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



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

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

Commerce in Action 9 ANNA UNIVERSITY CHENNAI .E-COMMERCE TECHNOLOGY AND MANAGEMENT             Financing and insurance Commercial transactions: ordering. delivery. customs.1. payment Product service and maintenance Co-operative product development Distributed co-operative working Use of public and private services Business-to-administrations (e. etc) Transport and logistics Public procurement Automatic trading of digital goods Accounting Dispute resolution NOTES 1.g.7 E.

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

ManageMore’s eCommerce Manager relies on the second scenario to handle all of its ecommerce orders. orders submitted after office hours or during holidays. 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. the process is transparent to the consumer and appears virtually the same. you must apply for an account with a credit card merchant account provider. There are several basic steps you will need to accomplish before becoming Commerce enabled.e.E-COMMERCE TECHNOLOGY AND MANAGEMENT In both scenarios. 2. depending on which country you live in. This can be relatively easy or somewhat difficult. These products are sold separately from ManageMore and eliminate the need for merchant terminal devices or separate time consuming steps to approve credit cards. 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.e. PC Charge™. 11 ANNA UNIVERSITY CHENNAI 2. When choosing a merchant account provider. back orders. etc. the following should also be noted: 1. 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. Let us assume an ecommerce implementation that uses the second scenario mentioned above. 1. . 3. or AuthorizeNet™ (i. 5. However.. This second scenario keeps the consumer accurately informed throughout the entire ordering process. items out of stock. you must ensure that your merchant account provider has credit card processors that connect with IC Verify™. Your merchant account provider must allow you to handle non-swiped credit card transactions. and the type of business you are running.Intellicharge Interface) software. In order for credit card authorization to be automatic from within ManageMore.). 4.

7. Web Hosting Web hosting is a very important step in this process. Avoid merchant account providers that require 1 or 2 year contract terms. These fees can come in the form of an application fee. and company size. Scenario1 involves setting up and maintaining your own web server. processing fee. If not.75% to 2. Since there are so many merchant account providers available. a separate data line will not be necessary if you use the Intellicharge Interface for electronic payment. When choosing a merchant account provider. Constantly changing to a new merchant account provider when your old one goes out-of business can be costly and time consuming. 12 ANNA UNIVERSITY CHENNAI . You should be able to find a merchant account provider that can offer you discount credit cards rates ranging from 1.DBA 1727 NOTES 3. 4. You will need a dedicated phone line or data line for processing credit cards and electronic checks. years in business. while Scenario 2 involves farming out all web hosting administration to an ISP. 8. you should do a little research on the company’s reputation. Always try to find an ISP that can provide a local telephone number for you to connect to the internet. There are actually two scenarios that can be used for web hosting. 5. software fee. 6. Note: If your computer or local area network is already connected to the internet.25 cent per transaction. etc. 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. The following should be noted when searching for an Internet Service Provider: 1. it doesn’t make sense to lock your company into a commitment for any period of time. contact Intellisoft regarding our merchant account provider affiliates and the free Intellicharge Interface just for signing up with them. Avoid merchant account providers that ask for a non-refundable fee before you get approved. Typically expect to pay around $100 to $500 for getting an account setup to accept credit cards and sometimes electronic checks. as this is how you gain a presence on the internet in the first place.75% and no more than . Expect merchant account providers to have some form of a sign up fee after being approved only.

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

For a minimal fee. The basics for registering a domain name are: Contact a domain name registrar on the internet to register for a domain name. It is important to understand that the aim of the architectural frame-work itself is not to build new database management systems.1. software agent based transaction monitors. your peers . Select a unique domain name you would like others to use for finding your web site.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. There are many to choose from. Your domain name says who you are to your clients. however. data repository.456. the architecture should focus on synthesizing the diverse resources already in place in corporations to 14 ANNA UNIVERSITY CHENNAI . 1. SSL protects communications so you can take credit card orders securely and ensure that hackers cannot eavesdrop on you. computer languages.com?” Registering a domain name is one of the most important decisions you can make for your online identity. you may want to get your own digital certificate. just do a web search on “domain name registrar” to get you started. will it be important to you.456” or by typing something simple to remember like “www. 2. Any ecommerce company that provides you with an online web store will require you to have SSL before you can use their services. one can usually use the certificate owned by the web hosting company where your page resides.mybiz.123.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. In layman terms. If you are a larger company. Thankfully. Obtaining a Digital Certificate A digital certificate. Domain names serve as a convenient way of locating information and people on the Internet. enables SSL (Secure Socket Layer encryption) on the web server. Rather. or communication protocols.the whole world. for customers to find your web site by typing “123. also known as a SSL Server Certificate. for most people obtaining a digital certificate is not a problem.

But only when they are integrated do they provide uniquely powerful solutions. These were discussed extensively earlier and will not be addressed here. 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. The electronic commerce application architecture consists of six layers of functionality. As seen in Fig. security and electronic document interchange. data or transaction management.8 a). middle ware and structured document interchange. In the ensuing discussion of each of these layers. electronic commerce applications are based on several elegant technologies..E-COMMERCE TECHNOLOGY AND MANAGEMENT facilitate the integration of data and software for better applications. and.8a Electronic Commerce: A conceptual framework 15 ANNA UNIVERSITY CHENNAI . We begin our discussion with the application level services. we will not elaborate on the various aspects of the network infrastructure that transports information. brokerage services. interface. support layers” secure messaging.1. or services: 1) 2) 3) 4) 5) 6) applications. 1. and network infrastructure and basic communications services (see Table. Table 1.1.

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. Three distinct classes of electronic commerce application can be distinguished: customer to business. submitting requests for proposals. Here. checks. In a marketplace transaction. Business-to-business transactions include the use of EDI and electronic mail for purchasing goods and services.8. The current accounts payable process occurs through the exchange of paper documents. Examine this scenario.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 error-prone. Each year the trading partners exchange millions of invoices. financial reports. 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. and a dependable way to conduct business’ transactions. and other transactions. In light of this. governments. Most of the documents are in electronic form at their point of origin but are printed and key-entered at the point of receipt. buying information and consulting services. buy them differently using electronic cash and secure payment systems. Small companies are also beginning to see the benefits of adopting the same methods. Also. 16 ANNA UNIVERSITY CHENNAI . and intra organization Consumer-to-Business Transactions We call this category marketplace transaction. and other organizations depend on computer . and have them delivered differently. an economical.to-computer communication as a fast. purchase orders. where “content” may not be equated to “product. customers learn about products differently through electronic publishing. businesses. and receiving proposals. The current manual process of printing. time consuming.” Where “distribution” may not automatically mean “physical Transport.” In this new environment. how customers allocate their loyalty may also be different. mailing is costly. business-to-business.DBA 1727 NOTES 1.1.

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

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

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

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

Messaging is well suited for both client server and peer-to-peer computing models. 1. Users in the 1970s. fill it in/ sign it. and the pressure was overwhelming. networks that permitted shared resources and applications that could be accessed by 21 NOTES ANNA UNIVERSITY CHENNAI . When an employee sends an electronic mail form. This is known as message-enabled work-flow solutions. with the messaging tools. Something was needed to solve all the interface. And. The main disadvantages of messaging are the new types of applications it enableswhich appear to be more complex. With the growth of networks. especially to traditional programmers and the jungle of standards it involves. people can communicate and work together more effectively-no matter where they are located. As the cry for distributed computing spread. and all other forms of communicating between/among unlike platforms. transformation. mail it to the next. the problems of getting all the pieces to work together grew from formidable to horrendous. Like so many other innovations. and so on. Messaging is central to work-group computing that is changing the way businesses operate. translation. it came into being out of necessity. delivered homogeneous systems that worked.8.1. client-server technology. the information travels along with the form. mail it to the next person. 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. and interpretation problems that were driving application developers crazy. the messages are treated as “objects” that pass between systems. when vendors. Because of the lack of standards. Today. there is often no interoperability between different messaging vendors leading to islands of messaging. privacy. Also. although there is an increasing need for programs to interpret the message. So one person can start the form. users demanded interaction between dissimilar systems.5 Middleware Services Middleware is a relatively new concept that emerged only recently. The ability to access the right information at the right time across diverse work groups is a challenge. the backlog was enormous. the users were dissatisfied.E-COMMERCE TECHNOLOGY AND MANAGEMENT Another advantage of messaging is that it is not associated with any particular communication protocol. security. In distributed systems. No pre-processing is necessary. 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.

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

E-COMMERCE TECHNOLOGY AND MANAGEMENT a standard TP sys-tem: the so-called ACID properties (atomicity. word processor. 23 NOTES ANNA UNIVERSITY CHENNAI . If you create a new document that is an integration of the spreadsheet. A natural instance of an object in electronic commerce is a document. 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. to a word processing tool bar.1. 1. which reduces costs on both sides of transactions. A document carries data and often carries instructions about the actions to be performed on the data. the term object is being used interchangeably with document resulting in a new form of computing called document oriented computing. Businesses can use electronic commerce to identify new suppliers and business partners. pictures. to a presentation package tool bar. Objects are an evolution of the more traditional programming concept of functions and procedures. and presentation package. The best example of this approach is an active document. isolation. Last but not the least is the Network Infrastructure. the tool bar will automatically change from a spreadsheet too bar. what you’ll see in the next generation of operating systems is that as you scroll through your document. and durability). which will be dealt in this unit later. Here. consistency. Objects are defined as the combination of data and instructions acting on the data.9 Advantages of E-Commerce     Electronic Commerce can increase sales and decrease costs. Today. or video toward integrated documents known as com-pound document architectures. Electronic Commerce increases the speed and accuracy with which businesses can exchange information. 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. the trend is to move away from single data-type documents such as text. These applications will also be able to access and retrieve data from any file in the computing network.

Electronic payments of tax refunds. can change dramatically even during short-lived electronic commerce implementation projects because the technologies are changing so rapidly.      24 ANNA UNIVERSITY CHENNAI .1. 1.2 DRIVING FORCES OF E-COMMERCE E-Commerce is becoming popular. Consumers are fearful of sending their credit card numbers over the Internet and having online merchants. 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. Costs.10 Disadvantages of E-Commerce  Some business processes such as perishable foods and high-cost. Consumers are simply resistant to change and are uncomfortable viewing merchandise on a computer screen rather than in person. which are a function of technology. Many firms have trouble recruiting and retaining employees with the technological. Companies that offer software design and consulting services to tie existing systems into new online business systems can be expensive. public retirement and welfare support cost less to issue and arrive securely and quickly when transmitted over the Internet.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. design and business process skills needed to create an effective electronic commerce presence. unique items such as custom-designed jewelry might be impossible to inspect adequately from a remote location. Firms facing difficulty of integrating existing databases and transactionprocessing software designed for traditional commerce into the software that enables electronic commerce. 1.

thus reducing errors and the cost of correcting them. Internal integration. This allows critical business information to be stored in a digital form that can be retrieved instantly and transmitted electronically. 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. New sales opportunities: the website is accessible all the time and reaches the global audience which is not possible with traditional storefront. on the other hand. Economic Forces One of the most evident benefits of e-commerce is economic efficiency resulting from the reduction in communications costs. 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. societal and technological factors are creating a highly competitive business environment in which consumers are the focal point. customers/clients. is the networking of the various departments within a corporation. lower global information sharing and advertising costs. and of business operations and processes. creating new products or providing superb customer service. and cheaper customer service alternatives. 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.1 Environmental factors that create Business Pressures: Market. These factors change quickly. suppliers. economical.2. NOTES   Economic integration is either external or internal. 25 ANNA UNIVERSITY CHENNAI . Internal integration is best exemplified by corporate intranets. External integration refers to the electronic networking of corporations. speedier and more economic electronic transactions with suppliers.E-COMMERCE TECHNOLOGY AND MANAGEMENT 1. and independent contractors into one community communicating in a virtual environment (with the Internet as medium).

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

thus enabling them to increase their market share. 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.E-COMMERCE TECHNOLOGY AND MANAGEMENT Moreover. 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. These several responses can be interrelated and Ecommerce can also facilitate the other categories. business process reengineering (BPR). business alliances and EC. 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. Strategic Systems Strategic systems provide organizations with strategic advantages. it becomes necessary to review the factors that create societal and environmental forces. or it can be an initiative that will defend an organization against future pressures.2 Critical response activities by Organizations: A response can be a reaction to a pressure already in existence. or prevent 27 ANNA UNIVERSITY CHENNAI . Organizations’ major responses are divided into five categories: strategic systems for competitive advantage. The four categories are described below. It can also be an activity that exploits an opportunity created by changing conditions.       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 1.2. but also include cable TV and Internet charges. the principle of universal access can be made more achievable with convergence.

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

NOTES Business alliances Many companies realize that alliances with other companies. generating income. One of the most interesting types is the temporary joint venture. a company produces a large quantity of identical items. the Internet and the intranets enable empowered employees to access data. or who can provide customers with a service faster than competitors. limited-time mission. Electronic commerce is an ideal facilitator of mass customization. integration with business processes. Empowerment of employees and collaborative work: Empowerment is related to the concept of self-directed teams. information and knowledge they need for making quick decisions. Management delegates authority to teams who can execute the work faster and with fewer delays. Information Technology allows the decentralization of decision making and authority but simultaneously supports a centralized control. Customer-focused approach: Companies are becoming increasingly customer oriented. yes. attributes such as viable application design. enjoy a distinct competitive advantage. 1. such as sharing resources. We certainly have the technology to build great business-to-consumer and business-tobusiness ecommerce applications into our business models. Some knowledge bases are open to the public for a fee over the Internet. Knowledge management: Employees can access organizational know-how via their company’s intranet. items are produced in a large quantity but are customized to fit the desires of each customer. For example.2.3 E-Commerce Communities What it is that will drive e-commerce in the future? — in a word. In mass production.E-COMMERCE TECHNOLOGY AND MANAGEMENT    time to market—is important because those who can be first on the market with a product. in which companies form a special organization for a specific. And. In mass customization. establishing permanent supplier-company relationships and creating joint research efforts. even competitors can be beneficial. 29 ANNA UNIVERSITY CHENNAI . and overall performance matter. This can be done in part by changing manufacturing processes from mass production to mass customization. There are several types of alliances. it’s community.

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


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.



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

4.    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. 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.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. 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. and certain routes that have likely been taken by the ship’s captains in that era. Sometimes called the k-nearest neighbour technique. Decision trees: Tree-shaped structures that represent sets of decisions.DBA 1727 NOTES 1. These decisions generate rules for the classification of a dataset. 1. Specific decision tree methods include Classification and Regression Trees (CART) and Chi Square Automatic Interaction Detection (CHAID) . and natural selection in a design based on the concepts of evolution. 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. Rule induction: The extraction of useful if-then rules from data based on statistical significance.4. For instance. mutation. With these models in hand you sail off looking for treasure where your model indicates it most likely 38 ANNA UNIVERSITY CHENNAI . 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).4 How Data Mining Works The technique that is used to perform these feats in data mining is called modeling. You note these similarities and build a model that includes the characteristics that are common to the locations of these sunken treasures. These capabilities are now evolving to integrate directly with industry-standard data warehouse and OLAP platforms. Genetic algorithms: Optimization techniques that use processes such as genetic combination.

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

4.where you already knew the answer. the results can be tested against the data held in the vault to confirm the model’s validity.4.4.(b) shows another common scenario for building models: predict what is going to happen in the future. With data mining. If the model works. Table 1.(b) . the best way to accomplish this is by setting aside some of your data in a vault to isolate it from the mining process.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 . Table 1. Once the mining is complete.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.4. 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. 40 ANNA UNIVERSITY CHENNAI . Test marketing is an excellent source of data for this kind of modeling. its observations should hold for the vaulted data.

Recent projects have indicated more than a 20fold decrease in costs for targeted mailing campaigns over conventional approaches. this company can build a unique segmentation identifying the attributes of high-value prospects. retention. 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. Using a small test mailing. Data from consumer panels. The ongoing. While early adopters of this technology have tended to be in information-intensive industries such as financial services and direct mail marketing. the technology is applicable to any company looking to leverage a large data warehouse to better manage their customer relationships. the attributes of customers with an affinity for the product can be identified. dynamic analysis of the data warehouse allows best practices from throughout the organization to be applied in specific sales situations. shipments. campaign management. Using data mining to analyze its own customer experience. 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. 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.4. A large consumer package goods company can apply data mining to improve its sales process to retailers.E-COMMERCE TECHNOLOGY AND MANAGEMENT 1. 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. The data needs to include competitor market activity as well as information about the local health care systems. and so on).5 Profitable Applications A wide range of companies have deployed successful applications of data mining. Applying this segmentation to a general business database such as those provided by Dun & Bradstreet can yield a prioritized list of prospects by region. and 41 NOTES    ANNA UNIVERSITY CHENNAI . Two critical factors for success with data mining are: a large. A diversified transportation company with a large direct sales force can apply data mining to identify the best prospects for its services.

