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

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

payment Product service and maintenance Co-operative product development Distributed co-operative working Use of public and private services Business-to-administrations (e.E-COMMERCE TECHNOLOGY AND MANAGEMENT             Financing and insurance Commercial transactions: ordering. etc) Transport and logistics Public procurement Automatic trading of digital goods Accounting Dispute resolution NOTES 1.7 E. delivery.1.g. customs.Commerce in Action 9 ANNA UNIVERSITY CHENNAI .

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

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

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

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

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

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

The current accounts payable process occurs through the exchange of paper documents. buying information and consulting services. 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. how customers allocate their loyalty may also be different. Examine this scenario.” Where “distribution” may not automatically mean “physical Transport.1. Here. buy them differently using electronic cash and secure payment systems. financial reports. Small companies are also beginning to see the benefits of adopting the same methods.to-computer communication as a fast. purchase orders. customers learn about products differently through electronic publishing. and a dependable way to conduct business’ transactions. Also. The current manual process of printing. time consuming. checks. Most of the documents are in electronic form at their point of origin but are printed and key-entered at the point of receipt.8. Business-to-business transactions include the use of EDI and electronic mail for purchasing goods and services. 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. governments.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. Three distinct classes of electronic commerce application can be distinguished: customer to business. submitting requests for proposals. and receiving proposals. and have them delivered differently. business-to-business. businesses. mailing is costly. In a marketplace transaction.DBA 1727 NOTES 1. Each year the trading partners exchange millions of invoices. where “content” may not be equated to “product. In light of this. and intra organization Consumer-to-Business Transactions We call this category marketplace transaction. an economical. and other transactions.” In this new environment. and other organizations depend on computer . and error-prone. 16 ANNA UNIVERSITY CHENNAI .

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

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

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

and large data files. Unstructured messaging consists of fax. when a message is sent. and invoices.4 Secure Messaging and Structured Document Interchange Services The importance of the fourth layer. With asynchronous messaging. 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. Others define messaging as a frame-work for the total implementation of portable applications. receive. Or. shipping notices. Messaging is gaining momentum in electronic commerce and seems to have many advantages.1. This must be done today.This allows the transfer of messages through store-and-forward methods. In general. 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. via telecommunications lines. What happened? The line was busy and he thought he’d try again later. Structured documents messaging consist of the automated inter-change of standardized and approved messages between computer applications. e-mail. 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. divorcing you from the architectural primitives of your system. Examples of structured document messaging include EDI. and combine messages. enhanced fax. but the shape of catalogs or directories will depend on the users’ desires and functional requirements. work continues (software doesn’t wait for a response). faxes. memos. masking the peculiarities of the environment. and form-based systems like Lotus Notes. 20 ANNA UNIVERSITY CHENNAI . and reports as weft asformatted (structured) data such as purchase orders. Everyone in business knows that electronic messaging is a critical business issue. Broadly defined. the number was wrong. secured messaging. Messaging services offer solutions for communicating non formatted (unstructured) data-letters. not tomorrow when the courier service would deliver. is clear. It supports both synchronous (immediate) and asynchronous (delayed) message delivery and processing. messaging products are not applications that solve problems. Some better-known examples are electronic mail. and electronic data interchange. they are more enablers of the applications that solve problems.DBA 1727 NOTES and designers might incorporate common tools for interface building. 1.8. There is a solution to these common and frustrating problems. but he forgot to let you know.

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

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

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

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

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

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

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

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

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

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


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



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

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

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

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

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


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


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

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



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

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.    Many of these technologies have been in use for more than a decade in specialized analysis tools that work with relatively small volumes of data.4 How Data Mining Works The technique that is used to perform these feats in data mining is called modeling. These decisions generate rules for the classification of a dataset. Genetic algorithms: Optimization techniques that use processes such as genetic combination. Nearest neighbour method: A technique that classifies each record in a dataset based on a combination of the classes of the k record(s) most similar to it in a historical dataset (where k ³ 1). 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. 1. Rule induction: The extraction of useful if-then rules from data based on statistical significance.DBA 1727 NOTES 1. With these models in hand you sail off looking for treasure where your model indicates it most likely 38 ANNA UNIVERSITY CHENNAI .4. These capabilities are now evolving to integrate directly with industry-standard data warehouse and OLAP platforms. For instance. Decision trees: Tree-shaped structures that represent sets of decisions. Sometimes called the k-nearest neighbour technique. and natural selection in a design based on the concepts of evolution. Specific decision tree methods include Classification and Regression Trees (CART) and Chi Square Automatic Interaction Detection (CHAID) .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. and certain routes that have likely been taken by the ship’s captains in that era. mutation. You note these similarities and build a model that includes the characteristics that are common to the locations of these sunken treasures. 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.

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

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

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

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

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

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

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

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


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

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

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

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

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

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

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

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

Some of the most important application available in the TCP / IP family are:         ftp and rep for file transfer telnet and rlogin for logging in to remote machines rsh (rcmd in SCO UNIX) for executing a command in a remote machine without logging in The Network File System (NFS) which lets one machine treat the file system of a remote machine as its own The electronic mail service using the Simple Mail Transport Protocol (SMTP).7. Facility to connect new sub networks without significant disruption of services High error rate handling . Later.Being originally meant for the defence network. must be 100% reliable.6 TCP/IP Terminology The Internet standards use a specific set of terms when referring to network elements and concepts related to TCP/IP networking. \ 60 ANNA UNIVERSITY CHENNAI . 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.DBA 1727 NOTES     Failure recovery . Enable reliable transmission of files. with facilities for full error control. irrespective of the distance travelled.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. it should be able to divert data immediately through other routes if one or more parts of the network went down. TCP/IP originally began by the development of a collection of programs (the DARPA set) that enabled computers to talk among themselves.

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

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

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

7 TCP/IP – Connectionless technology: TCP/IP is built on “connectionless” technology.e. and those datagrams are treated by the network as completely separate.1 Web Based Client / Server Over the past three or four years. Until recently. and to notify you when output is waiting for another connection. 1. Each of these datagrams will be sent to the other end. There are provisions to open connections (i. It is perfectly possible that datagram 14 will actually arrive before datagram 13.8. However while those datagrams are in transit. A datagram is a collection of data that is sent as a single message. to start a conversation that will continue for some time). network-oriented window systems. It is also possible that somewhere in the network. At that point.DBA 1727 NOTES  connections rapidly. but still give you a single graphically-based user interface. The vast majority of EC applications are Web based. the World Wide Web (WWW) has come to dominate the traffic on the Internet. Most networks can’t handle a 15000 octet datagram. the network doesn’t know that there is any connection between them. an error will occur. For example. and some datagram won’t get through at all. they will be put back together into the 15000-octet file. that datagram has to be sent again.8 HYPERTEXT MARKUP LANGUAGE (HTML) 1. information from those connections is broken up into datagrams. Full-scale network window systems provide an interface that lets you distribute jobs to the systems that are best suited to handle them. However at some level. high-performance graphics programs had to execute on a computer that had a bit-mapped graphics screen directly attached to it. In that case. In such applications. Each of these datagrams is sent through the network individually. Network window systems allow a program to use a display on a different computer. the clients are called Web browsers and the servers are simply called Web servers. So the protocols will break this up into something like 30 500-octet datagrams. Web browsers and servers need as way 64 ANNA UNIVERSITY CHENNAI . Like other client/server applications. Information is transferred as a sequence of “datagrams”. suppose you want to transfer a 15000 octet file. 1.7.

