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



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

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

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

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

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

processing fee. Avoid merchant account providers that require 1 or 2 year contract terms. Typically expect to pay around $100 to $500 for getting an account setup to accept credit cards and sometimes electronic checks. There are actually two scenarios that can be used for web hosting. 4. 12 ANNA UNIVERSITY CHENNAI . These fees can come in the form of an application fee. while Scenario 2 involves farming out all web hosting administration to an ISP. 7. Since there are so many merchant account providers available. When choosing a merchant account provider. Avoid merchant account providers that ask for a non-refundable fee before you get approved. 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. 5. Expect merchant account providers to have some form of a sign up fee after being approved only. 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. Web Hosting Web hosting is a very important step in this process. You will need a dedicated phone line or data line for processing credit cards and electronic checks. as this is how you gain a presence on the internet in the first place. etc. If not. 6.25 cent per transaction. The following should be noted when searching for an Internet Service Provider: 1. Scenario1 involves setting up and maintaining your own web server.DBA 1727 NOTES 3. you should do a little research on the company’s reputation. software fee. Note: If your computer or local area network is already connected to the internet. You should be able to find a merchant account provider that can offer you discount credit cards rates ranging from 1. Always try to find an ISP that can provide a local telephone number for you to connect to the internet. years in business. 8. Constantly changing to a new merchant account provider when your old one goes out-of business can be costly and time consuming.75% to 2. a separate data line will not be necessary if you use the Intellicharge Interface for electronic payment.75% and no more than . and company size.

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

the architecture should focus on synthesizing the diverse resources already in place in corporations to 14 ANNA UNIVERSITY CHENNAI . Select a unique domain name you would like others to use for finding your web site. Obtaining a Digital Certificate A digital certificate. however. one can usually use the certificate owned by the web hosting company where your page resides. just do a web search on “domain name registrar” to get you started. SSL protects communications so you can take credit card orders securely and ensure that hackers cannot eavesdrop on you. also known as a SSL Server Certificate. computer languages.123. for customers to find your web site by typing “123.8 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. or communication protocols. Your domain name says who you are to your clients. software agent based transaction monitors. you may want to get your own digital certificate. 1. will it be important to you. It is important to understand that the aim of the architectural frame-work itself is not to build new database management systems. The basics for registering a domain name are: Contact a domain name registrar on the internet to register for a domain name.1.456” or by typing something simple to remember like “www.the whole world. Rather. data repository. Any ecommerce company that provides you with an online web store will require you to have SSL before you can use their services. for most people obtaining a digital certificate is not a problem. your peers .mybiz.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. Thankfully.com?” Registering a domain name is one of the most important decisions you can make for your online identity. In layman terms.456. There are many to choose from. enables SSL (Secure Socket Layer encryption) on the web server. If you are a larger company. Domain names serve as a convenient way of locating information and people on the Internet. 2. For a minimal fee.

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

In a marketplace transaction. time consuming. and a dependable way to conduct business’ transactions.8. 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. Most of the documents are in electronic form at their point of origin but are printed and key-entered at the point of receipt. and other transactions.to-computer communication as a fast.DBA 1727 NOTES 1.1.1 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 have them delivered differently. an economical. and error-prone. Here. customers learn about products differently through electronic publishing. 16 ANNA UNIVERSITY CHENNAI . buy them differently using electronic cash and secure payment systems. buying information and consulting services. and receiving proposals.” Where “distribution” may not automatically mean “physical Transport. The current accounts payable process occurs through the exchange of paper documents. Three distinct classes of electronic commerce application can be distinguished: customer to business. where “content” may not be equated to “product. how customers allocate their loyalty may also be different. In light of this. The current manual process of printing. Each year the trading partners exchange millions of invoices. businesses. Small companies are also beginning to see the benefits of adopting the same methods.” In this new environment. 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. Examine this scenario. Also. purchase orders. business-to-business. Business-to-business transactions include the use of EDI and electronic mail for purchasing goods and services. and other organizations depend on computer . and intra organization Consumer-to-Business Transactions We call this category marketplace transaction. mailing is costly. checks. financial reports. governments. submitting requests for proposals.

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

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

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

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

Users in the 1970s. privacy. 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. No pre-processing is necessary. and so on. with the messaging tools. mail it to the next. the backlog was enormous. the information travels along with the form. when vendors. Because of the lack of standards. Also. Messaging is central to work-group computing that is changing the way businesses operate. Today. didn’t have a need for middleware3&heR conditions changed-along with the hardware and the software the organizations couldn’t cope: The tools were inadequate. When an employee sends an electronic mail form. fill it in/ sign it. networks that permitted shared resources and applications that could be accessed by 21 NOTES ANNA UNIVERSITY CHENNAI . The main disadvantages of messaging are the new types of applications it enableswhich appear to be more complex. Messaging is well suited for both client server and peer-to-peer computing models. especially to traditional programmers and the jungle of standards it involves. The ability to access the right information at the right time across diverse work groups is a challenge. Something was needed to solve all the interface. users demanded interaction between dissimilar systems. the problems of getting all the pieces to work together grew from formidable to horrendous.E-COMMERCE TECHNOLOGY AND MANAGEMENT Another advantage of messaging is that it is not associated with any particular communication protocol. security. transformation.1. the messages are treated as “objects” that pass between systems. and all other forms of communicating between/among unlike platforms. there is often no interoperability between different messaging vendors leading to islands of messaging. the users were dissatisfied. So one person can start the form. although there is an increasing need for programs to interpret the message.8. mail it to the next person. and the pressure was overwhelming. and interpretation problems that were driving application developers crazy. In distributed systems. translation.5 Middleware Services Middleware is a relatively new concept that emerged only recently. This is known as message-enabled work-flow solutions. As the cry for distributed computing spread. delivered homogeneous systems that worked. With the growth of networks. it came into being out of necessity. And. 1. Like so many other innovations. people can communicate and work together more effectively-no matter where they are located. client-server technology.

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

Objects are an evolution of the more traditional programming concept of functions and procedures. The best example of this approach is an active document. Objects are defined as the combination of data and instructions acting on the data. 1. what you’ll see in the next generation of operating systems is that as you scroll through your document.E-COMMERCE TECHNOLOGY AND MANAGEMENT a standard TP sys-tem: the so-called ACID properties (atomicity. A natural instance of an object in electronic commerce is a document. which will be dealt in this unit later. and durability). Today. pictures. the trend is to move away from single data-type documents such as text. Last but not the least is the Network Infrastructure. These applications will also be able to access and retrieve data from any file in the computing network. the tool bar will automatically change from a spreadsheet too bar. to a word processing tool bar. the term object is being used interchangeably with document resulting in a new form of computing called document oriented computing. Here. which reduces costs on both sides of transactions. 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. 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. consistency. isolation.1.9 Advantages of E-Commerce     Electronic Commerce can increase sales and decrease costs. to a presentation package tool bar. Electronic Commerce increases the speed and accuracy with which businesses can exchange information. word processor. If you create a new document that is an integration of the spreadsheet. A document carries data and often carries instructions about the actions to be performed on the data. 23 NOTES ANNA UNIVERSITY CHENNAI . and presentation package. or video toward integrated documents known as com-pound document architectures. Businesses can use electronic commerce to identify new suppliers and business partners.

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. 1. public retirement and welfare support cost less to issue and arrive securely and quickly when transmitted over the Internet.1. can change dramatically even during short-lived electronic commerce implementation projects because the technologies are changing so rapidly. Companies that offer software design and consulting services to tie existing systems into new online business systems can be expensive.2 DRIVING FORCES OF E-COMMERCE E-Commerce is becoming popular. Costs. Electronic payments of tax refunds. Consumers are fearful of sending their credit card numbers over the Internet and having online merchants. design and business process skills needed to create an effective electronic commerce presence. Consumers are simply resistant to change and are uncomfortable viewing merchandise on a computer screen rather than in person. unique items such as custom-designed jewelry might be impossible to inspect adequately from a remote location. which are a function of technology. Firms facing difficulty of integrating existing databases and transactionprocessing software designed for traditional commerce into the software that enables electronic commerce. 1.10 Disadvantages of E-Commerce  Some business processes such as perishable foods and high-cost.      24 ANNA UNIVERSITY CHENNAI . 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. Many firms have trouble recruiting and retaining employees with the technological.

lower global information sharing and advertising costs. economical. Internal integration is best exemplified by corporate intranets. speedier and more economic electronic transactions with suppliers. is the networking of the various departments within a corporation.1 Environmental factors that create Business Pressures: Market. customers/clients.E-COMMERCE TECHNOLOGY AND MANAGEMENT 1.2. thus reducing errors and the cost of correcting them. Internal integration. suppliers. and of business operations and processes. These factors change quickly. 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. 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. low-cost technological infrastructure. NOTES   Economic integration is either external or internal. New sales opportunities: the website is accessible all the time and reaches the global audience which is not possible with traditional storefront. External integration refers to the electronic networking of corporations. Economic Forces One of the most evident benefits of e-commerce is economic efficiency resulting from the reduction in communications costs. Categories of Economic Forces   Lower marketing costs: marketing on the Internet maybe cheaper and can reach a wider crowd than the normal marketing medium. creating new products or providing superb customer service. 25 ANNA UNIVERSITY CHENNAI . This allows critical business information to be stored in a digital form that can be retrieved instantly and transmitted electronically. and independent contractors into one community communicating in a virtual environment (with the Internet as medium). societal and technological factors are creating a highly competitive business environment in which consumers are the focal point. and cheaper customer service alternatives. on the other hand.

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

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

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

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

two-way mailing lists. and production control processes. they are distinct concepts. among others. governmental or non-profit entity) conducts over a computer-mediated network. 30 ANNA UNIVERSITY CHENNAI . A private discussion area or secured online meetings can go a long way toward building stronger relationships between companies. instant messaging. processing of payments. audio.” Three primary processes are enhanced in e-business: 1.4 Is e-Commerce the Same as e-Business? While some use e-commerce and e-business interchangeably.2. on the other hand. ordering and replenishment of stocks. In e-business. which include procurement. Online conversation with business partners will also give net positive results.DBA 1727 NOTES A successful community strategy must embrace the idea of moving the one-onone communication that occurs offline into the virtual world of e-commerce. video. This will also serve to potentially drive new business opportunities for both parties. 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). philosophies and computing paradigm of the new economy. In e-commerce. The tools that form online communities include discussion or forum software. electronic links with suppliers. 1. It includes any process that a business organization (either a for-profit. chat functions. Building community has to be at the heart of any successful ecommerce strategy. Such a strategy currently requires multiple technical approaches. we believe community solutions will soon become more integrated and far-reaching. 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. You may choose to invest slowly at first and increase your community commitment over time. Production processes. online collaboration tools. ICT is used to enhance one’s business. However. and more.


