E-BUSINESS AND OUTSOURCING

MEANING OF E-BUSINESS
In simple terms, e-business means doing business over the internet. E-business
refers to any form of business transaction in which the buyers and the sellers
interact electronically using telecommunication networks. E-business refers to all
forms of business transactions which take place through electronic processing
and transmission of data.

E-business involves:
• Strengthening relationships with customers and suppliers.
• Checking out the competition.
• Developing new product ideas and sources.
• Dealing with Government at all levels.
• Re-designing business processes and management systems.
• E-tailing or selling goods and services online.

Definitions of E-Business
"E-business means consumer and business transactions conducted over a
network using computers and telecommunications". -- Department of
Treasury, USA

ONLINE TRANSACTIONS AND PAYMENT MECHANISMS

The steps involved in online shopping are as follows:
1. Finding the Seller: First of all the buyer will locate the seller. From
advertisements and other sources, the buyer has come to know the website of the
seller. The buyer will log in the seller's website. It is necessary to register with the
online vendor using the 'password'.
2. Selection of Products: The buyer selects the products from the menu given on
the website. For this purpose, the buyer might visit the websites of two or more
vendors and compare prices and quality.
3. Placing the Order: While browsing the website, the buyer drops the selected
items in his shopping cart. Once the products are selected and sale takes place,
the buyer has to be given his payment options.
4. Payment Mechanism: In online shopping payment may be made in any of the
following ways:
(a) Cash on Delivery: The payment for the goods ordered online may be made in
cash at the time of physical delivery of the goods.
(b) Cheque: The buyer may send a cheque to the online vendor. The goods are
delivered upon realisation of the cheque. This method is not popular.
(c) Net-banking Transfer: The buyer may instruct his bank to electronically transfer
the amount from his account to the account of the online vendor.
(d) Credit/Debit Card: This is the most popular method of payment in online
shopping. In case of credit card the buyer can make purchases on credit.Later the
issuing bank transfers the amount to the vendor's account and the buyer's
account is debited.
(e) Digital Cash: On payment of the amount, the bank issues digital cash in favour
of the buyer. Digital cash is a form of electronic currency existing in cyberspace.
5. Delivery: On receiving payment, the product is delivered to the buyer. The
product may be downloaded from the seller's website. Whenever this is not
possible goods are delivered to the buyer through courier/post.
6. Post-Sale Activity: After delivery, the buyer may need some service concerning
the purchaser product.

SCOPE OF E-BUSINESS
The scope of e-business is vast as it covers all types of business functions
conducted through the internet.

1. B2C Commerce: This includes transactions between a business firm and its
customers. Online shopping, online advertising, online delivery, ATM are examples
of B2C commerce. Business firms can conduct online surveys to ascertain who is
buying and to what extent the customers are satisfied.
2. B2B Commerce: Business to business transactions take place between two or
more business firms. A business firm can place orders with its suppliers, monitor
delivery of materials and parts, and make payments online. Similarly, it can
exercise control over its dealers and monitor stock-in-transit.
3. Intra-B Commerce: This involves interactions and dealings among different
departments and persons within a firm. Customised production, efficient inventory
management, effective handling of customers's orders have become possible due
to such interactions.
4. C2C Commerce: This type of commerce takes place between consumers. E-bay
where consumers sell their goods and services to other consumers is an excellent
example of such commerce. Pay-Pal is another good example of C2C commerce.