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

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

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

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

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

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

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

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

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

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


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

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

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

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

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

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

but the enemy intercepts it and sends it to B.DBA 1727 NOTES Data origin authentication Here one wants to make sure that the person who is claiming to be the sender of the message really is the one from whom it originates. but the enemy intercepts it. non-repudiation is provided by a manual signature. Thanks to cryptography. Confidentiality protection is very 82 ANNA UNIVERSITY CHENNAI . with a seal and a signature. With data confidentiality we try to protect ourselves against unauthorized disclosure of the message. claiming A has sent it. one wants to make sure that this enemy never understands his contents. 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. while non-repudiation with proof of delivery protects against any attempt by the recipient to deny. Data confidentiality This aspect of data security certainly is the oldest and best known. If A sends a message to B. falsely. 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. 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. Suppose B is the owner of a mail-order company and he decides to let his customers order through electronic mail. In a paper and pencil world. having received a message. 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. there are techniques to ensure against this type of fraud. The example of Caesars cipher given in the introduction clearly demonstrates this. 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. An example will illustrate the importance of non-repudiation of origin.

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

only an authentic channel is required. Since each communication requires a secret key. Indeed. it requires a huge amount of computation to find the two prime factors. 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. but given a large number that is the product of two primes. he just enciphers it with B’s public key.DBA 1727 NOTES The best known cipher in this category is the Data Encryption Standard (DES) that was adopted in 1977 by the American NBS (National Bureau of Standards) as FIPS 46. the total number of keys required equals n*(n-1)/2. Public-key systems provide significant benefits in terms of key management: if every user generates his own key. He keeps one key secret and makes the other one public. If A wants to send a message to B. the number of keys can be reduced. Since then it has been used all over the world and until now no major flaws have been discovered. 84 ANNA UNIVERSITY CHENNAI . The most popular public-key cipher is the RSA system (RSA stands for Rivest. suppose we have a network of n users each of whom wanting to communicate with the others. Asymmetric ciphers The asymmetric or public-key ciphers are the most recent cryptographic tools. 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. Shamir and Adleman. 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. Each partner thus has two keys. the names of the three inventors). eliminating (expensive) secret channels like couriers. B is the only one who can decipher the message and read the contents. Since B is the only one who has access to the secret key.

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

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

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

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

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

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

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


In the online model. school. a hotel. Furthermore. delivery. and production) and become more efficient producers of goods. or airplane. Almost every retailer is re-evaluating every aspect of its operation from customer service to advertising. reacting to the pressure of retailers. car. merchandising to store design. suppliers are assessing technology based solutions to drive down costs (labour. and logistics to order fulfilment. In the traditional model. the customer went to the store and located the product. 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 . The success of catalog retailers demonstrates that a significant portion of consumers have embraced the reverse model: the retailer going to the consumer. catalogue retailing. Online channels such as online services and the Web are also impacting traditional retail business models.E-COMMERCE TECHNOLOGY AND MANAGEMENT NOTES UNIT II BUSINESS APPLICATIONS IN E-COMMERCE 2. the retailer seeks out the customer. These developments should impact retailing as much as the advent of strip malls. and TV-based home shopping. anytime-from work. However.1.1 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 RETAILING IN E-COMMERCE 2.

2(a) We can divide tangible goods into two categories: physical goods and digital goods. etc.DBA 1727 NOTES  Process Issues: What are the specific steps in the shopping process from a consumer’s perspective? What kind of processes should companies de-velop to fulfill orders efficiently? Before examining the implications of changing consumer behavior and online retailing in the existing retail business. a video recorder. which may be downloaded from the internet. The sale of intangible goods is sometimes called E-servicing.2 E-Retailing E-retailing essentially consists of the sale of goods and services. as shown in Figure 2.    Examples of physical goods would be a book. or education. 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. if they are sold directly to the consumer who is the end user. a washing machine. the most recent foreign exchange rate. Examples of services that may be sold are information such as the most recent stock prices. Here we discuss the sale of tangible goods. Selling of different type of goods 94 ANNA UNIVERSITY CHENNAI . The sale of tangible and intangible goods are all referred to as Customer oriented e-commerce or eretailing. Entertainment such as -games that would be played on the internet are also examples of e-services.1. So are the sales of services such as telecommunication services or banking services. a television set. Sometimes we refer to this as the sale of tangible and intangible goods. 2.1. Examples of digital goods are software and music.

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

4 Benefits of E-Retailing To the customer Customers enjoy a number of benefits from e-retailing. 96 ANNA UNIVERSITY CHENNAI . On the net. we see specialization not in a product line but in a class of purchasers and a class of sellers. Examples of these generalized stores include JC penny and Walmart. Normally. It is convenient for the customer as he does not have to move from shop to shop physically in order to examine goods. 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. In addition to these specialized stores. we also get generalized e-stores where a store sells several product lines under a single management. The second aspect of convenience he gets is in terms of time. which allows last minute purchases of travel tickets. We also have the electronic counterpart of malls or e-malls. 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. The first of these is convenience. Thus. which will actually locate the products that he describes’ and also the site where they may be available. The Internet and the World Wide web are essentially communication media that allow retailers to put on quite extensive information related to their products. the customer can choose at any time to visit a site to examine the goods that are available and actually carry out his purchasing at one’s own convenient time. the traditional shop has an opening time and a closing time and the customer can only visit the shop within these periods. we see lastminute. GEO Shops. This kind of specialization would not have been possible before we had the internet.DBA 1727 NOTES customers and sellers. and entertainment to be matched against last minute sellers of the same items. which is available to the customers.com. Examples of these e-malls are Yahoo! Store. and CNET stores: 2.1. gift. Here. He is able to sit in front of a terminal and search the net and examine the information on goods. 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. He does not have to have many shop assistants who are physically answering questions and. of course. Therefore. This is due to two factors. the retailer is now able to carry out mass customization with reduced time to market for the customized products. it keeps an inventory of a few thousand best selling titles only. Thus. The third benefit is the lowered capital cost to the retailer. The fourth benefit to the retailer is mass customization. The retailer now is no longer restricted to customers who are able to reach the store physically. 97 ANNA UNIVERSITY CHENNAI    . 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. Based on requests by the customers. he does not have to hire several shop assistants.  The first of these is global reach. while Amazon. The second benefit is better customer service.com lists over a few million titles. Therefore. the pressure is always there on the retailer to maintain a competitive price for his products. he can probably have lower inventories. the retailer has lower warehousing costs. These allow one to easily inquiries and deal with complaints. and these savings can be passed on to customers in the form of reduced prices.  The first is lowered costs to the retailer because he does not have to maintain a physical showroom. NOTES  To the business There are a number of benefits of e-retailing to the business itself. competitive pricing pressure that arises from the fact that the customer is now able to look at prices at several sites. Secondly. deliver the goods of a purchase to the customer. The retailer must. These also allow a much more rapid response time than was possible in the days of faxes and postal mail. Showing the customer goods. The retailer does not have to maintain showrooms.E-COMMERCE TECHNOLOGY AND MANAGEMENT The third type of benefit that the customer gets is competitive pricing.