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

E-COMMERCE TECHNOLOGY AND MANAGEMENT Network Trends. With these types of expectations and constraints. A data warehouse is more than an archive for corporate data and more than a new way of accessing corporate data.5 DATE WAREHOUSING 1. Scientific Computing Trends. react quicker. A data warehouse is a collection of computer-based information that is critical to successful execution of enterprise initiatives. but as general facility for getting quick. data mining becomes a fundamental technology. Today businesses must be more profitable. and languages are being developed to facilitate distributed data mining using current and next generation networks. This is over 100 times faster than the connectivity provided by current networks. enabling businesses to more accurately predict opportunities and risks generated by their customers and their customers’ transactions. experiment and simulation. especially for those cases in which the experiment or simulation results in large data sets. algorithms. It provides tools to satisfy the information needs of the employees organizational levels-not just for complex data queries. The next generation internet (NGI) will connect sites at OC-3 (155 MBits/sec) speeds and higher. As mentioned above.5. 1.1 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. With this type of connectivity. new protocols. and offer higher quality services than ever before. it becomes possible to correlate distributed data sets using current algorithms and techniques. A data warehouse is a subject-oriented repository designed with enterprise-wide access in mind. In addition. scientists and engineers today view simulation as a third mode of science. accurate and often insightful 43 NOTES ANNA UNIVERSITY CHENNAI . Data mining and knowledge discovery serves an important role linking the three modes of science: theory. Business Trends. and do it all using fewer people and at lower cost.

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. update and delete production data that feed the data warehouse. graphical user interfaces. integrated. which he defined in the following way: “A warehouse is a subject-oriented. Operational systems create. Integrated: Data that is gathered into the data warehouse from a variety of sources and merged into a coherent whole. Time-variant: All data in the data warehouse is identified with a particular time period. A data warehouse is analogous to a physical warehouse. Operational systems create data ‘parts’ that are loaded into the warehouse.5.2 Definitions Data Warehouse: The term Data Warehouse was coined by Bill Inmon in 1990. Some of those parts are summarised into information ‘components’ and are stored in the warehouse. Data warehouse users make requests and are delivered information ‘products’ that are created from the components and parts stored in the warehouse. 1. 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.DBA 1727 NOTES information. including relational and multidimensional databases. time-variant and nonvolatile collection of data in support of management’s decision making process”. client/ server architecture. A data warehouse is typically a blending of technologies. and more. A data warehouse is designed so that its users can recognize the information they want and access that information using simple tools. 44 ANNA UNIVERSITY CHENNAI . extraction / transformation programs.

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

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


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

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

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

alone computers made no sense made the network possible. Use IP-spoofing protection whenever possible. it should reside in the DMZ. this possibility is eliminated. the only packets containing a source IP address from your internal machines should come from within the network itself. For instance. people realized that stand . 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. 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. However. it was likely spoofed. By preventing IP spoofing. this conflicts with the desire to prevent internal machines from directly communicating with DMZ machines.alone networks 55 NOTES ANNA UNIVERSITY CHENNAI . most firewalls provide features to prevent IP spoofing. use a double proxy system.7 TRANSMISSION CONTROL PROTOCOL/INTERNET PROTOCOL TCP / IP 1. not from the Internet. A second proxy residing in the intranet passes connection requests of the internal machines to the proxy in the DMZ. which in turn makes the actual connection out on the Internet. Firewall Configuration In addition to the typical packet-filtering features. and the potential for bypassing IP address-based authorization and the other firewallfiltering rules is reduced. Based on your network’s topology. examine whether your mobile user population is stable or is expected to increase over time. To keep this communication indirect. Mobile Users When you have remote or mobile users. When there were too many of them. 1.1 Introduction to TCP/IP: The realization that stand . Use the same IP-spoofing protection on any internal firewall as well.7.E-COMMERCE TECHNOLOGY AND MANAGEMENT Because the proxy communicates directly with machines on the Internet. pay attention to how you will provide them access to the facilities.

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

e the sending and the receiving side) and not at the network layers. only the sender and the receiver are concerned about its contents. It was developed by a community of researchers centered around the ARPAnet. TCP and IP are two of the protocols in this suite.7. Certainly the ARPAnet is the best. it has become common to use the term TCP/IP or IP/ TCP to refer to the whole family. The most accurate name for the set of protocols are describing is the “Internet protocol suite”. This means that application programmers are hidden from the complexities of the underlying hardware.known TCP/IP network.E-COMMERCE TECHNOLOGY AND MANAGEMENT   Simple-each of the layers in the architecture provides only a few functions or operations. 57 ANNA UNIVERSITY CHENNAI . End-to end. It is much like the post office. Because TCP and IP are the best known of the protocols. The job of the post office is to deliver the mail. NOTES 1.3 What is TCP/IP? TCP/IP is a set of protocols developed to allow cooperating computers to share resources across a network. This means that the interpretation of the data happens at the application layer(i.the Internet is based on end-to-end protocols.

and is thus considered “unreliable. The organizations assign groups of their numbers to departments. These include IP. Because it doesn’t need to keep track of the sequence of packets. transferring files between computers.4 TCP/IP Services Initially TCP/IP was used mostly between minicomputers or mainframes. 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. although this is unsuitable for some applications. TCP. These machines had their own disks. Security is handled by requiring the user to specify a user name and password for the other computer.is responsible for verifying the correct delivery of data from client to server.. and UDP. 1.7.DBA 1727 NOTES TCP/IP is a family of protocols.level” functions needed for many applications. Data can be lost in the intermediate network. e.is responsible for moving packet of data from node to node. IP operates on gateway machines that move data from department to organization to region and then around the world.   Others are protocols for doing specific tasks. One of the things that makes UDP nice is its simplicity. Thus the most important “traditional” TCP/IP services are: File transfer. and generally were self. it does have much more applicability in other applications than the more reliable and robust TCP. etc. It does not provide the same features as TCP. IP forwards each packet based on a four byte destination address (the IP number). and that sort of thing.contained. or finding out who is logged in on another computer. TCP adds support to detect errors or lost data and to trigger retransmission until the data is correctly and completely received. in the right order.  IP . The file transfer protocol (FTP) allows a user on any computer to get files from another computer.” Again. or to send files to another computer.g. whether they ever made it to their destination. it has lower overhead than TCP. UDP (User Datagram Protocol) is a simple transport-layer protocol. The Internet authorities assign ranges of numbers to different organizations. A few provide “low. sending mail. TCP . 58 ANNA UNIVERSITY CHENNAI .

Generally. the mail software expects to be able to open a connection to the addressee’s computer. 59 NOTES ANNA UNIVERSITY CHENNAI .7. There are some problems with this in an environment where microcomputers are used. they are its inherent features:  Independence of vendor. Every character you type is sent directly to the other system. Originally. type of machine and network .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. You start a remote session by specifying a computer to connect to. The computer mail system is simply a way for you to add a message to another user’s mail file. This allows you to send messages to users on other computers. in whatever manner it would normally ask a user who had just dialed it up. But the telnet program effectively makes your computer invisible while it is running. From that time until you finish the session. 1. When you send mail.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. These rules are independent of the applications that have no idea of what is going on at the two ends of the communication channel. The most serious is that a micro is not well suited to receive computer mail. in order to send the mail. For this reason. That is. people tended to use only one or two specific computers. anything you type is sent to the other computer. They would maintain “mail files” on those machines. The goals of TCP/IP were set by the US Department of Defence. If this is a microcomputer. it may be turned off. mail is normally handled by a larger system. Computer mail.This was necessary to finally break the monopoly of vendors who claimed that their product alone will save the world. the remote system will ask you to log in and give a password. where it is practical to have a mail server running all the time. the connection to the remote computer behaves much like a dialup connection. Note that you are really still talking to your own computer. and today. Microcomputer mail software then becomes a user interface that retrieves mail from the mail server. or it may be running an application other than the mail system.

Enable reliable transmission of files. These terms provide a foundation for subsequent chapters illustrates the components of an IP network. Facility to connect new sub networks without significant disruption of services High error rate handling . remote login and remote execution of commands. TCP/IP originally began by the development of a collection of programs (the DARPA set) that enabled computers to talk among themselves. must be 100% reliable. irrespective of the distance travelled. it should be able to divert data immediately through other routes if one or more parts of the network went down. with facilities for full error control.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.DBA 1727 NOTES     Failure recovery . 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. 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).7.The transmission. Later. Post Office Protocol (POP) and the mail.Being originally meant for the defence network. 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. \ 60 ANNA UNIVERSITY CHENNAI .

 including routers and hosts. Upper-layer protocol A protocol above IP that uses IP as its transport. Other terms for subnet are network segment and link. Router  A node that can forward IP packets not explicitly addressed to itself. A host silently discards traffic that it receives but that is not explicitly addressed to itself.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. Subnet  One or more LAN segments that are bounded by routers and use the same IP address prefix. On an IPv6 network. Host  A node that cannot forward IP packets not explicitly addressed to itself (a non-router). Network  Two or more subnets connected by routers. LAN segment  A portion of a subnet consisting of a single medium that is bounded by bridges. Another term for network is internet work. 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). a router also typically advertises its presence and host configuration information. A host is typically the source and the destination of IP traffic. 61 ANNA UNIVERSITY CHENNAI      . which runs an implementation of IP.

Each machine is fitted with a network interface card that is connected by wire to the corresponding cards in other machines.) Here are the kinds of servers typically present in a modern computer setup.0. In a network. Although people are still likely to work with one specific computer.168. This address has to be unique not only within the network. 192. that computer will call on other systems on the net for specialized services. a computer is known as a host.168. and the combination of these two addresses forms the complete network address of the host. 192. Every host in the network has an address as well. This name is unique throughout the network. A local internet or intranet may easily be connected to the Internet which also uses the same protocol. They could be different programs running on the same computer.67 represents the complete network address of the host. 62 ANNA UNIVERSITY CHENNAI . This has led to the “server/client” model of network services. sometimes a node. Every TCP/IP network has an address that is used by external networks to direct their messages. Interface  The representation of a physical or logical attachment of a node to a subnet. For instance. These computers are likely to be configured to perform specialized tasks. and uses the TCP/IP protocol for communication. When two or more networks are connected together. A client is another system that uses that service. Note that these computer services can all be provided within the framework of TCP/IP. we have an internet. 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.168 (or strictly speaking.DBA 1727 NOTES     Air  A node connected to the same subnet as another node. An example of a physical interface is a network adapter. A server is a system that provides a specific service for the rest of the network. In that case. minicomputers. and a host within the network could have the host address of 45. Packet  The protocol data unit (PDU) that exists at the Internet layer and comprises an IP header and payload. popularly known as an intranet. if the network is hooked up to the Internet.45. and every such host has a hostname. but also to all connected networks. including microcomputers. Now many installations have several kinds of computers.67. (Note that the server and client need not be on different computers. it has to be unique throughout the world. And. and mainframes. workstations.0) could be the address of a network. All communication between hosts normally takes place through these network interfaces only. 192. which is the super – network of all networks.

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

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

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

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

type the above into a text editor and save the file as “test.htm” then the browser will recognize it as HTML. HTML is standardized and portable.3. HTML documents are often referred to as “Web pages”. The title should be placed at the beginning of your document. Most browsers show the title in the window caption bar. To try this out.html” or “. and </p> to indicate the end of a paragraph. Lynx etc.E-COMMERCE TECHNOLOGY AND MANAGEMENT The text includes markup tags such as <p> to indicate the start of a paragraph. 1.       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.1 HTML Tags: HTML tags are used to define areas of document as having certain characteristics. 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. The title text is preceded by the start tag <title> and ends with the matching end tag </title>. If the file extension is “. With just 67 ANNA UNIVERSITY CHENNAI . The tags used in HTML usually consist of a code in between two “wickets”. A document that has been prepared using HTML markup “tags” can be viewed using variety of web browsers such as Netscape. These codes are called container tags because the formatting described by the tag affects only the text contained between the tags.. A browser interprets the tags in an HTML file and presents the file as a formatted readable web page. The browser retrieves Web pages from Web servers that thanks to the Internet can be pretty much anywhere in World.html”..8. then view the file in a web browser.

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

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

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

often called an ordered list. one within another. This allows you to list terms and their definitions. Note that lists can be nested. The second kind of list is a numbered list. but the </li> end tag is 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. 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. but that the </li> is optional and can be left off. The third and final kind of list is the definition list. 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. It uses the <ol> and <li> tags. 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>. 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 . you always need to end the list with the </ol> end tag.

01 Transitional//EN” “http://www.DBA 1727 NOTES </li> <li>the third list item</li> </ol> You can also make use of paragraphs and headings etc. and information on style sheets and scripts. I recommend you regularly run Tidy over any markup you are editing. </body> contains the markup with the visible content. The <html> . </head> contains the title. 72 ANNA UNIVERSITY CHENNAI . Tidy is available for a wide range of operating systems from the TidyLib Sourceforge site.. for longer list items.org/TR/html4/loose. and is then followed by an <html> tag followed by <head> and at the very end by </html>. while the <body> . and has also been integrated into a variety of HTML editing tools. Tidy is very effective at cleaning up markup created by authoring tools with sloppy habits. </html> acts like a container for the document..w3...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. 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 document generally starts with a declaration of which version of HTML has been used.. The <head> . 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..

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

between 15 and 30) for in store sales.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. as well as through analysis of historical and projected data in various “what-if” data model scenarios. It would a time consuming process for an executive to obtain OLAP reports such as . Data stored by operational systems. With a database design. 74 ANNA UNIVERSITY CHENNAI . A retail example: Point-of-sales data and sales made via call-center or the Web are stored in different location and formats. they expect the transactions to occur instantaneously. Payment Method’ is created quickly on the database and the results can be recalled by managers equally quickly if needed. OLTP. Making data compatible involves ensuring that the meaning of the data in one repository matches all other repositories. 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. such as point-of-sales. call data modeling. Online Transaction Process. Order Name. OLAP helps the user synthesize enterprise information through comparative.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. SCM. Address. Telephone. Examples of OLTPs can include ERP. Normally data in an organization is distributed in multiple data sources and are incompatible with each other. CRM. OLAP allows business users to slice and dice data at will. and only. difference is the way in which data is stored.e. are in types of databases called OLTPs. It is not always necessary to create a data warehouse for OLAP analysis. This is achieved through use of an OLAP Server. Call Center. When a consumer makes a purchase online. optimized for transactions the record ‘Consumer name. databases do not have any difference from a structural perspective from any other databases. OLTPs are designed for optimal transaction speed. Price. Point-of-Sale applications. regardless of database size and complexity. The main difference. Order Number. personalized viewing.


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

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

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.. Sales analysis and forecasting are two of the OLAP applications found in sales departments. to create joins or worse. More control and timely access to strategic information equal more effective decision-making. it is certainly not a very efficient use of developer time. This requires more than a base level of detailed date. OLAP enables managers to model problems that would be impossible using less flexible systems with lengthy and inconsistent response times. Managers are no longer dependent on IT to make schema changes. its ability to provide “just – in . financial performance analysis. 1.time” information for effective decision. A truly flexible data model ensures that OLAP systems can respond to changing business requirements as needed for effective decision making. marketing departments use OLAP for market research analysis. Among other applications. IT developers also benefit from using the right OLAP software. promotions analysis. as needed. i. because the nature of data relationships may not be known in advance.5 OLAP Benefits: OLAP applications increase the productivity of business managers. Finance departments use OLAP for applications such as budgeting. The inherent flexibility of OLAP systems means business users of OLAP applications can become more self sufficient.9. developers.DBA 1727 NOTES 1. Although it is possible to build an OLAP system using software designed for transaction processing or data collection. 78 ANNA UNIVERSITY CHENNAI . The key indicator of a successful OLAP application is its ability to provide information. activity – based costing (allocations). and market / customer segmentation.making. developers can deliver applications to business users faster. Typical manufacturing OLAP applications include production planning and defect analysis. and whole organizations. and financial modelling. customer analysis. the data model must be flexible. In addition.9. sales forecasting. By using software specifically designed for OLAP. Perhaps more importantly.e.4 Uses Of Olap OLAP applications span a variety of organizational functions. Analyzing and modelling complex relationships are practical only if response times are consistently short.

1 Introduction to Cryptography The origin of the word cryptology lies in ancient Greek. 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.10. IT gains more self-sufficient users without relinquishing control over the integrity of the data. 1. 1. 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.10 CRYPTOGRAPHY 1. By using software designed for OLAP. The word cryptology is made up of two components: “kryptos”. which means hidden and “logos” which means word. Within the field of cryptology one can see two separate divisions: cryptography and cryptanalysis. Once it knows your identity. As a result. 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.10.E-COMMERCE TECHNOLOGY AND MANAGEMENT providing better service. unlike standalone departmental applications running on PC networks. IT also realizes more efficient operations through OLAP.2 Cryptographic services The main goals of modern cryptography can be seen as: user authentication. For example. and data confidentiality. and has been used for thousands of years to safeguard military and diplomatic communications. The same principal applies when one person tries to 79 NOTES ANNA UNIVERSITY CHENNAI . However. Cryptology is as old as writing itself. the famous Roman emperor Julius Caesar used a cipher to protect the messages to his troops. OLAP applications are dependent on data warehouses and transaction processing systems to refresh their source level data. IT reduces the query drag and network traffic on transaction systems or the data warehouse. data authentication (data integrity and data origin authentication). it can verify whether you are entitled to enter the system. non-repudiation of origin.