BENEFITS OF E-BUSINESS
1. Global Reach/Global Choice: The boundaries of electronic business are not
defined by geography or by national borders, but rather by the coverage of
computer networks. Even the smallest suppliers can achieve a global presence
and to conduct business world wide.
2. Improved Competitiveness/Quality of Service: Electronic business enables
suppliers to improve competitiveness by becoming "closer to the customer". As a
simple example, many companies are employing electronic commerce technology
to offer improved levels of pre- and post-sales support, with increased levels of
product information, guidance on product use, and rapid response to customer
enquiries.
3. Mass Customisation/Personalised Products and Services: With electronic
interaction, suppliers are able to gather detailed information on the needs of each
individual customer and automatically tailor products and services to those
individual needs.
4. Shorten or Eradicate Supply Chains/Rapid Response to Needs: Electronic
business often allows traditional supply chains to be shortened dramatically.
There are many established examples where goods are shipped directly from the
manufacturer to the end consumer.
5. Substantial Savings/Reductions: One of the major contributions of electronic
business is a reduction in transaction costs. While the cost of a business
transaction that entails human interaction might be measured in dollars, the cost
of conducting a similar transaction electronically might be a few cents or less.
6. Novel Business Opportunities/New Products and Services: In addition to
redefining the markets for existing products and services electronic business also
provides the opportunity for entirely new products and services. Examples include
network supply and support services, directory services, contact services and
many kinds of online information services.
7. Convenience: On the internet transactions can be made 24 hours, 7 days a
week, and 365 days a year. One can access anything from anywhere at any time.
Such flexibility provides great convenience to sellers, buyers, and employees.
8. Paperless Society: E-business reduces dependence on paperwork and the
attendant red tape. Tax payers can file tax returns electronically. Government can
grant licenses and approvals without much paperwork.
9. Speed: Much of the buying and selling involves exchange of information. On the
internet information can be exchanged at the click of a mouse. E-business
substantially reduces the cycle time of a transaction.
10. Lower Investment: It is much easier to start an e-business than a traditional
business. Capital required is much less. A small firm can obtain the same benefits
of internet technology which are available to big business. In e-business
networked firms are more efficient than net worthed firms.
Advantages of E-Business
1. Better service quality
2. Reduced service costs
3. Increased revenues
4. Reduced time to complete a business transaction
5. Reduced administration costs
6. Increased return on investment

LIMITATIONS OF E-BUSINESS
E-business suffers from the following limitations:
1. Limited Personal Touch: The warmth of interpersonal interaction is lacking in e-
business. Therefore, e-business is less suitable for products such as garments,
toiletries, etc. which required high degree of personal touch.
2. Delay in Delivery: In e-business information can flow at the click of a mouse. But
the physical delivery of the product takes time.
3. Unfamiliarity with Technology: Only those individuals can use e-business who
are well familiar with computers. Digital divide is a hurdle in the growth of e-
business.
4. High Risk: In e-business it is difficult to ascertain the identity of the parties and
even the location from where the parties are operating. There are hazards of
impersonation and leakage of confidential information.
5. Human Resistance: People oppose new technology and new ways of doing
things due to sense of insecurity and stress.
6. Ethical Problems: Many firms use an 'electronic eye' to keep track of the. e-mail
account, computer files, and websites used by their employees. This involves an
attack on their privacy.
RESOURCES REQUIRED FOR SUCCESSFUL IMPLEMENTATION OF E-BUSINESS
The resources required for successful implementation of E-business are as
follows:
(i) Well-designed website: A business enterprise must develop a comprehensive
website to communicate effectively with its customers and business partners. The
website should provide detailed information about the firm's products and
services.
(ii) Adequate computer hardware: The business firm must procure and install
computers with necessary speed, memory, and nodes to handle the expected
volume of business. It should provide the necessary Internet Service Provider
(ISP) and Application Service Provider (ASP), Server and Portals, and e-mail
facilities.
(iii) Effective telecommunication system: E-business requires an effective
telecommunication system in the form of telephone lines, optic fibre cables. and
Internet technology to handle the traffic on the internet. E-business cannot be
successful if telephone lines are getting frequently disconnected and it is difficult
to access the internet.
(iv) Technically qualified and responsive workforce: A well-trained work force, i.e.,
capable of working easily with the internet and computer networks is essential for
E-business. The staff must also be trained to handle sales inquiries, processing
orders, and ensuring prompt delivery.
(v) Reliable System of receiving payment: A fool proof system of receiving
payment for the goods sold must be developed. Adequate information should be
made available to enable the customers to calculate the amount to be paid. An in-
built system of refunds, in case excess amount is received should be created.