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

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

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

which is a useful feature before submission. and marketing. The use of Forums (collaborative purchasing circles) to create a customer community and thus increase “stickiness. Technology improvements that provide greater convenience and more information than traditional retailing.The last model i. it is dynamic and linked with order process. 5.7 Changing Retail Industry Dynamics Important factors that affects the retailing industry dynamics are:     Overbuilding and excess supply. which allows convenient goods selection. Brokers that provide comparison shopping between products (e. Thus. mySimon. E-services is discussed in the next lecture. deals. which is a very important feature that does not exist in traditional retailing. “who” can help customers to navigate through the site. The ability to distribute digital goods directly.E-COMMERCE TECHNOLOGY AND MANAGEMENT   Brokers that meet a certain requirement such as a fixed price (e. promotions.g.1. 101 ANNA UNIVERSITY CHENNAI . these goods can be downloaded instantly. The provision of a search engine. An ability to provide an automatic price update. The provision of an on-line catalogue.” 2. Thus. 7. 2.1. with less focus on brand name and more on lowest prices. Personalization of store layouts. 8. 4. which more premium placed on efficient use of time Changes in consumer behavior. An on-line customer salesperson. 3.Priceline.e.6 Features of E-Retailing 1.com). 6. Change in consumer demographics.com or bestbooksbuy. NOTES 2.g. The provision of a shopping cart. which allows one to browse through different categories of goods. An order status checking facility.com).

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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,



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

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

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

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

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

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

.4 The Seven Stages of Internet Marketing 114 ANNA UNIVERSITY CHENNAI . 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. under-standing the five forces enables firms to comprehensively map their competitive environment while simultaneously identifying specific actions for their managers (e. They also serve as guides to managerial action.2.DBA 1727 NOTES framework to understanding the practice of Internet marketing. Thus. 2.g. reduce buyer power by increasing the number of buyers).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

3. Travel Services Before the internet. etc. the customer who could be an individual or business specifies his requirements in relation to the service. hotel. 2. These include trip. Does one use a distance learning model where the student uses a PULL model to acquire the material? Does one use a traditional lecture model using video streaming? This is a PUSH model whereby a teacher “pushes” the materials to the students.com. The information is then returned to the e-service provider site to give the customer the required service. tests to provide the student with instant feedback on his/her mastery of the materials.com travelweb. The travel agent would try his best to meet these requirements by providing information regarding schedules.com. and priceline. 2.2 Matchmaking Services This has perhaps been the area in which there has been the greatest growth in eservices. The use of the ‘internet for education opens up many possibilities. tours. which address this precise market segment. or over other databases or web sites to look for one or more matches to these requirements. These web sites work in exactly 130 ANNA UNIVERSITY CHENNAI . These bookings could be for individuals or corporations involving corporate rates. pricing. train tickets. etc. in most of these applications. particularly those that have a dynamic character to them. namely use of quizzes. 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.DBA 1727 NOTES name.1. promotions. The e-commerce site then does a search over its own databases or over the internet using mobile agents. A large number of e-commerce sites have appeared. as well as suggestions on changes to de itinerary. Essentially. 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. use of graphics and animation to explain concepts. car hire. 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. one might have gone along to a travel agent in order to book one’s travel requirements such as air tickets.

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

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

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

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

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

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

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

3.DBA 1727 NOTES approval made DOS an industry standard. The identification of new market segments with untapped needs such as the willingness to pay for the convenience of remote banking. 2. The creation of online financial supply chains to manage the shift from banks as gatekeeper models to banks as gateways. The establishment of good customer service on the part of banks. Consumer question includes : 138 ANNA UNIVERSITY CHENNAI . customized ser-vice. high-touch personal and affordable service. losing control over the interface could have dire consequences. and price.3.1 Management issues in Online Banking The challenge facing the banking industry is whether management has the creativity and vision to harness the technology and provide customers with new financial products necessary to satisfy their continually changing financial needs. IBM was unable to move the industry to a new operating system called OS/2 in the late 1980s because Microsoft controlled the customer relationship and was able to convert most end -users to Windows. The emergence of low-cost interactive access terminals for the home as well as affordable interactive home information services. However. In order to achieve this. For banks. The development of effective back-office systems that can support sophisticated retail interfaces. 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. management has to balance the five key values that increasingly drive customers’ banking decisions: simplicity. convenience.  Marketing Issues: Attracting Customers The benefits of online banking are often not made clear to the potential user. too. quality. Online banking will realize its full potential when the following key elements fall into place:      The development of an interesting portfolio of products and services that is attractive to customers and sufficiently differentiated from competitors. Banks must deliver high quality products at the customers’ convenience with high-tech.

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

4 ADVERTISING AND ONLINE PUBLISHING 2.DBA 1727 NOTES 2.1 Reasons expected for the increase in Advertising spending Shorter Access Times As more bandwidth becomes available. With more advertisers. the advertiser pays for the access time used when accessing online yellow pages. 140 ANNA UNIVERSITY CHENNAI .4. Promotions are also common. and magazines such as Hot Wired. 30. In many cases. advertisers should be willing to pay more per user to place their icons in online periodicals. With more time available to draw users’ attention. 2. advertising rates should rise. 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. magazines and newspapers have also set up sites on the Web. which display an advertiser’s logo and. The cost of the access fee itself can be shared by an advertiser if. This should draw to the Web advertisers who may have been concerned that the current graphical quality was insufficient for displaying their products. for example. Shorter access times also enable increasingly complex graphics to be placed on Web sites. Many online periodicals include traditional advertisements as well as icons. and People.000 per quarter for an advertiser to place an icon in the periodical. when clicked with a mouse.000-Rs. which reportedly charge Rs. send a user across the Web to the advertiser’s Web site. 45. advertisers ask site visitors to provide their names and addresses in exchange for a product discount. Reduced Access Fees New Internet users will be attracted by reduced ac-cess fees. with part of the reduction covered by advertisers. users will spend a larger proportion of their time on Web sites and a smaller proportion waiting to access them.1. 100 per day for an advertisement. without requiring additional access time. Playboy. which reportedly charges Rs.4.1 Advertising and Online Publishing With the intention of attracting advertising dollars.

However. If online advertising encourages users to shift a portion of their purchases to the Web. 2. There is not a clear definition of what advertising expenses should be counted. maintaining a Web site.4. 2. Spending can be the amount that advertisers pay other Web sites such as periodicals and games to display their icons or product offerings. few publishers have attempted to measure how many advertising dollars are being spent. 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. it should be increasingly important for advertisers to get users to their sites quickly. an online publisher can use it to determine advertising rates and the appeal of its articles. NOTES 141 ANNA UNIVERSITY CHENNAI . and placing a site -linked icon in an online page. There are three reasons for this:    The market is too small to justify the cost of measuring its size. leading them to pay more for placement in online periodicals. a measurement system will not be useful until: 1.1. then companies may pay far more to advertise. and an advertiser can use it to justify the cost of promoting a Web site. Despite the popularity of advertising on Web sites.2 Better Measurement of Advertising Effectiveness Product advertising is far more effective if it leads to a purchase.E-COMMERCE TECHNOLOGY AND MANAGEMENT Increasingly Convenient Access to Information As the amount of information online increases. Increasingly Valuable Information Product descriptions can be enhanced through online advertising. With more information available. The market is changing too rapidly to develop an effective means of measurement. the decision to purchase should be easier and more purchases should occur (assuming the product is desirable).