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

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

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. An example will illustrate the importance of non-repudiation of origin. 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. claiming A has sent it. 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. Thanks to cryptography. falsely. If A sends a message to B. The example of Caesars cipher given in the introduction clearly demonstrates this.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. If A sends a message to B. 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. 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. having received a message. while non-repudiation with proof of delivery protects against any attempt by the recipient to deny. Confidentiality protection is very 82 ANNA UNIVERSITY CHENNAI . In a paper and pencil world. there are techniques to ensure against this type of fraud. Suppose B is the owner of a mail-order company and he decides to let his customers order through electronic mail. with a seal and a signature. non-repudiation is provided by a manual signature. Data confidentiality This aspect of data security certainly is the oldest and best known. but the enemy intercepts it and sends it to B. but the enemy intercepts it. With data confidentiality we try to protect ourselves against unauthorized disclosure of the message.

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

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

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

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

For the distribution of this keying material. one can use a new cryptographic primitive. More complex protocols are required to achieve mutual 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. sequence numbers or time stamps. 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. a physical channel.E-COMMERCE TECHNOLOGY AND MANAGEMENT 1. 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. A large number of protocols have been presented in the available literature. encryption and digital signatures can be seen as a special case of cryptographic protocols. many of which exhibit some weaknesses. in addition.5 Cryptographic protocols A cryptographic protocol is an interaction between one or more entities to achieve a certain goal. They are based on an encryption algorithm. 87 NOTES ANNA UNIVERSITY CHENNAI . whose confidentiality and/or integrity has to be protected. a MAC or a digital signature and the use. In fact. While a huge number of protocols have been developed. 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. we will restrict this section to two types of protocols: protocols for user authentication and protocols for key management. of so called nonces (never used more than once): random numbers.10. More complex challenge-response protocols can be designed in which the user does not transmit his secret information. The simplest protocol providing unilateral authentication consist of sending a password.

DBA 1727 NOTES These signed public keys are called certificates. This protocol is different from a key transport protocol. Note that there also exist public-key protocols which result in the agreement of a secret key between two parties. 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.Business to Consumer C2B . anybody can read his messages or forge his signatures.Business to Employee C2C . by exchanging public keys or parameters. In the context of public-key cryptography. There are a number of different types of E-Commerce      2. SUMMARY 1.Consumer to Consumer Architectural framework of e commerce: The electronic commerce application architecture consists of six layers of functionality. in which one party generates the secret key and enciphers it with the public key of the other party. 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.Consumer to Business B2E . data or transaction management. A well known example in this class is the Diffie-Hellman key agreement scheme. revocation of public keys is very important: once the user’s secret key is compromised. or services: 1) 2) Applications brokerage services. Although public-key systems require no on-line central management system. while stepping through those processes electronically rather than in a physical store or by phone (with a physical catalogue). B2B .Business to Business B2C . 88 ANNA UNIVERSITY CHENNAI .509 recommendation. The key agreement protocols have the advantage that they result in an increased security level. The central authority certifies that a certain public key belongs to a particular user.

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

Certainly the ARPAnet is the bestknown TCP/IP network. and has been used for thousands of years to safeguard military and diplomatic communications. Cryptography: The word cryptology is made up of two components: “kryptos”. which means hidden and “logos” which means word. 10 11 12 Questions for review 1.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.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. consistent. HTML: HTML stands for Hypertext Markup Language. 5. managers and executives to gain insight into data through fast. 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. 3. OLAP: On-Line Analytical Processing (OLAP) is a category of software technology that enables analysts. HTML is a special kind of text document that is used by Web browsers to present text and graphics. Cryptology is as old as writing itself. 4. 2.

10. 14. 7. 8. 16. 15. 18.E-COMMERCE TECHNOLOGY AND MANAGEMENT 6. 17. List the major activities taken by organizations to deal with the business pressures. consumer and societal benefits of EC Carefully examine the non-technological limitations of EC. 19. 20. 12. 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. 9. List the organizational. 11. 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. 13. What are cryptography protocols? NOTES 91 ANNA UNIVERSITY CHENNAI . What is data warehouse? List the advantages of data warehouse. Which of them are company-dependent and which are generic.


delivery. reacting to the pressure of retailers. In the traditional model. the customer went to the store and located the product. merchandising to store design. and production) and become more efficient producers of goods. Online channels such as online services and the Web are also impacting traditional retail business models. anytime-from work. and logistics to order fulfilment.1 RETAILING IN E-COMMERCE 2. a hotel.1. the retailer seeks out the customer. Almost every retailer is re-evaluating every aspect of its operation from customer service to advertising. suppliers are assessing technology based solutions to drive down costs (labour. catalogue retailing.E-COMMERCE TECHNOLOGY AND MANAGEMENT NOTES UNIT II BUSINESS APPLICATIONS IN E-COMMERCE 2. These developments should impact retailing as much as the advent of strip malls. The success of catalog retailers demonstrates that a significant portion of consumers have embraced the reverse model: the retailer going to the consumer. In the online model. Furthermore.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. and TV-based home shopping. However. school. 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 . or airplane. car.

if they are sold directly to the consumer who is the end user. So are the sales of services such as telecommunication services or banking services.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. Here we discuss the sale of tangible goods. a washing machine. a television set. or education. the most recent foreign exchange rate. which may be downloaded from the internet. 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. as shown in Figure 2.2 E-Retailing E-retailing essentially consists of the sale of goods and services. The sale of intangible goods is sometimes called E-servicing.    Examples of physical goods would be a book. Examples of services that may be sold are information such as the most recent stock prices. a video recorder. Sometimes we refer to this as the sale of tangible and intangible goods. The sale of tangible and intangible goods are all referred to as Customer oriented e-commerce or eretailing. 2.1. Selling of different type of goods 94 ANNA UNIVERSITY CHENNAI .1. etc. Examples of digital goods are software and music. Entertainment such as -games that would be played on the internet are also examples of e-services.2(a) We can divide tangible goods into two categories: physical goods and digital goods.

Thus.E-COMMERCE TECHNOLOGY AND MANAGEMENT 2. 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. Examples of physical outlets that retailers currently use are:     Malls generalized stores (e.1. they allow specialization in particular classes of 95 ANNA UNIVERSITY CHENNAI . E-retailing The internet has allowed a new kind of specialization to emerge. Instead of specializing just in a special product line. this notion of browsing through a catalogue is a forerunner of e-retailing. telemarketing.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.g. door-to-door sales. In some respects. 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. The customer browses through this catalogue and then carries out mail ordering. 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.

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

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

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

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

the manufacturer must have a thorough understanding of customer preferences. of the best known here is Ford. and security-related facilities. quality. which utilizes the internet to achieve direct selling but uses its dealer network to facilitate distribution and delivery. 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. There are several different models for electronic brokers and these include:  Brokers that provide a registration service with directory. That is the reason why they are sometimes referred to as electronic intermediaries. anewshop. 100 ANNA UNIVERSITY CHENNAI . Any business can register with such an e-broker (e. A note of caution is important here. By and large.com). order taking and fulfilment. with respect to particular criteria such as price. Note that this approach permits mass customization to meet customer preferences. search facilities. e-payment facilities.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. 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. otherwise he has to rely on the customer knowledge of a retailer. this approach can be used by manufacturers of well-known brands of products because the customer already knows the pro-duct. The other well -known examples are Cisco systems and Dell computers. Thus. One.g. such as a comparison between goods. etc. Secondly. and services to a customer. 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.

Thus. Technology improvements that provide greater convenience and more information than traditional retailing. 2.com). An ability to provide an automatic price update.e. 4.E-COMMERCE TECHNOLOGY AND MANAGEMENT   Brokers that meet a certain requirement such as a fixed price (e. The use of Forums (collaborative purchasing circles) to create a customer community and thus increase “stickiness. deals.com). which is a useful feature before submission.g. Personalization of store layouts. which more premium placed on efficient use of time Changes in consumer behavior. 3.g.Priceline. E-services is discussed in the next lecture.1. “who” can help customers to navigate through the site. 7.1. these goods can be downloaded instantly. Thus. mySimon. The provision of an on-line catalogue. and marketing. which is a very important feature that does not exist in traditional retailing. 8.7 Changing Retail Industry Dynamics Important factors that affects the retailing industry dynamics are:     Overbuilding and excess supply.6 Features of E-Retailing 1. 6.The last model i.” 2. The ability to distribute digital goods directly. An on-line customer salesperson. promotions. 101 ANNA UNIVERSITY CHENNAI . 5. The provision of a search engine. with less focus on brand name and more on lowest prices. The provision of a shopping cart. it is dynamic and linked with order process. Change in consumer demographics. NOTES 2.com or bestbooksbuy. which allows one to browse through different categories of goods. Brokers that provide comparison shopping between products (e. An order status checking facility. which allows convenient goods selection.

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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,



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

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

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

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

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

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

2. 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)..4 The Seven Stages of Internet Marketing 114 ANNA UNIVERSITY CHENNAI . They also serve as guides to managerial action. 2.g.DBA 1727 NOTES framework to understanding the practice of Internet marketing. Frameworks such as the 4Ps of marketing or the five forces of competitive analysis are important because they provide easy-to-remember. Thus. simplifying structures for complex problems.

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. sold. In order for the firm to make an informed choice about the opportunity. 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. 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. assessing opportunity attractiveness. and evaluating the results of the marketing program. that you are running a major dot-com business such as Amazon. collecting sufficient online and offline data to establish the burden of proof of opportunity assessment. music. Business-unit strategy focuses on how a particular unit in the company attacks a market to gain competitive advantage. crafting the customer interface. framing the market opportunity. designing the marketing program. What mechanism do they put in place to evaluate these opportunities? In this second part of the Internet-marketing process. However. Amazon. The final go/ no-go choice is often a corporate or business-unit decision. and number of business units such as kitchen.com. the management team needs to obtain a sufficient picture of the marketplace and a clear 115 NOTES ANNA UNIVERSITY CHENNAI . for example. including decisions about which units should be kept. formulating the marketing strategy. 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. for example. declaring the company’s resource-based opportunity for advantage. a simple six-step methodology helps evaluate the attractiveness of the opportunity The six steps include: seeding the opportunity. electronics. identifying the target segment. Corporate-strategy issues relate to the choice. it is very important to stress that marketing plays a critical role in this market-opportunity assessment phase. or augmented. designing the customer experience. mix. Let’s say. Consider. books. The seven stages are these: setting corporate and business-unit strategy. specifying unmet or underserved customer needs. Once these business units are established and incubated in Amazon’s corporate head~ quarters. and making the final go/no-go decision. and tools/hardware.

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

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

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

wireless applications protocol (WAP) device.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. sub-notebook. relationship intensity is correlated with the stage of the relationship. 119 ANNA UNIVERSITY CHENNAI . mobile phone. This visitor would have a high level of frequent contact but a low level of scope. commenting on products. As this shift from people-mediated to technology -mediated interfaces unfolds. personal digital assistant. This includes a balanced focus on both customer and financial metrics. The frequency of the connection. The key difference is that the nature of the exchange relationship is now mediated by a technology interface. In all cases. (How thoroughly is the customer using the site?) NOTES A customer might visit a website such as Amazon on a regular basis. or communicating with other Amazon users..e. What is the look-and— feel. 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. 2. screen-tb-face interaction). (How often does the customer visit the site?) The scope of the connection. This customer would have high frequency but low depth. 3. 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. but only to purchase books. or context. it is important to consider the types of interface design considerations that confront the senior management team.. 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.e. This interface can be a desktop PC. Three dimensions capture intensity: 1. (How many different points of contact does the customer have with the firm?) The depth of contact. face—to-face interaction) to the market space (i. or other Internet enabled appliance.

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

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

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

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

Culling specific customer insights from a veritable fire hose of data is critically important for new economy managers. Beyond strategy. Successful marketing managers use this passion to fuel their entrepreneurial instincts and vision. passion. is what will differentiate leaders from followers in the new economy. a marketing manager must fundamentally understand how to integrate these new tools into the overall marketing mix. Internet marketing professionals need to retool them-selves and their companies to enter into a whole new era of customer-centric marketing. 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. Internet marketing professionals must also be technologically savvy. Passion and Entrepreneurial Spirit Although very hard to objectively assess. The 124 ANNA UNIVERSITY CHENNAI . and then creatively applying the insights gleaned from analysis are critical success factors for all Internet marketing professionals. Balanced Thinking An Internet marketing professional needs to be highly analytical and very creative. Understanding the strategic and tactical implications of the Internet. a consistent message and experience must be maintained across customer touch points in order to create a consistent brand image.DBA 1727 NOTES Integration The Internet represents both a new channel and a new communications medium. It also requires determining the appropriate customer data requirements. 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. 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. It requires understanding the dynamic tension between one-toone marketing and mass marketing and being able to strike a strategic balance between them. creating “bleeding edge” tools as they lead their teams to success. or fire in the belly. leveraging the rapid learning environment and accelerated decision-making process it creates. Willingness to Accept Risk and Ambiguity In the new economy. In today’s multi channel environment.

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

enhancing and altering it. 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. These take a need from an individual or business customer and provide mechanisms (from providers) for matching that need. E-education is an example of this. this may bring a new dimension to the original service. 2. Matchmaking services. 3. Information-selling on the web. It may also bring into the catchments new groups of consumers of the service to whom it might not have been previously accessible.DBA 1727 NOTES E-services that fall into this category include    Banking Stock trading Education In some cases. 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 .

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

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

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

etc. which address this precise market segment.DBA 1727 NOTES name. 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. etc. 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. Travel Services Before the internet.2 Matchmaking Services This has perhaps been the area in which there has been the greatest growth in eservices.1. the customer who could be an individual or business specifies his requirements in relation to the service. A large number of e-commerce sites have appeared. tours. These web sites work in exactly 130 ANNA UNIVERSITY CHENNAI . tests to provide the student with instant feedback on his/her mastery of the materials.com. 2.com. in most of these applications. as well as suggestions on changes to de itinerary. and priceline. promotions. particularly those that have a dynamic character to them. The travel agent would try his best to meet these requirements by providing information regarding schedules. hotel. 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. one might have gone along to a travel agent in order to book one’s travel requirements such as air tickets. The use of the ‘internet for education opens up many possibilities. These bookings could be for individuals or corporations involving corporate rates.com travelweb. car hire. pricing. train tickets. The e-commerce site then does a search over its own databases or over the internet using mobile agents. namely use of quizzes. 2. Essentially. use of graphics and animation to explain concepts. These include trip. 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.3. or over other databases or web sites to look for one or more matches to these requirements. The information is then returned to the e-service provider site to give the customer the required service.

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

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

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

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

This gulf is filled with established methods. including over the weekend or late at night. 2. unfortunately. and sold products and services in their homes and offices whenever it is convenient for them-twenty-four hours a day. such as branches. seven days a week. off-the-shelf personal finance software cannot bridge the communications gap or reduce the duplication of effort described above. Banking Via Online Services Although personal finance software allows people to manage their money. these systems do not communicate with one another. it only represents half of the information management equation. information gets man-aged twice once by the consumer and once by the bank. Bankers want more stable and long term relationships with their customers. These methods can be costly and impersonal.3.3. Customers want to be able to bank at their convenience. But a few “home banking” systems that can help are beginning to take hold. developing and maintaining this relation-ship is difficult. From the bank’s perspective.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. Although financial products are essentially information products and financial institutions are highly automated. advertising. In combination with a PC and modem. then both the consumer and the bank are responsible for maintaining systems. a consumer enters data once into his system and transfers this information to paper in the form of a check. postage and mail. Electronic banking provides a method of communication that will enable the bank customer to be reached. For example. thus giving new meaning to double-entry bookkeeping. If the consumer uses personal finance software. No matter which software package is used to manage accounts. served. reducing the monthly paper chase of bills and checks NOTES 135 ANNA UNIVERSITY CHENNAI . Unfortunately. only to have the bank then transfer it from paper back into electronic form. and people on telephones. these home banking services let the bank become an electronic gateway. there is a gulf between automated information and the bank’s ability to reach the consumer in a unified way.

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

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

2. For banks.3. Banks must deliver high quality products at the customers’ convenience with high-tech. too.DBA 1727 NOTES approval made DOS an industry standard. and price. The development of effective back-office systems that can support sophisticated retail interfaces. customized ser-vice.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. 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. losing control over the interface could have dire consequences. In order to achieve this. high-touch personal and affordable service. However.  Marketing Issues: Attracting Customers The benefits of online banking are often not made clear to the potential user. The establishment of good customer service on the part of banks.3. Consumer question includes : 138 ANNA UNIVERSITY CHENNAI . quality. 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 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 emergence of low-cost interactive access terminals for the home as well as affordable interactive home information services. convenience. The creation of online financial supply chains to manage the shift from banks as gatekeeper models to banks as gateways. management has to balance the five key values that increasingly drive customers’ banking decisions: simplicity. The identification of new market segments with untapped needs such as the willingness to pay for the convenience of remote banking.

and this familiarity increases interest in additional vices and increases switching costs. Thus. Many of these firms have PCs and modems. Regardless of how a bank chooses to answer these questions. NOTES 2. household management is pushing consumers toward integrated services that can speed up financial procedures. Clearly. The rapidly growing use of personal computers by small business. heavy workload. 5 million. 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. it is clear that make a mistake trying to sell online banking services on the basis of convenience. Banks must provide integrated services.000 customers. 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.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. In the online world. New services like interactive cash management services could generate significant revenues for banks. 250. but also in order to be attractive to potential customers. While short term convenience is important.000 to Rs. Customers are increasingly familiar with using technology to access bank accounts and to handle financial affairs. The oftcited time squeeze on consumerslong commutes. 139 ANNA UNIVERSITY CHENNAI .provides a solid opportunity for banks to build a profitable base of small business until a broader consumer market evolves. There are mil-lions of small businesses with annual sales ranging from Rs. family obligations. marketers must also work on building a loyal customer base not only in order to maintain the existing base. Banks must switch the costs of moving from one software platform to other to keep customers from moving. Banks must also look beyond home consumers for online banking consumers. banks have opportunity to tap into this market segment. there is not a big cost dif-ference between serving one customer and serving 100. consumers want 19-term ability to control and organize their finances more than they want convenience. 3. These integrated services contribute to cementing the customer relationship.