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.



When data mining tools are implemented on high performance parallel processing systems. Larger databases. Other pattern discovery problems include detecting fraudulent credit card transactions and identifying anomalous data that could represent data entry keying errors. High speed makes it practical for users to analyze huge quantities of data. Otherwise. or intelligently probing it to find exactly where the value resides. Other predictive problems include forecasting bankruptcy and other forms of default. data mining technology can generate new business opportunities by providing these capabilities:  Automated prediction of trends and behaviours. It is only by analyzing large data sets that we can produce accurate logical descriptions that can be translated automatically into powerful predictive mechanisms. Data mining tools sweep through databases and identify previously hidden patterns in one step.4.2 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. Given databases of sufficient size and quality. 1. Data mining automates the process of finding predictive information in large databases. they can analyze massive databases in minutes.E-COMMERCE TECHNOLOGY AND MANAGEMENT The focus on large data sets is not a just an engineering challenge. it is an essential feature of induction of expressive representations from raw data. and can be implemented on new systems as existing platforms are upgraded and new products developed. Faster processing means that users can automatically experiment with more models to understand complex data. A typical example of a predictive problem is targeted marketing. Data mining techniques can yield the benefits of automation on existing software and hardware platforms. 37 NOTES   ANNA UNIVERSITY CHENNAI . An example of pattern discovery is the analysis of retail sales data to identify seemingly unrelated products that are often purchased together. and identifying segments of a population likely to respond similarly to given events. finding linked products in gigabytes of store scanner data — and mining a mountain for a vein of valuable ore. in turn. Automated discovery of previously unknown patterns. Data mining uses data on past promotional mailings to identify the targets most likely to maximize return on investment in future mailings. Both processes require either shifting through an immense amount of material. 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). yield improved predictions.

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

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

the results can be tested against the data held in the vault to confirm the model’s validity.4. 40 ANNA UNIVERSITY CHENNAI . If the model works.4. its observations should hold for the vaulted data. With data mining.(b) . 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. Test marketing is an excellent source of data for this kind of modeling. Table 1. Once the mining is complete.4. Table 1.where you already knew the answer.DBA 1727 NOTES The goal in prospecting is to make some calculated guesses about the information in the lower right hand quadrant based on the model that we build going from Customer General Information to Customer Proprietary Information.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 .(b) shows another common scenario for building models: predict what is going to happen in the future.4. the best way to accomplish this is by setting aside some of your data in a vault to isolate it from the mining process.

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

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

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

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

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

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


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

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

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

alone computers made no sense made the network possible. Mobile Users When you have remote or mobile users. A second proxy residing in the intranet passes connection requests of the internal machines to the proxy in the DMZ. this possibility is eliminated. people realized that stand . which in turn makes the actual connection out on the Internet.1 Introduction to TCP/IP: The realization that stand . it was likely spoofed. 1. pay attention to how you will provide them access to the facilities. examine whether your mobile user population is stable or is expected to increase over time. Use the same IP-spoofing protection on any internal firewall as well. Firewall Configuration In addition to the typical packet-filtering features. most firewalls provide features to prevent IP spoofing. it should reside in the DMZ. 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. and the potential for bypassing IP address-based authorization and the other firewallfiltering rules is reduced. When there were too many of them. To keep this communication indirect. 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. not from the Internet. By preventing IP spoofing. However. use a double proxy system.E-COMMERCE TECHNOLOGY AND MANAGEMENT Because the proxy communicates directly with machines on the Internet. Based on your network’s topology. Use IP-spoofing protection whenever possible. For instance. the only packets containing a source IP address from your internal machines should come from within the network itself. this conflicts with the desire to prevent internal machines from directly communicating with DMZ machines.alone networks 55 NOTES ANNA UNIVERSITY CHENNAI .7.7 TRANSMISSION CONTROL PROTOCOL/INTERNET PROTOCOL TCP / IP 1.

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

This means that the interpretation of the data happens at the application layer(i.7.3 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 application programmers are hidden from the complexities of the underlying hardware. 57 ANNA UNIVERSITY CHENNAI . It was developed by a community of researchers centered around the ARPAnet. it has become common to use the term TCP/IP or IP/ TCP to refer to the whole family. The job of the post office is to deliver the mail.e the sending and the receiving side) and not at the network layers. only the sender and the receiver are concerned about its contents.the Internet is based on end-to-end protocols.known TCP/IP network. TCP and IP are two of the protocols in this suite.E-COMMERCE TECHNOLOGY AND MANAGEMENT   Simple-each of the layers in the architecture provides only a few functions or operations. It is much like the post office. Because TCP and IP are the best known of the protocols. End-to end. NOTES 1. Certainly the ARPAnet is the best. The most accurate name for the set of protocols are describing is the “Internet protocol suite”.

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

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

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

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

A server is a system that provides a specific service for the rest of the network. workstations. Address  An identifier that can be used as the source or destination of IP packets and that is assigned at the Internet layer to an interface or set of interfaces. And. and a host within the network could have the host address of 45.168. which is the super – network of all networks. Every host in the network has an address as well. sometimes a node. 192. In a network. Note that these computer services can all be provided within the framework of TCP/IP. This name is unique throughout the network.67 represents the complete network address of the host. For instance.0) could be the address of a network. and every such host has a hostname. 192. a computer is known as a host. Now many installations have several kinds of computers.0. This has led to the “server/client” model of network services.45. These computers are likely to be configured to perform specialized tasks. A local internet or intranet may easily be connected to the Internet which also uses the same protocol. including microcomputers. Each machine is fitted with a network interface card that is connected by wire to the corresponding cards in other machines. This address has to be unique not only within the network.168. we have an internet. and the combination of these two addresses forms the complete network address of the host. but also to all connected networks. that computer will call on other systems on the net for specialized services. When two or more networks are connected together.) Here are the kinds of servers typically present in a modern computer setup. (Note that the server and client need not be on different computers.DBA 1727 NOTES     Air  A node connected to the same subnet as another node. 192. They could be different programs running on the same computer. popularly known as an intranet. A client is another system that uses that service. minicomputers. An example of a physical interface is a network adapter. In that case. if the network is hooked up to the Internet. Interface  The representation of a physical or logical attachment of a node to a subnet. it has to be unique throughout the world. and uses the TCP/IP protocol for communication. 62 ANNA UNIVERSITY CHENNAI . Although people are still likely to work with one specific computer.67. Packet  The protocol data unit (PDU) that exists at the Internet layer and comprises an IP header and payload. All communication between hosts normally takes place through these network interfaces only. and mainframes.168 (or strictly speaking. Every TCP/IP network has an address that is used by external networks to direct their messages.

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

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

text files. and anywhere else a company can advertise.2 Hypertext Transfer Protocol (HTTP) Hypertext Transfer Protocol (HTTP) is the set of rules. The server request identifies the resource that the client is interested in and tells the server what “action” to take on the resource. Hypertext is text that is specially coded using a standard system called Hypertext Markup Language (HTML). and file (e.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.1 Universal Resource Locator (URL) Universal Resource Locators (URLs) are ubiquitous.. In the case of a URL like www. for example.8.8. graphics. ftp. identify a resource.com”. where the access – method can be http. home page. The World Wide Web encompasses the universe of information that is available via HTTP.ge. HTTP is based on client/server principle.1. When a user selects a hypertext link. the client program on their computer uses HTTP to contact the server.com. To fulfil these needs. in print. a new addressing scheme – the URL .and a new protocol – the Hypertext Transport Protocol (HTTP) were introduced.cern. 1. We are all familiar with “www .html” on the server “info. animation and sound. on television.anywhere.ch” stored in the directory “Data Sources”.g. port (80). directory. What this URL represents is the Web page “Geographical. the access – method (http).ch:80/hypertext/Data Sources/ Geographical. can “link” the user to another resource such as other HTML documents. The complete syntax for an “absolute” URL is access – method: // server –name [: port]/directory/file.htm) take default values. This is the default syntax for a URL. gopher.html. These links can be textual or graphic and when clicked on. appearing on the Web. HTTP allows the client to establish a connection with the server and make a request. or protocol that governs the transfer of hypertext between two or more computers. 1. as opposed to the following example where all the values are explicitly specified: http://info. or telnet. The HTML codes are used to create links.cern. and ask the server to respond with an 65 NOTES ANNA UNIVERSITY CHENNAI .1. on billboards.

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

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

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

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

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

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

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

OLAP systems enable managers and analysts to rapidly and easily examine key performance data and perform powerful comparison and trend analyses. OLAP is now acknowledged as a key technology for successful management in the 90’s. An OLAP system is often contrasted to an OLTP (On-Line Transaction Processing) system that focuses on processing transactions such as orders. It describes a class of applications that require multidimensional analysis of business data. interactive access to a wide variety of possible views of information that has been transformed from raw data to reflect the real dimensionality of the enterprise as understood by the user. even on very large data volumes. The most common are sales and marketing analysis. quality tracking. and budgeting and planning. OLAP functionality is characterized by dynamic multi-dimensional analysis of consolidated enterprise data supporting end user analytical and navigational activities including:   calculations and modeling applied across dimensions. OLAP technology is being used in an increasingly wide range of applications. through hierarchies and/ or across members trend analysis over sequential time periods 73 NOTES ANNA UNIVERSITY CHENNAI . including sales and marketing analysis. They can be used in a wide variety of business areas.9 OLAP: ON-LINE ANALYTICAL PROCESSING 1.F. manpower planning. quality analysis.9. profitability analysis. in fact for any management system that requires a flexible top down view of an organization. 1. Codd in 1993 to refer a type of application that allows a user to interactively analyze data. OLAP is being used for applications such as product profitability and pricing analysis. financial reporting. activity based costing.9.2 What is OLAP? On-Line Analytical Processing (OLAP) is a category of software technology that enables analysts. managers and executives to gain insight into data through fast. consistent. invoices or general ledger transactions. financial reporting and consolidation. manpower and pricing applications and many others.E-COMMERCE TECHNOLOGY AND MANAGEMENT 1.1 Introduction: The term OLAP (On-Line Analytical Processing) was coined by E.