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

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

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

They are unlikely to view online publishing as a sufficiently attractive channel until costs fall and distribution widens. Moreover. 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. Testers also include 145 NOTES ANNA UNIVERSITY CHENNAI .E-COMMERCE TECHNOLOGY AND MANAGEMENT Effective technological protection mechanisms are vital to ensuring the availability of quality content online. The Internet makes it extremely easy to copy. Today. Watchers These are large publishing companies that employ scale-sensitive economics. This category includes publishers of unbranded or less distinctive content who cannot attract a sufficiently large initial consumer franchise. and who neither need nor want to make a choice now. as well as fo-cused publishers in categories not easily suited for the online medium.4.1 Online Publishing Strategies As with any new development. and policing is impossible since the levels of protections and sanctions against infringement vary widely in countries across the globe. publishers such as Addison—Wesley only offer catalogs or sample selections of works available online. Gathered here are many multi category and specialty publishers who are competing successfully in traditional markets.2. These publishers have the capacity to derive the highest benefits from new media as their learning curves are much shorter than others. Testers These are the majority of publishers that face either attractiveness and/ or skill challenges. which makes the risk even greater. 2. there is too great a risk to their intellectual property. and alter works without the permission or the copyright holder. the digital world has no international boundaries. who are uncertain who will win in the online marketplace. and they already have many of the necessary resources at hand. retransmit. 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.

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

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

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

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

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

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

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

promotions Supply chain process and performance – process descriptions. carrying costs. “Business-to-business” can also refer to all transactions made in an industry value chain before the finished product is sold to the end consumer. and agriculture are the leading items in B2B EC. As Handfield and Nichols (1999) suggest. B2B applications will offer enterprises access to the following sorts of information:           Product – specifications. commitments. Business-to-business EC covers a broad spectrum of applications that enable an enterprise or business to form electronic relationships with their distributors.330.2 percent in 1997 to 2. delivery time. sales terms and conditions Product process – capacities. schedules Competitor – benchmarking. motor vehicles. product plans Transportation – carriers. customer satisfaction NOTES 153 ANNA UNIVERSITY CHENNAI .5. food. 2. prices. and other partners.4 percent in2003. suppliers.9 billion by 2003 and continue to be the major share of the EC market (Free-man 1998.1 percent in 2000 and 9. paper and office products. quality.3 Characteristics of B2B EC Business – to – business electronic commerce implies that both the sellers and buyers are Business Corporation. competitive product offerings. lead times. Business-to – business EC is expected to grow to $1. a company selling photocopiers would more likely be a B2B sales organization than a B2C sales organization. shipping and warehousing. resellers. utilities. The percentage of Internet – based B2B EC compared to total B2B commerce will expand from. locations Supply chain alliance – key contacts. Computing electronics. market share Sales and marketing – point of seal (POS) . while business – to – consumer electronic commerce implies that the buyers are individual consumers. sales history Customer – sales history and forecasts Supplier – product line and lead times. partner roles and responsibilities. costs Inventory – inventory levels. performance measures. For example. Retter and Calyniuk 1998). petrochemicals.E-COMMERCE TECHNOLOGY AND MANAGEMENT “institutional sales”).

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

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

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

Coding and structuring the documents for business transactions is no easy matter. initially describing only industrial or capital goods marketing. Electronic data interchange (EDI) is a technology poised for explosive growth in use as the Internet provides an affordable way for businesses to connect and exchange documents with customers and suppliers of any size. However. today it is widely used to describe all products and services used by enterprises. and other information in a public-standard format. Let’s start with EDI Standards. EDI Standards At the heart of any EDI application is the EDI standard. These elements together with the EDI Agreement are covered in detail in this lecture. 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.5. 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. data.E-COMMERCE TECHNOLOGY AND MANAGEMENT clear “business rules. EDI is the electronic exchange of business documents. NOTES 157 ANNA UNIVERSITY CHENNAI . 2. the EDI networks and the EDI software that interfaces these two elements and the business applications. In this lecture we will discuss the EDI standards. This is one of the applications of E Commerce which makes Business to Business transactions possible over a network.6 EDI Standards EDI stands for Electronic Data Interchange. It eventually came to be used in marketing as well.” This provides the basis of differentiation from conventional B2B sales/purchasing channels. It cuts the cost of managing business-to-business transactions by eliminating the need for labor-intensive manual generation and processing of documents. Etymology The term “business-to-business” was originally coined to describe the electronic communication relations between businesses or enterprises in order to distinguish it from the communications between businesses and consumers (B2C).

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

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.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. The data recipients set the standard and the customers conformed to it. a standard for data interchange that is:     Ready formulated and available for use. 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. this would require a change to the existing standard or the introduction of an additional standard. The EDI standard provides. Comprehensive in its coverage of the data requirements for any given transaction. NOTES EDI Standards provide a common language for the interchange of standard transactions. EDI standards overcome these difficulties. Independent of the special interest of any party in the trading network. 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. Now let’s see how the various standards evolve. 159 ANNA UNIVERSITY CHENNAI . Most of the work on EDI standards has been concerned with the interchange of trade documentation and financial transactions but the principle applies to any interchange where the data can be systematized and codified. The concept of EDI as an application independent interchange standard evolved and several industry sector and / or national standards bodies developed EDI standards to meet the needs of a specific user community. Independent of hardware and software. EDI standards are used for the interchange of information as diverse as weather station readings and school exam results. or attempts to provide. 2. The overall picture is one of unnecessary complexity and incompatibility.

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

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

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

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

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

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

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

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

configurable. Internet culture owes Unix a major debt in the four areas. Internet Relay Chat. network backbones. Email. modularisation and low cost of the system is coupled with the growing densities of dedicated computer lines. Usenet newsgroups. and easy-to-upgrade off-the-shelf software and hardware. complex. openness and extensibility. 168 ANNA UNIVERSITY CHENNAI . All basic technical features of the Net such as the TCP/IP (transfer control protocol/internet protocol) (Kessler and Shepard 1997). Built-in piecemeal change and evolution. growing. polycentric. telecommunication networks). to handle unexpected interruptions and interferences. and public access to the source code.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. It is a system which scales up extremely well. Ubiquity. The Internet is not a one-off development. Robustness and reliability. the multiplicity of routes followed by the packet-switched data. It is an energetic. Internet operations piggyback on already existing solutions. Gopher. Java language UNIX The foundations of an operating system called Unix were laid at AT&T Bell Laboratories in 1969. Telnet. community fostering. 4. 5. WWW. 3.1. These conceptual and procedural debts are: multitasking. It is its catalyst and cornerstone. as well as wired and wireless phone networks. The robustness. Whenever possible. to advise users of encountered difficulties and to recover gracefully from any disasters and down-times. operating systems. This means that Internet-enabled tools are deployed in ever growing numbers in an ever widening range of environments 3. Unix is not a product of Internet culture. The Internet makes new uses of old technologies (standalone computers. File Transfer Protocol. It is a network which is geared to expansion and growth.DBA 1727 NOTES 2. and self-refining system. They rely on modularised. Let’s briefly look at each of these debts. Low cost. WAIS. Listserv Mailing List Software. and more recently by the Altavista search engine. easy-to-replace. and the sturdiness of related software are designed to eliminate errors.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Internet has also subsequently revolutionized shopping—for example. 3.8 Marketing The Internet has also become a large market for companies. and advertise their own companies’ products to those users. Friendster. also known as e-commerce. 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. Examples of personalized marketing include online communities such as MySpace. In turn.1. Orkut. a person can order a CD online and receive it in the mail within a couple of days. More mobile phones have Internet access than PCs. or download it directly in some cases. which can also run a wide variety of other Internet software.9 Online Internet Business Models The outward signs of a robust and thriving business are:      Revenue increases Ability to generate profits Success in creating meaningful alliances Success in expanding into new markets Differentiating itself from other business models 184 ANNA UNIVERSITY CHENNAI .DBA 1727 NOTES handsets. some of the biggest companies today have grown by taking advantage of the efficient nature of low-cost advertising and commerce through the Internet. 3. Facebook and others which thousands of Internet users join to advertise themselves and make friends online. though this is not as widely used. which online marketing companies can use as information as to what those users will purchase online. It is the fastest way to spread information to a vast number of people simultaneously. An Internet access provider and protocol matrix differentiates the methods used to get online. when they advertise themselves they advertise interests and hobbies.1.

