BBT 304: Survey of eCommerce Technology

Mukira

Course Objectives
1. Provide history, present state and future outlook for eCommerce and the internet. 2. Survey and define the key technology drivers of eCommerce including network, software, and hardware components. 3. Review eCommerce infrastructures including architecture models, security & payment systems. 4. Describe the general process of web design and development including tools and required skills. 5. Identify business models surrounding eCommerce including marketing strategies. 6. Explore international, ethical and tax issues surrounding eCommerce. 7. Provide experience in basic skills in web page authoring using Microsoft Frontpage / dreamweaver.
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Topics
1. 2. 3.
a. b. c.

What is eCommerce? Electronic commerce prior to the Internet Comparison to Traditional Commerce
Buyers & Sellers Viewpoint Business processes Fundamental business goals

4. 5. 6. 7. 8.

Why eCommerce? Seven Unique Features of eCommerce Technology Appropriateness of eCommerce The Internet: What Was, Is and Shall Be. Publishing on the Web for Homework 1.

What is eCommerce?
In its broadest definition, eCommerce is digitally enabled commercial transactions between and among organizations and individuals.  Digitally enabled means, for the most part, transactions that occur over the Internet and World Wide Web(Web)  Commercial transactions involve the exchange of value (e.g. money) across organizational or individual boundaries in return for products and services. Differentiated from eBusiness which is digitally enabled transactions and processes within a firm, involving Information Systems controlled by the firm. Doesnt involve commercial transactions across organizational boundaries.
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Components of eCommerce
Major components of eCommerce: 1. B2B Business to Business. Largest segment with about $700B of all total $12 Trillion in 2001(est)  Types include inter-business exchanges, edistributors, B2B service providers, matchmakers and infomediaries 2. B2C Business to Consumer. Much smaller with on $65B in 2001(est).  Buzzwords: Internet pureplay-located only on the web. Clicks and Mortar-both web and physical location.
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Components of eCommerce
Major components of eCommerce (continued): 1. C2C Consumer to Consumer. Individuals selling to each other through online market maker (eBay.com). Estimated at $5B in 2001. 2. P2P Peer to Peer. Allows iNet users to share files and resources directly without having to go thru a central web server. Napster is the most prevalent example. 3. M-Commerce Mobile commerce. Use of wireless digital devices (Palm Pilots, cell phones) to conduct transactions. Just emerging but expected to grow rapidly.
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Electronic Commerce Not New

Banks have used electronic funds transfers (EFTs), also called wire transfers, for decades. Businesses have been engaging in electronic data interchange (EDI) since the 1960s. EDI occurs when one business transmits computer readable data in a standard format to another business. Drawbacks to mass adoption by business was high cost of implementation; expensive, proprietary software, hardware, leased telephone lines. EDI now adapting to the Internet at a much lower cost. Estimates of $1 Trillion in transactions on the Internet by 2003.
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Technology and Business (Commerce)

Business drives Technology
Technology Enables Business
To understand how Technology enables Business, or Commerce, we must review traditional commerce. Once activities, or business processes in traditional commerce are identified, we can consider how they can be improved through technology Technology is not a panacea! Knowing when and when not to apply technology to business problems is the key.

Origins of commerce
Origins of commerce predate recorded history. Commerce is based on the specialization of skills. Instead of performing all services and producing all goods independently, people rely on each other for the goods and services they need. Example: In early times, the local shaman would cast a spell or intercede with the gods in exchange for food and tools. This is called barter.

Traditional commerce
Money has replaced bartering, but the basic mechanics of commerce remain the same: one member of society creates something of value that another member of society desires. Commerce is a negotiated exchange of valuable objects or services between at least two parties and includes all activities that each of the parties undertakes the complete the transaction.

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Views of commerce
Commerce can be viewed from at least two different perspectives: 1. The buyers viewpoint 2. The sellers viewpoint Both perspectives illustrate that commerce involves a number of distinct activities, called Business Processes.

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Business Processes
Business processes are the activities that firms engage in as they accomplish a specific element of commerce Examples include:  Transferring funds  Placing orders  Sending invoices  Shipping goods to customers

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The Buyers perspective

From the buyers perspective, commerce involves the following activities: 1. Identify a specific need 2. Search for products or services that will satisfy the specific need 3. Select a vendor 4. Negotiate a purchase transaction including delivery logistics, inspection, testing, and acceptance 5. Make payment 6. Perform/obtain maintenance if necessary

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The Sellers perspective

From the sellers perspective, commerce involves the following activities: 1. Conduct market research to identify customer needs 2. Create a product or service to meet those needs 3. Advertise and promote the product or service 4. Negotiate a sales transaction including delivery logistics, inspection, testing, and acceptance 5. Ship goods and invoice the customer 6. Receive and process customer payments 7. Provide after sales support and maintenance

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Why eCommerce?
The Internet and eCommerce are new technologies to help businesses increase profits. So why are there no special textbooks or courses on TV Commerce, Radio Commerce, Railroad Commerce or Highway Commerce? These are also technologies that have had profound impact on business in the 20th century and account for more commerce than eCommerce. Simply put, eCommerce technologies are more powerful than any of the other technologies we have seen in the 20th century.