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


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

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

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

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. Cryptology is as old as writing itself. 1.10. it can verify whether you are entitled to enter the system. and data confidentiality. the famous Roman emperor Julius Caesar used a cipher to protect the messages to his troops.2 Cryptographic services The main goals of modern cryptography can be seen as: user authentication. Once it knows your identity. and has been used for thousands of years to safeguard military and diplomatic communications. Within the field of cryptology one can see two separate divisions: cryptography and cryptanalysis.10 CRYPTOGRAPHY 1.E-COMMERCE TECHNOLOGY AND MANAGEMENT providing better service. IT gains more self-sufficient users without relinquishing control over the integrity of the data.1 Introduction to Cryptography The origin of the word cryptology lies in ancient Greek. By using software designed for OLAP. The word cryptology is made up of two components: “kryptos”. As a result. which means hidden and “logos” which means word. data authentication (data integrity and data origin authentication). unlike standalone departmental applications running on PC networks. non-repudiation of origin. 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. 1. IT also realizes more efficient operations through OLAP. 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. IT reduces the query drag and network traffic on transaction systems or the data warehouse. However. OLAP applications are dependent on data warehouses and transaction processing systems to refresh their source level data. The same principal applies when one person tries to 79 NOTES ANNA UNIVERSITY CHENNAI . For example.10.

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

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

with a seal and a signature. 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. The example of Caesars cipher given in the introduction clearly demonstrates this. one wants to make sure that this enemy never understands his contents. An example will illustrate the importance of non-repudiation of origin. Non-repudiation with proof of origin protects against any attempts by the sender to repudiate having sent a message. 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. but the enemy intercepts it and sends it to B. there are techniques to ensure against this type of fraud. 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. claiming A has sent it. falsely. With data confidentiality we try to protect ourselves against unauthorized disclosure of the message.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. non-repudiation is provided by a manual signature. In a paper and pencil world. The fact that confidentiality was considered to be much more important than authentication of both sender and data. If A sends a message to B. If A sends a message to B. Suppose B is the owner of a mail-order company and he decides to let his customers order through electronic mail. having received a message. Confidentiality protection is very 82 ANNA UNIVERSITY CHENNAI . Thanks to cryptography. Data confidentiality This aspect of data security certainly is the oldest and best known. 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. but the enemy intercepts it. while non-repudiation with proof of delivery protects against any attempt by the recipient to deny.

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

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

it should be hard to find an x’ different from x which has the same image under f. For an MDC one requires that it is a one-way function. or to protect the authenticity of a short string (MDC). and . A hash function is a function which maps an input of arbitrary length into a fixed number of output bits.E-COMMERCE TECHNOLOGY AND MANAGEMENT 1. as specified in ISO-9797.4 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. 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. which can yield protection of both confidentiality and authenticity. even in software implementations.10. These hash functions achieve a very high throughput (Mbit/s). In order to be useful for cryptographic applications. and an MDC (Manipulation Detection Code) that works without a key. For a MAC one requires that it should be impossible to compute the MAC without knowledge of the secret key. f(x) is easy to compute. 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). One can distinguish two types of hash functions. but for virtually all y in the range of f. a hash function has to satisfy some additional requirements. Sometimes an MDC is used in combination with encryption. A MAC (Message Authentication Code) that uses a secret key. In addition one requires that it is hard to find a second pre-image: given an x and the corresponding value of f(x).in most cases . and RIPE-MD 160. 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.that it is collision resistant. Other dedicated designs are SHA (Secure Hash Algorithm or FIPS 180). which means that it should be hard to find two arguments hashing to the same result. it is computationally infeasible to find an x such that y=f(x). Several MDC’s have been constructed based on the DES. NOTES 85 ANNA UNIVERSITY CHENNAI . There are several schemes which have been proposed for use as hash functions.

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

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

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

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

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

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


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

1. as shown in Figure 2. etc. the most recent foreign exchange rate. a washing machine. a video recorder. which may be downloaded from the internet. Examples of services that may be sold are information such as the most recent stock prices. a television set. or education. Selling of different type of goods 94 ANNA UNIVERSITY CHENNAI . Here we discuss the sale of tangible goods. if they are sold directly to the consumer who is the end user. 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. Entertainment such as -games that would be played on the internet are also examples of e-services. The sale of intangible goods is sometimes called E-servicing.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. Examples of digital goods are software and music.2(a) We can divide tangible goods into two categories: physical goods and digital goods. 2.    Examples of physical goods would be a book. Sometimes we refer to this as the sale of tangible and intangible goods. So are the sales of services such as telecommunication services or banking services. The sale of tangible and intangible goods are all referred to as Customer oriented e-commerce or eretailing.1.2 E-Retailing E-retailing essentially consists of the sale of goods and services.

1. 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. 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. Direct mailing. 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. Examples of physical outlets that retailers currently use are:     Malls generalized stores (e. This normally involves a fairly extensive chain starting from a manufacturer to a wholesaler and then to the retailer who through a physical outlet has direct contact with the final customer.E-COMMERCE TECHNOLOGY AND MANAGEMENT 2. they allow specialization in particular classes of 95 ANNA UNIVERSITY CHENNAI . Instead of specializing just in a special product line. Thus. The customer browses through this catalogue and then carries out mail ordering.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.g. this notion of browsing through a catalogue is a forerunner of e-retailing. E-retailing The internet has allowed a new kind of specialization to emerge. telemarketing. door-to-door sales. In some respects.

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

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

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

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

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

Thus. which is a very important feature that does not exist in traditional retailing. Brokers that provide comparison shopping between products (e. which is a useful feature before submission. The provision of a search engine. The provision of a shopping cart. mySimon. it is dynamic and linked with order process. “who” can help customers to navigate through the site.g. An on-line customer salesperson.” 2. 8. 6. The use of Forums (collaborative purchasing circles) to create a customer community and thus increase “stickiness. promotions. An order status checking facility. The ability to distribute digital goods directly.The last model i.com).1. NOTES 2. E-services is discussed in the next lecture.E-COMMERCE TECHNOLOGY AND MANAGEMENT   Brokers that meet a certain requirement such as a fixed price (e. which allows one to browse through different categories of goods. The provision of an on-line catalogue. 5. Thus.e. 7.com). Technology improvements that provide greater convenience and more information than traditional retailing. An ability to provide an automatic price update. 4.1.com or bestbooksbuy. these goods can be downloaded instantly. deals. 2. 3.7 Changing Retail Industry Dynamics Important factors that affects the retailing industry dynamics are:     Overbuilding and excess supply. with less focus on brand name and more on lowest prices. and marketing. Change in consumer demographics. which more premium placed on efficient use of time Changes in consumer behavior. 101 ANNA UNIVERSITY CHENNAI .Priceline.6 Features of E-Retailing 1. Personalization of store layouts.g. 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,



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

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

Building and Maintaining Customer Relationship The goal of marketing is to build and create lasting customer relationships. the goal is to build offline (as relevant) as well as online relationships. designing the customer experience. and serv-ices that satisfy the goals of both parties.2 INTERNET CONSUMERS AND MARKET RESEARCH 2. Hence.2. framing the market opportunity. It is important to stress that the goal of Internet marketing is not simply building relationships with online customers. designing the marketing program. The seven stages of the Internet marketing program process are setting corporate and business-unit strategy. loyal customers. The Internet marketing program may well be part of a broader campaign to satisfy customers who use both online and offline services. crafting the customer interface. the focal point shifts from finding customers to nurturing a sufficient number of committed. 110 ANNA UNIVERSITY CHENNAI . These seven stages must be coordinated and internally consistent. the marketing strategist often has to loop back and forth during the seven stages. Successful marketing programs move target customers through three stages of relationship building: awareness. and commitment. exploration. Rather.DBA 1727 NOTES 2.1 What is Internet Marketing? If traditional marketing is about creating exchanges that simultaneously satisfy the firm and customers. products. and evaluating the results of the marketing program. what is Internet marketing? Internet marketing is the process of building and maintaining customer relationships through online activities to facilitate the exchange of ideas. an Internet-marketing program involves a process. This definition can be divided into five components: A Process Like a traditional-marketing program. formulating the marketing strategy. While the process can be described in a simple linear fashion.

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

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

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

2. They also serve as guides to managerial action.4 The Seven Stages of Internet Marketing 114 ANNA UNIVERSITY CHENNAI .2. Frameworks such as the 4Ps of marketing or the five forces of competitive analysis are important because they provide easy-to-remember. simplifying structures for complex problems.g..DBA 1727 NOTES framework to understanding the practice of Internet marketing. Thus. reduce buyer power by increasing the number of buyers). under-standing the five forces enables firms to comprehensively map their competitive environment while simultaneously identifying specific actions for their managers (e.

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

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

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

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

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

a direct marketing process. For instance. Cross-selling and up-selling depend on identifying life-path needs. direct mail responses. allows companies to manage. This is because. then banks could cross-sell education savings plans or even loan consolidation plans. Whether it is product or service inquiries. This creates a need for fulfilment capabilities that can get product information.2. and arranging logistical aspects of events. 120 ANNA UNIVERSITY CHENNAI . If customers with young children can be identified. banks could recommend assets such as money markets. or requests for literature. literature. or other correspondence into the hands of the customers and prospects when they are most receptive. in the finance industry. Marketing departments today are being deluged with requests for information via the Web and other channels. By implementing a cross-sell strategy. complete with the applications necessary to track customer contacts. Campaign management. track contact or the “moments of truth and refer them to sales persons when appropriate. responding to requests in a timely manner is critical. collateral packages. and check on the status of the customer orders. As customers approach retirement. For example.DBA 1727 NOTES 2.5 Customer Relationship Management(CRM) Cross-selling and Up-selling This application has the capability to qualify prospects. integrate and leverage marketing programs by automating such tasks as managing responses. 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. as organizations grow larger. in a bank an event would be a large deposit. it becomes more difficult to manage multiple simultaneous programs and track costs across multiple channels. Another critical core competency is fulfilment. Cross-sell and up-sell application may be used to schedule sales calls. Marketing automation is critical. banks are attempting to build lasting relationships with customers by matching their life-path needs to complementary products and services. bonds and annuities. triggers can be established to identify prospects for additional sales. pricing or billing issues. keep detailed records of sales activities. qualifying leads. which would then trigger a sales person to call the customer and ask if she or he would be interested in investment options. easily and efficiently. The goal of effective fulfilment is to provide a myriad of information to customers and prospects quickly.

