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Digital Economy

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All activities that have to do with buying, selling , providing, paying, ... e-procurement to cut costs and speed supplies (General Electric and Wall-Mart) ... – PowerPoint PPT presentation

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Title: Digital Economy


1
Digital Economy
In 10 years from now the term will be completely
obsolete.
2
They backbite about you on the internet
3
Definition
  • What do we understand by business ?
  • All activities that have to do with buying,
    selling , providing, paying, handling,
    administrating etc. of goods, services or
    information.
  • What do we understand by E-business ?
  • IBM
  • E-business is what happens when you combine the
    broad reach of internet with the vast resources
    of traditional information technology systems. It
    is dynamic and interactive.
  • Automotive Industry Action Group
  • The application of advanced information
    technology to increase the effectiveness of the
    business relationships between partners.

4
Other Definitions
  • Electronic Commerce ( EC )
  • Narrower than electronic business
  • Limited to the pure trading activities
  • Electronic Commerce
  • A new concept covering buying and selling of
    products, services and information via computer
    networks, including the internet.
  • EC applies different technologies, varying from
    EDI till e-mail.
  • In fact we can also consider buying food at a POS
    automate using a smart card as a form of
    electronic commerce.

5
B2B and B2CBusiness to BusinessBusiness to
Customer
6
E-Commerce B2B
B2b or not 2b Internet changes the way of
doing business.

4/2/2000
7
B-2-B Growth of commerce via Internet
Business to Business Retail
trade Closed
8
  • The real impact of the Internet
  • at the long term?
  • The internet improves the transparency of the
    economy
  • easier prise comparisons (buyers - sellers)
  • eliminates intermediaries
  • reduces the cost of a transaction
  • lowers the entry barriers
  • The internet brings economy closer to the
    classical model of the free competition
  • abundance of information
  • cost of transaction almost zero

9
What will be the real long-term impact of IT and
the Net? The biggest winner will probably be
the consumers and the entreprises of the old
economy (the automobile sector, chemical sector,
...) that use e-commerce B2B within the framework
of a business process re-engineering
effort April 1, 2000
10
  • Strategic Networks !
  • Internet - The textbook model of perfect
    competition abundant information, zero
    transaction costs and no barriers to entry. The
    most important effect of the new economy may be
    to make the old economy more efficient
    The Economist April 1, 2000
  • L Ubiquité. Linternet transforme le mode de
    fonctionnement des entreprises tous les acteurs
    du marché seront dotés dune plus grande
    connectivité
  • Les réseaux stratégiques de partenariat
    deviennent la meilleure façon dêtre compétitif.
    Le Monde 27/4/1999

11
  • REORGANIZE YOUR COMPANY CHANGE THE OLD
    ENTERPRISE MODEL

March 22 1999
12
Example US
Feb 1998 31/1/2000
The Economist Jan 14 2000
The US Job Machine We woz wrong
13
e-penetration ? ? innovation ?
Eito-RIPE July 1999
14
Obstacles
EITO 99
15
  • Obstacles
  • Essentially Cultural
  • A generation of managers has to redo their exams
  • Connect yourself, boss (BusinessWeek)
  • The public
  • The value of the network grows by the square of
    the number of users

16
  • The Internet soap-bubble?
  • The railway companies in the 19th century
  • most lines bankrupted ? over investments created
    excess capacity and deadly competition
  • the good news after the collapse of the shares,
    the railways remained operational ? good for the
    whole economy

17
  • Ethical e-business
  • mainly for self-defense
  • High standards of ethical conduct by busi-nesses
    should be the main method of foste-ring consumer
    confidence in the Internet
  • US Secretary of Commerce Daley Global Business
    Dialogue On E-Commerce, Sept 13, 1999 Paris
  • non-transparancy
  • ? not accepted by the consumer
  • 100 data protection extremely high cost
  • changing mentality examples Dell-IBM
  • citizen follows ? more open society ?

