ECT 250: Survey of eCommerce Technology Sections 701

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ECT 250 Survey of eCommerce TechnologySections
701 404
David A. Schmelzer
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Course Objectives

• 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.
• Identify business models surrounding eCommerce
  including marketing strategies.
• Explore international, ethical and tax issues
  surrounding eCommerce.
• Provide experience in basic skills in web page
  authoring using Microsoft Frontpage.

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Course Requirements

• Attendance and participation in class lectures.
• Perform assigned readings.
• Completion of eight homework assignments all
  posted to a website.
• Midterm exam closed book.
• Final exam open book project posted on a
  website
• In class quizzes optional extra credit.

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Class Policieshttp//www.daschmelzer.com/ect250/e
ct250_policies.htm

• Attendance
• Homework Submission
• Exams
• Readings
• Class Notes
• Plagiarism
• Incomplete
• Grading Weights and Schedule
• Course Site

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The Course Sitewww.daschmelzer.com/ect250

• Class Schedule
• Reading Assignments
• Homework Assignments
• Grades
• Syllabus
• Lecture Notes
• Class Policies
• Helpful Links
• DePaul/CTI Info and Links
• Instructor Contacts
• Discussion forum on Delphi

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Discussion Forumwww.delphi.com/ect250/start

• All class announcements are posted here.
• Questions or clarifications on homework
• and admin issues pertinent to entire class.
• Additional information and links on current
• topics in eCommerce .
• During instructor office hours, open chat for
• students not able to travel to Loop.
• Distance learning class participation
  discussions.
• Used to explore concept of web enabled
• communication and community.
• Please allow 24 hours for responses.

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Questions?
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Week One Topics

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

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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
• 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
• 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)
• C2C Consumer to Consumer. Individuals selling
  to each other through online market maker
  (eBay.com). Estimated at 5B in 2001.
• 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.
• 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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Electric commerce is 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.
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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.
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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
• The buyers viewpoint
• The sellers viewpoint
• Both perspectives illustrate that commerce
  involves a number of distinct activities, called
  Business Processes.

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The Buyers perspective

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

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The Sellers perspective

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

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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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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
• 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
)

• 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
)

• 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
)

• 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
)

• 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
)

• 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
)

• 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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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 110 million hosts. Since
each host can include multiple computers, it is
very difficult to estimate the actual number of
computers that are connected to the Internet.
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The Internet EvolutionThe 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 EvolutionThe Innovation Phase 1961
- 1974
Milestones 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 Transfer Control
Protocol/Internet Protocol (TCP/IP) concepts are
presented. TCP/IP enabled a single open
protocol to potentially connect any of thousands
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 singles larges 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 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
• 93,047,785
• (est) 110,000,000

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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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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.