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

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

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

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

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

E-education is an example of this.DBA 1727 NOTES E-services that fall into this category include    Banking Stock trading Education In some cases. this may bring a new dimension to the original service. 3. Matchmaking services. This group essentially sells information content of one sort or another and includes ecommerce sites that provide on-line publishing such as web-based newspapers   consultancy advice specialized financial or other information 126 ANNA UNIVERSITY CHENNAI . E-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. enhancing and altering it. Information-selling on the web. 2. It may also bring into the catchments new groups of consumers of the service to whom it might not have been previously accessible. These take a need from an individual or business customer and provide mechanisms (from providers) for matching that need.

Specialized services such as auctions. 2. foreign exchange transactions.1. Entertainment services.bankofamerica.com) illustrates the second model. and education. Therefore. Many different auction sites have appeared and these are discussed further in this lecture.1.E-COMMERCE TECHNOLOGY AND MANAGEMENT 4. Web-Enabled Services Web-enabled services include personal banking. or theme sites. while the homepage of Bank of America (www. 127 ANNA UNIVERSITY CHENNAI . 4. stock trading. While not all banks offer the full range of services on the internet. Pure cyber banks Traditional banks that provide e-banking to complement their retail banking SFNB. electronic games. we can distinguish between twp distinct models: 1.3. These provide internet-based access to videos.sfnb. 2. 5. etc. This E-entertainment sector is expected to grow rapidly in the next few years. with a convergence of TV and internet-based technologies. NOTES 5. www. E-banking Security First Network Bank (SFNB. 2. It provides most of the banking services on the web.com/)was the first internet bank. banks in both the mentioned groups offer a varied range of services including 1. you can do your banking with your fingers instead of your feet. 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. 3. movies. personal banking commercial banking for both small businesses and large corporations financial services loan application services international trade including settlement instruments. is a pure cyber bank. Looking at e-banking.

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

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

com. promotions. as well as suggestions on changes to de itinerary. etc. The information is then returned to the e-service provider site to give the customer the required service. use of graphics and animation to explain concepts. A large number of e-commerce sites have appeared. 2.3. pricing. namely use of quizzes. or over other databases or web sites to look for one or more matches to these requirements.2 Matchmaking Services This has perhaps been the area in which there has been the greatest growth in eservices. The travel agent would try his best to meet these requirements by providing information regarding schedules. which address this precise market segment. 2.1. car hire. These bookings could be for individuals or corporations involving corporate rates. particularly those that have a dynamic character to them. the customer who could be an individual or business specifies his requirements in relation to the service. The e-commerce site then does a search over its own databases or over the internet using mobile agents. Essentially. Travel Services Before the internet. 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. 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. 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. tests to provide the student with instant feedback on his/her mastery of the materials.com travelweb. It is anticipated that the internet will not only lead to cyber universities of one kind or another but will also have a marked effect on teaching and learning in traditional universities. The use of the ‘internet for education opens up many possibilities. in most of these applications. These web sites work in exactly 130 ANNA UNIVERSITY CHENNAI .com. hotel. train tickets.DBA 1727 NOTES name. tours. one might have gone along to a travel agent in order to book one’s travel requirements such as air tickets. etc. and priceline. These include trip.

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

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

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

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

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

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

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

management has to balance the five key values that increasingly drive customers’ banking decisions: simplicity. high-touch personal and affordable service. The emergence of low-cost interactive access terminals for the home as well as affordable interactive home information services. convenience. quality.3.3. too. For banks. 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. Consumer question includes : 138 ANNA UNIVERSITY CHENNAI . Banks must deliver high quality products at the customers’ convenience with high-tech. 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 establishment of good customer service on the part of banks. and price. The development of effective back-office systems that can support sophisticated retail interfaces.  Marketing Issues: Attracting Customers The benefits of online banking are often not made clear to the potential user.DBA 1727 NOTES approval made DOS an industry standard. However. The creation of online financial supply chains to manage the shift from banks as gatekeeper models to banks as gateways. IBM was unable to move the industry to a new operating system called OS/2 in the late 1980s because Microsoft controlled the customer relationship and was able to convert most end -users to Windows. customized ser-vice. In order to achieve this. The identification of new market segments with untapped needs such as the willingness to pay for the convenience of remote banking. losing control over the interface could have dire consequences.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. 2.

000 to Rs. Banks must switch the costs of moving from one software platform to other to keep customers from moving.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. and this familiarity increases interest in additional vices and increases switching costs. 250. banks have opportunity to tap into this market segment. Customers are increasingly familiar with using technology to access bank accounts and to handle financial affairs. 5 million. household management is pushing consumers toward integrated services that can speed up financial procedures. Many of these firms have PCs and modems. While short term convenience is important. In the online world. Thus. consumers want 19-term ability to control and organize their finances more than they want convenience. Marketing Issues: Keeping Customers Keeping customers (or customer loyalty) requires the following: 1. The rapidly growing use of personal computers by small business. but also in order to be attractive to potential customers. 3. there is not a big cost dif-ference between serving one customer and serving 100.provides a solid opportunity for banks to build a profitable base of small business until a broader consumer market evolves. NOTES 2. Banks must also look beyond home consumers for online banking consumers. Regardless of how a bank chooses to answer these questions. 139 ANNA UNIVERSITY CHENNAI . Banks must provide integrated services. The oftcited time squeeze on consumerslong commutes. marketers must also work on building a loyal customer base not only in order to maintain the existing base. it is clear that make a mistake trying to sell online banking services on the basis of convenience. These integrated services contribute to cementing the customer relationship. 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. family obligations. New services like interactive cash management services could generate significant revenues for banks. Clearly. heavy workload.000 customers. Banks can realize the positive cost implications for the longterm value of building customer loyalty. There are mil-lions of small businesses with annual sales ranging from Rs.

With more time available to draw users’ attention. the advertiser pays for the access time used when accessing online yellow pages. advertisers ask site visitors to provide their names and addresses in exchange for a product discount. users will spend a larger proportion of their time on Web sites and a smaller proportion waiting to access them. In many cases. 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 Reasons expected for the increase in Advertising spending Shorter Access Times As more bandwidth becomes available.1 Advertising and Online Publishing With the intention of attracting advertising dollars. With more advertisers. 30. Many online periodicals include traditional advertisements as well as icons. Promotions are also common. which display an advertiser’s logo and. for example. which reportedly charges Rs.1. and People. 100 per day for an advertisement. Playboy. and magazines such as Hot Wired.DBA 1727 NOTES 2. This should draw to the Web advertisers who may have been concerned that the current graphical quality was insufficient for displaying their products. advertising rates should rise.4 ADVERTISING AND ONLINE PUBLISHING 2.000-Rs. advertisers should be willing to pay more per user to place their icons in online periodicals. send a user across the Web to the advertiser’s Web site. Shorter access times also enable increasingly complex graphics to be placed on Web sites. which reportedly charge Rs.4. magazines and newspapers have also set up sites on the Web. 2.4. Reduced Access Fees New Internet users will be attracted by reduced ac-cess fees. with part of the reduction covered by advertisers.000 per quarter for an advertiser to place an icon in the periodical. The cost of the access fee itself can be shared by an advertiser if. 140 ANNA UNIVERSITY CHENNAI . without requiring additional access time. 45. when clicked with a mouse.

2. a measurement system will not be useful until: 1. There are three reasons for this:    The market is too small to justify the cost of measuring its size. and an advertiser can use it to justify the cost of promoting a Web site. an online publisher can use it to determine advertising rates and the appeal of its articles. leading them to pay more for placement in online periodicals. it should be increasingly important for advertisers to get users to their sites quickly. and placing a site -linked icon in an online page.E-COMMERCE TECHNOLOGY AND MANAGEMENT Increasingly Convenient Access to Information As the amount of information online increases. few publishers have attempted to measure how many advertising dollars are being spent. With more information available. maintaining a Web site. Increasingly Valuable Information Product descriptions can be enhanced through online advertising. If online advertising encourages users to shift a portion of their purchases to the Web. 2.1. the decision to purchase should be easier and more purchases should occur (assuming the product is desirable).2 Better Measurement of Advertising Effectiveness Product advertising is far more effective if it leads to a purchase. However. Spending can be the amount that advertisers pay other Web sites such as periodicals and games to display their icons or product offerings. then companies may pay far more to advertise. 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.4. The market is changing too rapidly to develop an effective means of measurement. There is not a clear definition of what advertising expenses should be counted. NOTES 141 ANNA UNIVERSITY CHENNAI .

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

They discovered that offering exciting technology without compelling content is insufficient to capture market share.4. However. it was reported that.000 registered readers on the Web. NOTES 2. Online Copyright Protection Methods Unauthorized access to published content can be restricted by two methods: 1. 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. but judging from recent product offerings. Restricting manipulation of the electronic file containing the work. and that number is growing by some 3. publishers realized that simply having a presence on the Web did not guarantee profits. in less than three months. failing to define the business purposes driving their online presence. 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. This includes controlling Web server access or controlling individual document access. As the initial euphoria wore off. In addition.2 Electronic Commerce and Online Ppublishing The Web may have blossomed because of peer-to-peer publishing. Likewise. from 1993 to 1995 much of online publishing was inhibited by a lack of business purpose. For instance. there is an enormous groundswell of interest among both commercial and corporate publishers in the Web. 2. 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 . 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. The promise of new interactive publishing captured the imagination of both content providers and the public. the electronic edition has attracted more than thirty advertisers paying to reach this audience.E-COMMERCE TECHNOLOGY AND MANAGEMENT The stakes are high.000 readers per day. At that time. Initially. and unless the integrity of those works is assured. 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. Also. the Wall Street Journal Interactive Edition attracted 500.