18
Dot-Coms Needed a Double Dose of Reality...
  • Traditional commercial and legal precepts that
    govern capitalism must also apply to the Net.
    High-tech entrepreneurs must address these
    problems as the price for continued access to
    capital
  • Privacy.
  • Should be respected
  • Transparency.
  • About real cost
  • Patents.
  • Patenting widespread business methods to create a
    monopoly and inhibit rivals. The US Patent Office
    changed its mind.
  • Monopoly.
  • The courts have ruled that Microsoft violated the
    100-year-old Sherman Anti-Trust Act. Investors
    sent Microsoft's stock down.
  • BUSINESSWEEK APRIL 17, 2000

19
Dot.business ? Most companies must become
Internet firms if they are to survive The
Economist 26/2/2000
Merely adding a website on to an existing
business is not enough the whole business needs
to be redesigned around the cost-saving,
communication-easing properties of the net
20
e-Economy Threshold Timing
Germany
Italy
UK
France
Denmark
Austria
Portugal
Norway
Belgium
Finland
Greece
Switzerland
Spain
Sweden
Netherlands
Ireland
U.S.
2003
1998
1999
2000
2001
2002
2004
2005
Forrester Research - TM_at_B 18/5/1999
21
Online markets
  • Seller beware
  • e-procurement to cut costs and speed supplies
    (General Electric and Wall-Mart)
  • third-party exchanges independent firms that
    bring together many buyers and sellers to create
    a genuine market (auction market)
  • giants of an industry create large virtual
    markets General Motors, Ford, DaimlerChrysler,
    Toyota, Renault, Nissan abandon stand-alone
    efforts and join forces
  • markets intellectual property TechEx (Yale) 400
    inventions looking for a licence

22
e-Logistics E-technology transition ...
?
EDI era Large companies Proprietary
Batch Bilateral High cost
Internet era All companies Public
Online Networks Low cost
Results in cost (and quality) discontinuity
Cost to process an order 10x improvement, plus
better quality!!
23
The Zero-Latency Organization
24
Zero-Latency
  • Enterprises or organizations that can act quickly
    on new information have a competitive advantage
    and deliver better services.
  • Latency is the time it takes for a system to
    respond to an input
  • all parts of the organization can respond to
    events as soon as they become known to any one
    part of the organization.
  • Requires reengineering the business processes.
  • Zero-latency strategy is needed.

25
Zero-latency Strategy
  • A zero-latency strategy requires
  • A network and software infrastructure that is
    capable of quickly exchanging information across
    technical and organizational boundaries
  • End-user interface tools and other application
    programs that are capable of sending and
    receiving information in a timely fashion
  • A business strategy that leverages fast action to
    achieve a real business benefit (by managers)
  • A set of business policies, processes and product
    offerings that have been engineered to implement
    that business strategy
  • it can affect the way tasks are done or goods are
    delivered
  • An organization that can implement the new
    processes
  • function of workgroups and departments may change

26
Zero-latency Strategy
  • A zero-latency strategy is any strategy that
    exploits the immediate exchange of information
    across technical and organizational boundaries to
    achieve business or organizational benefits.
  • Technical boundaries
  • different operating systems
  • different DBMSs
  • different programming languages
  • Organizational boundaries
  • inter-department
  • inter-organizational

27
The Virtual Enterprise
Source Gartner group Inside report June 1998
28
Virtual Organization
  • Cooperation between independent organizations
    that operate to the outside world as a unit.
  • Temporary cooperation to gain competitive
    advantage or to make up from arrears (Airbus)
  • Works well if the objective is clear
  • Legal problems can occur in case of conflicts
  • Intensive but non-definitive relationship
  • Essential is that partners can survive after a
    divorce
  • e.g. Toyota with partners is not a virtual
    organization
  • Seen from user point-of-view
  • Clients and suppliers are seen as part of the
    network
  • organization is not seen as a unit of buildings
    and resources, but is always and everywhere
    accessible via IT
  • networking organization

29
Focussing on Core Competencies
  • Increased customer access to information allows
    them to search among product and services to
    select the best-of-breed
  • enterprises narrow their focus on core
    competencies
  • add customer value
  • differentiate products and services in the
    marketplace
  • add value across multiple products and services
    over time
  • enterprises narrowing the focus
  • Virtual companies
  • need to offer broader product range

30
Virtual Company
  • Basic set of ideas
  • outsourced non-core competencies
  • focus on core strength or business
  • little or no physical presence or infrastructure
  • network of business alliances
  • heavy reliance on telecommunications.
  • The combination of independent enterprises
    required to fulfill a defined customer need.