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

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

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

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

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

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

growth of internal networks based on Internet technologies known as the Intranet is outpacing the growth of the global Internet itself. Today. many Intranets are built around Web servers delivering HTML pages. The Intranet environment is completely owned by the enterprise and is generally not accessible from the Internet at large.2.2. The protocol suite manages all the information that moves 191 ANNA UNIVERSITY CHENNAI .2 TCP/IP protocol suite The TCP/IP protocol suite includes the Transport Control Protocol.E-COMMERCE TECHNOLOGY AND MANAGEMENT 3. In reality. NOTES An Intranet is a company-wide network that is based on Internet technologies. 3. Simply put. 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 INTRANET 3. an Intranet is the application of Internet technologies within an organization private LAN or WAN network.1What is an Intranet? The Internet has captured world attention in recent years. the Internet Protocol and other protocols.

anyone can use and develop new applications on top of TCP/IP. Hence. Within an Intranet. companies can mix and match platforms as needed with no adverse effect on the overall environment. These protocols work together to transfer information across the network. Table 3. Commonly used TCP/IP protocols TCP/IP exists as an open standard.2. It can manage almost all the network tasks on the Intranet and Internet and is also the only protocol required to ensure that the computer systems and communications and networking software are interoperable. The Intranet enables companies to unify communication within a multi-platform environment.2. The capability to exchange information across platforms is crucial. 3.2.a summaries the common TCP/IP protocols.3 The benefits of Intranets Cross-platform Many corporate computing environments use different computing platforms.DBA 1727 NOTES across the Intranet and Internet and each protocol transferring data across the network uses a different format. 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 .

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

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

Despite many successes. 3. The growth of Internet technologies provides companies with a greater pool of resources to develop their own Intranets. threaded discussion groups Multimedia using mime type Virtual private network over public Internet Internet Firewall Intranet NOTES 3.4 Basic intranet structure       Internet technologies used behind the corporate firewall or in private environment Internet standard mail. Users can choose from a number of vendors for software products. 195 ANNA UNIVERSITY CHENNAI . etc. web servers. particularly in cost and time savings.5 Internet Architecture The corporate intranet has been hailed as the most important business tool since the typewriter. databases. many sponsors of corporate intranets are dissatisfied. Unlike traditional GroupWare products.2. Intranets use open systems to distribute information. but the track record so far has been mixed. scheduling. Conversely. which facilitate software developers to develop cost effective and easy-to-implement Intranet solutions. Scalability Since Intranets are based on Internet technologies.2. The only per-client cost associated with Intranets is the cost of the browsers. providing access to information. which often charge on a per-client basis. traditional GroupWare products have a more limited range of compatible products and fewer specially trained consultants to install and administer them. size is not a limitation with Intranets.E-COMMERCE TECHNOLOGY AND MANAGEMENT Open standards Internet technologies follow a set of open standards.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

an Intranet is the application of Internet technologies within an organization private LAN or WAN network. 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. 211 ANNA UNIVERSITY CHENNAI . Why are intranets popular        Inexpensive to implement Easy to use. vendors.E-COMMERCE TECHNOLOGY AND MANAGEMENT web browser. Companies can use an extranet to:      Exchange large volumes of data using Electronic Data Interchange (EDI) Share product catalogs exclusively with wholesalers or those “in the trade” Collaborate with other companies on joint development efforts Jointly develop and use training programs with other companies Provide or access services provided by one company to a group of other companies. and online commissions. network connectivity. just point and click Saves time and money. and possibly the public telecommunication system to securely share part of an organization’s information or operations with suppliers. Simply put. selling online advertising space. partners. customers or other businesses. 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.

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

For the same period.1 ELECTRONIC PAYMENTS AND PROTOCOLS 4. from 117 billion in 1993 to 135 billion in the year 2000. debits. and banks are seeking less costly alternatives. or digital cash) that is backed by a bank or an intermediary. Three factors are stimulating interest among financial institutions in electronic payments:    decreasing technology costs. reduced operational and processing costs. It is estimated that approximately 56 percent of consumer transactions in the United States are cash and 29 percent are check. The content of this exchange is usually some form of digital financial instrument (such as encrypted credit card numbers. and are expected to increase rapidly. The desire to reduce costs is one major reason for the increase in electronic payments. Electronic transactions numbered 33 billion in 1993 and are expected to climb to 118 billion by the year 2000.1 Electronic Payment Systems Electronic payment is an integral part of electronic commerce. and other electronic transactions account for about 15 percent of all consumer transactions. and increasing online commerce. 213 ANNA UNIVERSITY CHENNAI . or by legal tender. Cash and checks are very expensive to process. Credits.E-COMMERCE TECHNOLOGY AND MANAGEMENT NOTES UNIT IV E-COMMERCE PAYMENTS AND SECURITY 4. electronic payment is a financial exchange that takes place online between buyers and sellers. electronic checks. Broadly de-fined.1. paper transactions are forecast to show very modest growth.

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

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

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

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

Theoretically. hides the customer’s credit card information from merchants and also hides the order information from banks to protect privacy. a relatively simple version of SSL is currently widely adopted. on the other hand. a simple version of SSL is a very viable alternative. Until SET becomes popular. This is because SET protocol is complex and certificates are not widely distributed in a stable manner. which integrates SET protocol with an IC card that can store multiple certificates. The SET protocol. Secure socket layer protocol for electronic payment even though SET is a perfect solution for secure electronic payments.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. 218 ANNA UNIVERSITY CHENNAI . This scheme is called dual signature. the SSL protocol may use a certificate but it does not include the concept of a payment gateway.

