.level” functions needed for many applications. and that sort of thing.

in order to send the mail. 59 NOTES ANNA UNIVERSITY CHENNAI . Every character you type is sent directly to the other system. the mail software expects to be able to open a connection to the addressee’s computer. people tended to use only one or two specific computers. they are its inherent features:  Independence of vendor. where it is practical to have a mail server running all the time. You start a remote session by specifying a computer to connect to. But the telnet program effectively makes your computer invisible while it is running. The most serious is that a micro is not well suited to receive computer mail. or it may be running an application other than the mail system. the remote system will ask you to log in and give a password. The computer mail system is simply a way for you to add a message to another user’s mail file.This was necessary to finally break the monopoly of vendors who claimed that their product alone will save the world. When you send mail.7.5 Features Of Tcp/Ip A protocol is a set of rules that have to use by two or more machines to talk to one another. anything you type is sent to the other computer. mail is normally handled by a larger system. There are some problems with this in an environment where microcomputers are used. The goals of TCP/IP were set by the US Department of Defence. They would maintain “mail files” on those machines. This allows you to send messages to users on other computers. If this is a microcomputer. Microcomputer mail software then becomes a user interface that retrieves mail from the mail server. it may be turned off. Computer mail. For this reason. That is.E-COMMERCE TECHNOLOGY AND MANAGEMENT Remote login The network terminal protocol (TELNET) allows a user to log in on any other computer on the network. Generally. in whatever manner it would normally ask a user who had just dialed it up. 1. These rules are independent of the applications that have no idea of what is going on at the two ends of the communication channel. Originally. and today. Note that you are really still talking to your own computer. From that time until you finish the session. the connection to the remote computer behaves much like a dialup connection. type of machine and network .

Being originally meant for the defence network.7. pine and elm mailers Remote printing which allows people to access printers on remote computers as if they were connected locally The Hyper Text Transport Protocol (HTTP) of the World Wide Web which browsers like Netscape use to fetch HTML documents The point – to – Point Protocol (PPP) which makes all these facilities available through a telephone line 1. Later. must be 100% reliable. with facilities for full error control.DBA 1727 NOTES     Failure recovery . remote login and remote execution of commands. Facility to connect new sub networks without significant disruption of services High error rate handling .6 TCP/IP Terminology The Internet standards use a specific set of terms when referring to network elements and concepts related to TCP/IP networking. \ 60 ANNA UNIVERSITY CHENNAI . Berkeley developed an entire suite of tools that are today known as the r – utilities because all their command names are prefixed with an “r. Enable reliable transmission of files. Post Office Protocol (POP) and the mail. TCP/IP originally began by the development of a collection of programs (the DARPA set) that enabled computers to talk among themselves. Some of the most important application available in the TCP / IP family are:         ftp and rep for file transfer telnet and rlogin for logging in to remote machines rsh (rcmd in SCO UNIX) for executing a command in a remote machine without logging in The Network File System (NFS) which lets one machine treat the file system of a remote machine as its own The electronic mail service using the Simple Mail Transport Protocol (SMTP).The transmission. irrespective of the distance travelled. These terms provide a foundation for subsequent chapters illustrates the components of an IP network. it should be able to divert data immediately through other routes if one or more parts of the network went down.

Another term for network is internet work. 61 ANNA UNIVERSITY CHENNAI      . which runs an implementation of IP. LAN segment  A portion of a subnet consisting of a single medium that is bounded by bridges. A host is typically the source and the destination of IP traffic. A host silently discards traffic that it receives but that is not explicitly addressed to itself. a router also typically advertises its presence and host configuration information. On an IPv6 network. Upper-layer protocol A protocol above IP that uses IP as its transport. Other terms for subnet are network segment and link. Network  Two or more subnets connected by routers. Router  A node that can forward IP packets not explicitly addressed to itself. Subnet  One or more LAN segments that are bounded by routers and use the same IP address prefix. Examples include Internet layer protocols such as the Internet Control Message Protocol (ICMP) and Transport layer protocols such as the Transmission Control Protocol (TCP) and User Datagram Protocol (UDP). Host  A node that cannot forward IP packets not explicitly addressed to itself (a non-router).E-COMMERCE TECHNOLOGY AND MANAGEMENT NOTES Elements of an IP network Common terms and concepts in TCP/IP are defined as follows:   Node Any device. including routers and hosts.

192. Interface  The representation of a physical or logical attachment of a node to a subnet. it has to be unique throughout the world. In a network. This has led to the “server/client” model of network services. For instance. 192. This name is unique throughout the network. A client is another system that uses that service. Now many installations have several kinds of computers. a computer is known as a host. that computer will call on other systems on the net for specialized services. minicomputers.DBA 1727 NOTES     Air  A node connected to the same subnet as another node. And.168. including microcomputers. if the network is hooked up to the Internet.0.0) could be the address of a network. and every such host has a hostname. but also to all connected networks. and mainframes. popularly known as an intranet. sometimes a node. A server is a system that provides a specific service for the rest of the network. They could be different programs running on the same computer. These computers are likely to be configured to perform specialized tasks. 62 ANNA UNIVERSITY CHENNAI . This address has to be unique not only within the network. Each machine is fitted with a network interface card that is connected by wire to the corresponding cards in other machines.67. and the combination of these two addresses forms the complete network address of the host. and a host within the network could have the host address of 45. Note that these computer services can all be provided within the framework of TCP/IP. All communication between hosts normally takes place through these network interfaces only.) Here are the kinds of servers typically present in a modern computer setup. Every TCP/IP network has an address that is used by external networks to direct their messages. we have an internet. 192. An example of a physical interface is a network adapter. A local internet or intranet may easily be connected to the Internet which also uses the same protocol. which is the super – network of all networks. Every host in the network has an address as well.45. (Note that the server and client need not be on different computers. Although people are still likely to work with one specific computer.168. Packet  The protocol data unit (PDU) that exists at the Internet layer and comprises an IP header and payload.168 (or strictly speaking. In that case. Address  An identifier that can be used as the source or destination of IP packets and that is assigned at the Internet layer to an interface or set of interfaces. and uses the TCP/IP protocol for communication.67 represents the complete network address of the host. workstations. When two or more networks are connected together.

and accounts. but still give others access to the disk space. Thus the databases are kept on a small number of systems. but a few tasks require the resources of a larger system. These computers have no disk drives at all. Your computer simply thinks it has some extra disk drives. and you are connected to it. This is useful when you can do most of your work on a small computer. If your terminal is connected to one of these. Aside from the obvious economic benefits. That is. Many installations no longer connect terminals directly to computers. Generally it is possible to have active connections to more than one computer at the same time. because you don’t have to worry about updating and backing up copies on lots of different machines. They are entirely dependent upon disks attached to common “file servers”. There is no need to use a special network utility to access a file on another system. It lets you put large disks on a few computers. (The most commonly used protocol is the remote lineprinter protocol from Berkeley Unix) remote execution. A number of vendors now offer high-performance diskless computers. remote printing. names and network addresses for computers. you request that a specific command or set of commands should run on some specific computer. The terminal server will have provisions to switch between 63 NOTES  ANNA UNIVERSITY CHENNAI . Some operate on a command by command basis. However there are also “remote procedure call” systems that allow a program to call a subroutine that will run on another computer.E-COMMERCE TECHNOLOGY AND MANAGEMENT     network file systems. There are a number of different kinds of remote execution. This capability is useful for several different purposes. It becomes very tedious to keep this data up to date on all of the computers. In large installations. name servers. This allows you to access printers on other computers as if they were directly attached to yours. there are a number of different collections of names that have to be managed. It makes system maintenance and backup easier. A network file system provides the illusion that disks or other devices from one system are directly connected to other systems. Other systems access the data over the network. This includes users and their passwords. you simply type the name of a computer. terminal servers. A terminal server is simply a small computer that only knows how to run telnet (or some other protocol to do remote login). Instead they connect them to terminal servers. These extra “virtual” drives refer to the other system’s disks. this allows people working on several computers to share common files.

Web browsers and servers need as way 64 ANNA UNIVERSITY CHENNAI . Like other client/server applications. It is perfectly possible that datagram 14 will actually arrive before datagram 13. Until recently. Full-scale network window systems provide an interface that lets you distribute jobs to the systems that are best suited to handle them.8 HYPERTEXT MARKUP LANGUAGE (HTML) 1. suppose you want to transfer a 15000 octet file. For example. an error will occur.DBA 1727 NOTES  connections rapidly. 1. and those datagrams are treated by the network as completely separate. So the protocols will break this up into something like 30 500-octet datagrams. 1.1 Web Based Client / Server Over the past three or four years. There are provisions to open connections (i. and some datagram won’t get through at all. It is also possible that somewhere in the network. Each of these datagrams is sent through the network individually. network-oriented window systems. In that case. that datagram has to be sent again. and to notify you when output is waiting for another connection. A datagram is a collection of data that is sent as a single message. Most networks can’t handle a 15000 octet datagram. the network doesn’t know that there is any connection between them. the clients are called Web browsers and the servers are simply called Web servers. Each of these datagrams will be sent to the other end.8.7. they will be put back together into the 15000-octet file. high-performance graphics programs had to execute on a computer that had a bit-mapped graphics screen directly attached to it. but still give you a single graphically-based user interface. to start a conversation that will continue for some time).e. However while those datagrams are in transit. the World Wide Web (WWW) has come to dominate the traffic on the Internet.7 TCP/IP – Connectionless technology: TCP/IP is built on “connectionless” technology. The vast majority of EC applications are Web based. At that point. Network window systems allow a program to use a display on a different computer. In such applications. information from those connections is broken up into datagrams. However at some level. Information is transferred as a sequence of “datagrams”.

E-COMMERCE TECHNOLOGY AND MANAGEMENT 1) to locate each other so they can send requests and responses back and forth and 2) to communicate with one another. We are all familiar with “www . and anywhere else a company can advertise. graphics. 1. and ask the server to respond with an 65 NOTES ANNA UNIVERSITY CHENNAI . animation and sound. HTTP is based on client/server principle..html.g. on billboards.8.cern. port (80). HTTP allows the client to establish a connection with the server and make a request. where the access – method can be http. and file (e. When a user selects a hypertext link. 1.htm) take default values. home page. on television. The HTML codes are used to create links.ch:80/hypertext/Data Sources/ Geographical. Hypertext is text that is specially coded using a standard system called Hypertext Markup Language (HTML).com.8. directory. The server request identifies the resource that the client is interested in and tells the server what “action” to take on the resource. or telnet.anywhere. appearing on the Web. the access – method (http). The complete syntax for an “absolute” URL is access – method: // server –name [: port]/directory/file. gopher. To fulfil these needs. can “link” the user to another resource such as other HTML documents.cern.ge. in print. for example. In the case of a URL like www. or protocol that governs the transfer of hypertext between two or more computers. a new addressing scheme – the URL . These links can be textual or graphic and when clicked on. as opposed to the following example where all the values are explicitly specified: http://info. identify a resource.and a new protocol – the Hypertext Transport Protocol (HTTP) were introduced.html” on the server “info.ch” stored in the directory “Data Sources”.com”.1. ftp. The World Wide Web encompasses the universe of information that is available via HTTP.2 Hypertext Transfer Protocol (HTTP) Hypertext Transfer Protocol (HTTP) is the set of rules. the client program on their computer uses HTTP to contact the server. text files. This is the default syntax for a URL.1.1 Universal Resource Locator (URL) Universal Resource Locators (URLs) are ubiquitous. What this URL represents is the Web page “Geographical.

sound clips. HTML is a special kind of text document that is used by Web browsers to present text and graphics. which is a language that can be used to define other languages.8. These mark up tags.DBA 1727 NOTES action. Telnet. Gopher. are the structure of the page and the text that makes up the main part of the page. also called tags. of marked up. and then uses HTTP to respond to or perform the action. Each of these elements is stored on the Web server as a separate file. such as graphics. Another markup language that was derived from SGML for use on the Web is Extensible Markup Language (XML). using a text mark up language. The Web client software uses those instructions as it renders the text and page elements contained in the other files into the Web page that appears on the screen of the client computer.2 Mark Uplanguages and The Web Web pages can include many elements. 1. HTML.HTML consists of standardized codes or ‘tags’ that are used to define the structure of information on a web page. 66 ANNA UNIVERSITY CHENNAI . The markup language most commonly used on the web is HTML. A text mark up language specifies a set of tags that are inserted into the text. provide formatting instructions that Web client software can understand. and even small programs that run in the web browser. SGML is a meta language. Network News Transfer Protocol (NNTP). which is increasingly used to mark up information that companies share with each other over the Internet 1. photographs. The server accepts the request. WAIS. HTTP also provides access to other Internet protocols like File Transfer Protocol (FTP). XML and XHTML have descended from the original SGML specification. however. In addition to its role as a markup language. The page structure and text are stored in a text file that is formatted.3 Hypertext Markup Language (Html) A web page is created using HTML. HTML stands for Hypertext Markup Language. SGML was used for many years by the publishing industry to create documents that needed to be printed in various formats and they were revised frequently. which is a subset of a much older and far more complex text markup language called Standard Generalized Markup Language (SGML).8. The most important parts of a Web page. etc. Simple Mail Transfer Protocol (SMTP).

The browser retrieves Web pages from Web servers that thanks to the Internet can be pretty much anywhere in World. Lynx etc. Here is what you need to type: <title>My first HTML document</title> Change the text from “My first HTML document” to suit your own needs. These codes are called container tags because the formatting described by the tag affects only the text contained between the tags.8.3. To try this out.htm” then the browser will recognize it as HTML.html”. HTML documents are often referred to as “Web pages”.E-COMMERCE TECHNOLOGY AND MANAGEMENT The text includes markup tags such as <p> to indicate the start of a paragraph. The tags used in HTML usually consist of a code in between two “wickets”. Most browsers show the title in the window caption bar. With just 67 ANNA UNIVERSITY CHENNAI .. A browser interprets the tags in an HTML file and presents the file as a formatted readable web page. type the above into a text editor and save the file as “test. HTML is standardized and portable. A document that has been prepared using HTML markup “tags” can be viewed using variety of web browsers such as Netscape. The title text is preceded by the start tag <title> and ends with the matching end tag </title>. The title should be placed at the beginning of your document.       start with a title add headings and paragraphs add emphasis to your text add images add links to other pages use various kinds of lists NOTES Start with a title Every HTML document needs a title. then view the file in a web browser.html” or “. If the file extension is “.. and </p> to indicate the end of a paragraph.1 HTML Tags: HTML tags are used to define areas of document as having certain characteristics. 1.

The </p> is optional. Don’t worry. H2 is slightly less important. the least important.jpg” width=”200" height=”150"> The src attribute names the image file. Add headings and paragraphs If you have used Microsoft Word. for instance: This is a really <em>interesting</em> topic! Adding interest to your pages with images Images can be used to make your Web pages distinctive and greatly help to get your message across.DBA 1727 NOTES a title. In HTML there are six levels of headings. unlike the end tags for elements like headings. the browser will show a blank page.jpg” in the same folder/directory as your HTML file.</p> <p>This is the second paragraph. H1 is the most important. The next section will show how to add displayable content. and so on down to H6. Let’s assume you have an image file called “peter. Here is how to add an important heading: <h1>An important heading</h1> and here is a slightly less important heading: <h2>A slightly less important heading</h2> Each paragraph you write should start with a <p> tag. <img src=”peter. Something is still missing! People who 68 ANNA UNIVERSITY CHENNAI . The width and height aren’t strictly necessary but help to speed the display of your Web page. For example: <p>This is the first paragraph.</p> Adding a bit of emphasis You can emphasize one or more words with the <em> tag. The simple way to add an image is using the <img> tag. It is 200 pixels wide by 150 pixels high. you will be familiar with the built in styles for headings of differing importance.

newer browsers also understand the PNG image format. 69 NOTES ANNA UNIVERSITY CHENNAI . while GIF and PNG are good for graphics art involving flat areas of color. Adding links to other pages What makes the Web so effective is the ability to define links from one page to another. Most browsers understand GIF and JPEG image formats. To avoid long delays while the image is downloaded over the network.E-COMMERCE TECHNOLOGY AND MANAGEMENT can’t see the image need a description they can read in its absence. Generally speaking.html”> You can create images in a number of ways. Assuming this has been written in the file “peter. you can add one as follows using the longdesc attribute: <img src=”peter.html”>Peter’s page</a>. by scanning an image in. You can add a short description as follows: <img src=”peter. in this case “My friend Peter”. For complex images.html”. Lets define a link to the page defined in the file “peter.html” in the same folder/directory as the HTML file you are editing: This a link to <a href=”peter. All three formats support options for progressive rendering where a crude version of the image is sent first and progressively refined. The text between the <a> and the </a> is used as the caption for the link. and to follow links at the click of a button. JPEG is best for photographs and other smoothly varying images. It is common for the caption to be in blue underlined text.jpg” width=”200" height=”150" alt=”My friend Peter”> The alt attribute is used to give the short description. you should avoid using large image files. you may need to also give a longer description. or creating one with a painting or drawing program. lines and text.jpg” width=”200" height=”150" alt=”My friend Peter” longdesc=”peter. A single click can take you right across the world! Links are defined with the <a> tag. for instance with a digital camera.

.DBA 1727 NOTES If the file you are linking to is in a parent folder/directory. for instance: <a href=”friends/sue./mary./college/friends/john. for instance to link to www. You can turn an image into a hypertext link.html”>Sue’s page</a> The use of relative paths allows you to link to a file by walking up and down the tree of directories as needed. It uses the <ul> and <li> tags.org/”>W3C</a>. i. Three kinds of lists HTML supports three kinds of lists. you need to put “. and then at a subdirectory of that named “friends” for a file called “john.w3. for instance: <ul> <li>the first list item</li> <li>the second list item</li> <li>the third list item</li> </ul> 70 ANNA UNIVERSITY CHENNAI . the following allows you to click on the company logo to get to the home page: <a href=”/”><img src=”logo.org you need to write: This is a link to <a href=”http://www.e.html”.. for instance: <a href=”.html”>Mary’s page</a> If the file you are linking to is in a subdirectory.. To link to a page on another Web site you need to give the full Web address (commonly called a URL).w3./” in front of it. you need to put the name of the subdirectory followed by a “/” in front of it. The first kind is a bulletted list. for example. the home page.html”>John’s page</a> Which first looks in the parent directory for another directory called “college”. often called an unordered list.gif” alt=”home page”></a> This uses “/” to refer to the root of the directory tree. for instance: <a href=”.

but that the </li> is optional and can be left off. For instance: <ol> <li>the first list item</li> <li>the second list item</li> <li>the third list item</li> </ol> Like bulletted lists. but the </li> end tag is optional and can be left off. For instance: <ol> <li>the first list item</li> <li> the second list item <ul> <li>first nested item</li> <li>second nested item</li> </ul> 71 NOTES ANNA UNIVERSITY CHENNAI . This kind of list starts with a <dl> tag and ends with </dl> Each term starts with a <dt> tag and each definition starts with a <dd>. often called an ordered list. It uses the <ol> and <li> tags. Note that lists can be nested. you always need to end the list with the </ol> end tag. The second kind of list is a numbered list. For instance: <dl> <dt>the first term</dt> <dd>its definition</dd> <dt>the second term</dt> <dd>its definition</dd> <dt>the third term</dt> <dd>its definition</dd> </dl> The end tags </dt> and </dd> are optional and can be left off.E-COMMERCE TECHNOLOGY AND MANAGEMENT Note that you always need to end the list with the </ul> end tag. one within another. This allows you to list terms and their definitions. The third and final kind of list is the definition list.

The <head> .. and is then followed by an <html> tag followed by <head> and at the very end by </html>..DBA 1727 NOTES </li> <li>the third list item</li> </ol> You can also make use of paragraphs and headings etc. </head> contains the title.. </body> contains the markup with the visible content. and has also been integrated into a variety of HTML editing tools. and information on style sheets and scripts.. Here is a template you can copy and paste into your text editor for creating your own pages: <!DOCTYPE html PUBLIC “-//W3C//DTD HTML 4.dtd”> <html> <head> <title> replace with your document’s title </title> </head> <body> replace with your document’s content </body> </html> Tidying up your markup A convenient way to automatically fix markup errors is to use HTML Tidy which also tidies the markup making it easier to read and easier to edit. Tidy is available for a wide range of operating systems from the TidyLib Sourceforge site. 72 ANNA UNIVERSITY CHENNAI . while the <body> .01 Transitional//EN” “http://www.org/TR/html4/loose. I recommend you regularly run Tidy over any markup you are editing. Tidy is very effective at cleaning up markup created by authoring tools with sloppy habits.w3. HTML has a head and a body If you use your web browser’s view source feature (see the View or File menus) you can see the structure of HTML pages... The <html> . </html> acts like a container for the document. for longer list items. The document generally starts with a declaration of which version of HTML has been used.

F. profitability analysis. OLAP technology is being used in an increasingly wide range of applications. They can be used in a wide variety of business areas. OLAP is being used for applications such as product profitability and pricing analysis. managers and executives to gain insight into data through fast. financial reporting. manpower planning.9. including sales and marketing analysis. activity based costing. even on very large data volumes. OLAP functionality is characterized by dynamic multi-dimensional analysis of consolidated enterprise data supporting end user analytical and navigational activities including:   calculations and modeling applied across dimensions. OLAP systems enable managers and analysts to rapidly and easily examine key performance data and perform powerful comparison and trend analyses. consistent. An OLAP system is often contrasted to an OLTP (On-Line Transaction Processing) system that focuses on processing transactions such as orders. quality analysis. OLAP is now acknowledged as a key technology for successful management in the 90’s. through hierarchies and/ or across members trend analysis over sequential time periods 73 NOTES ANNA UNIVERSITY CHENNAI . It describes a class of applications that require multidimensional analysis of business data. interactive access to a wide variety of possible views of information that has been transformed from raw data to reflect the real dimensionality of the enterprise as understood by the user. financial reporting and consolidation.1 Introduction: The term OLAP (On-Line Analytical Processing) was coined by E. The most common are sales and marketing analysis. 1.9.9 OLAP: ON-LINE ANALYTICAL PROCESSING 1. and budgeting and planning. invoices or general ledger transactions. Codd in 1993 to refer a type of application that allows a user to interactively analyze data. manpower and pricing applications and many others.2 What is OLAP? On-Line Analytical Processing (OLAP) is a category of software technology that enables analysts. quality tracking. in fact for any management system that requires a flexible top down view of an organization.E-COMMERCE TECHNOLOGY AND MANAGEMENT 1.

as well as through analysis of historical and projected data in various “what-if” data model scenarios. Normally data in an organization is distributed in multiple data sources and are incompatible with each other. difference is the way in which data is stored. regardless of database size and complexity. optimized for transactions the record ‘Consumer name. Examples of OLTPs can include ERP. Data stored by operational systems. Online Transaction Process. OLTPs are designed for optimal transaction speed.DBA 1727 NOTES     slicing subsets for on-screen viewing drill-down to deeper levels of consolidation reach-through to underlying detail data rotation to new dimensional comparisons in the viewing area OLAP is implemented in a multi-user client/server mode and offers consistently rapid response to queries. Price. With a database design. Call Center. It would a time consuming process for an executive to obtain OLAP reports such as . Point-of-Sale applications.What are the most popular products purchased by customers between the ages 15 to 30? Part of the OLAP implementation process involves extracting data from the various data repositories and making them compatible. call data modeling. databases do not have any difference from a structural perspective from any other databases. This is achieved through use of an OLAP Server. they expect the transactions to occur instantaneously. OLTP. A retail example: Point-of-sales data and sales made via call-center or the Web are stored in different location and formats. Order Name. Making data compatible involves ensuring that the meaning of the data in one repository matches all other repositories. OLAP allows business users to slice and dice data at will. such as point-of-sales. Address.e. CRM. An example of incompatible data: Customer ages can be stored as birth date for purchases made over the web and stored as age categories (i. are in types of databases called OLTPs. personalized viewing. between 15 and 30) for in store sales. OLAP helps the user synthesize enterprise information through comparative. 74 ANNA UNIVERSITY CHENNAI . Telephone. SCM. The main difference. and only. It is not always necessary to create a data warehouse for OLAP analysis. When a consumer makes a purchase online. Payment Method’ is created quickly on the database and the results can be recalled by managers equally quickly if needed. Order Number.


year or quarter.DBA 1727 NOTES Data are not typically stored for an extended period on OLTPs for storage cost and transaction speed reasons. OLAPs are designed to give an overview analysis of what happened. month.e.it is the name given to the process of linking 76 ANNA UNIVERSITY CHENNAI . Star Data Model for OLAP The central table in an OLAP start data model is called the fact table. The most common method is called the star design. Hence the data storage (i. OLAP cubes are not strictly cuboids . from a data model OLAP cubes are created. such as the ones above. The quantity shipped on a particular date. data modeling) has to be set up differently. OLAPs have a different mandate from OLTPs. Using the above data model. it is possible to build reports that answer questions such as:    The supervisor that gave the most discounts. In which zip code did product A sell the most. To obtain answers. The surrounding tables are called the dimensions.

OLAP analysis can aid an organization evaluate balanced scorecard targets. as well as for fast.E-COMMERCE TECHNOLOGY AND MANAGEMENT data from the different dimensions. Or a giant cube can be formed with all the dimensions. Customer and Product Dimensions OLAP can be a valuable and rewarding business tool. 77 ANNA UNIVERSITY CHENNAI . Aside from producing reports. NOTES OLAP Cube with Time. Given the current state of technology and the end user requirement for consistent and rapid response times. A multi-dimensional structure is arranged so that every data item is located and accessed based on the intersection of the dimension members which define that item. or it may populate its data structures in real-time from relational or other databases.9. staging the multi-dimensional data in the OLAP Server is often the preferred method. multi-user data manipulation engine specifically designed to support and operate on multi-dimensional data structures. Steps in the OLAP Creation Process 1. or offer a choice of both. The design of the server and the structure of the data are optimized for rapid ad-hoc information retrieval in any orientation. The OLAP Server may either physically stage the processed multi-dimensional information to deliver consistent and rapid response times to end users. The cubes can be developed along business units such as sales or marketing.3 OLAP Server An OLAP server is a high-capacity. flexible calculation and transformation of raw data based on formulaic relationships.

and market / customer segmentation. 78 ANNA UNIVERSITY CHENNAI . This requires more than a base level of detailed date. the data model must be flexible. to create joins or worse. The key indicator of a successful OLAP application is its ability to provide information.e. Typical manufacturing OLAP applications include production planning and defect analysis. and financial modelling. and whole organizations. Sales analysis and forecasting are two of the OLAP applications found in sales departments. Finance departments use OLAP for applications such as budgeting.9. it is certainly not a very efficient use of developer time.making. sales forecasting. activity – based costing (allocations). its ability to provide “just – in . By using software specifically designed for OLAP. as needed. In addition.DBA 1727 NOTES 1.5 OLAP Benefits: OLAP applications increase the productivity of business managers.. The inherent flexibility of OLAP systems means business users of OLAP applications can become more self sufficient. i. A truly flexible data model ensures that OLAP systems can respond to changing business requirements as needed for effective decision making. because the nature of data relationships may not be known in advance. marketing departments use OLAP for market research analysis. Analyzing and modelling complex relationships are practical only if response times are consistently short. OLAP enables managers to model problems that would be impossible using less flexible systems with lengthy and inconsistent response times. developers.4 Uses Of Olap OLAP applications span a variety of organizational functions. financial performance analysis. customer analysis. More control and timely access to strategic information equal more effective decision-making. promotions analysis. Although it is possible to build an OLAP system using software designed for transaction processing or data collection. Among other applications. For all the above applications is the ability to provide managers with the information they need to make effective decisions about an organization’s strategic directions. Perhaps more importantly.9. Managers are no longer dependent on IT to make schema changes. developers can deliver applications to business users faster. 1.time” information for effective decision. IT developers also benefit from using the right OLAP software.

Once it knows your identity.10. unlike standalone departmental applications running on PC networks. As a result. Cryptology is as old as writing itself. However. For example. OLAP applications are dependent on data warehouses and transaction processing systems to refresh their source level data. Within the field of cryptology one can see two separate divisions: cryptography and cryptanalysis. which means hidden and “logos” which means word. non-repudiation of origin.E-COMMERCE TECHNOLOGY AND MANAGEMENT providing better service.10. the famous Roman emperor Julius Caesar used a cipher to protect the messages to his troops. Faster delivery of applications also reduces the applications backlog OLAP reduces the applications backlog still further by making business users selfsufficient enough to build their own models. User Authentication If you log to a computer system there must (or at least should) be some way that you can convince it of your identity. 1. and has been used for thousands of years to safeguard military and diplomatic communications. and data confidentiality. The word cryptology is made up of two components: “kryptos”. IT gains more self-sufficient users without relinquishing control over the integrity of the data. The cryptographer seeks methods to ensure the safety and security of conversations while the cryptanalyst tries to undo the former’s work by breaking his systems. By using software designed for OLAP. data authentication (data integrity and data origin authentication). IT reduces the query drag and network traffic on transaction systems or the data warehouse.2 Cryptographic services The main goals of modern cryptography can be seen as: user authentication. The same principal applies when one person tries to 79 NOTES ANNA UNIVERSITY CHENNAI . IT also realizes more efficient operations through OLAP. it can verify whether you are entitled to enter the system. 1.1 Introduction to Cryptography The origin of the word cryptology lies in ancient Greek.10 CRYPTOGRAPHY 1.

a smart card (a hand-held computer the size of a credit-card). these biometric systems are not perfect: some legitimate users will inevitably fail the identification and some intruders will be accepted as genuine. Note that in this case the procedure does not authenticate the user but rather his device. it is a well-known fact that fingerprints. In case of a token (a mini-calculator). using secret information which has been assigned to him. the user will have to enter the challenge on the keyboard. These however require specialized equipment and thus a big investment. One might argue that you could change your password. All these systems provide static authentication only. all these items are being defined at a certain time and often don’t change from there on.DBA 1727 NOTES communicate with another: as a first step you want to verify that you are communicating with the right person. a pincode. The device will then compute the corresponding response. the system generates a random challenge and sends it to the person or to his device. a (predesigned) user-id. In order to increase the security. If more sophisticated protocols are used. this information should not vary too much over time. or can take into account the location of the user. using something 80 ANNA UNIVERSITY CHENNAI . This response is then sent back to the system. However. Whether it is a password. a token. If the user possesses a device which can perform simple computations. and many practical systems use a combination of both. You can give him something only you can know: a password. the user should authenticate himself with respect to the device. This process is called user authentication. a pincode or a user-id. the verifier does not need secret information (this requires public-key protocols). Other techniques include measurements of how a person types his name or writes his signature. One might make use of biometric properties. Or you could have some specific items with which you can identify yourself: a magnetic strip card. Since the user’s memory is limited. This indicates that someone who can eavesdrop this information will later be able to impersonate the user. There are several ways to obtain user authentication. the security can be increased significantly by introducing the well-known challenge-response idea. If a person tries to identify himself to the system. or will even not learn the secret of the users (this requires zero-knowledge protocols). the shape of the hand and retinal pattern of a person are good decision criteria. but this is not done each time you access the computer. Therefore there must be some way in which you can prove your identity. A similar observation holds true for a magnetic strip card or memory chip. which verifies it. For the time being the first two methods are the ones generally applied. and so on.

Active wire-taps (modifying and then relaying the messages) are also more difficult than passive wire-taps (listening in on the messages). which is commonly seen as being private. It is very easy to read and modify someone’s electronic mail. One could argue that active wire-tapping is difficult. Data integrity by itself is not meaningful: it does not help you to know that the data you have received has not been modified. We have A(lice) who sends a message to B(ob). This makes the device useless if it is stolen. If you don’t support data integrity. Data authentication Data authentication consists of two components: the fact that data has not been modified (data integrity) and the fact that you know who the sender is (data origin authentication). You should always be alert for possible intruders in your network or in your communication system. A well-known example is the Internet that connects universities and companies world-wide. unless you know it has been sent directly to you by the right person. we use the term mutual authentication. If both parties are authenticated to each other. an educated computer user can tap into the messages that are being transmitted over the line. has not been tampered with.E-COMMERCE TECHNOLOGY AND MANAGEMENT he alone knows. one also requires that the computer authenticates itself to the person logging on. Electronic mail over the Internet does not offer any security. NOTES 81 ANNA UNIVERSITY CHENNAI . Data integrity A data integrity service guarantees that the content of the message. B will not see that the message has been tampered with and will assume A really intended it the way he got it. In general. this enemy can just change the message and then relay it to B. As a consequence. In general wire-tapping is only a matter of cost: tapping a telephone line is obviously easier than tapping a coaxial cable or a micro-wave. There is also an enemy who taps the line between them. Therefore it should always be combined with data origin authentication. that was sent.

with a seal and a signature. If A sends a message to B. falsely. Confidentiality protection is very 82 ANNA UNIVERSITY CHENNAI . having received a message. An example will illustrate the importance of non-repudiation of origin. Non-repudiation of origin Non-repudiation protects against denial by one of the entities involved in a communication of having participated in all or part of the communication. non-repudiation is provided by a manual signature. but the enemy intercepts it and sends it to B. Data confidentiality This aspect of data security certainly is the oldest and best known. there are techniques to ensure against this type of fraud.DBA 1727 NOTES Data origin authentication Here one wants to make sure that the person who is claiming to be the sender of the message really is the one from whom it originates. but the enemy intercepts it. how can B be sure of the real origin of this data? A variation on this theme is: the enemy could send a message to B claiming it A is the originator. If A sends a message to B. The example of Caesars cipher given in the introduction clearly demonstrates this. Thanks to cryptography. one wants to make sure that this enemy never understands his contents. The fact that confidentiality was considered to be much more important than authentication of both sender and data. With data confidentiality we try to protect ourselves against unauthorized disclosure of the message. while non-repudiation with proof of delivery protects against any attempt by the recipient to deny. In a paper and pencil world. together with non-repudiation of origin can be explained as follows: the latter services have been provided implicitly by the physical properties of the channel: a letter was written in a recognizable handwriting. Non-repudiation with proof of origin protects against any attempts by the sender to repudiate having sent a message. claiming A has sent it. Suppose B is the owner of a mail-order company and he decides to let his customers order through electronic mail. For him it is really important that he can show to an arbitrary third party that A really ordered the things he is claiming otherwise it would be easy for a customer to deny the purchase of the goods.

we apply the inverse transformation. symmetric or conventional ciphers and asymmetric or public-key ciphers. In these schemes.10. If there were no way to protect confidentiality. primitives for authentication. called decryption. This key is the only thing one needs to know in order to encipher or decipher. We will also discuss protocols for user authentication and for key management. Thus it is really important to manage one’s keys and keep them secret where necessary. Encryption primitives can be used to provide confidentiality. .3 Cryptographic primitives The above cryptographic services can be realized by several cryptographic primitives: we distinguish between primitives for encryption. 83 NOTES ANNA UNIVERSITY CHENNAI . However they use a secret parameter: the keys which are known only by the sender and/ or the receiver. Encryption primitives In cryptography one often makes use of encryption. who has made what kind of withdrawal. and so on. World-wide there are several million transactions each day and all of these have to be passed from one financial institution to another. the key used to decipher the cipher-text is equal to the one used to encipher the plaintext. and cryptographic protocols. With encryption we transform the clear-text (or plaintext) into cipher-text. These transformations themselves are public: this makes it possible to analyze these algorithms and to develop efficient implementations.E-COMMERCE TECHNOLOGY AND MANAGEMENT important in the medical world and also in the banking sector. 1. In order to provide confidentiality. We discuss two types of encryption primitives. authentication primitives can be used to provide data authentication. Clearly this would violate individuals and companies rights to privacy. it is necessary to transform the message with a cipher. To get back to the original text. everybody would be able to see who had purchased what. Symmetric ciphers Basically there are two kinds of encryption-schemes. The oldest ones and most used until now are the symmetric ciphers.

Symmetric versus asymmetric ciphers The biggest drawback of the asymmetric systems up until now has been the relative low performance compared to the symmetric ones. Since each communication requires a secret key. Since then it has been used all over the world and until now no major flaws have been discovered. B is the only one who can decipher the message and read the contents. but given a large number that is the product of two primes. Indeed. The security of this scheme is related to the mathematical problem of factorization: it is easy to generate two large primes and to multiply them. only an authentic channel is required. If A wants to send a message to B. 84 ANNA UNIVERSITY CHENNAI . eliminating (expensive) secret channels like couriers. Asymmetric ciphers The asymmetric or public-key ciphers are the most recent cryptographic tools. suppose we have a network of n users each of whom wanting to communicate with the others. In contrary to the symmetric systems the key used to encipher and the one used to decipher are different. the names of the three inventors). Shamir and Adleman. Each partner thus has two keys. In systems without a central trusted server. Public-key systems provide significant benefits in terms of key management: if every user generates his own key. the number of keys can be reduced. Since B is the only one who has access to the secret key.DBA 1727 NOTES The best known cipher in this category is the Data Encryption Standard (DES) that was adopted in 1977 by the American NBS (National Bureau of Standards) as FIPS 46. the total number of keys required equals n*(n-1)/2. He keeps one key secret and makes the other one public. The most popular public-key cipher is the RSA system (RSA stands for Rivest. it requires a huge amount of computation to find the two prime factors. he just enciphers it with B’s public key.

but for virtually all y in the range of f. or to protect the authenticity of a short string (MDC). There are several schemes which have been proposed for use as hash functions. it is computationally infeasible to find an x such that y=f(x). and . a hash function has to satisfy some additional requirements. In addition one requires that it is hard to find a second pre-image: given an x and the corresponding value of f(x). A hash function is a function which maps an input of arbitrary length into a fixed number of output bits. One-way functions are used to protect passwords: one will store a one-way image of the password in the computer rather than the password itself. as specified in ISO-9797. Other dedicated designs are SHA (Secure Hash Algorithm or FIPS 180). One applies then the oneway function to the input of the user and verifies whether the outcome agrees with the value stored in the table. One can distinguish two types of hash functions.4 Authentication primitives One-way functions and hash codes A one-way function is defined as a function f such that for every x in the domain of f. and an MDC (Manipulation Detection Code) that works without a key. These hash functions achieve a very high throughput (Mbit/s). f(x) is easy to compute. NOTES 85 ANNA UNIVERSITY CHENNAI . and RIPE-MD 160. Several MDC’s have been constructed based on the DES. In order to be useful for cryptographic applications. The widely used construction for a MAC is the CBC mode of the DES (with an additional output transformation).10. even in software implementations. For a MAC one requires that it should be impossible to compute the MAC without knowledge of the secret key. For an MDC one requires that it is a one-way function. Sometimes an MDC is used in combination with encryption. it should be hard to find an x’ different from x which has the same image under f.E-COMMERCE TECHNOLOGY AND MANAGEMENT 1. which means that it should be hard to find two arguments hashing to the same result. which can yield protection of both confidentiality and authenticity. Hash functions can be used to protect the authenticity of large quantities of data with a short secret key (MAC).that it is collision resistant. A MAC (Message Authentication Code) that uses a secret key.in most cases .

but also more secure. Bob can go to a third party (e. As in the case of encryption. i. Other constructions use a conventional cipher in combination with tamper resistant hardware: this offers only a limited protection. in addition tamper resistant hardware). This explains why in general one will first compute the hashcode of the message with a fast hash function and subsequently apply the digital signature to this short hashcode. Assume Bob has received from Alice a digitally signed message.DBA 1727 NOTES Digital signature Public-key techniques can also be used for other purposes than for enciphering information. these schemes are less efficient in terms of memory and computations. This provides digital signatures which are not only faster and shorter. hash functions tend to be three orders of magnitude faster than digital signatures. If Alice subsequently denies having sent the message. Hash functions versus digital signatures Hash functions can only be used in a situation where the parties mutually trust each other: they cannot be used to resolve a dispute (unless one uses. Since it is not physically connected to the signed data or the originator. it will depend on this data and on the secret key of the originator. Several signature schemes have been proposed. In this way a digital signature can provide non-repudiation of origin. 86 ANNA UNIVERSITY CHENNAI .e. Schemes which can only be used for digital signature purposes are the DSA and the Fiat-Shamir scheme. data integrity and data origin authentication. who will be able to obtain Alice’s public key. anyone who knows Alice’s public key can verify that this message was sent by Alice (by verifying the redundancy). which is the equivalent of the hand-written signature on a document..g. Note that it is possible to produce a digital signature based on conventional ciphers like the DES. However. It is easy to see that it provides in addition data authentication. In this way one can create a digital signature. a judge). If Alice adds some redundancy to her message and transforms the result using her secret key. The RSA public-key cryptosystem is the only one which can be used for both enciphering and digital signatures.. Subsequently he can verify the validity of the signature.

many of which exhibit some weaknesses. For the distribution of this keying material. one can use a new cryptographic primitive. They are based on an encryption algorithm. In fact. The simplest protocol providing unilateral authentication consist of sending a password. While a huge number of protocols have been developed. whose confidentiality and/or integrity has to be protected. sequence numbers or time stamps. An alternative is to sign these public keys with a single master key: now one only has to distribute a single master key via an authentic channel. of so called nonces (never used more than once): random numbers. and ultimately. The public keys of the asymmetric cipher can be distributed via an authentic channel which can be provided for example by combining conventional mail with voice authentication. In this way one builds a key hierarchy: secret keys for bulk encryption with a symmetric cipher system will be encrypted using an asymmetric cipher system and signed with a digital signature scheme. encryption and digital signatures can be seen as a special case of cryptographic protocols. we will restrict this section to two types of protocols: protocols for user authentication and protocols for key management. A large number of protocols have been presented in the available literature.E-COMMERCE TECHNOLOGY AND MANAGEMENT 1. More complex protocols are required to achieve mutual authentication. 87 NOTES ANNA UNIVERSITY CHENNAI . in addition.5 Cryptographic protocols A cryptographic protocol is an interaction between one or more entities to achieve a certain goal. More complex challenge-response protocols can be designed in which the user does not transmit his secret information. User authentication protocols The design of cryptographic protocols for user authentication is very complex. Key Management Protocols One of the main links in the cryptographic keychain is the key management protocol: every cryptographic service will make use of cryptographic keying material.10. a MAC or a digital signature and the use. a physical channel.

B2B . Define EC and describe its types: Electronic commerce is an emerging model of new selling and merchandising tools in which buyers are able to participate in all phases of a purchase decision. 88 ANNA UNIVERSITY CHENNAI .DBA 1727 NOTES These signed public keys are called certificates. anybody can read his messages or forge his signatures. Note that there also exist public-key protocols which result in the agreement of a secret key between two parties. or services: 1) 2) Applications brokerage services.509 recommendation.Consumer to Consumer Architectural framework of e commerce: The electronic commerce application architecture consists of six layers of functionality. The commonly used scheme nowadays in based on the ITU-T X. the system has to provide a means to protect the user in the case by warning the other users that his public key is no longer valid. The central authority certifies that a certain public key belongs to a particular user. This protocol is different from a key transport protocol.Business to Consumer C2B . There are a number of different types of E-Commerce      2. while stepping through those processes electronically rather than in a physical store or by phone (with a physical catalogue). The key agreement protocols have the advantage that they result in an increased security level. data or transaction management. Although public-key systems require no on-line central management system. SUMMARY 1. In the context of public-key cryptography. revocation of public keys is very important: once the user’s secret key is compromised.Business to Business B2C . by exchanging public keys or parameters.Business to Employee C2C . A well known example in this class is the Diffie-Hellman key agreement scheme.Consumer to Business B2E . in which one party generates the secret key and enciphers it with the public key of the other party.

Decision trees. The most commonly used techniques in data mining are: Artificial neural networks. Scientific Computing Trends and Business Trends. and society. and network infrastructure and basic communications services NOTES Environmental factors and major responses: Market. economical. Data library. societal and technological factors are creating a highly competitive business environment in which consumers are the focal point. nearest neighbour method. Data warehouses and types of data warehouses: A data warehouse is a collection of computer-based information that is critical to successful execution of enterprise initiatives. Benefits of EC: The global nature of the technology. low cost. individuals. variety of possibilities. and support layers” secure messaging. Data mining and techniques used in Data mining: Data mining. The Limitations of EC: The limitations of EC can be grouped into technical and non-technical categories. and Rule induction: Trends that Effect Data Mining: Five external trends which promise to have a fundamental impact on data mining are Data Trends. business alliances and EC. middle ware and structured document interchange. security and electronic document interchange. Genetic algorithms. Logical data warehouse. Network Trends. Hardware Trends. business process reengineering (BPR). continuous improvement efforts. the extraction of hidden predictive information from large databases. is a powerful new technology with great potential to help companies focus on the most important information in their data warehouses. The term data warehouse is currently being used to describe a number of different facilities each with diverse characteristics-Physical data warehouse. opportunity to reach hundreds of millions of people. and resourcefulness and rapid growth of the supporting infrastructures (especially the Web) result in many potential benefits to organizations.E-COMMERCE TECHNOLOGY AND MANAGEMENT 3) 4) 5) 6) 2 interface. Organizations’ major responses are divided into five categories: strategic systems for competitive advantage. Decision support systems (DSSs) 3 4 5 6 7 89 ANNA UNIVERSITY CHENNAI . interactive nature.

managers and executives to gain insight into data through fast. Cryptography: The word cryptology is made up of two components: “kryptos”. Cryptology is as old as writing itself. consistent. 3. 5. HTML: HTML stands for Hypertext Markup Language. 2. Certainly the ARPAnet is the bestknown TCP/IP network. What is eCommerce? What so you understand by EDI? Explain different types of EC? Explain Electronic Commerce Application Services List the advantages and disadvantages of EC: 90 ANNA UNIVERSITY CHENNAI . It was developed by a community of researchers centred around the ARPAnet. OLAP: On-Line Analytical Processing (OLAP) is a category of software technology that enables analysts.DBA 1727 NOTES 8      9 Network Infrastructure Components Routers and switches Firewalls Load balancers Storage Area Network (SAN) DNS What is TCP/IP? TCP/IP is a set of protocols developed to allow cooperating computers to share resources across a network.HTML consists of standardized codes or ‘tags’ that are used to define the structure of information on a web page. interactive access to a wide variety of possible views of information that has been transformed from raw data to reflect the real dimensionality of the enterprise as understood by the user. 4. 10 11 12 Questions for review 1. which means hidden and “logos” which means word. HTML is a special kind of text document that is used by Web browsers to present text and graphics. and has been used for thousands of years to safeguard military and diplomatic communications.

20. Which of them are company-dependent and which are generic. consumer and societal benefits of EC Carefully examine the non-technological limitations of EC. 11. List the major activities taken by organizations to deal with the business pressures. 8. 10. What are cryptography protocols? NOTES 91 ANNA UNIVERSITY CHENNAI . List the organizational. 12. 9. Discuss the Network infrastructure components What is TCP/IP? Discuss the traditional TCP/IP services? What is HTML? What are HTML tags and where are they used? What is OLAP and discuss the data model of OLAP? What are the benefits of OLAP? What is Cryptography? Discuss the major goals of modern cryptography? Discuss about encryption primitives. 7. 14. 19. 17. 13. List the major activities of BPR What is data mining? List the techniques used in data mining Describe five external trends which promise to have a fundamental impact on data mining.E-COMMERCE TECHNOLOGY AND MANAGEMENT 6. 18. What is data warehouse? List the advantages of data warehouse. 15. 16.


delivery. In the online model. anytime-from work. retailers need to consider the following issues in developing a business model:   Product/Content Issues: What kind of products are suited for online retailing? Software Interface Issues: What kind of features will constitute an effective interface? What features make it easy to find and select items for on-line purchase? 93 ANNA UNIVERSITY CHENNAI . car.1 Electronic Commerce and Retailing Retailing is expected to change with the rapid development of new online sales and distribution channels that literally can be used from anywhere. reacting to the pressure of retailers. the customer went to the store and located the product. These developments should impact retailing as much as the advent of strip malls. Online channels such as online services and the Web are also impacting traditional retail business models. However. a hotel. or airplane. school. In the traditional model. the retailer seeks out the customer. suppliers are assessing technology based solutions to drive down costs (labour. catalogue retailing. The success of catalog retailers demonstrates that a significant portion of consumers have embraced the reverse model: the retailer going to the consumer. Almost every retailer is re-evaluating every aspect of its operation from customer service to advertising. Furthermore. and logistics to order fulfilment. and production) and become more efficient producers of goods. and TV-based home shopping.1.E-COMMERCE TECHNOLOGY AND MANAGEMENT NOTES UNIT II BUSINESS APPLICATIONS IN E-COMMERCE 2.1 RETAILING IN E-COMMERCE 2. merchandising to store design.