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Unique Features of eCommerce Technology

The features the set eCommerce Technology apart from others used in traditional commerce are: 1. Ubiquity internet/web technology is available everywhere: at work, home and elsewhere via mobile devices.  Marketplace extended beyond traditional boundaries  Marketspace is created, available 24/7/365  Customer convenience increased, costs reduced.

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Unique Features of eCommerce Technology (continued)

2. Global Reach the technology reaches across national boundaries, around the earth. Commerce enabled across cultural and national boundaries seamlessly.  Potential customer reach extended.  Reduces barriers to markets.

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Unique Features of eCommerce Technology (continued)

3. Universal standards there is one set of technology standards, namely internet standards.  Promotes technology adoption  Reduces costs of adoption

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Unique Features of eCommerce Technology (continued)

4. Richness Video, Audio, graphical and text messages are possible.  Integration to a more powerful marketing message and customer experience

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Unique Features of eCommerce Technology (continued)

5. Interactivity the technology allows active user involvement.  Consumers engage in dynamic dialog  Experience adjusted to the individual based on responses.  Customer becomes co-participant in the process of delivering goods to the market.

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Unique Features of eCommerce Technology (continued)

6. Information Density - the technology reduces information costs and increase quantity and quality.  Information processing, storage and communication costs drop dramatically.  Accuracy and timeliness improve greatly.  Information becomes plentiful, cheap and accurate.

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Unique Features of eCommerce Technology (continued)

7. Personalization/Customization the technology reaches allows personalized messages to be delivered to individuals as well as groups. Commerce enabled across cultural and national boundaries seamlessly.  Potential customer reach extended.  Reduces barriers to markets.

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Fundamental Business Goals

The fundamental goal of a business is to earn a profit. Performing business processes in the most efficient way possible furthers this goal. Firms are increasingly interested in eCommerce because it can help increase profits. All the advantages of eCommerce can be summarized in one statement: eCommerce can Increase Sales and Decrease Costs.

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Examples of eCommerce Enabling Business Goals

Increase Revenues A company is able, through publishing its catalogs online, to reach more customers for the same costs as printing and mailing its catalogs. (LL Bean) Decrease Costs The same company can provide more timely product information by updating its catalog online, than by mailing its catalog four times a year.

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Appropriateness

It is important to identify which business processes can be streamlined using eCommerce technologies. It is equally important to realize that some processes make effective use of traditional commerce and cant be improved upon using technology. Technology is not a panacea. Using it when it is not necessary or helpful can be a costly mistake.

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Well-suited for eCommerce

Business processes that are well-suited for electronic commerce: Sale/purchase of new books and CDs Online delivery of software Advertising and promotion of travel services Online tracking of shipments The business processes that are especially well-suited to eCommerce include Commodity items. A Commodity is a product or service that has become so standardized and well-known that buyers cannot detect a difference in the offerings of various sellers and decide to buy based on price.
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Best for Traditional Commerce

Business processes that are well-suited to traditional commerce:     Sale/purchase of high fashion clothing Sale/purchase of perishable food products Small-denomination transactions Sale of expensive jewelry and antiques Exceptions?

In general, products that buyers prefer to touch, smell, or otherwise closely examine are difficult to sell using eCommerce.
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Questionable cases
Would eCommerce or traditional commerce work best for the following activities? Sale/purchase of rare books Browsing through new books Sale/purchase of shoes Sale/purchase of collectibles (trading cards, plates, etc.)

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Combinations of both
Some business processes can be handled well using a combination of electronic and traditional methods:     Sale/purchase of automobiles Online banking Roommate-matching services Sale/purchase of investment/insurance products

Consumers can research products online and make final transactions in person. In any business problem it is good practice to weigh the advantages and disadvantages of a particular approach. Evaluating the application of eCommerce technology is no Different.
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Advantages of eCommerce
For the seller:  Increases sales/decreases cost.  Makes promotion easier for smaller firms.  Can be used to reach narrow market segments. For the buyer:  Makes it easier to obtain competitive bids  Provides a wider range of choices  Provides an easy way to customize the level of detail in the information obtained  Allows anonymity and less pressure to buy.

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Advantages of eCommerce II
In general:     Increases the speed and accuracy with which businesses can exchange information. Electronic payments (tax refunds, paychecks, etc.) cost less to issue and are more secure. Can make products and services available in remote areas. Enables people to work from home, providing scheduling flexibility.
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Disadvantages of eCommerce
 Some business processes are not suited to eCommerce, even with improvements in technology. Many products and services require a critical mass of potential buyers (e.g. online grocers). Costs and returns on eCommerce can be difficult to quantify and estimate. Cultural impediments: People are reluctant to change in order to integrate new technology. The legal environment is unclear and full of conflicting laws; regulation has not kept up.
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The Internet
What Was. What Is. And What Shall Be. But First..

