E Commerce

E CommerceConcepts and Issues

David MillerJay Roloff

E Commerce Definition

The process of selling or buying products or services via the

Internet

Questions

Don’t Hesitate Ask Questions

Traditional Commerce Model

PersonalRetail OutletsShopping Malls

BusinessIndividual Purchasing AgentsBased on ERP requirements

E Commerce Model

PersonalWeb Based Retail OutletsAmazon.comBarnesAndNoble.com

Comparison ServicesShopper.com

E Commerce Model

Businesse-Procurement• Commerce One• Ariba

Industry Purchasing Portals• Airline Portal• TradeXchange

– GM Supply Power (Commerce One)– Auto Xchange (Ford – Oracle)

Building an E Commerce Site

DatabaseServer

Internet

Router/Firewall

Web PageServer

Web PageServer

Web PageServer

Web PageServer

Load Balancer

DatabaseServer

DatabaseServer

DatabaseServer

Web Servers

Apache ($free) 63%Microsoft Internet Information Server ($free)Netscape Enterprise Server ($1,295)Novell Enterprise Server ($1,295)

Database Servers

IBM DB2 v7.1Holds Transaction Processing Performance record with 440,000 TPM32 Servers$14.2 Million for Equipment

Oracle8Microsoft SQL Server 2000

Content Development

Microsoft FrontPageMicrosoft InterDev

Site BuildersStorefront 2000 (Frontpage 2000)eStore Builder (Active Server)ezMerchant (Lotus Domino)

Active Server Pages

Microsoft TechnologyRuns on the ServerCreates Standard HTML codeCompatible with many different BrowsersBarnes and Noble

Content Development

Back-end Integration can cost 25%Large ongoing Cost

ERP IntegrationOraclemySAPJ.D. EdwardsBaan E-EnterpriseeStore (PeopleSoft) #12

B2B E Commerce

2000 - $131 Billion

2003 - $1.55 Trillion

B2B Concepts

Common Portals for ExchangeAbility to Integrate DataRequisition to Sales Order

Cost decrease from $100 to $20/Transaction

Production Schedules feed Forecasts

B2B Portals

AribaCommerce One

Provide Common Ground for ExchangeReplaces EDI for Transactions

Case Study

GM Supply Power (www.gmsupplypower.com)

Quality Information (Real Time)Engineering Information and CollaborationFinancial Information

System Resources (Provided by Commerce One)

Windows NT ServerMicrosoft SQL Server Database

GM TradeXchange

CatalogOnline catalog that are used to purchase standard parts throughFulfillment was Costs $55 Buyer/$45 SellerNow $10 total

AuctionUsed for Special Catalog PurchasesRFQ’s or “reverse” auctions

Bid-QuoteComplex part Purchases

GM TradeXchange

Price Waterhouse Coopers Provide Back Office IntegrationWork With Commerce One to Develop PortalDeveloped Initial Portal in 3 Weeks (Dec 99)

200,000 Catalog Items$4,000,000 SuppliesFirst Bid/Quote for $147 MillionGM Currently Spends $87 Billion with 30k Suppliers

Automotive Trade Exchange

GM TradeXchangeFord AutoXchangeDaimler – Chrysler

$240 Billion of $500 Billion Total Big Three PurchasesCommerce One and Oracle

Airline Purchasing Portal

Six Major AirlinesAmerican AirlinesAir FranceBritish AirwaysContinentalDeltaUnited

Airline Purchasing Portal

$32 Billion Annual PurchasesFuelFuel ServicesAirframeAvionicsEngine ComponentsServices

B2B Future

e-Business in Only 1 Year OldBy 2003, 2/3 of Online Transactions to be B2Be-Supply Chain Synthesis

Seamless integration from end to end

Collaboration with Competition

Where To From Here?

Eliminate Human ContactCurrent e-Commerce Sites have Poor Customer Service

Sell Only Commodity ItemsLow Margins

Have Lowest Price and Highest Selection

No Profits From Sales

The Future

Voice Browsers2000 – 1.4 Million Users Worldwide2005 – 300 Million Users WorldwideText – Speech Conversion

MapQuest.comRequest Direction via PhoneDirections Will Be Read BackIn the Future, Maps Will be Sent to PDA

Issues Regarding E Commerce

Entry Into e-Commerce

Barriers to Entrydevelopment of Web infrastructureintegration with existing infrastructure

• multiple databases• multiple transaction channels

performance and scalability• technology deployed

changes in business processes• customer/supplier relationships• data access • data ownership


Barriers to EntryFor successful, effective, sustainable strategy barriers are high.


It is expensive$750,000 for baseline technologymultiple vendors required

• transactions• security

must be heavily marketed• branding• mass marketing


Must be a compelling business reasonfor many EDI serves purposefew Amazon.com opportunities existin B-2-C, consumers prefer less subjective items like books, software to apparelonline sales less than 5% of total retail revenuemiddlemen still necessary for B-2-B


Performance and size matterBrand power, trust and consumer confidence are criticalCredibility is gained through performancesmalls can enter the fray but price will prevail

Reliability, availability and service are still the

necessary fundamentals.