SECURITY AND SAFETY OF E-BUSINESS TRANSACTIONS (E-BUSINESS RISKS)

Several risks are involved in online transactions. These risks may cause financial,
reputational, and psychological losses to the parties involved in online
transactions. These risks are as follows:
1. Transaction Risks: Online business is prone to the following types of
transaction risks:
(a) Default on order giving/taking: The customer denies that he ever placed the
order or the seller denies that the order was placed.
(b) Default on Delivery: The intended delivery does not take place or goods are
delivered at wrong address or goods other than ordered are delivered.
(c) Default on payment: The customer claims that the payment was made but the
seller does not get the payment for the goods supplied.
2. Data Storage and Transmission Risks: Data stored by computer systems is
exposed to several risks. People may steal or distort the data for selfish motives or
just for fun. VIRUS and Hacking are well-known threats. Anti-virus programmes
should be installed and updated from time to time.
3. Risks to Intellectual Property and Privacy: Internet is an open space. Anybody
can copy the data and supply it to others. Host of advertising and promotional
literature may be dumped into our e-mail box.
There are five essential elements for ensuring secure transactions over the
internet.
1. Authenticity
2. Integrity
3. Confidentiality
4. Non - repudiability of origin
5. Non - repudiability of receipt
Confidentiality means privacy of the transactions. Non - repudiability of origin
refers to ensuring that the parties to a transaction cannot subsequently deny their
participation. Non - repudiability of receipt implies that the seller cannot
subsequently deny the payment received.

Threats to E-Business Transactions

E-business transactions face the following threats and risks:
(i) Hacking: Hacking means unauthorised entry into a website. Hackers intercept
messages sent on internet. They intercept confidential information. They misuse
such information to their advantage or modify and even destroy its contents to
harm the parties.
(ii) Brand hijacking: Companies may create powerful new brands overnight
through the internet. They hijack brands built over a long period of time and
through considerable expenditure through radio and TV.
(iii) Impersonation: Hackers may pretend to be customers themselves. They thus
make use of stolen credit cards of real customers.
(iv) Fraudulent trading: A business enterprise operating a website may indulge in
fraudulent practices. It may operate a fake website, take away money from
customers and not supply the product/service to the customer.
(v) Improper registration of domain names: A dishonest person may register a
domain name linked to the established brand name or trade mark of another firm.
For example, he may register vodafone.com in his name to sell the domain name
to the rightful owner at a price.
(vi) Viruses: Some viruses destroy all the information stored in a computer. Others
also hamper the functioning of e-business. They cause huge loss of revenue and
time.
(vii) Other cyber crimes: Embezzlement, hate mail, threats to life and property are
examples of other computer crimes.

Methods to Ensure Security and Safety of E-Business Transactions

The following methods can be used to ensure security and safety of e-business
transactions.

(i) Cyber crime cells: Government may set up special crime cells to look into the
cases of hacking and take necessary action against the hackers.
(ii) Encryption or cryptography: Encryption means converting the message into a
code so that unauthorised persons may not understand it. Only the sender and the
receiver of the message know the coding and encoding rules.
(iii) Digital signatures: Under this method, a coded digital certificate is issued for
each message by a certification authority. The purpose is to check the identity of
the sender.
(iv) Third-party involvement: In order to ensure that parties to a transaction do not
disown the transaction, a copy of the transaction is sent to a third party which is
acceptable to the parties to the transaction.

CONCEPT AND NATURE OF OUTSOURCING

Outsourcing means contracting out the none-core and even-core activities to a
third party so as to benefit from the expertise and experience of the specialists.
The specialist is known as the outsourcer and the company appointing it is called
outsourced.
Outsourcing includes both Business Process Outsourcing (BPO) and Knowledge
Process Outsourcing (KPO). BPO means contracting out of a Company's in-house
function to an outside vendor.
The salient features of outsourcing are as follows:
(i) Contracting Out: Outsourcing means to source from outside what was hitherto
been done in-house. For example, a business firm which had been doing
housekeeping of its premises through its own staff may appoint an outside agency
to perform this task on a contractual basis.
(ii) Non-Core Activities: Generally, non-core activities are outsourced. For
example, a school may enter into a contract with an outside agency which will
maintain neatness and cleanliness of its buildings. Once the outsourcing
experience proves successful, the school may even outsource its core activity.
(iii) Third-Party Specialised Agency: The agency to which an activity is outsourced
is generally an independent business firm. However, a large multinational may set
up own in-house unit to perform core activities for its affiliates all over the world.
(iv) Fees: The outsourcer charges fee for performing the activity on a contractual
basis.