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

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

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

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

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

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

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

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

If one employee makes a mistake and leaves a security hole. hackers can get to the machine and exploit the hole. in the credit card industry. the certificate authority creates a message containing Alice’s name and her public key. and the institution then provides a digital certificate to the cardholder. For example. as well as a copy of one of the owner’s public keys. Once Alice has provided proof of her identity. This message. 4. To get the most benefit. all of those hundreds of computers are directly accessible to anyone on the Internet. A similar process takes place for the merchant. A company will place a firewall at every connection to the Internet (for example. the landscape is much different. Without a firewall in place. At the time of the transaction. In many ways. digital certificates are the heart of secure electronic transactions. try to make telnet connections to them and so on. is digitally signed by the certificate authority. The company will therefore have hundreds of computers that all have network cards connecting them together. it is not allowed through. disparate parties can engage in electronic commerce with a high degree of trust. Let’s say that you work at a company with 500 employees.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. Through the use of a common third party. digital certificates ensure that two computers talking to each other may successfully conduct electronic commerce. try to make FTP connections to them. With a firewall in place. In addition. known as a certificate. It contains owner identification information. A person who knows what he or she is doing can probe those computers.party means of establishing authentication. each party’s software validates both merchant and cardholder before any information is exchanged. Thus by using one public key (that of a CA) as a trusted third. Visa provides digital certificates to the card-issuing financial institution. The validation takes place by checking the digital certificates that were both issued by an authorized and trusted third party. digital certificates provide an easy and convenient way to ensure that the participants in an electronic commerce transaction can trust each other. the public key of the certificate authority should be known to as many people as possible. If an incoming packet of information is flagged by the filters. Such a party is known as a certificate authority (CA).2.2. at every T1 line coming into the 227 NOTES ANNA UNIVERSITY CHENNAI .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. the company will have one or more connections to the Internet through something like T1 or T3 lines.

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

someone else could be probing your system while you are working. Storeowners must ensure that product information database is secure. When you are connected to the network your personal system is vulnerable. Another security measure is to delete the not required data or information. Many commercial products provide this facility and often work well to keep the data secure. Because of the nature slip type connectivity and TCP/IP networks. The best solution is to use 229 ANNA UNIVERSITY CHENNAI . One of the best security measures that you can take for physically stored data is to have hardware password protection. As the user of the system. This information of-course applies equally to the both the user and the storeowner. as well as transactions in the process of being fulfilled. Decrypted data residing on your hard disk may be available to outside for snooping.E-COMMERCE TECHNOLOGY AND MANAGEMENT      System and user logs Credit card information Trusted remote system information Compiler Administration tools NOTES User passwords and usage logs should be kept secure to keep pirate from looking at those files to figure out how to gain further access to your system. you should know the place and the method to store your data. If a business can afford only lesser security then the best you can do is keep permissions of files hidden from pirates.” 4.2. They can even unformatted a formatted disk after securely deleting file defrayment your drive using any popular disk utility. if they fall into wrong hands. As server and browser security increases almost pirates will be driven to breaking into the system at the source or at the destination. be sure to protect administration tools as well as compiler. Such program ensures that the original structure of the disk is recognized leaving no recoverable data.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. General users to your system should not have access to these tools because. Finally. Pirates can easily undelete previously deleted information. 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. Again store owners should ensure that they encrypt archived transactions. Simply deleting the information is not enough. the tools can be used to create programs that aid the pirate in greasing security.

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

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

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

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

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

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

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

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

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

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

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

The vendor will then sign the message with its own secret key and send it to the credit card company. or funds flow: 1. the following sequence of steps must occur before actual goods. The secret key is re-encrypted with a password. each consumer and each vendor generates a public key and a secret key. To make a credit card transaction truly secure and non-refutable. which will bill the consumer for Y dollars and give the same amount (less a fee) to X. the consumer sends vendor X the message. credit Card systems will have to develop distributed key 241 ANNA UNIVERSITY CHENNAI . (See Fig. 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.4. To buy something from vendor X. The public key is sent to the credit card company and put on its public key server. He can’t submit the same charge twice.E-COMMERCE TECHNOLOGY AND MANAGEMENT 4. 5.4. The credit card company sends the consumer a credit card number and a credit limit. privacy. The customer’s bank returns the credit card data. The merchant relays the credit card charge information and signature to its bank or on-line credit card processors. The merchant validates the customer’s identity as the owner of the cred-it card account. 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 become useful. NOTES 2.” then the consumer uses his or her password to sign the message with the public key. I am paying Y dollars to X for item Z. The vendor can’t invent fake charges. a thief would have to get access to both a consumer’s encrypted secret key and password. services. however. 4. charge authentication. safety. The consumer can’t claim that he didn’t agree to the transaction. speed. The bank or processing party relays the information tot the customer’s. does not meet important requirements for an adequate financial system. such as non refutability. This practice. and security. bank for authorization approval. In this scheme. because the consumer included the precise time in the message. and the unencrypted version is erased. ‘It is now time T. because he doesn’t have access to the consumer’s key. and authorization to the merchant. 3.5(a) Nobody can cheat this system.4. because he signed it (as in everyday life).

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

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

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

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

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

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

4. 2. 3. The need for cross-border compatibility and the advent of the euro recently led to many of these card networks (such as Switzerland’s “EC direkt”. Like credit cards. Magnetic stripe Signature strip Card Security Code Although many debit cards are of the Visa or MasterCard brand. 7. An example of the front of a typical debit card: 1. Laser in Ireland. 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. Carte Bleue in France. The 3 by 5 mm security chip embedded in the card is shown enlarged in the inset. “EC electronic cash” (formerly Eurocheck) in Germany and EFTPOS cards in Australia and New Zealand. 4.5. for example Switch (now: Maestro) and Solo in the United Kingdom. The gold contact pads on the card enable electronic access to the chip. debit cards are used widely for telephone and Internet purchases. where a customer can withdraw cash along with their purchase. there are many other types of debit card. Austria’s “Bankomatkasse” and Switch in the United Kingdom) being rebranded 248 ANNA UNIVERSITY CHENNAI .2 Types of debit card A Finnish smart card.DBA 1727 NOTES ”cashout” facilities to customers. 3. 5. and in some instances cash transactions by volume. The use of debit cards has become wide-spread in many countries and has overtaken the check. 6. 2. each accepted only within a particular country or region.

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

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

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

the payer’s bank. enhancing security at each step of the transaction through automatic validation of the electronic signature by each party (payee and banks). Electronic checks are modelled on paper checks. The security/authentication aspects of digital checks are supported via digital signatures using public-key cryptography.6. Ideally. 252 ANNA UNIVERSITY CHENNAI .6. thus simplifying customer education. such as automated clearing houses (ACH) networks. use digital signatures for signing and endorsing. electronic checks will facilitate new online services by: allowing new payment flows (the payee can verify funds availability at the payer’s bank). By retaining the basic characteristics and flexibility of paper checks while enhancing the functionality.6 ELECTRONIC CHECKS 4. Electronic checks are delivered either by direct transmission using telephone lines.DBA 1727 NOTES 4.1 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. 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. and facilitating payment integration with widely used EDI-based electronic ordering and billing processes. except that they are initiated electronically. electronic checks can be easily understood and readily adopted. Electronic check payments (deposits) are gathered by banks and cleared through existing banking channels.2 Benefits of Electronic Checks Electronic checks have the following advantages:  Electronic checks work in the same way as traditional checks. and require the use of digital certificates to authenticate the payer. and bank account. or by public networks such as the Internet.