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

E-COMMERCE TECHNOLOGY AND MANAGEMENT Effective technological protection mechanisms are vital to ensuring the availability of quality content online. as well as fo-cused publishers in categories not easily suited for the online medium. Watchers These are large publishing companies that employ scale-sensitive economics. the digital world has no international boundaries.1 Online Publishing Strategies As with any new development. 2. This category includes publishers of unbranded or less distinctive content who cannot attract a sufficiently large initial consumer franchise. Today. The Internet makes it extremely easy to copy. These publishers have the capacity to derive the highest benefits from new media as their learning curves are much shorter than others. which makes the risk even greater. 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. retransmit.4. Testers These are the majority of publishers that face either attractiveness and/ or skill challenges. and policing is impossible since the levels of protections and sanctions against infringement vary widely in countries across the globe.2. They do not and cannot offer more because in an environment where the culture and technology provide so little protection for the rights of content producers. there is too great a risk to their intellectual property. 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. and alter works without the permission or the copyright holder. Testers also include 145 NOTES ANNA UNIVERSITY CHENNAI . who are uncertain who will win in the online marketplace. and they already have many of the necessary resources at hand. Moreover. Gathered here are many multi category and specialty publishers who are competing successfully in traditional markets. publishers such as Addison—Wesley only offer catalogs or sample selections of works available online.

2. quality. Those with strong brand images and existing consumer franchises may choose to post-pone entry until they find viable service providers and distributors. service. This is more controversial and more difficult to implement.4.2 Online Publishing Approaches There are four contrasting content publishing approaches. 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. This is new to the Web. content is assembled in real-time and transmitted in the format best suited to the user’s tastes and preferences.     The online archive approach. 146 ANNA UNIVERSITY CHENNAI . Publishers will have to innovate constantly and challenge present concepts if this form of commerce is to become widely accepted and popular. The new medium approach. Content. The publishing intermediation approach. but is a logical extension of the trends in electronic delivery over the past several years. to some extent. and customer service as well as re-learning the fundamental principles concerning why people subscribe. Winning in online publishing will entail developing new skills in areas such as tailored advertising. and diversity of choice also become critical success factors. incentives. Speed of delivery. and exploring the attractiveness of potential channels. In this approach. publishers are educating themselves about the potential opportunities without committing themselves to anyone position.DBA 1727 NOTES branded general publishers with robust consumer franchises and attractive distribution channels already in place. The dynamic and just-in-time approach. building required skills. bundling of products. 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. the online medium appears to be an alternative. 2. In general. 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. For this group. This is an online extension of the thirdparty publisher role off-line. order processing and fulfilment. and price will not be enough to compete in this new environment. but also more exciting.

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

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

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

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

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

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

food. resellers. suppliers. and other partners. As Handfield and Nichols (1999) suggest. sales history Customer – sales history and forecasts Supplier – product line and lead times.330. Retter and Calyniuk 1998). petrochemicals. customer satisfaction NOTES 153 ANNA UNIVERSITY CHENNAI . product plans Transportation – carriers. The percentage of Internet – based B2B EC compared to total B2B commerce will expand from. 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 in2003.1 percent in 2000 and 9.3 Characteristics of B2B EC Business – to – business electronic commerce implies that both the sellers and buyers are Business Corporation. For example. utilities. partner roles and responsibilities. market share Sales and marketing – point of seal (POS) . costs Inventory – inventory levels. and agriculture are the leading items in B2B EC. quality. Computing electronics. “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.5. prices. delivery time.9 billion by 2003 and continue to be the major share of the EC market (Free-man 1998. shipping and warehousing. while business – to – consumer electronic commerce implies that the buyers are individual consumers. commitments.E-COMMERCE TECHNOLOGY AND MANAGEMENT “institutional sales”). locations Supply chain alliance – key contacts. competitive product offerings. carrying costs. B2B applications will offer enterprises access to the following sorts of information:           Product – specifications. Business-to – business EC is expected to grow to $1. promotions Supply chain process and performance – process descriptions. a company selling photocopiers would more likely be a B2B sales organization than a B2C sales organization.2 percent in 1997 to 2. performance measures. lead times. schedules Competitor – benchmarking. sales terms and conditions Product process – capacities. 2. motor vehicles. paper and office products.

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

campaign description. and if at all possible. your product positioning. 155 NOTES ANNA UNIVERSITY CHENNAI . target market. So always put metrics in place to measure your campaigns. RosettaNet is an XML-based. After all. As well as focusing the agency on what’s important to you and your campaign. Briefing an agency A standard briefing document is usually a good idea for briefing an agency. measure your impact upon your desired objectives. corporate guidelines. emerging B2B standard in the high tech industry.5. be it Cost Per Acquisition. graphical considerations. and any other supporting material and distribution. Typical elements to an agency brief are: Your objectives. these are also referred to as “third-party” B2B marketplaces.make sure the entire organization is geared up to handle the inquiries appropriately. ANSI ASC X12 is a popular standard in North America. Since the builders of such marketplaces primarily aim at facilitating buyer-seller interaction (in most cases without being a buyer or seller themselves). Cost per Lead or tangible changes in customer perception. it serves as a checklist of all the important things to consider as part of your brief. 2.5 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. An approach like UN/CEFACT’s Modeling Methodology (UMM) might be used to capture the collaborative space of B2B business processes.E-COMMERCE TECHNOLOGY AND MANAGEMENT the marketing process . you’re not in the business of developing marketing campaigns for marketing sake.and that doesn’t just include developing the lead . target audience. product. Measuring results The real value in results measurement is in tying the marketing campaign back to business results. B2B standards UN/EDIFACT is one of the most well-known and established B2B standards.

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

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

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

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

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

com. Typical intermediaries are www. Independent auctions.. There are three major types of B2B auctions according to Forrester Research: 1. For example.g. for selling obsolete computer equipment to its regular business customers. while introducing the latest technology to them to facilitate their business.net) is a global non-profit membership organization that aims to meet the needs of companies doing EC. Commodity auctions. 3. Private auctions by invitation only. In this case many buyers and sellers come together to a third – party Web site. 2.fastparts.auctionagate. www. NOTES Acquiring and Retaining Members  All bidding transactions result in additional registered members. utilities. and www. It targets promoting and supporting emerging communities of EC. Ingram Micro has its own site.com.E-COMMERCE TECHNOLOGY AND MANAGEMENT Increasing Page Views  Auctions give “stickiness”. The Dutch flower market is another example. 2.8 Business – TO – Business Services Many companies provide services that are intended to facilitate B2B.net and www. (e.com). www. access energy.com. CommerceNet CommerceNet (www.fairmarket.band – x. In this case companies use a third – party auctioneer to create the site and sell the goods. Several companies by pass the intermediaries and auction their products by themselves. others by specialists. Here are some examples. and telecommunications are sold at www. 161 ANNA UNIVERSITY CHENNAI .5. CommerceNet established a forum for companies doing EC to meet and exchange their experiences.com.imx exchange. Auction users spend more time on a site and generate more page views than other users.com.commerce.autionblock.metalsite. www. Some of these services are provided by intermediaries.

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

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

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

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

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

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

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

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

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

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

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

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.6 Elements of Internet Architecture     Protocol Layering Networks Routers Addressing Architecture NOTES Protocol Layering To communicate using the Internet system.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 must implement the layered set of protocols comprising the Internet protocol suite. A host typically must implement at least one protocol from each layer. save and display the full HTML source code for any and all of the published web documents.Presentation and Application . and support protocols that provide common system functions. (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. The most common Internet user protocols are: 173 ANNA UNIVERSITY CHENNAI . although some application layer protocols do contain some internal sub-layering. The Internet suite does not further subdivide the Application Layer. The application layer of the Internet suite essentially combines the functions of the top two layers . The Application Layer in the Internet protocol suite also includes some of the function relegated to the Session Layer in the OSI Reference Model.of the OSI Reference Model [ARCH:8]. We distinguish two categories of application layer protocols: user protocols that provide service directly to users. 3.1. (d) ability to acquire.

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

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

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

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

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

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

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

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

In recent years many VoIP systems have become as easy to use and as convenient as a normal telephone. but it is not universally available.DBA 1727 NOTES updates slowly. Many uses can be found for personal webcams in and around the home. Video chat rooms. was founded on February 15.000. Voice quality can still vary from call to call but is often equal to and can even exceed that of traditional calls. It is currently estimated that there are 64. however. ships in the Panama Canal. and it is also currently estimated that 825. video conferencing. VoIP is maturing into a viable alternative to traditional telephones. Currently. with and without two-way sound. VoIP can be free or cost much less than a normal telephone call. as the Internet carries the actual voice traffic. inexpensive VoIP modems are now available that eliminate the need for a PC. Traditional phones are line-powered and operate during a power failure. It is now the leading website for free streaming video. the traffic at a local roundabout or their own premises. sometimes described as an Internet phenomenon because of the vast amount of users and how rapidly the site’s popularity has grown. if users do sign up they are able to upload an unlimited amount of videos and they are given their own personal profile. Internet users can watch animals around an African waterhole. It uses a flash-based web player which streams video files in the format FLV. a few VoIP providers provide an emergency service. Interoperability between different providers has improved and the ability to call or receive a call from a traditional telephone is available. and remote controllable webcams are also popular.000 new videos are uploaded every day. Voice telephony (VoIP) VoIP stands for Voice over IP. Simple. where IP refers to the Internet Protocol that underlies all Internet communication. VoIP does not do so without a backup power source for the electronics. Users are able to watch videos without signing up. This phenomenon began as an optional two-way voice extension to some of the instant messaging systems that took off around the year 2000. Remaining problems for VoIP include emergency telephone number dialling and reliability.000 videos on YouTube. The benefit is that. 2005. You Tube. especially over long distances and especially for those with always-on Internet connections such as cable or ADSL. 182 ANNA UNIVERSITY CHENNAI . Thus. live and in real time.