45. when clicked with a mouse.1. 30. which reportedly charges Rs.4.000 per quarter for an advertiser to place an icon in the periodical. Playboy. 100 per day for an advertisement. which reportedly charge Rs. The cost of the access fee itself can be shared by an advertiser if. without requiring additional access time. In many cases. which display an advertiser’s logo and. the advertiser pays for the access time used when accessing online yellow pages.4. Reduced Access Fees New Internet users will be attracted by reduced ac-cess fees. send a user across the Web to the advertiser’s Web site. users will spend a larger proportion of their time on Web sites and a smaller proportion waiting to access them. With more time available to draw users’ attention. Many online periodicals include traditional advertisements as well as icons. Shorter access times also enable increasingly complex graphics to be placed on Web sites. advertisers ask site visitors to provide their names and addresses in exchange for a product discount.1 Reasons expected for the increase in Advertising spending Shorter Access Times As more bandwidth becomes available. Promotions are also common. with part of the reduction covered by advertisers. 140 ANNA UNIVERSITY CHENNAI .000-Rs. 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.1 Advertising and Online Publishing With the intention of attracting advertising dollars. advertising rates should rise. This should draw to the Web advertisers who may have been concerned that the current graphical quality was insufficient for displaying their products. for example. advertisers should be willing to pay more per user to place their icons in online periodicals. 2. and magazines such as Hot Wired. With more advertisers.DBA 1727 NOTES 2. magazines and newspapers have also set up sites on the Web. and People.4 ADVERTISING AND ONLINE PUBLISHING 2.

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

owned. 2.DBA 1727 NOTES Effective measurement of online advertising is taking centre stage. displayed. The scope and magnitude of the problem is clear. a TV or computer program.3 Digital Copyrights and Electronic Publishing Intellectual property rights (copyrights. Today. Even worse. 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 potential of online copyright infringement vastly surpasses the damage that can be inflicted with a photocopy machine. and stored. 142 ANNA UNIVERSITY CHENNAI . causing a blurring of the traditional content lines. the digital version can be sent to friends or even a bulletin board system (BBS) for downloading by anyone with a modern.4. managed. reproduced. In short. 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. as well as how works are created.has sent a shiver down the spine of many ad sales executives. presented. distributed.1. The anticipated P&G strategy. Anyone with a computer can make and distribute countless copies of anything digital. performed. the emergence of the Internet is dramatically changing how consumers and businesses deal in information and entertainment products and services. virtually any work can be “digitized. a sharp departure from the industry standard which measures hits . accessed. The concern was that other advertisers will follow P&G’s lead. All of this has led to a clarion call for changes in the copyright law. such as a CD-ROM. However. used. or a piece of music. This increases the ease and speed with which a work can be reproduced. to deliver perfect copies of digitized works to scores of other individuals.3 billion ad budget to advertise on various Web sites. trademarks. and licenses) are an important asset possessed by the publishers in their respective markets. Advances in technology have raised the stakes considerably. and the speed with which copies (authorized and unauthorized) can be “delivered” to the public. and used in the digital format. with a few key strokes. sold. the quality of the copies.” archived. It was reported in MediaWeek [MW96] that Procter & Gamble was ready to spend some of its $3. Works also can be combined with other works into a single medium. the ability to manipulate and change the work. The establishment of high-speed networking makes it possible for one individual. organized. In other words. licensed. be it a book. Protecting intellectual property rights and collecting dues from online users is proving to be quite challenging.

the Wall Street Journal Interactive Edition attracted 500. 2. and that number is growing by some 3. but judging from recent product offerings. the electronic edition has attracted more than thirty advertisers paying to reach this audience. At that time. and unless the integrity of those works is assured. This includes controlling Web server access or controlling individual document access. Restricting manipulation of the electronic file containing the work. 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. In addition. They discovered that offering exciting technology without compelling content is insufficient to capture market share.000 registered readers on the Web. Initially. Online Copyright Protection Methods Unauthorized access to published content can be restricted by two methods: 1. However. it was reported that. from 1993 to 1995 much of online publishing was inhibited by a lack of business purpose.2 Electronic Commerce and Online Ppublishing The Web may have blossomed because of peer-to-peer publishing. NOTES 2. growth in the online publishing marketplace was driven by the potential of new interactive technologies and applications. there were publishing companies who took a “Just Get Me on the Web!” approach. 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.4.000 readers per day. Likewise. there is an enormous groundswell of interest among both commercial and corporate publishers in the Web. failing to define the business purposes driving their online presence. publishers realized that simply having a presence on the Web did not guarantee profits.E-COMMERCE TECHNOLOGY AND MANAGEMENT The stakes are high. Restricting access to the source of the work. 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 . Also. As the initial euphoria wore off. 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. For instance. The promise of new interactive publishing captured the imagination of both content providers and the public. in less than three months.

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

which makes the risk even greater. Watchers These are large publishing companies that employ scale-sensitive economics. and they already have many of the necessary resources at hand. as well as fo-cused publishers in categories not easily suited for the online medium. 2. Gathered here are many multi category and specialty publishers who are competing successfully in traditional markets. 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. the digital world has no international boundaries. Testers These are the majority of publishers that face either attractiveness and/ or skill challenges. and alter works without the permission or the copyright holder. These publishers have the capacity to derive the highest benefits from new media as their learning curves are much shorter than others. The Internet makes it extremely easy to copy. 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. This category includes publishers of unbranded or less distinctive content who cannot attract a sufficiently large initial consumer franchise.1 Online Publishing Strategies As with any new development.E-COMMERCE TECHNOLOGY AND MANAGEMENT Effective technological protection mechanisms are vital to ensuring the availability of quality content online. who are uncertain who will win in the online marketplace. Moreover. Testers also include 145 NOTES ANNA UNIVERSITY CHENNAI .4.2. publishers such as Addison—Wesley only offer catalogs or sample selections of works available online. and policing is impossible since the levels of protections and sanctions against infringement vary widely in countries across the globe. Today. retransmit. They are unlikely to view online publishing as a sufficiently attractive channel until costs fall and distribution widens. and who neither need nor want to make a choice now. there is too great a risk to their intellectual property.

    The online archive approach. building required skills. 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. Winning in online publishing will entail developing new skills in areas such as tailored advertising. The new medium approach. The publishing intermediation approach. publishers are educating themselves about the potential opportunities without committing themselves to anyone position.4. Speed of delivery. This is more controversial and more difficult to implement. service. order processing and fulfilment. For this group. and price will not be enough to compete in this new environment. 2. 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. 146 ANNA UNIVERSITY CHENNAI . Those with strong brand images and existing consumer franchises may choose to post-pone entry until they find viable service providers and distributors. The dynamic and just-in-time approach. to some extent. and customer service as well as re-learning the fundamental principles concerning why people subscribe. This is new to the Web. incentives. Content. quality. but also more exciting. bundling of products. In general. and diversity of choice also become critical success factors. but is a logical extension of the trends in electronic delivery over the past several years.DBA 1727 NOTES branded general publishers with robust consumer franchises and attractive distribution channels already in place.2. Publishers will have to innovate constantly and challenge present concepts if this form of commerce is to become widely accepted and popular. This is an online extension of the thirdparty publisher role off-line. the online medium appears to be an alternative. In this approach. content is assembled in real-time and transmitted in the format best suited to the user’s tastes and preferences. 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. and exploring the attractiveness of potential channels.2 Online Publishing Approaches There are four contrasting content publishing approaches.

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

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

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

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

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

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

performance measures. while business – to – consumer electronic commerce implies that the buyers are individual consumers. Business-to – business EC is expected to grow to $1.9 billion by 2003 and continue to be the major share of the EC market (Free-man 1998. lead times. The percentage of Internet – based B2B EC compared to total B2B commerce will expand from. delivery time. As Handfield and Nichols (1999) suggest. sales history Customer – sales history and forecasts Supplier – product line and lead times. resellers. competitive product offerings. motor vehicles. market share Sales and marketing – point of seal (POS) . utilities. Computing electronics. Business-to-business EC covers a broad spectrum of applications that enable an enterprise or business to form electronic relationships with their distributors.4 percent in2003. shipping and warehousing. carrying costs. For example.5. paper and office products. commitments.E-COMMERCE TECHNOLOGY AND MANAGEMENT “institutional sales”). costs Inventory – inventory levels. B2B applications will offer enterprises access to the following sorts of information:           Product – specifications. food. product plans Transportation – carriers. “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. promotions Supply chain process and performance – process descriptions. quality. petrochemicals. sales terms and conditions Product process – capacities. and agriculture are the leading items in B2B EC. prices. suppliers.330. locations Supply chain alliance – key contacts. schedules Competitor – benchmarking. customer satisfaction NOTES 153 ANNA UNIVERSITY CHENNAI .3 Characteristics of B2B EC Business – to – business electronic commerce implies that both the sellers and buyers are Business Corporation. a company selling photocopiers would more likely be a B2B sales organization than a B2C sales organization.2 percent in 1997 to 2. partner roles and responsibilities. Retter and Calyniuk 1998). and other partners. 2.1 percent in 2000 and 9.

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

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

the no-frills e-marketplace parallels the B2C offering of no-frills budget airlines. Each level of the industry has access to every other level. Help increase trade between distant geographies 4. The most common type of materials traded horizontally are MRO (maintenance. which greatly increases collaboration. Therefore e-commerce is not well no where near the advanced technology that us in organizations use now a days. E-commerce has a variety of different opinions going out towards different people in different organization that are committed to such technology. these items are in demand because they are crucial to the daily running of a business. Horizontal e-Marketplace A horizontal e-marketplace connects buyers and sellers across many industries. The subject of several Harvard and IMD articles/case-studies. Help reduce the time and cost of interaction for B2B transactions 3. regardless of industry and level within that industry. Many corporations have MRO materials bought directly on-line by the maintenance team in order to relieve the purchasing department. repair and operations) materials. Help buyers find new suppliers and vice versa 2. This is possible because buying/selling items in a single industry standardizes needs.DBA 1727 NOTES These marketplaces can do one or more of the following: 1. no-frills B2B e-marketplaces enable the effective de-bundling of service from product via 156 ANNA UNIVERSITY CHENNAI . 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. 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 reduce the number of profits after tax 6. 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 increase the greenhouse gas emissions in the country 7. thereby reducing the need for outsourcing many products. Mainly business and consumer articles.

today it is widely used to describe all products and services used by enterprises. data. It eventually came to be used in marketing as well. This is one of the applications of E Commerce which makes Business to Business transactions possible over a network. It cuts the cost of managing business-to-business transactions by eliminating the need for labor-intensive manual generation and processing of documents. initially describing only industrial or capital goods marketing. Coding and structuring the documents for business transactions is no easy matter. Let’s start with EDI Standards. 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. In this lecture we will discuss the EDI standards. EDI is the electronic exchange of business documents. 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). and other information in a public-standard format. 2. 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. However.6 EDI Standards EDI stands for Electronic Data Interchange.5. EDI Standards At the heart of any EDI application is the EDI standard.E-COMMERCE TECHNOLOGY AND MANAGEMENT clear “business rules. 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.” This provides the basis of differentiation from conventional B2B sales/purchasing channels. These elements together with the EDI Agreement are covered in detail in this lecture. the EDI networks and the EDI software that interfaces these two elements and the business applications. NOTES 157 ANNA UNIVERSITY CHENNAI .

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

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. Independent of the special interest of any party in the trading network. The EDI standard provides. 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. 159 ANNA UNIVERSITY CHENNAI . EDI standards are used for the interchange of information as diverse as weather station readings and school exam results. EDI standards overcome these difficulties. 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. this would require a change to the existing standard or the introduction of an additional standard. 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. or attempts to provide. 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. 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. Independent of hardware and software. a standard for data interchange that is:     Ready formulated and available for use. 2. Now let’s see how the various standards evolve. Comprehensive in its coverage of the data requirements for any given transaction. The data recipients set the standard and the customers conformed to it. NOTES EDI Standards provide a common language for the interchange of standard transactions. The overall picture is one of unnecessary complexity and incompatibility.

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

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

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

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

11. which can extend from the supplier of raw materials to the final consumer. accounting for about 80 per cent at present. 2. 8. 13. What is E-Marketplace in a B2B EC? Discuss B2B auctions and B2B services 164 ANNA UNIVERSITY CHENNAI . 5. B2B EC: In business-to-business electronic commerce businesses use the Internet to integrate the value. 3.added chain. 14. 4. 12. 16. 15. 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.DBA 1727 NOTES 8. 10. Questions for review 1. 7. Business for business dominates the total value of ecommerce activity. 6. 9.

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

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

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

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

e. 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. Email Email is the first of the Internet’s tools dedicated to the provision of fast. simple and global communication between people. numbers and graphic files. Within this framework messages were now able to chase their individual recipients anywhere in the world. This revolutionary client/server software implied for the first time that individuals (both as persons and roles) could have their unique electronic addresses. 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 wide-area array of sites collating and swapping UUCP-based messages was pioneered in 1979. Usenet Newsgroups Usenet (Unix Users Network). 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. 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.E-COMMERCE TECHNOLOGY AND MANAGEMENT Unix was one of the first operating systems which embodied the principle of multitasking (time-sharing). TCP/IP) networks (Laursen 1997). Later. Usenet was originally conceived as a surrogate for the Internet (then called ARPANET). This simple function was subsequently augmented by email’s ability to handle various attachments. NOTES 169 ANNA UNIVERSITY CHENNAI . The initial format of email communication was that of a one-to-one exchange of electronic messages. such as documents with complex formatting.

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

The WWW server is an invention which has redefined the way the Internet is visualized by its users. commentaries. Berners-Lee 1998). image) document could act as a portal leading directly to any other nominated segment of any other document anywhere in the world. and again in the 1965 by Theodor Nelson who embarked on the never-completed Project Xanadu (Nielsen 1995. et al. including in the 1945 by Vannevar Bush of the Memex fame. Secondly. Gilster 1997:267). unified environment for handling an array of other electronic tools. It is also evident in the apparatus.5 Web based Client/Server Gopher Gopher client/server software was used for the first time in 1991 (La Tour nd. standalone scale in 1986 in the Macintosh software called Hypercard (Goodman 1987). Firstly. of a 19th century scholarly monograph. it acted as a predictable. Liu. nd. It was a ground-breaking development on two accounts. such as Telnet. Firstly. appendices and references. Gopher was the first ever tool capable of the creation and mapping of a rich. The hypertext notions of a home page and links spanning the entire body of data was first successfully employed on a small. the WWW server introduced to the Internet the powerful point-and-click hypertext capabilities. C. BernersLee. This invention was previously theoretically anticipated by a number of writers. 171 NOTES ANNA UNIVERSITY CHENNAI .1. or John Harris’ Lexicon Technicum which was published in 1704 (PWN 1964). World Wide Web Server The first prototype of the WWW server was built in 1991 (Cailliau 1995. Gopher acted as electronic glue which seamlessly linked together archipelagos of information tracked by and referenced by other gopher systems. FTP and WAIS. 1994). and infinitely extendable information space. In short. The WWW however. compiled in 1674 by Louis Moreriego. such as footnotes. Hypertext itself is not an new idea. was the first hypertext technology applied to distributed online information. It is already implicitly present (albeit in an imperfect because a paperbased form) in the first alphabetically ordered dictionaries such as Grand dictionnaire historique. The hypertext principle as employed by the WWW server meant that any part of any text (and subsequently. large-scale.E-COMMERCE TECHNOLOGY AND MANAGEMENT 3.