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

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

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

control access to accounts. The MTA is the largest transportation agency in the United States and. and enhance consumer convenience and safety. Smart cards offer clear benefits to both merchants and consumers.7. 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.DBA 1727 NOTES 4. and nine tolled intrastate bridges and tunnels.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.1 Smart Cards Smart cards.600 MTA buses became operational in 1996. including electronic money. telephone customers. store information. many state and federal governments are considering stored value cards as an efficient option for dispersing government entitlements.2 billion electronic fare collection transactions a year on subway and bus lines. Other private sector institutions market stored value products to transit riders. operates the New York City subway and public bus system. use magnetic stripe technology or integrated circuit chips to store customer-specific information.7. All 3. The full complement of 467 subway stations is expected to be operational by mid-1997. the MTA anticipates more than 1. These facilities serve four million customers each workday. vending customers. 4. In 1994. The management challenges created by smart card payment systems are formidable. Institutions such as the MTA have made a considerable investment in the stored value card processing network. In spite of the many prototypes developed. the Long Island Railroad and Metro-North commuter rail systems. expedite customer transactions at the checkout counter. One successful use of stored value cards is by New York’s Metropolitan Transportation Authority (MTA). In addition. also called stored value cards. we are a long way from a universal payment system because 256 ANNA UNIVERSITY CHENNAI .7 STORED VALUE CARDS AND E-CASH 4. through its subsidiaries and affiliates. and retail customers. university students. The cards can be used to purchase goods or services. and perform many other functions. the MTA began the operation of an automated fare-collection system based on a plastic card with a magnetic stripe. and to get a good return on investment must identify new and innovative ways to achieve additional operating efficiencies and value. By 1999. They reduce cash-handling expenses and losses caused by fraud.

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

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

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

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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.



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

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

These transactions occur within the banking system. The question of risk. convenience store. Such a transaction occurs when a customer uses a debit card to make a purchase from a merchant (supermarket. The funds. and authentication. and safety of payment is assured. electronic benefit transfer cards. Some may be more open to potentially prying eyes-or even to the participants themselves. and smart cards. which reads the information. 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. 4.7. are transferred from the customer’s bank to the merchant’s bank. For example. The merchant swipes the card through a transaction terminal. These include debit cards. or some other store that accepts such cards instead of using cash. just as it is at 268 ANNA UNIVERSITY CHENNAI . or credit card).DBA 1727 NOTES 3. non reputability. The third-party processors who provide services for merchants are also examined by the federal regulators for system integrity. consumers may be exposed to risk as they hold static assets. The transaction works much like a credit card transaction.10 Other Emerging Financial Instruments Several other electronic payment systems are currently being prototyped and tested. 4. gas station. Debit Cards at the Point of Sale (POS) The fastest growing number of electronic transactions today is debit card pointof-sale transactions. and asset management. anonymity. If the system stores value in a smart card. Risk also arises if the transaction has long lag times between product delivery and payments to merchants. and the funds are transmitted inter-bank within the payment system. Both the consumer and the merchant maintain bank accounts. once approved. Authentication is provided by the use of the digital signature or PIN numbers. Approach to security. 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. Also electronic tokens might be subject to discounting or arbitrage. the customer enters his personal identification number (PIN). a customer gives an ATM card to the merchant for the purchase. Electronic tokens vary in the protection of privacy and confidentiality of the transactions. Encryption can help with authentication. This exposes merchants to the risk that buyers don’t pay-or vice versa that the vendor doesn’t deliver. check.

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

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

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. Its use has become widespread with the arrival of personal computers. improved cryptography and the Internet. 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. however. cheap networks. Digital cash attempts to replace paper cash as the principal payment vehicle in online payments. 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. Smart cards are basically of two types: Relationship-based smart credit cards. 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). and perform many other functions. 2. Cash or real-time. and require the use of digital certificates to authenticate the payer. Electronic checks are modelled on paper checks. Electronic tokens are of three types: 1. Credit or post-paid. E-token: An electronic token is a digital analogue of various forms of payment backed by a bank or financial institution. Electronic purses. Debit or prepaid. NOTES 271 ANNA UNIVERSITY CHENNAI . use digital signatures for signing and endorsing. 3. use magnetic stripe technology or integrated circuit chips to store customer-specific information. the payer’s bank. control access to accounts. The cards can be used to purchase goods or services. store information. also called stored value cards. E-cash: Electronic or digital cash combines computerized convenience with security and privacy that improve on paper cash. and bank account. Smart cards: Smart cards. Physically the card is an ISO 7810 card like a credit card. including electronic money. except that they are initiated electronically. 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. or from the remaining balance on the card.

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

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

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

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

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

Eform is valid. even after reading the notice may be constructed as accepting the conditions imposed by it. who choose to proceed further. viz. E-mail distribution list etc. however. AN ISP could be held liable for the bulletin boards. the timing of the acceptance offer determines when the contract is formed. liability for hosting of unlawful materials. Liability for materials distributed in the Internet may be different for the Website operators.4 Service Provider liability Many ISPs provide users access to shared websites. 277 NOTES ANNA UNIVERSITY CHENNAI . A court law may rule that the location of the Website determines the jurisdiction for that business. Unlawful material includes banned publications. offer is communicated by the acceptor and acceptance is received by the offer or from the acceptor. much the same way a fax message is. These facilities can because by their users to upload unlawful. The key activities associated with the formation of an enforceable contract do take place on the Internet. An offer can be communicated orally or in writing. Similarly. be interpreted to decide the jurisdiction of disputes especially in EC. liability for infringement of third-party rights. Usenet news. For example. 5. and the ISPs. Jurisdiction determines which laws would be acceptable. and in the EC environment through Email. third-party liability for defamation. EC on the Internet will grow if the parties doing business know what rules will govern what rules govern their activities. amazon. Visitor to the site.E-COMMERCE TECHNOLOGY AND MANAGEMENT 5.1. defamatory.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. However. 5. copyright or trademarks infringing material.1.-web sites. This is based on accepted legal practice. pornography and obscene material.com is a bookstore retailing books. and for aiding and abetting the commission of an offence such as the distribution of photography. on his website.3 Issues Related to Jurisdicary The Internet allows anyone to set up a Website anywhere in the world. A Website may accept orders from visitors to the site as part of an Internet store or a shopping mall. 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).1. Its location could. The offer or can display terms and conditions as a legal notice. etc: “Thus the concerns include libel and defamation. hate propaganda. without ISP having chance to review it.

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

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

and political institutions. and public safety and welfare Then business firms discover that they can make a business out of aggregating these musical tracks . In the meantime. 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. and Congress were not prepared at first to cope with the onslaught of online digital copying. information rights.or creating a mechanism for sharing musical tracks.DBA 1727 NOTES “belong” as a legal matter to the owners of the copyright . These impacts can be classified into four moral dimensions: property rights.even though they do not “own” them in the traditional sense. we will briefly review some basic concepts of ethical reasoning that you can use as a guide to ethical decision making. as an individual and a manager. and acceptable behavior in just this one area of social impact. How can you make good decisions in this type of situation? Before reviewing the four moral dimensions of e-commerce in greater depth.areas. Fig 5. but no c1ear-cutural guidelines.2.1(a) 280 ANNA UNIVERSITY CHENNAI . societies.” It may take years to develop new understandings. The introduction of the Internet and e-commerce impacts individuals. and provide general reasoning principles about social political issues of the Internet that you will face in the future. The record companies.musicians and record label companies. courts. you will have to decide what you and your firm should do in legal “grey”. where there is conflict between ethical principles. laws. governance.