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

which online marketing companies can use as information as to what those users will purchase online. Facebook and others which thousands of Internet users join to advertise themselves and make friends online.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 . It is the fastest way to spread information to a vast number of people simultaneously.1. 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. or download it directly in some cases. Friendster. 3. In turn. a person can order a CD online and receive it in the mail within a couple of days. also known as e-commerce. An Internet access provider and protocol matrix differentiates the methods used to get online. when they advertise themselves they advertise interests and hobbies. though this is not as widely used. More mobile phones have Internet access than PCs. which can also run a wide variety of other Internet software. some of the biggest companies today have grown by taking advantage of the efficient nature of low-cost advertising and commerce through the Internet. The Internet has also subsequently revolutionized shopping—for example. Orkut. Examples of personalized marketing include online communities such as MySpace.8 Marketing The Internet has also become a large market for companies.DBA 1727 NOTES handsets. and advertise their own companies’ products to those users. 3.1.

com DoubleClick. They defy easy categorization by diversifying revenue streams and becoming hybrids in a cost-efficient way.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 YAHOO! 185 ANNA UNIVERSITY CHENNAI .com Oracle CISCO Amazon. Let’s take a look at some of the top e-businesses in the field today:        E-Bay HomeStore.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 .

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

com’s internet business model allows prospective buyers to review properties before buying. Consulting services with major firms like Sun Professional Systems have established their reliability with customers. Their built-in self-service system for customers. and buyer’s guides to homes and household items. Useful advice when moving home and tips on resettling has ensured user satisfaction to the core.6% of all online visitors. employees and suppliers improved productivity and accuracy and brought down costs by 100’s of millions of dollars. home improvement tips. online loans.com is a company that has dominated the real estate field with 3. 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. ORACLE This software and service provider entered the digitized world only in 1998. 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. Is that all? No. Their main revenue came in from subscriptions (52%) and the remaining from advertising. Homestore. 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. remodeling. NOTES 187 ANNA UNIVERSITY CHENNAI . have made them a one stop shop for e-businesses today. Homestore. they also offer financial advice. Innovative products and services and integration of these services have brought them into the forefront of web innovation today.COM Statistics have revealed that realty sites account for about 9. and metamorphosed into a digital pioneer in the span of two years.28 million customers in January 2001 and is listed among the Fortune top e-50.E-COMMERCE TECHNOLOGY AND MANAGEMENT HOMESTORE. It registered a growth of 252% at one stage. and safety and security aspects.

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

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

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

NOTES An Intranet is a company-wide network that is based on Internet technologies. Simply put. The protocol suite manages all the information that moves 191 ANNA UNIVERSITY CHENNAI . In reality.E-COMMERCE TECHNOLOGY AND MANAGEMENT 3. growth of internal networks based on Internet technologies known as the Intranet is outpacing the growth of the global Internet itself. 3. the Internet Protocol and other protocols. An Intranet is a company-specific network that uses software programs based on the Internet TCP/IP protocol and common Internet user interfaces such as the web browser.2.2 TCP/IP protocol suite The TCP/IP protocol suite includes the Transport Control Protocol. an Intranet is the application of Internet technologies within an organization private LAN or WAN network.2.2 INTRANET 3. The Intranet environment is completely owned by the enterprise and is generally not accessible from the Internet at large. many Intranets are built around Web servers delivering HTML pages.1What is an Intranet? The Internet has captured world attention in recent years. Today.

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

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

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

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

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

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

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

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

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

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

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

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

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

which can be integrated into other online collaborative applications such as Content Management Systems. The limited access typically includes the ability to order products and services. request customer service and much more. Doing so frees up resources to concentrate on customer service and expansion as opposed to administrative office tasks such as data entry. Also exist a variety of Open Source extranet applications and modules.3.4 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. 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. 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. check order status. Specially secured extranets are used to provide virtual data room services to companies in several sectors (including law and accountancy).E-COMMERCE TECHNOLOGY AND MANAGEMENT applications are offered on a Software as a Service (SaaS) basis by vendors functioning as Application service providers (ASPs). A properly developed extranet application provides the supply chain connection needed with customers and suppliers to dramatically lessen routine and time consuming communications. and others which include broader collaboration and project management tools. some of which are for pure file management. 205 ANNA UNIVERSITY CHENNAI . There are a variety of commercial extranet applications.

employee training costs) — if hosted internally instead of via an ASP.5 Disadvantages 1. Extranets can be expensive to implement and maintain within an organization (e. Software products. selling online advertising space. 3. music and video files can be delivered to the customer through the downloading process. This could cause a lack of connections made between people and a company.g. 3.6 E-Commerce Business Models Since eCommerce consists of doing business online or electronically. 206 ANNA UNIVERSITY CHENNAI . Amazon.3. which hurts the business when it comes to loyalty of its business partners and customers 2. software. Extranets can reduce personal contact (face-to-face meetings) with customers and business partners. Since delivery is often by mail. this is similar to customers buying from a mail order catalog. and online commissions. the business or revenue models are somewhat different than that of a “brick and mortar” business.3. extranets provide increased efficiencies between your company and its customers and/or suppliers. 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.com is a good example of a business using the direct sales model to gain revenue. Common eCommerce models are direct online sales.DBA 1727 NOTES Just as intranets provide increased internal collaboration. 3.: hardware. e-books. 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. Security of extranets can be a big concern when dealing with valuable information. System access needs to be carefully controlled to avoid sensitive information falling into the wrong hands.

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

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

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

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

and possibly the public telecommunication system to securely share part of an organization’s information or operations with suppliers. and online commissions. such as an online banking application managed by one company on behalf of affiliated banks Share news of common interest exclusively with partner companies  E-Commerce Business Models: Common eCommerce models are direct online sales.E-COMMERCE TECHNOLOGY AND MANAGEMENT web browser. an Intranet is the application of Internet technologies within an organization private LAN or WAN network. selling online advertising space. network connectivity. 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. partners. Why are intranets popular        Inexpensive to implement Easy to use. customers or other businesses. just point and click Saves time and money. 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. vendors. Simply put. 211 ANNA UNIVERSITY CHENNAI .

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

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

on-line markets. 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. Currently. and gradually came to be used as money. Banks are solving these problems all over again in an online environment. merchants face the unappealing option of either picking one standard and alienating consumers not subscribing to a standard or needing to support multiple standards. health care. In the early 1970s. 214 ANNA UNIVERSITY CHENNAI . 4. For instance. effort. users install client software packages. sometimes known as “electronic wallets. and even government-in fact.1. This software then communicates with “electronic cash registers” that run on merchants’ Web servers. in one method marketed by CyberCash. Each vendor’s client works with only that vendor’s own server software. Further. The solutions proposed to the online payment problem have been ad hoc at best. Organizations are motivated by the need to deliver products and services more cost effectively and to provide a higher quality of service to customers. Banks faced similar problems in off-line commerce in the early nineteenth century. Innovations in payment methods involved the creation of new financial instruments that relied on backing from governments or central banks. and a recurrent problem was the tendency of some institutions to issue more notes than they had gold as backing. 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. consumers can view an endless variety of products and services offered by vendors on the Internet.” on their browsers. getting one bank to honor another’s notes was a major problem. but a consistent and secure payment capability does not exist. and money. which entails extra time. a rather restrictive scenario. anywhere money needs to change hands. and the first applications-credit cards appeared soon after. Today.1.1 Types of Electronic Payment Systems Electronic payment systems are proliferating in banking. Many banks issued their own notes. The crucial issue in electronic commerce revolves around how consumers will pay businesses online for various products and services. Research into electronic payment systems for consumers can be traced back to the 1940s.DBA 1727 NOTES Banks and retailers want to wean customers away from paper transactions because the processing overhead is both labor intensive and costly. retail. Currently.

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

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

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

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

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

DBA 1727 NOTES Interoperability The SET specifications must be applicable on a variety of hardware and software platforms. The persons who uses the Internet and the Web to benefit themselves by doing illegal activities such as. This type of criminal activity raises the concern for network security. 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.  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. information and causing damage to resources. ands must not prefer one over another. As all the people are not honest. stealing software’s. 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. There are many terms used to signify the computer criminals. For example teenagers who tries to enter into a network out of curiosity till they are caught or deducted. 220 ANNA UNIVERSITY CHENNAI . 4.1 Security Issues The Internet is a huge place that hosts several millions of people.2 SECURITY SCHEMES AGAINST INTERNET FRAUD 4. 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.2. In this case the person has no intentions to do any damage or to steal any resources but tries to observe the system functionality. illegal activity’ is inevitable. Statistics show that only 10% of computer client is reported and only 2% of the reported client results in with convictions.

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

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

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

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

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

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

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

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

This information of-course applies equally to the both the user and the storeowner. As the user of the system. Finally. They can even unformatted a formatted disk after securely deleting file defrayment your drive using any popular disk utility. As server and browser security increases almost pirates will be driven to breaking into the system at the source or at the destination. as well as transactions in the process of being fulfilled. Again store owners should ensure that they encrypt archived transactions. One of the best security measures that you can take for physically stored data is to have hardware password protection. If a business can afford only lesser security then the best you can do is keep permissions of files hidden from pirates. The best solution is to use 229 ANNA UNIVERSITY CHENNAI . 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. Storeowners must ensure that product information database is secure.” 4.4 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. you should know the place and the method to store your data. Such program ensures that the original structure of the disk is recognized leaving no recoverable data. Many commercial products provide this facility and often work well to keep the data secure. General users to your system should not have access to these tools because. Another security measure is to delete the not required data or information. Because of the nature slip type connectivity and TCP/IP networks. Pirates can easily undelete previously deleted information. be sure to protect administration tools as well as compiler. When you are connected to the network your personal system is vulnerable. Decrypted data residing on your hard disk may be available to outside for snooping. the tools can be used to create programs that aid the pirate in greasing security. someone else could be probing your system while you are working.E-COMMERCE TECHNOLOGY AND MANAGEMENT      System and user logs Credit card information Trusted remote system information Compiler Administration tools NOTES User passwords and usage logs should be kept secure to keep pirate from looking at those files to figure out how to gain further access to your system. if they fall into wrong hands. Simply deleting the information is not enough.2.