2. Entertainment such as -games that would be played on the internet are also examples of e-services. a video recorder. a television set. Selling of different type of goods 94 ANNA UNIVERSITY CHENNAI . Sometimes we refer to this as the sale of tangible and intangible goods. or education. the most recent foreign exchange rate.DBA 1727 NOTES  Process Issues: What are the specific steps in the shopping process from a consumer’s perspective? What kind of processes should companies de-velop to fulfill orders efficiently? Before examining the implications of changing consumer behavior and online retailing in the existing retail business. a washing machine. if they are sold directly to the consumer who is the end user.    Examples of physical goods would be a book. Examples of services that may be sold are information such as the most recent stock prices. let us step back for a moment and ask the question: Why should retailers consider the online environment as a way of doing business? The answer lies in understanding the market changes that affect retailing and that will continue to affect it in the future. So are the sales of services such as telecommunication services or banking services. etc. which may be downloaded from the internet. as shown in Figure 2. The sale of intangible goods is sometimes called E-servicing. Examples of digital goods are software and music.2(a) We can divide tangible goods into two categories: physical goods and digital goods.2 E-Retailing E-retailing essentially consists of the sale of goods and services. Here we discuss the sale of tangible goods.1. The sale of tangible and intangible goods are all referred to as Customer oriented e-commerce or eretailing.1.

E-COMMERCE TECHNOLOGY AND MANAGEMENT 2.3 Difference between Traditional retailing and E-retailing Traditional retailing Traditional retailing essentially involves selling to a final customer through a physical outlet or through direct physical communication. Direct mailing. In some respects. The customer browses through this catalogue and then carries out mail ordering.1. they allow specialization in particular classes of 95 ANNA UNIVERSITY CHENNAI . Examples of physical outlets that retailers currently use are:     Malls generalized stores (e.g. telemarketing. Instead of specializing just in a special product line. this notion of browsing through a catalogue is a forerunner of e-retailing. Thus. door-to-door sales. more recent forms of traditional retailing include     direct mailing telemarketing door-to-door sales vending machines Direct mailing to a customer normally involves sending a brochure or catalogue to a customer. department store) specialized stores franchise stores NOTES It is useful to reflect that even in traditional retailing we have moved away from just using a static physical outlet within which a customer can have direct contact with the retailer. or the use of vending machines includes other forms that have actually moved away from a physical fixed outlet and in a way are intermediate forms of the movement away from traditional physical retailing outlet to the virtual retailing we see on the internet. This normally involves a fairly extensive chain starting from a manufacturer to a wholesaler and then to the retailer who through a physical outlet has direct contact with the final customer. E-retailing The internet has allowed a new kind of specialization to emerge.

Examples of these e-malls are Yahoo! Store. Normally.1. GEO Shops. Here. we also get generalized e-stores where a store sells several product lines under a single management. It is convenient for the customer as he does not have to move from shop to shop physically in order to examine goods. and CNET stores: 2.com. The Internet and the World Wide web are essentially communication media that allow retailers to put on quite extensive information related to their products. which allows last minute purchases of travel tickets. 96 ANNA UNIVERSITY CHENNAI . the traditional shop has an opening time and a closing time and the customer can only visit the shop within these periods. The third type of convenience that the customer gets is that he has access to a search engine. and entertainment to be matched against last minute sellers of the same items. He is able to sit in front of a terminal and search the net and examine the information on goods. Thus. we see lastminute.4 Benefits of E-Retailing To the customer Customers enjoy a number of benefits from e-retailing. the customer can choose at any time to visit a site to examine the goods that are available and actually carry out his purchasing at one’s own convenient time. gift. which is available to the customers. On the net. Examples of these generalized stores include JC penny and Walmart. This kind of specialization would not have been possible before we had the internet. E-malls essentially provide a web-hosting service for your individual store much in the way that mall provide a hosting service in the sense of a physical location for your store. The second aspect of convenience he gets is in terms of time. In addition to these specialized stores. We also have the electronic counterpart of malls or e-malls.DBA 1727 NOTES customers and sellers. The first of these is convenience. we see specialization not in a product line but in a class of purchasers and a class of sellers. or perhaps even locate the sites where they may be available at the best price The second type of benefit to customers is better information. which will actually locate the products that he describes’ and also the site where they may be available.

He does not have to have many shop assistants who are physically answering questions and. Showing the customer goods. The retailer now is no longer restricted to customers who are able to reach the store physically. The fourth benefit to the retailer is mass customization. he can probably have lower inventories.com lists over a few million titles.  The first is lowered costs to the retailer because he does not have to maintain a physical showroom. the pressure is always there on the retailer to maintain a competitive price for his products. it keeps an inventory of a few thousand best selling titles only. deliver the goods of a purchase to the customer. of course. The retailer does not have to maintain showrooms. This is due to two factors. These allow one to easily inquiries and deal with complaints.  The first of these is global reach. competitive pricing pressure that arises from the fact that the customer is now able to look at prices at several sites. The retailer must. Therefore. The second benefit is better customer service. Based on requests by the customers. he does not have to hire several shop assistants. Secondly. The third benefit is the lowered capital cost to the retailer. The use of email and the use of electronic interchange of messages between the customer and the retailer allow better communication between the customer and the retailer.E-COMMERCE TECHNOLOGY AND MANAGEMENT The third type of benefit that the customer gets is competitive pricing. while Amazon. the retailer is now able to carry out mass customization with reduced time to market for the customized products. These also allow a much more rapid response time than was possible in the days of faxes and postal mail. the retailer has lower warehousing costs. NOTES  To the business There are a number of benefits of e-retailing to the business itself. Therefore. They can be from anywhere around the globe. Thus. 97 ANNA UNIVERSITY CHENNAI    . and these savings can be passed on to customers in the form of reduced prices.

add-on services to basic services. The retailer is now able to pick on a specific targeted group of customers and direct marketing towards these customers. CDs. clothes.g.com In lastminute. travel tickets. A good example of this is lastminute. The retailer is also able to provide more value-added services in the way of better information.positioning within that product line to cater for a particular part of the marker. and sells only this particular product line. or add-on options to products that he is selling. it could choose to position itself at the very expensive end of the market selling brand names _ Gucci and Armani. clothes. e.com they sell gifts. The last advantage to the retailer consists of different new forms of specialized stores that he is now able to utilize.1. 2. Alternatively it could do more mass marketing by selling non . It may also choose to position itself in a particular part of the product line. So. and other items for last 98 ANNA UNIVERSITY CHENNAI . and then you could have specialization . or it could go into discount selling.brand names at a much lower price. earlier. In contrast to this. you can have a specialization by product line. namely specialization by function. as mentioned.DBA 1727 NOTES   The next advantage is targeted marketing. flowers. say books. a new kind of specialization is emerging on the internet.5 Models of E-Retailing There are several models for e-retailing and these include        Specialized e-store Generalized e-store E-mall Direct selling by the manufacturer Supplementary distribution channel E-broker E-services Specialized e-stores The first class of model what we mention in e-retailing was the specialized e-store and here you can distinguish between two different kinds of specialization: the more traditional specialization along product lines and specialization by function. When you have specialization by product line. essentially you have a store that decides to pick one particular product line.

when one purchases an item at a very short notice (e. It. 99 NOTES ANNA UNIVERSITY CHENNAI . Generalized e-stores sell a large number of product lines rather than con-fining themselves to just one or a very few product lines. which can be utilized by a prospective e-store to create and maintain it_ e-store. that have empty seats at the last minute which they are unable to fill. So.E-COMMERCE TECHNOLOGY AND MANAGEMENT minute shoppers who want to purchase these items at a very short notice. he often pays a premium. several product lines can be present.g. The producers of the web site lastminute. each store is under its own management. and allow the former to buy from the latter at the last minute. In this situation. in a single e-mall. in an e-mall. It is very difficult to do this unless one utilizes the internet to carry out this kind of specialization. the purchaser may get his airline ticket at a reduced price. The advantage for an e-store is that it is grouped together with other stores in a wellknown e-mall site and.com realized that there are groups of customers who make these purchases at the last minute and feel some degree of angst at having to pay the premium for doing this shopping at the last minute. E-mall management is responsible only for creating the cyber sites that can be rented and can support services and marketing of the mall. Several e-malls also provide software tools. what lastminute. this means that the air ticket is likely to cost much more than if he had purchased it some time before traveling and made use of different discounts or promotions. Generally. So. So.com does is bring together travelers who want to book at the last minute and an airline which has got spare capacity at the last minute. which is an extra amount for the convenience of booking the travel at the last minute. E-malls The next e-retailing model we consider is the e-mall. is likely to pick up visitors to the mall. Now. therefore. This is a unique kind of specialization. Generalized e-stores The next category of e-retailing models that we intend to look at is generalized e-stores. In an e-mall. cyberspace is rented out to cyber e-stores that wish to sell their goods. provides a web hosting service. airline companies. thus. However. This store could be a specialized or generalized e-store. you will find that you may have sellers. there is a win-win situation for both the purchaser and the seller. unlike the generalized e-store which is under a single unified management. e. On the other hand.g. travel).

A broker is an intermediary who    may take an order from a customer and pass it on to a supplier may put a customer with specific requirements in touch with a supplier who can meet those requirements may provide a service to a customer. One.DBA 1727 NOTES Direct selling by the manufacturer A number of manufacturers with well-known brand name products have chosen to use the internet to carry out direct selling via the internet. That is the reason why they are sometimes referred to as electronic intermediaries. with respect to particular criteria such as price. this approach can be used by manufacturers of well-known brands of products because the customer already knows the pro-duct. There are several different models for electronic brokers and these include:  Brokers that provide a registration service with directory. A note of caution is important here. which utilizes the internet to achieve direct selling but uses its dealer network to facilitate distribution and delivery. By and large. Secondly. Note that this approach permits mass customization to meet customer preferences. anewshop. the manufacturer must have a thorough understanding of customer preferences. This direct selling by the manufacturer has an important disintermediation effect leading to reduced costs to the end customer and increased profitability to the manufacturer. brokers provide comparison shopping. etc. order taking and fulfilment. Thus. and services to a customer. Brokers or intermediaries This class of e-retailers is essentially an extension of the notion of a broker from the physical to the cyber world. quality. such as a comparison between goods.g.com). 100 ANNA UNIVERSITY CHENNAI . otherwise he has to rely on the customer knowledge of a retailer. Any business can register with such an e-broker (e. of the best known here is Ford. e-payment facilities. search facilities. and security-related facilities. The other well -known examples are Cisco systems and Dell computers.

E-services is discussed in the next lecture. Brokers that provide comparison shopping between products (e. 8. which allows convenient goods selection. 3. these goods can be downloaded instantly. Thus.The last model i.e. and marketing. 2. An ability to provide an automatic price update. 5. 6. 4. “who” can help customers to navigate through the site.” 2. The use of Forums (collaborative purchasing circles) to create a customer community and thus increase “stickiness. which is a very important feature that does not exist in traditional retailing. Thus.6 Features of E-Retailing 1. promotions.7 Changing Retail Industry Dynamics Important factors that affects the retailing industry dynamics are:     Overbuilding and excess supply. which is a useful feature before submission. mySimon. NOTES 2. An on-line customer salesperson. The provision of an on-line catalogue. The ability to distribute digital goods directly. which more premium placed on efficient use of time Changes in consumer behavior. Personalization of store layouts.com). 101 ANNA UNIVERSITY CHENNAI .Priceline. An order status checking facility.com). 7. deals. with less focus on brand name and more on lowest prices. which allows one to browse through different categories of goods. The provision of a search engine. it is dynamic and linked with order process.com or bestbooksbuy. Technology improvements that provide greater convenience and more information than traditional retailing.1.1.g. Change in consumer demographics. The provision of a shopping cart.g.E-COMMERCE TECHNOLOGY AND MANAGEMENT   Brokers that meet a certain requirement such as a fixed price (e.

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Overbuilding and Excess Capacity With online retailing, constraints of time and space disappear. There is no bricks and mortar storefront to worry about, no critical locations. This new way of retailing can severely affect companies that have invested in expansion and adding capacity. It is important to understand the trouble traditional retailers will face if online retailing takes off. The 1980s was a period of overexpansion and turmoil for retailers. By the end of the decade, complaints about excessive retail space were being voiced. Profits were declining and control of operating expenses became a paramount management objective. Retailers reduced staff and minimized merchandising in order to enhance profits. Sales growth and market share development were given second priority behind profit enhancement. In the 1990s, companies are under pressure to grow and produce profit. An important measurement of profit gains is gross margin per square foot. For many retailers, these numbers is either growing slowly or declining, partially reflecting a less favorable product mix and more competition. Inadequate productivity, both per worker and per unit of space, is also reducing profit margins. Overbuilding also resulted in a growing shortage of lowcost, entry-level workers for the retail industry. The shortage of entry -level workers means that retailers are using under trained workers who are less able to empathize with shopper needs-leading to a perception that retailers in general and shopping centres in particular are unable or unwilling to provide quality service. Clearly, with crowded domestic markets and competition constantly grinding away at operating profit, new ways of retailing are being explored by forward-thinking companies such as Wal-Mart. Demographic Changes Shopping patterns are beginning to change with the increase of time -strapped, two-career couples and the aging ofAmerica. Value and time management are the consumer concerns driving interest in online retailing. Recent retail data shows a decline in the amount of time Americans are spending in shopping malls [EDR95]. The suggested reasons vary: time constraints, safety concerns, and growing frustration with the lack of courteous service and insufficient product information. Understanding the implications of time constraints on consumer shopping behavior is important as they portend the trends to come. For instance, Americans have openly embraced shopping channels like QVC and Home Shopping Network and retailers like CUC International.




Today’s time-strapped shoppers have less time and want better values, fewer hassles, and more options. Today, a shopping trip requires a consumer to decide what he or she or the family needs, brave the traffic on the way to a store, hunt for parking, find and select items for purchase, take them to a checkout, wait in line, pay for the items, sometimes bag them, and carry them back home. It can be a hassle and a lot of work, so most working professionals have learned to dread shopping trips. As technology improves, it may not be long before driving to the store gives way to online shopping with home delivery as provided by Peapod. In contrast, there is a growing segment of the population for whom time constraints are less of a problem. The demographic outlook in the United States is for an increasing share of older shoppers (age 50 and above) who prefer shopping at stores rather than online. However, the product mix offered by many department stores and malls is increasingly out of touch with the aging population and does not reflect the shift in purchasing power. Also, with the aging of the population, there is evidence to indicate a shift in consumer interest away from material goods and toward experiences, such as travel and recreation. In addition, as people get older, they tend to become more frugal. Retailers will need to concentrate on value by offering new product mixes. By this we mean a product mix that includes not only merchandise but also bundles in entertainment and “recreational” shopping with movie theatres, restaurants, bookstores, libraries, and community meeting facilities. This sort of change is already occurring in bookstore design (such as Borders Bookstores and Barnes and Noble), which include a variety of facilities such as coffee shops. However, building shopping malls based on these new business models is a risky venture and requires huge investments. Consumer Behavior Consumer behavior is more volatile than ever before, and companies need new ways of responding to consumer needs and satisfying demand. According to one survey, the typical consumer spent only four hours a month in a shopping mall in 1990 versus ten hours in 1985, and sales per square foot dropped. Specialty retailing-power centres, discount malls, discount stores, and catalogue shopping-has become one solution for closely monitoring consumer trends and reacting to them quickly. All of these alter-natives have one thing in common: they provide consumers with a very large selection of producers priced with deep discounts.



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Consumers are no longer as influenced by brand names as they used to be. The emergence of the value shopper is changing retailing. Today, the shopper is less willing to pay the premium for the brand name and much more attentive to quality and value. The decline in gross margins is the first evidence of the impact of that change, reflecting lower initial mark-ups and more discriminating shoppers in that segment clearly, retailers that are focused on providing value-the best price, service, and selection-regardless of the brand name will be successful. The real differentiating characteristic for retailers will be in their ability to define what the broad or niche consumer segment is looking for, identifying characteristics of customers in each target segment, and learning how to bundle products and package brands so that they become the preferred choice for online customers Technology Improvements in Electronic Retailing Today, electronic retailing is still far from being a competitive threat to more traditional store retailing (see Table), but it is becoming increasingly attractive as technology and applications improve, and retailers gain experience.




Three dominant forms of electronic retailing channels are: television re-tailing, CDROM retailing, and online service based retailing, in which we include Web-based retailing. Now we can discuss about the most prominent one: the television retailing. Television Retailing: Television retailing grossed an estimated Rs. 3.2 billion in 1994. One of the pioneers in this area is Home Shopping Network, Inc. (HSN), which began broadcasting electronic retailing to a small, local audience in 1982. Three years later they took this still unproven idea national- and made it work. Today, HSN is a television-based retail, entertainment company, and online retailer (owns Internet Shopping Network), with coast-to-coast customers and annual sales of $1 + billion. The breadth and reach of TV retailing are amazing. In. 1994, HSN reached 65.8 million television households throughout the United States. These households received the signals via cable, broadcast, and satellite dish, twenty-four hours a day, seven days a week. Unlike online audiences, which tend to be predominantly affluent and well educated (net annual in-come is estimated at Rs. 60,000 - Rs. 80,000), the target audience for television re-tailing is moderate income households and mostly women. How does it work? The TV retail marketing and programming are divided into segments that are televised live, with a show host who presents the merchandise and conveys information relating to the product, including price, quality, features, and benefits. Show hosts engage callers in on-air discussions regarding the currently featured product or the caller’s previous experience with the company’s products. Viewers place orders for products by calling a toll-free telephone number. Generally, merchandise is delivered to customers within seven to ten business days of placing an order. The purchased item may be returned within thirty days for a full refund of the purchase price, including the original shipping and handling charges. The success of television shopping is the result of the effective utilization of electronic media for capturing the power and influence of celebrity and the magic of showmanship, and bringing them to bear on a sale. In its annual report, the Home Shopping Network states that a celebrity can de-but a line of jewelry on HSN and sell more than Rs. 2 million in a single weekend. Of course, there’s another advantage to television retailing. When customer interest, which is monitored by the number of calls being received, begins to



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wane, the retailer knows it instantly and can simply move on to the next product. More recently, infomercials have become a crucial retailing topic. The infomercial has become a new and interesting way to retail specialty products. Modem filming techniques and ingenuity make it possible to create high-quality, cost-efficient, and entertaining documentaries that sell. This Coincides with the television viewing public’s appetite for information. Infomercials are an especially logical medium since retailers have the opportunity to economically test and evaluate a product through mass channels such as television retailing before committing major capital resources to infomercial production. Management Challenges in Online Retailing While changes in retailing may be driven by technology, managerial vision is required for successful implementation. Traditionally, retailing has been a low-tech environment in which retailing executives often relegated technology issues to back-room operators. These managers are most at risk, as they do not have a clue that a major revolution has begun. Most of them have never used a computer (or had to), never been on an online service, and do not know what the Internet is or what it can do. The winners will be the players who understand how to leverage the unique capabilities of the on-line medium to effectively meet the changing needs of the consumer. While the technology required to implement online retailing is maturing, many management issues remain unanswered. No one really knows yet how to build and run a successful, mass market online mall. The sales Medium is new, the technology is new, and retailers have a lot to learn about tricky technology, customer behavior, and management issue. But one thing is clear: For online retailing to succeed, online technology must complement management and operational strategy. Online Retailing Success Stories Peapod, CUC International, and Virtual Vineyards help to explain the intricacies of online retailing. Online Retailing: Peapod’s Experience Peapod, based in Evanston, Illinois, is using the online medium for food retailing services. Founded in 1989 by two brothers, Peapod (http://www.peapod.com/) is a


member of an online grocery / drug-store shopping and delivery service that already has thousands of customers in the Chicago, San Francisco, and Boston areas. Peapod was founded on the idea that people do not want to go to the grocery store. Peapod has an online database of over 25,000 grocery and drugstore items, and allows comparison shopping based on price, nutritional content, fat, or calories. Other features include electronic coupons, retailer preferred customer discounts, and other benefits like recipes, tips, and information. Peapod membership also allows users to use the shopping and home delivery service. Peapod has a staff of professional shoppers, produce specialists, and delivery people who fulfil the order. How Does It Work? Peapod provides customers with home shopping ser-vices via Pc. Customers need to buy a software application that enables them to access Peapod’s database through an online computer service. Peapod initially had a DOS-based system with graphics. They introduced a new version of the software in 1995-a Windows platform in which product pictures are available. Using the PC, a consumer can access all of the items in a grocery store and drug store. Peapod customers create their own grocery aisles in their own virtual store. Customers can request a list of items by category (cereals), by item (Frosted Flakes), by brand (Kellogg’s), or even by what is on sale in the store on a given day. Within categories, they can choose to have the items arranged alphabetically by brand or sorted by lowest cost per ounce, package size, unit price, or nutritional value. Customers also can cre-ate repeated use shopping lists (baby items, barbecue needs, and the like). Peapod’s back office is linked with the mainframe databases of the super-markets at which it shops for its customers (Jewel in Chicago and Safeway in San Francisco), allowing it to provide the supermarkets’ stock keeping units and shelf prices electronically to its customers. Once consumers have made a selection, they can then give specific shopping instructions, such as “substitute with same calories,” or red grapes only.” They can click on the “Comment” button and type in any extra information they would like the Peapod shopper to know. At any time during the order, a consumer can subtotal the amount purchased, or access the “Help” screen for immediate assistance. Online ordering is simple: users double-click on the Peapod icon and then enter their user IDs and passwords. On verification, users get access to a whole grocery store and drug store of items. Before the actual purchase of an item, users can view images of it and the nutritional content as well. The system allows users to sort items by various criteria like price, price/ unit, total calories, fat, protein,



Peapod treats each call as an opportunity to learn (and remember) each customer’s preferences and to figure out what the company can do to improve service as a whole. the delivery ad-dress. For example.00 plus 5 percent of the order amount. There are also search features to help locate a particular item. 5. A “Find Item” option at the top of the screen lets users search either by brand name or product type. and then faxed to the stores. Reducing impulse purchases is important when you consider that 80 percent of the items purchased in a grocery store are impulse items-non-planned purchases. Consumers save money-despite the extra overhead-because they use more coupons. Pea pod aims to target the health and fitness conscious consumer who chooses foods tailored to specific dietary needs. Customers are willing to pay these extra charges for convenience and because Peapod provides a lower cost shopping experience for the consumer. service representatives found that some customers were receiving five bags of grapefruits when they really wanted only five grapefruits. Payment can be made by check. and a service representative will try to resolve the matter. 108 ANNA UNIVERSITY CHENNAI . users need to choose a delivery time within a 90minute slot. Peapod began asking customers to confirm orders in which orderentry errors may occur. shopping. Pinpoint delivery within a 3Dminute window) can be selected for a small additional charge. In addition. the rest are faxed or phoned. and delivery-the processes are tailored to provide personalized service at a relatively low cost. often at special Peapod counters in the back of the store. The employee pays for the groceries. Eighty-five to ninety percent of Peapod’s orders come in via computer. and cholesterol. and buy fewer impulse items than they would if they shopped at a real supermarket. he or she can call Membership Services. or Peapod Electronic Payment. who shops the aisles of the store. plus a monthly service fee. At each stage-ordering. During the transaction closing process. In response. The order is then taken to a holding area in the supermarket. a per-order charge of Rs. and instructions for getting there. they click on “Done” and the order is electronically routed to Peapod.DBA 1727 NOTES carbohydrates. do better comparison shopping. With these features. consumers save time and have more control because they can shop from home or work whenever they want. holding. When users have finished shopping. Peapod members are charged actual shelf prices. where the appropriate items are kept cold or frozen until the deliverer picks up a set of orders and takes them to the customers within their 90-minute pre-selected windows. If a customer has a problem. charge. Each order is filled by a Peapod employee. The store gets a printout with the order. Peapod orders are taken centrally.

It is also inconvenient for consumers to relearn dozens of product locations at a new store. such as having an overflow warehouse when something is available on a deal or buying products before there is actual need. Peapod has to make sure the orders get to the stores and that they are shopped correctly. The one thing these demographics have in common is they have better things to do than grocery shop. advantage enjoyed by food retailers is the shopper’s resistance to switching food stores because of familiarity with the shelf locations of products purchased. How does Peapod Compete with Traditional Retailers? Traditional retailers make money from the suppliers. However. Peapod could have its own warehouse. Indeed. Still. if it were not for wellmanaged logistics. the formula for Peapod’s success is the busy American lifestyle. though subtle. it is a mass customizer. these customers would be back in the stores in a second. Is Peapod a competitor to the retail grocer? Not really. To avoid the overhead . An important. and getting coop advertising. Peapod will be tempted to say it is costing a lot to go to the store and pick up product off the shelf. Peapod is using interactive technology to change the shopping experience altogether. as other online providers are doing. 109 NOTES ANNA UNIVERSITY CHENNAI . Why? As these new retail formats emerge . Peapod can help grocers expand into places that might not otherwise be practical from a capital investment standpoint. patronage. and it feeds off the existing infrastructure to do it. existing retailers do have some advantages. let alone continued. The online environment must offer significant advantages to overcome shopper inertia and induce trial. and once Peapod gains enough customers. They provide access to customers and make their money by buying on deals. However. Peapod’s strategy has been to partner with the retailer rather than compete directly.E-COMMERCE TECHNOLOGY AND MANAGEMENT What is the Business Model? Rather than automating the trip to a retail store. A lot of credibility comes with the name of the retailer in its individual market. volume discounts. As soon as the Peapod does that it is likely to fall into the same traps as the retailers. it is quite possible that in the future Peapod may be tempted to compete with grocers by emulating certain aspects of their warehousing. It creates the supply chain after identifying a specific demand from a specific customer. The behindthe-scenes logistics are central to what Peapod is all about. Peapod makes all of its money on the customers it serves. The homes it delivers to cut across many demographics.

and commitment.1 What is Internet Marketing? If traditional marketing is about creating exchanges that simultaneously satisfy the firm and customers. an Internet-marketing program involves a process. The seven stages of the Internet marketing program process are setting corporate and business-unit strategy. These seven stages must be coordinated and internally consistent.DBA 1727 NOTES 2. exploration. Hence. 110 ANNA UNIVERSITY CHENNAI . the goal is to build offline (as relevant) as well as online relationships. the marketing strategist often has to loop back and forth during the seven stages. products. This definition can be divided into five components: A Process Like a traditional-marketing program. The Internet marketing program may well be part of a broader campaign to satisfy customers who use both online and offline services. While the process can be described in a simple linear fashion. It is important to stress that the goal of Internet marketing is not simply building relationships with online customers. designing the customer experience. loyal customers. and serv-ices that satisfy the goals of both parties.2 INTERNET CONSUMERS AND MARKET RESEARCH 2. Rather. crafting the customer interface.2. framing the market opportunity. what is Internet marketing? Internet marketing is the process of building and maintaining customer relationships through online activities to facilitate the exchange of ideas. and evaluating the results of the marketing program. designing the marketing program. the focal point shifts from finding customers to nurturing a sufficient number of committed. Building and Maintaining Customer Relationship The goal of marketing is to build and create lasting customer relationships. Successful marketing programs move target customers through three stages of relationship building: awareness. formulating the marketing strategy.

an online marketing program must be evaluated according to its overall exchange impact-not just the online exchange impact. firms must be very sensitive to cross-channel exchanges. That is. but the firm is unable to sustain its revenue model. In the new economy. and services to create exchanges that satisfy individual and organizational goals NOTES 111 ANNA UNIVERSITY CHENNAI . In both the online and offline worlds. online marketing may produce exchanges in retail stores. its widely successful of the past two years. or shareholders. the recruiting and job-seeking service Monster. for example. goods. pricing. However. He is clearly satisfied with and loyal to the site. if the firm is unable to meet its financial obligations to employees. promotion. offline marketing vehicles.2 Scope of Internet Marketing Marketing is the process of planning and executing the conception. Hence. in the form of advertising revenueboth parties will be satisfied. Internet marketing deals with levers that are available in the world of the Internet. suppliers.com can monetize this loyalty-most likely. as noted above.com.E-COMMERCE TECHNOLOGY AND MANAGEMENT Online By definition. To the extent that weather. Monster’s success can be tied directly to the effectiveness of its television advertising and. Firms must be increasingly sensitive to these cross channel effects if they are to measure the independent effects of online and offline marketing programs. Both parties must be satisfied for exchange to continue. 2. Satisfaction of Goals of both Parties One of the authors of this book is a loyal user of the website weather. then the exchange is unbalanced. and distribution of ideas. the success of an Internet marketing program ‘may rest with traditional. Exchange At the core of both online and offline marketing programs is the concept of exchange. Customers are still happy. exchange is still the heart of marketing.2. Consider. in particular. However. Each day he arises and checks the weather in his city as well as the weather in cities he will be traveling to during the week.com.

and Distribution Strong marketing programs do not involve one action. 5 Market analysis involves searching for opportunities in the marketplace. Pricing. or services. How often have you witnessed the hot Christmas toy advertised-but not found it on the shelf? In the Internet environment. Market implementation includes the systems and processes to go to market with the marketing pro-gram. upon which a particular firm-with unique skills-can capitalize. and political donations. positioning. and control collectively provide a process for marketing managers to follow in the design and execution of marketing programs. It Involves a Mix of Product. The classical marketing approach involves four broad steps: market analysis. Market planning requires segmentation. Promotion. Too often. target market choice. and control. exchange also occurs in a wide variety of contexts. planning. market planning. at the right time. It is about Exchange Marketing is not successful unless two parties exchange something of value. These are: Marketing is a Process A process is a particular method of doing an activity. money. many of which are non monetary. However. Finally. marketing programs fail because they allocate too many (or too few) resources in an uncoordinated way. These include bartering. This mixing entails blending the right amounts of the 4P ingredients. The buyer may exchange time. The traditional retail context provides the simplest illustration of this principle. implementation. Analysis. marketing control refers to the informal and formal mechanisms that marketing mangers can use to keep the marketing program on course. while the seller must exchange something of value to the buyer.DBA 1727 NOTES The definition summarized above has four critical features. or marketing program). generally involving a series of steps or operations. volunteering services. the most successful marketing programs involve mixing the ingredients of marketing to deliver value to customers. A given consumer exchanges money for a particular good or service. this translates into significant problems with order fulfilment at the most pressing times of the year. implementation. such as the design of a great product. Rather. 112 ANNA UNIVERSITY CHENNAI . and in the right sequence. and the design of the marketing mix (also termed the 4Ps.

At the same time. these are new. the standard marketing-mix toolkit includes such mass-marketing levers as television advertising. mass marketing. Firms can have highly satisfied customers if they provide services for free. and positioning in the minds of customershave remained the same. 2. To accomplish this goal. as well as customer-specific marketing techniques such as the use of sales reps. and regionalized programs. interactive television). new levers have been added to the marketing mix. direct mail. That is. those organizations are not likely to have a long life. and competitive responses happen in real time. In the long run. With the emergence of the Internet and its associated technology-enabled. screento-face interfaces (e. However. some of the fundamentals of business strategy-seeking competitive advantage based on superior value..3 E-Business Issues & Internet Marketing At its core. a new era of marketing has emerged. Well-respected academics and practitioners have called for new rules and urged debate about fundamental tenets of marketing. mobile phones. In short. and public relations.) At the ‘other extreme. the mission of marketing is to attract and retain customers. advertising. and its shareholders. a traditional bricks-and mortar marketer uses a variety of market-ing variables-including pricing. In this context. exciting changes that have a profound impact on the practice of marketing. including segmentation. the firm. consumer expectations about convenience have forever been altered. pundits and academics alike have argued that both the basic building blocks of marketing strategy and the pathways to competitive advantage have remained the same The approach taken in the current volume falls between these polar views. building unique resources. At the same time.g. The intent of this text is to provide a clear indication of what has changed and what has not changed. the text would not be complete (and indeed might be actionable from the standpoint of business practice!) if it did not propose a broader 113 NOTES ANNA UNIVERSITY CHENNAI . The key to modern marketing is simultaneously satisfying the customer. segments have been narrowed to finer gradations. and channel choice-to satisfy cur-rent and new customers.E-COMMERCE TECHNOLOGY AND MANAGEMENT It is Intended to Satisfy Individual and Organizational Needs The aim of marketing is to provide a satisfactory outcome for both the firm and the customer.2. the firm must have a positive cash flow or show a clear path to profitability for investors to maintain confidence.

.g.DBA 1727 NOTES framework to understanding the practice of Internet marketing. They also serve as guides to managerial action. under-standing the five forces enables firms to comprehensively map their competitive environment while simultaneously identifying specific actions for their managers (e. reduce buyer power by increasing the number of buyers). 2.2. Thus. Frameworks such as the 4Ps of marketing or the five forces of competitive analysis are important because they provide easy-to-remember. simplifying structures for complex problems.4 The Seven Stages of Internet Marketing 114 ANNA UNIVERSITY CHENNAI .

books. collecting sufficient online and offline data to establish the burden of proof of opportunity assessment. music. crafting the customer interface. designing the customer experience. sold. Corporate-strategy issues relate to the choice. Amazon. including decisions about which units should be kept. The Seven Stage Cycle Of internet Marketing Stage One: Setting Corporate and Business-Unit Strategy Corporate strategy addresses the interrelationship between the various business units in a firm. and number of business units such as kitchen. declaring the company’s resource-based opportunity for advantage. Business-unit strategy focuses on how a particular unit in the company attacks a market to gain competitive advantage. The final go/ no-go choice is often a corporate or business-unit decision. Stage Two: Framing the Market Opportunity Stage two entails the analysis of market opportunities and an initial first pass of the business concept-that is. it is very important to stress that marketing plays a critical role in this market-opportunity assessment phase. designing the marketing program. Consider. for example. framing the market opportunity. and tools/hardware. What mechanism do they put in place to evaluate these opportunities? In this second part of the Internet-marketing process. and evaluating the results of the marketing program. mix. Once these business units are established and incubated in Amazon’s corporate head~ quarters. assessing opportunity attractiveness. for example. However. electronics. specifying unmet or underserved customer needs. that you are running a major dot-com business such as Amazon. and making the final go/no-go decision. The seven stages are these: setting corporate and business-unit strategy. In order for the firm to make an informed choice about the opportunity. or augmented. a simple six-step methodology helps evaluate the attractiveness of the opportunity The six steps include: seeding the opportunity. Let’s say. The senior management team is continually confronted with go/no-go decisions about whether to add a new business unit or develop a new product line within an existing business unit. identifying the target segment. formulating the marketing strategy. the senior leadership team of each unit sets the strategic direction and steers the business unit toward its goals.E-COMMERCE TECHNOLOGY AND MANAGEMENT The given figure provides an overview of the seven stages of Internet marketing. the management team needs to obtain a sufficient picture of the marketplace and a clear 115 NOTES ANNA UNIVERSITY CHENNAI .com.

resources. business unit. and sequencing of actions must be tightly aligned with the businessunit strategy. the overall marketing strategy comprises both offline and online marketing activities. and Marketing Strategy Corporate Stage Four: Designing the Customer Experience Firms must understand the type of customer experience that needs to be delivered to meet the market opportunity. Business-unit. the firm also needs to collect sufficient market research data. The marketing strategy goals. Thus. and overall marketing strategies of the firm. the design of the customer experience constitutes a bridge between the high-level marketing strategy (step three) and the marketing program tactics (step five). The experience should correlate with the firm’s positioning and marketing strategy. Stage Three: Formulating the Marketing Strategy Internet marketing strategy is based upon corporate. Corporate. Finally.DBA 1727 NOTES articulation of the customer experience that is at the core of the opportunity. during the market-opportunity assessment phase. 116 ANNA UNIVERSITY CHENNAI . This set of linkages is shown in figure . Thus.

Stage five entails designing a particular combination of marketing actions (termed levers) to move target customers from aware-ness to commitment. intense commitment to the brand (e. and online marketing programs such as banner ads.. Awareness is the first step in a potentially deeper relationship 117 NOTES ANNA UNIVERSITY CHENNAI . Whether defined as a function or an organization-wide culture. However. the stages of the customer relationship and the associated classes of levers that can be employed must be defined. Moreover. the firm is in a position to observe their behavior patterns and determine which customers to nurture and which customers to terminate (or serve at a lower level of cost).g. including word-of-mouth. it has decided upon the target segment and the specific position that it wishes to own in the minds of the target customer. it is hoped. pricing.g. commitment to the firm’s offering. exploration.E-COMMERCE TECHNOLOGY AND MANAGEMENT Stage Five: Designing the Marketing Program The completion of stages one through four results in clear strategic direction for the firm. Managing this building and pruning process is one of marketing’s key tasks.com). commitment. This bond can originate from cognitive or emotional sources. the Harley-Davidson HOG club-member) or a simple. Consumers become aware of firms through a variety of sources. marketing is responsible for acquiring and retaining target customers. successful marketers manage to move desirable customers from awareness through exploration and. The firm has made a go/no-go decision on a particular option. Building and Nurturing Customer Relationships A relationship can be defined as a bond or connection between the firm and its customers. knowledge. they are in the awareness stage. The connection may manifest itself in a deep. finally. prior to discussion of the Market space Matrix. The framework used to accomplish this task is the Market space Matrix. or attitudes about a firm or its offerings but have not initiated any communications with the firm... the Internet marketer has six classes of levers (e. The four stages of customer relationships are briefly outlined below Awareness When customers have some basic information.g. traditional marketing such as television advertising. Simply put. Once customers reach commitment. and. regular use of weather. community) that can be used to create target customer awareness. functional based commitment (e. In this process.

In the online world. their repeated. awareness without action is not in the best interests of the firm. 118 ANNA UNIVERSITY CHENNAI .driving a car.g. Unprofitable. the customer (and firm) begin to initiate communications and actions that enable an evaluation of whether or not to pursue the four key stages of customer relationship. By implication.marketing context. as one can imagine. therefore. However. managers often refer to the 80/20 rule of profitability. Firms should segment their most valuable and less valuable customers.DBA 1727 NOTES with the firm. That is. When customers commit to a website. In an industrial. The exploration stage may take only a few visits or perhaps years to unfold. Commitment Commitment involves feeling a sense of obligation or responsibility for a product or firm. Exploration In the exploration stage. non strategic customers are a different matter. or test. Dissolution Not all customers are equally valuable to the firm. some e-commerce retail exchanges. going on a first date.. and/or strategic significance (e. This stage is also likely to include some trial on the part of the customer. exploration may take the form of frequent site visits. revenue. 20 percent of customers provide 80 percent of the profit. It may include phone call followups on delivery times or e-mails about product inventory. a large well-regarded customer may not be profitable but opens the door to new accounts). and possibly even the return of merchandise. Exploration is analogous to sampling songs. The firm does not want this set of customers to terminate the relationship. enduring attitudes and behaviors reflect loyalty. a large number of customers are unprofitable or have high cost to serve. The most valuable customers may be identified based on profit.

or context. 3. personal digital assistant. wireless applications protocol (WAP) device. sub-notebook.e. This visitor would have a high level of frequent contact but a low level of scope. commenting on products. (How often does the customer visit the site?) The scope of the connection. but only to purchase books. it is important to consider the types of interface design considerations that confront the senior management team..e.E-COMMERCE TECHNOLOGY AND MANAGEMENT Often it is in the best interests of the firm to terminate the relationship or encourage this set of customers to disengage with the firm. or communicating with other Amazon users. Another customer might visit Amazon frequently but not stay on the site for a long duration or engage in deeper connections such as writing reviews. (How many different points of contact does the customer have with the firm?) The depth of contact. (How thoroughly is the customer using the site?) NOTES A customer might visit a website such as Amazon on a regular basis. As this shift from people-mediated to technology -mediated interfaces unfolds. This includes a balanced focus on both customer and financial metrics. The frequency of the connection. Three dimensions capture intensity: 1. relationship intensity is correlated with the stage of the relationship. 2. face—to-face interaction) to the market space (i. This customer would have high frequency but low depth. screen-tb-face interaction). The key difference is that the nature of the exchange relationship is now mediated by a technology interface. What is the look-and— feel.. or other Internet enabled appliance. In all cases. Stage Six: Crafting the Customer Interface The Internet has shifted the locus of the exchange from the marketplace (i. The four stages vary by the ‘intensity of the connection between the firm and the customer Intensity of connection may be defined as the degree or amount of connection that unfolds between the firm and its target customers. mobile phone. of the site? Should the site include commerce activities? How important are communities in the business model? Stage Seven: Evaluating the Marketing Program This last stage involves the evaluation of the overall Internet marketing program. 119 ANNA UNIVERSITY CHENNAI . This interface can be a desktop PC.

If customers with young children can be identified. Another critical core competency is fulfilment. Marketing departments today are being deluged with requests for information via the Web and other channels. as organizations grow larger. The goal of effective fulfilment is to provide a myriad of information to customers and prospects quickly. By implementing a cross-sell strategy. Marketing automation is critical. Cross-sell and up-sell application may be used to schedule sales calls. Direct Marketing and Fulfilment This includes pre-sale interaction such as advertising that either influences or provides potential customers with the necessary information to make a purchase decision. or requests for literature. Campaign management. collateral packages.5 Customer Relationship Management(CRM) Cross-selling and Up-selling This application has the capability to qualify prospects. For example. triggers can be established to identify prospects for additional sales. qualifying leads. As customers approach retirement. banks could recommend assets such as money markets. track contact or the “moments of truth and refer them to sales persons when appropriate. a direct marketing process. in a bank an event would be a large deposit. it becomes more difficult to manage multiple simultaneous programs and track costs across multiple channels. integrate and leverage marketing programs by automating such tasks as managing responses.2. and check on the status of the customer orders. and arranging logistical aspects of events. Cross-selling and up-selling depend on identifying life-path needs. banks are attempting to build lasting relationships with customers by matching their life-path needs to complementary products and services. This creates a need for fulfilment capabilities that can get product information. responding to requests in a timely manner is critical. allows companies to manage. bonds and annuities. or other correspondence into the hands of the customers and prospects when they are most receptive. For instance. keep detailed records of sales activities. complete with the applications necessary to track customer contacts. easily and efficiently. direct mail responses. which would then trigger a sales person to call the customer and ask if she or he would be interested in investment options. Whether it is product or service inquiries. literature. then banks could cross-sell education savings plans or even loan consolidation plans. in the finance industry. pricing or billing issues.DBA 1727 NOTES 2. 120 ANNA UNIVERSITY CHENNAI . This is because.

and capture support costs for charge backs. monitor service-level agreements. contact and activity management. The field service application provides the organization with features for scheduling and dispatching repair personnel. Help-desk software automates the management and resolution of support calls and improves efficiency and effectiveness. customer surveys. sales force automation. activated when a problem can be solved over the phone and requires sending a repair person to the customer site to perform maintenance or repair.. Customer support capabilities are used to manage customers who are having problems with a product or service and to resolve those problems. as well as look up detailed information about customer service contracts. service professional can resolve customer issues efficiently and effectively. very few organizations are able to make these 121 NOTES ANNA UNIVERSITY CHENNAI . Field service and dispatch applications have become mission critical tools that affect a company’s ability to deliver effective customer service and contain costs. contacts and activities. Retention Management Effective Customer Relation must be based on differentiating customers based on account and transaction histories. Today. These discrete applications work together to ensure that customer service representatives can quickly assign. it requires a sophisticated interface with campaign management. Armed with this complete customer and product information. and detailed service agreements.g. what level of support they are entitled to) track specific tasks needed to resolve problems across multiple workgroups. These applications typically include capabilities to verify customer status (e. and handling contracts and accounting. create and manage service requests. and posting systems. The applications include support for service request management. Customer Service and Support Customer support provides customer care and other services. managing inventory and logistics. Field service is the hands on extension of external customer support. account management. Field Service Operations There is nothing like the hands-on approach to in they with of the customers about the company your company.E-COMMERCE TECHNOLOGY AND MANAGEMENT Effective fulfilment is not trivial. maintain permanent incident histories. return material authorizations.

to search the web for a bundle of products and report back on which supplier is offering them the cheapest. Buying and selling firms have the same views of the transactions. so once a customer found a supplier they were comfortable with they tended to stick with them. Global Reach: Gives businesses an instant global reach to find supplies anywhere in the world.6 Benefit from an e-Commerce Sales Strategy The internet is changing the balance of power between business and the customer.DBA 1727 NOTES distinctions. But with the advent of e-commerce. Before online shopping. which most executives see as a powerful enabler of Customer Relation Management. 7 days a week. low-margin prospects. 122 ANNA UNIVERSITY CHENNAI . at least until something went wrong. customers can check out the options anywhere. which make online commerce more precise. The ability to effectively segment customers depends on the decision support technology. Detailed knowledge about customers allows companies to treat all customers individually and. track and manage.2. Effective decision support depends on the ability to gather customer information at great levels of detail. As a general rule. 365 days a year from any location. whatever sells in print in a catalogue will also sell on the internet. thus speeding payment. Speed: It takes far less time to complete the entire buy/sell process. disengage from customers are high maintenance. Convenience: Buying and selling can go on 24 hours a day. in many cases. or “bots” as they are known. Accuracy: Virtually eliminates processing errors. and then buy from anyone. companies could be reasonably certain that buying almost anything was not easy. Customers can use comparison sites or shopping agents. 2. in any time or currency zone. There are several major advantages to developing an e-commerce sales strategy: Efficiency: Electronic purchase orders and sales orders are more economical to place.

fax and e-mail notification to identify potential problems. selling direct to consumers could be expensive. Customer Advocacy and Insight An insatiable curiosity for customers and marketplaces is a bare necessity for today’s marketing professional.7 Critical success factors for internet marketing executives Marketers have always been in the business of anticipating and managing change.E-COMMERCE TECHNOLOGY AND MANAGEMENT Low Cost Entry: Before the web. a deep understanding of customer needs should serve as the guidepost driving marketing decisions. enabling problem avoidance or swifter solutions. 2. Because the Internet enables a much greater degree of interaction with customers. balanced thinking. A true customer advocate will be looking to provide demonstrable added value to each customer interaction to form the basis for a meaningful relationship. designing and promoting these interactions around customers’ needs and progressively gaining deeper insights are critical components of creating positive customer experience. and technology has been their principle tool for managing it. On the web.2. which in turn become a platform for advocacy. Up-to-date Status and Alerts: Generates instant pager. create insightful customer mosaics. Also provides order histories. Marketing professionals will need to strategically collect information from many disparate sources. These critical new skills include customer advocacy and insight. NOTES 123 ANNA UNIVERSITY CHENNAI . integration. and a willingness to accept risk and ambiguity. As both customer behaviors and enabling technologies simultaneously evolve. This innate curiosity fuels an individual’s desire to transform mounds of customer data into meaningful and actionable insights. The Internet presents an adaptive challenge for the marketing executive. Today’s Internet marketing exec-utive must have all the traditional skills of the offline marketing professional. Setting up a retail outlet or printing a glossy catalogue could cost hundreds of thousands of pounds. you can sell direct to consumers worldwide for a hundred pounds a month. but must place extra emphasis on some of them to account for the new economy. and effectively trans-late them into marketing strategies and tactics.