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

although some application layer protocols do contain some internal sub-layering. (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. We distinguish two categories of application layer protocols: user protocols that provide service directly to users. (d) ability to acquire.of the OSI Reference Model [ARCH:8]. a host must implement the layered set of protocols comprising the Internet protocol suite. The application layer of the Internet suite essentially combines the functions of the top two layers . 3. The Application Layer in the Internet protocol suite also includes some of the function relegated to the Session Layer in the OSI Reference Model.Presentation and Application .1. save and display the full HTML source code for any and all of the published web documents.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. A host typically must implement at least one protocol from each layer. The Internet suite does not further subdivide the Application Layer. and support protocols that provide common system functions.6 Elements of Internet Architecture     Protocol Layering Networks Routers Addressing Architecture NOTES Protocol Layering To communicate using the Internet system. The most common Internet user protocols are: 173 ANNA UNIVERSITY CHENNAI . 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.

providing no end-to-end delivery guarantees. Internet Layer All Internet transport protocols use the Internet Protocol (IP) to carry data from source host to destination host. TFTP.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. booting. fragmentation and reassembly. BOOTP. and the set of official Internet transport protocols may be expanded in the future. UDP is a connectionless (datagram) transport service. Transport Layer The Transport Layer provides end-to-end communication services. and a variety of routing protocols. resequencing. Other transport protocols have been developed by the research community. The IP protocol includes provision for addressing. type-of-service specification. duplicated. or not at all. and flow control. the Domain Name System (DNS) protocol. This layer is roughly equivalent to the Transport Layer in the OSI Reference Model. 174 ANNA UNIVERSITY CHENNAI . Support protocols. The layers above IP are responsible for reliable delivery service when it is required. and management include SNMP. IP datagrams may arrive at the destination host damaged. used for host name mapping. except that it also incorporates some of OSI’s Session Layer establishment and destruction functions. 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. out of order. IP is a connectionless or datagram internetwork service.

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

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

The term “router” derives from the process of building this route database. are much more secure. The World Wide Web Many people use the terms Internet and World Wide Web (or just the Web) interchangeably.1.7 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. 177 NOTES ANNA UNIVERSITY CHENNAI . Routers provide datagram transport only. routing protocols and configuration interact in a process called routing. 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. but. Purely internal or intranet mail systems. called relaying or forwarding depends upon a route database within the router. as discussed above. A router normally accomplishes this by participating in distributed routing and reachability algorithms with other routers. These other devices are outside the scope of this document. such devices are usually called bridges. The route database is also called a routing table or forwarding table. Even today it can be important to distinguish between Internet and internal e-mail systems.E-COMMERCE TECHNOLOGY AND MANAGEMENT the next-hop router or (for the final hop) the destination host. if anyone considers it important enough. The routing database should be maintained dynamically to reflect the current topology of the Internet system. Packet switching devices may also operate at the Link Layer. where the information never leaves the corporate or organization’s network. the e-mail of other employees not addressed to them. and they seek to minimize the state information necessary to sustain this service in the interest of routing flexibility and robustness. 3. the two terms are not synonymous. and occasionally accessing. 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. Network segments that are connected by bridges share the same IP network prefix forming a single IP subnet. This choice.

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

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

180 ANNA UNIVERSITY CHENNAI . colleagues and friends as an attachment. this has been the source of some notable security breaches. because it extends the secure perimeter of a corporate network into its employees’ homes. Internet “chat”. or via instant messaging systems. even among niche interests. but also provides security for the workers. allow colleagues to stay in touch in a very convenient way when working at their computers during the day. Films such as Zeitgeist. whether in the form of IRC “chat rooms” or channels. An example of this is the free software movement in software development.DBA 1727 NOTES This concept is also referred to by some network security people as the Virtual Private Nightmare. Loose Change and Endgame have had extensive coverage on the Internet. Not only can a group cheaply communicate and test. Messages can be sent and viewed even more quickly and conveniently than via e-mail. Collaboration The low cost and nearly instantaneous sharing of ideas. 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. which produced GNU and Linux from scratch and has taken over development of Mozilla and OpenOffice. but the wide reach of the Internet allows such groups to easily form in the first place.org (formerly known as Netscape Communicator and StarOffice). “whiteboard” drawings to be shared as well as voice and video contact between team members. It can be uploaded to a website or FTP server for easy download by others. and skills has made collaborative work dramatically easier. File sharing A computer file can be e-mailed to customers. The load of bulk downloads to many users can be eased by the use of “mirror” servers or peer-to-peer networks. Extension to these systems may allow files to be exchanged. while being virtually ignored in the mainstream media. It can be put into a “shared location” or onto a file server for instant use by colleagues. knowledge.

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

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

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

when they advertise themselves they advertise interests and hobbies. 3. Facebook and others which thousands of Internet users join to advertise themselves and make friends online. and advertise their own companies’ products to those users. Many of these users are young teens and adolescents ranging from 13 to 25 years old. 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. which can also run a wide variety of other Internet software. a person can order a CD online and receive it in the mail within a couple of days. An Internet access provider and protocol matrix differentiates the methods used to get online. In turn. also known as e-commerce. It is the fastest way to spread information to a vast number of people simultaneously.1. some of the biggest companies today have grown by taking advantage of the efficient nature of low-cost advertising and commerce through the Internet. More mobile phones have Internet access than PCs.8 Marketing The Internet has also become a large market for companies. which online marketing companies can use as information as to what those users will purchase online.DBA 1727 NOTES handsets.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 . Orkut. though this is not as widely used. or download it directly in some cases. Examples of personalized marketing include online communities such as MySpace.1. The Internet has also subsequently revolutionized shopping—for example. 3. Friendster.

com YAHOO! 185 ANNA UNIVERSITY CHENNAI .banner and direct marketing Subscription sites Customer services Directory services Content providers Product sales Most successful companies pursue several related but different models concurrently.com Oracle CISCO Amazon.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 DoubleClick. Let’s take a look at some of the top e-businesses in the field today:        E-Bay HomeStore. They defy easy categorization by diversifying revenue streams and becoming hybrids in a cost-efficient way.

certain high quality goods can be sold at prices fixed by the seller. This site also offers professional services for all kinds of business needs. a site that offers airline tickets on discount has begun experimenting quite successfully with this business model.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. 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. Selling just about anything. 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 . Other companies like Yahoo! and Excite have been quick to catch on and incorporate auctions into their sites. Apart from bidding.7 million registered users today. It has transformed auctions that were limited to garage sales and flea markets into highly evolved emarketplaces. it has 29. Priceline. To summarize. the company projects a trustworthy and reliable image. where credit-card payment facilities are secure and easy. automobiles and even auto insurance. Person-to-person trading and a barter economy have established the company on a secure B2B and B2C platform. where buyers and sellers of all items are allowed to post their comments online.com. Adopting an amazing and unique culture. from antiques and jewelry to computers.

employees and suppliers improved productivity and accuracy and brought down costs by 100’s of millions of dollars. Homestore.com is a company that has dominated the real estate field with 3. home improvement tips. Their main revenue came in from subscriptions (52%) and the remaining from advertising. and safety and security aspects. 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.com’s internet business model allows prospective buyers to review properties before buying. and buyer’s guides to homes and household items.COM Statistics have revealed that realty sites account for about 9. and metamorphosed into a digital pioneer in the span of two years. 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. remodeling. Homestore. online loans. ORACLE This software and service provider entered the digitized world only in 1998. 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. Their built-in self-service system for customers. have made them a one stop shop for e-businesses today.6% of all online visitors. Innovative products and services and integration of these services have brought them into the forefront of web innovation today. NOTES 187 ANNA UNIVERSITY CHENNAI . 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. Consulting services with major firms like Sun Professional Systems have established their reliability with customers. Is that all? No.28 million customers in January 2001 and is listed among the Fortune top e-50.

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

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

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

Simply put. The protocol suite manages all the information that moves 191 ANNA UNIVERSITY CHENNAI . Today. many Intranets are built around Web servers delivering HTML pages. growth of internal networks based on Internet technologies known as the Intranet is outpacing the growth of the global Internet itself. NOTES An Intranet is a company-wide network that is based on Internet technologies. The Intranet environment is completely owned by the enterprise and is generally not accessible from the Internet at large.2. an Intranet is the application of Internet technologies within an organization private LAN or WAN network.2 TCP/IP protocol suite The TCP/IP protocol suite includes the Transport Control Protocol.E-COMMERCE TECHNOLOGY AND MANAGEMENT 3.1What is an Intranet? The Internet has captured world attention in recent years.2 INTRANET 3. In reality. 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. 3. the Internet Protocol and other protocols.2.

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. Commonly used TCP/IP protocols TCP/IP exists as an open standard. anyone can use and develop new applications on top of TCP/IP.DBA 1727 NOTES across the Intranet and Internet and each protocol transferring data across the network uses a different format. Hence. These protocols work together to transfer information across the network.3 The benefits of Intranets Cross-platform Many corporate computing environments use different computing platforms. 3.2. 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 .a summaries the common TCP/IP protocols. Table 3.2.2. companies can mix and match platforms as needed with no adverse effect on the overall environment. The capability to exchange information across platforms is crucial. The Intranet enables companies to unify communication within a multi-platform environment. Within an Intranet.

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

cities or countries. Minimal learning curve With the increase in popularity of the Internet and the World Wide Web. 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. Employees in Hong Kong can communicate easily through e-mail with their counterparts in the United States. At Sun Microsystems. especially when they are located in different buildings. for example.DBA 1727 NOTES Increase internal communication Intranets greatly facilitate communication among employees. different departments are setting up their own servers to serve their customers directly. create online forums on new policies and use videoconference to exchange ideas. 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. send project documents electronically. for example. Many companies have designed their Intranet pages to look as similar to the Web pages as possible. They can. 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. Companies are able to build a long-lasting relationship with their customers. 194 ANNA UNIVERSITY CHENNAI . Employees can learn first hand on how customers feel about the company’s products and services. Customers are no longer required to go through various layers of organizational hierarchies to reach those who build the products or provide the service.

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

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

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

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

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

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

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

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

where “registered users” can navigate. the issuance and use of digital certificates or similar means of user authentication. more recently. 203 NOTES  ANNA UNIVERSITY CHENNAI . the term “site” refers to a distinct networked environment.E-COMMERCE TECHNOLOGY AND MANAGEMENT It is important to note that in the quote above from RFC 4364. Two “sites” connected to each other across the public Internet backbone comprise a VPN. These include the standardized techniques for transmitting and sharing information and the methods for encrypting and storing information. “intranet” also refers to just the web-connected portions of a “site. or other companies. The term “site” does not mean “website. Similarly. Users access Extranet information using a web browser like Microsoft Internet Explorer.” but to have a VPN. they would need to provide tunneled access to that network for geographically distributed employees. customers. That makes an application developed for a browser a snap to deploy. a small company in a single building can have an “intranet. No messy and confounding installation disks.” Thus. These can include firewalls. Browser software uses relatively small amounts of memory and resources on a computer. An extranet requires security and privacy.” Further. but rather simply an authentication mechanism to a web server. or IP. Mozilla’s Firefox. otherwise known as the Internet Protocol. 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. “extranet” is a useful term to describe selective access to intranet systems granted to suppliers. enabled by authentication mechanisms on a “login page”. A browser on a user’s machine is all the software he or she needs to take full advantage of the Extranet application. an “extranet” designates the “private part” of a website. Such access does not involve tunneling.3. geographically united organizations. server management. 3. for smaller. and the use of virtual private networks (VPNs) that tunnel through the public network. fewer clogged hard drives. In this sense.2 Features of Extranet Extranets generally have the following features:  The use of Internet technologies and standards. Netscape Navigator or. The use of Web browsers. encryption of messages.

make comments. to promote the technologies and to establish data exchange standards between the different systems. or NCCTP. They can be employed in a wide variety of environments and for very different purposes. For example. several of the leading vendors formed the Network of Construction Collaboration Technology Providers. To protect the privacy of the information that is being transmitted. in the construction industry. project teams could login to and access a ‘project extranet’ to share drawings and documents. By their very nature. among others. Extranets are embroiled in concerns about security. Central Server/Repository. issue requests for information.3. Germany and Belgium.3 Industry use During the late 1990s and early 2000s. etc. The same type of construction-focused technologies have also been developed in the United States. In 2003 in the United Kingdom. most Extranets use either secure communication lines or proven security and encryption technologies that have been developed for the Internet. Extranets usually have a central server where documents or data reside. Members can access this information from any computer that has Internet access. Extranets vary dramatically in their design and implementation.DBA 1727 NOTES   Security. Scandinavia. While these are the broad attributes shared by most Extranets. Some 204 ANNA UNIVERSITY CHENNAI . Australia. 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. 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.

Specially secured extranets are used to provide virtual data room services to companies in several sectors (including law and accountancy). There are a variety of commercial extranet applications. check order status. 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. 205 ANNA UNIVERSITY CHENNAI . Doing so frees up resources to concentrate on customer service and expansion as opposed to administrative office tasks such as data entry. 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. A properly developed extranet application provides the supply chain connection needed with customers and suppliers to dramatically lessen routine and time consuming communications. Also exist a variety of Open Source extranet applications and modules.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.E-COMMERCE TECHNOLOGY AND MANAGEMENT applications are offered on a Software as a Service (SaaS) basis by vendors functioning as Application service providers (ASPs). which can be integrated into other online collaborative applications such as Content Management Systems. request customer service and much more. and others which include broader collaboration and project management tools. some of which are for pure file management. The limited access typically includes the ability to order products and services.3.

Extranets can be expensive to implement and maintain within an organization (e. Since delivery is often by mail.g. which hurts the business when it comes to loyalty of its business partners and customers 2. Common eCommerce models are direct online sales. System access needs to be carefully controlled to avoid sensitive information falling into the wrong hands. and online commissions. 3. Extranets can reduce personal contact (face-to-face meetings) with customers and business partners.6 E-Commerce Business Models Since eCommerce consists of doing business online or electronically. This could cause a lack of connections made between people and a company. this is similar to customers buying from a mail order catalog. employee training costs) — if hosted internally instead of via an ASP. 206 ANNA UNIVERSITY CHENNAI . 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. e-books.3. software.DBA 1727 NOTES Just as intranets provide increased internal collaboration. 3. Security of extranets can be a big concern when dealing with valuable information. 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. the business or revenue models are somewhat different than that of a “brick and mortar” business. selling online advertising space. 3. extranets provide increased efficiencies between your company and its customers and/or suppliers.5 Disadvantages 1. Software products. Amazon. music and video files can be delivered to the customer through the downloading process.3.com is a good example of a business using the direct sales model to gain revenue.: hardware.

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

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

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

which he describes as “The web’s first family communication center featuring calendars. academic.” Summary Internet: The Internet is a worldwide. Telnet. which together carry various information and services. and finally. and more recently by the Altavista search engine. address books. such as electronic mail. 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 . publicly accessible series of interconnected computer networks that transmit data by packet switching using the standard Internet Protocol (IP). online chat. Usenet newsgroups. photo albums. file transfer. WWW. 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. Gopher.DBA 1727 NOTES Robert Samuelsen operates eVine Online. Java language. business. and more—all in a password protected family environment. Email. Internet Relay Chat. and the interlinked web pages and other resources of the World Wide Web (WWW). File Transfer Protocol. It is a “network of networks” that consists of millions of smaller domestic. discussion groups. and government networks. WAIS. Listserv Mailing List Software.

partners. network connectivity.E-COMMERCE TECHNOLOGY AND MANAGEMENT web browser. customers or other businesses. and possibly the public telecommunication system to securely share part of an organization’s information or operations with suppliers. Why are intranets popular        Inexpensive to implement Easy to use. 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. 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. 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. and online commissions. just point and click Saves time and money. an Intranet is the application of Internet technologies within an organization private LAN or WAN network. Simply put. vendors. 211 ANNA UNIVERSITY CHENNAI . selling online advertising space.

11.DBA 1727 NOTES Questions for review 1. 10. 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 . 5. 7. 2. 6. 12. 15. 16. 14. 9. 4. 17. 13. 3. 8.

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

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

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

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

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

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

the transaction will not be processed accurately. SET designates a third party called a certificate authority to authenticate the sender and receiver. If any component is altered in transit. 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. Integrity of Information SET ensures that message content is not altered during the transmission between originator and recipient. personal data. 219 NOTES ANNA UNIVERSITY CHENNAI . and payment instructions.1 What Features does SET Specify? The following objectives are addressed by SET specifications: Confidentiality of Information To facilitate and encourage financial transactions. 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.3. SET provides the means to ensure that the contents of all order and payment messages received match the contents of messages sent. Information integrity is ensured by the use of digital signatures. SET provides confidentiality by the use of message encryption. credit card account and payment information must be se-cured as it travels across the network. Digital signatures and digital certificates ensure consumer account authentication by providing a mechanism that links a consumer to a specific account number. Merchant authentication is ensured by the use of digital signatures and merchant certificates. Consumer Account Authentication Merchants need a way to verify that a consumer is a legitimate user of a valid account number. Payment information sent from consumers to merchants includes order information. 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.1.

There are many terms used to signify the computer criminals. stealing software’s. 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. Statistics show that only 10% of computer client is reported and only 2% of the reported client results in with convictions.DBA 1727 NOTES Interoperability The SET specifications must be applicable on a variety of hardware and software platforms. 220 ANNA UNIVERSITY CHENNAI . In this case the person has no intentions to do any damage or to steal any resources but tries to observe the system functionality. ands must not prefer one over another.2 SECURITY SCHEMES AGAINST INTERNET FRAUD 4. information and causing damage to resources. illegal activity’ is inevitable. As all the people are not honest.  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. 4. 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.2. This type of criminal activity raises the concern for network security. The persons who uses the Internet and the Web to benefit themselves by doing illegal activities such as. 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.1 Security Issues The Internet is a huge place that hosts several millions of people. For example teenagers who tries to enter into a network out of curiosity till they are caught or deducted.