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

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

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

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

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

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

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

. he or she will be given credit in the range of Rs. In these cases. In some cases. In the case of credit cards. It is also different from a charge card (though this name is sometimes used by the public to describe credit cards).1 What is credit card? A credit card is a system of payment named after the small plastic card issued to users of the system. credit card issuers will offer incentives even on their secured card portfolios. Typically. which requires the balance to be paid in full each month. A credit card is different from a debit card in that it does not remove money from the user’s account after every transaction. 3. 1000.4 CREDIT CARD BASED-ELECTRONIC PAYMENT SYSTEM 4.2 Secured credit cards A secured credit card is a type of credit card secured by a deposit account owned by the cardholder. to adapt and to take initiative. 4.4. but the agent itself decides whether to approve and allow the action. the cardholder must deposit between 100% and 200% of the total amount of credit desired. The level of intelligence is further classified according to its ability to respond. 500–Rs. 2. Thus if the cardholder puts down Rs. 1. that is actions performed without the need for direct human intervention or intervention by other agents. the issuer lends money to the consumer (or the user) to be paid to the merchant. The agents should have control over the actions performed within its system. and can be as low as 10% of the 237 NOTES ANNA UNIVERSITY CHENNAI . Intelligence: The extent to which an agent can understand its own internal state and its external environment.4. 4. i. the deposit required may be significantly less than the required credit limit.e. not have actions performed by other agents. Respond: Agents should perceive and respond to their environments. intelligence and mobility. Other agents can request actions. Agency: The degree of autonomous action that can me taken. 1000.E-COMMERCE TECHNOLOGY AND MANAGEMENT Intelligent Agent Computing Agent Three primary dimensions of the agents have been defined: agency.

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

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

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

however. The consumer can’t claim that he didn’t agree to the transaction. The bank or processing party relays the information tot the customer’s.5(a) Nobody can cheat this system. services. NOTES 2. In this scheme. credit Card systems will have to develop distributed key 241 ANNA UNIVERSITY CHENNAI . The merchant validates the customer’s identity as the owner of the cred-it card account. To make a credit card transaction truly secure and non-refutable. the consumer sends vendor X the message. the following sequence of steps must occur before actual goods.4. because the consumer included the precise time in the message. 4. To buy something from vendor X. safety. The secret key is re-encrypted with a password. The merchant relays the credit card charge information and signature to its bank or on-line credit card processors. charge authentication. The customer’s bank returns the credit card data. and security. The vendor can’t invent fake charges. does not meet important requirements for an adequate financial system. and the unencrypted version is erased. privacy. The vendor will then sign the message with its own secret key and send it to the credit card company. which will bill the consumer for Y dollars and give the same amount (less a fee) to X. This practice. each consumer and each vendor generates a public key and a secret key. To become useful. speed.” then the consumer uses his or her password to sign the message with the public key. (See Fig. 5. a thief would have to get access to both a consumer’s encrypted secret key and password. The public key is sent to the credit card company and put on its public key server. such as non refutability. 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. To steal a credit card.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. I am paying Y dollars to X for item Z. or funds flow: 1.4. because he doesn’t have access to the consumer’s key.4. because he signed it (as in everyday life). and authorization to the merchant. The credit card company sends the consumer a credit card number and a credit limit. He can’t submit the same charge twice. ‘It is now time T. 3.E-COMMERCE TECHNOLOGY AND MANAGEMENT 4. bank for authorization approval.

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

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

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

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

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

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

The 3 by 5 mm security chip embedded in the card is shown enlarged in the inset. 2.2 Types of debit card A Finnish smart card.DBA 1727 NOTES ”cashout” facilities to customers. 7. The gold contact pads on the card enable electronic access to the chip. 3.5. debit cards are used widely for telephone and Internet purchases. and in some instances cash transactions by volume. 4. 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”. for example Switch (now: Maestro) and Solo in the United Kingdom. 2. “EC electronic cash” (formerly Eurocheck) in Germany and EFTPOS cards in Australia and New Zealand. Magnetic stripe Signature strip Card Security Code Although many debit cards are of the Visa or MasterCard brand. Austria’s “Bankomatkasse” and Switch in the United Kingdom) being rebranded 248 ANNA UNIVERSITY CHENNAI . 5. 4. 6. Like credit cards. where a customer can withdraw cash along with their purchase. Carte Bleue in France. The use of debit cards has become wide-spread in many countries and has overtaken the check. 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. each accepted only within a particular country or region. Laser in Ireland. An example of the front of a typical debit card: 1. 3. there are many other types of debit card.

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

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

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

6. 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.DBA 1727 NOTES 4. Electronic checks are delivered either by direct transmission using telephone lines. Ideally.6. and require the use of digital certificates to authenticate the payer. Electronic checks are modelled on paper checks. The security/authentication aspects of digital checks are supported via digital signatures using public-key cryptography. or by public networks such as the Internet. and bank account. such as automated clearing houses (ACH) networks. electronic checks can be easily understood and readily adopted. thus simplifying customer education. 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 will facilitate new online services by: allowing new payment flows (the payee can verify funds availability at the payer’s bank).6 ELECTRONIC CHECKS 4. 252 ANNA UNIVERSITY CHENNAI . By retaining the basic characteristics and flexibility of paper checks while enhancing the functionality. enhancing security at each step of the transaction through automatic validation of the electronic signature by each party (payee and banks). except that they are initiated electronically. the payer’s bank.2 Benefits of Electronic Checks Electronic checks have the following advantages:  Electronic checks work in the same way as traditional checks.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. use digital signatures for signing and endorsing.

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

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

there are significant differences between echecks and home banking bill payments. These differences are reviewed in five main categories: terminology. this white paper provides a high level comparison of some of the main differences between the ACH debit system and echecks. and information richness. This white paper will briefly explore the differences between the two payment approaches. This white paper briefly compares paper and echecks. E-checks and Debit cards Debit cards are used by individuals and to a far lesser extent by businesses. transaction authorization.E-COMMERCE TECHNOLOGY AND MANAGEMENT 4.6. NOTES 255 ANNA UNIVERSITY CHENNAI . cost. This white paper will briefly compare the differences between debit cards and e-checks. risk management. and allowance for errors. This white paper briefly compares the differences between SET and e-checks. E-check and Automated Clearing House (ACH) Since electronic checks are debit transactions.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. to make payments at the retail point-of-sale. and risk management. or to obtain cash from ATMs. business practices. 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. underlying technology. and although they have some of the characteristics of electronic payments. based on five categories: usage. E-check and Home Banking Home banking bill payments are convenient for consumers.

university students. the MTA anticipates more than 1.2 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. use magnetic stripe technology or integrated circuit chips to store customer-specific information. Other private sector institutions market stored value products to transit riders. and nine tolled intrastate bridges and tunnels.7 STORED VALUE CARDS AND E-CASH 4. we are a long way from a universal payment system because 256 ANNA UNIVERSITY CHENNAI .600 MTA buses became operational in 1996. 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. They reduce cash-handling expenses and losses caused by fraud. All 3.1 Smart Cards Smart cards. operates the New York City subway and public bus system. In spite of the many prototypes developed. through its subsidiaries and affiliates. including electronic money. the MTA began the operation of an automated fare-collection system based on a plastic card with a magnetic stripe. and enhance consumer convenience and safety. By 1999.7. vending customers. Institutions such as the MTA have made a considerable investment in the stored value card processing network. 4. and to get a good return on investment must identify new and innovative ways to achieve additional operating efficiencies and value. Smart cards offer clear benefits to both merchants and consumers. the Long Island Railroad and Metro-North commuter rail systems. One successful use of stored value cards is by New York’s Metropolitan Transportation Authority (MTA). store information.2 billion electronic fare collection transactions a year on subway and bus lines. telephone customers.DBA 1727 NOTES 4.7. The management challenges created by smart card payment systems are formidable. The cards can be used to purchase goods or services. also called stored value cards. and retail customers. In addition. The MTA is the largest transportation agency in the United States and. 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. In 1994. The full complement of 467 subway stations is expected to be operational by mid-1997. and perform many other functions. These facilities serve four million customers each workday. control access to accounts.

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

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

Electronic purses would virtually eliminate fumbling for change or small bills in a busy store or rush-hour toll booth. The vending machine need only verify that a card is authentic and there is enough money available for a chocolate bar. Although it may be surprising to some. by telephone and transferred to a bank account. cash is still the most prevalent consumer payment instrument. In order to displace cash. meaning that it can be given or traded to someone else. the purse can be recharged with more money. and waiting for a credit card purchase to be approved. Today the cards cost $1. more likely.3 Electronic or Digital Cash Electronic or digital cash combines computerized convenience with security and privacy that improve on paper cash. And when the balance on an electronic purse is depleted. NOTES These reasons behind the prevalent use of cash in business transactions indicate the need to re-engineer purchasing processes.7. the receipts can be collected periodically in person—or. Cash remains the dominant form of payment for three reasons: o o o lack of consumer trust in the banking system. it can be used to pay for. candy in a vending machine equipped with a card reader. 4. from $5 to $10. at an ATM or through the use of an inexpensive special telephone. While the technology has been available for a decade. inefficient clearing and settlement of non-cash transactions. A simple card reader would cost a merchant less than $200. even after thirty years of developments in electronic payment systems. In one second. electronic payment systems need to have some cash-like qualities that current credit and debit cards lack. As for the vendor. the cards have been relatively expensive. 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. the value of the purchase is deducted from the balance on the card and added to an e-cash box in the vending machine. cash is negotiable. and special telephones that consumers could install at home to recharge the cards are projected to cost as little as $50. For example. Digital cash attempts to replace paper cash as the principal payment vehicle in online payments.E-COMMERCE TECHNOLOGY AND MANAGEMENT After the purse is loaded with money. Cash 259 ANNA UNIVERSITY CHENNAI . say. and negative real interest rates on bank deposits. The versatility of digital cash opens up a host of new markets and applications. 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.



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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

use. education. In addition to common law and the Constitution. 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.DBA 1727 NOTES Amendment protections against unreasonable search and seizure of one’s personal documents or home. Electronic Communications Privacy Act Makes conduct that would infringe on the security of electronic communications illegal of 1986 Computer Matching and Privacy Regulates computerized matching of files held by different government agencies Makes conduct that would infringe on the security of computer based files illegal Limits access to personal information maintained by state Motor vehicle departments to these with legit mate business purposes Also gives drivers the option to prevent disclosure of driver’s license information to marketers and the general public DESCRIPTION Protection Act of 1983 Computer Security Act of 1987 Driver’s Privacy Protection Act of 1994 Privacy Laws affecting Private Institutions Regulates the credit investigating and reporting industry. Gives individuals right to inspect and correct records. 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 the Fourteenth Amendment’s guarantee of due process. and disclosure of data collected by federal agencies. 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.2.2. 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 . as amended Regulates the federal government’s collection. and media institutions (cable television and video rentals) Table 5.(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.