The 124 ANNA UNIVERSITY CHENNAI . or fire in the belly. In today’s multi channel environment. Balanced Thinking An Internet marketing professional needs to be highly analytical and very creative. Successful marketing managers use this passion to fuel their entrepreneurial instincts and vision. Managers who are able to hone their marketing plan in a highly integrated fashion are more likely to capitalize on the synergies between marketing elements and thus drive greater effectiveness. Trying to change the status quo is never easy and only people with conviction and passion will be heard over the din of the inevitable naysayer. creating “bleeding edge” tools as they lead their teams to success. a consistent message and experience must be maintained across customer touch points in order to create a consistent brand image. a marketing manager must fundamentally understand how to integrate these new tools into the overall marketing mix. Culling specific customer insights from a veritable fire hose of data is critically important for new economy managers. Passion and Entrepreneurial Spirit Although very hard to objectively assess. Willingness to Accept Risk and Ambiguity In the new economy. It requires understanding the dynamic tension between one-toone marketing and mass marketing and being able to strike a strategic balance between them. It also requires determining the appropriate customer data requirements. Understanding the strategic and tactical implications of the Internet. Internet marketing professionals need to retool them-selves and their companies to enter into a whole new era of customer-centric marketing. passion. leveraging the rapid learning environment and accelerated decision-making process it creates. and then creatively applying the insights gleaned from analysis are critical success factors for all Internet marketing professionals.DBA 1727 NOTES Integration The Internet represents both a new channel and a new communications medium. Internet marketing professionals must also be technologically savvy. The new-economy marketing professional needs to have an integrated or’ holistic view of the customer and the enterprise in order to create a uniquely advantaged strategic plan. is what will differentiate leaders from followers in the new economy. Beyond strategy.

insurance.3.1 E-Services The delivery of services via the internet to consumers or other businesses can be referred to by the generic term of e-services. computer games. The primary purpose here is that these services help to save time and effort for the user. and on-line delivery of media content such as videos. This list is by no means exhaustive and it is growing all the time. Today’s online marketing professionals must have the basic skill set of the offline marketing professional. Web-enabling services. broker services.3 E-COMMERCE FOR SERVICE SECTOR 2. Successful Internet professionals need to rely on a whole new set of marketing tools that work in an extraordinarily dynamic environment. In many cases. we will give an overview of eservices. In order to bring some order to the discuss of these wide variety of e-services. and the most successful Internet marketers will be willing to play at the edges. it can result in a reduced cost for the consumer. Having the courage to try new things is the key to developing break-through Internet marketing. education. The risk and ambiguity of managing in such uncharted territory is tremendous. on-line publishing.E-COMMERCE TECHNOLOGY AND MANAGEMENT Internet has enabled customers to have much more information and many more choices than ever before. travel. Successful Internet marketers will build their business models and value propositions around a deep understanding of customer needs-not around the product. real estate. 2. etc. loans. we organize them into the following categories. thus shifting the balance of power toward the customer and creating the need for a whole new set of “pull” -based marketing tools. The skill set has not changed tremendously. In this lecture. There is a wide range of e-services currently offered through the internet and these include banking. consultancy advice. but-the tools need to be applied with more vigor and sometimes with greater speed. bring convenience. stock trading. and improve the quality of life. But they must also react more quickly and manage more information and channels in order to stay one step ahead of the competition. namely 1. NOTES 125 ANNA UNIVERSITY CHENNAI . jobs and career sites. which were previously provided by humans in office agencies and/or their branches.

enhancing and altering it. This group essentially sells information content of one sort or another and includes ecommerce sites that provide on-line publishing such as web-based newspapers   consultancy advice specialized financial or other information 126 ANNA UNIVERSITY CHENNAI . E-education is an example of this.DBA 1727 NOTES E-services that fall into this category include    Banking Stock trading Education In some cases. It may also bring into the catchments new groups of consumers of the service to whom it might not have been previously accessible. 2. 3. Information-selling on the web. These take a need from an individual or business customer and provide mechanisms (from providers) for matching that need. Matchmaking services. this may bring a new dimension to the original service. E-services that fall into this category include       Jobs and employment sites Travel Insurance Loans including mortgage loans Real estate sales Brokers The advantage of this kind of matchmaking through the internet is that the ability to search electronically over a wider area to satisfy the customer need and to more precisely meet the customer need is greatly facilitated by both computerization and communication over the internet.

Entertainment services. foreign exchange transactions. E-banking Security First Network Bank (SFNB. While not all banks offer the full range of services on the internet. movies.E-COMMERCE TECHNOLOGY AND MANAGEMENT 4. Looking at e-banking. personal banking commercial banking for both small businesses and large corporations financial services loan application services international trade including settlement instruments. Pure cyber banks Traditional banks that provide e-banking to complement their retail banking SFNB. banks in both the mentioned groups offer a varied range of services including 1.bankofamerica. 2. 2.com/)was the first internet bank. stock trading. etc. www. Web-Enabled Services Web-enabled services include personal banking. or theme sites. electronic games. This E-entertainment sector is expected to grow rapidly in the next few years.3. with a convergence of TV and internet-based technologies. Specialized services such as auctions. we can distinguish between twp distinct models: 1. 127 ANNA UNIVERSITY CHENNAI . It is not possible to discuss all the different eservices in this lecture and so we will briefly sample only a few examples for each category. It provides most of the banking services on the web. Therefore.1. 2. 3. NOTES 5. you can do your banking with your fingers instead of your feet.com) illustrates the second model. 4.1. is a pure cyber bank. Many different auction sites have appeared and these are discussed further in this lecture. and education.sfnb. These provide internet-based access to videos. while the homepage of Bank of America (www. 5.

This has resulted in these on-line trading companies grabbing an increasing market share. etc. In response to this. reduction in staffing because of the reduction in paper processing as well as face-toface bank teller contact. a number of banks offer personal financial services including making personal loan applications on the internet. These advantages are so significant that some banks offer customers a number of incentives to -switch to internet banking. 2. saving rentals or ownership of the related properties. discount brokers including Charles Schwab and full-service brokers have also moved to introduce internet trading of stocks. such as free checks. place a request to trade. The advantages to the banking institutions themselves include 1. reduced fees. saving him trips to the bank branch. All these represent a large increase in convenience and time saving for the bank customer.DBA 1727 NOTES There are significant advantages for both the individual or corporation as well as the bank in using e-banking. An individual doing personal banking on the internet can. American Express Financial Services. amongst other things. reduction in the number of retail banking branches. etc. one can make such transactions 24 hours a day from any place with internet access around the world. obtain statements. make queries on account balances. increased deposit rates. pay bills. etc. In addition to these. etc. and import transactions directly into home account management software. bringing about increase in the time the bank hangs on to the money before making the required transfers. 3.com). allow you to trade stocks. on the internet. mutual funds. do account transfers. E-stock trading and e-investing Several companies such as E-Trade (www. Datek. These companies offer you to trade at a very small cost compared to discount brokers or full-service brokers. etc. bonds. in some cases view images of checks.on-line.. say buy a stock the system responds with current “on the web site” prices 128 ANNA UNIVERSITY CHENNAI .etrade. The steps involved essentially are the following: 1. 2. leading to increase in interest received by the banks. Furthermore. queuing.

the internet trader has to confirm this trade or cancel it Several companies allow one to create a simulated portfolio. An example of this the Hong Kong CyberU . An example is Web CT. such as Jones International University (http://www.smartmoney. . 2. Traditional universities offering courses themselves on the internet. which one watches over time without actually buying or selling the stocks in reality.com.hkcyberu. these sites provide a considerable amount of information.(www. They can now reach a client base that is outside their catchment. In addition to actually allowing you to trade. Pure cyber universities.hk. the jury is still out on this.) which was set by the Hong Kong Polytechnic University and Pacific Century CyberWorks. There are a number of web-based technology tools for this purpose. however. Another advantage a traditional university has on the internet over a new pure cyber university is that it has an established brand 129 ANNA UNIVERSITY CHENNAI 3.g. They also expect to be able to deliver these courses at a reduced cost. This has led to some traditional brokers also providing internet trading of stocks. jonesinternationa. These traditional universities have a number of advantages. The reduction in margins available to stockbrokers as a result of internet trading is beginning to have an effect on other more traditional forms of brokers. A number of so called “open universities” that previously provided distance learning have moved into providing an internet-based version of their courses. An example of this can be found on the Smart Money site (www. the convenience of being able to trade anywhere in the world with internet access. 2.edu) Traditional universities setting up new cyber vehicles for providing university education perhaps with other business partners. E-education A number of e-universities are being spawned around the world. 3. NOTES The major advantages to the person doing the trading are 1.com). three models can be seen: 1. Again.E-COMMERCE TECHNOLOGY AND MANAGEMENT 3. while travelling. the reduced cost. e. and access to a wide variety of information on a number of sites.

One among some of the innovations that are being explored is the joint teaching by two universities on different continents in order to enhance the learning experience. in most of these applications. These bookings could be for individuals or corporations involving corporate rates. 2. These include trip. pricing.DBA 1727 NOTES name. the customer who could be an individual or business specifies his requirements in relation to the service. and priceline. etc.com. Essentially. tests to provide the student with instant feedback on his/her mastery of the materials. car hire. A large number of e-commerce sites have appeared. use of graphics and animation to explain concepts. Travel Services Before the internet.1. These web sites work in exactly 130 ANNA UNIVERSITY CHENNAI . namely use of quizzes. particularly those that have a dynamic character to them. which address this precise market segment. train tickets. The travel agent would try his best to meet these requirements by providing information regarding schedules. one might have gone along to a travel agent in order to book one’s travel requirements such as air tickets. 2. tours.com travelweb. The information is then returned to the e-service provider site to give the customer the required service. There are a variety of issues that need to be explored carefully when preparing to deliver educational material on the internet and these include the following: 1.3. promotions. as well as suggestions on changes to de itinerary. Does one use a distance learning model where the student uses a PULL model to acquire the material? Does one use a traditional lecture model using video streaming? This is a PUSH model whereby a teacher “pushes” the materials to the students.com. It is anticipated that the internet will not only lead to cyber universities of one kind or another but will also have a marked effect on teaching and learning in traditional universities. The e-commerce site then does a search over its own databases or over the internet using mobile agents.2 Matchmaking Services This has perhaps been the area in which there has been the greatest growth in eservices. etc. The use of the ‘internet for education opens up many possibilities. or over other databases or web sites to look for one or more matches to these requirements. hotel.

E-COMMERCE TECHNOLOGY AND MANAGEMENT the same way. E-employment and e-jobs There are several different kinds of services provided here.com. 2. the ability to meet requirements such as specified prices. and minimal information. such as high cost. such as real estates e. a special customer need (i. When a customer provides requirements. namely 1.hotjobs. limited duration. such as priceline.monster. matchmaking facilities that search the internet for jobs for jobseekers based on a specification. (www. 3. These ecommerce sites are having a strong “disintermediation” effect. Disintermediation refers to the removal of intermediaries such as travel agents from the process involved in the purchase of the service. further emphasizing the disintermediation effect. sites where you can get advice on developing your resumes and can post your resumes on the web recruiters who use the web site to post available jobs. NOTES Others In some areas.com) or Jobdirect employers who list available jobs on the web sites a. and in some cases like lastminute. These ecommerce sites are beginning to grab an increasing part of the travel market.. which are useful for customers. these sites do a search of their own databases or send agents our _ explore other web sites and respond to the consumer. require that provided the price specified is met. They are attractive to consumers because of the convenience.g. Amongst the requirement that the customer could specify is an acceptable price.realestate.. the customer cannot refuse the offer found. such as www.e” booking at the last minute). such as Hot jobs (www.com) the visualization ‘(3D’ facilities provided on the web allow one to either 131 ANNA UNIVERSITY CHENNAI . These travel sites often also have a lot of information on promotions.com b.com. suggestions. A recent increasing trend has also seen the primary provider of a service such as an airline introducing internet based booking at reduced prices. matchmaking facilities to search the internet for resumes that best fit a job description given by a prospective employer use of agents to do the search These approaches of using the internet for e-employment or ejobs avoid many of the costs and difficulties associated with traditional approaches to advertising. A number of sites. etc.

banks are reassessing their cost and profit structures. This philosophy is evident in the many mergers and acquisitions occurring in the banking industry. The role of electronic commerce in banking is multifaceted impacted by changes in technology. rapid deregulation of many parts of finance. A number of companies are gaining access to or have purchased large inventories of movies or other entertainment material with the view of allowing people to download this on the web. 132 ANNA UNIVERSITY CHENNAI . The challenge behind bank restructuring lies in adequately operational zing the notion of cost control. This is also an area with the greatest likelihood of disinter mediation. to others that provide games either for a fee or are free coupled together with advertising that pays for the site. 2. international wholesale. Many banks feel that in order to be profitable they need to reduce operating expenses and maintain strict cost control. An important issue here is that the payments involved are relatively small for each transaction. the emergence of new banking institutions.3.DBA 1727 NOTES   show visualizations of buildings at the drawing board stage. and hence the use of micro payment techniques is likely to be of considerable importance here. Given these environmental changes. investment. Sites here vary from theme sites that use a small amount of interactive entertainment to promote their products. E-Entertainment This is expected to be a growing area of e-commerce in the future. or allow people distant from the physical site of building to actually visualize it This area of matchmaking and brokering services is expected to grow greatly in the near future with e-commerce sites exploiting new market niches. domestic wholesale. such as Disney. Of all these types. and traditional agents or brokers will have to build new dimensions to their services in order to survive. and trust. retail and investment banking are most affected by online technological innovations and are the ones that stand to profit most from electronic commerce.2 Electronic Commerce and Banking “Banking is vital to a healthy economy. Banking as a business can be subdivided into five broad types: retail. and basic economic restructuring.

bank. However. threatening the banking stronghold on one of the last key services provided by banks. For example. 133 ANNA UNIVERSITY CHENNAI . technological innovations have enabled the following capabilities: online delivery of bank brochures and marketing information. The present nature of online payments is a clear indication that if the banking industry fails to meet the demand for new products. In particular. This is not surprising. The Securities and Exchange Commission’s decision to allow Spring Street Brewery to trade its stock online may also fundamentally change investment banking by disinter mediating the traditional role of underwriting. micro payments (or nickel-and-dime transactions using electronic cash and electronic checks). Technology has also accelerated the pace of product innovation. new technology is a double-edged sword. and transferring funds.E-COMMERCE TECHNOLOGY AND MANAGEMENT Technology is the predominant solution for controlling costs. ability to request the transfer of funds between accounts. For example. These online capabilities increase the facility and speed of retail banking. where recent innovations have provided an opportunity for non banks to break into the banking business. Technology is changing the interaction between banks and consumers. there are many industries that are both willing and able to fill the void. electronic bill payment and presentment. many small businesses and most households still do them manually. ability to use multiple financial software products with “memory” (thus eliminating the need to re-enter the same data). electronic access to bank statements. and finally. This trend can be seen in the area of online payments. While it enables banks to be more competitive through huge investments. sophisticated arbitrage instruments like derivatives are changing the nature of investment banking. non banking firms. filing taxes. online payments—encrypted credit cards for transferring payment instructions between merchant. Banks are NOTES Increasingly help to reduce operating costs and still provide adequate customer service. and decision analytics have allowed institutions to lower service costs. Although large businesses have automated these tasks. whereas PCs have been entering households in significant numbers only in the last few years. processing. customer. technology is capable of replacing or expediting tedious financial exercises like check writing. Advance in networking. Innovation and technology are becoming the key differentiators in the financial services business. it also enables new competition from fast-moving. large businesses have been undergoing computerization for more than thirty years. Technology is enabling the development of new products and services.

transfer funds between accounts. 134 ANNA UNIVERSITY CHENNAI . In the past. Today. In this new “virtual model. banks must be able to supply/guarantee the privacy and confidentiality that customers demand. the banking industry was chiefly concerned with asset quality and capitalization.DBA 1727 NOTES Technology also creates problems in the product development lifecycle. Instead of a single institution doing everything. This is no longer the case. along with these services.  Changing demographic trends and potential new consumer markets  Cross-industry competition caused by deregulation. if the bank was performing well along these two dimensions. A thorough understanding of this competitive environment is needed before banks can determine their online strategy. technology allows the creation of a “virtual financial institution” made up of firms. Five distinct factors contribute to the new competitive environment:  Changing consumer needs driven by online commerce  Optimization of branch networks in order to reduce costs. Banks need to find new ways to increase revenues in a “mature market” for most traditional banking services. each contributing the best-of-breed software or products to the overall product. This financial requirement pre-vented new participants from entering the market and was a key determinant of success. and  New online financial products. Changing Dynamics In Banking Industry In recent years. there has been a major change in the way banks strive for increased profitability. which have product life-cycle times of only six to nine months. banks had the luxury of long roll-out periods because successful investment in retail banking required a large monetary commitment for product development. Of course. Customers want to access account-related information. and pay bills electronically. Changing Consumer Needs Consumer requirements have changed substantially in the last decade. then the bank would likely be profitable. particularly consumer credit.” banks compete with the twelve-to-eighteen-month product development times of companies like Intuit or Netscape. download account data for use with personal finance software products. In the past. which is not a trivial matter to implement on the part of the banks. performing well on asset quality and capitalization is not enough.

unfortunately. Bankers want more stable and long term relationships with their customers.3. advertising. a consumer enters data once into his system and transfers this information to paper in the form of a check. off-the-shelf personal finance software cannot bridge the communications gap or reduce the duplication of effort described above. there is a gulf between automated information and the bank’s ability to reach the consumer in a unified way. Customers want to be able to bank at their convenience. and sold products and services in their homes and offices whenever it is convenient for them-twenty-four hours a day. thus giving new meaning to double-entry bookkeeping. Electronic banking provides a method of communication that will enable the bank customer to be reached. This gulf is filled with established methods. developing and maintaining this relation-ship is difficult. For example. From the bank’s perspective. But a few “home banking” systems that can help are beginning to take hold. seven days a week. these systems do not communicate with one another. these home banking services let the bank become an electronic gateway.E-COMMERCE TECHNOLOGY AND MANAGEMENT Many consumer requirements are based on a simple premise: customers and financial institutions both seek closer and more multifaceted relation-ships with one another. These methods can be costly and impersonal. No matter which software package is used to manage accounts. Unfortunately. it only represents half of the information management equation. then both the consumer and the bank are responsible for maintaining systems. information gets man-aged twice once by the consumer and once by the bank. If the consumer uses personal finance software. In combination with a PC and modem. including over the weekend or late at night.3. 2. only to have the bank then transfer it from paper back into electronic form. Banking Via Online Services Although personal finance software allows people to manage their money. reducing the monthly paper chase of bills and checks NOTES 135 ANNA UNIVERSITY CHENNAI . served. and people on telephones. postage and mail. such as branches. Although financial products are essentially information products and financial institutions are highly automated.

The agreement represents the first time that CitiBank has expanded access to its proprietary PC Banking service through a commercial online service. and has relationships with more banks than any commercial online service. To en-courage Citi Bank customers to try online banking through Prodigy. Customers can check their account balances. in 1996 Citibank began offering Prodigy subscribers a free and direct link to its electronic home banking service. CitiBanking on Prodigy offers a full range of banking services. transfer money between accounts. we look at CitiBank and Prodigy. To expand the attractiveness of its online banking services. The goal of this approach to banking is to provide superior 136 ANNA UNIVERSITY CHENNAI . Prodigy has been pro-viding home banking to consumers since 1988. and buy and sell stock trough Citi Corp Investment Services. Access to Citibank is available to Prodigy sub-scribers at no extra fee throughout the New York metropolitan area.DBA 1727 NOTES Citibank and Prodigy To understand the more contemporary online banking services. review their Citi Bank credit card account. Banking via the Web: Security First Network Bank With the explosive growth in Internet use. pay bills electronically. Citi Bank and Prodigy al-low customers to explore the wide array of services using an interactive. free Prodigy software will be made available at local Citi Bank branches. hands-on demonstration. banking via the World Wide Web will undoubtedly catch on quickly.

If bank customers (end users) install personal financial management software on their PCs. making a call to access a separate network. As a result. banks can offer additional services and provide a personal feel to the interface. Internet banking allows banks to break out of the hegemony of software developers. IBM’s seal of 137 NOTES ANNA UNIVERSITY CHENNAI . back up any information.E-COMMERCE TECHNOLOGY AND MANAGEMENT customer service and convenience in a secure electronic environment. at the office. Consumers can download account information into their own choice of programs rather than following the dictates of the service provider. these customers become direct customers of software firms. they lose control over the end user interface and the relationship they have with customers. Internet banking means that: Consumers do not have to purchase any additional software (the Web browser is sufficient). If banks choose to offer home banking via personal financial management software. IBM licensed DOS from a small software company called Microsoft. store any data on their computer. since all transactions occur on a secure server over the Internet. IBM decided that operating systems were not central to IBM business strategy. By maintaining a direct relationship with end users via the Web. The software industry history offers com-pelling proof of the importance of organizations having a direct relationship with consumers. Consumers can conduct banking anywhere as long as they have a com-puter (not necessarily their own computer) and a modem-whether at home. and banking during limited hours of operation. By controlling the software interface. IBM called this operating system PC-DOS and allowed Microsoft to market this same operating system to competing computer manufacturers under the name of MSDOS. In the early 1980s. and firms like Intuit that can easily transport their product to the Internet. Banking on the Internet is not the same as banking via online services. Banking via online services is restrictive in that the consumer has to install a soft-ware package onto her computer. This loss of control has tremendous long-term implications. This limits the customer to banking only from that computer. working with a separate software company. without seeking the cooperation of a software company. or wait months for new versions and upgrades. The competitors in this segment are banks that are setting up Web sites. or in a place outside the United States. software firms such as Intuit can control the kinds of transactions end users make and with whom these transactions occur.

1 Management issues in Online Banking The challenge facing the banking industry is whether management has the creativity and vision to harness the technology and provide customers with new financial products necessary to satisfy their continually changing financial needs.DBA 1727 NOTES approval made DOS an industry standard. Banks must deliver high quality products at the customers’ convenience with high-tech. The creation of online financial supply chains to manage the shift from banks as gatekeeper models to banks as gateways. IBM was unable to move the industry to a new operating system called OS/2 in the late 1980s because Microsoft controlled the customer relationship and was able to convert most end -users to Windows. too. and price. losing control over the interface could have dire consequences. Online banking will realize its full potential when the following key elements fall into place:      The development of an interesting portfolio of products and services that is attractive to customers and sufficiently differentiated from competitors. The emergence of low-cost interactive access terminals for the home as well as affordable interactive home information services. quality. 2. In order to achieve this.  Marketing Issues: Attracting Customers The benefits of online banking are often not made clear to the potential user. convenience.3. The establishment of good customer service on the part of banks. management has to balance the five key values that increasingly drive customers’ banking decisions: simplicity. However. high-touch personal and affordable service. The fact that technology increases the ease of switching from one bank to an-other means that banks that do not offer superior customer service may see low levels of customer loyalty. The identification of new market segments with untapped needs such as the willingness to pay for the convenience of remote banking. Consumer question includes : 138 ANNA UNIVERSITY CHENNAI . For banks. The development of effective back-office systems that can support sophisticated retail interfaces. customized ser-vice.3.

Marketing Issues: Keeping Customers Keeping customers (or customer loyalty) requires the following: 1. Banks can realize the positive cost implications for the longterm value of building customer loyalty. banks have opportunity to tap into this market segment. NOTES 2. Many of these firms have PCs and modems. consumers want 19-term ability to control and organize their finances more than they want convenience. Customers are increasingly familiar with using technology to access bank accounts and to handle financial affairs. New services like interactive cash management services could generate significant revenues for banks. household management is pushing consumers toward integrated services that can speed up financial procedures. Banks must provide integrated services.000 to Rs. but also in order to be attractive to potential customers. While short term convenience is important. 139 ANNA UNIVERSITY CHENNAI . Banks must also look beyond home consumers for online banking consumers. Thus. family obligations. 5 million. 250.000 customers. There are mil-lions of small businesses with annual sales ranging from Rs. Industry studies indicate that 20 percent of small businesses are immediate prospects for online banking and are willing to pay more than individual consumers for the service-up to $100 a “month. and this familiarity increases interest in additional vices and increases switching costs. Clearly. heavy workload. marketers must also work on building a loyal customer base not only in order to maintain the existing base. it is clear that make a mistake trying to sell online banking services on the basis of convenience. The oftcited time squeeze on consumerslong commutes.E-COMMERCE TECHNOLOGY AND MANAGEMENT How is balancing the checking account online superior to doing it on paper? Is paying bills online superior to the familiar 5 of writing checks? Where is the consumer gaining value? Perhaps the answers to these questions are not clear to the bankers themselves. The rapidly growing use of personal computers by small business. Regardless of how a bank chooses to answer these questions. These integrated services contribute to cementing the customer relationship.provides a solid opportunity for banks to build a profitable base of small business until a broader consumer market evolves. 3. there is not a big cost dif-ference between serving one customer and serving 100. Banks must switch the costs of moving from one software platform to other to keep customers from moving. In the online world.

Playboy. send a user across the Web to the advertiser’s Web site. With more time available to draw users’ attention. 2. which reportedly charge Rs. 30.1 Advertising and Online Publishing With the intention of attracting advertising dollars.1. Promotions are also common. Shorter access times also enable increasingly complex graphics to be placed on Web sites.4. Among periodicals that have gone from print to online advertising with some degree of advertising success are: Knight-Ridder’s San Jose Mercury News newspaper. which reportedly charges Rs. and People. With more advertisers. In many cases.4 ADVERTISING AND ONLINE PUBLISHING 2. 100 per day for an advertisement. advertisers should be willing to pay more per user to place their icons in online periodicals. advertisers ask site visitors to provide their names and addresses in exchange for a product discount. when clicked with a mouse.000-Rs.1 Reasons expected for the increase in Advertising spending Shorter Access Times As more bandwidth becomes available. 140 ANNA UNIVERSITY CHENNAI . for example. This should draw to the Web advertisers who may have been concerned that the current graphical quality was insufficient for displaying their products. and magazines such as Hot Wired. Reduced Access Fees New Internet users will be attracted by reduced ac-cess fees. users will spend a larger proportion of their time on Web sites and a smaller proportion waiting to access them. which display an advertiser’s logo and. the advertiser pays for the access time used when accessing online yellow pages. The cost of the access fee itself can be shared by an advertiser if. advertising rates should rise.DBA 1727 NOTES 2.4. magazines and newspapers have also set up sites on the Web. without requiring additional access time. with part of the reduction covered by advertisers. 45. Many online periodicals include traditional advertisements as well as icons.000 per quarter for an advertiser to place an icon in the periodical.

E-COMMERCE TECHNOLOGY AND MANAGEMENT Increasingly Convenient Access to Information As the amount of information online increases. it should be increasingly important for advertisers to get users to their sites quickly. leading them to pay more for placement in online periodicals. and an advertiser can use it to justify the cost of promoting a Web site. There are three reasons for this:    The market is too small to justify the cost of measuring its size. With more information available. an online publisher can use it to determine advertising rates and the appeal of its articles. a measurement system will not be useful until: 1. NOTES 141 ANNA UNIVERSITY CHENNAI . few publishers have attempted to measure how many advertising dollars are being spent. The market is changing too rapidly to develop an effective means of measurement.2 Better Measurement of Advertising Effectiveness Product advertising is far more effective if it leads to a purchase. the decision to purchase should be easier and more purchases should occur (assuming the product is desirable).4. and placing a site -linked icon in an online page. There is not a clear definition of what advertising expenses should be counted. However. Spending can be the amount that advertisers pay other Web sites such as periodicals and games to display their icons or product offerings. 2. Increasingly Valuable Information Product descriptions can be enhanced through online advertising. Despite the popularity of advertising on Web sites. If online advertising encourages users to shift a portion of their purchases to the Web. 2. maintaining a Web site.1. This should boost the appeal of the Web and increase the rates that advertisers could be charged for placing their icons in an online periodical. then companies may pay far more to advertise.

a sharp departure from the industry standard which measures hits . performed. All of this has led to a clarion call for changes in the copyright law. reproduced. licensed. and stored. the ability to manipulate and change the work. virtually any work can be “digitized. Anyone with a computer can make and distribute countless copies of anything digital. However. such as a CD-ROM. or a piece of music. Protecting intellectual property rights and collecting dues from online users is proving to be quite challenging. accessed. Advances in technology have raised the stakes considerably. with a few key strokes. Works also can be combined with other works into a single medium. managed. and used in the digital format. The scope and magnitude of the problem is clear. owned. 2.” archived. This increases the ease and speed with which a work can be reproduced. used. In other words. the quality of the copies. In short. as well as how works are created. 142 ANNA UNIVERSITY CHENNAI . standard impressions-delivered when an Internet surfer sees an ad banner but does not click on it to connect to a Web site -are considered to have no value by P&G. a TV or computer program.DBA 1727 NOTES Effective measurement of online advertising is taking centre stage.4. The potential of online copyright infringement vastly surpasses the damage that can be inflicted with a photocopy machine. The anticipated P&G strategy. the packaged goods giant told the online publishing community that it will compensate the ad banners it buys only on a “click-through” ba-sis. the digital version can be sent to friends or even a bulletin board system (BBS) for downloading by anyone with a modern.3 Digital Copyrights and Electronic Publishing Intellectual property rights (copyrights. displayed.3 billion ad budget to advertise on various Web sites. The establishment of high-speed networking makes it possible for one individual. and the speed with which copies (authorized and unauthorized) can be “delivered” to the public. distributed. trademarks. organized.has sent a shiver down the spine of many ad sales executives. to deliver perfect copies of digitized works to scores of other individuals. be it a book. the emergence of the Internet is dramatically changing how consumers and businesses deal in information and entertainment products and services. The concern was that other advertisers will follow P&G’s lead. Today. and licenses) are an important asset possessed by the publishers in their respective markets. causing a blurring of the traditional content lines. presented. It was reported in MediaWeek [MW96] that Procter & Gamble was ready to spend some of its $3. Even worse.1. sold.

the con-tent creation side of online publishing was dominated by techno-savvy individuals who were not experienced at selling and who did not under-stand the business of publishing.2 Electronic Commerce and Online Ppublishing The Web may have blossomed because of peer-to-peer publishing. the Wall Street Journal Interactive Edition attracted 500.000 registered readers on the Web. and unless the integrity of those works is assured.E-COMMERCE TECHNOLOGY AND MANAGEMENT The stakes are high. At that time. As the initial euphoria wore off. These firms are learning that the best way to capture consumers’ attention is to develop a business model that allows the company to 143 ANNA UNIVERSITY CHENNAI . However. Owners of copyrights are not willing to put their interests at risk if appropriate protections are not in place to permit them to set and enforce the terms and conditions under which their works are made available online. Initially. They discovered that offering exciting technology without compelling content is insufficient to capture market share. it was reported that. there is an enormous groundswell of interest among both commercial and corporate publishers in the Web. publishers realized that simply having a presence on the Web did not guarantee profits.4. but judging from recent product offerings. Restricting manipulation of the electronic file containing the work. 2. from 1993 to 1995 much of online publishing was inhibited by a lack of business purpose. and that number is growing by some 3. failing to define the business purposes driving their online presence. Online Copyright Protection Methods Unauthorized access to published content can be restricted by two methods: 1. the electronic edition has attracted more than thirty advertisers paying to reach this audience.000 readers per day. NOTES 2. there were publishing companies who took a “Just Get Me on the Web!” approach. Also. This includes controlling Web server access or controlling individual document access. growth in the online publishing marketplace was driven by the potential of new interactive technologies and applications. In addition. the public will not use the services avail-able and create the market necessary for online publishing’s success un-less access to a wide variety of works is provided under equitable and reasonable terms and conditions. For instance. Likewise. Restricting access to the source of the work. The promise of new interactive publishing captured the imagination of both content providers and the public. in less than three months.

are tinkering with new advertising models for their fledgling Web sites. This approach may not be viable in the online medium when mass markets are re-placed by customers selecting their information and delivery methods. As a result of relatively low ad revenues. mainstream advertisers have been skittish about pumping money into a medium with an audience whose size and habits are nearly impossible to figure out. Many early pioneers invested a huge amount of money into brand building. must be packaged so that it provides more value than alternative sources of information. the more likely it is to pop up in the consumer’s mind another key issue in online publishing relates to digital copyrights. Many online publishing pioneers have gone up the technology curve and are confronting tough management questions such as how to gain market share and how to be profitable sooner than later. they could grow substantially in coming years as the traffic increases and brand names become established. and they have not yet turned a profit. Some of these firms have invested tens of millions of dollars in people. Some of the sites employ hundreds of people. and entertainment they receive should be subsidized or nearly free and that advertisers will pay the bill. 144 ANNA UNIVERSITY CHENNAI . some of the first to stake their claims on the Internet. no matter how it is delivered.DBA 1727 NOTES offer unique and valuable information. Newspaper and magazine publishers. Online publishers are developing new business models to charge customers directly and convince them that such charges are justified. she needs to make a decision about where to go. with millions of dollars in payroll alone. This content. and content. These are tricky but necessary conditions to successful online publishing. and services. marketing. information. The public has been trained to think that the news. The early online publishing pioneers are trying to accomplish a difficult feat. equipment. While ad revenues are not coming close to covering expenses now. none of the Web publishers have turned a profit. Publishers need to pay more attention to their core competency of packaging and delivering content and making money online. The key is to identify what the customer wants and finds interesting and to avoid being distracted by new technologies. programming. The better the brand. Publishers currently finance their businesses by offering advertisers mass markets for delivering their message in return for large advertising fees. but they have not been able to figure out which business model works best for making money. In general. As more and more firms begin to offer online content. Brand development is important because every time a user sits in front of a Web browser. they are being forced to adjust to new customer attitudes regarding pricing. and marketing.

and alter works without the permission or the copyright holder. The Internet makes it extremely easy to copy.E-COMMERCE TECHNOLOGY AND MANAGEMENT Effective technological protection mechanisms are vital to ensuring the availability of quality content online. as well as fo-cused publishers in categories not easily suited for the online medium. 2. They do not and cannot offer more because in an environment where the culture and technology provide so little protection for the rights of content producers. retransmit. Watchers These are large publishing companies that employ scale-sensitive economics. there is too great a risk to their intellectual property. This category includes publishers of unbranded or less distinctive content who cannot attract a sufficiently large initial consumer franchise. the digital world has no international boundaries. These publishers have the capacity to derive the highest benefits from new media as their learning curves are much shorter than others.1 Online Publishing Strategies As with any new development. Testers These are the majority of publishers that face either attractiveness and/ or skill challenges. and they already have many of the necessary resources at hand.4. Today. publishers such as Addison—Wesley only offer catalogs or sample selections of works available online. Testers also include 145 NOTES ANNA UNIVERSITY CHENNAI . there are generally three strategies for publishing companies to consider: Early Movers These are highly skilled independent publishers with existing access to such key capabilities as direct marketing and order fulfilment. who are uncertain who will win in the online marketplace. Gathered here are many multi category and specialty publishers who are competing successfully in traditional markets. and who neither need nor want to make a choice now.2. They are unlikely to view online publishing as a sufficiently attractive channel until costs fall and distribution widens. which makes the risk even greater. and policing is impossible since the levels of protections and sanctions against infringement vary widely in countries across the globe. Moreover.

to some extent. The Online Archive Approach The online archive approach (including bibliographic databases and full-text search/ retrieval services) is one that appeals to corporate publishers and. In general.2 Online Publishing Approaches There are four contrasting content publishing approaches.4. Winning in online publishing will entail developing new skills in areas such as tailored advertising. quality. order processing and fulfilment. This is an online extension of the thirdparty publisher role off-line. Publishers will have to innovate constantly and challenge present concepts if this form of commerce is to become widely accepted and popular. Content. and customer service as well as re-learning the fundamental principles concerning why people subscribe. but is a logical extension of the trends in electronic delivery over the past several years. service.DBA 1727 NOTES branded general publishers with robust consumer franchises and attractive distribution channels already in place. and price will not be enough to compete in this new environment. Those with strong brand images and existing consumer franchises may choose to post-pone entry until they find viable service providers and distributors. The publishing intermediation approach. bundling of products. For this group. The new medium approach. In this approach. building required skills. The dynamic and just-in-time approach. 2. the online medium appears to be an alternative. Publishers such as the Wall Street Journal and New York Times are taking part in targeted tests and pilot projects aimed at learning what online publishing has to offer. and exploring the attractiveness of potential channels. 146 ANNA UNIVERSITY CHENNAI . This is new to the Web.     The online archive approach.2. Speed of delivery. and diversity of choice also become critical success factors. These tests often include a skill-building program as well as an early warning system so that a company can quickly identify and re-act to changes within the industry or economy. incentives. but also more exciting. publishers are educating themselves about the potential opportunities without committing themselves to anyone position. This is more controversial and more difficult to implement. content is assembled in real-time and transmitted in the format best suited to the user’s tastes and preferences.

but separate content streams will be developed for each medium.zdnet. which quickly grew in popularity.000 Internet hosts each month and is reportedly showing a profit. personalized news delivery. This approach will have the most appeal to commercial print publishers. one deserving its own material. which began its venture into electronic publishing in . the ZD Net Web Edition (http://www. and edutainment) aims to create new material for the Web-to treat the Web as its own medium. That bulletin board evolved in 1988 to become PC Mag-Net on CompuServe. The spread of PCs has enabled physicians to directly search databases used only by librarians in the past. developed by the National Library of Medicine (NLM). Ziff-Davis created the ZD Net subscription service on CompuServe to provide a service supporting online versions of all its publications.1985 with a bulletin board system for readers of PC Magazine. For example. MEDLINE and other medical databases are available free of charge on the Internet. not a replacement. Most libraries have replaced traditional card catalogs with sophisticated electronic online bibliographic databases offering an incredible range of functions. or other media. The online archive approach is also being used by niche publishers such as ZiffDavis.ROM. The New Medium Approach The new medium approach (including real -time news delivery. Wired magazine sees very little crossover in content between its magazine and its HotWired venture. and a comprehensive database of past articles. which caters to an increasing number of physicians who rely on online medical databases to keep up to date with the latest developments and literature. such as magazines. that view the Web as an alternative.com) logs access by more than 700. This approach currently has some teething problems because of technological limitations. bibliographic databases represent a sizable chunk of the online data-base market. CD. An example of a bibliographic database is MEDLINE. including the ZD Net University series of comprehensive online “continuing education courses. In addition to its successful CompuServe subscription ser-vice. For instance. sophisticated on-line forums with top industry personalities. Some writers may write for both media. In 1991.E-COMMERCE TECHNOLOGY AND MANAGEMENT commercial publishers (such as academic or journal publishers) who have an existing digital archive that they want to deliver over the Web as well as on paper. The most prevalent example of online archive approach is library catalogs and bibliographic databases. but with technological 147 NOTES ANNA UNIVERSITY CHENNAI . At revenues of over $1 billion a year. the formatting limitations of the Web are frustrating at the moment. for print publications. Members of the ZD Net/CompuServe edition have access to several features.

At one time. the expectations of the Web are so different from print media that new content. but its intellectual content. It went on to become one of the most popular means of navigating around the Internet. written for a Web audience. Yahoo was getting about 6 million visitors per day. The frustrations are more than offset by the excitement of the interactivity the Web offers. With online publishing there may be a well-known starting point. Once on that sprawling network. must be created. two Stanford. products. The Publishing Intermediation Approach The publishing intermediation approach (including online directories) exploits new service opportunities for intermediaries. companies offering material owned by more than one publisher face the daunting task of obtaining permissions. Yahoo is the first place millions of Internet users go when they try to find their way around the rapidly growing Internet. too-once the information is out there. New organizations that specialize in the management of copyright clearance are emerging as key players. all a publisher can do is “be the first with the most interesting stuff. The publisher gives up not only its brand name. It quickly becomes apparent that under this model.” an approach that HotWired is taking in its attempt to create a place where readers can see what the world has to say on a minute-by minute basis. Companies and consumers interested in conducting electronic commerce often struggle to navigate the Internet to create an electronic marketplace. The success of Yahoo’s initial public offering (IPO) underscores the importance of online directories.DBA 1727 NOTES advancements they will soon be forgotten. the old paradigms do not work. and services. it is no longer. which made it the second most active Web site next to Netscape’s home page. they are having trouble finding other companies. University electrical engineering PhD students who began DY simply compiling lists of their favorite Web sites. Even if the technology constraints were overcome. owned. Faced with that model. For example. Yahoo (which stands for Yet Another Hierarchical Officious Oracle) was created in 1994 by David Filo and Jerry Yang. in the growing market for educational material such as course packs and other customized books. Online directories are important for several reasons. the subsequent value-added improvisation from readers makes each online magazine a unique experience. its model is both broadcasting and conversation at the same time. 148 ANNA UNIVERSITY CHENNAI . but with no controlling gatekeeper.

and products. A number of micro payment schemes are emerging. speed.E-COMMERCE TECHNOLOGY AND MANAGEMENT Clearly. The future is bright for the publishing intermediaries who offer ease of operation. Another way of looking at dynamic publishing is that it is just-in-time publishing. and detailed information. tastes. and sound-are stored separately in a database and used to create individualized pages on the fly as each user browses the site. the stories. What is more. Content can now be created in realtime and transmitted on the fly in the format best suited to the user’s location. graphics. the content engine recognizes repeat visitors to a site and configures the Web pages to match the individual’s known preferences. and others-could serve as the best model for every-one else [PCW96]. The Dynamic and Just-in-Time Publishing Approach Online content is no longer static information. Instead. and they are nowhere near that yet. For example. More importantly. the user’s geographic location. The page content can be further customized to reflect which Web browser is being used. The world of online entertainment-specifically “pay-for-play” outlets being developed by Sony. and preferences. applets. the elements of each page-text. For micro payments to work. Clearly publishers and developers should be thinking about low-value payments. but it is still too early for most companies to de-ploy. and modem speed. and content flow into the computer just as consumers need them. Sierra OnLine. services. a publisher planning to deploy a large product catalog will no longer have to author and update each individual Web page. and then self-destruct after usage. transaction costs must be very small (around 10 cents). That is. video. there will be a demand for intermediation because there will al-ways be a need for a good directory to help people locate goods. the proposed schemes vary widely and many kinks in the micro payment puzzle have to be worked out. NOTES 149 ANNA UNIVERSITY CHENNAI .

150 ANNA UNIVERSITY CHENNAI . Pentwyn Splicers based in Pontypool manufacture pneumatic splicers for the UK and world textile market. The two businesses pass information electronically to each other. Using the Web to sell more products was an initial consideration. order fulfilment. and automate corporate processes to deliver the right products and services to customers quickly and cost-effectively.5.DBA 1727 NOTES 2. develop. and procurement processes. but. They are now able to develop services for individual clients rather than provide a standard service. and cultivate relationships with customers. but it was in the provision of customer service and support to their overseas distributors that the greatest benefits have been achieved.1 B2B . B2B E-Commerce could be used as a significant enabler in their move towards greater trading partner collaboration. in the short term.5 B2B E-COMMERCE 2. Typically in the B2B environment. E-Commerce can be used in the following processes:    Procurement. Managing trading-partner relationships. An alternative way of thinking of B2B eCommerce is to think of it as being used to:   Attract. B2B e-commerce currently makes up about 94% of all e-commerce transactions. B2B E-Commerce is synonymous with the vision of integrated supply chains. In the past EDI was conducted on a direct link of some form between the two businesses where as today the most popular connection is the internet. manufacturing. This might be the ultimate objective. retain. E-Commerce technologies have allowed even the smallest businesses to improve the processes for interfacing with customers.Business to Business E-Commerce E-commerce has been in use for quit a few years and is more commonly known as EDI (electronic data interchange). For many Welsh SMEs. Streamline the supply chain. They evaluated all aspects of their business process to determine where the greatest return could be obtained.

which can extend from the supplier of raw materials to the final consumer.business e-commerce is likely to maintain for enlarge is advantage for the foreseeable future: Electronic links between businesses are not new. such as questions of security and reliability. information about customers and company operations. and Insistence by large businesses that all of their suppliers link into their e-commerce system as a condition of-doing business. developed by the Automotive Industry Action Group (AIAG). b. there will be a significant increase in business-to-business e-commerce as it draws in smaller second. drives the second and third and will be explored in greater detail in the next chapter. the US Automotive Network exchange (ANX). will have been overcome. They have existed for decades. many barriers. General Electric (GE). Business for business dominates the total value of e-commerce activity. makes use of the Transport Control Protocol/Internet Protocol (TCP/IP) to link automotive 151 ANNA UNIVERSITY CHENNAI . telephone or mail. reduced transaction costs. analyze. business-to. Large manufacturing firms are the main users of EDI. The first factor.added chain. For example. which now limit the extension of Internet EDI to unknown firms. Because the-economic factors affecting the adoption of e-commerce between businesses are such different from those affecting business-toconsumer ecommerce. one of the largest EDI service suppliers. a defensive reaction A competitors engaging in commerce.E-COMMERCE TECHNOLOGY AND MANAGEMENT  Capture. As a result. in order to make better decisions. electronic commerce clearly reduces these costs and thus drives its adoption. three factors are likely to lead to e-commerce a reduction in transaction costs and improvement of product quality/customer service a. It is expected that by 2001-02. However. NOTES In business-to-business electronic commerce businesses use the Internet to integrate the value. accounting for about 80 per cent at present. and share. estimates that 80 per cent of suppliers are not connected to an EDI system but rely on from. Drivers and inhibitors of business-to-business electronic commerce in businessto-business e-commerce. in the form of electronic data interchange (EDI) supplied by value-added networks (VAN) operated over leased telephone lines.and third-tier suppliers.

In addition to migrating existing activity to e-commerce. exist before electronic commerce over the Internet made them economically viable. 2. An example of a B2C transaction is a grocery store selling grain-fed chickens to a consumer.5. a premium is placed on timely. Ford and Chrysler). For example. As businesses move to “build-to-order” processing and just-intime inventories.g. The volume of B2B transactions is much higher than the volume of B2C transactions. An example of a B2B transaction is a chicken feed company selling its product to a chicken farm.2 Automated Ecommerce Transactions It is a term also used in electronic commerce and to describe automated processes between trading partners. The largest impact of business –to – business e-commerce is likely to be on small and medium sized enterprises (SMEs). accurate inbound and outbound logistics. the new system will provide a single common system that can be extended to include all suppliers. One reason for this is that businesses have adopted electronic commerce technologies in greater numbers than consumers. not just the final transactions that result from marketing. though the term can be used to identify sales transactions between businesses (also referred to as 152 ANNA UNIVERSITY CHENNAI . Also. In addition. Parcel delivery. Another example is the extension of EDI-type links via the Internet. frequently by the same firm. they represent only the beginning of what is expected to be a wide number of new business-to-business opportunities. Dispensing with the multiple networks and protocols that now link first-tier suppliers to OEMs. there is greater demand by final consumers for fast order fulfillment and the ability to track an order as it is being processed and delivered. which is another company. as the completed product is retailed to the end customer. new business—to-business products are being created which did not. in a typical supply chain there will be many B2B transactions but only one B2C transaction. or could not. The accessibility of the Internet makes electronic commerce realistic possibility for SMEs and is likely to lead to its widespread diffusion. are also experiencing growth as ecommerce increases. because many large business already have EDT’ systems in place. B2B can also describe marketing activities between businesses. GM. spot markets that match buyers and sellers for a wide variety of goods ranging from electronic components to agricultural commodities to transportation futures have sprung up. logistics and order fulfillment services.DBA 1727 NOTES suppliers to each other and to original equipment manufacturers (OEM) (e.

petrochemicals. Business-to – business EC is expected to grow to $1.2 percent in 1997 to 2. “Business-to-business” can also refer to all transactions made in an industry value chain before the finished product is sold to the end consumer. and other partners. performance measures. The percentage of Internet – based B2B EC compared to total B2B commerce will expand from. commitments. sales history Customer – sales history and forecasts Supplier – product line and lead times. Retter and Calyniuk 1998). food. promotions Supply chain process and performance – process descriptions. suppliers. carrying costs.4 percent in2003. costs Inventory – inventory levels. delivery time. As Handfield and Nichols (1999) suggest. schedules Competitor – benchmarking. shipping and warehousing. utilities. quality. resellers. prices. motor vehicles. paper and office products. partner roles and responsibilities. while business – to – consumer electronic commerce implies that the buyers are individual consumers. 2. and agriculture are the leading items in B2B EC. Business-to-business EC covers a broad spectrum of applications that enable an enterprise or business to form electronic relationships with their distributors. lead times.5. locations Supply chain alliance – key contacts.E-COMMERCE TECHNOLOGY AND MANAGEMENT “institutional sales”).330. sales terms and conditions Product process – capacities. market share Sales and marketing – point of seal (POS) . Computing electronics. product plans Transportation – carriers.1 percent in 2000 and 9. B2B applications will offer enterprises access to the following sorts of information:           Product – specifications. competitive product offerings.3 Characteristics of B2B EC Business – to – business electronic commerce implies that both the sellers and buyers are Business Corporation. For example.9 billion by 2003 and continue to be the major share of the EC market (Free-man 1998. a company selling photocopiers would more likely be a B2B sales organization than a B2C sales organization. customer satisfaction NOTES 153 ANNA UNIVERSITY CHENNAI .

supported by a number of secondary messages. and make sure you have all the infrastructure in place to support each stage of 154 ANNA UNIVERSITY CHENNAI . public relations. branding.5. Developing your messages The next step is to develop your messages. The Business Marketing Association is the trade organization that serves B2B marketing professionals. direct mail. sales collateral. often complicated by a longer sales cycle and multiple decision makers on the buyer’s side. It was founded in 1922 and offers certification programs.4 What is B2B Marketing Communications? B2B marketing communications is how businesses promote their products and services to other businesses using tactics other than direct sales. The purpose of B2B marketing communications is to support the marketer’s sales effort and improve company profitability. industry awards and training programs. trade show support. conferences. There is usually a primary message that conveys more strongly to your customers what you do and the benefit it offers to them. research services. Building a campaign plan Whatever form your B2B marketing campaign will take. each of which may have a number of supporting arguments. B2B Marketing Methodologies Positioning Statement An important first step in business to business marketing is the development of your positioning statement. facts and figures. B2B marketing communications tactics generally include advertising. build a comprehensive plan up front to target resources where you believe they will deliver the best return on investment. B2B marketing is generally considered to be more complex than B2C marketing.DBA 1727 NOTES 2. This is a statement of what you do and how you do it differently and better than your competitors. and interactive services such as website design and search engine optimization.