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

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

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

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 .2. Electronic Communications Privacy Act Makes conduct that would infringe on the security of electronic communications illegal of 1986 Computer Matching and Privacy Regulates computerized matching of files held by different government agencies Makes conduct that would infringe on the security of computer based files illegal Limits access to personal information maintained by state Motor vehicle departments to these with legit mate business purposes Also gives drivers the option to prevent disclosure of driver’s license information to marketers and the general public DESCRIPTION Protection Act of 1983 Computer Security Act of 1987 Driver’s Privacy Protection Act of 1994 Privacy Laws affecting Private Institutions Regulates the credit investigating and reporting industry. as amended Regulates the federal government’s collection. and media institutions (cable television and video rentals) Table 5.DBA 1727 NOTES Amendment protections against unreasonable search and seizure of one’s personal documents or home.2. and disclosure of data collected by federal agencies. 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.(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. In addition to common law and the Constitution. and the Fourteenth Amendment’s guarantee of due process. use. there are both federal laws and state laws that protect individuals against government intrusion and in some cases define privacy rights vis-a-vis private organizations such as financial. Gives people the right to inspect credit records if they have been denied credit and provides procedures for correcting information Family Educational Rights and Privacy Requires schools and colleges to give students and their parents access to student records and to allow Act of 1974 them to challenge and correct information limits disclosure of such records to third parties Regulates the financial industry’s use of personal Right to Financial Privacy Act of 1978 financial records establishes procedures that federal agencies mist follow to gain access to such records Privacy Protection Act of 1980 Prohibits government agents from conducting unannounced searches of press offices and files if no one in the office is suspected of committing a crime. education. Gives individuals right to inspect and correct records.

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

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

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

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

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

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

which is defined as any behavior that would weaken the connection between the trademark and the product. 5.4. the intentional misuse of words and symbols in the marketplace to extort revenue from legitimate trademark owners (“bad faith”) is proscribed. Use of a trademark that creates confusion with existing trademarks.1 Cyber law Cyber law is a term used to describe the legal issues related to use of communications technology. but Internet users remain in physical jurisdictions and are subject to laws independent of their presence on the Internet. as it is an intersection of many legal fields. Jurisdiction and sovereignty Issues of jurisdiction and sovereignty have quickly come to the fore in the era of the Internet. privacy. 2) the laws of the state/nation that apply where the server hosting the transaction is located. cyber law is an attempt to apply laws designed for the physical world to human activity on the Internet. including intellectual property. the Internet.e. causes consumers to make market mistakes. 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). which created a federal cause of action for dilution of famous marks.4 CYBER LAW.E-COMMERCE TECHNOLOGY AND MANAGEMENT Disputes over federal trademarks involve establishing infringement. Congress passed the Federal ‘Trademark Dilution Act. and extends protection to owners of famous trademarks against dilution. The Internet does not tend to make geographical and jurisdictional boundaries clear. and jurisdiction. In essence. particularly “cyberspace”. In addition. As such. The test for infringement is twofold: market confusion and bad faith. freedom of expression. This new legislation dispenses with the test of market confusion (although that is still required to claim infringement). a single transaction may involve the laws of at least three jurisdictions: 1) the laws of the state/nation in which the user resides. CONTRACTS AND WARRANTIES 5. In 1995. and 3) the 291 NOTES ANNA UNIVERSITY CHENNAI . It is less a distinct field of law in the way that property or contract are. i. or misrepresents the origins of goods is an infringement.

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

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

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

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

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

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

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

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

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

or technological advances that would allow businesses to calculate the sales tax simply and without a large investment in time and resources. 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. there are more than 1. Nowadays various encryption techniques are available. provided the tax is simple to calculate for businesses. Before the digital age. These numbers could be significantly increased if states and local jurisdictions were allowed to tax Ecommerce. created by the ITFA legislation.300 separate sales tax jurisdictions. This could mean a uniform tax rate agreed to by all the states.5 Encryption policy: Encryption is a technique for hiding data. Therefore. One of the available techniques commonly used for encryption is Public Key. 301 NOTES ANNA UNIVERSITY CHENNAI . are notoriously parochial minded when it comes to defending their jurisdiction. Computer encryption is based on the science of cryptography. the biggest users of cryptography were governments. particularly for military purposes.4 The Future for Ecommerce Taxation The Commission on Electronic Commerce. In a Public Key encryption system each user has two keys-public key and private key. RSA Data Security of Redwood City offers the most popular and commercially available algorithm.5. Unfortunately. which number close to 7.500 throughout the U. which has been used throughout history.S. the current state and local tax systems. In Public Key encryption system. That is precisely why the commerce clause in the Constitution prohibits taxes and is an undue burden on interstate commerce.E-COMMERCE TECHNOLOGY AND MANAGEMENT 5. 5. has not been able to make any headway in the taxation debate.. encrypted by the private key. In Texas alone. Small businesses would be buried in costly paperwork attempting to comply with all these rules. one can broadcast the public key to all users. The encrypted data can be read only by those users for whom it is intended. And the public key can decrypt data. but several members have voice support for Internet taxes.5.

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

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

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

look for processes in which information is transferred. Ask yourself if your customers want this? If they do. 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. In particular. suppliers and distributors find for themselves. 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. Supplier & Distributor Benefits What’s in it for customers. computer to computer? With the time saved. Challenge Internal Assumptions Remove internal processing costs to make dramatic improvements to profit margins. then you can redirect your time and resources and use the knowledge gained to good effect elsewhere. Complexity often arises from integrating tried and tested stand-alone services. cheaper. If they don’t. it’s almost always impossible to measure the effect of each one.E-COMMERCE TECHNOLOGY AND MANAGEMENT with the intention of proving a principle. then a more robust version can be built. suppliers and distributors? Have you asked what they’d like? The web’s very good at research. Test out Your Plan In the online marketplace everything is a test until it’s proven by the customer. NOTES 305 ANNA UNIVERSITY CHENNAI . Are you offering them a new way to use an existing service or a completely new service? Is it faster. 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. what could your staff do to add more value for customers? Focus on Customer. Test to learn from the customer and to improve one step at a time. If a test includes more than one change.

306 ANNA UNIVERSITY CHENNAI . 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. 3. Unless a company’s online services are entirely online. Equally. 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. If you prefer customers to use an online channel.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. 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. others will not enjoy the increased interaction with customers. Some may find this work more fulfilling. There are three sets of costs that should be calculated: 1. post change  long-term cost-savings  long-term outsourcing arrangements  ongoing online development plans 2. find ways to: Inform them that it is there (they may not know this) Tell them how to change over Incentivise the swap to make it worthwhile Introduce the new service as a special privilege beta test programme Calculate the Three Sets of Costs Very few organisations have all the resources in-house to start offering online services. there will be a progressive transfer from processing tasks towards customer service. If your organisation is typical. Help Staff Adapt to Online Working An online service will affect your staff and the work that they do.

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

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