B-2-C Issues

Consumer purchasing is on the increaseacceptance of mediumtrustentry of big name creditors i.e. VISA

Service and support are criticalresponding to e-mail inquiriesspeed of responsevolume capabilitydevelopment of Web based systems

• chat, e-mail, voice, self-help

B-2-C Issues

Service is the only means of differentiation. You must have price and selection.

adding contentcreating links to other sites and servicespersonalizing the shopping experience

Security

What parts of the transaction are vulnerable and in need of protection?

data in transit• susceptible to modification, monitoring

web servers• http server security flaws• common gateway interfaces

customer data• credit card #’s stored in unencrypted server

databases

Security

Advances in technologyhtml extension languages

• greater control given to client system

more powerful programming languages like JAVA and Visual Basic

• creation of credit card stealing applet

ability to access keystrokes• circumvent encryption

Security

Current security technologyFirewalls

• Hardware and software to protect internal network from external attack

• Location of web server is critical– Ahead of firewall

– site is vulnerable but more user friendly and less cumbersome

– data must be moved behind firewall for safety– Behind firewall

– site is secure– data can be stored in server database

Security

Current security technologyEncryption

• uses a public/private key pair to encode, authorize and decode data transmissions

• data is encoded with a 48 to 126 bit random alphanumeric string

• the message then can only be opened with the proper key located at the receiving end.

• attempts are being made to use this public key technology to handle e-commerce transactions

Security

Current security technologyEncryption

• SSL(Secure Sockets Layer) – authenticates server to client

• SHTTP(Secure http)– authenticates both client and server

• SET(Secure Electronic Transactions)– authenticates both client and server– securely carries payment through to bank

Security

Current security technology3rd party payment systems

• Cybercash– intermediary between merchant and customer/bank– merchant never sees customer credit card #

• Digicash– digital tokens used like travelers checks

• Virtual PIN– payments authorized via e-mail – difficult to intercept– credit card enrollment via phone

Security

Current security technologyUniform standards must be developed and adopted to provide interoperability between systems.Current payment systems require both the client and the server to register.As standards are developed and proposed they must be easy to employ.The entire transaction process must be incorporated; from the point of sale to the merchant to the bank and to the credit clearing house.

Security

Recent DevelopmentsMicrosoft fix

• Active Setup download program which detects which files are needed and downloads relevant ones.

• Microsoft files are automatically downloaded without approval

• can specify download locations on user’s hard disk

• vulnerable to denial-of-service attacks

Security

Recent DevelopmentsApproximately 50% of organizations in a 1997 survey reported security breaches

• up from 37% in the previous year

Nike.com• hackers seized domain name and routed users to

an Australian site with anti-Nike messages• problem lasted for days due to ISPs’ use of

cached versions of web pages to speed access

PrivacyThe need for e-Marketing information

How do you turn browsers into purchasers?How do you identify and retain repeat customers?Who are the most profitable customers?What marketing and promotional efforts attract them?What content leads them to buy?What products should be marketed through which channels?You cannot personalize the shopping experience without some knowledge of the individual.

Privacy

How is this accomplished without jeopardizing privacy?

Technology has been focused on the marketer• consumers cannot manage personal data

Value, Control and Security• must have a perceived benefit• must have control as to how information is used• must be secure from theft, unauthorized

modification

Demographics may be skewed• data could be misleading if only those willing to

release information can be tracked

Privacy

Recent DevelopmentsFTC involvement

• from consumer protection standpoint, many online privacy policies are confusing, contradictory and ambiguous

• changing its stance on self-regulation• congressional action possible

PrivacyRecent Developments

Essential Elements of Privacy Policies (FTC)• Notification defining privacy policies• Choice as to what data are collected and how it can

be used• Customer access to data• Assurances of security from theft and improper

usage

Effects on business• consumer choice could hurt many business models

based on data warehousing and data mining• requirements for access would increase

expenditures for technology and security

Privacy

Recent DevelopmentsU.S./Europe hammer out safe harbor agreement designed to set policy for U.S. based firms to engage in e-commerce in Europe

• establishment of an independent body and process for handling consumer complaints

• compensation for damages from violations of privacy rules

Privacy

Recent DevelopmentsToysmart attempted sale of customer data as part of its bankruptcy liquidation.

• Toysmart had a contract with TRUSTe a privacy watchdog group

• TRUSTe is suing for breach of contract

Ethical/Legal Issues

B-2-B exchangesCreated to achieve marketplace efficienciesTargets of Antitrust investigations

• price signaling• collusion• freezing out competitors

Threat of one online marketplace for each industry via shakeouts and mergers


Methods to avoid legal issuesFTC recommendations

• keep prices and trade secrets private• establish firewalls and procedures to keep

competitors from learning one another’s prices from e-catalogs, bids and auctions

• allow competitors to move freely from one marketplace to another

Identify which players will be hurt by an exchange

• limit their exposure• where there are losers there will be litigation


Methods to avoid antitrust litigationMetalSite.com

• extensive controls and audits• require antitrust education for employees


Recent ethical and legal developmentsNike.com

• a recent attack sent users to a Scotland based web hosting firm, tying up its system

• web hosting company is threatening legal action against Nike and its internet provider

• who bears the responsibility for such injuries?


Recent ethical and legal developmentsNapster Inc. - Internet music sharing service

• allows users to share MP3 files• suits brought on by record labels and music

industry institutions for copy right infringement• company claims it is a ‘mere conduit’ for digital

information• claims that fair use doctrine applies

Questions

E Commerce

Business

Transcript of E Commerce