An approach like UN/CEFACT’s Modeling Methodology (UMM) might be used to capture the collaborative space of B2B business processes. 2. corporate guidelines.5 E-Marketplace “E-” or “electronic” marketplace in a business-to-business context is primarily a large online platform (B2B portal) or website that facilitates interaction and/or transactions between buyers and suppliers at organizational or institutional rather than individual levels.and that doesn’t just include developing the lead . Since the builders of such marketplaces primarily aim at facilitating buyer-seller interaction (in most cases without being a buyer or seller themselves). it serves as a checklist of all the important things to consider as part of your brief. RosettaNet is an XML-based. product. Typical elements to an agency brief are: Your objectives. campaign description. As well as focusing the agency on what’s important to you and your campaign. Cost per Lead or tangible changes in customer perception. emerging B2B standard in the high tech industry. target market. 155 NOTES ANNA UNIVERSITY CHENNAI . Briefing an agency A standard briefing document is usually a good idea for briefing an agency. measure your impact upon your desired objectives. you’re not in the business of developing marketing campaigns for marketing sake. be it Cost Per Acquisition. and any other supporting material and distribution. After all. Measuring results The real value in results measurement is in tying the marketing campaign back to business results. ANSI ASC X12 is a popular standard in North America. these are also referred to as “third-party” B2B marketplaces. So always put metrics in place to measure your campaigns. your product positioning. B2B standards UN/EDIFACT is one of the most well-known and established B2B standards.E-COMMERCE TECHNOLOGY AND MANAGEMENT the marketing process . and if at all possible. graphical considerations. target audience.make sure the entire organization is geared up to handle the inquiries appropriately.5.

which greatly increases collaboration. Therefore e-commerce is not well no where near the advanced technology that us in organizations use now a days. thereby reducing the need for outsourcing many products. Mainly business and consumer articles. these items are in demand because they are crucial to the daily running of a business. inventories and cycle times. No-frills e-Marketplace Developed in response to customers wanting to purchase products without service (or with very limited service). Help the environment by using appropriate technology that is environmentally friendly Vertical e-Marketplace A vertical e-marketplace spans up and down every segment of one specific industry. Help reduce the time and cost of interaction for B2B transactions 3. E-commerce has a variety of different opinions going out towards different people in different organization that are committed to such technology. regardless of industry and level within that industry. Help manage payments and track orders for B2B transactions 5. Buyers and sellers in the industry are connected to increase operating efficiency and decrease supply chain costs. The subject of several Harvard and IMD articles/case-studies. Help increase the greenhouse gas emissions in the country 7. the no-frills e-marketplace parallels the B2C offering of no-frills budget airlines. repair and operations) materials. The most common type of materials traded horizontally are MRO (maintenance. Horizontal e-Marketplace A horizontal e-marketplace connects buyers and sellers across many industries. Help buyers find new suppliers and vice versa 2. no-frills B2B e-marketplaces enable the effective de-bundling of service from product via 156 ANNA UNIVERSITY CHENNAI . Help increase trade between distant geographies 4.DBA 1727 NOTES These marketplaces can do one or more of the following: 1. This is possible because buying/selling items in a single industry standardizes needs. Each level of the industry has access to every other level. Many corporations have MRO materials bought directly on-line by the maintenance team in order to relieve the purchasing department. Help reduce the number of profits after tax 6.

Coding and structuring the documents for business transactions is no easy matter. Let’s start with EDI Standards. The essence of EDI is the coding and structuring of the data into a common and generally accepted format -anything less is nothing more than a system of file-transfers.E-COMMERCE TECHNOLOGY AND MANAGEMENT clear “business rules. 2. It eventually came to be used in marketing as well. EDI Standards At the heart of any EDI application is the EDI standard. There have been a number of EDI standards developed in various industry sectors or within a specific country and there are complex committee structures and procedures to support them. It cuts the cost of managing business-to-business transactions by eliminating the need for labor-intensive manual generation and processing of documents. However. today it is widely used to describe all products and services used by enterprises. Electronic data interchange (EDI) is a technology poised for explosive growth in use as the Internet provides an affordable way for businesses to connect and exchange documents with customers and suppliers of any size. These elements together with the EDI Agreement are covered in detail in this lecture. data. Etymology The term “business-to-business” was originally coined to describe the electronic communication relations between businesses or enterprises in order to distinguish it from the communications between businesses and consumers (B2C). initially describing only industrial or capital goods marketing. EDI is the electronic exchange of business documents. the EDI networks and the EDI software that interfaces these two elements and the business applications.6 EDI Standards EDI stands for Electronic Data Interchange.” This provides the basis of differentiation from conventional B2B sales/purchasing channels. and other information in a public-standard format. In this lecture we will discuss the EDI standards. NOTES 157 ANNA UNIVERSITY CHENNAI . This is one of the applications of E Commerce which makes Business to Business transactions possible over a network.5.

receiving computer system. To illustrate this. with relative ease. The computer systems that exchange data need a common format. without a common format the data is meaningless. Two organizations that exchange data can. This is the standard that should be adopted for any new EDI application. agree a format that meets their mutual needs. As the network of exchanges develops then the number of organizations needing to be party to the agreement grows. EDI provides an electronic linkage between two trading partners. 158 ANNA UNIVERSITY CHENNAI .DBA 1727 NOTES Following on from the various sectorial and national EDI standards is the United Nations (UN) EDI Standard: EDIFACT. transmitted or transported in electronic format and input into the second. Business transactions are output from the sending computer system. It is unlikely that each of these exchanges would have its own format but it is perfectly possible that each customer would have developed its own standards (giving each supplier three separate standards to cope with). assume a network of three customers (say supermarkets) ordering goods from four suppliers (food manufacturers). see Interchanges between Customers and Suppliers. The network in is 12 separate interchanges.

2. The evolution of EDI standards can be seen as having three stages (although in practice it was and is somewhat more complex than that): 1. a standard for data interchange that is:     Ready formulated and available for use. EDI standards overcome these difficulties. The concept of EDI as an application independent interchange standard evolved and several industry sector and / or national standards bodies developed EDI standards to meet the needs of a specific user community. Most of the work on EDI standards has been concerned with the interchange of trade documentation and financial transactions but the principle applies to any interchange where the data can be systematized and codified. National and Sectorial Standards Evolution of EDI Standards The first EDI standards evolved from the formats used for file transfer of data between computer applications. Independent of the special interest of any party in the trading network. The data recipients set the standard and the customers conformed to it. EDI standards are used for the interchange of information as diverse as weather station readings and school exam results. 159 ANNA UNIVERSITY CHENNAI . Independent of hardware and software. Now let’s see how the various standards evolve. The first formats that might properly be called EDI were developed by organizations that had to process data from a large number of customer organizations. NOTES EDI Standards provide a common language for the interchange of standard transactions. The EDI standard provides. or attempts to provide.E-COMMERCE TECHNOLOGY AND MANAGEMENT It is also possible that new exchanges added to the system will have requirements not envisaged when the data formats were originally agreed. this would require a change to the existing standard or the introduction of an additional standard. The overall picture is one of unnecessary complexity and incompatibility. Comprehensive in its coverage of the data requirements for any given transaction.

etc. The requirements of international and cross sector trade meant that the sector and national standards were becoming an impediment to the further development of electronic trading. To facilitate this cross sector and international development of EDI the EDIFACT standard has been.5. as a universal standard for commercial EDI. and returned products quickly and easily. Weirton steel Corp. The use of sector and national standards for this type of trade was satisfactory. For example. obsolete. In addition to the problem of cross sector trade there is a desire to use EDI for international trade.DBA 1727 NOTES 3. EDIFACT is the United Nations standard of Electronic Data 2. EDIFACT was developed. under the auspices of the United Nations (UN). However. New venue for disposing of excess. . customs authorities.TO . International trade also requires a great deal of additional documentation for shipping.7 Business . invoice. developed. This (sensibly) requires a common format for the exchange of the standard business forms (order. and is being.all of this is potentially electronic and obviously a common format is very desirable.Business Actions Business – to-business auctions are growing very rapidly due to the following benefits they provide: Generating Revenue   New sales channel that supports existing online sales. 160 ANNA UNIVERSITY CHENNAI .) between organisations in differing countries. international credit arrangements. The International EDI Standard As already outlined. EDI developed in closed user communities within trade sectors and / or national boundaries. as electronic trade developed to cover wider trading relationships there is a growing problem of trade between organisations using different EDI standards. doubled its customer base when it started auctions. etc.

There are three major types of B2B auctions according to Forrester Research: 1. Several companies by pass the intermediaries and auction their products by themselves.com.autionblock. utilities.com.com. Auction users spend more time on a site and generate more page views than other users. 161 ANNA UNIVERSITY CHENNAI .E-COMMERCE TECHNOLOGY AND MANAGEMENT Increasing Page Views  Auctions give “stickiness”. www.8 Business – TO – Business Services Many companies provide services that are intended to facilitate B2B. For example. Ingram Micro has its own site.band – x.fastparts. and telecommunications are sold at www. 2.com). www.net and www. In this case many buyers and sellers come together to a third – party Web site.fairmarket.metalsite. The Dutch flower market is another example. others by specialists.com. (e. Commodity auctions. www. 3. Some of these services are provided by intermediaries. NOTES Acquiring and Retaining Members  All bidding transactions result in additional registered members. and www. access energy. In this case companies use a third – party auctioneer to create the site and sell the goods. It targets promoting and supporting emerging communities of EC.com. CommerceNet established a forum for companies doing EC to meet and exchange their experiences.g.imx exchange. for selling obsolete computer equipment to its regular business customers. Private auctions by invitation only. Typical intermediaries are www.5. Independent auctions. while introducing the latest technology to them to facilitate their business. Here are some examples.net) is a global non-profit membership organization that aims to meet the needs of companies doing EC.auctionagate. 2..commerce. CommerceNet CommerceNet (www.

not dealing with any of the individual transactions. CommerceNet mainly acts as a services provider. catalogue retailing. EC and Retailing: Retailing is expected to change with the rapid development of new online sales and distribution channels that literally can be used from anywhere. Open Buying on the Internet The Open Buying on the Internet (OBI) Consortium (www. Summary 1. technology providers.openbuy. is open to buying and selling organizations. The service is now as part of www. a hotel. an independent collaborative managed by CommerceNet. school. anytime-from work. However. operated by Thomas Publishing Co.DBA 1727 NOTES It does contain information about members. allowing companies to search for suppliers anywhere in the world.geis. which are difficult to audit. These developments should impact retailing as much as the advent of strip malls. and other interested parties on an annual fee basis. or airplane. In fact. ConnectUS provides all the necessary information that supports card purchasing and facilities trades done EDI. which can be buyer or supplier companies. 162 ANNA UNIVERSITY CHENNAI .com and www. The service may cut up to 90 percent of the transaction cost for the average ($150) purchase. Membership in the consortium. no specific product information is stored in its database.com systems. ConnectUS also aids companies in overcoming the shortfalls of purchasing card programs. car. ConnectUS ConnectUS is an online service designed for use by companies paying with corporate purchasing cards. and General Electric Information Systems. and TVbased home shopping.thomasregister.org) is a non-profit organization dedicated to developing open standards for B2B Internet commerce. financial institutions. CommerceNet also certifies Internet-enabled EDI products. sometimes resulting in vendor overpayment. It is basically for – fee database.

Speed. E-Services: The delivery of services via the internet to consumers or other businesses can be referred to by the generic term of e-services. etc We organize e-services into the following categories. there is an enormous groundswell of interest among both commercial and corporate publishers in the Web.E-COMMERCE TECHNOLOGY AND MANAGEMENT 2. but judging from recent product offerings. NOTES 3. E-commerce Sales strategy: There are several major advantages to developing an e-commerce sales strategy: Efficiency. Up-to-date Status and Alerts. rapid deregulation of many parts of finance. computer games. consultancy advice. 163 ANNA UNIVERSITY CHENNAI . loans. EC and On-line publishing: The Web may have blossomed because of peer-topeer publishing. 4. and basic economic restructuring. There are several models for e-retailing and these include Specialized e-store Generalized e-store E-mall Direct selling by the manufacturer Supplementary distribution channel E-broker E-services Internet Marketing: Internet marketing is the process of building and maintaining customer relation-ships through online activities to facilitate the exchange of ideas. and services that satisfy the goals of both parties. and on-line delivery of media content such as videos. education. There is a wide range of eservices currently offered through the internet and these include banking. Entertainment services. Convenience. Low Cost Entry. Global Reach. products. Specialized services such as auctions EC in Banking: The role of electronic commerce in banking is multifaceted impacted by changes in technology. the emergence of new banking institutions. real estate. Matchmaking services. 5. Accuracy. insurance. namely Web-enabling services. 7. on-line publishing. jobs and career sites. 6. stock trading. travel. broker services.

which can extend from the supplier of raw materials to the final consumer.DBA 1727 NOTES 8. 13. 14. 2. 16.added chain. 10. accounting for about 80 per cent at present. 5. 3. 8. 12. Questions for review 1. 7. 15. 9. 6. What is E-Marketplace in a B2B EC? Discuss B2B auctions and B2B services 164 ANNA UNIVERSITY CHENNAI . 11. Business for business dominates the total value of ecommerce activity. 4. How do you differentiate between traditional and E retailing? What are the benefits of E retailing for a customer? What are the benefits of E retailing for a business? Describe the several models of E-retailing? What is Internet Marketing? What are the E-Business issues? What is CRM? What are the critical success factors for internet marketing executives/? Discuss about the wide variety of E-Services? How do you find E-education to be better than the traditional one? What are the advantages of E-banking? What is On-line banking? Discuss the management issues in On-Line banking? Discuss about on-line publishing and its strategies What is B2B EC? List the characteristics of B2B EC. B2B EC: In business-to-business electronic commerce businesses use the Internet to integrate the value.

along with various others including e-mail. The World Wide Web is one of the services accessible via the Internet. ). online gaming and others described below. and government networks.1 What is the Internet? The Internet is a worldwide. business. which together carry various information and services.E-COMMERCE TECHNOLOGY AND MANAGEMENT UNIT III NOTES E-COMMERCE INFRASTRUCTURE 3. online chat. file transfer. The Internet is a collection of interconnected computer networks. the Web is a collection of interconnected documents and other resources. and the interlinked web pages and other resources of the World Wide Web (WWW). file sharing.1 INTERNET 3.1. etc. It supports:  Multimedia Information (text. America Online. . publicly accessible series of interconnected computer networks that transmit data by packet switching using the standard Internet Protocol (IP). sound. The Internet and the World Wide Web are not synonymous. are examples of Internet service providers. wireless connections. Earthlink. academic. pictures. They allow you to send and receive data to and from their computers or routers which are connected to the Internet. linked by hyperlinks and URLs. In contrast. It is a “network of networks” that consists of millions of smaller domestic. . etc. 165 ANNA UNIVERSITY CHENNAI . fiber-optic cables. movies. linked by copper wires. programs . such as electronic mail. They make it physically possible for you to send and access data from the Internet. Comcast. World Wide Web is an example of an information protocol/service that can be used to send and receive information over the Internet.

Internet Explorer. from the Internet for free. The server software for the World Wide Web is called an HTTP server (or informally a Web server). Second. Firefox. Netscape Navigator. you can obtain access once you have three things.  One popular component of the Internet is electronic mail. The first part of the address (. government offices. the Internet also allows organizations and individuals to post information about themselves so that others can see it. you need a browser. In addition to allowing people to send e-mail messages to one another. which usually looks so mething like this: mark. Schools. usually Internet Explorer. Many new computers have built-in modems. For example. or ISP. First. You also can download another popular browser. a device that allows you to connect your computer with the Internet.edu. such as America Online or Carolina Online. many companies post pictures and descriptions on World 166 ANNA UNIVERSITY CHENNAI .2 Internet Structure The Internet is an international network of computers connected by wires such as telephone lines. businesses.mark. Examples are Apache and IIS. and many homes use the Internet to communicate with one another.canada) specifies the individual user.1. or e-mail. You also may have access at home or in your residence hall. Safari. you need a computer and a modem. In general. These examples are particular “brands” of software that have a similar function. each of these people has an e-mail address. Examples are: Netscape. which people at separate locations can use to send messages to one another. Finally. just like Lotus 123 and Excel are both spreadsheet software packages.edu). and Mozilla. You have access to the Internet when you work in one of this university’s computer labs. a piece of software that allows you to view information on the Internet. 3. you need to subscribe to an Internet Service Provider. The client software for World Wide Web is called a Web browser. If not.canada@uncp.DBA 1727 NOTES   Hypertext Information (information that contains links to other information resources) Graphic User Interface (so users can point and click to request information instead of typing in text commands). Many new computers also come with a browser. and the rest of the address refers to the server (uncp. which is a computer that can store a lot of information.

Originally a military communication’s network it is now routinely used for five types of operations: (i) long-distance transactions (e. (iii) data storage. Whenever you finished a new article. First. name of your directory (name of your folder). Technological neutrality. NOTES 167 ANNA UNIVERSITY CHENNAI . who would then place it in your folder.e. The Internet is a dynamic and mercurial system endowed with a number of traits.1. (iv) research (i. they need your Web address.  In fact. and the filename of the particular Web page (name of article). who would assign you a folder where they would store your articles. When people want to read your Web page (article). The company (librarian) then assigns you a directory (folder) where it will store your Web pages (articles). you can set up your own World Wide Web site by reserving space on a server.3 The Internet and its Characteristics The Internet by the late 1990s has evolved into a complex environment. you would put a name on it and send it to the librarians. These are: 1.  When they supplied this information.  The World Wide Web works the same way. the name of your folder. (ii) interpersonal communication.  The URL consists of the domain name of the server (address of the library). When people wanted to read one of these articles. remote work. They may run on various operating systems and utilise a great variety of communication links. and the name of the specific article they want to read. The Internet joins together computers of various sizes and architectures. 3. you give it a filename (name) and publish it on the server (send it to the library). form-filling. (v) remote data access and downloading. First you need to identify an Internet company (librarian) and ask permission to save Web pages (articles) on its server (library).E-COMMERCE TECHNOLOGY AND MANAGEMENT Wide Web sites. sometimes called a Uniform Resource Locator. e-commerce. data finding). As you create each Web page (article). you would need to obtain permission from the librarians. entertainment). the librarian would give them the article they want. they would need to know the address of the library. To understand how this process works.g. imagine that you wanted to store some articles you have written at a library so that people could come and read them. or URL.

Internet operations piggyback on already existing solutions. File Transfer Protocol.4 The Internet Tools and their Characteristics The evolution of the Internet is punctuated by the introduction and mass acceptance of such key resources and tools as Unix. Internet Relay Chat. 4. These conceptual and procedural debts are: multitasking. It is an energetic. modularisation and low cost of the system is coupled with the growing densities of dedicated computer lines. They rely on modularised. WAIS. Listserv Mailing List Software. Internet culture owes Unix a major debt in the four areas. Built-in piecemeal change and evolution. Low cost. The Internet is not a one-off development. and the sturdiness of related software are designed to eliminate errors. The Internet makes new uses of old technologies (standalone computers. 168 ANNA UNIVERSITY CHENNAI . and more recently by the Altavista search engine. and easy-to-upgrade off-the-shelf software and hardware. complex. Whenever possible. and public access to the source code. All basic technical features of the Net such as the TCP/IP (transfer control protocol/internet protocol) (Kessler and Shepard 1997). easy-to-replace. as well as wired and wireless phone networks.1. 5. Unix is not a product of Internet culture. WWW. Robustness and reliability. Telnet. openness and extensibility. operating systems. polycentric. the multiplicity of routes followed by the packet-switched data. It is its catalyst and cornerstone. telecommunication networks). Java language UNIX The foundations of an operating system called Unix were laid at AT&T Bell Laboratories in 1969. network backbones. Ubiquity. Email. Usenet newsgroups. This means that Internet-enabled tools are deployed in ever growing numbers in an ever widening range of environments 3. to advise users of encountered difficulties and to recover gracefully from any disasters and down-times.DBA 1727 NOTES 2. It is a system which scales up extremely well. 3. Let’s briefly look at each of these debts. It is a network which is geared to expansion and growth. to handle unexpected interruptions and interferences. growing. and self-refining system. community fostering. configurable. Gopher. The robustness.

E-COMMERCE TECHNOLOGY AND MANAGEMENT Unix was one of the first operating systems which embodied the principle of multitasking (time-sharing). It was to be used by people who did not have ready access to the TCP/IP protocol and yet wanted to discuss their various Unix tools. numbers and graphic files. It was only in 1987 that the NNTP (Network News Transfer Protocol) was established in order to enable Usenet to be carried on the Internet (i. TCP/IP) networks (Laursen 1997). the wide-area array of sites collating and swapping UUCP-based messages was pioneered in 1979. simple and global communication between people. This revolutionary client/server software implied for the first time that individuals (both as persons and roles) could have their unique electronic addresses. In most general terms it means that several users could simultaneously operate within a single environment and that the system as a whole coped well with this complicated situation. Unix was the first operating system which demonstrated in practical terms robustness and tolerance for the variety of it’s users simultaneous activities. Usenet Newsgroups Usenet (Unix Users Network). with the use of multi-recipient mailing lists electronic mail could be used for simple multicasting of messages in the form of one-to-many transmissions. The initial format of email communication was that of a one-to-one exchange of electronic messages. Usenet was originally conceived as a surrogate for the Internet (then called ARPANET). Email Email is the first of the Internet’s tools dedicated to the provision of fast. such as documents with complex formatting. NOTES 169 ANNA UNIVERSITY CHENNAI .e. This simple function was subsequently augmented by email’s ability to handle various attachments. Within this framework messages were now able to chase their individual recipients anywhere in the world. Later.

image files). Thirdly. that is. text files. There they could browse through data subdirectories. 170 ANNA UNIVERSITY CHENNAI . Its usefulness to Internet culture is three-fold.e. Moreover. results of all these and other operations could be remotely directed to a printer or via FTP to another networked computer. Usenet flame wars indulged in. ability to do the work as telecommuters.g. However. Firstly. distributed information system. nor did the visitors have the right to change any component part of the accessed electronic archive. limited public access) techniques as a way of coping with the mounting general requests for access to the archived information. electronic mail read and dispatched. as well as deposit (within the context of a dedicated area) new digital material.all at a distance. the FTP software would not let them wander across other parts of the host. the rapid proliferation in the number of public access FTP archives all over the world necessitated techniques for keeping an authoritative. programs. albeit encumbered by the need to give explicit instructions as to which of the FTP systems need to be monitored. copy relevant files. 1995) and its many mirrors.DBA 1727 NOTES Telnet The networking tool called Telnet was invented in 1980 (Postel 1980). nevertheless integrated a motley collection of online resources into a single. FTP archives promoted the use of anonymous login (i. Telnet gave us the ability to engage in long distance man-machine transactions. In short. File Transfer Protocol The FTP client/server technology was first introduced in 1985 (Barnes 1997). renamed and deleted. That novel technique placed electronic visitors in a strictly circumscribed work environment. Thereby files and directories could be established. This approach. It allowed people (with adequate access rights) to login remotely into any networked computer in the world and to employ the usual gamut of computer commands. This was accomplished through the Archie database (Deutsch et al. and statistical packages run against numeric data . Secondly. Archie used an automated process which periodically scanned the entire contents of all known “anonymous FTP” sites and report findings back to its central database. up-to-date catalogue of their contents. cohesive. the FTP was a first widely-accepted tool for systematic permanent storage and world-wide transmission of substantial electronic information (e.

Hypertext itself is not an new idea. the WWW server introduced to the Internet the powerful point-and-click hypertext capabilities. This invention was previously theoretically anticipated by a number of writers. compiled in 1674 by Louis Moreriego. or John Harris’ Lexicon Technicum which was published in 1704 (PWN 1964). commentaries.5 Web based Client/Server Gopher Gopher client/server software was used for the first time in 1991 (La Tour nd. Secondly. The WWW however.E-COMMERCE TECHNOLOGY AND MANAGEMENT 3.1. Liu. of a 19th century scholarly monograph. Berners-Lee 1998). The hypertext principle as employed by the WWW server meant that any part of any text (and subsequently. World Wide Web Server The first prototype of the WWW server was built in 1991 (Cailliau 1995. image) document could act as a portal leading directly to any other nominated segment of any other document anywhere in the world. Firstly. Gopher acted as electronic glue which seamlessly linked together archipelagos of information tracked by and referenced by other gopher systems. such as footnotes. BernersLee. such as Telnet. It was a ground-breaking development on two accounts. and infinitely extendable information space. It is also evident in the apparatus. nd. et al. Firstly. The WWW server is an invention which has redefined the way the Internet is visualized by its users. standalone scale in 1986 in the Macintosh software called Hypercard (Goodman 1987). it acted as a predictable. and again in the 1965 by Theodor Nelson who embarked on the never-completed Project Xanadu (Nielsen 1995. was the first hypertext technology applied to distributed online information. large-scale. 171 NOTES ANNA UNIVERSITY CHENNAI . C. unified environment for handling an array of other electronic tools. It is already implicitly present (albeit in an imperfect because a paperbased form) in the first alphabetically ordered dictionaries such as Grand dictionnaire historique. 1994). appendices and references. Gopher was the first ever tool capable of the creation and mapping of a rich. FTP and WAIS. The hypertext notions of a home page and links spanning the entire body of data was first successfully employed on a small. In short. Gilster 1997:267). including in the 1945 by Vannevar Bush of the Memex fame.

the World Wide Web. However. This situation has changed only with the introduction of PC-based Web browsers with user-friendly. Erwise. The HTML language could be used in three different yet complementary ways: (a) as a tool for establishing the logical structure of a document. Moreover. Telnet-based client software). several editions of Netscape and Explorer Each of the Web browsers. was also a powerful electronic glue which smoothly integrated not only most of the existing Internet tools (Email. text. Viola. Usenet. (b) as a tool for shaping the size. have laid foundations for today’s global. blindingly fast and infinitely complex cyberspace. IRC. except for Lynx. surprisingly. the WWW server introduced an explicit address for subsets of information. effective and extendable language for document markup. Telnet.with the same ease . video. but also the whole body of online information which could accessed by all those tools. (b) the 172 ANNA UNIVERSITY CHENNAI . which constitutes a deliberately simplified and thus very fast software. Common and simple addressing methodology (Universal Resource Locater [URL] scheme) enabled users to uniquely identify AND access any piece of networked information anywhere in the document. URLs and the markup language. World Wide Web Browsers The principle of a client/server division of labour was put to work yet again in the form of a series of WWW browsers such as Mosaic (built in 1993). or anywhere on one’s computer. simple. The interlocking features of the hypertext. Thirdly.DBA 1727 NOTES Secondly. These are: (a) an ability to handle multi-format. appearance and layout of lines of text on the page. Lynx (which is an ASCII. provided Internauts with series of novel capabilities. or . graphics-interfaces.anywhere in the world. the WWW provided a common. sound) data within the framework of a single online document. the revolutionary strengths of the Web have not been immediately obvious to the most of the Internet community. and Gopher (but. since 1994. Listservs FTP. as well as. animations. who initially regarded the WWW as a mere (and possibly clumsy) variant of the then popular Gopher technology. or multimedia (numbers. like gopher before it. Cello. not WAIS). (c) as a tool for building the internal (i. images.e. within the same document) and external (to a different document residing on the same or totally different server) hypertext connections.

The application layer of the Internet suite essentially combines the functions of the top two layers . The Application Layer in the Internet protocol suite also includes some of the function relegated to the Session Layer in the OSI Reference Model.6 Elements of Internet Architecture     Protocol Layering Networks Routers Addressing Architecture NOTES Protocol Layering To communicate using the Internet system. We distinguish two categories of application layer protocols: user protocols that provide service directly to users. 3. and support protocols that provide common system functions. The protocol layers used in the Internet architecture are as follows Application Layer The Application Layer is the top layer of the Internet protocol suite. The most common Internet user protocols are: 173 ANNA UNIVERSITY CHENNAI . (d) ability to acquire.of the OSI Reference Model [ARCH:8]. although some application layer protocols do contain some internal sub-layering. A host typically must implement at least one protocol from each layer. a host must implement the layered set of protocols comprising the Internet protocol suite.E-COMMERCE TECHNOLOGY AND MANAGEMENT ability to configure and modify the appearance of received information in a manner which best suits the preferences of the reader.1. The Internet suite does not further subdivide the Application Layer. save and display the full HTML source code for any and all of the published web documents. (c) the ability to use the browser as a WYSIWYG (“what you see is what you get”) tool for crafting and proofreading of the locally created HTML pages on a user’s PC.Presentation and Application .

and management include SNMP. Transport Layer The Transport Layer provides end-to-end communication services. except that it also incorporates some of OSI’s Session Layer establishment and destruction functions. or not at all. This layer is roughly equivalent to the Transport Layer in the OSI Reference Model. UDP is a connectionless (datagram) transport service.DBA 1727 NOTES    Telnet (remote login) FTP (file transfer) SMTP (electronic mail delivery) There are a number of other standardized user protocols and many private user protocols. used for host name mapping. duplicated. BOOTP. IP is a connectionless or datagram internetwork service. 174 ANNA UNIVERSITY CHENNAI . fragmentation and reassembly. booting. There are two primary Transport Layer protocols at present:   Transmission Control Protocol (TCP) User Datagram Protocol (UDP) TCP is a reliable connection-oriented transport service that provides end-to-end reliability. and security. resequencing. Support protocols. TFTP. and the set of official Internet transport protocols may be expanded in the future. Internet Layer All Internet transport protocols use the Internet Protocol (IP) to carry data from source host to destination host. type-of-service specification. providing no end-to-end delivery guarantees. the Domain Name System (DNS) protocol. and a variety of routing protocols. IP datagrams may arrive at the destination host damaged. and flow control. The IP protocol includes provision for addressing. Other transport protocols have been developed by the research community. The layers above IP are responsible for reliable delivery service when it is required. out of order.

normally electrical or optical. Protocols in this Layer are generally outside the scope of Internet standardization. the Internet (intentionally) uses existing standards whenever possible.it uses IP to carry its data end-to-end. and first-hop router redirection. We call this a Link Layer protocol. This layer contains everything below the Internet Layer and above the Physical Layer (which is the media connectivity. Some older Internet documents refer to this layer as the Network Layer. The Internet Control Message Protocol (ICMP) is a control protocol that is considered to be an integral part of IP. Internet Link Layer standards usually address only address resolution and rules for transmitting IP packets over specific Link Layer protocols. NOTES 175 ANNA UNIVERSITY CHENNAI .E-COMMERCE TECHNOLOGY AND MANAGEMENT The datagram or connectionless nature of IP is a fundamental and characteristic feature of the Internet architecture. ICMP provides error reporting. Link Layer To communicate on a directly connected network. Its responsibility is the correct delivery of messages. a host must implement the communication protocol used to interface to that network. The Internet Group Management Protocol (IGMP) is an Internet layer protocol used for establishing dynamic host groups for IP multicasting. but it is not the same as the Network Layer in the OSI Reference Model. congestion reporting. among which it does not differentiate. which encodes and transports messages). Thus. although it is architecturally layered upon IP .

Constituent networks may generally be divided into two classes:  Local-Area Networks (LANs) LANs may have a variety of designs. and/or contain errors. the extra reliability provided by virtual circuits enhances the end-end robustness of the system. In this document. represented by IP subnets or unnumbered point to point lines . According to the IP service specification. also called long-haul networks.DBA 1727 NOTES Networks The constituent networks of the Internet system are required to provide only packet (connectionless) transport. LANs may be passive (similar to Ethernet) or they may be active (such as ATM). TCP). LANs normally cover a small geographical area (e. but is not necessary for Internet operation. In networks providing connection-oriented service. the loss rate of the network should be very low. This specification applies to routers regardless of how they are implemented. For reasonable performance of the protocols that use IP (e. These networks may have a complex internal structure of lines and packetswitches.  Routers In the Internet model. Many older Internet documents refer to routers as gateways. constituent networks are connected together by IP datagram forwarders which are called routers or IP routers. special purpose hardware is becoming increasingly common. as custom hardware development becomes cheaper and as higher throughput is required. However.g. Forwarding an IP datagram generally requires the router to choose the address and relevant interface of 176 ANNA UNIVERSITY CHENNAI . be lost or duplicated... Thus.g. or they may be as simple as point-to-point lines. routers have been realized with packet-switching software executing on a general-purpose CPU. datagrams can be delivered out of order. Historically. a single building or plant site) and provide high bandwidth with low delays. Wide-Area Networks (WANs) Geographically dispersed hosts and LANs are interconnected by wide-area networks. A router connects to two or more logical interfaces. every use of the term router is equivalent to IP router. it has at least one physical interface.

The routing database should be maintained dynamically to reflect the current topology of the Internet system. where the information never leaves the corporate or organization’s network. if anyone considers it important enough. as discussed above. and occasionally accessing. The World Wide Web Many people use the terms Internet and World Wide Web (or just the Web) interchangeably. are much more secure. but.1. 3. Network segments that are connected by bridges share the same IP network prefix forming a single IP subnet. A router normally accomplishes this by participating in distributed routing and reachability algorithms with other routers. The route database is also called a routing table or forwarding table. During this time it is quite possible for the content to be read and even tampered with by third parties. although in any organization there will be IT and other personnel whose job may involve monitoring. routing protocols and configuration interact in a process called routing. 177 NOTES ANNA UNIVERSITY CHENNAI . such devices are usually called bridges. Even today it can be important to distinguish between Internet and internal e-mail systems. This choice. called relaying or forwarding depends upon a route database within the router. and they seek to minimize the state information necessary to sustain this service in the interest of routing flexibility and robustness.7 Common uses of the Internet E-mail The concept of sending electronic text messages between parties in a way analogous to mailing letters or memos predates the creation of the Internet. These other devices are outside the scope of this document. The term “router” derives from the process of building this route database. Internet e-mail may travel and be stored unencrypted on many other networks and machines out of both the sender’s and the recipient’s control. Purely internal or intranet mail systems. Packet switching devices may also operate at the Link Layer. Routers provide datagram transport only. the two terms are not synonymous.E-COMMERCE TECHNOLOGY AND MANAGEMENT the next-hop router or (for the final hop) the destination host. the e-mail of other employees not addressed to them.

access web pages and allow users to navigate from one to another via hyperlinks. of these resources to deliver them as required using HTTP (Hypertext Transfer Protocol). Compared to encyclopedias and traditional libraries. instant access to a vast and diverse amount of online information. It is also easier. millions of people worldwide have easy. web browsers. Collections of personal web pages published by large service providers remain popular. Publishing and maintaining large. than ever before for individuals and organizations to publish ideas and information to an extremely large audience. sounds. using the Web. Web documents may contain almost any combination of computer data including photographs. and have become increasingly sophisticated. One example of this practice is Microsoft.DBA 1727 NOTES The World Wide Web is a huge set of interlinked documents. however. professional websites full of attractive. In normal use. and be attracted to the corporation as a result. which are largely used as easily updatable online diaries. Web services also use HTTP to allow software systems to communicate in order to share and exchange business logic and data. images and other resources. Many individuals and some companies and groups use “web logs” or blogs. office applications and scientific demonstrations. the World Wide Web has enabled a sudden and extreme decentralization of information and data. Through keyword-driven Internet research using search engines like Yahoo! and Google. graphics. These hyperlinks and URLs allow the web servers and other machines that store originals. Some commercial organizations encourage staff to fill them with advice on their areas of specialization in the hope that visitors will be impressed by the expert knowledge and free information. video. whose product developers publish their personal blogs in order to pique the public’s interest in their work. diverse and up-to-date information is still a difficult and expensive proposition. text. such as Internet Explorer and Firefox. HTTP is only one of the communication protocols used on the Internet. and cached copies. multimedia and interactive content including games. Software products that can access the resources of the Web are correctly termed user agents. Whereas operations such as Angelfire 178 ANNA UNIVERSITY CHENNAI . linked by hyperlinks and URLs. Anyone can find ways to publish a web page or build a website for very little initial cost.

Advertising on popular web pages can be lucrative. Contributors to these systems. but the cost of private leased lines would have made many of them infeasible in practice. These operations often brand themselves as social network services rather than simply as web page hosts. Facebook and MySpace currently have large followings. can open a remote desktop session into his normal office PC using a secure Virtual Private Network (VPN) connection via the Internet. for example. including e-mail and other applications. websites are more often created using content management system (CMS) or wiki software with. on a server situated in a third country that is remotely maintained by IT specialists in a fourth. wherever they may be across the world. This is encouraging new ways of working from home. collaboration and information sharing in many industries. More recently. very little content. 179 NOTES ANNA UNIVERSITY CHENNAI . and e-commerce or the sale of products and services directly via the Web continues to grow. An accountant sitting at home can audit the books of a company based in another country. depending on the requirements. members of a club or other organization or members of the public. newer offerings from. based on information e-mailed to them from offices all over the world. An office worker away from his desk. initially. These accounts could have been created by home-working bookkeepers. who may be paid staff. This gives the worker complete access to all of his or her normal files and data. while away from the office. There may or may not be editorial. Remote access The Internet allows computer users to connect to other computers and information stores easily. while casual visitors view and read this content in its final HTML form. perhaps on the other side of the world on a business trip or a holiday. They may do this with or without the use of security. fill underlying databases with content using editing pages designed for that purpose. authentication and encryption technologies. In the early days. approval and security systems built into the process of taking newly entered content and making it available to the target visitors. web pages were usually created as sets of complete and isolated HTML text files stored on a web server.E-COMMERCE TECHNOLOGY AND MANAGEMENT and GeoCities have existed since the early days of the Web. in other remote locations. Some of these things were possible before the widespread use of the Internet.

allow colleagues to stay in touch in a very convenient way when working at their computers during the day. Extension to these systems may allow files to be exchanged. 180 ANNA UNIVERSITY CHENNAI . An example of this is the free software movement in software development. or via instant messaging systems.org (formerly known as Netscape Communicator and StarOffice). whether in the form of IRC “chat rooms” or channels. “whiteboard” drawings to be shared as well as voice and video contact between team members. because it extends the secure perimeter of a corporate network into its employees’ homes. but also provides security for the workers. The load of bulk downloads to many users can be eased by the use of “mirror” servers or peer-to-peer networks. It can be uploaded to a website or FTP server for easy download by others. Version control systems allow collaborating teams to work on shared sets of documents without either accidentally overwriting each other’s work or having members wait until they get “sent” documents to be able to add their thoughts and changes. Loose Change and Endgame have had extensive coverage on the Internet. Collaboration The low cost and nearly instantaneous sharing of ideas. File sharing A computer file can be e-mailed to customers. while being virtually ignored in the mainstream media. Not only can a group cheaply communicate and test. It can be put into a “shared location” or onto a file server for instant use by colleagues. Internet “chat”. but the wide reach of the Internet allows such groups to easily form in the first place. colleagues and friends as an attachment.DBA 1727 NOTES This concept is also referred to by some network security people as the Virtual Private Nightmare. knowledge. Films such as Zeitgeist. which produced GNU and Linux from scratch and has taken over development of Mozilla and OpenOffice. even among niche interests. and skills has made collaborative work dramatically easier. this has been the source of some notable security breaches. Messages can be sent and viewed even more quickly and conveniently than via e-mail.

E-COMMERCE TECHNOLOGY AND MANAGEMENT In any of these cases. Classic Clips and Listen Again features. with little censorship or licensing control. are changing the basis for the production. and money may change hands before or after access to the file is given. This means that an Internet-connected device. Pod casting is a variation on this theme. conference planning. software products. The price can be paid by the remote charging of funds from. Streaming media Many existing radio and television broadcasters provide Internet “feeds” of their live audio and video streams (for example. where—usually audio—material is first downloaded in full and then may be played back on a computer or shifted to a digital audio player to be listened to on the move. This includes all manner of print publications. The range of material is much wider. a credit card whose details are also passed— hopefully fully encrypted—across the Internet. software development. the BBC). While some webcams can give full-frame-rate video. video. Internet collaboration technology enables business and project teams to share documents. the picture is usually either small or NOTES 181 ANNA UNIVERSITY CHENNAI . for example. over a worldwide basis. film. Such collaboration occurs in a wide variety of areas including scientific research. The origin and authenticity of the file received may be checked by digital signatures or by MD5 or other message digests. calendars and other information. These providers have been joined by a range of pure Internet “broadcasters” who never had on-air licenses. They may also allow time-shift viewing or listening such as Preview. access to the file may be controlled by user authentication. can be used to access on-line media in much the same way as was previously possible only with a television or radio receiver. the transit of the file over the Internet may be obscured by encryption. photography. and distribution of anything that can be reduced to a computer file for transmission. This in turn has caused seismic shifts in each of the existing industries that previously controlled the production and distribution of these products. These techniques using simple equipment allow anybody. to broadcast audio-visual material on a worldwide basis. political activism and creative writing. These simple features of the Internet. such as a computer or something more specific. technical web casts. news. graphics and the other arts. sale. Webcams can be seen as an even lower-budget extension of this phenomenon. from pornography to highly specialized. music.

000. and remote controllable webcams are also popular. sometimes described as an Internet phenomenon because of the vast amount of users and how rapidly the site’s popularity has grown.000 new videos are uploaded every day. VoIP can be free or cost much less than a normal telephone call. Remaining problems for VoIP include emergency telephone number dialling and reliability. Traditional phones are line-powered and operate during a power failure. 2005. VoIP does not do so without a backup power source for the electronics. It is currently estimated that there are 64. Thus. Voice telephony (VoIP) VoIP stands for Voice over IP.DBA 1727 NOTES updates slowly. a few VoIP providers provide an emergency service. Internet users can watch animals around an African waterhole. The benefit is that. live and in real time. video conferencing. 182 ANNA UNIVERSITY CHENNAI . but it is not universally available. Currently. It is now the leading website for free streaming video. You Tube. if users do sign up they are able to upload an unlimited amount of videos and they are given their own personal profile. VoIP is maturing into a viable alternative to traditional telephones. inexpensive VoIP modems are now available that eliminate the need for a PC. especially over long distances and especially for those with always-on Internet connections such as cable or ADSL. This phenomenon began as an optional two-way voice extension to some of the instant messaging systems that took off around the year 2000. was founded on February 15. Users are able to watch videos without signing up. It uses a flash-based web player which streams video files in the format FLV. ships in the Panama Canal. with and without two-way sound. as the Internet carries the actual voice traffic. Voice quality can still vary from call to call but is often equal to and can even exceed that of traditional calls.000 videos on YouTube. In recent years many VoIP systems have become as easy to use and as convenient as a normal telephone. Simple. Interoperability between different providers has improved and the ability to call or receive a call from a traditional telephone is available. and it is also currently estimated that 825. the traffic at a local roundabout or their own premises. Video chat rooms. however. where IP refers to the Internet Protocol that underlies all Internet communication. Many uses can be found for personal webcams in and around the home.

or even an entire city can be enabled. online payment etc. in some cases just for brief use while standing. Chicago and Pittsburgh.E-COMMERCE TECHNOLOGY AND MANAGEMENT Most VoIP providers offer unlimited national calling. Commercial Wi-Fi services covering large city areas are in place in London. where would-be users need to bring their own wireless-enabled devices such as a laptop or PDA. Web browsers such as Opera are available on these advanced 183 NOTES ANNA UNIVERSITY CHENNAI . Various terms are used. though these are usually fee-based. there have been experiments with proprietary mobile wireless networks like Ricochet. A whole campus or park. Grassroots efforts have led to wireless community networks. bank deposit. as a form of communication between players. Vienna. Wi-Fi. and therefore can do so to the Internet itself. Toronto. satellite and 3G technology cell phones. The PlayStation 3 and Xbox 360 also offer VoIP chat features. Apart from Wi-Fi. or fee-based. “public access terminal”. free to customers only. Internet access Common methods of home access include dial-up. Many hotels now also have public terminals. These services may be free to all. VoIP has also become increasingly popular within the gaming world. such as “public Internet kiosk”. Popular gaming VoIP clients include Ventrilo and Teamspeak. These terminals are widely accessed for various usage like ticket booking. High-end mobile phones such as smartphones generally come with Internet access through the phone network. where computers with Internet connections are available. Wi-Fi provides wireless access to computer networks. Hotspots providing such access include WiFi cafes. and there are others available also. Philadelphia. various high-speed data services over cellular phone networks. and fixed wireless services. Public places to use the Internet include libraries and Internet cafes. There are also Internet access points in many public places such as airport halls and coffee shops. and “Web payphone”. A hotspot need not be limited to a confined location. San Francisco. fiber optic or copper wires). The Internet can then be accessed from such places as a park bench. landline broadband (over coaxial cable. but the direction in VoIP is clearly toward global coverage with unlimited minutes for a low monthly fee.

An Internet access provider and protocol matrix differentiates the methods used to get online. also known as e-commerce. The Internet has also greatly facilitated personalized marketing which allows a company to market a product to a specific person or a specific group of people more so than any other advertising medium. a person can order a CD online and receive it in the mail within a couple of days.8 Marketing The Internet has also become a large market for companies.1. or download it directly in some cases. Many of these users are young teens and adolescents ranging from 13 to 25 years old. 3. It is the fastest way to spread information to a vast number of people simultaneously. The Internet has also subsequently revolutionized shopping—for example. 3. and advertise their own companies’ products to those users.DBA 1727 NOTES handsets. which can also run a wide variety of other Internet software.9 Online Internet Business Models The outward signs of a robust and thriving business are:      Revenue increases Ability to generate profits Success in creating meaningful alliances Success in expanding into new markets Differentiating itself from other business models 184 ANNA UNIVERSITY CHENNAI . which online marketing companies can use as information as to what those users will purchase online. Orkut. Friendster. More mobile phones have Internet access than PCs.1. though this is not as widely used. Examples of personalized marketing include online communities such as MySpace. In turn. Facebook and others which thousands of Internet users join to advertise themselves and make friends online. some of the biggest companies today have grown by taking advantage of the efficient nature of low-cost advertising and commerce through the Internet. when they advertise themselves they advertise interests and hobbies.

banner and direct marketing Subscription sites Customer services Directory services Content providers Product sales Most successful companies pursue several related but different models concurrently. Let’s take a look at some of the top e-businesses in the field today:        E-Bay HomeStore.com DoubleClick.E-COMMERCE TECHNOLOGY AND MANAGEMENT What are the key areas that a profitable web site needs to concentrate on?          Develop a unique e-business website Control the product line Introduce new products on a regular basis Ensure easy and reliable credit-card payment methods Provide customer-friendly policies On-time delivery Keep promises Develop a clever marketing strategy Be the best in your field NOTES Existing business models are of many kinds:       Advertising .com Oracle CISCO Amazon.com YAHOO! 185 ANNA UNIVERSITY CHENNAI . They defy easy categorization by diversifying revenue streams and becoming hybrids in a cost-efficient way.

To summarize. It has transformed auctions that were limited to garage sales and flea markets into highly evolved emarketplaces. their business model can be elucidated thus:        Automation of traditional methods of selling unique items Reliability in mode of payments Customer friendly company Professional services in addition to just plain selling of goods Global reach Regional diversification Successful advertising 186 ANNA UNIVERSITY CHENNAI . certain high quality goods can be sold at prices fixed by the seller. Priceline. where credit-card payment facilities are secure and easy. automobiles and even auto insurance.7 million registered users today. Adopting an amazing and unique culture. it has 29. from antiques and jewelry to computers. A widespread global reach makes its easy for a buyer in Hong Kong to bid and buy a product from a seller in Paris while the regional sites in North America are able to offer hard-to-ship merchandise. Person-to-person trading and a barter economy have established the company on a secure B2B and B2C platform. Apart from bidding. Selling just about anything. the company projects a trustworthy and reliable image. a site that offers airline tickets on discount has begun experimenting quite successfully with this business model. where buyers and sellers of all items are allowed to post their comments online. Other companies like Yahoo! and Excite have been quick to catch on and incorporate auctions into their sites.com.DBA 1727 NOTES EBAY A company that has emerged unscathed from the recent dot-com bust with profits soaring to almost 400% and revenues doubling in the past one year. This site also offers professional services for all kinds of business needs.