31
The IT-enabled Virtual Enterprise
Virtual Enterprise 1
Business Partners
Customers
Virtual Enterprise 2
Internal Operations
Physical Enterprise
Fulfillment and Delivery
Product and Service Creation
Suppliers
Industry network
Sales and Marketing
Virtual Enterprise 3
Source GartnerGroup
32
Types of Virtual Companies
  • Project oriented (airbus)
  • Competence based
  • Kernel partner (Mc Donnalds)
  • With or without mission overlap

33
IT-enabled
  • Existed for a long time as a business concept
  • Made feasible by IT
  • A chain of enterprises is required to deliver a
    single product
  • Some enterprises offer multiple bundles of
    products and services
  • Enterprises rely on a virtual enterprise of
    coordinated service providers (value web)
  • IS departments must be ready to provide
    necessary IT-services to rapidly changing
    partners
  • Need for rapid IT infrastructure, application
    development capabilities and security strategies

34
Could you check my agenda and tell me who are the
people with whom I'am having this lovely lunch ?

35
Characteristics and examples
  • Elements usually present
  • alliances
  • brand identity
  • knowledge base
  • marketing strategy
  • problem solving
  • research and development
  • Elements usually absent
  • Human resources
  • Inventory
  • Manufacturing
  • Materials
  • Offices
  • Storefronts
  • Examples
  • Airbus Aerospatial, DASA, Aerospace, CASA, SABCA
  • Virgin
  • Construction companies

36
Knowledge Key Differentiator
  • The virtual company will
  • constantly scan the environment
  • constantly scan own internal processes
  • identify opportunities and challenges
  • sense changes among its suppliers, competitors,
    customers,
  • innovate products, services, communications,
  • Constant mutation and change will be the norm
  • Knowledge Based

37
Critical Success Factors
  • Extensive interoperability between constituent
    parts
  • Subsume non-differentiating business processes
    for key functions that facilitate application
    interoperability
  • packaged solutions Baan, Oracle, Peoplesoft,
    SAP,
  • Standards for the meaning and presentation of
    information
  • Key technology enablers
  • application interoperability (interenterprise,
    intraenterprise )
  • high speed networks
  • rapid application development
  • terabyte database management systems
  • interenterprise collaborative computing
  • security

38
Electronic Commerce
39
Interorganisational Systems
  • Information flow between two or more
    organisations
  • efficient transaction processing
  • no bargaining, only execution
  • pre-defined formats, no telephone calls nor paper
  • Drivers
  • reduced cost for routine business transactions
    (SWIFT)
  • improved quality of the procedures because of
    less errors
  • reduced processing time (Singapore)
  • lower cost for paper handling
  • business process easier for the users
  • Types
  • EDI, EFT, e-mail
  • shared databases

40
Establishing Trust
  • Without trust between parties online, the value
    of electronic transactions remains limited.
  • The concept of a certificate authority, trusted
    by all parties involved in electronic
    transactions, is at the heart of new security
    practices for E-business.
  • Outsourcing trust is not always the best
    solution it has consequences for vulnerability
    and the degree of comfort.

41
(No Transcript)
42
E-commerce
Buying, selling products, services or information
via a computer network
  • EDI
  • SWIFT
  • Tradenet
  • ...

Seller
Purchaser
Electronic Market
Order
Purchase order
  • Reply on information request
  • purchase confirmation
  • shipping note
  • payment acknowledgment

Order reply
Approvals by Trusted party
Payment authorization request
Payment approval
EFT
Bank of the purchaser Transaction
Handlers bank
bank Supplier
43
Role of the certificate Authority
  • Facilitate E-commerce among parties.
  • Identify and authenticate certificate requesters
    and users.
  • Maintain records on certificates issued.
  • Audit itself and (as appropriate) its
    subscribers.
  • Where possible, avoid or resolve disputes due to
    the use of certificates.
  • Absorb risk and take fiduciary responsibility for
    certificate issuance.

44
Electronic Market
  • Clients and providers negotiate on an on-line or
    off-line sales transaction.
  • Network of interactions and relations where
    information, products, services and payments are
    exchanged.
  • The business center is not a physical building
    but a network-based location.
  • Participants sellers, buyers, brokers,
    providers, clients
  • they are on different locations
  • sometimes they dont know each other
  • Push and Pull possibilities

45
Advantages for the Organisation
  • Lower cost for handling, creation and storage of
    paper information
  • electronic purchasing system
  • electronic payment 95 cheaper than check
  • Reduced stock and overhead with pull-type
    delivery
  • Reduced time between sales and payment
  • Supports BPR efforts , leading to higher
    efficiency

46
Advantages for the Client
  • More alternatives from various vendors
  • Cheaper products and services
  • Often immediate delivery
  • 24 hours service
  • Relevant information can be obtained after
    seconds instead of after days

47
Constraints
  • Lack of security standards
  • Insufficient bandwidth
  • Problems with Interoperability
  • Accessibility of the internet
  • Remaining legal aspects (digital signature)
  • Still in full evolution code of conduct
  • Clients do not like changes
  • Still limited number of buyers and sellers
  • Problems with human relationships.