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

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

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

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

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

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

A company will place a firewall at every connection to the Internet (for example. If an incoming packet of information is flagged by the filters. all of those hundreds of computers are directly accessible to anyone on the Internet. hackers can get to the machine and exploit the hole. the certificate authority creates a message containing Alice’s name and her public key. The company will therefore have hundreds of computers that all have network cards connecting them together. Visa provides digital certificates to the card-issuing financial institution. 4.2. Without a firewall in place. Through the use of a common third party. digital certificates are the heart of secure electronic transactions. In short. A similar process takes place for the merchant. Thus by using one public key (that of a CA) as a trusted third. the public key of the certificate authority should be known to as many people as possible. To get the most benefit. In many ways. It contains owner identification information. digital certificates provide an easy and convenient way to ensure that the participants in an electronic commerce transaction can trust each other. This message. The validation takes place by checking the digital certificates that were both issued by an authorized and trusted third party. it is not allowed through. is digitally signed by the certificate authority. In addition. For example. the company will have one or more connections to the Internet through something like T1 or T3 lines.2.party means of establishing authentication. digital certificates ensure that two computers talking to each other may successfully conduct electronic commerce. in the credit card industry.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. If one employee makes a mistake and leaves a security hole.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. try to make FTP connections to them. known as a certificate. Once Alice has provided proof of her identity. and the institution then provides a digital certificate to the cardholder. the landscape is much different. With a firewall in place. each party’s software validates both merchant and cardholder before any information is exchanged. Let’s say that you work at a company with 500 employees. as well as a copy of one of the owner’s public keys. A person who knows what he or she is doing can probe those computers. Such a party is known as a certificate authority (CA). try to make telnet connections to them and so on. disparate parties can engage in electronic commerce with a high degree of trust. at every T1 line coming into the 227 NOTES ANNA UNIVERSITY CHENNAI .

Packets (small chunks of data) are analyzed against a set of filters. Stateful inspection . Otherwise it is discarded 4. the information is allowed through. only one of them is permitted to receive public FTP traffic. For example.   Information travelling from inside the firewall to the outside is monitored for specific defining characteristics. Telnet servers and so on. A company can set up rules like this for FTP servers.2. Allow FTP connections only to that one computer and prevent them on all others. This is especially crucial for any of the following types of data and files.   User passwords Billing files 228 ANNA UNIVERSITY CHENNAI .DBA 1727 NOTES company). In addition.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. Proxy service . Web servers. The firewall can implement security rules. the company can control how employees connect to Web sites. A firewall gives a company tremendous control over how people use the network. one of the security rules inside the company might be: Out of the 500 computers inside this company. Packets that make it through the filters are sent to the requesting system and all others are discarded. The” first step is to keep the security of your data files such that only the right people can see them.3 Creating a Secure System It’s a known saying Prevention is the best medicine and this implies equally well to compute security. whether files are allowed to leave the company over the network and so on. If the comparison yields a reasonable match. Firewalls use one or more of three methods to control traffic flowing in and out of the network:  Packet filtering . then incoming information is compared to these characteristics.Information from the Internet is retrieved by the firewall and then sent to the requesting system and vice versa.

someone else could be probing your system while you are working. Simply deleting the information is not enough. The best solution is to use 229 ANNA UNIVERSITY CHENNAI . as well as transactions in the process of being fulfilled.” 4. As the user of the system. Such program ensures that the original structure of the disk is recognized leaving no recoverable data. you should know the place and the method to store your data. Again store owners should ensure that they encrypt archived transactions. be sure to protect administration tools as well as compiler. As server and browser security increases almost pirates will be driven to breaking into the system at the source or at the destination. When you are connected to the network your personal system is vulnerable. the tools can be used to create programs that aid the pirate in greasing security. if they fall into wrong hands. 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.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. One of the best security measures that you can take for physically stored data is to have hardware password protection. Decrypted data residing on your hard disk may be available to outside for snooping. General users to your system should not have access to these tools because. They can even unformatted a formatted disk after securely deleting file defrayment your drive using any popular disk utility. This information of-course applies equally to the both the user and the storeowner.2.4 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. Because of the nature slip type connectivity and TCP/IP networks. If a business can afford only lesser security then the best you can do is keep permissions of files hidden from pirates. Many commercial products provide this facility and often work well to keep the data secure. Pirates can easily undelete previously deleted information. Another security measure is to delete the not required data or information. Finally. Storeowners must ensure that product information database is secure.

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

improved cryptography and the Internet.3. Points of sale (also known as POS) are also part of this group. funds transfers were an usual thing in commercial transactions. It is used by employers for depositing their employees’ salary in a bank account. cheap networks. it has helped to bring costs down and beneficiate the costumer. Finally. Other kind of EFT is the automatic charge to your check or savings account.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. Since it is affected by financial fraud.2 Where do we find EFT? One of the most common EFT’s is Direct Deposit. Since an automatic teller machine is much cheaper than a group of bank tellers.3 Advantages of EFT: The main advantage of an electronic funds transfer is time. The benefit is that you won’t have to go to the bank to do it. 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. a 231 NOTES ANNA UNIVERSITY CHENNAI .3 ELECTRONIC FUNDS TRANSFER 4. the electronic funds transfer act was implemented. Since all the transaction is done automatically and electronically. when you are paying a mortgage. It’s automatic. This federal law protects the consumer in case a problem arises at the moment of the transaction.3. and with the help of telegraphs. For example. Since the 19th century.3. ATM’s are also used for EFT’s. Its use has become widespread with the arrival of personal computers. the bank will discharge the monthly payment from a pre-accorded bank account. 4. it migrated itself to computers and became the electronic money transfers of today. 4.E-COMMERCE TECHNOLOGY AND MANAGEMENT 4. the bank doesn’t need to pay a person to do it. The history electronic funds transfer originated from the common funds transfer of the past.

These transfers to make or receive payment may be one-time occurrences or may recur as directed by you. the cost of the transport. the cost of the maintenance of the transport. or via some other method) to trusted third parties whom you have authorized to initiate these electronic funds transfers. 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. 232 ANNA UNIVERSITY CHENNAI  . Examples of these transfers include. 4. Electronic returned check charge. This information can be found on your check as well as on a deposit or withdrawal slip. EFT’s have revolutionized modern banking. Other benefit is immediate payment. but are not limited to:    Preauthorized credits.3.4 Electronic Funds Transfers Initiated By Third Parties. 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. This may occur at the point of purchase. In all cases. you should only provide your bank and account information (whether over the phone. These transfers may use the Automated Clearinghouse (ACH) or other payments network. In some cases.DBA 1727 NOTES person to drive the loans to the other bank. You may authorize a third party to initiate electronic funds transfers between your account and the third party’s account. your authorization can occur when the merchant posts a sign informing you of their policy. Electronic check conversion. or when you provide your check by other means such as by mail or drop box. Preauthorized payments. You may provide your check to a merchant or service provider who will scan the check for the encoded bank and account information. the Internet. the transaction will require you to provide the third party with your account number and bank information. You may make arrangements to pay certain recurring bills from your checking account(s). Thus. which brings an up to date cash flow. insurance and the gas of the transport. The merchant or service provider will then use this information to convert the transaction into an electronic funds transfer. You may make arrangements for certain direct deposits to be accepted into your checking or savings account(s). Your authorization to the third party to make these transfers can occur in a number of ways.

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. which is disclosed to institutions that issue MasterCard cards. for example an online merchant does not necessarily meant that transactions are lawful in all jurisdictions in which the cardholder may be located. 233 ANNA UNIVERSITY CHENNAI . 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 . You agree not to use your card(s) for illegal gambling or other illegal purpose. Currently. Display of a payment card logo by. If you effect a transaction with your MasterMoney® Card in a currency other than US Dollars. Currency Conversion. MasterCard International Incorporated will convert the charge into a US dollar amount. NOTES Some of these services may not be available at all terminals. 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.E-COMMERCE TECHNOLOGY AND MANAGEMENT Limitations on frequency of transfers section regarding limitations that apply to savings accounts. Advisory Against Illegal Use. increased by an adjustment factor established from time to time by MasterCard International. MasterCard International will use its currency conversion procedure.

automatic.com and using your user identification number. 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. there are some exceptions. In addition to those limitations on transfers elsewhere described.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. there are other limits on the number of transfers and dollar amount you can make by check card. 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. if any. for instance: 234 ANNA UNIVERSITY CHENNAI . and a secure web browser. or similar order to third parties. your password. or computer transfer are limited to six per month with no more than three by check. telephone. draft. For security reasons. However. We will not be liable. the following limitations apply:  Transfers from a money market account to another account or to third parties by preauthorized. we will be liable for your losses or damages.  FINANCIAL INSTITUTION’S LIABILITY       Liability for failure to make transfers.

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

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

The agents should have control over the actions performed within its system. 3. not have actions performed by other agents. but the agent itself decides whether to approve and allow the action. Typically. 4.E-COMMERCE TECHNOLOGY AND MANAGEMENT Intelligent Agent Computing Agent Three primary dimensions of the agents have been defined: agency. It is also different from a charge card (though this name is sometimes used by the public to describe credit cards). intelligence and mobility. Thus if the cardholder puts down Rs. to adapt and to take initiative. Agency: The degree of autonomous action that can me taken. 4. the issuer lends money to the consumer (or the user) to be paid to the merchant. the cardholder must deposit between 100% and 200% of the total amount of credit desired.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. Respond: Agents should perceive and respond to their environments. 1000.2 Secured credit cards A secured credit card is a type of credit card secured by a deposit account owned by the cardholder. A credit card is different from a debit card in that it does not remove money from the user’s account after every transaction. In the case of credit cards. that is actions performed without the need for direct human intervention or intervention by other agents.. Other agents can request actions.4. he or she will be given credit in the range of Rs. the deposit required may be significantly less than the required credit limit. In some cases.4 CREDIT CARD BASED-ELECTRONIC PAYMENT SYSTEM 4. which requires the balance to be paid in full each month. 1000. i. and can be as low as 10% of the 237 NOTES ANNA UNIVERSITY CHENNAI .4. The level of intelligence is further classified according to its ability to respond. credit card issuers will offer incentives even on their secured card portfolios.e. Intelligence: The extent to which an agent can understand its own internal state and its external environment. 2. 1. 500–Rs. In these cases.

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. (for example. the deposit will not be debited simply for missing one or two payments. security is 238 ANNA UNIVERSITY CHENNAI . 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.1 Security Overview Credit card security is based on privacy of the actual credit card number. for people in certain situations. 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. They are often offered as a means of rebuilding one’s credit. or people with a long history of delinquency on various forms of debt). 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.2. either at the request of the customer or due to severe delinquency (150 to 180 days). Secured credit cards are available with both Visa and MasterCard logos on them.DBA 1727 NOTES desired credit limit. This allows for building of positive credit history. after charging off on other credit cards. Fees and service charges for secured credit cards often exceed those charged for ordinary non-secured credit cards. This deposit is held in a special savings account. and could result in a balance which is much higher than the actual credit limit on the card. but should he or she default on a payment. as he or she would with a regular credit card. Most of these conditions are usually described in a cardholder agreement which the cardholder signs when their account is opened. 4. even including the security deposit. 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. This means that whenever a person other than the card owner reads the number. This means that an account which is less than 150 days delinquent will continue to accrue interest and fees. secured cards can often be less expensive in total cost than unsecured credit cards. however.4. Usually the deposit is only used as an offset when the account is closed. Although the deposit is in the hands of the credit card issuer as security in the event of default by the consumer.

E-COMMERCE TECHNOLOGY AND MANAGEMENT potentially compromised. Merchants will often accept credit card numbers without extra verification for mail order. so the thief must make sure he can have the goods delivered to an anonymous address (i. and if this is done quickly. not his own) and collect them without being detected. The main one is to require a security PIN with the card. security is low. and share a common numbering scheme. and the final digit is a validity check code. Since this happens most of the time when a transaction is made. The card number’s prefix. This is the first six digits for MasterCard and Visa cards.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). but often there are additional measures. and require a signature. a user with access to just the number can only make certain types of transactions. Some merchants will accept a credit card number for in-store purchases.e. For internet purchases. Thus. a stolen card can be cancelled. Not all credit cards have the same sets of extra codes nor do they use the same number of digits. The next nine digits are the individual account number. is the sequence of digits at the beginning of the number that determine the bank to which a credit card number belongs. Many card issuers levy a commission for cash withdrawals. no fraud can take place in this way.4. but many require the card itself to be present. but then the delivery address will be recorded. The interest on cash advances is commonly charged from the date the withdrawal is made. which requires that the thief have access to the card.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. However. whereupon access to the number allows easy fraud. as well as extra codes such as issue numbers and security codes.2.4. rather than the monthly billing date. 4. 4. 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. even if the ATM belongs to the same bank as the 239 NOTES ANNA UNIVERSITY CHENNAI . In addition to the main credit card number. called the Bank Identification Number.

but even then there are certain factors to consider. It would make sense to encrypt your credit card details before sending them out. thereby making it uneconomical. and will carry those balances for years.DBA 1727 NOTES card issuer. After a certain period of time. The easiest method of payment is the exchange of unencrypted credit cards over a public network such as telephone lines or the Internet. Payments using third-party verification. 240 ANNA UNIVERSITY CHENNAI . which have no grace period and incur interest at a rate that is (usually) higher than the purchase rate. Many credit card companies will also.4 Credit Card payment-online networks We can break credit card payment on on-line networks into three basic categories: 1. 4. One would be the cost of a credit card transaction itself. do so at the end of a billing cycle. even if they pay off their statement balance each month.4. Without encryption there is no way to do this. Payments using encrypted credit card details. and the vendor is usually responsible to ensure that the person using the credit card is its owner. For this reason. 3. when applying payments to a card. and programs can be created to scan the Internet traffic for credit card numbers and send the numbers to its master). one credit card transaction for the total accumulated amount is completed. The low level of security inherent in the design of the Internet makes this method problematic (any snooper can read a credit card number. Payments using plain credit card details. 2. 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. Such cost would prohibit low-value payments (micro payments) by adding costs to the transactions. and apply those payments to everything before cash advances. 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. Authentication is also a significant problem.

and security. because he doesn’t have access to the consumer’s key. bank for authorization approval. 4. and the unencrypted version is erased. To make a credit card transaction truly secure and non-refutable. 5.4.5(a) Nobody can cheat this system. services. because the consumer included the precise time in the message. speed. To buy something from vendor X. such as non refutability. The vendor will then sign the message with its own secret key and send it to the credit card company. charge authentication.4. or funds flow: 1. (See Fig. I am paying Y dollars to X for item Z. the consumer sends vendor X the message. the following sequence of steps must occur before actual goods. This practice. The secret key is re-encrypted with a password. The bank or processing party relays the information tot the customer’s. does not meet important requirements for an adequate financial system. however. The credit card company sends the consumer a credit card number and a credit limit. safety. To steal a credit card. each consumer and each vendor generates a public key and a secret key. In this scheme.E-COMMERCE TECHNOLOGY AND MANAGEMENT 4. 3. which will bill the consumer for Y dollars and give the same amount (less a fee) to X. because he signed it (as in everyday life). credit Card systems will have to develop distributed key 241 ANNA UNIVERSITY CHENNAI . The consumer can’t claim that he didn’t agree to the transaction. The merchant validates the customer’s identity as the owner of the cred-it card account. The customer’s bank returns the credit card data. NOTES 2.4. a thief would have to get access to both a consumer’s encrypted secret key and password. ‘It is now time T. The vendor can’t invent fake charges. and authorization to the merchant. privacy. He can’t submit the same charge twice. 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. The public key is sent to the credit card company and put on its public key server. To become useful. The merchant relays the credit card charge information and signature to its bank or on-line credit card processors.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.” then the consumer uses his or her password to sign the message with the public key.

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

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

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

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

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

Without such guarantees the development of clearing and settlement systems and money markets-may be impeded. 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. A middle road is also possible.E-COMMERCE TECHNOLOGY AND MANAGEMENT whole transaction protocol by which a good or service is purchased and delivered. for many types of transactions. however. Various alternatives exist. trusted third-party agents will be needed to vouch for the authenticity and good faith of the involved parties. The transaction is authorized and processed and the customer verifies the transaction either by entering a PIN or.. This implies that. or from the remaining balance on the card. for example. the conditions and terms for extending liquidity to banks in connection with settlement. occasionally. In some countries the debit card is multipurpose.5. at least internally. The digital central bank must develop policies to deal with this possibility. acting as the ATM card for withdrawing cash and as a check guarantee card. Despite cost and efficiency gains. many hurdles remain to the spread of electronic payment systems. by signing a sales receipt. If the central bank does not guarantee settlement.5 Debit card based-Electronic Payment System 4. or they may hand it to the merchant who will do so. 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). Merchants can also offer “cashback”/ 247 NOTES ANNA UNIVERSITY CHENNAI . Depending on the store or merchant.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. Physically the card is an ISO 7810 card like a credit card. setting controls on bank exposures (bilateral or multilateral) and requiring collateral. 4. each with advantages and disadvantages. the customer may swipe or insert their card into the terminal. 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.