6% of all online visitors. Internet business models like the Biz Online Initiative that deliver simple and complete online services and a host of other tools that customers require in setting up an e-business model. Innovative products and services and integration of these services have brought them into the forefront of web innovation today. Homestore.COM Statistics have revealed that realty sites account for about 9. home improvement tips. Subscription sites that allow users access to a regularly updated online database of any kind for a fee are fast evolving into healthy and strong e-businesses. Is that all? No.com’s internet business model allows prospective buyers to review properties before buying. NOTES 187 ANNA UNIVERSITY CHENNAI . As a subscription site they picked a specific topic which a segment of the population would be passionate about and marketed their services through strategic advertising. It registered a growth of 252% at one stage. Homestore. and buyer’s guides to homes and household items. ORACLE This software and service provider entered the digitized world only in 1998. and metamorphosed into a digital pioneer in the span of two years.28 million customers in January 2001 and is listed among the Fortune top e-50.com is a company that has dominated the real estate field with 3. Their main revenue came in from subscriptions (52%) and the remaining from advertising. online loans. remodeling. have made them a one stop shop for e-businesses today. they also offer financial advice.E-COMMERCE TECHNOLOGY AND MANAGEMENT HOMESTORE. Useful advice when moving home and tips on resettling has ensured user satisfaction to the core. Consulting services with major firms like Sun Professional Systems have established their reliability with customers. and safety and security aspects. employees and suppliers improved productivity and accuracy and brought down costs by 100’s of millions of dollars. Their built-in self-service system for customers.

e-Bay and Merril Lynch. 188 ANNA UNIVERSITY CHENNAI . a personal touch from another era. the latest being its investments in an optical equipment company and speech recognition software makers. They have become the worldwide leaders in networking for the Internet today. Their business model could be termed an acquisition one! AMAZON. 90% of their sales are conducted over the Internet. This e-tailer cultivates relationships that lead to customers liking and trusting them. They offer expertise in planning and executing Internet enabled solutions. The company has grown in the past 7 years with 71 acquisitions to its credit. tracks their tastes and uses this information to create a unique customer experience. bandwidth on demand. security monitoring. an Internet data center that offers a range of web hosting services.COM The customer is King here! Amazon pampers their customers. Amazon brought in the world of successful oneto-one marketing. They are expanding from 19 data centers to 34 data centers this year.DBA 1727 NOTES Their business formula:      Innovative products and packages Integration of internal processes Exemplary customer service . This kind of service surpasses the most brilliant technology in use today. They allow these firms to deliver content and applications online round the clock without fail.a user friendly web site that connects customers easily Fast online e-business services Expert consultancy service Another company using a similar business model is Exodus Communications. CISCO Cisco develops switches and routers for Local Area Networks (LAN) and Wireless Area Networks (WAN) and the related software. Their servers host leading web sites like Yahoo!. 35% of their revenue comes from a very successful e-business consulting firm whom they have partnered with (Sapient).

Online ads possess tremendous communication powers.macromedia. technology.networldsolutions. Abacus is one of the largest databases of buyer behavior in about 90 million households in the United States itself. Stu Heinecke Services. entertainment. www. using odd-shaped attention grabbing banners.E-COMMERCE TECHNOLOGY AND MANAGEMENT Recently though. Lycos. another famous online bookseller.net conducts online research to evaluate and understand online campaigns and strategies. are run separately. travel and health. CompuServe. including trading links with other sites. Online advertising is international advertising that gets a 24X7 exposure for much lesser costs. and hosting online chat are a sure fire way to get a response. increase sales. using a search component or a woman’s face in a banner ad. 189 NOTES ANNA UNIVERSITY CHENNAI . One of their divisions. Their direct marketing strategies use customer data to refine marketing messages and increase investment returns. Another division. exemplary customer service. successful online advertising and special discounted offers made Amazon and books synonymous terms today. www.palm. they have suffered heavy losses.COM This Fortune e-50 company offers a collection of premium sites for custom adbuys and sponsorships in various fields .net. To summarize. They help markets build brands.Business. a la Barnes and Noble. Banner ads placed on sites like CNN. Some of their clients include www. Although barnesandnoble.diameter.com and www.nasdaq. proving that any successful ebusiness strategy will survive provided it is based on a solid brick and mortar foundation. The web has proven to be an amazing vehicle for advertising and reaching millions without spending a dime on postage and printing. automobiles.com. They offer agencies plans to manage online campaigns.com and Barnes the Noble Ltd. DOUBLECLICK. Pathfinder and The New York Times showed that:      appropriate placement of the ad on specific targeted sites.com. a customer tends to associate trust and comfort in a known and established brand. an advertising solutions company used personalized cartoon direct mail and achieved response rates as high as 100%. www. maximize revenue and build one-to-one relationships with their customers.

great and innovative promotional ideas are an integral part of any e-success. Other search engines like Altavista. free news and information services. Smart thinking. As a result. Immediate success stopped them from evolving and developing other important aspects of e-business. clubs and auction stores has become the most popular directory in the web. 190 ANNA UNIVERSITY CHENNAI . Among the other successful dot-coms. Also. showing that generalized media doesn’t work compared to specialized media. sports and news. There is no doubt that in the near future. online ads. 1-800Flowers.a completely professional looking web site in all. it makes sense for entrepreneurs of all kinds to come up with ideas of generating income by marketing their products or services to these surfers. but they didn’t really check on what kind of ads worked online. Instead of spending on physical infrastructure they concentrated in increasing the volume of transactions.com. a beauty customization site outlasted other higher profile e-tailers in the business. But. Excite and Juno seem to have raked in more profits recently. video and audio. thus proving that the basic B2C business model is valid. Reflect. this year they have been forced to cut budgets and ads. banner ads. all of Yahoo’s content is owned by other sites and only licensed for their use. The value of this successful business model lies in its unique and easy categorization of all pages and subjects . Online advertising was the main revenue for Yahoo!. an average person anywhere in the world will surf the Internet more often than he or she watches television or uses the telephone. As a result.com blended telephone and Internet technologies. trends revealed that online e-brokers offer the best economic models among consumer-centered Internet companies. brilliant business plans. Competition in cyberspace may become even fiercer in the future and therefore the right business plan is what will eventually ensure long-term success.DBA 1727 NOTES YAHOO! The “operating system” of the net and a site for evolving search engines. a BPI (Buying Power Index) report reveals that more online buying and popularity of a site don’t go hand in hand.

2. the Internet Protocol and other protocols. An Intranet is a company-specific network that uses software programs based on the Internet TCP/IP protocol and common Internet user interfaces such as the web browser.2. Today. 3. an Intranet is the application of Internet technologies within an organization private LAN or WAN network. NOTES An Intranet is a company-wide network that is based on Internet technologies.2 INTRANET 3.2 TCP/IP protocol suite The TCP/IP protocol suite includes the Transport Control Protocol.E-COMMERCE TECHNOLOGY AND MANAGEMENT 3. The Intranet environment is completely owned by the enterprise and is generally not accessible from the Internet at large.1What is an Intranet? The Internet has captured world attention in recent years. The protocol suite manages all the information that moves 191 ANNA UNIVERSITY CHENNAI . growth of internal networks based on Internet technologies known as the Intranet is outpacing the growth of the global Internet itself. In reality. many Intranets are built around Web servers delivering HTML pages. Simply put.

The capability to exchange information across platforms is crucial.DBA 1727 NOTES across the Intranet and Internet and each protocol transferring data across the network uses a different format.3 The benefits of Intranets Cross-platform Many corporate computing environments use different computing platforms. companies can mix and match platforms as needed with no adverse effect on the overall environment. universal browsers such as Netscape Navigator and Microsoft Internet Explorer enable the users to perform the following tasks independent of the platforms used: 192 ANNA UNIVERSITY CHENNAI . anyone can use and develop new applications on top of TCP/IP. The Intranet enables companies to unify communication within a multi-platform environment. Commonly used TCP/IP protocols TCP/IP exists as an open standard.2.2. These protocols work together to transfer information across the network. It can manage almost all the network tasks on the Intranet and Internet and is also the only protocol required to ensure that the computer systems and communications and networking software are interoperable. Table 3.2. Hence.a summaries the common TCP/IP protocols. Within an Intranet. 3.

an employee can make a request for taking leave on an Intranet. booklets and flyers. geographical location and decentralized resources. Putting manuals on-line is an example of how a company can reduce paper consumption and hence costs. Intranets create global accessibility by bringing together individuals and resources from a distributed environment. The request form can be filled out and submitted electronically and can reach the concerned parties in seconds. Information can move much more quickly and effectively by removing the need for human intervention. Immediate delivery Information delivered using an Intranet becomes available almost instantaneously throughout the entire organization. pamphlets.E-COMMERCE TECHNOLOGY AND MANAGEMENT 1 2 3 4 create. customers and vendors are able to access information stored in multiple locations simultaneously. they are published electronically on the company’s Intranet. post sign-up sheets and schedules on the Intranet. Instead. such as printed pages. Most companies have found that hundreds of paper-based applications can be eliminated using Intranets. 193 ANNA UNIVERSITY CHENNAI . With HTML form-support. Employees. users may even fill out forms. view and revise documents. Reducing distribution cost By combining computing and communication in the same system. For example. distribute and update them. saving the resources needed to print. participate in discussions and news groups interact with multimedia presentation gain access to the Internet NOTES Breaking down the barriers Intranets dissolve the barriers of communication that are created by department walls. Intranets reduce distribution costs by eliminating the traditional paper-based internal corporate communication media.

At Sun Microsystems. send project documents electronically. 194 ANNA UNIVERSITY CHENNAI .DBA 1727 NOTES Increase internal communication Intranets greatly facilitate communication among employees. Many companies have designed their Intranet pages to look as similar to the Web pages as possible. for example. They can. Customers are no longer required to go through various layers of organizational hierarchies to reach those who build the products or provide the service. for example. create online forums on new policies and use videoconference to exchange ideas. Companies are able to build a long-lasting relationship with their customers. different departments are setting up their own servers to serve their customers directly. Employees in Hong Kong can communicate easily through e-mail with their counterparts in the United States. cities or countries. Individuals and groups can distribute their ideas to those who need it without having to go through the department traditionally responsible for the distribution of information. Employees can learn first hand on how customers feel about the company’s products and services. especially when they are located in different buildings. Minimal learning curve With the increase in popularity of the Internet and the World Wide Web. Getting the customers involved Involving the customers with a company’s Intranet will help that company’s focus move from being product driven to being more customer driven. training users to use the Intranet is easy as many people are already familiar with the Web interface and can translate that experience to Intranet use quickly.

providing access to information.2. but the track record so far has been mixed. Unlike traditional GroupWare products. Intranets use open systems to distribute information.E-COMMERCE TECHNOLOGY AND MANAGEMENT Open standards Internet technologies follow a set of open standards. The only per-client cost associated with Intranets is the cost of the browsers. particularly in cost and time savings. The growth of Internet technologies provides companies with a greater pool of resources to develop their own Intranets. 195 ANNA UNIVERSITY CHENNAI . which often charge on a per-client basis.5 Internet Architecture The corporate intranet has been hailed as the most important business tool since the typewriter. 3. Despite many successes. Scalability Since Intranets are based on Internet technologies. databases. web servers. etc. threaded discussion groups Multimedia using mime type Virtual private network over public Internet Internet Firewall Intranet NOTES 3. which facilitate software developers to develop cost effective and easy-to-implement Intranet solutions. many sponsors of corporate intranets are dissatisfied. traditional GroupWare products have a more limited range of compatible products and fewer specially trained consultants to install and administer them. size is not a limitation with Intranets.2. Users can choose from a number of vendors for software products. Conversely. scheduling.4 Basic intranet structure       Internet technologies used behind the corporate firewall or in private environment Internet standard mail.

” Management gurus are helping companies move away from vertical. Successful process-oriented intranets look and work as differently as the processes they enable. intranets should be organized primarily around the business processes they help employees carry out. The trouble is that this requires significant interaction between departments. 196 ANNA UNIVERSITY CHENNAI . Finally. able to easily locate company information. Intranets should help employees collaborate on business processes such as product development or order fulfillment. even countries. but still aren’t enjoying significant enough productivity or cost savings. hierarchical organizational lines towards horizontal. Focusing on processes rather than departments is a widely-hailed business trend. rather than the organizational chart of the company. Specifically. Recent shifts in corporate structure point to the emergence of “communities of process. the ideal vehicle for creating and empowering process-based corporate communities. but they share several common characteristics. Because the public doesn’t see the intranet. Second. Unlike customers. Successful intranets allow employees from a variety of departments to contribute the different skills necessary to carry out a particular process. process-oriented groups that link cross-functional teams focused on the same set of business tasks. an intranet needs to be carefully designed to help employees access information and collaborate effectively. and aim to integrate those tasks into distinct processes. So. employees are assumed to be insiders. not documents. Why? While critics often point to technological glitches. Don’t Overlook Design Just as physical work spaces rely on architectural plans to optimize efficiency. even intranet training. information design for intranets often receives scant attention. platformindependent virtual space. intranets centralize the business process in an easily accessible.DBA 1727 NOTES They have spent time and money on development. while the company Web site usually has the input of the marketing department. functions. Enter the intranet. the best intranets encourage collaboration by creating shared and familiar spaces that reflect the personality of the company and create a common ground for all employees. While each department of a company may have its own virtual space. the real problems may lie in information design. which create value for a company and its customers. First they are built on smart information design. design and structure of the intranet is often relegated to the IT department. Net-enabled desktops. they focus on tasks.

they can be more complex. Similarly. Tasks include fulfilling orders. intranets can contribute to dramatic increases in efficiency (as much as a 40% improvement in time spent processing documents..” both need to be next to each other in order to develop a new budget. It won’t allow employees from marketing and research and development to work together to create a new product. While important. When you sit down to begin a task (e. documents are usually a means to an end.g. looking up a customer’s billing history. information on various retirement plans (including links to financial Web sites) should be placed near the forms actually used to register for those plans. to save employee time while signing up for various retirement plans. The principal of organizing by task can be demonstrated by the example of working at a desk. people need to have related documents and tools close at hand. an organizational chart of the company is often used to organize information on the intranet. the tasks of the users rather than the classification of documents or tools. creating a budget). and last year’s budget is an “internal document. Organize Tasks Into Larger Processes Isolated tasks are usually part of a larger process. such as tracking deliveries.E-COMMERCE TECHNOLOGY AND MANAGEMENT By default. 197 NOTES ANNA UNIVERSITY CHENNAI . While seemingly the obvious candidate for the structure of the intranet. Organizing documents within the context of tasks also focuses employees on the function of the documents they are working with. Think About Tasks Rather Than Documents Thinking of the intranet as a tool means understanding the intranet as more than a collection of documents. An organizational chart can’t help employees from the marketing and legal departments collaborate on bringing a document through the approval process. or collaborating on a research document. To complete these tasks. on the corporate intranet. should dictate the organization of the intranet. you have a variety of information and tools at hand. People use documents to complete tasks. Designed effectively around dynamic tasks rather than static documents. according to the GIGA Group). Processes can be relatively discrete. For example. an organizational chart actually works against the collaboration the intranet is meant to foster. Or. or getting approval for documents. Intranets should group together all the tasks that make up a business process. While a spreadsheet is a “calculation” tool.

when Ford implemented an intranet. By creating spaces for cross-departmental collaboration. Intranets (and private extranets) can also bring together employees and partners who are geographically dispersed to work on common problems. For example. These are the central processes which every intranet should help employees accomplish. Even though the employees necessary to resolve the complaint work in different departments. expensive process. the company included an application to help geographically dispersed engineers to get authorization for new projects. sales and marketing department. Other applications for intranet collaboration include complex transactions with lawyers and multiple parties. is now centralized in an efficient electronic process. More complex processes can also be effectively integrated into an intranet. Each phase of the sales process is represented on the intranet with relevant information and tools. 198 ANNA UNIVERSITY CHENNAI . Even simple processes can become more efficient when incorporated into an intranet. So. and internal forms. For example. Organizing all steps of the sales process together also allows for easy tracking of each sales effort. For example. sample letters. A major franchise retailer is using bulletin boards on its intranet to coordinate major marketing projects. Create Virtual Workgroups Organized Around Processes Intranets can break though departmental walls to help accomplish business processes more efficiently. Travel costs are eliminated. involving the potential for lost documents and delays. the intranet can help employees collaborate to efficiently carry out the central processes of the company. they are all involved in the process of customer service. What would previously be a time-consuming. key documents. Cadence Systems created an integrated section of the intranet for its entire sales process. and modification of. and cut costs by avoiding in-person conferences and employee reallocations. For example. Caterpillar is developing an extranet application so that experts from around the world can collaborate with employees to design new products. The most important processes in a company are those that create value for a customer.DBA 1727 NOTES such as developing or selling products. which rely on access to. the section covering an initial stage of the sales process includes links to customer presentations. a pharmaceutical company is using its intranet to allow scientists all over the world to collaborate on research. a customer complaint might involve people and information from the accounting. and employees can increase their productivity by sharing knowledge.

marketing and customer service. For the intranet to be successful. is “in sync” with the company it works for. then. it must provide ways of empowering all employees. it will challenge traditional ways of doing work and obtaining information. software development time fell from twenty-two to eight months. Unless there is a clear commitment from senior management to have employees collaborate across departments to more efficiently accomplish key business processes. and encourage the use. An intranet that reflects the culture of its company will make employees feel more at home. and will encourage collaboration and communication around the processes they support. offering concrete incentives for employees to use. The Intranet Reflects the Company. When Texas Instruments initiated a process-centered organization. At the same time. As the intranet creates new forms of collaboration. NOTES 199 ANNA UNIVERSITY CHENNAI . oriented around collaborative work groups. of the intranet.E-COMMERCE TECHNOLOGY AND MANAGEMENT The bulk of discussion about collaboration in and between companies centers around security.and off-line. The Texas Instruments intranet was established after this shift. tone and standards emerge as vital to the intranet’s success. increase the efficiency of key business processes such as product development. shared. The unique imagery created a friendly. These. will help dispersed employees feel that they share the same space. What receives less attention-but is central to the value of an intranet-is the design of virtual spaces. Like it or not. marketing the intranet to employees remains essential. for example. which are amalgams of visual style. using an intranet to shift the way work is done in an organization requires a cultural change within the organization. Whether it precedes or follows the organizational shift. in turn. Turner Entertainment Group. created a distinctive. casual feel for its intranet with a home page that uses a refrigerator with magnates to represent the various divisions. tone and content. The process-oriented intranet. And this is where graphic design. an intranet that encourages this type of collaborative work environment can provide a significant return-on-investment. the intranet may have only limited application and benefit. certainly an important issue to resolve. and was designed to reflect and enhance the new organization. which encourage new forms of collaboration. the Company Reflects the Intranet The corporate intranet can help a company organize around “communities of process” both on. intranets have personalities. Even after the intranet is designed to encourage collaboration. familiar space for all employees.

secure global access to their data and applications. increasing employees’ ability to perform their jobs faster. and web front ends to large corporate and scientific databases. We also have experience of developing distributed applications deployed over the internet such as climateprediction. but are also available for PDAs and mobile phones. the world’s largest climate prediction experiment. Advantages of intranets 1. and the majority of our work has a web-based component. Any device which has a web browser can potentially utilize an internet/intranet application. These applications are no longer restricted to the traditional PC user running Windows.2. and with confidence that they have the right information. It also helps to improve the services provided to the users. With the help of a web browser interface.DBA 1727 NOTES 3. the Internet and its related technologies have provided new opportunities and new ways of doing business. We have worked on a variety of web-based systems which have fulfilled many different business roles. more accurately. including systems such as sophisticated workflow systems that help organizations manage their day to day business. Time: With intranets.subject to security provisions from anywhere within the company workstations. Workforce productivity: Intranets can help users to locate and view information faster and use applications relevant to their roles and responsibilities.net. Webbased systems have enabled organizations to provide maintainable. Tessella has acquired wide ranging experience of internet and intranet applications. anytime and . The ease of deployment over the web has made such applications very attractive for enterprise systems. users can access data held in any database the organization wants to make available. organizations can make more information available to employees on a “pull” basis (ie: employees can link to relevant information at a time which suits them) rather than being deluged indiscriminately by emails. The introduction of Web Services has widened the scope of web-based applications by allowing other systems to interact with them.6 Internet/Intranet Applications From blue-chip companies to one-person start-ups. 2. 200 ANNA UNIVERSITY CHENNAI .

Promote common corporate culture: Every user is viewing the same information within the Intranet. Cost-effective: Users can view information and data via web-browser rather than maintaining physical documents such as procedure manuals. 7.E-COMMERCE TECHNOLOGY AND MANAGEMENT 3. The type of information that can easily be conveyed is the purpose of the initiative and what the initiative is aiming to achieve. Communication: Intranets can serve as powerful tools for communication within an organization. 9. CGI applications). benefits documents. NOTES 4. Enhance Collaboration: With information easily accessible by all authorised users. Business operations and management: Intranets are also being used as a platform for developing and deploying applications to support business operations and decisions across the internetworked enterprise. internal phone list and requisition forms. Cross-platform Capability: Standards-compliant web browsers are available for Windows. and even training. can be accessed using common Internet standards (Acrobat files. Because each business unit can update the online copy of a document. Web publishing allows ‘cumbersome’ corporate knowledge to be maintained and easily accessed throughout the company using hypermedia and Web technologies. teamwork is enabled. business standards. intranets are useful to communicate strategic initiatives that have a global reach throughout the organization. Flash files. 6. 8. vertically and horizontally. results achieved to date. and who to speak to for more information. who is driving the initiative. By providing this information on the intranet. staff have the opportunity to keep up-todate with the strategic focus of the organization. company policies. the most recent version is always available to employees using the intranet. Mac. 5. and UNIX. Examples include: employee manuals. From a communications standpoint. newsfeeds. 201 ANNA UNIVERSITY CHENNAI .

e. but is managed by more than one company’s administrator(s). vendors.3 EXTRANET 3. that is. For example. An extranet can be viewed as part of a company’s Intranet that is extended to users outside the company (e. an intranet is a VPN under the control of a single company’s administrator(s). Briefly. One of the differences that characterized an extranet. military networks of different security levels may map onto a common military radio transmission system that never connects to the Internet. business-to-consumer (B2C) involves known server(s) of one or more companies. in isolation from all other Internet users. Any private network mapped onto a public one is a virtual private network (VPN)..DBA 1727 NOTES 3. the VPN is an extranet.g. communicating with previously unknown consumer users.1 What is an Extranet? An extranet is a private network that uses Internet protocols.g. In general. With respect to Internet Protocol networks.” 202 ANNA UNIVERSITY CHENNAI . If the various sites in a VPN are owned by different enterprises. In contrast. and possibly the public telecommunication system to securely share part of an organization’s information or operations with suppliers. in an intranet and several extranets. Even if this argument is valid. It has also been described as a “state of mind” in which the Internet is perceived as a way to do business with a pre approved set of other companies business-to-business (B2B). the VPN is a corporate intranet. interconnecting to each other to create private networks for sharing information. In contrast. RFC 4364 states “If all the sites in a VPN are owned by the same enterprise.: normally over the Internet). A site can be in more than one VPN. We regard both intranets and extranets as VPNs. customers or other businesses. an extranet can be understood as a private intranet mapped onto the Internet or some other transmission system not accessible to the general public. the term “extranet” is still applied and can be used to eliminate the use of the above description. network connectivity. when we use the term VPN we will not be distinguishing between intranets and extranets. is that its interconnections are over a shared network rather than through dedicated physical lines. partners. An argument has been made that “extranet” is just a buzzword for describing what institutions have been doing for decades.3. however.

geographically united organizations. Mozilla’s Firefox. These include the standardized techniques for transmitting and sharing information and the methods for encrypting and storing information. server management. Browser software uses relatively small amounts of memory and resources on a computer. more recently. encryption of messages.” Thus. and the use of virtual private networks (VPNs) that tunnel through the public network. or IP. customers. No messy and confounding installation disks. Similarly. That makes an application developed for a browser a snap to deploy. Users access Extranet information using a web browser like Microsoft Internet Explorer. An extranet requires security and privacy. the issuance and use of digital certificates or similar means of user authentication. but rather simply an authentication mechanism to a web server.2 Features of Extranet Extranets generally have the following features:  The use of Internet technologies and standards. for smaller.” Further. where “registered users” can navigate. “extranet” is a useful term to describe selective access to intranet systems granted to suppliers.” but to have a VPN. or other companies. The use of Web browsers. otherwise known as the Internet Protocol. they would need to provide tunneled access to that network for geographically distributed employees. The great thing about browsers is that an application written for a browser can be read on almost any computer without regard to operating system or manufacturer. Such access does not involve tunneling. fewer clogged hard drives. Two “sites” connected to each other across the public Internet backbone comprise a VPN. 3. the term “site” refers to a distinct networked environment. These can include firewalls. The term “site” does not mean “website. A browser on a user’s machine is all the software he or she needs to take full advantage of the Extranet application. Netscape Navigator or. 203 NOTES  ANNA UNIVERSITY CHENNAI . In this sense.E-COMMERCE TECHNOLOGY AND MANAGEMENT It is important to note that in the quote above from RFC 4364.3. a small company in a single building can have an “intranet. “intranet” also refers to just the web-connected portions of a “site. enabled by authentication mechanisms on a “login page”. an “extranet” designates the “private part” of a website.

The same type of construction-focused technologies have also been developed in the United States. By their very nature. In 2003 in the United Kingdom. Germany and Belgium.3. or NCCTP. several industries started to use the term “extranet” to describe central repositories of shared data made accessible via the web only to authorized members of particular work groups. project teams could login to and access a ‘project extranet’ to share drawings and documents. to promote the technologies and to establish data exchange standards between the different systems. While these are the broad attributes shared by most Extranets. Central Server/Repository. Extranets vary dramatically in their design and implementation. among others. etc. Some 204 ANNA UNIVERSITY CHENNAI . issue requests for information. For example. Members can access this information from any computer that has Internet access. Extranets usually have a central server where documents or data reside. Extranets are embroiled in concerns about security. like:   Sharing case information Sharing of case-related documents—many Extranets contain document repositories that can be searched and viewed by both lawyer and client online Calendaring—key dates and scheduling of hearings and trials can be shared on-line Providing firm contact information Acting as a “work flow engine” for various suppliers Providing access to firm resources remotely Sharing time and expense information      3.3 Industry use During the late 1990s and early 2000s. Australia. several of the leading vendors formed the Network of Construction Collaboration Technology Providers. make comments.DBA 1727 NOTES   Security. To protect the privacy of the information that is being transmitted. most Extranets use either secure communication lines or proven security and encryption technologies that have been developed for the Internet. Scandinavia. in the construction industry. They can be employed in a wide variety of environments and for very different purposes.

A properly developed extranet application provides the supply chain connection needed with customers and suppliers to dramatically lessen routine and time consuming communications. some of which are for pure file management. request customer service and much more. Also exist a variety of Open Source extranet applications and modules. Companies can use an extranet to:      Exchange large volumes of data using Electronic Data Interchange (EDI) Share product catalogs exclusively with wholesalers or those “in the trade” Collaborate with other companies on joint development efforts Jointly develop and use training programs with other companies Provide or access services provided by one company to a group of other companies.4 Extranet applications An extranet application is a software data application that provides limited access to your company’s internal data by outside users such as customers and suppliers. The limited access typically includes the ability to order products and services. Specially secured extranets are used to provide virtual data room services to companies in several sectors (including law and accountancy). such as an online banking application managed by one company on behalf of affiliated banks Share news of common interest exclusively with partner companies NOTES  3. Doing so frees up resources to concentrate on customer service and expansion as opposed to administrative office tasks such as data entry. which can be integrated into other online collaborative applications such as Content Management Systems. 205 ANNA UNIVERSITY CHENNAI .E-COMMERCE TECHNOLOGY AND MANAGEMENT applications are offered on a Software as a Service (SaaS) basis by vendors functioning as Application service providers (ASPs). check order status.3. and others which include broader collaboration and project management tools. There are a variety of commercial extranet applications.

System access needs to be carefully controlled to avoid sensitive information falling into the wrong hands. Common eCommerce models are direct online sales.: hardware. software.3.3. 3. this is similar to customers buying from a mail order catalog. Amazon. which hurts the business when it comes to loyalty of its business partners and customers 2.g. 3.com is a good example of a business using the direct sales model to gain revenue. 3. Extranets can be expensive to implement and maintain within an organization (e.DBA 1727 NOTES Just as intranets provide increased internal collaboration. Direct online sales model You can establish your website as your place of business and directly sell to those entering your “store” to make a purchase. Since delivery is often by mail. employee training costs) — if hosted internally instead of via an ASP. Security of extranets can be a big concern when dealing with valuable information. Software products. music and video files can be delivered to the customer through the downloading process. the business or revenue models are somewhat different than that of a “brick and mortar” business. selling online advertising space.5 Disadvantages 1.6 E-Commerce Business Models Since eCommerce consists of doing business online or electronically. 206 ANNA UNIVERSITY CHENNAI . and online commissions. This could cause a lack of connections made between people and a company. e-books. Extranets can reduce personal contact (face-to-face meetings) with customers and business partners. extranets provide increased efficiencies between your company and its customers and/or suppliers. Developing and implementing an extranet application can provide you the competitive edge to stay ahead of the competition in the eyes of your customers and a better ability to negotiate prices with your suppliers.

There are different business models underlying each website. Samuelsen considers affiliate 207 NOTES ANNA UNIVERSITY CHENNAI . uses web server software. related to the reach or number of viewers they have. taking them to the company’s website.6. so too can popular websites charge for the number of viewers seeing an ad. Someone must pay for the computers. Google gains a commission for ads placed on others’ websites. telecommunication charges. five distinct eCommerce business models form the basic structure for the wide variety of websites today. Free home pages fit into a business model. and must be maintained. [Editor’s Note: Mr. it holds true as much today as it ever has. First lets establish the fact that no site is free . software. A public site offered by a library. Free email service has a business model. and storefront sites. billboard. Every site in the entire world wide web has a business model. 3.1 Successful Ecommerce Business Models Five different ways websites can generate revenue by Robert Samuelsen “There’s no such thing as a free lunch!” While this simple economic aphorism seems to have been forgotten in the world of cyberspace. where they gain a commission for sales made through a company using the direct online sales model.E-COMMERCE TECHNOLOGY AND MANAGEMENT Online advertising space model Just as television and radio stations gain revenue from advertisements. advertising. Therefore. accesses telecommunication resources. The omnipresent cost either comes from your pocket or some benevolent benefactor. or university has a business model. school. The five categories are called vanity.3. Online companies such as eBay and PayPal charge a commission for their services. In actuality. The cost and potential revenue constitutes a business model. Online commission model Individuals and companies can also be established as affiliates. even the “free” sites have a business model. and time.every web site costs money. The web site is stored on a computer. subscriptions. A better method is to count the number of viewers that click on an ad.

with the actual purchase transaction occurring off-line. many sites combine several of the five identified business models. Revenue comes from creating awareness of its products or services via the web. advertising can be in the form of banners. with consumer viewership measuring value. success is measured on viewer ship as net citizens “surf” by and are influenced to purchase product. For eCommerce. communities.DBA 1727 NOTES programs to be a variant on the storefront model. 208 ANNA UNIVERSITY CHENNAI . reduced cost. some businesses feel this is the best way to avoid channel conflict’s potential pricing disparity between different supply chains. libraries. Therefore. The costs are borne either by the individual or by some altruistic enterprise such as universities. and other promotion methods. experts will prepare purchase pattern analyses providing advertisers with empirical data to support their promotion campaigns. radio. it is important to understand their differences. Nevertheless. to share a hobby. Advertising: Network television. These sites are often created by individuals as an outlet of self expression. These sites are created with no intentions of deriving revenue and no illusions of grandeur.] While not all drive revenue directly. sponsorships. Agencies conduct sophisticated surveys to measure the value and establish the pricing. It could be as simple as a one page family site or a complex forum on a specific topic. the costs are real of these “free” sites. or find others with similar interests. promote a cause. ezine ads. the lack of websavvy viewership statistics hindering the mass adoption by advertisers? As the knowledge of consumer behavior is further understood. associations. and even businesses. While there are a few sites that are entirely supported by advertising dollars. Economic benefit is created through the indirect purchase of goods or services from existing physical outlets and cost savings through the elimination of infrastructure or inefficiency. Each of the five models have unique characteristics which make it different from the other types. and many periodicals follow the advertising model. employment information. they all incur costs. All programming and content is funded by advertising dollars. In addition. This is a much-ballyhooed but still largely unproven model on the web. Just like a billboard on a highway. or public information. or both. Billboard: Billboard sites (also called brochure or information sites) are designed to derive economic benefit through indirect means from either referred sales. Finally. Vanity: Many web sites are started as vanity sites. Most corporate sites today put up these electronic brochures to provide information about their products.

On the web. With the understanding of the business models. With the business plan in hand. the subscription model caters to sites targeted to particular niches of individuals who have specific needs. there is no such thing as a free lunch. the subscription models are well established’ accepted by subscribers and nurtured by publishers. A website that offers products for sale is the electronic version of a catalog. Consumers will increasingly look to the web for physical commerce alternatives because of the limitlessness of the media both in terms of geography and shopping hours. provide a “shopping cart. a products-offered site is narrowly defined as a “true” eCommerce site. The subscriptions fund the development and maintenance of the site. For net entrepreneurs. financial projections can be easily created and business plans finalized. Payment through a credit card account is a common payment scheme for subscription sites because of the ability to periodically process the purchase transaction electronically. The primary characteristic of these types of sites is the ability to make a one time purchase with no future obligations. Although the vast majority of these sites offer tangible products. monthly. it is obvious that all five business models will remain viable for the near term. Subscriptions can be paid on a weekly. offer promotions. each model should be examined carefully to understand which model provides the maximum benefit.” and complete the purchase transaction. or annual basis. NOTES 209 ANNA UNIVERSITY CHENNAI . Storefront: To some people. the cyber enterprise arranges for product fulfillment including shipping and handling. you will realize even in cyberspace. These virtual storefronts are built to describe the offering with pictures and words. The fulfillment is sometimes completed by the website enterprise or directly from the manufacturer in a drop shipping arrangement. subscriptions are not yet widely accepted by consumers. Each model will continue to mature both in its acceptance and sophistication. Once the product is purchased. they can work for service products too. These sites are often specialized with expert content and timely information. Some manufacturers are now passing up the intermediary wholesalers and retailers by offering their products directly to consumers. Of those that are accepted. While it is impossible to predict the future in this fast moving media. This collapsing of the supply chain is called disintermediation.E-COMMERCE TECHNOLOGY AND MANAGEMENT Subscriptions: In other media.

such as electronic mail. Java language. Email.DBA 1727 NOTES Robert Samuelsen operates eVine Online. It is a “network of networks” that consists of millions of smaller domestic. and government networks. Internet Relay Chat. Usenet newsgroups. Gopher. academic. online chat. and finally. address books. which together carry various information and services. File Transfer Protocol. business. The Internet Tools and their Characteristics: The evolution of the Internet is punctuated by the introduction and mass acceptance of such key resources and tools as Unix. file transfer. Telnet. and more—all in a password protected family environment. publicly accessible series of interconnected computer networks that transmit data by packet switching using the standard Internet Protocol (IP).” Summary Internet: The Internet is a worldwide. discussion groups. and the interlinked web pages and other resources of the World Wide Web (WWW). the Elements of Internet Architecture  Protocol Layering Networks Routers  Addressing Architecture The outward signs of a robust and thriving business are:  Revenue increases  Ability to generate profits  Success in creating meaningful alliances  Success in expanding into new markets  Differentiating itself from other business models Intranet: An Intranet is a company-specific network that uses software programs based on the Internet TCP/IP protocol and common Internet user interfaces such as the 210 ANNA UNIVERSITY CHENNAI . WAIS. which he describes as “The web’s first family communication center featuring calendars. WWW. Listserv Mailing List Software. and more recently by the Altavista search engine. photo albums.

partners. customers or other businesses. Companies can use an extranet to:      Exchange large volumes of data using Electronic Data Interchange (EDI) Share product catalogs exclusively with wholesalers or those “in the trade” Collaborate with other companies on joint development efforts Jointly develop and use training programs with other companies Provide or access services provided by one company to a group of other companies. vendors. Simply put. an Intranet is the application of Internet technologies within an organization private LAN or WAN network. and online commissions. such as an online banking application managed by one company on behalf of affiliated banks Share news of common interest exclusively with partner companies  E-Commerce Business Models: Common eCommerce models are direct online sales. selling online advertising space. 211 ANNA UNIVERSITY CHENNAI . just point and click Saves time and money. and possibly the public telecommunication system to securely share part of an organization’s information or operations with suppliers. better information faster Based on open standards Scaleable and flexible Connects across disparate platforms Puts users in control of their data NOTES Extranet: An extranet is a private network that uses Internet protocols. network connectivity. Why are intranets popular        Inexpensive to implement Easy to use.E-COMMERCE TECHNOLOGY AND MANAGEMENT web browser.

6. What is an Internet? Explain its characteristics? List the Internet tools and explain its characteristics What is FTP? Explain web based Client/Server? Describe the elements of Internet architecture? Explain the uses of Internet? What are the key areas that a profitable web site needs to concentrate on? Discuss some successful companies that pursue different business models? What is an intranet? List the benefits of Intranet List the basic intranet structure Describe Internet architecture Discuss Internet/Intranet applications Discuss the integration of web technologies with business models What is an Extranet and list its features Describe the extranet applications Discuss E-Commerce Business models 212 ANNA UNIVERSITY CHENNAI . 17. 10. 15. 5. 3.DBA 1727 NOTES Questions for review 1. 7. 13. 4. 9. 16. 2. 14. 8. 11. 12.

1 Electronic Payment Systems Electronic payment is an integral part of electronic commerce.E-COMMERCE TECHNOLOGY AND MANAGEMENT NOTES UNIT IV E-COMMERCE PAYMENTS AND SECURITY 4. 213 ANNA UNIVERSITY CHENNAI . It is estimated that approximately 56 percent of consumer transactions in the United States are cash and 29 percent are check.1. Broadly de-fined. reduced operational and processing costs.1 ELECTRONIC PAYMENTS AND PROTOCOLS 4. electronic checks. debits. and banks are seeking less costly alternatives. and other electronic transactions account for about 15 percent of all consumer transactions. Three factors are stimulating interest among financial institutions in electronic payments:    decreasing technology costs. Cash and checks are very expensive to process. For the same period. Credits. and increasing online commerce. and are expected to increase rapidly. The content of this exchange is usually some form of digital financial instrument (such as encrypted credit card numbers. or by legal tender. paper transactions are forecast to show very modest growth. or digital cash) that is backed by a bank or an intermediary. The desire to reduce costs is one major reason for the increase in electronic payments. Electronic transactions numbered 33 billion in 1993 and are expected to climb to 118 billion by the year 2000. electronic payment is a financial exchange that takes place online between buyers and sellers. from 117 billion in 1993 to 135 billion in the year 2000.

retail. anywhere money needs to change hands.DBA 1727 NOTES Banks and retailers want to wean customers away from paper transactions because the processing overhead is both labor intensive and costly. and gradually came to be used as money. and the first applications-credit cards appeared soon after. effort. The solutions proposed to the online payment problem have been ad hoc at best. Banks faced similar problems in off-line commerce in the early nineteenth century.” on their browsers. Currently. Today. Research into electronic payment systems for consumers can be traced back to the 1940s. which entails extra time. sometimes known as “electronic wallets. 4. Currently. health care. users install client software packages. but a consistent and secure payment capability does not exist. and even government-in fact. the proliferation of incompatible electronic payment schemes has stifled electronic commerce in much the same way the split between Beta and VHS standards stifled the video industry’s growth in the 1970s. Banks are solving these problems all over again in an online environment.1. on-line markets.1 Types of Electronic Payment Systems Electronic payment systems are proliferating in banking. For instance. This software then communicates with “electronic cash registers” that run on merchants’ Web servers. The goal of online commerce is to develop a small set of payment methods that are widely used by consumers and widely accepted by merchants and banks. getting one bank to honor another’s notes was a major problem.1. Innovations in payment methods involved the creation of new financial instruments that relied on backing from governments or central banks. 214 ANNA UNIVERSITY CHENNAI . Each vendor’s client works with only that vendor’s own server software. and a recurrent problem was the tendency of some institutions to issue more notes than they had gold as backing. consumers can view an endless variety of products and services offered by vendors on the Internet. Many banks issued their own notes. merchants face the unappealing option of either picking one standard and alienating consumers not subscribing to a standard or needing to support multiple standards. and money. a rather restrictive scenario. In the early 1970s. in one method marketed by CyberCash. The crucial issue in electronic commerce revolves around how consumers will pay businesses online for various products and services. Organizations are motivated by the need to deliver products and services more cost effectively and to provide a higher quality of service to customers. Further.

g. DigiCash) Electronic checks (e. or authorize a financial institution to debit or credit an account.g.g.. VISA or MasterCard) Private label credit/debit cards (e. or computer or magnetic tape so as to order.g. telephonic instrument.g. Mondex Electronic Currency Card) o Credit card-based payment systems Encrypted credit cards (e... EFT is defined as “any transfer of funds initiated through an electronic terminal.” EFT utilizes computer and telecommunication components both to supply and to transfer money or financial assets..E-COMMERCE TECHNOLOGY AND MANAGEMENT the emerging electronic payment technology was labelled electronic funds transfer (EFT). automated teller machines and cash dispensers) Home banking (e. or airplane.g.. NetCheque) Smart cards or debit cards (e. Transfer is informationbased and intangible. World Wide Web form based encryption) Third-party authorization numbers (e.g.g.. J.C. First Virtual) 215 ANNA UNIVERSITY CHENNAI ...g.. bank-to-bank transfer) Small-scale or retail payments (e.g. instruct.g. bill payment) NOTES Retailing payments Credit cards (e.. Thus EFT stands in marked contrast to conventional money and payment modes that rely on physical delivery of cash or checks (or other paper orders to pay) by truck.. train. Penney Card) Charge cards (e. Work on EFT can be segmented into three broad categories: Banking and financial payments    Large-scale or wholesale payments (e. American Express) On-line electronic commerce payments o Token-based payment systems Electronic cash (e.

To date. it must be recognized that without subsidies. and a little ingenuity. Tomorrow’s bank robbers will need no getaway cars just a computer terminal. The problem with subsidies is the potential waste of resources. For example. separate accounts have been stored on separate databases. The biggest question concerns how customers will take to a paperless and (if not cashless) less-cash world.DBA 1727 NOTES 4. although designers are concentrating closely on security. settle conflicts. A “network banker”-someone to broker goods and services. The payment interface must be as easy to use as a telephone. from cash to bank payments. Intuitive interfaces. from paper-’based to e-cash. will be solved as technology is improved and experience is gained.     One fundamental issue is how to price payment system service. the welding of different payment users into different networks and different systems is impossible. giving users the ability to buy and receive information. A secure system verifies the identity of two-party transactions through “user authentication” and reserves flexibility to restrict information/services through access control. for example. Standards enable interoperability. The challenge before banks is to tie these databases together and to allow customers access to any of them while keeping the data up-to-date and error free. regardless of which bank is managing their money. Security. A user expects to trust in a secure system. On the other hand. None of these hurdles are insurmountable. Without standards. as money may be invested in systems that will not be used. experts hope. and facilitate financial transactions electronically-must be in place.1. Brokers. These technical problems. Millions of dollars have been embezzled by computer fraud. should subsidies be used to encourage users to shift from one form of payment to another.2 Designing Electronic Payment Systems  Privacy. the price of a telephone call. users value convenience more than anything. Thus investment in systems not only might not be recovered but substantial ongoing operational subsidies will also be necessary. it is difficult to price all services affordably. just as the telephone is a safe and private medium free of wiretaps and hackers. electronic communication must merit equal trust. Generally speaking. a customer wants to play with all his accounts. Most will be jumped within the next few years. · Standards. No systems are yet fool-proof. Database integration. With home banking. 216 ANNA UNIVERSITY CHENNAI .

SET defines the message format. and American Express) has established a company called SETCo (Secure Electronic Transaction LLC 1999). Since the interoperability of the cardholder’s digital wallet with any merchant’s software is essential. Electronic Wallet To achieve perfect security. Storage of Certificates If the private key and corresponding public key in a certificate are physically stored in the customer’s personal computer. encryption. The role of payment gateway is to connect the Internet and proprietary networks of banks. integrity. Microsoft. Netscape. storing the certificate in IC card seems to be the safest method. This company performs the interoperability test and issues a SET Mark as a confirmation of interoperability. JCB. the electronic wallet has to be downloaded into the buyer’s personal computer. To keep the consumer’s certificate in his or her personal computer or IC card. software called the electronic wallet. Each participating entity needs its own certificate. if the certificate is stored in an IC card.E-COMMERCE TECHNOLOGY AND MANAGEMENT 4. the customer can use the certificate only at the computer. SET protocol meets the four security requirements for EC as SSL(Secure Socket Layer) does: authentication. NOTES 217 ANNA UNIVERSITY CHENNAI .3 Secure Electronic Transaction (SET) Protocol SET protocol was initially designed by Visa and MasterCard in 1997 and has evolved since then. IBM. is necessary.1. and non repudiation. However. a consortium of companies (Visa. or digital wallet. Therefore. and procedure of message exchange as depicted in. To connect the dig-ital wallet with various merchants. Tandem. In addition. and MetaLand provide such interoperable digital wallets. certificate format. interoperability is a very important characteristic to meet. MasterCard. the wallet can work if the IC card is inserted into a card reader attached to a computer. VeriSign.

the SSL protocol may use a certificate but it does not include the concept of a payment gateway. Theoretically. Merchants need to receive both ordering information and credit card information because the capturing process initiated by the merchant. a relatively simple version of SSL is currently widely adopted. which integrates SET protocol with an IC card that can store multiple certificates. This scheme is called dual signature.DBA 1727 NOTES Overview of main messages in SET The International Center for Electronic Commerce (ICEC 1999) has developed a system named Smart-SET. a simple version of SSL is a very viable alternative. Until SET becomes popular. on the other hand. hides the customer’s credit card information from merchants and also hides the order information from banks to protect privacy. 218 ANNA UNIVERSITY CHENNAI . Secure socket layer protocol for electronic payment even though SET is a perfect solution for secure electronic payments. This is because SET protocol is complex and certificates are not widely distributed in a stable manner. The SET protocol.

SET provides the means to ensure that the contents of all order and payment messages received match the contents of messages sent. Digital signatures and digital certificates ensure consumer account authentication by providing a mechanism that links a consumer to a specific account number. SET designates a third party called a certificate authority to authenticate the sender and receiver. 219 NOTES ANNA UNIVERSITY CHENNAI . In order to eliminate this potential source of fraud and/or error.E-COMMERCE TECHNOLOGY AND MANAGEMENT 4. preventing interception of account numbers and expiration dates by unauthorized individuals. Merchant authentication is ensured by the use of digital signatures and merchant certificates. SET provides confidentiality by the use of message encryption. Payment information sent from consumers to merchants includes order information. credit card account and payment information must be se-cured as it travels across the network.3. If any component is altered in transit.1. Merchant Authentication The SET specifications provide a way for consumers to confirm that a merchant has a relationship with a financial institution that allows that merchant to accept bank card payments. Consumer Account Authentication Merchants need a way to verify that a consumer is a legitimate user of a valid account number. the transaction will not be processed accurately.1 What Features does SET Specify? The following objectives are addressed by SET specifications: Confidentiality of Information To facilitate and encourage financial transactions. and payment instructions. Information integrity is ensured by the use of digital signatures. it will be necessary for merchants and banks to assure consumers that their payment information is safe and accessible only by the intended recipient. Therefore. Integrity of Information SET ensures that message content is not altered during the transmission between originator and recipient. personal data.

Type of Computer Criminals  Hacker-is a person who has good knowledge about computers and tries to open the data packets and steal the information transmitted through the Internet.  A large system like Internet has many holes and crevices in which a determined person can easily find the way to get into any private network. Statistics show that only 10% of computer client is reported and only 2% of the reported client results in with convictions. The persons who uses the Internet and the Web to benefit themselves by doing illegal activities such as. ands must not prefer one over another. Any consumer with compliant software must be able to communicate with any merchant software that also meets the defined standard Interoperability by the use of standard protocols and message formats. information and causing damage to resources. There are many terms used to signify the computer criminals. illegal activity’ is inevitable. In this case the person has no intentions to do any damage or to steal any resources but tries to observe the system functionality.DBA 1727 NOTES Interoperability The SET specifications must be applicable on a variety of hardware and software platforms.1 Security Issues The Internet is a huge place that hosts several millions of people. There are two basic types of criminal activities:  The person who tries to understand and learn the various systems and capabilities of any private network. For example teenagers who tries to enter into a network out of curiosity till they are caught or deducted. 4. As all the people are not honest.2 SECURITY SCHEMES AGAINST INTERNET FRAUD 4.2. This type of criminal activity raises the concern for network security. 220 ANNA UNIVERSITY CHENNAI . stealing software’s.