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What is the Internet?

The Internet is defined as a loosely configured global wide area network. A network is the means of connecting computers together. The Internet includes more than 31,000 different networks in over 100 different countries. It currently has about 115 million hosts. Since each host can include multiple computers, its difficult to estimate total number of computers connected to the internet.

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The Internet Evolution

The Innovation Phase 1961 1974 Milestones Early 1960s - Given the rise of both the nuclear age and communism (cold war), the Department of Defense became concerned that a nuclear attack could destroy computer systems required to run their weapons systems. 1961 Leonard Kleinrock (MIT) publishes paper on packet switching networks. The enabling technology for the internet is conceived. 1962 to 1963 J.C.R. Licklider (MIT) writes memos calling for a Galactic Network of computers. He becomes head of Advanced Research Project Agency Network Development for Department of Defense. The vision of a global network is born.
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The Internet Evolution

The Innovation Phase 1961 - 1974 Milestones (Chapter 3 p109-113) 1972 - eMail invented. First killer app of internet born. 1973 - Ethernet and Local Area Networks are invented. Client-server computing is invented. 1974 Open Architecture networking and Transmission Control Protocol/Internet Protocol (TCP/IP) concepts are presented. TCP/IP enabled a single open protocol to potentially connect any of thousands of disparate local area networks with a common addressing scheme to send and deliver data.

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The Internet Evolution

The Institutional Phase 1980 - 1993 Milestones 1980 DOD adopts TCP/IP as standard protocols. The single largest computing organization in the world adopts and legitimizes TCP/IP and packet switching networks 1980 Personal computers invented. PCs represent enabling technology for millions of people to connect to the internet. 1983 DOD creates separate military network (MILNET). ARPANET contains only civilian university traffic. Idea of Civilian internet is born.

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The Internet Evolution

The Institutional Phase 1980 - 1993 Milestones 1983 Telnet and File Transfer Protocol (FTP) deployed on internet as new killer apps. 1989 A world wide network of hyperlinked documents is proposed based on a common language called Hyper Text Markup Language (HTML). The concepts of an internet supported service called the World Wide Web is born. 1993 First graphical Web Browser (Mosaic) is invented. Mosaic made it easy for ordinary users to connect to HTML documents anywhere on the Web.

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The Internet Evolution

The Commercialization Phase 1994 - Present Milestones 1994 National Science Foundation (NSF) report plans development of an Information Superhighway supporting research, education, commercial and private interests. 1995 NSF privatizes internet backbone and turns control over to major carriers ATT, Sprint, GTE and UUNet as primary Network Access Providers (NAP). The fully commercial civilian internet is born. 1995 Jeff Bezos starts Amazon.com. First major early entry onto WWW as an internet pure play.

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The Internet Evolution

The Commercialization Phase 1994 - Present Milestones 1996 to 2000 Amount of venture capital backing Internet start-up companies grows from $3.1 to $72.4 Billion. Huge run up of stock market based on demand for new internet stocks going public in Initial Public Offerings (IPOs). Countless internet entrepreneurs become (paper) millionaires from stock options. 2001 to Present Reality sets in as dot com companies mount huge losses. Demonstration of faulty business models. VC money dries up, many internet companies go broke, stock market slides.

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The Growth of the Internet

The Internet has grown, and (most probably) will continue to grow, at high rate: Year Internet Hosts 1969 4 1979 188 1989 159,000 1993 2,056,000 1996 21,819,000 1999 56,218,000 2000 93,047,785 2001(est) 115,000,000+

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Factors behind growth

Some of the Main factors that led to the surge in popularity of the Internet:     The web-like ability to link from site to site enabled through HTML and HTTP. The ease of use provided by the browsers graphical user interface. The growth of personal computers and local area networks that could be connected to the Internet. The TCP/IP standard and packet switching.

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Evolution of Web Programming

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A Different Perspective

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E-Commerce I: 1995-2000
 Characteristics (Table 1.5 p32):
        

Technology driven Revenue growth emphasis Venture capital financing Ungoverned Entrepreneurial Disintermediation (p.26) Perfect markets (p.26) Pure online strategies First mover advantages (p.26)

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E-Commerce II: 2001-2006

 Characteristics (Table 1.5 p32):
        

Business driven Earnings/Profit emphasis Traditional financing Stronger Regulation Large traditional firms Strengthening intermediaries Imperfect markets, brands, network effects(p.26) Mixed clicks and bricks strategies Strategic follower strength

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And What Shall Be

Pundits and experts have a variety of opinions. Some areas, however, that will continue to grow, albeit at a slower pace(and as much venture capital!?!)  mCommerce: Mobile computing  Broadband: higher speed lines for both business and individuals as infrastructure matures.  B2B: Integration of web front ends to back office mission critical systems to allow more access by customers.  TCP/IP v6.0 and the X-Internet: The Xtended internet, a wider variety of devices hooked up to the internet; televisions, appliances, etc.
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