“EC electronic cash” (formerly Eurocheck) in Germany and EFTPOS cards in Australia and New Zealand. 5. 3. debit cards are used widely for telephone and Internet purchases. 7.DBA 1727 NOTES ”cashout” facilities to customers. 2. 2. 6. 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”. Like credit cards. 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. Austria’s “Bankomatkasse” and Switch in the United Kingdom) being rebranded 248 ANNA UNIVERSITY CHENNAI . Carte Bleue in France. each accepted only within a particular country or region. 4. An example of the front of a typical debit card: 1. for example Switch (now: Maestro) and Solo in the United Kingdom. and in some instances cash transactions by volume. Magnetic stripe Signature strip Card Security Code Although many debit cards are of the Visa or MasterCard brand. The gold contact pads on the card enable electronic access to the chip. where a customer can withdraw cash along with their purchase. Laser in Ireland. 3. there are many other types of debit card. The 3 by 5 mm security chip embedded in the card is shown enlarged in the inset. The use of debit cards has become wide-spread in many countries and has overtaken the check.2 Types of debit card A Finnish smart card.5.

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

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

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

Ideally. Electronic checks are modelled on paper checks.6 ELECTRONIC CHECKS 4. use digital signatures for signing and endorsing. electronic checks can be easily understood and readily adopted. By retaining the basic characteristics and flexibility of paper checks while enhancing the functionality. electronic checks will facilitate new online services by: allowing new payment flows (the payee can verify funds availability at the payer’s bank). and facilitating payment integration with widely used EDI-based electronic ordering and billing processes. Electronic check payments (deposits) are gathered by banks and cleared through existing banking channels. The security/authentication aspects of digital checks are supported via digital signatures using public-key cryptography. or by public networks such as the Internet.6.1 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. such as automated clearing houses (ACH) networks. except that they are initiated electronically. thus simplifying customer education.DBA 1727 NOTES 4.2 Benefits of Electronic Checks Electronic checks have the following advantages:  Electronic checks work in the same way as traditional checks. enhancing security at each step of the transaction through automatic validation of the electronic signature by each party (payee and banks). 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. Electronic checks are delivered either by direct transmission using telephone lines. and require the use of digital certificates to authenticate the payer. 252 ANNA UNIVERSITY CHENNAI . and bank account. the payer’s bank.6.

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

large and small.4 Why do we use e-checks? E-Checks have important new features. The accounting server verifies the digital signature on the check using any authentication scheme. Properly signed and endorsed checks can be electronically exchanged between financial institutions through electronic clearinghouses. yet are safe enough to use on the Internet unlimited. the seller presents it to the accounting server for verification and payment. but controlled. The specifics of the technology work in the following manner: On receiving the check. 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 . 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. 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. 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. again like a paper check. precisely as a large number of banks may wind up stamping the back of a check along its journey through the system. even where other electronic payment solutions are too risky. And. Most of the information is in uncoded form.6. with the institutions using these endorsed checks as tender to settle accounts. before the check can be paid. 4. using another electronic signature. Like a paper check. an e-check will need to be endorsed by the payee. They offer:       the ability to conduct bank transactions. Subsequent endorsers add successive layers of information onto the tickets.DBA 1727 NOTES number. the name of the payee and amount of the check.

and although they have some of the characteristics of electronic payments. NOTES 255 ANNA UNIVERSITY CHENNAI . E-check and Home Banking Home banking bill payments are convenient for consumers. E-checks and Debit cards Debit cards are used by individuals and to a far lesser extent by businesses. or to obtain cash from ATMs.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-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. These differences are reviewed in five main categories: terminology. and risk management. business practices. this white paper provides a high level comparison of some of the main differences between the ACH debit system and echecks. and information richness. risk management. underlying technology. cost. based on five categories: usage. This white paper will briefly explore the differences between the two payment approaches. This white paper briefly compares the differences between SET and e-checks. This white paper will briefly compare the differences between debit cards and e-checks. and allowance for errors. to make payments at the retail point-of-sale.6.E-COMMERCE TECHNOLOGY AND MANAGEMENT 4. transaction authorization. there are significant differences between echecks and home banking bill payments. E-check and Automated Clearing House (ACH) Since electronic checks are debit transactions. This white paper briefly compares paper and echecks.

The cards can be used to purchase goods or services. and perform many other functions. 4. and enhance consumer convenience and safety. control access to accounts. Smart cards offer clear benefits to both merchants and consumers. They reduce cash-handling expenses and losses caused by fraud. The management challenges created by smart card payment systems are formidable. In 1994. In spite of the many prototypes developed. university students.7. The full complement of 467 subway stations is expected to be operational by mid-1997.2 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.2 billion electronic fare collection transactions a year on subway and bus lines. operates the New York City subway and public bus system. These facilities serve four million customers each workday.DBA 1727 NOTES 4. through its subsidiaries and affiliates. In addition. and to get a good return on investment must identify new and innovative ways to achieve additional operating efficiencies and value. By 1999. The MTA is the largest transportation agency in the United States and. the Long Island Railroad and Metro-North commuter rail systems. also called stored value cards. we are a long way from a universal payment system because 256 ANNA UNIVERSITY CHENNAI .1 Smart Cards Smart cards. store information. All 3. and nine tolled intrastate bridges and tunnels. Other private sector institutions market stored value products to transit riders. vending customers. and retail customers.7. the MTA began the operation of an automated fare-collection system based on a plastic card with a magnetic stripe. One successful use of stored value cards is by New York’s Metropolitan Transportation Authority (MTA).7 STORED VALUE CARDS AND E-CASH 4. telephone customers. the MTA anticipates more than 1. use magnetic stripe technology or integrated circuit chips to store customer-specific information. including electronic money.600 MTA buses became operational in 1996. many state and federal governments are considering stored value cards as an efficient option for dispersing government entitlements. expedite customer transactions at the checkout counter. 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. Institutions such as the MTA have made a considerable investment in the stored value card processing network.

thousands of would-be sellers of electronic commerce services have to pay one another and are actively looking for payment substitutes. The idea has taken longer to catch on in the United States. and reliable. since a highly reliable and fairly inexpensive telecommunications system has favored the use of credit and debit cards. transportation/ and shopper loyalty programs. Smart cards are basically of two types:   Relationship-based smart credit cards Electronic purses.E-COMMERCE TECHNOLOGY AND MANAGEMENT merchants and banks have to be signed up and a means has to be developed to transfer money. as well as to meet the emerging payment needs of electronic commerce. Electronic purses. convenient. can store significantly greater amounts of data. by the year 2000. at its current state of development. The smart card technology is widely used in countries such as France. one-half of all payment cards issued in the world will have embedded microprocessors rather than the simple magnetic stripe. Smart cards have been in existence since the early 1980s and hold promise for secure transactions using existing infrastructure.2. Germany. which replace money. One such substitute is the smart card. NOTES 4. 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. These new services may include access to multiple financial accounts. In the meantime. Traditional credit cards are fast evolving into smart cards as consumers demand payment and financial services products that are user-friendly. or other information cardholders may want to store on their card. The chip. Smart cards are credit and debit cards and other card products enhanced with microprocessors capable of holding more information than the traditional magnetic stripe.7. Industry observers have predicted that. Japan. 257 ANNA UNIVERSITY CHENNAI . are also known as debit cards and electronic money. and Singapore to pay for public phone calls.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. 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. value-added marketing programs. estimated to be 80 times more than a magnetic stripe.

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

cash is negotiable. Cash 259 ANNA UNIVERSITY CHENNAI . the receipts can be collected periodically in person—or. more likely. Digital cash attempts to replace paper cash as the principal payment vehicle in online payments. In one second. at an ATM or through the use of an inexpensive special telephone.3 Electronic or Digital Cash Electronic or digital cash combines computerized convenience with security and privacy that improve on paper cash. the value of the purchase is deducted from the balance on the card and added to an e-cash box in the vending machine. 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. and waiting for a credit card purchase to be approved. Today the cards cost $1. And when the balance on an electronic purse is depleted. the cards have been relatively expensive. The versatility of digital cash opens up a host of new markets and applications. candy in a vending machine equipped with a card reader. For example. from $5 to $10. While the technology has been available for a decade. A simple card reader would cost a merchant less than $200. inefficient clearing and settlement of non-cash transactions. by telephone and transferred to a bank account. The vending machine need only verify that a card is authentic and there is enough money available for a chocolate bar.E-COMMERCE TECHNOLOGY AND MANAGEMENT After the purse is loaded with money. and negative real interest rates on bank deposits. say. the purse can be recharged with more money. Electronic purses would virtually eliminate fumbling for change or small bills in a busy store or rush-hour toll booth. NOTES These reasons behind the prevalent use of cash in business transactions indicate the need to re-engineer purchasing processes. As for the vendor. In order to displace cash. 4. cash is still the most prevalent consumer payment instrument. it can be used to pay for. even after thirty years of developments in electronic payment systems. Although it may be surprising to some. meaning that it can be given or traded to someone else. and special telephones that consumers could install at home to recharge the cards are projected to cost as little as $50.7. Cash remains the dominant form of payment for three reasons: o o o lack of consumer trust in the banking system. electronic payment systems need to have some cash-like qualities that current credit and debit cards lack. This allows customers to pay for rides and calls with a prepaid card that “remembers” each transaction.

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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.



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

1. The server authenticates the customers and verifies with the bank that funds are adequate before purchase. Examples of prepaid payment mechanisms are stored in smart cards and electronic purses that store electronic money. Electronic tokens are of three types: 1. Users pay in advance for the privilege of getting information. electronic bill payments (prearranged and spontaneous). 2. Some systems target specific niche transactions. An example of on-line currency exchange is electronic cash (e-cash). The nature of the transaction for which the instrument is designed. and the purchase interaction. Credit or post-paid. effectively creating currencies of dubious liquidity and with interesting tax. NOTES 3.9 Electronic Tokens An electronic token is a digital analogue of various forms of payment backed by a bank or financial institution. Examples of post-paid mechanisms are credit/ debit cards and electronic checks. Each option incurs trade-offs among transaction speed. payments for small snippets of information. and cost. and wire transfers. cashier’s checks. Here are four dimensions that are useful for analyzing the different initiatives. 2. credit. Transactions are settled with the exchange of electronic currency. while others use other proxies for value.E-COMMERCE TECHNOLOGY AND MANAGEMENT 4. letters and lines of credit. risk. 267 ANNA UNIVERSITY CHENNAI . Most transaction settlement methods use Credit cards. Sometokens are-specifically designed to handle micro payments. to name a few. Tokens must be backed by cash. that is. Cash or real-time. Others are designed for more traditional products. risk.7. Debit or prepaid. The means of settlement used. the average amounts. others seek more general transactions. But we must first understand the different viewpoints that these payment instruments bring to electronic commerce. The key is-to identify the parties involved. and float implications. The following sections examine these methods of on-line payment.

7. anonymity. The third-party processors who provide services for merchants are also examined by the federal regulators for system integrity. and safety of payment is assured. The merchant swipes the card through a transaction terminal. once approved. Such a transaction occurs when a customer uses a debit card to make a purchase from a merchant (supermarket. a customer gives an ATM card to the merchant for the purchase. which reads the information. electronic benefit transfer cards. convenience store.DBA 1727 NOTES 3. 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. The transaction works much like a credit card transaction. These include debit cards. and the funds are transmitted inter-bank within the payment system. Also electronic tokens might be subject to discounting or arbitrage. check. This exposes merchants to the risk that buyers don’t pay-or vice versa that the vendor doesn’t deliver. Approach to security. 4. Debit Cards at the Point of Sale (POS) The fastest growing number of electronic transactions today is debit card pointof-sale transactions. These transactions occur within the banking system. Authentication is provided by the use of the digital signature or PIN numbers. The funds. are transferred from the customer’s bank to the merchant’s bank. or credit card). If the system stores value in a smart card. Electronic tokens vary in the protection of privacy and confidentiality of the transactions. Some may be more open to potentially prying eyes-or even to the participants themselves. just as it is at 268 ANNA UNIVERSITY CHENNAI . and asset management. the customer enters his personal identification number (PIN). For example. 4. non reputability. Encryption can help with authentication. gas station. 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. The question of risk. and smart cards. or some other store that accepts such cards instead of using cash. consumers may be exposed to risk as they hold static assets. and authentication. Both the consumer and the merchant maintain bank accounts.10 Other Emerging Financial Instruments Several other electronic payment systems are currently being prototyped and tested. Risk also arises if the transaction has long lag times between product delivery and payments to merchants.

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

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

Digital cash attempts to replace paper cash as the principal payment vehicle in online payments. use digital signatures for signing and endorsing.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. Credit card: A credit card is a system of payment named after the small plastic card issued to users of the system. E-token: An electronic token is a digital analogue of various forms of payment backed by a bank or financial institution. store information. also called stored value cards. 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. improved cryptography and the Internet. The cards can be used to purchase goods or services. 2. Smart cards are basically of two types: Relationship-based smart credit cards. NOTES 271 ANNA UNIVERSITY CHENNAI . or from the remaining balance on the card. Debit or prepaid. and bank account. the payer’s bank. Electronic purses. except that they are initiated electronically. E-cash: Electronic or digital cash combines computerized convenience with security and privacy that improve on paper cash. A credit card is different from a debit card in that it does not remove money from the user’s account after every transaction. including electronic money. Electronic tokens are of three types: 1. and require the use of digital certificates to authenticate the payer. Electronic checks are modelled on paper checks. Credit or post-paid. however. 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). control access to accounts. Physically the card is an ISO 7810 card like a credit card. 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. and perform many other functions. 3. Smart cards: Smart cards. Cash or real-time. use magnetic stripe technology or integrated circuit chips to store customer-specific information. Its use has become widespread with the arrival of personal computers.

15. 7. 16. 24. 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 . 21. 20. 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. 19. 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. 2. What is Electronic Payment System? Discuss the various Electronic Payment Systems. security in electronic payment. 12. 25. 13. 6. 4.DBA 1727 NOTES Questions for review 1. 22. 8. 10. 18. 23. 17. 14. Discuss about the benefits of electronic payment system. 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. 11. 9. 5. 3.

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

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

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

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

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

there was very little “cyber crime. and enforceability of appropriate laws for EC. and synergy of action among trade. despoil the environment. And Political Issues in E-Commerce Internet and its use in e-commerce have raised pervasive ethical. Before automobiles. the Internet and ecommerce can be used to achieve social progress. there was very little interstate crime and very little federal jurisdiction over crime. electronic document must be acceptable as legal evidence in courts of law.1 Ethics. influence. 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. and other things thought to be valuable. We live in an “information society. this has occurred. and television. telephones. Like other technologies such as steam. and for the most part. Controversies over information are often in fact disagreements over power. AND POLITICAL ISSUES IN ECOMMERCE 5. and make recommendations for managers who are given the responsibility of operating e-commerce companies within commonly accepted standards of appropriateness. and threaten cherished social values. and societies. social. and political issues raised by the rapid evolution of e-commerce. Whether it is EDI over VANs.” Many business firms and individuals are benefiting from the commercial development of the Internet. legal and EC technology communities to make EC happen through appropriate developments in their respective areas. social. Understanding Ethical. In case of dispute. the same technologies can be used to commit crimes. SOCIAL. electricity. wealth.DBA 1727 NOTES Legal issues are manifold. However. Likewise with the Internet: Before the Internet. but this development also exacts a price from individuals. organizations. and political issues raised in e-commerce.2. provide a framework for organizing the issues. There is sufficient awareness in. they are not insurmountable. 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. social and political issues on a scale unprecedented for computer technology. These costs and benefits must be carefully considered by those seeking to make ethical and socially responsible decisions in this new environment. While the problems of acceptance of and confidence in electronic transactions are there. 278 ANNA UNIVERSITY CHENNAI . The ethical. Social. 5.2 ETHICAL.

something which. and political institutions. 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. Individuals know what is expected of them. social. individuals discover that they can download perfect digital copies of music tracks. For instance. Some of the ethical. imagine we drop into the middle of this calm setting a powerful new technology such as the Internet and e-commerce. 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. federal. and public safety and welfare as shown in Fig 5. social organizations such as business firms know their limits.state. 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. 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.1(a). banking and commercial law that provides sanctions against violators. property rights. or in their private homes. what law-making bodies have jurisdiction . 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.a threat to public safety and welfare? Should mobile commerce be allowed from moving vehicles? NOTES    To illustrate. would have been impossible. This can be done.E-COMMERCE TECHNOLOGY AND MANAGEMENT The major ethical. governance. and political institutions are confronted by new possibilities of behavior. under the old technology of CDs. social organizations.such as pornography and gambling . capabilities. business firms. Now.2. Suddenly individuals. and roles and political institutions provide a supportive framework of market regulation. despite the fact that these music tracks still 279 ANNA UNIVERSITY CHENNAI .