This is possible specially. These persons enter into the network as authenticated users and can cause any harm to the system. in case of offshore servers where laws are more favorable to the criminal and enforcement will be very difficult.1 Encryption Encryption is a technique for hiding data. because one must host pages somewhere.E-COMMERCE TECHNOLOGY AND MANAGEMENT    Cracker-is someone who specifically breaks into computer systems by bypassing or by guessing login passwords. One of the reasons of misrepresentation is that on the net it is easy to appear as anyone or anything without the actual presence. These people specifically try to scam long distance phone-time for them to control phone switch capability or to hack company automated EBX systems to get free voice-mail accounts or to raid companies existing voice-mail messages. Nowadays various encryption techniques are available. With the rapid growth in use of Internet. For this reason. 4. most Web site providers examines sites and have access to the information that is been provided. creating a scam site is not as easy as it seems to be. NOTES Another major issue in the Internet security is misrepresentation and fraud.2 Security Schemes 4.2. which the dealer may not have them physically. The encrypted data can be read only by those users for whom it is intended. which makes the provider responsible for the content. The encryption and decryption algorithms are designed in a way so that only the private key can decrypt data that is encrypted by the public key. One of the available techniques commonly used for encryption is Public Key. In a Public Key encryption system each user has two keys-public key and private key. RSA Data Security of Redwood City offers the most popular and commercially available algorithm. A phracker breaks into phone systems and computer systems and specializes in total network destruction. Phreaks-are persons who hack phone systems. But at the same time. it is increasingly important for Web users to protect themselves. Phracker-is the combination of freak and cracker.2. shops site displaying goods. And the public key can 221 ANNA UNIVERSITY CHENNAI . For this reason. For example.2. In Public Key encryption system. in future the number of fraud cases in which perpetrators create their own provider site will probably increase.

Secretkey encryption works in the following way: Anne wishes to send a purchase order (PO) to Bob in such a way that only Bob can read it. involves the use of a shared key for both encryption by the transmitter and decryption by the receiver. Encryption scrambles the message. Broadly speaking. Anne encrypts the PO (the plaintext) with an encryption key and sends the encrypted PO (the cipher text) to Bob. particularly for military purposes.KEY ENCRYPTION I n t e r n e t Anne Encrypt Decrypt Bob Secret-key encryption. one can broadcast the public key to all users. Bob decrypts the cipher text with the decryption key and reads the PO. encrypted by the private key. also known as symmetric encryption. the biggest users of cryptography were governments. Although secret-key encryption is useful in many cases. and the recipient must use the same key to decipher or decrypt it.DBA 1727 NOTES decrypt data.). Most computer encryption systems belong in one of two categories. there are two types of encryption methods:   Secret-key encryption Public-key encryption SECRET . and have in their possession a 222 ANNA UNIVERSITY CHENNAI . Therefore. the encryption key and decryption key are the same (see Fig. it has significant limitations. Computer encryption is based on the science of cryptography. rendering it unreadable to anyone but the intended recipient. Note that in secret-key encryption. The transmitter uses a cryptographic secret “key” to encrypt the message. Before the digital age. A widely adopted implementation of secret-key encryption is data encryption standard (DES). which has been used throughout history. All parties must know and trust each other completely.

and storage of keys. given the difficulty of providing secure key management. Hence. in order for a merchant to conduct transactions securely with Internet subscribers. first developed in the 1970s. Public-Key Encryption Public-key encryption. uses two keys: one key to encrypt the message and a different key to decrypt the message. If the transmitter and receiver are in separate sites. what can? The solution to widespread open network security is a newer. Anyone who over-hears or intercepts the key in transit can later use that key to read all encrypted messages. a postal service) when the secret key is being exchanged. they must trust not being overheard during face-to-face meetings or over a public messaging system (a phone system. also known as asymmetric encryption. The two keys are mathematically related so that data encrypted with one key only be decrypted using the other. Further. If secret encryption cannot ensure safe electronic commerce. more sophisticated form of encryption. secretkey encryption suffers from the problem of key distribution-generation. known as public-key encryption. it is hard to see secret-key encryption becoming a dominant player in electronic commerce. adding to the overall cost.E-COMMERCE TECHNOLOGY AND MANAGEMENT protected copy of the key. secret-key encryption is impractical for exchanging messages with a large group of previously unknown parties over a public network. 223 ANNA UNIVERSITY CHENNAI . transmission. For in-stance. each consumer would need a distinct secret key as-signed by the merchant and transmitted over a separate secure channel such as a telephone. Scrambled message scrambled NOTES I n t e r n e t message Buyer Encrypt with private key Decrypt with private key seller Since shared keys must be securely distributed to each communicating party. Secure key distribution is cumbersome in large networks and does not scale well to a business environment where a company deals with thousands of online customers.

the private key must be kept confidential and must be known only to its owner. Even if a would-be criminal intercepts the message on its way to the intended recipient.” which is kept secret. Often. and Adleman). Both types of systems offer advantages and disadvantages. Table compares secret. however. she simply looks up his public key and uses that key to en-crypt her text. Both keys. In the RSA method. and a “private key. Public-key encryption is particularly useful when the parties wishing to communicate cannot rely on each other or do not share a common key. Another prominent public key method being used in online commerce today is called Digital Signatures 224 ANNA UNIVERSITY CHENNAI . need to be protected against modification. the two are combined to form a hybrid system to exploit the strengths of each method. The two keys work together. The best known public-key encryption algorithm is RSA (named after its inventors Rivest. an organization first has to identify its security requirements and operating environment. each participant creates two unique keys.DBA 1727 NOTES Unlike secret-key encryption. When the friend receives the e-mail. a “public key.and public key systems. a successful decryption using the corresponding public key verifies the identity of the author and ensures message integrity. if an individual wants to send a snoop-proof email message to a friend. This is often the case in online commerce.” which is published in a sort of public directory. One of the two keys is “public” and the other is “private. The computer handles the hard work of manipulating the large numbers used in the math of encrypting and decrypting messages. Shamir. which uses a single key shared by two (or more) parties.” The public key can be made known to other parties. that criminal has no way of deciphering the message without the private key. To determine which type of encryption best meets its needs.” only the other can unlock. he uses his private key to convert the encrypted message on his computer screen back to the sender’s original message in clear text. For example. whatever data one of the keys “locks. Since only the bona fide author of an encrypted message has knowledge of the private key. public-key encryption uses a pair of keys for each party.

which Online Mart could decrypt with the customers public key and know that only the particular customer could have sent it. Online mart. How Do Digital Signatures Work? Data is electronically signed by applying the originator’s private key to the data. NOTES Digital Signature Digital signatures are used for sending authentication. a digital signature enables the computer to notarize the message. Online Mart then uses its private key to decrypt the message (only a private key can unlock a document deciphered with a public key). This shows how digital signature works in combination with public key encryption to ensure authentication and privacy.E-COMMERCE TECHNOLOGY AND MANAGEMENT Comparing Secret key and public key Encryption methods. thus the customer knows that only Online Mart received that data. and only she can decrypt it using her private key. In the other direction Online mart would send confidential information to the customer using her public key. he uses Online mart’s public key to encrypt her confidential information. Technically. When the customer orders something from Online mart. To ensure further security. interacting with a merchant. Let us consider the following scenario of a customer. To increase the speed of the process. This also means that the originator cannot falsely deny having signed the data. the customer can enclose a digital signature. ensuring the recipient that the message has not been forged transit. encrypted with her own private key. the private key is applied to a shorter form of the 225 ANNA UNIVERSITY CHENNAI . In addition.

Any recipient can verify that the program re-mains virus-free. and the customer’s public key.DBA 1727 NOTES data. a user combines her private key and the document and performs a computation on the composite (key+docurnent) in order to generate a unique number called the digital signature. is run through the digital signature process. The signature can be verified by any party using the public key of the signer. for example. Bob and Alice. the output is a unique “fingerprint” of the document. in most circumstances this solution is not practical. Before two parties. Digital Certificates Authentication is further strengthened by the use of digital certificates. If the results of the computation generate a matching “fingerprint” of the document. when distributing signed copies of virus-free . If a user is communicating with her bank. then the verifier has confidence that the data was not modified after 1:Jeing signed and that the owner of the public key was the signer. In order to digitally sign a document. To verify the signature. the signature may be fraudulent or the message altered. and is the cyberspace equivalent of “signing” for purchases. the purported digital signature. such as an order form with a credit card number.” rather than to the entire set of data. and checks to see if the enclosed message has been tampered with by a third party. called a “hash” or “message digest.software. This feature is very useful. the bank performs a computation involving the original document. For example. In this way. The bank then decrypts the document using her public key. A digital signature provides a way to associate the message with the sender. The resulting digital signature can be stored or transmitted along with the data. 226 ANNA UNIVERSITY CHENNAI . when an electronic document. each wants to be sure that the other party is authenticated. However. otherwise. If the signature verifies properly. consumers can use credit card accounts over the Internet. the digital signature is verified as genuine. This “fingerprint” is attached to the original message and further encrypted with the signer’s private key. are the basis for secure commerce. One way to be sure that the public key belongs to Alice is to receive it over a secure channel directly from Alice. Digital signatures. use public-key encryption to conduct business. he wants to be sure that the public key belongs to Alice and not to someone masquerading as Alice on an open network. variations of which are being explored by several companies. Before Bob accepts a message with Alice’s digital signature. she sends the result of the second encryption to her bank. Digital signatures ensure authentication in the following way.

If an incoming packet of information is flagged by the filters. each party’s software validates both merchant and cardholder before any information is exchanged. In addition. This message. the certificate authority creates a message containing Alice’s name and her public key. at every T1 line coming into the 227 NOTES ANNA UNIVERSITY CHENNAI . Let’s say that you work at a company with 500 employees. the company will have one or more connections to the Internet through something like T1 or T3 lines.party means of establishing authentication. With a firewall in place. known as a certificate. it is not allowed through. and the institution then provides a digital certificate to the cardholder. try to make telnet connections to them and so on. digital certificates are the heart of secure electronic transactions. A similar process takes place for the merchant. all of those hundreds of computers are directly accessible to anyone on the Internet. 4. digital certificates provide an easy and convenient way to ensure that the participants in an electronic commerce transaction can trust each other.2 Firewall A firewall is simply a program or hardware device that filters the information coming through the Internet connection into your private network or computer system. Visa provides digital certificates to the card-issuing financial institution. If one employee makes a mistake and leaves a security hole. To get the most benefit. is digitally signed by the certificate authority.2. In short. Without a firewall in place. as well as a copy of one of the owner’s public keys. Such a party is known as a certificate authority (CA). The company will therefore have hundreds of computers that all have network cards connecting them together. the landscape is much different.2. in the credit card industry. For example. digital certificates ensure that two computers talking to each other may successfully conduct electronic commerce. A company will place a firewall at every connection to the Internet (for example. It contains owner identification information. hackers can get to the machine and exploit the hole. the public key of the certificate authority should be known to as many people as possible. The validation takes place by checking the digital certificates that were both issued by an authorized and trusted third party. In many ways. try to make FTP connections to them. Through the use of a common third party. A person who knows what he or she is doing can probe those computers.E-COMMERCE TECHNOLOGY AND MANAGEMENT An alternative to the use of a secure channel is to use a trusted third party to authenticate that the public key belongs to Alice. At the time of the transaction. disparate parties can engage in electronic commerce with a high degree of trust. Once Alice has provided proof of her identity. Thus by using one public key (that of a CA) as a trusted third.

Otherwise it is discarded 4. The” first step is to keep the security of your data files such that only the right people can see them. the information is allowed through. Telnet servers and so on.   User passwords Billing files 228 ANNA UNIVERSITY CHENNAI .DBA 1727 NOTES company). the company can control how employees connect to Web sites. only one of them is permitted to receive public FTP traffic. This is especially crucial for any of the following types of data and files. whether files are allowed to leave the company over the network and so on. A company can set up rules like this for FTP servers. then incoming information is compared to these characteristics. The firewall can implement security rules.2. one of the security rules inside the company might be: Out of the 500 computers inside this company. In addition. A firewall gives a company tremendous control over how people use the network. Stateful inspection . Allow FTP connections only to that one computer and prevent them on all others.Packets (small chunks of data) are analyzed against a set of filters. Web servers.   Information travelling from inside the firewall to the outside is monitored for specific defining characteristics. Proxy service . Packets that make it through the filters are sent to the requesting system and all others are discarded.A newer method that doesn’t examine the contents of each packet but instead compares certain key parts of the packet to a database of trusted information.Information from the Internet is retrieved by the firewall and then sent to the requesting system and vice versa. For example. Firewalls use one or more of three methods to control traffic flowing in and out of the network:  Packet filtering .3 Creating a Secure System It’s a known saying Prevention is the best medicine and this implies equally well to compute security. If the comparison yields a reasonable match.

Finally. If a business can afford only lesser security then the best you can do is keep permissions of files hidden from pirates. General users to your system should not have access to these tools because.2. Again store owners should ensure that they encrypt archived transactions. This information of-course applies equally to the both the user and the storeowner. the tools can be used to create programs that aid the pirate in greasing security. Keeping your password files shadowed or hidden keeps pirates from remotely acquiring your file and then running password cracking programs on the file in their own time. The best solution is to use 229 ANNA UNIVERSITY CHENNAI . if they fall into wrong hands. As server and browser security increases almost pirates will be driven to breaking into the system at the source or at the destination. They can even unformatted a formatted disk after securely deleting file defrayment your drive using any popular disk utility.4 Storing Secure Information The most insure part of the Internet is not the Net itself but the source and destination of users and computers on the net. When you are connected to the network your personal system is vulnerable. Decrypted data residing on your hard disk may be available to outside for snooping. as well as transactions in the process of being fulfilled. Such program ensures that the original structure of the disk is recognized leaving no recoverable data. someone else could be probing your system while you are working.E-COMMERCE TECHNOLOGY AND MANAGEMENT      System and user logs Credit card information Trusted remote system information Compiler Administration tools NOTES User passwords and usage logs should be kept secure to keep pirate from looking at those files to figure out how to gain further access to your system. you should know the place and the method to store your data. Another security measure is to delete the not required data or information. Many commercial products provide this facility and often work well to keep the data secure.” 4. As the user of the system. Pirates can easily undelete previously deleted information. One of the best security measures that you can take for physically stored data is to have hardware password protection. be sure to protect administration tools as well as compiler. Storeowners must ensure that product information database is secure. Simply deleting the information is not enough. Because of the nature slip type connectivity and TCP/IP networks.

The internal clock speed of the computer would oscillate like the radio stations. Another type of pirating is also done by using. not leaving printouts laying around. Such programs are available in software archives throughout the Internet. more sophisticated security measures should be implemented. the electromagnetic emissions that come from the monitors. programmers could debug programs by turning on a radio and placing it near the computer. In the early age of computing. So they could hear the programming sequence running on the computer. One should encrypt sensitive data that sent over the Internet. 230 ANNA UNIVERSITY CHENNAI . But monitor the system in. regular intervals. Particularly. The degree of security for computer connected Into Internet. Before marking the file as deleted. depends upon the requirements and cost. A type of technology and research called TEMPEST is available that can reverse this electromagnetic radiation into a reasonable reproduction of the original information. If security breaches are encounter. such programs first write repeating sequences of bits to each bit within the file. and keeping hard” Yare secure. This ensures that magnetic particles are mixed several times so that traces of data are not readable. The programmers soon learn how to interpret the different sound frequencies to determine what was happening in their program. the companies are vulnerable those are involved in national security or those that have such companies as clients. The basic measures should be enough to cover the average security standards for the company.DBA 1727 NOTES programs like the Defense Departments recommended secure delete program. Every one should take the basic measures of creating secure passwords.

This federal law protects the consumer in case a problem arises at the moment of the transaction.3 ELECTRONIC FUNDS TRANSFER 4. Those little blue or dark blue machines in which you pass your card are doing an electronic fund transfer from your account to the retail account. Finally. 4.E-COMMERCE TECHNOLOGY AND MANAGEMENT 4.3. improved cryptography and the Internet.3. The benefit is that you won’t have to go to the bank to do it. and with the help of telegraphs.2 Where do we find EFT? One of the most common EFT’s is Direct Deposit. For example. Points of sale (also known as POS) are also part of this group.3 Advantages of EFT: The main advantage of an electronic funds transfer is time. Its use has become widespread with the arrival of personal computers.3. 4. The history electronic funds transfer originated from the common funds transfer of the past. when you are paying a mortgage. Since the 19th century. it migrated itself to computers and became the electronic money transfers of today. It is used by employers for depositing their employees’ salary in a bank account. the bank will discharge the monthly payment from a pre-accorded bank account. the electronic funds transfer act was implemented. a 231 NOTES ANNA UNIVERSITY CHENNAI .1 What is EFT? An electronic funds transfer (also known as EFT) is a system for transferring money from one bank to another without using paper money. Other kind of EFT is the automatic charge to your check or savings account. Since it is affected by financial fraud. the bank doesn’t need to pay a person to do it. Since all the transaction is done automatically and electronically. ATM’s are also used for EFT’s. funds transfers were an usual thing in commercial transactions. Since an automatic teller machine is much cheaper than a group of bank tellers. It’s automatic. cheap networks. it has helped to bring costs down and beneficiate the costumer.

or when you provide your check by other means such as by mail or drop box.3. You may authorize a third party to initiate electronic funds transfers between your account and the third party’s account. You won’t hear either about lost checks causes by the inefficiency of normal mail (nowadays known as snail mail for its velocity compared to emails) and up to date bookkeeping. You may make arrangements to pay certain recurring bills from your checking account(s). 4. the Internet. The merchant or service provider will then use this information to convert the transaction into an electronic funds transfer. Examples of these transfers include. 232 ANNA UNIVERSITY CHENNAI  . which brings an up to date cash flow. Preauthorized payments. but are not limited to:    Preauthorized credits. These transfers may use the Automated Clearinghouse (ACH) or other payments network. Electronic check conversion. This information can be found on your check as well as on a deposit or withdrawal slip. you should only provide your bank and account information (whether over the phone. the cost of the maintenance of the transport. EFT’s have revolutionized modern banking. Thus. This may occur at the point of purchase. your authorization can occur when the merchant posts a sign informing you of their policy. the cost of the transport. or via some other method) to trusted third parties whom you have authorized to initiate these electronic funds transfers. You may provide your check to a merchant or service provider who will scan the check for the encoded bank and account information. the transaction will require you to provide the third party with your account number and bank information. Your authorization to the third party to make these transfers can occur in a number of ways. insurance and the gas of the transport. Some merchants or service providers will initiate an electronic funds transfer to collect a charge in the event a check is returned for insufficient funds. Electronic returned check charge. In some cases.4 Electronic Funds Transfers Initiated By Third Parties. These transfers to make or receive payment may be one-time occurrences or may recur as directed by you.DBA 1727 NOTES person to drive the loans to the other bank. You may make arrangements for certain direct deposits to be accepted into your checking or savings account(s). In all cases. Other benefit is immediate payment.

E-COMMERCE TECHNOLOGY AND MANAGEMENT Limitations on frequency of transfers section regarding limitations that apply to savings accounts. Advisory Against Illegal Use. which is disclosed to institutions that issue MasterCard cards. 233 ANNA UNIVERSITY CHENNAI . Currency Conversion. MasterCard International Incorporated will convert the charge into a US dollar amount. the conversion rate used by MasterCard International to determine the transaction amount in US dollars for such transactions is generally either a government mandated rate or a wholesale rate determined by MasterCard International for the processing cycle in which the transaction is processed . NOTES Some of these services may not be available at all terminals. The currency conversion rate used by MasterCard International on the processing date may differ from the rate that would have been used on the purchase date or cardholder statement posting date. ATM Transfers – types of transfers and dollar limitations – You may access your account(s) by ATM using your MasterMoney®  card and personal identification number to:     make deposits to checking account(s) with a check card get cash withdrawals from checking with a check card transfer funds from checking to money market account(s) with a check card get information about the account balance of your checking account(s) with a check card. You agree not to use your card(s) for illegal gambling or other illegal purpose. If you effect a transaction with your MasterMoney® Card in a currency other than US Dollars. Display of a payment card logo by. increased by an adjustment factor established from time to time by MasterCard International. Currently. MasterCard International will use its currency conversion procedure. for example an online merchant does not necessarily meant that transactions are lawful in all jurisdictions in which the cardholder may be located.

telephone. If we do not complete a transfer to or from your account on time or in the correct amount according to our agreement with you. for instance: 234 ANNA UNIVERSITY CHENNAI . However. there are some exceptions. We will not be liable. your password. or similar order to third parties. In addition to those limitations on transfers elsewhere described. automatic. there are other limits on the number of transfers and dollar amount you can make by check card. and a secure web browser. we will be liable for your losses or damages. draft. to:            transfer funds from checking to checking transfer funds from checking to money market transfer funds from money market to checking transfer funds from money market to money market transfer funds from line of credit to checking transfer funds from line of credit to money market make payments from checking to third parties make payments from checking or money market to loan account(s) with us get information about: the account balance of checking account(s) the account balance of money market account(s) Limitations on frequency of transfers.  FINANCIAL INSTITUTION’S LIABILITY       Liability for failure to make transfers. For security reasons.com and using your user identification number.DBA 1727 NOTES Computer Transfer – types of transfers – You may access your account(s) by computer through the internet by logging onto our website at firststarbank. the following limitations apply:  Transfers from a money market account to another account or to third parties by preauthorized. or computer transfer are limited to six per month with no more than three by check. if any.

Product managers can update information in the database and immediately broadcast the changes throughout the enterprise. without having to endure the inconvenience of visiting a showroom. promotions. or in order to verify the existence and condition of your account for a third party. Some critical requirements of any marketing encyclopedia are the ability to easily create and maintain a repository of product information. CONFIDENTIALITY We will disclose information to third parties about your account or the transfers you make: (1) (2) (3) (4) where it is necessary for completing transfers. (5)       If circumstances beyond our control (such as fire or flood) prevent the transfer. up to the minute information about a wide range of products over the Internet. you do not have enough money in your account to make the transfer. (6)       There may be other exceptions stated in our agreement with you. 235 ANNA UNIVERSITY CHENNAI . (3)       If the automated teller machine where you are making the transfer does not have enough cash. (2)       If you have an overdraft line and the transfer would go over the credit limit. For assisted selling. and complementary products. despite reasonable precautions that we have taken. and the ability to alert sales representatives and customers to bundled products and services. Consumers are benefited because they are able to obtain detailed. or as explained in the separate Privacy Disclosure. an intelligent electronic catalog that connects sales representatives and customers to a company’s most current product and service information. It provides a single point of entry for harnessing and distributing all product information. NOTES 4. such as credit bureau or merchant. through no fault of ours.3. or in order to comply with government agency or court orders. a valuable tool is a marketing encyclopedia.5 Online Catalogs Online catalogs provide easy access to product information. the ability to create multiple search mechanisms to assist in locating information.E-COMMERCE TECHNOLOGY AND MANAGEMENT (1)       If. (4)       If the terminal or system was not working properly and you knew about the breakdown when you started the transfer.

In times to come it is hoped that agent technology can enhance the feature of electronic commerce by efficiently matching buyers and sellers. remember things the user might have forgotten. The Internet can be viewed as a large distributed Information resource. 236 ANNA UNIVERSITY CHENNAI .3. to the agent software. learn from the user and even make recommendations to the user. intelligently summarize complex data. Intelligent agents work by allowing people to delegate work that they could have done. automate repetitive tasks. with connecting systems that are designed and implemented by many different organizations with various goals and agendas.DBA 1727 NOTES 4. presents a problem to the users-information overload. the agents can also make decisions and perform actions based on those decisions. Agents can. This causes a problem of locating the relevant information. One typical use of the intelligent agent may be found in the exploration of data on the Internet.6 Intelligent Agents The Intelligent agent is software that assists people and acts on their behalf. just as assistants can. The agent technology may help the user by helping the user get around this problem. As a result much of the information is discarded and processed in a sub optimal manner. The growth of the Internet and correspondingly the vast amount of Information it holds. In addition to making recommendations to the user.

The level of intelligence is further classified according to its ability to respond. The agents should have control over the actions performed within its system. the cardholder must deposit between 100% and 200% of the total amount of credit desired. and can be as low as 10% of the 237 NOTES ANNA UNIVERSITY CHENNAI . Typically. credit card issuers will offer incentives even on their secured card portfolios.4. Agency: The degree of autonomous action that can me taken. Intelligence: The extent to which an agent can understand its own internal state and its external environment. i. 500–Rs. Thus if the cardholder puts down Rs. the issuer lends money to the consumer (or the user) to be paid to the merchant. In some cases. intelligence and mobility. 1000.E-COMMERCE TECHNOLOGY AND MANAGEMENT Intelligent Agent Computing Agent Three primary dimensions of the agents have been defined: agency. which requires the balance to be paid in full each month. In the case of credit cards.e. that is actions performed without the need for direct human intervention or intervention by other agents. 1. It is also different from a charge card (though this name is sometimes used by the public to describe credit cards).1 What is credit card? A credit card is a system of payment named after the small plastic card issued to users of the system. 3. 4. 1000.4 CREDIT CARD BASED-ELECTRONIC PAYMENT SYSTEM 4. not have actions performed by other agents. to adapt and to take initiative.4. Other agents can request actions. the deposit required may be significantly less than the required credit limit. but the agent itself decides whether to approve and allow the action. 4. he or she will be given credit in the range of Rs. A credit card is different from a debit card in that it does not remove money from the user’s account after every transaction.2 Secured credit cards A secured credit card is a type of credit card secured by a deposit account owned by the cardholder. Respond: Agents should perceive and respond to their environments.. In these cases. 2.

In these cases the total debt may far exceed the original deposit and the cardholder not only forfeits their deposit but is left with an additional debt.DBA 1727 NOTES desired credit limit. Credit card issuers offer this as they have noticed that delinquencies were notably reduced when the customer perceives he has something to lose if he doesn’t repay his balance. after charging off on other credit cards. even including the security deposit. They are often offered as a means of rebuilding one’s credit. the card issuer has the option of recovering the cost of the purchases paid to the merchants out of the deposit. The cardholder of a secured credit card is still expected to make regular payments. Usually the deposit is only used as an offset when the account is closed. either at the request of the customer or due to severe delinquency (150 to 180 days). The advantage of the secured card for an individual with negative or no credit history is that most companies report regularly to the major credit bureaus. 4.2. and could result in a balance which is much higher than the actual credit limit on the card.1 Security Overview Credit card security is based on privacy of the actual credit card number. This deposit is held in a special savings account. for people in certain situations. or people with a long history of delinquency on various forms of debt). however. Fees and service charges for secured credit cards often exceed those charged for ordinary non-secured credit cards. This means that whenever a person other than the card owner reads the number. as he or she would with a regular credit card. Secured credit cards are an option to allow a person with a poor credit history or no credit history to have a credit card which might not otherwise be available. (for example. This means that an account which is less than 150 days delinquent will continue to accrue interest and fees. the deposit will not be debited simply for missing one or two payments. Most of these conditions are usually described in a cardholder agreement which the cardholder signs when their account is opened. secured cards can often be less expensive in total cost than unsecured credit cards. but should he or she default on a payment.4. This allows for building of positive credit history. security is 238 ANNA UNIVERSITY CHENNAI . Secured credit cards are available with both Visa and MasterCard logos on them. Although the deposit is in the hands of the credit card issuer as security in the event of default by the consumer.

Some merchants will accept a credit card number for in-store purchases. not his own) and collect them without being detected. The next nine digits are the individual account number. which requires that the thief have access to the card. However. a stolen card can be cancelled.e. whereupon access to the number allows easy fraud.3 Credit cards in ATMs Many credit cards can also be used in an ATM to withdraw money against the credit limit extended to the card but many card issuers charge interest on cash advances before they do so on purchases. This is the first six digits for MasterCard and Visa cards. For internet purchases. and the final digit is a validity check code. The interest on cash advances is commonly charged from the date the withdrawal is made. 4. and require a signature. security is low. The main one is to require a security PIN with the card. as well as extra codes such as issue numbers and security codes. 4. Not all credit cards have the same sets of extra codes nor do they use the same number of digits. no fraud can take place in this way. Since this happens most of the time when a transaction is made. and share a common numbering scheme. Merchants will often accept credit card numbers without extra verification for mail order. is the sequence of digits at the beginning of the number that determine the bank to which a credit card number belongs. and if this is done quickly. so the thief must make sure he can have the goods delivered to an anonymous address (i. called the Bank Identification Number. Many card issuers levy a commission for cash withdrawals. there is sometimes the same level of security as for mail order (number only) hence requiring only that the fraudster take care about collecting the goods. a user with access to just the number can only make certain types of transactions. The card number’s prefix.2 Credit card numbering The numbers found on credit cards have a certain amount of internal structure. credit cards also carry issue and expiration dates (given to the nearest month). rather than the monthly billing date.4. Thus.2. even if the ATM belongs to the same bank as the 239 NOTES ANNA UNIVERSITY CHENNAI . but many require the card itself to be present. In addition to the main credit card number. but often there are additional measures.E-COMMERCE TECHNOLOGY AND MANAGEMENT potentially compromised. but then the delivery address will be recorded.4.

Such cost would prohibit low-value payments (micro payments) by adding costs to the transactions. 4.4. Payments using plain credit card details. 3. Merchants do not offer cash back on credit card transactions because they would pay a percentage commission of the additional cash amount to their bank or merchant services provider. The low level of security inherent in the design of the Internet makes this method problematic (any snooper can read a credit card number. 240 ANNA UNIVERSITY CHENNAI . but even then there are certain factors to consider. which have no grace period and incur interest at a rate that is (usually) higher than the purchase rate. one credit card transaction for the total accumulated amount is completed.DBA 1727 NOTES card issuer. It would make sense to encrypt your credit card details before sending them out. even if they pay off their statement balance each month. For this reason. do so at the end of a billing cycle. and programs can be created to scan the Internet traffic for credit card numbers and send the numbers to its master). The easiest method of payment is the exchange of unencrypted credit cards over a public network such as telephone lines or the Internet. After a certain period of time. and the vendor is usually responsible to ensure that the person using the credit card is its owner.4 Credit Card payment-online networks We can break credit card payment on on-line networks into three basic categories: 1. 2. when applying payments to a card. and apply those payments to everything before cash advances. Authentication is also a significant problem. Many credit card companies will also. One solution to security and verification problems is the introduction of a third party: a company that collects and approves payments from one client to another. many consumers have large cash balances. Without encryption there is no way to do this. Payments using third-party verification. thereby making it uneconomical. Payments using encrypted credit card details. One would be the cost of a credit card transaction itself. and will carry those balances for years.

because he signed it (as in everyday life).5 Encryption and Credit Cards Encryption is instantiated when credit card information is entered into a browser or other electronic commerce device and sent securely over the net-work from buyer to seller as an encrypted message. charge authentication. 5. each consumer and each vendor generates a public key and a secret key. The credit card company sends the consumer a credit card number and a credit limit. does not meet important requirements for an adequate financial system. The consumer can’t claim that he didn’t agree to the transaction. bank for authorization approval. and authorization to the merchant. 3.4. The merchant validates the customer’s identity as the owner of the cred-it card account. which will bill the consumer for Y dollars and give the same amount (less a fee) to X. A customer presents his or her credit card information (along with an authenticity signature or other information such as mother’s maiden name) securely to the merchant.E-COMMERCE TECHNOLOGY AND MANAGEMENT 4.4. safety. services. The customer’s bank returns the credit card data. or funds flow: 1. (See Fig. ‘It is now time T. To steal a credit card. This practice. credit Card systems will have to develop distributed key 241 ANNA UNIVERSITY CHENNAI . NOTES 2. He can’t submit the same charge twice. In this scheme. To become useful. the consumer sends vendor X the message. and security. The merchant relays the credit card charge information and signature to its bank or on-line credit card processors. the following sequence of steps must occur before actual goods. I am paying Y dollars to X for item Z.4. The vendor will then sign the message with its own secret key and send it to the credit card company.5(a) Nobody can cheat this system. such as non refutability. To make a credit card transaction truly secure and non-refutable. and the unencrypted version is erased. The secret key is re-encrypted with a password. 4. The vendor can’t invent fake charges. speed. because the consumer included the precise time in the message. however. The public key is sent to the credit card company and put on its public key server. The bank or processing party relays the information tot the customer’s. privacy. To buy something from vendor X. because he doesn’t have access to the consumer’s key. a thief would have to get access to both a consumer’s encrypted secret key and password.” then the consumer uses his or her password to sign the message with the public key.

Otherwise. Merchants get paid for the credit card drafts that they submit to the credit card company. 242 ANNA UNIVERSITY CHENNAI .DBA 1727 NOTES servers and card checkers.4. a con-centrated attack on these sites could bring the system to a halt. Figure 4.4. Now any vendor can create a secure system that accepts credit card numbers in about an hour. Both of these schemes can be substantially bolstered with the addition of encryption to defeat snooping attacks. Support for Privacy Enhanced Mail (PEM) and Pretty Good Privacy (PGP) encryption has been built into several browsers.5(a) Processing payments using encrypted credit cards 4.6 Advantages and Disadvantage of credit cards: Consumers use credit cards by presenting them for payment and then paying an aggregate bill once a month. Consumers pay either by flat fee or individual transaction charges for this service. Businesses get charged a transaction charge ranging from 1 percent to 3 percent for each draft submitted.

The infrastructure supporting the exchange must be reliable. unless the authorization request is denied. In general. which would be downloaded into a PC or other information appliance immediately at the time of purchase. and fast. Sellers are ensured that they will be paid for all their sales—they needn’t worry about fraud. One disadvantage to credit cards is that their transactions are not anonymous. simple. implementing payment policies will be simpler when payment is made by credit rather than with cash. For example. and a movie distributor might charge depending on how much of the video had been downloaded. Encryption and transaction speed must be balanced.. intentional customer action versus a problem in the network or provider’s equipment). many message relays and authorizations take place in real time while the customer waits. as it is a function of network capabilities. on-line credit card users must find the process to be accessible. and credit card companies do in fact compile valuable data about spending habits. an information provider might charge for partial delivery of a file (the user may have abandoned the session after reading part of the file). all the relaying and authorizations can occur after the customer-merchant transaction is completed. Hence. Disputes may arise because different services may have different policies. The user must feel confident that the supporting payment 243 NOTES     ANNA UNIVERSITY CHENNAI . however. Buyers can sometimes dispute a charge retroactively and have the credit card company act on their behalf. a potential bottleneck. The cause of interrupted delivery needs to be considered in resolving disputes (e. when an airline ticket is purchased well in advance of the date of travel). the customer verification process is simple because it does not have to be done in real time. Speed will have design and cost implications. computing power. The complexity of credit card processing takes place in the verification phase. If the customer wants a report (or even a digital airline ticket).E-COMMERCE TECHNOLOGY AND MANAGEMENT  Credit cards have advantages over checks in that the credit card company assumes a larger share of financial risk for both buyer and seller in a transaction.g. as research has show that on-line users get very impatient and typically wait for 20 seconds before pursuing other actions. however. available at every server. Record keeping with credit cards is one of the features consumers value most because of disputes and mistakes in billing. Such exchanges may require many sequence-specific operations such as staged encryption and decrying and exchanges of cryptographic keys. In fact. and the specific form of the transaction. If there is a lapse in time between the charging and the delivery of goods or services (for example.

banking is receiving a jarring message: Get wired or lose customers. and other companies understand that they have to do something. Barriers to entry include (1) (2) (3) (4) large initial capital requirements. the goal would be to offer everything from mutual funds to brokerage services over the network. the companies that own the transaction infrastructure will be able to charge a fee. VISA. and electronic payment on the Internet can have a substantial effect on transaction processing in the “real” (non 244 ANNA UNIVERSITY CHENNAI .” They know all too well that ecommerce transaction architectures (similar to MS-DOS or Windows) on which other e-commerce applications are developed will be very profitable. Most third-party processors market their services directly to large regional or national merchants rather than through financial institutions or independent sales organizations .7 Infrastructure for On-Line Credit Card Processing Competition among these players is based on service quality. In the emerging world of ecommerce. and software companies are increasingly allying with banks to sell home banking. ongoing expenses related to establishing and maintaining an electronic transaction processing network. The builders and providers of this infrastructure are aware of customer requirements and are in fierce competition to fulfill those needs. mostly unsuccessfully. it will be “too little too late. much as banks do today with ATMs. After years of dabbling. 4.. customer support. What exactly is at stake here? A lot. the ability to obtain competitively priced access to an existing network. If they wait for a clear path to emerge. and reliability.4. Many banks are concerned about this prospect and view it as an encroachment on their turf. Many companies are developing advanced electronic services for home-based financial transactions. Microsoft.DBA 1727 NOTES infrastructure will be available on demand and that the system will operate reasonably well regardless of component failures or system load conditions. This could be extremely profitable. price. and the reluctance of merchants to change processors. Eventually. processing system speed. The traditional roles are most definitely being reshuffled. with remote banking.

Once information has been captured electronically. created without any explicit effort by the transaction parties. From a technical standpoint. in many transaction processing systems. and data transfer to payment maker. for obvious reasons. so banks clearly stand to lose business. such as VISA and MasterCard. If software companies and other interlopers become electronic toll-takers.E-COMMERCE TECHNOLOGY AND MANAGEMENT electronic) world. For example.8 Risks from Mistake and Disputes: Consumer Protection Virtually all electronic payment systems need some ability to keep automatic records. for as much as 25 percent of non interest income for banks. or monetary authorities. 70 percent of those transactions are processed by nonbanks such as First Data Resources. banks could become mere homes for deposits. not the providers of lucrative value-added services. 4. Given the intangible nature of electronic transactions and dispute resolution relying solely on records. trans-action processing services account. A decade ago. banks processed 90 percent of all bank card transactions.4. it is easy and inexpensive to keep (it might even cost more to throw it away than to keep it). NOTES The need for record keeping for purposes of risk management conflicts with the transaction anonymity of cash. this is no problem for electronic systems. old or blocked accounts are never purged and old transaction histories can be kept forever on magnetic tape. invented long before the computer and networks gave us the ability to track everything. Features of these automatic records include (1) (2) (3) (4) permanent storage. a general law of payment dynamics and banking technology might be: No data need ever be discarded. One can say that anonymity exists today only because cash is a very old concept. According to some estimates. Today. The record feature is an after-the-fact transcription of what happened. accessibility and traceability. To be fair. banks could lose the all-important direct link to be the customer’s primary provider of financial services that lets them hawk profitable services. Even more worrisome. bank. Although a segment of the payment-making public will always desire 245 ANNA UNIVERSITY CHENNAI . Why banks are on the defensive is obvious if we look at banking in the last ten years. a payment system database. things are happening so fast in this area that it’s hard to keep up with it all. The effect of electronic commerce on the banking industry has been one of total confusion. Credit and debit cards have them and even the paper-based check creates an automatic record.

swindled. each transaction would have to be reported. and/or money laundering possibilities exist. customers might feel that all this record keeping is an invasion of privacy resulting in slower than expected adoption of electronic payment systems. For instance. machines.DBA 1727 NOTES transaction anonymity. Were the regulation to apply. Furthermore. a database somewhere. all these records can be linked so that they constitute in effect a single dossier. All details of a consumer’s payments can be easily be aggregated: Where. Every time one purchases goods using a credit card. the balance on any smart card could be reconstructed after the fact. Obviously. thus allowing for additional protection against loss or theft. The anonymity issue raises the question: Can electronic payments hap-pen without an automatic record feature? Many recent payment systems seem to be ambivalent on this point. Managing Information Privacy The electronic payment system must ensure and maintain privacy. This protection must apply throughout the 246 ANNA UNIVERSITY CHENNAI . that information goes into. many believe that anonymity runs counter to the public welfare because too many tax. There is considerable debate on this point. or telephones could all maintain records of all transactions and they probably ultimately will. In sum. anonymity is an issue that will have to be addressed through regulation covering consumer protection in electronic transactions. With these records. This dossier would reflect what items were bought and where and when. or falsely implicated in a fraudulent transaction. The next risk involved is the privacy of the customer making a purchase. This would certainly add some value versus cash. subscribes to a magazine or accesses a server. limited only to the parties involved and their designated agents (if any). Users must be assured that knowledge of transactions will be confidential. when. and sometimes what the consumer buys is stored. meaning it would appear on an account statement making mistakes and disputes easier to resolve. This violates one the unspoken laws of doing business: that the privacy of customers should be protected as much as possible. This collection of data tells much about the person and as such can conflict with the individual’s right to privacy. An anonymous payment system without automatic record keeping will be difficult for bankers and governments to accept.Privacy must be maintained against eavesdroppers on the network and against unauthorized insiders. However. the card-reading terminals. the Mondex electronic purse touts equivalence with cash. The users must be assured that they cannot be easily duped. smuggling. but its electronic wallets are designed to hold automatic records of the card’s last twenty transactions with a statement built in.

Depending on the store or merchant. the conditions and terms for extending liquidity to banks in connection with settlement.. The transaction is authorized and processed and the customer verifies the transaction either by entering a PIN or.1 What is a debit card? A debit card (also known as a gift card) is a plastic card which provides an alternative payment method to cash when making purchases. Various alternatives exist. many hurdles remain to the spread of electronic payment systems. A middle road is also possible. acting as the ATM card for withdrawing cash and as a check guarantee card. or from the remaining balance on the card. The digital central bank must develop policies to deal with this possibility.5. 4. In some countries the debit card is multipurpose. the customer may swipe or insert their card into the terminal. for example. Without such guarantees the development of clearing and settlement systems and money markets-may be impeded. however. Managing Credit Risk Credit or systemic risk is a major concern in net settlement systems because a bank’s failure to settle its net position could lead to a chain reaction of bank failures. it must define. or they may hand it to the merchant who will do so. If the central bank does not guarantee settlement. occasionally. Merchants can also offer “cashback”/ 247 NOTES ANNA UNIVERSITY CHENNAI . trusted third-party agents will be needed to vouch for the authenticity and good faith of the involved parties. Despite cost and efficiency gains. at least internally.E-COMMERCE TECHNOLOGY AND MANAGEMENT whole transaction protocol by which a good or service is purchased and delivered. by signing a sales receipt. its functionality is more similar to writing a cheque as the funds are withdrawn directly from either the cardholder’s bank account (often referred to as a check card). Physically the card is an ISO 7810 card like a credit card. This implies that. setting controls on bank exposures (bilateral or multilateral) and requiring collateral. each with advantages and disadvantages. for many types of transactions.5 Debit card based-Electronic Payment System 4. A digital central bank guarantee on settlement removes the insolvency test from the system because banks will more readily assume credit risks from other banks.

7. “EC electronic cash” (formerly Eurocheck) in Germany and EFTPOS cards in Australia and New Zealand. 3. An example of the front of a typical debit card: 1. Laser in Ireland. The 3 by 5 mm security chip embedded in the card is shown enlarged in the inset. Magnetic stripe Signature strip Card Security Code Although many debit cards are of the Visa or MasterCard brand. Austria’s “Bankomatkasse” and Switch in the United Kingdom) being rebranded 248 ANNA UNIVERSITY CHENNAI . The need for cross-border compatibility and the advent of the euro recently led to many of these card networks (such as Switzerland’s “EC direkt”. 6. The use of debit cards has become wide-spread in many countries and has overtaken the check. 2. 3. and in some instances cash transactions by volume. 5. The gold contact pads on the card enable electronic access to the chip. for example Switch (now: Maestro) and Solo in the United Kingdom. there are many other types of debit card. Carte Bleue in France. debit cards are used widely for telephone and Internet purchases. 2. 4.5. each accepted only within a particular country or region. Issuing bank logo EMV chip Hologram Card number Card brand logo Expiry date Cardholder’s name An example of the reverse side of a typical debit card: 1. 4.2 Types of debit card A Finnish smart card. where a customer can withdraw cash along with their purchase. Like credit cards.DBA 1727 NOTES ”cashout” facilities to customers.

Bancontact cards in Belgium. although this is becoming commonplace for all card transactions in many countries. Some debit cards are dual branded with the logo of the (former) national card as well as Maestro (e. There are currently two ways that debit card transactions are processed: online debit (also known as PIN debit) and offline debit (also known as signature debit). One difficulty in using online debit cards is the necessity of an electronic authorization device at the point of sale (POS) and sometimes also a separate PINpad to enter the PIN. bowling centers and theme parks. such as Canada and Brazil. EC cards in Germany. even though in either case the user’s bank account is debited and no credit is involved. The transaction may be additionally secured with the personal identification number (PIN) authentication system and some online cards require such authentication for every transaction. essentially becoming enhanced automatic teller machine (ATM) cards. Overall. An example of one of these systems is ECS by Embed International. Online debit (“PIN debit” or “debit”) Online debit cards require electronic authorization of every transaction and the debits are reflected in the user’s account immediately. etc. NOTES 249 ANNA UNIVERSITY CHENNAI .g. which is part of the MasterCard brand.3 Online and offline debit transactions Typical debit card transaction machine. In some countries including the United States and Australia.E-COMMERCE TECHNOLOGY AND MANAGEMENT with the internationally recognised Maestro logo. Banks in some countries. only issue online debit cards. Pinpas cards in the Netherlands.). the online debit card is generally viewed as superior to the offline debit card because of its more secure authentication system and live status. Laser cards in Ireland. Switch and Solo in the UK. 4. The use of a debit card system allows operators to package their product more effectively while monitoring customer spending. Debit card systems have become popular in video arcades. branded to McDonalds.5. they are often referred to at point of sale as “debit” and “credit” respectively. which alleviates problems with processing lag on transactions that may have been forgotten or not authorized by the owner of the card.

debit cards are accepted by merchants with less identification and scrutiny than personal checks. Maestro in the United Kingdom and other countries. Offline debit cards in the United States and some other countries are not compatible with the PIN system. thereby preventing the consumer from racking up debt as a result of its use. Visa or MasterCard) or major debit cards (e. Use of a debit card is limited to the existing funds in the account to which it is linked. have revealed numerous advantages and disadvantages to the consumer and retailer alike.g. merchants generally do not believe that a payment via a debit card may be later dishonored. or to write an insecure check containing the account holder’s personal information. Unlike personal checks.4 Advantages and Disadvantages Debit and check cards. or fees exclusive to credit cards.5. which charges higher fees and interest rates when a cash advance is obtained. other than a foreign ATM fee.g. since users are rarely required to present identification. thereby making transactions quicker and less intrusive. Check cards debit funds from the user’s account on the spot. This type of debit card may be subject to a daily limit. For most transactions. thereby finalizing the transaction at the time of purchase. 4. in which case they can be used with a forged signature. Advantages are as follows:  A consumer who is not credit worthy and may find it difficult or impossible to obtain a credit card can more easily obtain a debit card. Transactions conducted with offline debit cards usually require 2-3 days to be reflected on users’ account balances. Unlike a credit card. a check card can be used to avoid check writing altogether. late fees. as they have become widespread. a debit card may be used to obtain cash from an ATM or a PIN-based transaction at no extra charge. Like credit cards.DBA 1727 NOTES Offline debit (“signature debit” or “credit”) Offline debit cards have the logos of major credit cards (e. and bypassing the requirement to pay a credit card bill at a later date. or being charged interest. allowing him/her to make plastic transactions. but not the United States) and are used at point of sale like a credit card.     250 ANNA UNIVERSITY CHENNAI . as well as a maximum limit equal to the amount currently deposited in the current/checking account from which it draws funds.

or who has otherwise been treated unfairly by the merchant. will verify the creditworthiness of the renter using a debit card. Car rental agencies require an actual credit card to be used. over-the-limit. and therefore. Theft of the users PIN using skimming devices can be accomplished much easier with a PIN input than with a signature-based credit transaction. the bank may place a hold on funds much greater than the actual purchase for a fixed period of time. Debit cards offer lower levels of security protection than credit cards. a major exception is at car rental facilities.E-COMMERCE TECHNOLOGY AND MANAGEMENT The debit card has many disadvantages as opposed to cash or credit:  Some banks are now charging over-limit fees or non-sufficient funds fees based upon pre-authorizations. But when a debit purchase is made.  For certain types of purchases. or car rental. any other transactions presented to the account. and even attempted but refused transactions by the merchant (some of which may not even be known by the client). the consumer has spent his/her own money. These companies will deny a rental to anyone who does not fit the requirements. including checks. such as gasoline. Many merchants mistakenly believe that amounts owed can be “taken” from a customer’s account after a debit card (or number) has been presented. payee name. and dollar and cent amount. may be dishonored. Until the hold is released. the bank has a vested interest in claiming its money where there is fraud or a dispute. thus causing penalty fees for overdrafts. While debit cards bearing the logo of a major credit card are accepted for virtually all transactions where an equivalent credit card is taken. and such a credit check may actually hurt one’s credit score. without agreement as to date. and the bank has little if any motivation to collect the funds. When a transaction is made using a credit card. NOTES     251 ANNA UNIVERSITY CHENNAI . or may be paid at the expense of an overdraft fee if the account lacks any additional funds to pay those items. amounts not available causing further rejections or overdrafts. the bank’s money is being spent. The bank may fight to void the charges of a consumer who is dissatisfied with a purchase. or at the very least. lodging. and rejected transactions by some banks.