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

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

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

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

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. Virtually any software program can be patented as long as it is novel and not obvious. and made the telegraph useful. surgical and medical procedures (1950). The danger of patents is that they stifle competition by raising barriers to entry into an industry. and thus slow down the development of technical applications of new ideas by creating lengthy licensing applications and delays. NOTES 289 ANNA UNIVERSITY CHENNAI . and software (1981). 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. as technology and industrial arts progress. B. Unlike Samuel F. thousands of software patents have been granted. 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. This early Internet spirit changed in the mid-1990s with the commercial development of the World Wide Web. Patent protection has been extended to articles of manufacture (1842). Since that time. plants (1930).com to invent a simplified two-click method of purchasing. The early Internet was characterized by a spirit of worldwide community development and sharing of ideas without consideration of personal wealth. Morse. Patents encourage inventors to come up with unique ways of achieving the same functionality as existing patents. who patented the idea of Morse Code. Essentially. Patents force new entrants to pay licensing fees to incumbents. Business firms began applying for “business methods” and software patents. 1998). 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. most of the inventions that make the Internet and e-commerce possible were not patented by their inventors. For instance.

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

the intentional misuse of words and symbols in the marketplace to extort revenue from legitimate trademark owners (“bad faith”) is proscribed. CONTRACTS AND WARRANTIES 5. Congress passed the Federal ‘Trademark Dilution Act. particularly “cyberspace”. and jurisdiction. Use of a trademark that creates confusion with existing trademarks. 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). 5. privacy. In essence. which is defined as any behavior that would weaken the connection between the trademark and the product. This new legislation dispenses with the test of market confusion (although that is still required to claim infringement). In 1995.4. or misrepresents the origins of goods is an infringement. freedom of expression. and extends protection to owners of famous trademarks against dilution.E-COMMERCE TECHNOLOGY AND MANAGEMENT Disputes over federal trademarks involve establishing infringement. The Internet does not tend to make geographical and jurisdictional boundaries clear. 2) the laws of the state/nation that apply where the server hosting the transaction is located. and 3) the 291 NOTES ANNA UNIVERSITY CHENNAI . cyber law is an attempt to apply laws designed for the physical world to human activity on the Internet. including intellectual property. Jurisdiction and sovereignty Issues of jurisdiction and sovereignty have quickly come to the fore in the era of the Internet. i. a single transaction may involve the laws of at least three jurisdictions: 1) the laws of the state/nation in which the user resides. but Internet users remain in physical jurisdictions and are subject to laws independent of their presence on the Internet. the Internet.1 Cyber law Cyber law is a term used to describe the legal issues related to use of communications technology. It is less a distinct field of law in the way that property or contract are. which created a federal cause of action for dilution of famous marks. As such. causes consumers to make market mistakes.e. The test for infringement is twofold: market confusion and bad faith. as it is an intersection of many legal fields.4 CYBER LAW. In addition.

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

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

especially with intangible property transmitted by computer such as software. Also. Ecommerce involves commerce using the Internet: typically purchases and sales through computers. states and local jurisdictions that rely on sales and property taxes to fund their operations are in steep trouble.DBA 1727 NOTES 5. But the U. because of the speed in which transactions occur and the absence of a traditional paper trail. constitution requires a sufficient physical connection with the state or local jurisdiction by a company to 294 ANNA UNIVERSITY CHENNAI .5.5. TAXATION AND ENCRYPTION POLICIES: 5. In contrast. While governments who rely on an income tax to fund themselves will have great difficulty taxing Ecommerce. As discussed below. taxes foreign individuals and businesses who are receiving income from U. transactions are both instantaneous and largely anonymous.S. cannot tax a foreign citizen who is not a U.S. if not impossible to apply traditional notions of jurisdiction to tax these transactions.S. a government’s authority to tax has always been based on territory and jurisdiction. the U. to sophisticated concepts in international taxation. The concept of taxation involves jurisdiction. it will be very difficult. two traditional forms used by remote sellers. through citizenship and residency. a business can move to so-called tax haven jurisdictions and conduct business outside the taxing jurisdiction of any country. the internet allows almost any small business to sell to customers in different states and countries. involve the delivery of goods from a specific physical location to a specific location by means of a common carrier. sources.S. resident on earnings from a foreign source. 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.S.1 Introduction on Taxation Electronic Commerce (“Ecommerce”) presents unique challenges to federal and state tax authorities. the U. For instance. the U. government taxes its residents on their world-wide income because they are connected with the U. With the internet. Also. Because Ecommerce involves computers communicating with each other at the speed of light. digital music or books and services.S.S. From the Boston Tea Party Rebellion in which tea was taxed as it physically landed on American shores. mail order and telephone solicitation.

they would be less likely to vote for a politician who voted to tax internet transactions. In fact.S. In short. 1998 and remains in effect until October 21.E-COMMERCE TECHNOLOGY AND MANAGEMENT burden the business with a tax obligation. According to a Gallup Poll. Congress was concerned that because internet 295 NOTES ANNA UNIVERSITY CHENNAI .  Electronic delivery of goods (books. 73% of active internet users oppose an internet sales tax. passed in 1988 there is a 3-year moratorium on federal and state taxation imposed on internet transactions. there is little ground swell for internet taxation by politicians. and it extremely doubtful that U. CDs and movies in electronic form) and services (brokerage or accounting services). contend that internet taxes are needed to equalize the tax burden for competitive reasons. especially if a new form of electronic cash takes hold. and  Bundling of taxable and non-taxable items.A Moratorium on Internet Taxes Currently. 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.5. page D2). The moratorium began on October 21. it will take a Constitutional amendment to change the commerce clause.  Lack of information on the location of the seller and purchaser. Congress realized that the internet needed time to grow as a viable medium for commerce. Congress noted that the internet was inherently susceptible to multiply and discriminatory taxation in ways that traditional commerce was not. such as taxable goods with taxexempt services. According to 36% of the respondents who use the internet. services or goods to a customer who resides in a state is not sufficient nexus. Some of the unique features of Ecommerce include:  Computer-to-Computer transactions without a paper trail. September 15. 5. 2001.2 Current Law . without being subjected to taxing regimes imposed by the states. outside of pressure from state and local tax authorities. citizens will vote to tax themselves on internet transactions. But brick and mortar retailers who sell their products in physical locations. under the Internet Taxation Freedom Act (“ITFA”). compared to 14% in favor (Source: San Francisco Chronicle. and merely selling property. 1999.  Anonymous transactions.

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

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

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

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

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

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. Before the digital age. which has been used throughout history.5.S. And the public key can decrypt data. Therefore. but several members have voice support for Internet taxes. are notoriously parochial minded when it comes to defending their jurisdiction. the current state and local tax systems. Computer encryption is based on the science of cryptography.300 separate sales tax jurisdictions. has not been able to make any headway in the taxation debate. or technological advances that would allow businesses to calculate the sales tax simply and without a large investment in time and resources. RSA Data Security of Redwood City offers the most popular and commercially available algorithm. These numbers could be significantly increased if states and local jurisdictions were allowed to tax Ecommerce. Small businesses would be buried in costly paperwork attempting to comply with all these rules.500 throughout the U. particularly for military purposes.4 The Future for Ecommerce Taxation The Commission on Electronic Commerce. 5. In Public Key encryption system. 301 NOTES ANNA UNIVERSITY CHENNAI . That is precisely why the commerce clause in the Constitution prohibits taxes and is an undue burden on interstate commerce. In Texas alone.E-COMMERCE TECHNOLOGY AND MANAGEMENT 5. The encrypted data can be read only by those users for whom it is intended.. provided the tax is simple to calculate for businesses.5 Encryption policy: Encryption is a technique for hiding data. In a Public Key encryption system each user has two keys-public key and private key. there are more than 1.5. One of the available techniques commonly used for encryption is Public Key. the biggest users of cryptography were governments. encrypted by the private key. Nowadays various encryption techniques are available. Unfortunately. one can broadcast the public key to all users. created by the ITFA legislation. This could mean a uniform tax rate agreed to by all the states. which number close to 7.

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

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

Aim for graphics and functions in proportion to your customer’s needs. Younger visitors and technically aware customers may be more tolerant of higher technical demands. And remember to train your staff to handle returned online orders. Use technology as a transparent aid to navigation and activity. These needs will change with your customer’s experience. use it to build customer expectation of the site’s content. major software companies and web security organizations. Are you handling visitors new to the web trade or devotees?   Newcomers need signposts and easy navigation. Web customers will have higher service expectations than offline customers. with transparency and. Familiar Names & Logos Names that we know and trust are familiar and friendly. Should your company have a familiar name. Customers trust sites where they can see the familiar logos of credit card brands. 5.7 Steps to Plan Successful E-Commerce Respond Fast If the plan is to respond to customer wishes.5. the quality of products and the level of service support. give customers the option to return goods there. don’t hide it. 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. then the most successful plan will be the one that responds fastest. Technology Too much technology can be daunting. If we see them on a website we trust the website more. 4. above all. If your company is trusted by these organizations. Old hands need quick routes to every part of the site. They may expect service delivered in real time. If you have shops on the high street. This means that every component of the plan should be built 304 ANNA UNIVERSITY CHENNAI .DBA 1727 NOTES personal information. with consistency.

Ask yourself if your customers want this? If they do. Test to learn from the customer and to improve one step at a time. NOTES 305 ANNA UNIVERSITY CHENNAI . suppliers and distributors find for themselves. 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 a test includes more than one change. Analyse each sales process to clarify what it is that staff spend time doing. Successful testing follows a simple rule: Test one Thing at a Time Only test changes that can be measured directly. cheaper. then you can redirect your time and resources and use the knowledge gained to good effect elsewhere. look for processes in which information is transferred. Test out Your Plan In the online marketplace everything is a test until it’s proven by the customer.E-COMMERCE TECHNOLOGY AND MANAGEMENT with the intention of proving a principle. computer to computer? With the time saved. 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. suppliers and distributors? Have you asked what they’d like? The web’s very good at research. what could your staff do to add more value for customers? Focus on Customer. If they don’t. Are you offering them a new way to use an existing service or a completely new service? Is it faster. Complexity often arises from integrating tried and tested stand-alone services. then a more robust version can be built. In particular. 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. Supplier & Distributor Benefits What’s in it for customers.

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

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

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

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