NEED FOR OUTSOURCING

Outsourcing offers the following benefits:
1. Improvement in Productivity and Service Quality: Outsourcing support services
helps to increase productivity by providing access to a high level of expertise.
2. Reduction in Costs: The external provider has shared service centers for several
clients. Therefore, the client company benefits from economies of scale. Case
studies have shown cost savings of 10-20%.
3. Opportunity to Focus on Core Business: The client company is able to focus on
its core processes by outsourcing the non-core and routine processes. For
example, by outsourcing advertising service, a company can focus better on the
function of selling its products/services.
4. Improved Accountability: The outsourcer assumes responsibility for the total
process. He provides the expertise at a fee. Therefore, he is more responsible for
the quality of service provided than the internal staff of the client company.
5. Benefits of Latest Developments: The outsourcer maintains a world class
information technology infrastructure and remains in touch with the new
developments in its area of expertise.
6. Expansion and Growth: Outsourcing helps to reduce the investment which can
be utilised for expanding the core activities of the firm. Moreover, outsourcing
facilitates knowledge sharing and collaborative learning.

SCOPE OF OUTSOURCING
Any non-core business process can be outsourced. Outsourcing of some of the
popular services are given below:
1. Financial Services: Every business firm requires some sort of financial service,
e.g., pay roll accounting services, merchant banking, underwriting, etc.
Manufacturing and commercial firms except of very large size find it more
convenient and economical to depend upon outside financial agencies for the
various financial services.
2. Advertising Services: Business firms generally depend upon advertising
agencies for designing, developing, and disseminating advertisements for their
products and services. Some big advertisers such as Coca Cola, Pepsi, Hindustan
Lever, and others have agreements with advertising agencies.
3. Courier Service: Big business firms have to send letters, parcels, etc. in large
numbers. They make use of services offered by courier firms such as DTH,
Overnight Express, and others.
4. Customer Support Service (CSS): Several services are offered to customers to
support the purchase and use of products. Companies are realising that customer
service is an excellent way to achieve a competitive advantage in a highly
competitive market.

MEANING OF KNOWLEDGE PROCESS OURSOURCING (KPO)

KPO means getting high-end knowledge work done from an outside or external
organisation to improve efficiency and quality and to reduce costs of doing
business. In KPO the focus is on knowledge expertise whereas in BPO the focus is
on process expertise. In KPO there is no determined process to solve a problem.
Rather the expert develops separately and himself the method to solve each
problem.

Features of KPO:
The main features of KPO are as follows:
(i) KPO is the higher-end of BPO.
(ii) Its focus is on knowledge expertise rather than on process expertise.
(iii) There is no pre-determined process to solve a problem.
(iv) It is the result of success in BPO sector.
(v) It covers all non-core activities.

SMART CARDS-MEANING AND UTILITY

A smart card is typically a pocket-sized card. It is a plastic card that contains an
embedded computer chip either a memory or microprocessor type that stores and
transacts data. This data is usually associated with either value, information, or
both and is stored and processed within the card's chip.
Utility of Smart Cards:
(i) Smart card can be used as electronic wallet. The card can be used for electronic
cash payments. The smart card chip is loaded with funds to pay at different retail
outlets.
(ii) Smart card is used for personal identification such as Driver's License card,
Patient card, Voter card, etc. It can easily provide authentic digital identification.
(iii) Smart card can serve as pre-payment card for households, ATM card, fuel
card, mobile phone SIM, etc.
(iv) Smart health card helps to ensure privacy and security of patient information.
(v) Smart card can be issued to students in schools and colleges to track their
attendance.