Ideally. and bank account. or by public networks such as the Internet. and require the use of digital certificates to authenticate the payer.2 Benefits of Electronic Checks Electronic checks have the following advantages:  Electronic checks work in the same way as traditional checks. Electronic checks are delivered either by direct transmission using telephone lines. The security/authentication aspects of digital checks are supported via digital signatures using public-key cryptography. and facilitating payment integration with widely used EDI-based electronic ordering and billing processes.6.6 ELECTRONIC CHECKS 4. Electronic check payments (deposits) are gathered by banks and cleared through existing banking channels. except that they are initiated electronically. such as automated clearing houses (ACH) networks.DBA 1727 NOTES 4. E-checks:       contain the same information as paper checks contain are based on the same rich legal framework as paper checks can be linked with unlimited information and exchanged directly between parties can be used in any and all remote transactions where paper checks are used today enhance the functions and features provided by bank checking accounts expand on the usefulness of paper checks by providing value-added information 4. By retaining the basic characteristics and flexibility of paper checks while enhancing the functionality.6. the payer’s bank. use digital signatures for signing and endorsing. electronic checks will facilitate new online services by: allowing new payment flows (the payee can verify funds availability at the payer’s bank). enhancing security at each step of the transaction through automatic validation of the electronic signature by each party (payee and banks).1 E-Checks Electronic checks are designed to accommodate the many individuals and entities that might prefer to pay on credit or through some mechanism other than cash. thus simplifying customer education. 252 ANNA UNIVERSITY CHENNAI . electronic checks can be easily understood and readily adopted. Electronic checks are modelled on paper checks.

6. An account holder will issue an electronic document that contains the name of the payer. and the availability of float is an important requirement for commerce. since the contents of a check can be attached to the trading partner’s remittance information. the electronic check will easily integrate with EDI applications. These checks may be sent using e-mail or other transport methods. The third-party accounting server can earn revenue by charging the buyer or seller a transaction fee or a flat rate fee. Electronic checks create float. NOTES 4. Electronic check technology links public networks to the financial payments and bank clearing networks. The registration procedure can vary depending on the particular account server and may require a credit card or a bank account to back the checks. the check authorizes the transfer of account balances from the account against which the check was drawn to the account to which the check was deposited. Firms can use electronic checks to complete payments over the networks in a more cost-effective manner than present alternatives. Further. Once registered. Digital signatures can also be validated automatically. or it can act as a bank and provide deposit accounts and make money from the deposit account pool. The payee and the payee’s and payer’s banks can authenticate checks through the use of publickey certificates. the payer’s account 253 ANNA UNIVERSITY CHENNAI . When deposited. The account server also acts as a billing service. such as ac-counts receivable. the name of the financial institution.3 How do Electronic Check works? Electronic checks are another form of electronic tokens. The e-check method was deliberately created to work in much the same way as a conventional paper check. leveraging the access of public net-works with the existing financial payments infrastructure.E-COMMERCE TECHNOLOGY AND MANAGEMENT   Electronic checks are well suited for clearing micro payments. Buyers must register with a third-party account server before they are able to write electronic checks. the conventional cryptography of electronic checks makes them easier to process than systems based on public-key cryptography (like digital cash). They are designed to accommodate the many individuals and entities that might prefer to pay on credit or through some mechanism other than cash. the buyer sends a check to the seller for a certain amount of money. To complete a transaction. Electronic checks can serve corporate markets. a buyer can then contact sellers of goods and services.

precisely as a large number of banks may wind up stamping the back of a check along its journey through the system. Properly signed and endorsed checks can be electronically exchanged between financial institutions through electronic clearinghouses. even where other electronic payment solutions are too risky. A user’s digital “signature” is used to create one ticket-a checkwhich the seller’s digital “endorsement” transforms into another-an order to a bank computer for fund transfer. an e-check will need to be endorsed by the payee. but controlled. large and small.DBA 1727 NOTES number. with the institutions using these endorsed checks as tender to settle accounts. or not appropriate  is the most secure payment instrument available today  provides rapid and secure settlement of financial obligations  can be used with existing checking accounts can be initiated from a variety of hardware platforms and software applications 254 ANNA UNIVERSITY CHENNAI . information carrying capability reduces fraud losses for all parties automatic verification of content and validity traditional checking features such as stop payments and easy reconciliation enhanced capabilities such as effective dating The E-Check:  can be used by all account holders. using another electronic signature. the name of the payee and amount of the check.6. Subsequent endorsers add successive layers of information onto the tickets. before the check can be paid. They offer:       the ability to conduct bank transactions. The specifics of the technology work in the following manner: On receiving the check. the seller presents it to the accounting server for verification and payment. Like a paper check. And. Most of the information is in uncoded form. yet are safe enough to use on the Internet unlimited.4 Why do we use e-checks? E-Checks have important new features. an e-check will bear the digital equivalent of a signature: a computed number that authenticates the check as coming from the owner of the account. again like a paper check. 4. The accounting server verifies the digital signature on the check using any authentication scheme.

risk management.5 Comparison with other payment instruments E-Check and Paper Checks The electronic check (e-Check) is an all-electronic enhancement to the paper check and is based on current check law. E-checks and Debit cards Debit cards are used by individuals and to a far lesser extent by businesses. E-check and Home Banking Home banking bill payments are convenient for consumers. based on five categories: usage. NOTES 255 ANNA UNIVERSITY CHENNAI . This white paper will briefly compare the differences between debit cards and e-checks. This white paper will briefly explore the differences between the two payment approaches. there are significant differences between echecks and home banking bill payments. This white paper briefly compares the differences between SET and e-checks. and allowance for errors. These differences are reviewed in five main categories: terminology. this white paper provides a high level comparison of some of the main differences between the ACH debit system and echecks. to make payments at the retail point-of-sale. underlying technology. and information richness.E-COMMERCE TECHNOLOGY AND MANAGEMENT 4. transaction authorization. and risk management. business practices. or to obtain cash from ATMs. cost. E-check and Secure Electronic Transaction (SET) The SET protocol specifications were defined by the credit card industry to facilitate credit card purchases over the Internet.6. This white paper briefly compares paper and echecks. E-check and Automated Clearing House (ACH) Since electronic checks are debit transactions. and although they have some of the characteristics of electronic payments.

and perform many other functions. Other private sector institutions market stored value products to transit riders. the MTA anticipates more than 1. telephone customers. many state and federal governments are considering stored value cards as an efficient option for dispersing government entitlements. vending customers. Institutions such as the MTA have made a considerable investment in the stored value card processing network.1 Smart Cards Smart cards. In spite of the many prototypes developed. expedite customer transactions at the checkout counter. By 1999. use magnetic stripe technology or integrated circuit chips to store customer-specific information. and nine tolled intrastate bridges and tunnels. In addition. operates the New York City subway and public bus system. One successful use of stored value cards is by New York’s Metropolitan Transportation Authority (MTA). the MTA began the operation of an automated fare-collection system based on a plastic card with a magnetic stripe. store information. These facilities serve four million customers each workday. 4. and to get a good return on investment must identify new and innovative ways to achieve additional operating efficiencies and value. The MTA is the largest transportation agency in the United States and.600 MTA buses became operational in 1996. including electronic money. The management challenges created by smart card payment systems are formidable. The MetroCard is either swiped through a card reader at subway stations or dipped into a fare box on buses where the fare is decremented. Smart cards offer clear benefits to both merchants and consumers. They reduce cash-handling expenses and losses caused by fraud.2 billion electronic fare collection transactions a year on subway and bus lines. The cards can be used to purchase goods or services. also called stored value cards. control access to accounts. and enhance consumer convenience and safety.DBA 1727 NOTES 4. through its subsidiaries and affiliates. we are a long way from a universal payment system because 256 ANNA UNIVERSITY CHENNAI .2 Smart Cards and Electronic Payment Systems The enormous potential of electronic tokens is currently stunted by the lack of a widely accepted and secure means of transferring money on-line. and retail customers. university students. the Long Island Railroad and Metro-North commuter rail systems. The full complement of 467 subway stations is expected to be operational by mid-1997.7. In 1994.7 STORED VALUE CARDS AND E-CASH 4.7. All 3.

at its current state of development. Smart cards are credit and debit cards and other card products enhanced with microprocessors capable of holding more information than the traditional magnetic stripe. convenient. The smart card technology is widely used in countries such as France. or other information cardholders may want to store on their card. One such substitute is the smart card. and Singapore to pay for public phone calls. Electronic purses.2. and reliable. thousands of would-be sellers of electronic commerce services have to pay one another and are actively looking for payment substitutes. Smart cards are basically of two types:   Relationship-based smart credit cards Electronic purses. A relationshipbased smart card is an enhancement of existing card ser-vices and/or the addition of new services that a financial institution delivers to its customers via a chip-based card or other device.E-COMMERCE TECHNOLOGY AND MANAGEMENT merchants and banks have to be signed up and a means has to be developed to transfer money. can store significantly greater amounts of data. Such a system moreover must be robust and capable of handling a large number of transactions and will require extensive testing and usage to iron out all the bugs. as well as to meet the emerging payment needs of electronic commerce. Japan. The idea has taken longer to catch on in the United States. one-half of all payment cards issued in the world will have embedded microprocessors rather than the simple magnetic stripe.7.1 Relationship-Based Smart Cards Financial institutions worldwide are developing new methods to maintain and expand their services to meet the needs of increasingly sophisticated and technically smart customers. transportation/ and shopper loyalty programs. by the year 2000. value-added marketing programs. Industry observers have predicted that. since a highly reliable and fairly inexpensive telecommunications system has favored the use of credit and debit cards. The chip. estimated to be 80 times more than a magnetic stripe. Traditional credit cards are fast evolving into smart cards as consumers demand payment and financial services products that are user-friendly. Germany. In the meantime. Smart cards have been in existence since the early 1980s and hold promise for secure transactions using existing infrastructure. NOTES 4. which replace money. These new services may include access to multiple financial accounts. 257 ANNA UNIVERSITY CHENNAI . are also known as debit cards and electronic money.

balance inquiry. retailers. to making photocopies. and even government institutions are racing to introduce “electronic purses. or funds transfer for selected accounts Multiple access options at multiple locations using multiple device types. birth date. build loyalty and retention. credit. telephone companies. As with credit cards/banks may link up with health care providers.2. banks. This information will enable merchants to accurately track consumer behavior and develop promotional programs designed to increase shopper loyalty.7. Electronic Purses and Debit Cards Despite their increasing flexibility. 258 ANNA UNIVERSITY CHENNAI .2. such as an automated teller machine. The electronic purse works in the following manner. relationship-based cards are credit based and settlement occurs at the end of the billing cycle. 4. such as debit. such as cash access. on one card or an electronic device A variety of functions. offering a menu of services similar to those that come up on ATM screens. including the following:    Access to multiple accounts. There remains a need for a financial instrument to replace cash.” wallet-sized smart cards embedded with programmable microchips that store sums of money for people to use instead of cash for everything from buying food. They can package financial and non financial services with valueadded programs to enhance convenience.DBA 1727 NOTES The chip-based card is but one tool that will help alter mass marketing techniques to address each individual’s specific financial and personal requirements. a screen phone. investments or stored value for e-cash. credit card companies. and attract new customers. or interactive TVs Companies are trying to incorporate these services into a personalized banking relationship for each customer. a personal digital assistant (PDA). a personal computer. Banks are also attempting to customize services on smart cards. To meet this need. bill payment. Enhanced credit cards store cardholder information including name. Relationship-based products are expected to offer consumers far greater options. and airlines to offer frequent shopping and flyer programs and other services. to paying subway fares. and actual purchase records. personal shopping preferences.

E-COMMERCE TECHNOLOGY AND MANAGEMENT After the purse is loaded with money. Today the cards cost $1. more likely. and special telephones that consumers could install at home to recharge the cards are projected to cost as little as $50.7.3 Electronic or Digital Cash Electronic or digital cash combines computerized convenience with security and privacy that improve on paper cash. meaning that it can be given or traded to someone else. the value of the purchase is deducted from the balance on the card and added to an e-cash box in the vending machine. say. NOTES These reasons behind the prevalent use of cash in business transactions indicate the need to re-engineer purchasing processes. cash is negotiable. cash is still the most prevalent consumer payment instrument. The vending machine need only verify that a card is authentic and there is enough money available for a chocolate bar. The versatility of digital cash opens up a host of new markets and applications. Although it may be surprising to some. For example. And when the balance on an electronic purse is depleted. the cards have been relatively expensive. In order to displace cash. electronic payment systems need to have some cash-like qualities that current credit and debit cards lack. even after thirty years of developments in electronic payment systems. the purse can be recharged with more money. As for the vendor. A simple card reader would cost a merchant less than $200. Electronic purses would virtually eliminate fumbling for change or small bills in a busy store or rush-hour toll booth. Digital cash attempts to replace paper cash as the principal payment vehicle in online payments. by telephone and transferred to a bank account. Cash remains the dominant form of payment for three reasons: o o o lack of consumer trust in the banking system. and negative real interest rates on bank deposits. This allows customers to pay for rides and calls with a prepaid card that “remembers” each transaction. In one second. at an ATM or through the use of an inexpensive special telephone. While the technology has been available for a decade. Cash 259 ANNA UNIVERSITY CHENNAI . The remaining balance on the card is displayed by the vending machine or can be checked at an ATM or with a balance-reading device. from $5 to $10. the receipts can be collected periodically in person—or. candy in a vending machine equipped with a card reader. it can be used to pay for. inefficient clearing and settlement of non-cash transactions. 4. and waiting for a credit card purchase to be approved.

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is legal tender, meaning that the payee is obligated to take it. Cash is a bearer instrument, meaning that possession is proof of ownership. Cash can be held and used by anyone, even those without a bank account. Finally, cash places no risk on the part of the acceptor; the medium is always good. In comparison to cash, debit and credit cards have a number of limitations. First, credit and debit cards cannot be given away because, technically, they are identification cards owned by the issuer and restricted to one user. Credit and debit cards are not legal tender, given that merchants ‘have the right to refuse to accept them. Nor are credit and debit cards bearer instruments; their usage requires an account relationship and authorization system. Similarly, checks require either personal knowledge of the payer, or a check guarantee system. A really novel electronic payment method needs to do more than recreate the convenience that is offered by credit and debit cards; it needs to create a form of digital cash that has some of the proper-ties of cash. Properties of Electronic Cash o Digital cash must have a monetary value; it must be backed by cash (currency), bank-authorized credit, or a bank-certified cashier’s check. When digital cash created by one bank is accepted by others, reconciliation must occur without any problems. Without proper bank certification, digital cash carries the risk that when deposited, it might be returned for insufficient funds. Digital cash must be interoperable or exchangeable as payment for other digital cash, paper cash, goods or services, lines of credit, deposits in banking accounts, bank notes or obligations, electronic benefits transfers, and the like. Digital cash must be storable and retrievable. Remote storage and retrieval (such as via a telephone or personal communications device) would allow users to exchange digital cash (withdraw from and deposit into banking accounts) from home or office or while travelling. Digital cash should not be easy to copy or tamper with while it is being exchanged. It should be possible to prevent or detect duplication and doublespending of digital cash.







4.7.4 Using the Digital Currency Once the tokens are purchased, the e-cash software on the customer’s PC stores digital money undersigned by a bank. The user tan spend the digital-money of any shop accepting e-cash, without having to open an account there first or-having to transmit credit card numbers. As soon as the customer wants to make a payment, the software collects the necessary amount from the stored tokens. Two types of transactions are possible: bilateral and trilateral. Typically, transactions involving cash are bilateral or two-party (buyer and seller) transactions, whereby the merchant checks the veracity of the note’s digital signature by using the bank’s public key. If satisfied with the payment, the merchant stores the digital currency on his machine and deposits it later in the bank to redeem the face value of the note. Transactions involving financial instruments other than cash are usually trilateral or three-party (buyer, seller, and bank) transactions, whereby the “notes” are sent to the merchant, who immediately sends them directly to the digital bank. The bank verifies the validity of these “notes” and that they have not been spent before. The account of the merchant is credited. In this case, every “note” can be used only once. In many business situations, the bilateral transaction is not feasible because of the potential for double spending, which is equivalent to bouncing a check. Double spending becomes possible because it is very easy to make copies of the e-cash, forcing banks and merchants to take extra precautions. To uncover double spending, banks must compare the note passed to it by the merchant against a database of spent notes .Just as paper currency is identified with a unique serial number, digital cash can also be protected. The ability to detect double spending has to involve some form of registration so that all “notes” issued globally can be uniquely identified. However, this method of matching notes with a central registry has problems in the on-line world. For most systems, which handle high volumes of micro payments, this method would simply be too expensive. In addition, the problem of double spending means that banks have to carry added overhead because of the constant checking and auditing logs. (fig 4.7.4(a)) Double spending would not be a major problem if the need for anonymity were relaxed. In such situations, when the consumer is issued a bank note, it is issued to that person’s unique license. When he or she gives it to some-body else, it is transferred specifically to that other person’s license. Each time the money changes hands, the old owner adds a tiny bit of information to the bank note based on the bank note’s serial number and his or her license. If somebody attempts to spend money twice, the bank will



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now be able to use the two bank notes to determine who the cheater is. Even if the bank notes pass through many different people’s hands, whoever cheated will get caught, and none of the other people will ever have to know. The downside is that the bank can tell precisely what your buying habits are since it can check the numbers on the e-cash and the various merchant accounts that are being credited. Many people would feel uncomfortable letting others know this personal information.

Figure 4.7.4(a) Detection of double spending




4.7.5 Drawback of E-cash One drawback of e-cash is its inability to be easily divided into smaller amounts. It is often necessary to get small denomination change in business transactions. A number of variations have been developed for dealing with the “change” problem. For the bank to issue users with enough separate electronic “coins” of various denominations would be cumbersome in communication and storage. So would a method that required payees to return extra change. To sidestep such costs, customers are issued a single number called an “open check” that contains multiple denomination values sufficient for transactions up to a prescribed limit. At payment time, the e-cash software on the client’s computer would create a note of the transaction value from the “open check.” 4.7.6 Business Issues and Electronic Cash Electronic cash fulfils two main functions: as a medium of exchange and as a store of value. Digital money is a perfect medium of exchange. By moving monetary claims quickly and by effecting instant settlement of transactions, e-cash may help simplify the complex interlocking credit and liabilities that characterize today’s commerce. For instance, small businesses that spend months waiting for big customers to pay their bills would benefit hugely from a digital system in which instant settlement is the norm. Instant settlement of micro payments is also a tantalizing proposition. The controversial aspects of e-cash are those that relate to the other role, as a store of value. Human needs tend to require that money take a tangible form and be widely accepted, or “legal tender”. In most countries, a creditor by law cannot refuse cash as settlement for a debt. With the acceptability of cash guaranteed by law, most people are willing to bank their money and settle many of their bills by checks and debits, confident that, barring a catastrophe, they can obtain legal tender (cash) on demand. If e-cash had to be convertible into legal tender on demand, then for every unit there would have to be a unit of cash reserved in the real economy: or, to look at it the other way round, there would be cash in the real world for which digital proxies were created and made available. This creates problems, because in an efficient system, if each e-cash unit represents a unit of real cash, then positive balances of e-cash will earn no interest; for the interest they might earn would be offset by the interest foregone on the real cash that is backing them. The enormous currency fluctuations in international finance pose another




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problem. On the Internet, the buyer could be in Mexico and the seller in the United States. How do you check-that the party in Mexico is giving a valid electronic currency that has suitable backing? Even if it were valid today, what would happen if a sudden devaluation occurs such as the one in December 1994 where the peso was devalued 30 percent overnight. Who holds the liability, the buyer or the seller? These are not technological issues but business issues that must be addressed for large-scale bilateral transactions to occur. Unless, we have one central bank offering one type of electronic currency, it is very difficult to see e-cash being very prominent except in narrow application domains. From a banker’s point of view, e-cash would be a mixed blessing. Because they could not create new money via lending in the digital world, banks would see electronic money as unproductive. They might charge for converting it, or take a transaction fee for issuing it, but on-line competition would surely make this a low-profit affair. In the short term, banks would probably make less from this new business than they would lose from the drift of customers away from traditional services. It seems unlikely that e-cash would be allowed to realize its potential for bypassing the transaction costs of the foreign exchange market. If you pay yen for e-cash in Osaka and buy something from a merchant based in New York who cashes them for francs, a currency conversion has taken place. That, however, is an activity toward which most governments feel highly defensive; and if e-cash started to bypass regulated foreign exchange markets by developing its own gray market for settlement, then governments might be provoked into trying to clamp down on it. Because of these obstacles, e-cash in its early forms may be denominated in single currencies and exchanged at conventional market rates. Next we will see the risks involved while doing the transactions involving the use of e-cash. 4.7.7 Operational Risk and Electronic Cash Operational risk associated with e-cash can be mitigated by imposing constraints, such as limits on (1) (2) (3) (4) the time over which a given electronic money is valid, how much can be stored on and transferred by electronic money the number of exchanges that can take place before a money needs to be redeposit with a bank or financial institution, and the number of such transactions that can be made during a given period of time.


These constraints introduce a whole new set of implementation issues For example, time limits could be set beyond which the electronic money, would expire and become worthless. The customer would have to redeem or exchange the money prior to the expiration deadline. For this feature to work; electronic money would have to be timestamped, and time would have to be synchronized across the network to some degree of precision. The objective of imposing constraints is to limit the issuer’s liability. A maximum upper limit could be imposed on the value that could be assigned to any single transaction or that could be transferred to the same vendor within a given period of time. Since the user’s computer could be programmed to execute small transactions continuously at a high rate over the network, a strategy of reporting transactions over a certain amount would be ineffective for law enforcement. However, a well-designed system could enforce a policy involving both transaction size and value with time. For example, an “anonymous coinpurse” feature might be capable of receiving or spending no more than $500 in any twentyfour hour period. Alternatively, the “rate ceiling” for the next twenty-four hours could be made dependent on the rate of use or on the number of exchanges that could be permitted before any electronic money would have to be redeposit in a bank or financial institution and reissued. Finally, exchanges could also be restricted to a class of services or goods (e.g., electronic benefits could be used only for food, clothing, shelter, or educational purposes). The exchange process should allow payment to be withheld from the seller upon the buyer’s instructions until the goods, or services are delivered within a specified time in the future. 4.7.8 Legal Issues and Electronic Cash Electronic cash will force bankers and regulators to make tough choices that will shape the form of lawful commercial activity related to electronic commerce. As a result of the very features that make it so attractive to many, cash occupied an unstable and uncomfortable place within the existing taxation and law enforcement systems. Anonymous and virtually untraceable, cash transactions today occupy a place in a kind of underground economy. This underground economy is generally confined to relatively small scale transactions because paper money in large quantities is cumbersome to use and manipulateorganized crime being the obvious exception. As long as the transactions fare small in monetary value, they are tolerated by the government as an unfortunate but largely insignificant by product of the modern commercial .state. As transactions get larger the government becomes more suspicious and enlists the aid of the banks, through the various currency reporting laws, in reporting large disbursements of cash so that additional oversight can be ordered.



what the government will do remains a mystery. 266 ANNA UNIVERSITY CHENNAI . Under the most ambitious visions of e-cash. as issues to be reconsidered. the encrypted e-cash file could be handed off without the knowledge of anyone but the par-ties to the transaction. But if e-cash really is made to function the way that paper money does. but it is going to take some serious thinking to design a regulatory scheme that balances personal privacy. too. Moreover. say. Anything that makes cash substantially easier to use in a broader range of transactions holds the potential to expand this underground economy to pro-portions posing ever more serious threats to the existing legal order. However. the government through law may prevent a truly anonymous and untraceable e-cash system from developing. we are mainly watching and trying to educate ourselves about the likely path of the transition to electronic cash. we would see a new form of currency that could be freely passed off from one computer to another with no record. The bank would have a record of that transaction. For now. the technology is forcing legal. and ease of use. Without a functioning system. But after that.. Just as powerful encryption schemes permit the design of untraceable e-cash systems. sales taxes) account for a significant portion of state and local government revenue. it is not even clear yet that the market as a whole will adopt an anonymous e-cash standard. e-cash cannot escape government scrutiny and regulation.g. allowing those with access to know more about an individual than anyone could know today. just as a withdrawal or check is recorded now. and officials in government are starting to take cognizance of this development and to prepare their responses. A consumer could draw such e-cash electronically from his or her bank. so. “How can it not?” By impacting revenue-raising capabilities. The question e-cash poses is not. “Should the law take notice of this development?” but rather.DBA 1727 NOTES E-cash on taxation Transaction based taxes (e. do powerful electronic record-keeping tools permit the design of traceable systems-systems in which all financial transactions are duly recorded in some database. or as the down payment on a house-could be made in this new form of currency because there would be no problem of bulk and no risk of robbery. yet incapable of being forged. To prevent an underground economy. speed of execution. as the politics and business play out. The threat to the government’s revenue flow is a very real one. payments we would never think of making in cash-to buy a new car.

NOTES 3. and float implications.7. 2.E-COMMERCE TECHNOLOGY AND MANAGEMENT 4. Tokens must be backed by cash. Here are four dimensions that are useful for analyzing the different initiatives.9 Electronic Tokens An electronic token is a digital analogue of various forms of payment backed by a bank or financial institution. risk. the average amounts. Transactions are settled with the exchange of electronic currency. The means of settlement used. Electronic tokens are of three types: 1. and cost. risk. Most transaction settlement methods use Credit cards. Each option incurs trade-offs among transaction speed. 267 ANNA UNIVERSITY CHENNAI . electronic bill payments (prearranged and spontaneous). effectively creating currencies of dubious liquidity and with interesting tax. payments for small snippets of information. 2. others seek more general transactions. The key is-to identify the parties involved. and the purchase interaction. The server authenticates the customers and verifies with the bank that funds are adequate before purchase. Users pay in advance for the privilege of getting information. Examples of post-paid mechanisms are credit/ debit cards and electronic checks. The following sections examine these methods of on-line payment. that is. 1. An example of on-line currency exchange is electronic cash (e-cash). to name a few. Sometokens are-specifically designed to handle micro payments. Some systems target specific niche transactions. But we must first understand the different viewpoints that these payment instruments bring to electronic commerce. and wire transfers. cashier’s checks. letters and lines of credit. credit. Debit or prepaid. Others are designed for more traditional products. The nature of the transaction for which the instrument is designed. Credit or post-paid. Examples of prepaid payment mechanisms are stored in smart cards and electronic purses that store electronic money. Cash or real-time. while others use other proxies for value.

This exposes merchants to the risk that buyers don’t pay-or vice versa that the vendor doesn’t deliver. and smart cards. Such a transaction occurs when a customer uses a debit card to make a purchase from a merchant (supermarket. check. Authentication is provided by the use of the digital signature or PIN numbers. and safety of payment is assured.7. just as it is at 268 ANNA UNIVERSITY CHENNAI . Approach to security. The question of risk. The third-party processors who provide services for merchants are also examined by the federal regulators for system integrity. 4. and the terminal routes the transaction through the ATM network back to the customer’s bank for authorization against the customer’s demand deposit account. a customer gives an ATM card to the merchant for the purchase.10 Other Emerging Financial Instruments Several other electronic payment systems are currently being prototyped and tested. once approved. These include debit cards. anonymity. The funds. Both the consumer and the merchant maintain bank accounts. are transferred from the customer’s bank to the merchant’s bank. electronic benefit transfer cards. Encryption can help with authentication. Some may be more open to potentially prying eyes-or even to the participants themselves. The transaction works much like a credit card transaction. or some other store that accepts such cards instead of using cash. and authentication. For example. consumers may be exposed to risk as they hold static assets. The merchant swipes the card through a transaction terminal. the customer enters his personal identification number (PIN). convenience store. Debit Cards at the Point of Sale (POS) The fastest growing number of electronic transactions today is debit card pointof-sale transactions. and asset management. gas station. Risk also arises if the transaction has long lag times between product delivery and payments to merchants. These transactions occur within the banking system. or credit card). which reads the information. If the system stores value in a smart card. Also electronic tokens might be subject to discounting or arbitrage. non reputability. and the funds are transmitted inter-bank within the payment system. 4.DBA 1727 NOTES 3. Electronic tokens vary in the protection of privacy and confidentiality of the transactions. Who assumes what kind of risk at what time? The tokens might suddenly become worthless and the customers might have the currency that nobody will accept.

recipients access their benefits in the same way that consumers use debit cards to access their bank accounts electronically: the card is inserted into or swiped through a card reader and the cardholder must enter a PIN associated with that card. and the PIN pads and terminals are tamper-proof. Further. food stamp purchases are charged against the participant’s allotment. except for the receipt printed for the purchaser by the pas device or the ATM. and other purchases or cash distributions are charged against the participant’s cash assistance program allotment. and supplemental or emergency payments). refugee assistance. many recipients of federal and state benefits must pay significant fees (three or more dollars) to cash their checks. which can be lost or stolen. state-funded and state-administered benefits (such as general assistance. EBT is less costly. Recipients can access cash through any number of establishments. Currently. In EBT. heating assistance. existing networks and technologies can provide benefit recipients with online access to their funds at pas devices and ATMs. Benefits that can be delivered via EBT generally fall into three cate-gories: federally funded.E-COMMERCE TECHNOLOGY AND MANAGEMENT ATMs. In an EBT process. In an EBT system. and financial institutions.Second. Electronic benefits transfer uses debit cards for the electronic delivery of benefits to individuals who otherwise may not have bank accounts. as well as ATMs. The benefit recipient can then access his or her benefits to make a purchase or obtain cash. particularly by larger merchants. EBT systems are designed to provide nocost or low-cost access methods. no paper changes hands. Electronic benefits transfer has several advantages over paper based. Aid to Families with Dependent Children programs). Certain cash payments can also be facilitated by installing pas devices in housing authority and utility company offices to accept rent and bill payments. First. PINs are sent through the system in an encrypted form. EBT eliminates the need to carry food stamp coupons. or accept the entire benefit amount at one time. stand in long lines to cash checks. EBT is more convenient than paper methods. including grocers. Through EBT. benefit distribution systems. Dedicated lines are also often used for transmission. . benefits are stored 269 NOTES ANNA UNIVERSITY CHENNAI . but state administered benefits (such as food stamps. EBT programs also provide recipients with toll-free customer service lines and multilingual support to handle questions or problems. EBT is safer than cash or coupons. and benefits that are both federally funded and federally administered (such as Social Security and Veterans benefits). Debit Cards and Electronic Benefits Transfer Debit cards are being used extensively for electronic benefits transfer (EBT). For example. drugstores.

By eliminating checks and coupons. EBT is convenient for the government. Broadly de-fined. EBT improves benefit program management by creating an audit trail and record of benefit usage. Retailing payments. This also means that the originator cannot falsely deny having signed the data. Recipients control all ac-cess to their benefits through their cards and PINs. On-line electronic commerce payments Secure Electronic Transaction (SET) protocol: SET protocol meets the four security requirements for EC as SSL (Secure Socket Layer) does: authentication. there are two types of encryption methods: Secret-key encryption. Third. encryption. a digital signature enables the computer to notarize the message. Summary Electronic payment system: Electronic payment is an integral part of electronic commerce. Most computer encryption systems belong in one of two categories. and non repudiation. making grocery checkout procedures faster and easier. forgery. electronic payment is a financial exchange that takes place online between buyers and sellers. In addition. EBT is convenient for retailers.DBA 1727 NOTES electronically. EBT reduces losses associated with theft. ensuring the recipient that the message has not been forged I transit. Firewall: A firewall is simply a program or hardware device that filters the information coming through the Internet connection into your private network or computer system 270 ANNA UNIVERSITY CHENNAI . Security issues: Encryption is a technique for hiding data. Its inherent audit and tracking advantages enhance investigations into suspicious conduct by retailers. Types of Electronic Payment System: Banking and financial payments. integrity. Public-key encryption Digital Signature: Digital signatures are used for sending authentication. ensuring that programs are working properly and effectively. and fraud. They can also deactivate lost or stolen cards immediately and request a replacement card by a toll free phone call. It eliminates the time-consuming task of handling food stamp coupons. Finally. and can be used only when needed and in the amounts required.

E-cash: Electronic or digital cash combines computerized convenience with security and privacy that improve on paper cash. use digital signatures for signing and endorsing. and bank account. and perform many other functions. use magnetic stripe technology or integrated circuit chips to store customer-specific information. Its use has become widespread with the arrival of personal computers. Credit card: A credit card is a system of payment named after the small plastic card issued to users of the system. Physically the card is an ISO 7810 card like a credit card. however. Cash or real-time. Debit or prepaid. improved cryptography and the Internet. and require the use of digital certificates to authenticate the payer. The cards can be used to purchase goods or services. A credit card is different from a debit card in that it does not remove money from the user’s account after every transaction. Electronic checks are modelled on paper checks. store information. E-token: An electronic token is a digital analogue of various forms of payment backed by a bank or financial institution. the payer’s bank. Smart cards are basically of two types: Relationship-based smart credit cards. cheap networks. its functionality is more similar to writing a cheque as the funds are withdrawn directly from either the cardholder’s bank account (often referred to as a check card).E-COMMERCE TECHNOLOGY AND MANAGEMENT EFT: An electronic funds transfer (also known as EFT) is a system for transferring money from one bank to another without using paper money. NOTES 271 ANNA UNIVERSITY CHENNAI . E-checks: Electronic checks are designed to accommodate the many individuals and entities that might prefer to pay on credit or through some mechanism other than cash. Electronic tokens are of three types: 1. including electronic money. 2. 3. Electronic purses. also called stored value cards. Credit or post-paid. Debit card: A debit card (also known as a gift card) is a plastic card which provides an alternative payment method to cash when making purchases. except that they are initiated electronically. or from the remaining balance on the card. Smart cards: Smart cards. Digital cash attempts to replace paper cash as the principal payment vehicle in online payments. control access to accounts.

14. 4. 18. 25. 16. 15. List the advantages and disadvantages of using credit card How do you make your credits cards information secure? What is a debit card? How debit card is different from credit card? Discuss on-line and off-line debit transactions List the advantages and disadvantages of debit card What are electronic cheques? How they are different from traditional cheques? List the benefits of E-check Compare E-check with other payment instruments How electronic checks are differing from credit card? What are smart cards? Compare and contrast smart card and traditional credit cards. 24. What is EFT? Describe the advantages of EFT What is a credit card? What are the pros and cons of using Credit Cards for electronic payment? Describe the major steps involved in an online credit card transaction. security in electronic payment. 22. 8. 2. 9. 10. 11. 17. 13. 7. 23. 6.DBA 1727 NOTES Questions for review 1. 20. What is SET protocol? What features does SET specify? Describe security schemes against internet fraud How do you differentiate Secret-key cryptography and Public-key cryptography? How can you ensure and maintain privacy. 21. How electronic purses work? What are bilateral and trilateral transactions? What all are the risk factors associated with E-cash? How e-cash effect the government revenues? Discuss the other emerging financial instruments 272 ANNA UNIVERSITY CHENNAI . Discuss about the benefits of electronic payment system. 19. What is Electronic Payment System? Discuss the various Electronic Payment Systems. 5. 12. 3.

therefore.1. which were hitherto unknown. But then these are known. have changes the scene. However. without the familiar signatures and marks. trade still wants to be assured that the electronic world is safe. It is well known that frauds do take place in the traditional paper based commercial transaction.1 Legal issues The world is used to conducting business and commerce on signed paper documents. on the other hand. since they have been there for as long as we have been trading. The world is comfortable with these problems. and that their authentication can be established 273 ANNA UNIVERSITY CHENNAI . Companies set aside funds to take care of losses due to such frauds. Electronic documents and messages. Signatures can be forged. and even the most secure marks. since they are directly the outcome of creating documents electronically. For example.E-COMMERCE TECHNOLOGY AND MANAGEMENT NOTES UNIT V LEGAL AND PRIVACY ISSUES IN E-COMMERCE 5. emblems and seals can be forging. The EC system must. Trading partners exchange documents electronically. They need to convince themselves that such documents are authentic when received over networks. transmitting them over world wide computer communication networks.1 LEGAL ASPECTS OF E. offer at least the same level of reliability as that which obtains in the paper world notwithstanding the significant difference between the concepts embodied in electronic messages and paper documents. exposes us to issues. The EC world. paper document can be tampered with. impression. and trade as well as the legal community knows how to deal with these problems.COMMERCE 5. credit-cards companies do know that a very small percentage of transactions is fraudulent in nature. The current legal practice has paper documents and signatures affixed thereon as its foundation. Two millennia of commerce has been based on the written document with its value ‘authorized’ by the signature of a duly authorized officer.

DBA 1727 NOTES in case of dispute. that it was sent. despatch. In the EDI world of electronic documents. a Wide Area Network. legal requirement. but the key concept of admissibility of evidence and evidential value of electronic documents. Transactions may be electronic. optical fiber or a satellite communication channel. EDI interchange Agreement It is a known fact that a certain discipline is required in the conduct of commerce in the paper world. it may be transmitted over a Local Area Network. or an optical disk. between VANs and their customers. was received. In addition. a magnetic disk. signing. From the legal angle. radio link. traders and legal experts. or even a proper interchange agreement. and regions. and that it could not be read and interpreted by any third party intercepting or deliberately receiving it. the UN has adopted the Model Interchange Agreement for the International Commercial Use of Electronic Data Interchange. too the Indian Customs EDI system (ICES) Project got off the ground in 1995 without any EC/EDI law in existence. this kind of discipline has been created through a set of rules that have developed in the form of interchange agreements within a number of user groups. receipts etc. thus gets directly linked to the technical methods for security of computers and networks. At the international level. The message can be stored on a floppy. was not changed between the sending and receiving. which are central to the law. It addresses the need for uniformity of agreement so that there are no barriers to international trade on account of different 274 ANNA UNIVERSITY CHENNAI . there is a further complication because the electronic message is independent of the actual medium used for storage transmission. In India. national organization. acceptable rules of conduct are also necessary to achieve the kind of discipline required for smooth and effective trade and commerce. Likewise. have to follow certain protocols agreed to by trading partners. The legal issues of EC have generated tremendous interest among technologists. drawing up commercial contracts. remain the same. The security of an electronic message. in fact they are still in the making. and even production systems went into operation without any legal interchange agreement between trading partners. The physical medium could be coaxial cable. There must be a way to prove that a message existed. Simple activities such as preparation of invoices. These may be formal or in formal. a private Value Added Network or the Internet. Many of the early EDI experiments. No laws for EC existed. which applies to the interchange of data and not to the underlying commercial contracts between the parties.

also introduce uncertainty regarding the legal validity of electronic document. standards and the methods of communication. The points at which EDI messages have legal effect. 3. Responsibilities for ensuring that the equipment. are as follows: 1. and that they desire to operate within a legal framework. The UN has recommended that the member countries should take into account the terms and provisions of the Model Interchange Agreement when framing their own laws on EC. which were addressed by the working party. The need (if any) for confidentiality. which prepared this model Interchange Agreement. 7. It details the individual roles and legal responsibilities of trading partners for transmitting. and storing electronic messages. 6. software and services are operated and maintained effectively. subject to national laws and regulations. The laws governing the interchange of EDI messages and the arrangements of the parties. Security procedures and services. It establishes the rules they will adopt for using EDI/EC transactions.E-COMMERCE TECHNOLOGY AND MANAGEMENT solutions for various problems being adopted by countries. 10. It” is precisely in this kind of a scenario where clear legal rules and principles are absent. Liabilities in the event of any delay or failure to meet agreed EDI communications requirement. Many of the conventions and agreements relating to international trade do not anticipate the use of EDIIEC. NOTES 275 ANNA UNIVERSITY CHENNAI . The roles and contracts of any third-party service providers. 8. as noted above. 2. An interchange agreement may be made between trading partners. . that an interchange agreement provides trading partners with readily available solutions the EDI/ EC relationship between them. Procedures for making any systems changes which may impair the ability of the trading partners to communicate. messages or signatures. 5. 4. 9. This can help reduce legal uncertainty in the electronic environment. The signing of an interchange agreement signifies that the parties intend to be bound by it. 11. Many national laws. There are still very few national and international judgments ruling” on the validity of electronic documents. Methods for resolving any possible disputes. The issues. It establishes the rules they will adopt for using EDII ED transaction. Procedures for dealing with technical errors. It provides a strong legal framework for ensuring that electronic documents will have a legal binding effect. receiving. Selection of EDI messages.

much the same way it applies to physical copies. the subject matter of copyright has further expanded. electronic filing. electronic transactions. dramatic or musical works. sound recordings. however. remote employee access. In due course it protects the originality of artists and innovators too. 1988 in the UK. The multimedia capability of websites enables all types of work to be ‘published’ on the Internet in the sense that copies can be distributed to users/customers. Copyright law protects only the expression of an idea and idea itself.  Trade and commerce over the Internet give rise to several legal issues . cable programs These have been broadly classified into two groups as ‘author works’ and ‘media works’ by Hector L. allows protection of the following subject matter: Original literary. Macqueen. Trading partners can feel confident that it addresses the recognised legal issues arising from commercial use of EDI in international trade. this copy can be readily duplicated and distributed further by the recipient. dramatic. 276 ANNA UNIVERSITY CHENNAI . however. But the copyright law applies to the downloaded matter. If the material is in the public domain there are no difficulties. the typographical arrangement of published editions of literary.DBA 1727 NOTES The interchange agreement is flexible enough to meet the requirement of all business sectors involved in international trade.  Exchange of electronic messages and documents  EDI.1. is that unlike a paper copy. 5. Legal Issues for Internet Commerce Internet commerce raises legal issues through the provision of the following services:  Online marketing  Online retailing ordering of products and services  Financial services such as banking and trading in securities. musical and artistic works. In recent times. and provides a strong legal and practical framework for considering and recording the necessary business decisions. For example. The problems.2 Copyright and the Internet Copyright developed in the printed world to protect the economic interests of creative writers. broadcasts. the Copyright Designs and Patent Act.

Visitor to the site.1. however. much the same way a fax message is. offer is communicated by the acceptor and acceptance is received by the offer or from the acceptor. For example. This is based on accepted legal practice. on his website. viz. E-mail distribution list etc. The key activities associated with the formation of an enforceable contract do take place on the Internet. amazon. 5.com is a bookstore retailing books.1. However. etc: “Thus the concerns include libel and defamation. be interpreted to decide the jurisdiction of disputes especially in EC. Jurisdiction determines which laws would be acceptable.4 Service Provider liability Many ISPs provide users access to shared websites. third-party liability for defamation. AN ISP could be held liable for the bulletin boards. pornography and obscene material.5 Formation of an Enforceable Online Contract The growth of EC on the Internet depends to a large extent on the confidence of traders in forming legally enforceable contracts online. 5. The offer or can display terms and conditions as a legal notice. An offer can be communicated orally or in writing.E-COMMERCE TECHNOLOGY AND MANAGEMENT 5.-web sites. liability for infringement of third-party rights. In this case the E-mail of acceptance has to reach the offer or who may say that the contract will be legal only after its receipt (in his notice placed on the Website). and for aiding and abetting the commission of an offence such as the distribution of photography. 277 NOTES ANNA UNIVERSITY CHENNAI . These facilities can because by their users to upload unlawful. who choose to proceed further. EC on the Internet will grow if the parties doing business know what rules will govern what rules govern their activities. Usenet news.3 Issues Related to Jurisdicary The Internet allows anyone to set up a Website anywhere in the world.1. the timing of the acceptance offer determines when the contract is formed. and the ISPs. Similarly. Eform is valid. and in the EC environment through Email. Its location could. defamatory. Unlawful material includes banned publications. A Website may accept orders from visitors to the site as part of an Internet store or a shopping mall. A court law may rule that the location of the Website determines the jurisdiction for that business. Liability for materials distributed in the Internet may be different for the Website operators. liability for hosting of unlawful materials. without ISP having chance to review it. copyright or trademarks infringing material. hate propaganda. even after reading the notice may be constructed as accepting the conditions imposed by it.

Understanding Ethical. despoil the environment. 5. but this development also exacts a price from individuals. AND POLITICAL ISSUES IN ECOMMERCE 5. social and political issues on a scale unprecedented for computer technology. there was very little “cyber crime. Before automobiles. there was very little interstate crime and very little federal jurisdiction over crime. provide a framework for organizing the issues. Controversies over information are often in fact disagreements over power. There is sufficient awareness in. telephones. influence.DBA 1727 NOTES Legal issues are manifold. this has occurred. and political issues raised in e-commerce. and political issues raised by the rapid evolution of e-commerce. wealth. These costs and benefits must be carefully considered by those seeking to make ethical and socially responsible decisions in this new environment.1 Ethics. electronic document must be acceptable as legal evidence in courts of law. We live in an “information society. social. And Political Issues in E-Commerce Internet and its use in e-commerce have raised pervasive ethical. social. Whether it is EDI over VANs. and enforceability of appropriate laws for EC. Like other technologies such as steam. The ethical. Social. and other things thought to be valuable. or EC over the Internet the primary concern of users is the existence.” where power and wealth increasingly depend on information and knowledge as central assets. SOCIAL. 278 ANNA UNIVERSITY CHENNAI . and synergy of action among trade. In case of dispute. Likewise with the Internet: Before the Internet. and make recommendations for managers who are given the responsibility of operating e-commerce companies within commonly accepted standards of appropriateness. organizations. electricity. and television. Social and Political issues Defining the rights of people to express their ideas and the property rights of copyright owners are just two of many ethical. and societies.2. and threaten cherished social values.” Many business firms and individuals are benefiting from the commercial development of the Internet. While the problems of acceptance of and confidence in electronic transactions are there. and for the most part. they are not insurmountable. the same technologies can be used to commit crimes. the Internet and ecommerce can be used to achieve social progress. legal and EC technology communities to make EC happen through appropriate developments in their respective areas. However.2 ETHICAL.

when Internet technology make information collection so pervasive and efficient? What rights do individuals have to access information about business firms and other organizations? Property rights: How can traditional intellectual property rights be enforced in an internet world where perfect copies of protected works can be made and easily distributed worldwide in seconds? Governance: Should the Internet and e-commerce be subject to public laws? And if so. social organizations. Now. and political issues that have developed around ecommerce over the past seven to eight years can be loosely categorized into four major dimensions: information rights.state. and political institutions. banking and commercial law that provides sanctions against violators. something which. and roles and political institutions provide a supportive framework of market regulation. Suddenly individuals. and public safety and welfare as shown in Fig 5. imagine that at any given moment society and individuals are more or less in an ethical equilibrium brought about by a delicate balancing of individuals.such as pornography and gambling . For instance.2. Some of the ethical. capabilities. and political institutions are confronted by new possibilities of behavior.a threat to public safety and welfare? Should mobile commerce be allowed from moving vehicles? NOTES    To illustrate. under the old technology of CDs. imagine we drop into the middle of this calm setting a powerful new technology such as the Internet and e-commerce. social.1(a). social.E-COMMERCE TECHNOLOGY AND MANAGEMENT The major ethical. property rights. This can be done. would have been impossible. and political issues raised in each of these areas include the following:  Information rights: What rights to their own personal information do individuals have in a public marketplace. despite the fact that these music tracks still 279 ANNA UNIVERSITY CHENNAI . business firms. what law-making bodies have jurisdiction . federal. or in their private homes. individuals discover that they can download perfect digital copies of music tracks. Individuals know what is expected of them. and/or international? Public safety and welfare: What efforts should be undertaken to ensure equitable access to the Internet and ecommerce channels? Should governments be responsible for ensuring that schools and colleges have access to the Internet? Is certain online content and activities . social organizations such as business firms know their limits. governance.

