Survey of eCommerce Technology Muhammad Rashid Mukhtar.

Survey of eCommerce Technology

Muhammad Rashid Mukhtar

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1. Provide history, present state and future outlookfor 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.

Course Objectives

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In its broadest definition, eCommerce is digitally enabled commercial transactions between and among organizationsand 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. Doesn’t involvecommercial transactions across organizational boundaries.

What is eCommerce?

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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, e-distributors, 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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Banks have used electronic funds transfers (EFTs), also called wire transfers, for decades.

Businesses have been engaging in electronic data interchange (EDI) since the 1960’s. 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.

Electronic Commerce Not New

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“Business drives TechnologyTechnology 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.

Technology and Business (Commerce)

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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.

Origins of commerce

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Money has replaced bartering, but the basic mechanicsof commerce remain the same: one member of societycreates something of value that another member of society desires.

Commerce is a negotiated exchange of valuable objectsor services between at least two parties and includes allactivities that each of the parties undertakes the completethe transaction.

Traditional commerce

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Commerce can be viewed from at least two different perspectives:

1. The buyer’s viewpoint2. The seller’s viewpoint

Both perspectives illustrate that commerce involves a number of distinct activities, called Business Processes.

Views of commerce

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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

Business Processes

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From the buyer’s perspective, commerce involvesthe following activities:1. Identify a specific need2. Search for products or services that will satisfy

the specific need3. Select a vendor4. Negotiate a purchase transaction including

delivery logistics, inspection, testing, andacceptance

5. Make payment6. Perform/obtain maintenance if necessary

The Buyer’s perspective

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From the sellers’ perspective, commerce involvesthe following activities:1. Conduct market research to identify customer

needs2. Create a product or service to meet those needs3. Advertise and promote the product or service4. Negotiate a sales transaction including delivery

logistics, inspection, testing, and acceptance5. Ship goods and invoice the customer6. Receive and process customer payments7. Provide after sales support and maintenance

The Seller’s perspective

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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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3. Universal standards – there is one set of technology standards, namely internet standards.

Promotes technology adoption

Reduces costs of adoption

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4. Richness – Video, Audio, graphical and text messages are possible.

Integration to a more powerful marketing message and customer experience

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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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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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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 eCommerceEnabling 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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It is important to identify which business processescan be streamlined using eCommerce technologies.

It is equally important to realize that some processesmake effective use of traditional commerce and can’t be improved upon using technology.

Technology is not a panacea. Using it when it is

not necessary or helpful can be a costly mistake.

Appropriateness

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Business processes that are well-suited for electroniccommerce:

• 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 hasbecome so standardized and well-known that buyerscannot detect a difference in the offerings of varioussellers and decide to buy based on price.

Well-suited for eCommerce

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Business processes that are well-suited to traditionalcommerce:

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 usingeCommerce.

Best for Traditional Commerce

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Would eCommerce or traditional commerce workbest 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.)

Questionable cases

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Some business processes can be handled well usinga 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 finaltransactions in person.

In any business problem it is good practice to weigh theadvantages and disadvantages of a particular approach.Evaluating the application of eCommerce technology is noDifferent.

Combinations of both

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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.

Advantages of eCommerce

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In general:

Increases the speed and accuracy with whichbusinesses can exchange information.

Electronic payments (tax refunds, paychecks, etc.) cost less to issue and are more secure.

Can make products and services available inremote areas.

Enables people to work from home, providingscheduling flexibility.

Advantages of eCommerce II

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Some business processes are not suited to eCommerce, even with improvements intechnology.

Many products and services require a criticalmass of potential buyers (e.g. online grocers).

Costs and returns on eCommerce can be difficult to quantify and estimate.

Cultural impediments: People are reluctant tochange in order to integrate new technology.

The legal environment is unclear and full of conflicting laws; regulation has not kept up.

Disadvantages of eCommerce

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The Internet

What Was….What Is….

And What Shall Be…….

But First…………..

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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, it’s difficult to estimate total number of computers connected to the internet.

What is the Internet?

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The Internet EvolutionThe Innovation Phase 1961 – 1974

Milestones

Early 1960’s - 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 EvolutionThe 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 EvolutionThe 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 EvolutionThe 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 EvolutionThe 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 EvolutionThe 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 Internet has grown, and (most probably) willcontinue to grow, at high rate:

Year Internet Hosts1969 41979 188 1989 159,000 1993 2,056,0001996 21,819,000 1999 56,218,000 2000 93,047,7852001(est) 115,000,000+

The Growth of the Internet

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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.

Factors behind growth

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Evolution of Web Programming

Survey of eCommerce Technology Muhammad Rashid Mukhtar.

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