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

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. 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). organizations and societies are responsible for the actions they take. Responsibility means that as free moral agents. but it is not impossible. organizations. If you understand some basic ethical principles. and political controversies usually present themselves as dilemmas. 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. account. when. Accountability means that individuals. how can you analyze and reason about the situation? The following is a five step process that should help.extends the concepts of responsibility and accountability to the area of law. you will be surprised at the errors in the initially reported facts.E-COMMERCE TECHNOLOGY AND MANAGEMENT 5.  Identify and describe clearly the facts. social. A dilemma is a situation in which there are at least two diametrically opposed actions. your ability to reason about larger social and political debates will be improved. individuals. In western culture. In many instances. Extending ethics from individuals to business firms and even entire societies can be difficult. The third principle -liability . there are ability and liability principles that all ethical schools of thought share: responsibility. When confronted with a situation that seems to present ethical dilemmas. Analyzing Ethical Dilemmas Ethical. Find out who did what to whom. and how.liability. and where. their decisions can be judged against a variety of ethical principles. systems.2.2 Basic Ethical Concepts: Responsibility Accountability. each of which supports a desirable outcome. Ethics is the study of principles that individuals and organizations can use to determine right and wrong courses of action. or organizations. and often you will find that simply getting 281 NOTES ANNA UNIVERSITY CHENNAI . It is assumed in ethics that individuals are free moral agents who are in a position to make choices. and societies should be held accountable to others for the consequences of their actions. and Liability Ethics is at the heart of social and political debates about the Internet.

privacy. social. and Double Click should cease its or offer Web users the option of not participating in such tracking. “what if I choose this option consistently over time?” Once your analysis is complete. arriving at a “good” or ethical solution may not. You may find that none of the options satisfies all the interests involved.DBA 1727 NOTES     the facts straight helps define the solution. 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. 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 . Identify the potential consequences of your options.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.2. who have its vested in the situation. there would be no debate. Identify the stakeholders. Some options may be ethically correct. Ethical. 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. and the -enterprise system). but disastrous from other points of view. and usually who have vocal opinions.. Always ask yourself. Sometimes. social. and political issue has stakeholders: players in the game who have an interest in the outcome.g. and political issues always reference higher values. Every ethical. freedom. Opponents argue this claimed efficiency comes at the expense of individual privacy. but that some options do a better job than others. The parties to a dispute all claim to be pursuing higher values (e. It also helps to get the opposing parties involved in an ethical dilemma to agree on the facts. This will be useful later when designing a solution. Define the conflict or dilemma and identify the higher order value involved. Other options may work in this one instance. 5. Find out the identity of these groups and what they want. For example. protection of property. but not in other similar instances. Otherwise. you can refer to the following well established ethical principle to help decide the matter. Identity the options that you can reasonably take. always be a balancing of consequences to stakeholders.

including the state. in the United States. In England and the United States. public disclosure of private facts. 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). as well as in specific statutes. free from surveillance or interference from other individuals or organizations. The right to information privacy includes both the claim that certain information should not be collected at all by governments or business firms. as well as public attitudes. Canada. and perhaps destroyed. 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. Individual control over personal information is at the core of the privacy concept. Privacy is a girder supporting freedom: Without the privacy required to think.E-COMMERCE TECHNOLOGY AND MANAGEMENT What legitimates intruding into others lives through unobtrusive surveillance. and associate independently and without fear. and Germany. founding documents such as constitutions. social and political freedom is weakened. or other means? The major social issues related to e-commerce and privacy concern the development of “exception of privacy” or privacy norms. market research. In the United States. write. The Concept of Privacy Privacy is the moral right of individuals to be left alone. Legal Protections In the United States. plan. Due process also plays an important role in defining privacy. rights to privacy are explicitly granted in or can be derived from. and the claim of individuals to control over personal of whatever information that is collected about them. a body of court decisions involving torts or personal injuries. 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 . For instance. publicity placing a person in a false light. Information privacy is a subset of privacy. and appropriation of a person’s name or likeness (mostly concerning celebrities) for a commercial purpose. there is also protection of privacy in the common law. four privacy-related torts have been defined in court decisions involving claims of injury to individuals caused by other private parties intrusion on solitude.

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 . 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. 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.2. 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. and disclosure of data collected by federal agencies. Gives individuals right to inspect and correct records. as amended Regulates the federal government’s collection. and media institutions (cable television and video rentals) Table 5. use. education. and the Fourteenth Amendment’s guarantee of due process.2. 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.(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.DBA 1727 NOTES Amendment protections against unreasonable search and seizure of one’s personal documents or home.

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

Maintaining this balance of interests is always challenged by the invention of new technologies. music. works of art. 5. .1 Copyright: The Problem of Perfect Copies and Encryption In the United States. the information technologies of the last century . once again. 5.the public and the private. intellectual property rights are severely challenged. copyright law protects original forms of expression such as writings (books. and even to extend protection for longer periods of time and to entirely new areas of expression. or handwritten notes. literature.2 Types of Intellectual Property Protection There are three main types of intellectual property protection:  Copyright. or worse off. and computer programs from being copied by others for a minimum of 50 years. art.have at first tended to weaken the protections afforded by intellectual property law.from radio and television to CD-ROMs and the Internet .2. and other forms of intellectual expression. In general. motion pictures.3. 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. periodicals. 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. drawings. 286 ANNA UNIVERSITY CHENNAI . cassette tape. In the case of the Internet and ecommerce technologies. and lecture notes).3. Copyright does not protect ideas -just their expression in a tangible medium such as paper. 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. The goal of intellectual property law is to balance two competing interests . performances. The public interest is served by the creation and distribution of inventions. music.DBA 1727 NOTES value in protecting intellectual property in the Internet age? In what ways is society better off.  Patent and  Trademark law. photographs.

Apple claimed that the defendants copied the expression of overlapping windows. the expression can-not be copyrighted. in 1988. the HTML code for a Web page . the Copyright Office began registering software programs.even though easily available to every browser . Copyright protection is clear-cut: It protects against copying of entire programs or their parts. Damages and relief are readily obtained for infringement. and there are several international conventions and bilateral agreements through which nations coordinate and enforce their laws.E-COMMERCE TECHNOLOGY AND MANAGEMENT Since the first federal Copyright Act of 1790. Among other claims. potentially inhibiting other rights such as 287 NOTES ANNA UNIVERSITY CHENNAI . For instance. When ideas and their expression merge (Le. Most industrial nations have their own copyright laws. 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. are not absolute. Apple Computer sued Microsoft Corporation and Hewlett-Packard Inc. The drawback to copyright protection is that the underlying ideas behind a work are not protected. like all rights. to create a new Web site that looks identical. Look and Feel “Look and feel” copyright infringement lawsuits are precisely about the distinction between an idea and its expression. Congress passed the Computer Software Copyright Act. say. only their expression in a work. was not protect able under the “merger” doctrine of copyright law. 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. Fair Use Doctrine Copyrights. therefore.. for infringing Apple’s copyright on the Macintosh interface. and in 1980. 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. For instance. The defendants counter claimed that the idea of overlapping windows could only be expressed in a single way and. and sets forth the rights of the purchaser to use the software while the creator retains legal title. In the mid-1960s. although the method of producing the expression might be patentable. if there is only one way to express an idea).cannot be lawfully copied and used for a commercial purpose. There are situations where strict copyright observance could be harmful to society. which clearly provides protection for source and object code and for copies of the original sold in commerce.

The doctrine of fair use permits teachers and 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). As a result the doctrine of fair use has been created. the applicant must show that the invention is new. Journalists. devices. Ultimately. and abstract ideas. and not evident in prior arts and practice. and processing methods. As with copyrights. and academics must be able to refer to. Patents are obtained from the United States Patent and trademark Office (USPTO).2 Patents: Business Methods and Processes A patent grants the owner an exclusive monopoly to the ideas behind an invention for 20 years. federal courts decide when patents are valid and when infringement occurs. Obtaining a patent is much more difficult and time-consuming than obtaining copyright protection (which is automatic with the creation of the work). In order to be granted a patent. Professors are allowed to clip a contemporary article just before class. original. to use copyrighted materials without permission under certain circumstances. and hand it out to students as an example of a topic under discussion. copyrighted works in order to criticize or even discuss copyrighted works. natural phenomena. There are three things that cannot be patented: laws of nature. 5. 288 ANNA UNIVERSITY CHENNAI . man-made products. Patents are very different from copyrights because patents protect the ideas themselves and not merely the expression of ideas. 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. writers. Patents must be formally applied for. and the granting of a patent is’ determined by ‘Patent Office examiners who follow a set of rigorous rules. novel. created in 1812.3.2. non obvious. compositions of matter. The congressional intent behind patent law was to ensure that inventors of new machines. 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. There are four types of inventions for which patents are granted under patent law: machines. copy it. For instance.DBA 1727 NOTES the right to freedom of expression and thought. The fair use doctrine draws upon the First Amendment’s protection of freedom of speech (and writing). and cite from.

Patents force new entrants to pay licensing fees to incumbents. Since that time. thousands of software patents have been granted. For instance. Essentially. 1998). B. NOTES 289 ANNA UNIVERSITY CHENNAI . who patented the idea of Morse Code. Business firms began applying for “business methods” and software patents. Virtually any software program can be patented as long as it is novel and not obvious. 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.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. 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. 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. and software (1981). plants (1930). This early Internet spirit changed in the mid-1990s with the commercial development of the World Wide Web. 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. Morse. Amazon’s patent on one-click purchasing caused Barnesandnoble. 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. Patents encourage inventors to come up with unique ways of achieving the same functionality as existing patents. surgical and medical procedures (1950). most of the inventions that make the Internet and e-commerce possible were not patented by their inventors. as technology and industrial arts progress. and made the telegraph useful. Unlike Samuel F. and thus slow down the development of technical applications of new ideas by creating lengthy licensing applications and delays.

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

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

has addressed the governments of the world and stated. such as money. Contracts are a key element of traditional business practice. “Where there are real conflicts. where there are wrongs. 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. John Perry Barlow. an acceptance and consideration. we will identify them and address them by our means. 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). A Declaration of the Independence of Cyberspace). The Contract is formed when one party accepts the offer of another party. 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. This governance will arise according to the conditions of our world. Code 190). engage in electronic data interchange (EDI) or fill out forms on web pages. for example. you have no ethical right to intrude our lives. property or future services. Consideration is the agreed upon exchange of something valuable.4. An acceptance is the expression of willingness to take an offer. Our world is different” (Barlow. 5. We are forming our own Social Contract. All we want is to be free to inhabit it with no legal constraints. Those who favor the latter view often feel that government should leave the Internet community to self-regulate. not yours. 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. Offers and acceptances can occur when parties exchange email messages.2 Contracting and Contract Enforcement in EC Any contract includes three essential elements: an offer. which they are absolutely free to inhabit with no legal constraints. Since you make sure we cannot harm you. Other scholars argue for more of a compromise between the two notions.DBA 1727 NOTES laws of the state/nation which apply to the person or business with whom the transaction takes place. A more balanced alternative is the Declaration of Cyber secession: “Human beings possess a mind. and they are equally important on the Internet. So stop intruding!”. 292 ANNA UNIVERSITY CHENNAI . including all of its stated terms.

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

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

In fact. Congress noted that the internet was inherently susceptible to multiply and discriminatory taxation in ways that traditional commerce was not. 1999.  Lack of information on the location of the seller and purchaser. contend that internet taxes are needed to equalize the tax burden for competitive reasons. it will take a Constitutional amendment to change the commerce clause. and it extremely doubtful that U. According to 36% of the respondents who use the internet. and merely selling property. Congress realized that the internet needed time to grow as a viable medium for commerce. 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.S. passed in 1988 there is a 3-year moratorium on federal and state taxation imposed on internet transactions. they would be less likely to vote for a politician who voted to tax internet transactions. September 15. The moratorium began on October 21. compared to 14% in favor (Source: San Francisco Chronicle. outside of pressure from state and local tax authorities. there is little ground swell for internet taxation by politicians.E-COMMERCE TECHNOLOGY AND MANAGEMENT burden the business with a tax obligation. page D2). But brick and mortar retailers who sell their products in physical locations.  Anonymous transactions. According to a Gallup Poll. Some of the unique features of Ecommerce include:  Computer-to-Computer transactions without a paper trail. In short. such as taxable goods with taxexempt services.5. especially if a new form of electronic cash takes hold. 2001. under the Internet Taxation Freedom Act (“ITFA”). CDs and movies in electronic form) and services (brokerage or accounting services). citizens will vote to tax themselves on internet transactions. services or goods to a customer who resides in a state is not sufficient nexus. 1998 and remains in effect until October 21. 73% of active internet users oppose an internet sales tax.A Moratorium on Internet Taxes Currently.2 Current Law . and  Bundling of taxable and non-taxable items. 5.  Electronic delivery of goods (books. Congress was concerned that because internet 295 NOTES ANNA UNIVERSITY CHENNAI .

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

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

1992. Under the commerce clause. Retail sales by venders to in-state consumers are subject to sales tax on the purchase.DBA 1727 NOTES 5. 298 ANNA UNIVERSITY CHENNAI . Quill established an economic presence in North Dakota which created nexus for sales tax purposes. 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. The U. Converse. but sells to California residents. In general. the North Dakota Supreme Court held that by selling its product to North Dakota customers. the U.S.S. Under what circumstances may California levy a tax on sales to California residents? In Quill v North Dakota. 504 U. both California and San Francisco have the right to tax a company physically located in San Francisco. even though the guests might reside in another state. The key issue is whether the company that is being taxed as sufficient connection (nexus) with the taxing authority. Constitution prevents the states and their political subdivisions from imposing taxes that unduly burden interstate commerce. such as a hotel. 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.5. It is the commerce clause’s concept of nexus that prohibits most ecommerce transactions from being taxed.The Significant Issues Nexus .S. Three general rules apply: 1. employees or sales agents in North Dakota could not be compelled to collect sales tax on its sales to North Dakota customers.3 Taxation of Ecommerce .The Foundation of State and Local Taxation The Interstate Commerce Clause of the U. Supreme Court held otherwise and ruled that a state could impose a requirement that a company collect and remit sales taxes. The problem comes when a business is not physically located in California. 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. 298.S. Although it was not physically present in North Dakota and did not have a sales agents in the state. but the vendor has the obligation of collect and remit the tax to the tax agency. a mailorder company without a physical location. Quill corporation sold office furniture products through a catalogue.

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

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

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

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

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

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

Ask yourself if your customers want this? If they do. Successful testing follows a simple rule: Test one Thing at a Time Only test changes that can be measured directly. Test to learn from the customer and to improve one step at a time. suppliers and distributors? Have you asked what they’d like? The web’s very good at research. look for processes in which information is transferred. then you can redirect your time and resources and use the knowledge gained to good effect elsewhere. Are you offering them a new way to use an existing service or a completely new service? Is it faster. what could your staff do to add more value for customers? Focus on Customer. Test out Your Plan In the online marketplace everything is a test until it’s proven by the customer. cheaper. suppliers and distributors find for themselves. Complexity often arises from integrating tried and tested stand-alone services. In particular. 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. NOTES 305 ANNA UNIVERSITY CHENNAI . If a test includes more than one change. Supplier & Distributor Benefits What’s in it for customers. computer to computer? With the time saved. then a more robust version can be built. 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.E-COMMERCE TECHNOLOGY AND MANAGEMENT with the intention of proving a principle. Analyse each sales process to clarify what it is that staff spend time doing. it’s almost always impossible to measure the effect of each one. Challenge Internal Assumptions Remove internal processing costs to make dramatic improvements to profit margins.

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. If you prefer customers to use an online channel. They will almost certainly require some training in how to make the most of the new technology for the benefit of their customers. Help Staff Adapt to Online Working An online service will affect your staff and the work that they do. Unless a company’s online services are entirely online. 306 ANNA UNIVERSITY CHENNAI . Some may find this work more fulfilling. 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. staff who is to fulfil new service roles will require assistance to develop new skills. 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. 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. There are three sets of costs that should be calculated: 1. If your organisation is typical. others will not enjoy the increased interaction with customers. Equally. post change  long-term cost-savings  long-term outsourcing arrangements  ongoing online development plans 2. 3.

including the state. 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. remote employee access.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. because computerized information can be so easily copied or distributed on networks. electronic filing. write. Information technology has made it difficult to protect intellectual property. and perhaps destroyed. offer is communicated by the acceptor and acceptance is received by the offer or from the acceptor. and make recommendations for managers who are given the responsibility of operating e-commerce companies within commonly accepted standards of appropriateness.   307 ANNA UNIVERSITY CHENNAI . viz. The ethical. 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. The Concept of Privacy: Privacy is the moral right of individuals to be left alone. social. plan. social and political freedom is weakened. free from surveillance or interference from other individuals or organizations. and associate independently and without fear. provide a framework for organizing the issues. Exchange of electronic messages and documents EDI. electronic transactions. and political issues raised in e-commerce.  Intellectual property is considered to be intangible property created by individuals or corporations.

List the major legal issues of EC Discuss the EDI Interchange agreement Define ethics Discuss the ethical. Patent and Trademark law. the Internet. including intellectual property. 11. to decrease the burden of compliance on business and to deal with the increasingly integrated economy of Ecommerce. 4. 12.    Questions for review 1. as it is an intersection of many legal fields. 8. 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.DBA 1727 NOTES  There are three main types of intellectual property protection: Copyright. an acceptance and consideration. 6. particularly “cyberspace”. 2. 5. In essence. privacy. 7. 10. It is less a distinct field of law in the way that property or contract are. i. 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 . 14. 3. The Contract is formed when one party accepts the offer of another party. Contracting and Contract Enforcement in EC: Any contract includes three essential elements: an offer. 13. freedom of expression. Cyber law is a term used to describe the legal issues related to use of communications technology. and jurisdiction. cyber law is an attempt to apply laws designed for the physical world to human activity on the Internet.e. 9.

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