How can you make good decisions in this type of situation? Before reviewing the four moral dimensions of e-commerce in greater depth. societies. as an individual and a manager. information rights. and political institutions. courts.areas.” It may take years to develop new understandings. and acceptable behavior in just this one area of social impact. Fig 5.DBA 1727 NOTES “belong” as a legal matter to the owners of the copyright . Courts and legislative bodies will have to make new laws and reach new judgments about who owns digital copies of copyrighted works and under what conditions such works can be “shared.even though they do not “own” them in the traditional sense. governance. and Congress were not prepared at first to cope with the onslaught of online digital copying. The record companies. In the meantime. you will have to decide what you and your firm should do in legal “grey”. and public safety and welfare Then business firms discover that they can make a business out of aggregating these musical tracks . laws. The introduction of the Internet and e-commerce impacts individuals.2.or creating a mechanism for sharing musical tracks. we will briefly review some basic concepts of ethical reasoning that you can use as a guide to ethical decision making.1(a) 280 ANNA UNIVERSITY CHENNAI .musicians and record label companies. but no c1ear-cutural guidelines. where there is conflict between ethical principles. These impacts can be classified into four moral dimensions: property rights. and provide general reasoning principles about social political issues of the Internet that you will face in the future.

there are ability and liability principles that all ethical schools of thought share: responsibility. Due process is a feature of law-governed societies and refers to a process in which laws are known and understood and there is an ability to appeal to higher authorities to ensure that the laws have been applied correctly. In western culture. As long as there is a decision-making body or individual (such as a Board of Directors or CEO in a business firm or a governmental body in a society). you will be surprised at the errors in the initially reported facts. their decisions can be judged against a variety of ethical principles. each of which supports a desirable outcome. and where. systems. When confronted with a situation that seems to present ethical dilemmas. Find out who did what to whom. how can you analyze and reason about the situation? The following is a five step process that should help. organizations. and societies should be held accountable to others for the consequences of their actions.2 Basic Ethical Concepts: Responsibility Accountability. In many instances. organizations and societies are responsible for the actions they take. account. Ethics is the study of principles that individuals and organizations can use to determine right and wrong courses of action.liability.E-COMMERCE TECHNOLOGY AND MANAGEMENT 5. but it is not impossible.2. Liability is a feature of political systems in which a body of law is in place that permits individuals to recover the damages done to them by other actors. A dilemma is a situation in which there are at least two diametrically opposed actions. or organizations. your ability to reason about larger social and political debates will be improved. The third principle -liability . Analyzing Ethical Dilemmas Ethical. social. when. and Liability Ethics is at the heart of social and political debates about the Internet. Accountability means that individuals. It is assumed in ethics that individuals are free moral agents who are in a position to make choices. individuals. and how. and political controversies usually present themselves as dilemmas. Responsibility means that as free moral agents.  Identify and describe clearly the facts. Extending ethics from individuals to business firms and even entire societies can be difficult. If you understand some basic ethical principles. and often you will find that simply getting 281 NOTES ANNA UNIVERSITY CHENNAI .extends the concepts of responsibility and accountability to the area of law.

there would be no debate. who have its vested in the situation. The parties to a dispute all claim to be pursuing higher values (e. “what if I choose this option consistently over time?” Once your analysis is complete. protection of property. and political issues always reference higher values. but not in other similar instances. The major ethical issues related to ecommerce and privacy includes the following: Under what conditions should we invade the privacy of others? 282 ANNA UNIVERSITY CHENNAI . Double Click and its supporters argue that their tracking of consumer movements on the Web increases market efficiency and the wealth of the entire society. always be a balancing of consequences to stakeholders. and political issue has stakeholders: players in the game who have an interest in the outcome. but disastrous from other points of view. but that some options do a better job than others. Ethical. Find out the identity of these groups and what they want. This will be useful later when designing a solution.2. Perhaps no other recent issue has raised as much widespread social and political concern as protecting the privacy of over 160 million Web users in the United States alone. privacy. You may find that none of the options satisfies all the interests involved.g.3 Privacy and Information Rights The Internet and the Web provide an ideal environment for invading the personal privacy of millions of users on a scale unprecedented in history. you can refer to the following well established ethical principle to help decide the matter. 5. social. freedom. Identify the stakeholders. Otherwise. Define the conflict or dilemma and identify the higher order value involved. For example. Sometimes. It also helps to get the opposing parties involved in an ethical dilemma to agree on the facts. and the -enterprise system). Identify the potential consequences of your options. Opponents argue this claimed efficiency comes at the expense of individual privacy. Some options may be ethically correct. Identity the options that you can reasonably take.. social. arriving at a “good” or ethical solution may not. and usually who have vocal opinions. Always ask yourself. Other options may work in this one instance. Every ethical.DBA 1727 NOTES     the facts straight helps define the solution. and Double Click should cease its or offer Web users the option of not participating in such tracking.

E-COMMERCE TECHNOLOGY AND MANAGEMENT What legitimates intruding into others lives through unobtrusive surveillance. as well as public attitudes. and appropriation of a person’s name or likeness (mostly concerning celebrities) for a commercial purpose. rights to privacy are explicitly granted in or can be derived from. there is also protection of privacy in the common law. Information privacy is a subset of privacy. and perhaps destroyed. a body of court decisions involving torts or personal injuries. founding documents such as constitutions. the claim to privacy against government intrusion is protected primarily by the First Amendment guarantees of freedom of speech and association and the Fourth: 283 NOTES ANNA UNIVERSITY CHENNAI . and Germany. as well as in specific statutes. The right to information privacy includes both the claim that certain information should not be collected at all by governments or business firms. in the United States. market research. and associate independently and without fear. In what areas of should we as a society encourage people to think they are in “private territory” as opposed to public view? The major political issues related to ecommerce and privacy concern the development of statutes that govern the relations between record keepers and individuals. Canada. Legal Protections In the United States. public disclosure of private facts. Privacy is a girder supporting freedom: Without the privacy required to think. including the state. and the claim of individuals to control over personal of whatever information that is collected about them. Due process also plays an important role in defining privacy. Individual control over personal information is at the core of the privacy concept. The best statement of due process in record keeping is given by the Fair Information Practices doctrine developed in the early 1970s and extended to the online privacy debate in the late 1990s (described below). write. The Concept of Privacy Privacy is the moral right of individuals to be left alone. For instance. In the United States. plan. free from surveillance or interference from other individuals or organizations. or other means? The major social issues related to e-commerce and privacy concern the development of “exception of privacy” or privacy norms. publicity placing a person in a false light. four privacy-related torts have been defined in court decisions involving claims of injury to individuals caused by other private parties intrusion on solitude. social and political freedom is weakened. In England and the United States.

Gives people the right to inspect credit records if they have been denied credit and provides procedures for correcting information Family Educational Rights and Privacy Requires schools and colleges to give students and their parents access to student records and to allow Act of 1974 them to challenge and correct information limits disclosure of such records to third parties Regulates the financial industry’s use of personal Right to Financial Privacy Act of 1978 financial records establishes procedures that federal agencies mist follow to gain access to such records Privacy Protection Act of 1980 Prohibits government agents from conducting unannounced searches of press offices and files if no one in the office is suspected of committing a crime. as amended Regulates the federal government’s collection. In addition to common law and the Constitution. also allows other individuals and organizations the right to request disclosure of government records based on the publics right to know Privacy Act of 1947. Cable Communications Policy Act of Regulates the cable industry’s collection and disclosure of information concerning subscribers 1984 Fair Credit Reporting Act of 1970 Video Privacy Protection Act of 1988 Prevents disclosure of a person’s video rental records without court order or consent 284 ANNA UNIVERSITY CHENNAI . use.(a) Federal Privacy Laws a NAME General Federal Privacy Laws Freedom of Information Act of 1966 Gives people the right to inspect information about themselves held in government files. there are both federal laws and state laws that protect individuals against government intrusion and in some cases define privacy rights vis-a-vis private organizations such as financial. and disclosure of data collected by federal agencies. Gives individuals right to inspect and correct records.2.DBA 1727 NOTES Amendment protections against unreasonable search and seizure of one’s personal documents or home. Electronic Communications Privacy Act Makes conduct that would infringe on the security of electronic communications illegal of 1986 Computer Matching and Privacy Regulates computerized matching of files held by different government agencies Makes conduct that would infringe on the security of computer based files illegal Limits access to personal information maintained by state Motor vehicle departments to these with legit mate business purposes Also gives drivers the option to prevent disclosure of driver’s license information to marketers and the general public DESCRIPTION Protection Act of 1983 Computer Security Act of 1987 Driver’s Privacy Protection Act of 1994 Privacy Laws affecting Private Institutions Regulates the credit investigating and reporting industry. education.2. and the Fourteenth Amendment’s guarantee of due process. and media institutions (cable television and video rentals) Table 5.

copies of software.from music to plays. and journal articles . and difficulty in establishing uniqueness. Information technology has made it difficult to protect intellectual property. and other media in terms of ease of replication. books. difficulty in classifying a software work as a program.1 Intellectual Property Rights Next to privacy.3. In short. and alteration. poems. But the Internet potentially changes things. compactness . 5. social. because computerized information can be so easily copied or distributed on networks. transmission. and political issue related to e-commerce is the fate of intellectual property rights.E-COMMERCE TECHNOLOGY AND MANAGEMENT 5.making theft easy. computer disks. For instance. periodicals. creating some hurdles to distribution. the most controversial ethical. the Internet has demonstrated the potential for destroying traditional conceptions and implementations of intellectual property law developed over the last two centuries. The spirit of the Web has been so free-wheeling that many entrepreneurs ignored trademark law and registered domain names that could easily be confused with another company’s registered trademarks. or video tape.and then to distribute them nearly cost-free to hundreds of millions of Web users. The proliferation of innovation has occurred so rapidly that few entrepreneurs have stopped to consider who owns the patent on a business technique or method their site is using. The Internet technically permits millions of people to make perfect digital copies of various works .3 PROTECTING INTELLECTUAL PROPERTY Intellectual property is considered to be intangible property created by individuals or corporations. magazine articles. Before widespread use of the Internet. These are precisely the areas that intellectual property seeks to control. use. or films had to be stored on physical media. Digital media differ from books. it becomes difficult to control access. or even music. Once intellectual works become digital. The major ethical issue related to e-commerce and intellectual property concerns how we (both as individuals and as business professionals) should treat property that belongs to others. the main questions are: Is there continued 285 NOTES ANNA UNIVERSITY CHENNAI . and copying. and you have exclusive rights to use this “property” in any lawful way you see fit. book. From a social point of view. distribution. it belongs entirely to you. if you personally create an ecommerce site. such as paper.

. drawings. music. and even to extend protection for longer periods of time and to entirely new areas of expression.have at first tended to weaken the protections afforded by intellectual property law. motion pictures. photographs.1 Copyright: The Problem of Perfect Copies and Encryption In the United States. Owners of intellectual property have usually been successful in pressuring Congress and the courts to strengthen the intellectual property laws to compensate for any technological threat. music. 5. 286 ANNA UNIVERSITY CHENNAI . The goal of intellectual property law is to balance two competing interests . art. or handwritten notes. or worse off.the public and the private. In general. and other forms of intellectual expression.  Patent and  Trademark law. performances. Maintaining this balance of interests is always challenged by the invention of new technologies. cassette tape. copyright law protects original forms of expression such as writings (books.DBA 1727 NOTES value in protecting intellectual property in the Internet age? In what ways is society better off. and lecture notes). the information technologies of the last century .3. once again. and computer programs from being copied by others for a minimum of 50 years.3. Copyright does not protect ideas -just their expression in a tangible medium such as paper. for having the concept of property apply to intangible ideas? From a political perspective we need to ask how the Internet and ecommerce can be regulated or governed to protect the institution of intellectual property while at the same time encouraging the growth of e-commerce and the Internet. The public interest is served by the creation and distribution of inventions. works of art. periodicals. 5. The private interest is served by rewarding people for creating these works through the creation of a time-limited monopoly granting exclusive use to the creator.2 Types of Intellectual Property Protection There are three main types of intellectual property protection:  Copyright.from radio and television to CD-ROMs and the Internet . literature. In the case of the Internet and ecommerce technologies.2. intellectual property rights are severely challenged.

The defendants counter claimed that the idea of overlapping windows could only be expressed in a single way and. the congressional intent behind copyright laws has been to encourage creativity and authorship by ensuring that creative people receive the financial and other benefits of their work. and sets forth the rights of the purchaser to use the software while the creator retains legal title. Copyright protection is clear-cut: It protects against copying of entire programs or their parts.E-COMMERCE TECHNOLOGY AND MANAGEMENT Since the first federal Copyright Act of 1790.cannot be lawfully copied and used for a commercial purpose. Congress passed the Computer Software Copyright Act. for infringing Apple’s copyright on the Macintosh interface. therefore. When ideas and their expression merge (Le.even though easily available to every browser . the expression can-not be copyrighted. Apple failed to patent the idea of over-lapping windows when it invented this method of presenting information on a computer screen in the late 1960s. Apple Computer sued Microsoft Corporation and Hewlett-Packard Inc. In the mid-1960s. For instance. are not absolute. and in 1980. There are situations where strict copyright observance could be harmful to society. like all rights. Damages and relief are readily obtained for infringement. if there is only one way to express an idea). potentially inhibiting other rights such as 287 NOTES ANNA UNIVERSITY CHENNAI .. to create a new Web site that looks identical. in 1988. the HTML code for a Web page . say. A competitor can view the source code on your Web site to see how various effects were created and then reuse those techniques to create a different Web site without infringing on your copyright. only their expression in a work. Most industrial nations have their own copyright laws. Look and Feel “Look and feel” copyright infringement lawsuits are precisely about the distinction between an idea and its expression. Among other claims. For instance. although the method of producing the expression might be patentable. Fair Use Doctrine Copyrights. The drawback to copyright protection is that the underlying ideas behind a work are not protected. was not protect able under the “merger” doctrine of copyright law. the Copyright Office began registering software programs. Apple claimed that the defendants copied the expression of overlapping windows. which clearly provides protection for source and object code and for copies of the original sold in commerce. and there are several international conventions and bilateral agreements through which nations coordinate and enforce their laws.

There are three things that cannot be patented: laws of nature. As with copyrights. original. and abstract ideas. Ultimately. The doctrine of fair use permits teachers and writers. Journalists. and processing methods. Patents are very different from copyrights because patents protect the ideas themselves and not merely the expression of ideas. natural phenomena. As a result the doctrine of fair use has been created. In order to be granted a patent.3. Obtaining a patent is much more difficult and time-consuming than obtaining copyright protection (which is automatic with the creation of the work). 288 ANNA UNIVERSITY CHENNAI . and not evident in prior arts and practice.DBA 1727 NOTES the right to freedom of expression and thought. For instance. The fair use doctrine draws upon the First Amendment’s protection of freedom of speech (and writing). man-made products. created in 1812. and cite from. There are four types of inventions for which patents are granted under patent law: machines. non obvious. novel. writers. a mathematical algorithm cannot be patented unless it is realized in a tangible machine or process that has a “useful” result (the mathematical algorithm exception). to use copyrighted materials without permission under certain circumstances. Patents are obtained from the United States Patent and trademark Office (USPTO). Professors are allowed to clip a contemporary article just before class.2 Patents: Business Methods and Processes A patent grants the owner an exclusive monopoly to the ideas behind an invention for 20 years.2. copyrighted works in order to criticize or even discuss copyrighted works. The congressional intent behind patent law was to ensure that inventors of new machines. or industrial methods would receive the full financial and other rewards of their labor and yet still makes widespread use of the invention possible by providing detailed diagrams for those wishing to use the idea under license from the patent’s owner. 5. and academics must be able to refer to. The Supreme Court has determined that patents extend to “anything under the sun that is made by man” as long as the other requirements of the Patent Act are met. and the granting of a patent is’ determined by ‘Patent Office examiners who follow a set of rigorous rules. and hand it out to students as an example of a topic under discussion. devices. compositions of matter. copy it. the applicant must show that the invention is new. Patents must be formally applied for. federal courts decide when patents are valid and when infringement occurs.

Patents encourage inventors to come up with unique ways of achieving the same functionality as existing patents. Virtually any software program can be patented as long as it is novel and not obvious. This early Internet spirit changed in the mid-1990s with the commercial development of the World Wide Web. surgical and medical procedures (1950). and software (1981). NOTES 289 ANNA UNIVERSITY CHENNAI . who patented the idea of Morse Code. 1998). and made the telegraph useful. patents have been extended to both encourage entrepreneurs to invent useful devices and promote widespread dissemination of the new techniques through licensing and artful imitation of the published patents (the creation of devices that provide the same functionality as the invention but use different methods) (Winston. The Patent Office did not accept applications for software patents until a 1981 Supreme Court decision that held that computer programs could be a part of a patentable process. thousands of software patents have been granted. and thus slow down the development of technical applications of new ideas by creating lengthy licensing applications and delays. Amazon’s patent on one-click purchasing caused Barnesandnoble. Morse. Unlike Samuel F. B.E-COMMERCE TECHNOLOGY AND MANAGEMENT the granting of patents has moved far beyond the original intent of Congress’s first patent statute that sought to protect industrial designs and machines. plants (1930). most of the inventions that make the Internet and e-commerce possible were not patented by their inventors. The early Internet was characterized by a spirit of worldwide community development and sharing of ideas without consideration of personal wealth.com to invent a simplified two-click method of purchasing. Patent protection has been extended to articles of manufacture (1842). The danger of patents is that they stifle competition by raising barriers to entry into an industry. as technology and industrial arts progress. Essentially. For instance. Patents force new entrants to pay licensing fees to incumbents. E-commerce Patents Much of the Internet’s infrastructure and software was developed under the auspices of publicly funded scientific and military programs in the United States and Europe. Since that time. Business firms began applying for “business methods” and software patents.

and energy bringing the product to the marketplace . money. In hub and spoke financial systems. be it electronic or chemical or mechanical. mutual funds (the spokes) pool their funds into a single portfolio to achieve greater financial leverage.” 5.Financial Group. The purpose of trademark law is two fold. by use in interstate commerce. Signature Financial Group.3 Trademarks: Online Infringement and Dilution Trademark law is a form of intellectual property protection for trademarks . Inc. the Federal Appeals Court threw out the socalled business methods exception under which it was thought business methods could not be patented. flags of states and nations. and colors”. The court concluded that business methods should be treated like any process and that Signature Financial had invented a business method that could be patented. and second. in a landmark decision that paved the way for Internet business methods patents. State Street Bank & trust attempted to license the system from Signature Financial. a Federal Circuit Court of Appeals in the State Street Bank & ‘Dust v. immoral or deceptive marks. shapes.who has spent time. First.DBA 1727 NOTES “Business Methods” Patents In 1998. or marks belonging to others. first. the trademark law protects the public in the market-place by ensuring that it gets what it pays for and wants to receive. Inc. and can be renewed indefinitely. trademark law protects the owner . Second.2. However.a mark used to identify and distinguish goods and indicates their source. Some things may not be trademarked: common words that are merely descriptive (“clock”).S. but when negotiations broke down. case upheld the claims of Signature Financial to a valid patent for a business method that allows managers to monitor and record financial information flows generated by a partner fund ( a “hub and spoke” system). packaging. 290 ANNA UNIVERSITY CHENNAI . Federal trademarks are obtained. ‘Trademarks have been extended from single words to pictures.3. that involves an algorithm in the broad sense of the term. The court ruled there was no reason to disallow business methods from patent protection.against piracy and misappropriation. Trademark protections exist at both the federal and state levels in the United States. ‘Trademarks are granted for a period of ten years. by registration with the U. Signature Financial had invented and obtained a patent (“Data Processing System for Hub and spoke Financial Services Configuration”) on such a system in 1993. State Street sought to have the patent declared invalid and unenforceable because business methods could not be patented. or any “step by step process. diversification. Patent and ‘Trademark Office (USPTO). and higher returns.

and jurisdiction.1 Cyber law Cyber law is a term used to describe the legal issues related to use of communications technology. the intentional misuse of words and symbols in the marketplace to extort revenue from legitimate trademark owners (“bad faith”) is proscribed. a single transaction may involve the laws of at least three jurisdictions: 1) the laws of the state/nation in which the user resides.4 CYBER LAW. freedom of expression. Jurisdiction and sovereignty Issues of jurisdiction and sovereignty have quickly come to the fore in the era of the Internet. This new legislation dispenses with the test of market confusion (although that is still required to claim infringement).e. and extends protection to owners of famous trademarks against dilution. Congress passed the Federal ‘Trademark Dilution Act. which is defined as any behavior that would weaken the connection between the trademark and the product. Dilution occurs through blurring (weakening the connection between the trademark and the goods) and tarnishment (using the trademark in a way that makes the underlying products appear unsavoury or unwholesome). and 3) the 291 NOTES ANNA UNIVERSITY CHENNAI . The Internet does not tend to make geographical and jurisdictional boundaries clear. including intellectual property. Use of a trademark that creates confusion with existing trademarks. privacy. the Internet. 2) the laws of the state/nation that apply where the server hosting the transaction is located. but Internet users remain in physical jurisdictions and are subject to laws independent of their presence on the Internet. In addition. CONTRACTS AND WARRANTIES 5. The test for infringement is twofold: market confusion and bad faith. As such. or misrepresents the origins of goods is an infringement. cyber law is an attempt to apply laws designed for the physical world to human activity on the Internet.E-COMMERCE TECHNOLOGY AND MANAGEMENT Disputes over federal trademarks involve establishing infringement. particularly “cyberspace”. 5. as it is an intersection of many legal fields. In essence. causes consumers to make market mistakes.4. which created a federal cause of action for dilution of famous marks. It is less a distinct field of law in the way that property or contract are. i. In 1995.

Contracts are a key element of traditional business practice.DBA 1727 NOTES laws of the state/nation which apply to the person or business with whom the transaction takes place. and they are equally important on the Internet. So stop intruding!”. Offers and acceptances can occur when parties exchange email messages. has addressed the governments of the world and stated. An offer is a commitment with certain terms made to another party such as declaration of willingness to buy or sell a product or service. Code 190). engage in electronic data interchange (EDI) or fill out forms on web pages. including all of its stated terms. we will identify them and address them by our means. you have no ethical right to intrude our lives. 5. which they are absolutely free to inhabit with no legal constraints. John Perry Barlow. an acceptance and consideration. All we want is to be free to inhabit it with no legal constraints. Since you make sure we cannot harm you. A Declaration of the Independence of Cyberspace). A more balanced alternative is the Declaration of Cyber secession: “Human beings possess a mind.2 Contracting and Contract Enforcement in EC Any contract includes three essential elements: an offer. “Where there are real conflicts. This governance will arise according to the conditions of our world. An acceptance is the expression of willingness to take an offer. 292 ANNA UNIVERSITY CHENNAI . property or future services. such as money. Consideration is the agreed upon exchange of something valuable.4. Those who favor the latter view often feel that government should leave the Internet community to self-regulate. Other scholars argue for more of a compromise between the two notions. where there are wrongs. We are forming our own Social Contract. such as Lawrence Lessig’s argument that “The problem for law is to work out how the norms of the two communities are to apply given that the subject to whom they apply may be in both places at once” (Lessig. So a user in one of the United States conducting a transaction with another user in Britain through a server in Canada could theoretically be subject to the laws of all three countries as they relate to the transaction at hand. Our world is different” (Barlow. for example. Human civilization is developing its own (collective) mind. Another major problem of cyber law lies in whether to treat the Internet as if it were physical space (and thus subject to a given jurisdiction’s laws) or to act as if the Internet is a world unto itself (and therefore free of such restraints). The Contract is formed when one party accepts the offer of another party. not yours.

often unintentionally. or opening a wrapped package—are all. which suggests that the goods are suitable for the specific uses of the buyer. If the actions are reasonable under the circumstances. nodding one’s head. shipping goods. acceptance of an offer from the buyer may result in an additional implied warranty of fitness. 5. A signature is any symbol executed or adopted for the purpose of authenticating writing.3 Warranties on the web Any contract for the sale of goods includes implied warranties. When enforcing contracts. Firms concluding international electronic commerce do not need to worry about the signed writing requirement in most cases.4. requires neither a writing nor a signature to create a legally binding acceptance. Sellers could create explicit warranties. such as exchange of paper documents. Courts have been similarly generous in determining what constitutes a signature.E-COMMERCE TECHNOLOGY AND MANAGEMENT These Internet communications can be combined with traditional methods of forming contracts. courts have held the various actions—including mailing a check. Article 11 of the United Nations Convention on Contracts for the International Sales of Goods (CISG). If the seller knows specific information about the buyer’s requirements. legally binding acceptances of offers. courts tend to view offers and acceptances as actions that occur within a particular context. NOTES 293 ANNA UNIVERSITY CHENNAI . faxes and verbal agreements made over the telephone or in person. courts tend to interpret those actions as offers and acceptances. in some circumstances. Thus the parties to an electronic commerce contract should find it relatively easy to satisfy the writing requirement. Writing Contracts on the web An early decision in the 1800’s held that a telegraph transmission was writing. computer files on disks and faxes are writings. taking an item off a shelf. The main treaty that governs international sales of goods. by making general statements in brochures or other advertising materials about product performance or suitability for particular tasks. Later courts have held that tape recordings of spoken words. For example. A seller implicitly warrants that the goods it offers for sale are fit for the purposes for which they are normally used. It is reasonable to assume that a symbol or code included in an electronic file would constitute a signature. shaking hands.

Although states and local jurisdictions have wrestled with the issue of collecting taxes from out-of-state mail order sellers and telephone solicitors for decades. From the Boston Tea Party Rebellion in which tea was taxed as it physically landed on American shores. the U. Because Ecommerce involves computers communicating with each other at the speed of light. constitution requires a sufficient physical connection with the state or local jurisdiction by a company to 294 ANNA UNIVERSITY CHENNAI . mail order and telephone solicitation. the internet allows almost any small business to sell to customers in different states and countries. While governments who rely on an income tax to fund themselves will have great difficulty taxing Ecommerce. cannot tax a foreign citizen who is not a U. resident on earnings from a foreign source. a government’s authority to tax has always been based on territory and jurisdiction. transactions are both instantaneous and largely anonymous.S. As discussed below. through citizenship and residency.DBA 1727 NOTES 5. With the internet. the U.5. TAXATION AND ENCRYPTION POLICIES: 5. But the U. involve the delivery of goods from a specific physical location to a specific location by means of a common carrier. the U. sources. especially with intangible property transmitted by computer such as software. two traditional forms used by remote sellers.S. For instance. because of the speed in which transactions occur and the absence of a traditional paper trail.S.S. it will be very difficult. digital music or books and services. government taxes its residents on their world-wide income because they are connected with the U. Ecommerce involves commerce using the Internet: typically purchases and sales through computers. to sophisticated concepts in international taxation. In contrast. taxes foreign individuals and businesses who are receiving income from U.5. Also. states and local jurisdictions that rely on sales and property taxes to fund their operations are in steep trouble. The concept of taxation involves jurisdiction. if not impossible to apply traditional notions of jurisdiction to tax these transactions.S. Also.S.1 Introduction on Taxation Electronic Commerce (“Ecommerce”) presents unique challenges to federal and state tax authorities.S. a business can move to so-called tax haven jurisdictions and conduct business outside the taxing jurisdiction of any country.

According to a Gallup Poll.E-COMMERCE TECHNOLOGY AND MANAGEMENT burden the business with a tax obligation. and  Bundling of taxable and non-taxable items. under the Internet Taxation Freedom Act (“ITFA”). citizens will vote to tax themselves on internet transactions. 1999. Some of the unique features of Ecommerce include:  Computer-to-Computer transactions without a paper trail. there is little ground swell for internet taxation by politicians. According to 36% of the respondents who use the internet. Congress realized that the internet needed time to grow as a viable medium for commerce. 2001. outside of pressure from state and local tax authorities. especially if a new form of electronic cash takes hold. Congress noted that the internet was inherently susceptible to multiply and discriminatory taxation in ways that traditional commerce was not. and merely selling property. The moratorium began on October 21. passed in 1988 there is a 3-year moratorium on federal and state taxation imposed on internet transactions. it will take a Constitutional amendment to change the commerce clause. such as taxable goods with taxexempt services. ITFA’s purpose is to halt the rush by states to tax transactions occurring on the internet until Congress has had the opportunity to study the issue and make recommendations. without being subjected to taxing regimes imposed by the states.5.2 Current Law . 73% of active internet users oppose an internet sales tax. In fact. they would be less likely to vote for a politician who voted to tax internet transactions. CDs and movies in electronic form) and services (brokerage or accounting services).  Lack of information on the location of the seller and purchaser. and it extremely doubtful that U. services or goods to a customer who resides in a state is not sufficient nexus.  Electronic delivery of goods (books. But brick and mortar retailers who sell their products in physical locations. Congress was concerned that because internet 295 NOTES ANNA UNIVERSITY CHENNAI .S. 1998 and remains in effect until October 21. compared to 14% in favor (Source: San Francisco Chronicle.A Moratorium on Internet Taxes Currently. contend that internet taxes are needed to equalize the tax burden for competitive reasons. 5. In short.  Anonymous transactions. September 15. page D2).

potentially dozens of jurisdictions could attempt to tax a single transaction. goods or services through other means. but the definition under ITFA has been broadened to include the coverage of the tax. Also. no state or political subdivision may levy a sales tax. Thus. a taxing jurisdiction may discriminate in favor of ecommerce. It other works. routing transactions throughout the country and even throughout the world. there is no agency relationship between the remote seller and the company providing the access or online services. Sales tax cannot be levied on because the purchaser uses ecommerce to access the seller’s computer to acquire property. However. if an ecommerce transaction is subject to a tax that is any different from a tax imposed on similar property. ITFA would protect internet business from being taxed in complicated and unexpected ways by remote jurisdictions. its application or a differential tax rate. goods or service. states cannot use an “agency nexus” theory to claim that a purchaser’s ISP is an in-state agent for the seller. Discriminatory Taxes A discriminatory tax traditionally involved a tax that favored local commerce over interstate commerce. the tax is discriminatory. California cannot claim there is an agency nexus to tax the transaction. Example: If a purchaser in California uses his computer to connect with a bookseller’s computer located in Nevada. Example: If a Nevada-based seller hosts his website on a California computer and a California resident purchases a book. Example: If the purchase of a book over the internet is subject to a tax that is different from purchasing a book in a bookstore. it is permissible to charge a lower rate on an ecommerce transaction. 296 ANNA UNIVERSITY CHENNAI . In other words. if a remote seller in one state.DBA 1727 NOTES transactions involved a number of computers and routers. Ecommerce conducted by out-of-state vendors do not have an obligation to collect sales taxes if traditional remote sellers. In addition. The same would be true if the taxing authority charged a higher rate of tax for ecommerce purchases of books. such as mail-order and telephone solicitation vendors do not collect sales taxes. then the tax is discriminatory. uses a computer in another state for internet access or online services. even if the purchaser used a California ISP to connect to the internet.

If books. service or property would be the entity responsible to collect sales tax under conventional commerce. Unless a credit is given to eliminate any double-taxation. the vendor can use ITFA as a defense if he uses credit card verification or procedures to insure he is dealing with persons over age 17. California cannot impose a sales tax on transactions because a California ISP was involved. newspapers or forms of tangible information are not subject to sales tax. However. but only in proportion to the ecommerce or internet applications. Lycos or Alta Vista or ISPs that host such websites or telecommunication companies that transmit information over the internet. hosts its website with a California ISP. The exception does not apply to internet information and search services such as Yahoo. such a tax would violate the prohibition against multiple taxation. This could occur if a state taxed internet access services as telecommunications services and then taxed located telephone services as well. A tax obligation cannot be imposed on a different entity such as a credit card company.E-COMMERCE TECHNOLOGY AND MANAGEMENT Example: A New Hampshire company. There is an exception if the tax is imposed by a state and a local subdivision. with no physical presence in California. Multiple Taxes Multiple taxes on the same transaction or service either in the same taxing jurisdiction or tow or more taxing jurisdictions are prohibited. NOTES 297 ANNA UNIVERSITY CHENNAI . such as California’s sales tax and San Francisco County’s add-on sales tax for it Bay Area Rapid Transit. Exceptions to ITFA transactions. Vendors who knowingly conduct ecommerce involving obscene or materials that are otherwise harmful to minors cannot rely on ITFA as a defense against taxation. if the vendor selling the product. magazines. Bundled software that includes protected ecommerce or internet applications are protected under ITFA. then downloads of that same information cannot be taxed.

The problem comes when a business is not physically located in California.S.DBA 1727 NOTES 5.3 Taxation of Ecommerce . It is the commerce clause’s concept of nexus that prohibits most ecommerce transactions from being taxed.The Foundation of State and Local Taxation The Interstate Commerce Clause of the U. Constitution prevents the states and their political subdivisions from imposing taxes that unduly burden interstate commerce. 298.S. Supreme Court held otherwise and ruled that a state could impose a requirement that a company collect and remit sales taxes. the North Dakota Supreme Court held that by selling its product to North Dakota customers. The key issue is whether the company that is being taxed as sufficient connection (nexus) with the taxing authority. Under the commerce clause. 504 U. 1992. employees or sales agents in North Dakota could not be compelled to collect sales tax on its sales to North Dakota customers. Supreme Court held that a remote seller could be required to collect sales taxes only if the seller had the requisite nexus with the buyer’s state. but sells to California residents. Under what circumstances may California levy a tax on sales to California residents? In Quill v North Dakota. 298 ANNA UNIVERSITY CHENNAI . The U. but the vendor has the obligation of collect and remit the tax to the tax agency. Example: A company that operates in Nevada and does not sell products in California or to California residents cannot be taxed by California. the company had to have substantial connections (a physical presence) with the state.S. even though the guests might reside in another state. such as a hotel. the duty to collect a sales or use tax depends on where the sale is located and whether the buyer is a consumer or a business. Converse. both California and San Francisco have the right to tax a company physically located in San Francisco. Retail sales by venders to in-state consumers are subject to sales tax on the purchase.5. In general. Quill corporation sold office furniture products through a catalogue. Three general rules apply: 1. a mailorder company without a physical location. Although it was not physically present in North Dakota and did not have a sales agents in the state.The Significant Issues Nexus .S. the U. Quill established an economic presence in North Dakota which created nexus for sales tax purposes.

this response might be overblown. Even if a transaction can be theoretically taxed. This means that mail order and 299 ANNA UNIVERSITY CHENNAI . it is impossible to determine jurisdiction for sales tax purposes. California cannot determine whether the purchaser was a California resident and whether the seller had sufficient physical presence in California. This is usually referred to as a “use” tax. often then can be located outside the jurisdiction of the U. The absence of nexus in the mail order cases is profoundly greater in the Ecommerce context. unless the vendor has sufficient nexus under the commerce clause with the purchaser’s state to require collection.S. Note: If the goods or property purchased are tangible. this is virtually impossible to enforce. Without ascertaining the location of the seller or buyer. As a practical matter. unless a state or locality can pinpoint the physical location of the seller and buyer. hence the emphasis on requiring out-of-state vendors to collect and remit the tax. in reality. then the consumer is legally obligated to pay a self-assessed tax directly to the taxing agencies on the purchase. instead of a sales tax. states and localities cannot tax remote sellers anyway. Because the sales tax is destination based. since the consumer is paying a tax for the use of the property. If the out-of-state vendor cannot be required to collect the tax. CD or a shirt. Ecommerce transactions occur instantaneously and without identity of the seller’s or buyer’s location. it must determine that the purchase is a California resident and that the seller has sufficient nexus with California to be required to collect and remit the sales tax. Example: California wants to apply a sales tax to the sale of software to its residents. Out-of-state vendors making consumer sales are not required to collect and remit sales taxes. In order to California to levy the tax. altogether. then the traditional notions applicable to mail order taxation could be applied since it could be ascertained where the goods were shipped and where they were delivered. Currently. such as an actual book. Will Ecommerce Really Erode the Tax Base for States and Localities? Although state and local tax officials express grave concern that the Ecommerce will decimate the ability for states and localities to levy taxes on these transactions. NOTES 3. Not only do internet companies not have physical presence in the taxing jurisdiction. unless they have sufficient nexus with the state.E-COMMERCE TECHNOLOGY AND MANAGEMENT 2.

despite Ecommerce. such as legal. There is evidence that even if all Ecommerce was subject to sales taxes. In California. a state’s citizen is supposed to self-assess a use tax which is equal to the sales tax. accounting. Ecommerce merely continues the trend to avoid taxes by engaging in remote selling without a physical presence. Ecommerce does not affect the tax base since remote sales involving mail order or telephone solicitation are exempt from sales tax under the commerce clause. it represents much less than 1% of total consumer spending. the ultimate tax liability is not affected since in-state consumers have the legal tax liability to self-assess and pay the tax anyway. or there is a constitutional amendment allowing taxation of remote sellers. Unless the Supreme Court drastically alters its reading of the Constitutions’s commerce clause. the revenue generated to the states and localities would represent about one-tenth of one percent of all sales and use taxes collected. although Ecommerce prevents states from forcing remote sellers from collecting and remitting sales tax.DBA 1727 NOTES telephone solicitation commerce by remote sellers is not subject to tax. To the extent Ecommerce is merely a substitute for other remote seller transactions. are not subject to sales taxes. as of 1988. 300 ANNA UNIVERSITY CHENNAI . Neither are food or medicine. Therefore. services. Most services and intangible products are not currently subject to sales taxes anyway. Although Ecommerce in rapidly growing. is to require a state or locality’s resident to self-assess the tax that should have been collected by the remote seller. Also. There is no prohibition against the use tax. sales and use taxes continue to grow. Remember that business-to-business sales are subject to use tax payments by in-state businesses. the problem lies in enforcement. but the states have been lax in enforcing this requirement. Even if a remote seller is not subject to sales tax rules. Ecommerce involving intangible goods or services will not cause an erosion of the tax base. Therefore. and medical costs. The answer to Ecommerce taxation in particular and remote selling in general. and approximately 80% of current Ecommerce is business-to-business.

which number close to 7. One of the available techniques commonly used for encryption is Public Key. The encrypted data can be read only by those users for whom it is intended. In a Public Key encryption system each user has two keys-public key and private key. Before the digital age.5. are notoriously parochial minded when it comes to defending their jurisdiction. but several members have voice support for Internet taxes. That is precisely why the commerce clause in the Constitution prohibits taxes and is an undue burden on interstate commerce.300 separate sales tax jurisdictions. Nowadays various encryption techniques are available.S. RSA Data Security of Redwood City offers the most popular and commercially available algorithm.500 throughout the U.. the biggest users of cryptography were governments.E-COMMERCE TECHNOLOGY AND MANAGEMENT 5. 301 NOTES ANNA UNIVERSITY CHENNAI . the current state and local tax systems. This could mean a uniform tax rate agreed to by all the states. In Texas alone. 5. encrypted by the private key. Therefore. there are more than 1. Small businesses would be buried in costly paperwork attempting to comply with all these rules. particularly for military purposes. which has been used throughout history. provided the tax is simple to calculate for businesses. or technological advances that would allow businesses to calculate the sales tax simply and without a large investment in time and resources. has not been able to make any headway in the taxation debate.5.5 Encryption policy: Encryption is a technique for hiding data. Computer encryption is based on the science of cryptography. In Public Key encryption system. The encryption and decryption algorithms are designed in a way so that only the private key can decrypt data that is encrypted by the public key. one can broadcast the public key to all users. Unfortunately.4 The Future for Ecommerce Taxation The Commission on Electronic Commerce. And the public key can decrypt data. created by the ITFA legislation. These numbers could be significantly increased if states and local jurisdictions were allowed to tax Ecommerce.

DES was introduced in 1975 by IBM. symmetric cryptosystem: When used for communication. the National Security Agency (NSA). was developed to solve this problem. public-key cryptography. for example. however. that is.DBA 1727 NOTES Most computer encryption systems belong in one of two categories. discussed in the next subsection. to 112 bits. which is used both to encrypt and decrypt the message. If you use DES three times on the same message with different secret 302 ANNA UNIVERSITY CHENNAI . The number 256 is also large enough to make it difficult to break the code using a brute force attack (trying to break the cipher by using all possible keys). With a few exceptions. encrypting each message block using three different keys in succession. DES defines a whole family of them. Broadly speaking. secure-key distribution becomes difficult. This means that everybody can be told about the algorithm and your message will still be secure. thought to be equivalent to doubling the key size of DES. Of course. and the National Bureau of Standards (NBS) (which is now called NIST). it is impossible to break the cipher without using tremendous amounts of computing power. there are two types of encryption methods:   Secret-key cryptography Public-key cryptography Data Encryption Standard (DES) A widely-adopted implementation of secret-key cryptography is Data Encryption Standard (DES). to store files on a hard disk in encrypted form. it operation is relatively fast and works well for large bulk documents or encryption. In a multi-user environment. Instead of defining just one encryption algorithm. using triple-encryption takes three times as long as singleencryption DES. DES is secret-key. should prevent decryption by a third party capable of single-key exhaustive search. The actual software to perform DES is readily available at no cost to anyone who has access to the Internet. both sender and receiver must know the same secret key. DES operates on 64-bit blocks with a 56-bit secret key. Designed for hardware implementation. Despite the fact that its algorithm is well known. A new technique for improving the security of DES is triple encryption (Triple DES). DES has been extensively researched and studied over the last twenty years and is definitely the most well-known and widely used cryptosystem in the world. a different algorithm is generated for each secret key. DES has withstood the test of time. Triple DES. DES can also be used for single user encryption. You just need to tell others your secret key a number less than 256.

At this point most shopping carts are abandoned.without customers getting lost. Fulfilment Goods have now been selected and your customer has made it to the checkout. Websites can keep customers’ trust by taking them through a transparent transaction process. At all times customers should know where they are in the checkout process and they should be able to find out what happens later. It must be easy to see: How orders are to be processed The company’s returns policy. sound and move in ways that reinforce the company’s existing image.5. Presentation The look of a site conveys a sense of personality and influences the degree to which visitors are prepared to trust the site owner..E-COMMERCE TECHNOLOGY AND MANAGEMENT keys. Online conventions are still being developed. There are conventions for laying out a shop and customers unconsciously understand and follow them. but DES remains the most frequently used. 5. it is virtually impossible to break it using existing algorithms. Navigation If customers walk into a new high street shop they can usually find their way around. On-screen design and copy styles should reflect existing printed literature. Use simple words to describe the site’s content and make it easy for visitors to find what they are looking for by giving clear instructions. On the home page a site’s purpose must be clear to the first-time visitor. faster symmetric algorithms have been developed.6 Customer’s Trust Online 1. The challenge is to create enticement – to explore the store . If an organisation already has a corporate identity then the site should be consistent with this.web pages should look. Therefore. Developing a brand to work online is a new task. Over the past few years several new. Online and offline customer support services The company’s security policy for 303 NOTES ANNA UNIVERSITY CHENNAI . to a new palette that is fast to download to the computer screen. some judgement will be needed to make first-time visits successful. A company’s colours may need re-working online. 2. 3. The internet is tactile .

Web customers will have higher service expectations than offline customers. Customers trust sites where they can see the familiar logos of credit card brands. Are you handling visitors new to the web trade or devotees?   Newcomers need signposts and easy navigation.DBA 1727 NOTES personal information. Make sure that technology supports your sales process and does not obscure it: Automatically recognise returning customers Help to complete forms correctly Design forms to work with software programs that automatically add user details to the form 5. give customers the option to return goods there. If your company is trusted by these organizations. 5. If we see them on a website we trust the website more. then the most successful plan will be the one that responds fastest. Use technology as a transparent aid to navigation and activity. major software companies and web security organizations. Technology Too much technology can be daunting. above all. Aim for graphics and functions in proportion to your customer’s needs. This means that every component of the plan should be built 304 ANNA UNIVERSITY CHENNAI . These needs will change with your customer’s experience. the quality of products and the level of service support. with consistency. Should your company have a familiar name. don’t hide it. 4. Familiar Names & Logos Names that we know and trust are familiar and friendly. with transparency and. And remember to train your staff to handle returned online orders.7 Steps to Plan Successful E-Commerce Respond Fast If the plan is to respond to customer wishes. If you have shops on the high street. Younger visitors and technically aware customers may be more tolerant of higher technical demands.5. They may expect service delivered in real time. use it to build customer expectation of the site’s content. Old hands need quick routes to every part of the site.

E-COMMERCE TECHNOLOGY AND MANAGEMENT with the intention of proving a principle. How many steps can be eliminated by outsourcing tasks to your customers and suppliers? Who is best placed to make the original information entry? Can that information be shared to avoid reentering the same information? What information could customers. then you can redirect your time and resources and use the knowledge gained to good effect elsewhere. In particular. what could your staff do to add more value for customers? Focus on Customer. Successful testing follows a simple rule: Test one Thing at a Time Only test changes that can be measured directly. Analyse each sales process to clarify what it is that staff spend time doing. cheaper. Ask yourself if your customers want this? If they do. If a test includes more than one change. Test to learn from the customer and to improve one step at a time. NOTES 305 ANNA UNIVERSITY CHENNAI . computer to computer? With the time saved. suppliers and distributors find for themselves. then a more robust version can be built. more convenient or just new and online? What new information do they get? Decide what you can reliably offer each group now and plan a phased introduction of more complex services. If they don’t. Complexity often arises from integrating tried and tested stand-alone services. look for processes in which information is transferred. suppliers and distributors? Have you asked what they’d like? The web’s very good at research. Challenge Internal Assumptions Remove internal processing costs to make dramatic improvements to profit margins. Are you offering them a new way to use an existing service or a completely new service? Is it faster. Supplier & Distributor Benefits What’s in it for customers. Test out Your Plan In the online marketplace everything is a test until it’s proven by the customer. it’s almost always impossible to measure the effect of each one.

DBA 1727 NOTES Give Good Reasons to Use Online Services Not all customers will automatically move to an online service simply because it’s there. find ways to: Inform them that it is there (they may not know this) Tell them how to change over Incentivise the swap to make it worthwhile Introduce the new service as a special privilege beta test programme Calculate the Three Sets of Costs Very few organisations have all the resources in-house to start offering online services. post change  long-term cost-savings  long-term outsourcing arrangements  ongoing online development plans 2. Some may find this work more fulfilling. 306 ANNA UNIVERSITY CHENNAI . Current company costs that will be altered by the online changes  both internal and external costs Cost to implement the changes  interim support may be needed  training for staff whose tasks change New cost assumptions. in a service’s early stages it may not make good sense to risk overwhelming a new online channel by quickly moving large numbers of customers over to the new service. there will be a progressive transfer from processing tasks towards customer service. 3. If your organisation is typical. Unless a company’s online services are entirely online. Help Staff Adapt to Online Working An online service will affect your staff and the work that they do. others will not enjoy the increased interaction with customers. They will almost certainly require some training in how to make the most of the new technology for the benefit of their customers. Equally. staff who is to fulfil new service roles will require assistance to develop new skills. If you prefer customers to use an online channel. There are three sets of costs that should be calculated: 1.

offer is communicated by the acceptor and acceptance is received by the offer or from the acceptor. and associate independently and without fear. social and political freedom is weakened. Information technology has made it difficult to protect intellectual property. viz. including the state. Exchange of electronic messages and documents EDI. write. free from surveillance or interference from other individuals or organizations.   307 ANNA UNIVERSITY CHENNAI . social.  Intellectual property is considered to be intangible property created by individuals or corporations. plan. remote employee access. electronic filing. and make recommendations for managers who are given the responsibility of operating e-commerce companies within commonly accepted standards of appropriateness.E-COMMERCE TECHNOLOGY AND MANAGEMENT Summary  Internet commerce raises legal issues through the provision of the following services: NOTES Online marketing Online retailing ordering of products and services Financial services such as banking and trading in securities. The key activities associated with the formation of an enforceable contract do take place on the Internet. Privacy is a girder supporting freedom: Without the privacy required to think. Trade and commerce over the Internet give rise to several legal issues  The growth of EC on the Internet depends to a large extent on the confidence of traders in forming legally enforceable contracts online. and political issues raised in e-commerce. The Concept of Privacy: Privacy is the moral right of individuals to be left alone. electronic transactions. because computerized information can be so easily copied or distributed on networks. provide a framework for organizing the issues. and perhaps destroyed. The ethical.

to decrease the burden of compliance on business and to deal with the increasingly integrated economy of Ecommerce. 10. 9.e. Contracting and Contract Enforcement in EC: Any contract includes three essential elements: an offer. 2. List the major legal issues of EC Discuss the EDI Interchange agreement Define ethics Discuss the ethical. particularly “cyberspace”. Patent and Trademark law. 5. It is less a distinct field of law in the way that property or contract are. 4. an acceptance and consideration. 8. 6. and jurisdiction. 14. 12. 3. including intellectual property. the Internet. privacy. i. The Contract is formed when one party accepts the offer of another party. The outdated and overly complex mechanisms used by thousands of jurisdictions to tax traditional transactions is clear that a fundamental restructuring of our current sales tax laws is needed to simply tax collection. cyber law is an attempt to apply laws designed for the physical world to human activity on the Internet. freedom of expression. 13. Cyber law is a term used to describe the legal issues related to use of communications technology. In essence. 7. as it is an intersection of many legal fields.    Questions for review 1.DBA 1727 NOTES  There are three main types of intellectual property protection: Copyright. 11. social and political issues in EC What are the basic ethical concepts Define privacy Define Intellectual property Describe the three main types of intellectual property protection What is contracting? How is it enforced in EC Discuss taxation in EC Describe the significant issues of taxation in EC Define encryption policy Define DES Discuss the steps to plan successful EC 308 ANNA UNIVERSITY CHENNAI .

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