48
(No Transcript)
49
SET Secure Electronic Transaction
  • 1. Client initiates a transaction by sending a
    request and a signed, encrypted authorization.
    The supplier can not access the credit card
    number because it is encrypted.
  • 2. The supplier passes on authorization. The bank
    can decrypt this and see the credit card number.
    It can also check the signature.
  • 3. Acquiring bank checks credit card with card
    issuer.
  • 4. Card issuer authorizes and signs transaction.
  • 5. Bank authorizes merchant and signs
    transaction.
  • 6. Customer gets goods or service and a receipt.
  • 7. Supplier asks to capture the transaction and
    get the money.
  • 8. Supplier gets paid according to its contract.
  • 9. Customer gets monthly bill from card issuer.

50
E-cash Electronic Cash
  • 1. Customers open an account with a bank and
    either buy or receive free special software for
    their PC,s.
  • 2. The customers buy electronic money by using
    the software. Their accounts are debited
    accordingly.
  • 3. The bank sends an electronic money note to
    this customer, endorsing it with a digital
    signature (made with its private key). Customers
    then inquire whether the money is available by
    using the banks public key.
  • 4. The money is stored on the buyers PC and can
    be spent in any store that accepts E-cash.
  • 5. The software is used to transfer the E-cash to
    the sellers computer. The seller uses the banks
    and customers public keys to verify that the
    money belongs to the specific buyer and is indeed
    at hand.
  • 6. The seller then deposits the E-cash in the
    bank, crediting his regular or electronic
    account.

51
Electronic Credit CardsEncrypted payments
  • 1. Customer sends the encrypted credit card
    information and digital signature to the
    supplier.
  • 2. The merchant validates the customers identity
    as the owner of the credit card account.
  • 3. The supplier checks the information with his
    own bank or credit card processor. Authorization
    is obtained by contacting the customers bank.
  • 4. When the authorization is sent to the
    suppliers bank, the deal can be concluded.
  • 5. The customers account is debited and the
    suppliers account is credited.

52
Electronic checks
  • similar to regular checks, secured by public key
    cryptography.
  • 1. The customer establishes a checking account
    with a bank.
  • 2. The customer contacts a supplier, buys a
    product or service and e-mails an encrypted
    electronic check.
  • 3. The supplier deposits the check in his
    account money is debited in the buyers account
    and credited to the seller,s account.
  • E-checks carry an encrypted digital signature and
    additional information.
  • Can be exchanged between financial institutions
    via electronic clearinghouses.
  • Can be used as payment instruments in
    EDI-applications.
  • The NetCheck system.
  • Accept paper checks in exchange for crediting
    customers NetCheck account.
  • Integrated with financial institutions.

53
Electronic Payment Cards
  • Traditional bank cards
  • Payment cards for specific companies
    (transportation)
  • Smart cards electronic purse

54
Information Services
55
Evolution in information services
Information Broker
Content Specialist
Electronic Market Facilitator
56
Information Broker
  • Identify an unfilled need for high-value
    information contentthat is difficult to access
    through available channels
  • Build a community of interest between suppliers
    and customers
  • Penetrate quickly throughgiveaway strategies,
    contracts and partnership arrangements
  • Deliver value toall parties initially through
    linkages, information collection and
    categorization, and transaction coordination.

57
Content Specialist
  • While paying careful attention to private rights,
    collect information on market transactions
  • Create organizational capabilitiesto make sense
    of information and use it to add value to
    products and services
  • Distribute value to to all members of the
    community

58
Electronic Market Facilitator
  • Build a web of alliances to extend scale and
    scope of community
  • Develop interactive tools to establish closer
    links with community members and to facilitate
    linkages among community members
  • Develop intelligent agents and filters to
    customize the experience of all members of the
    community
  • Build organizational capabilities to deepen
    commitment and loyalty of all community members.
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