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Chapter 7 Doing Business on the Internet

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Title: Chapter 7 Doing Business on the Internet


1
Chapter 7 Doing Business on the Internet
  • Managing and Using Information Systems A
    Strategic Approach, 2nd ed.

2
INTRODUCTION
  • E-business occurs when buyers and sellers
    interact electronically.
  • While this area is changing so rapidly that
    text-based materials are usually out of date
    before they are used, it is also a field that is
    too important to ignore.
  • Chapter 7 therefore provides a basic
    understanding of the ideas used in discussions on
    current Internet activities.

3
OVERVIEW OF THE INTERNET
4
Some Definitions
  • Internet Interconnected network of millions of
    individual computers with no central computer.
  • World Wide Web Popular method for accessing
    Internet information, utilizes hypertext to link
    documents. WWW not synonymous with Internet
  • Information Superhighway High-speed, global
    communications network arguably synonymous with
    the Internet. (Not invented by Al Gore)
  • Intranet Internet-style information used
    exclusively within an organization, inaccessible
    by outsiders.
  • Extranet A companys inter-organizational
    information unavailable to users of its intranet
    or to the wider Internet community.

5
TCP/IP
  • TCP/IP (Transmission Control Protocol/Internet
    Protocol) was the breakthrough technology making
    interoperability between networks possible and
    thus allowing the Internet to work
  • Protocols are the specifications for the
    interface between 2 computers, and they set
    standards to define how computers communicate
    with each other to accomplish specific tasks
  • IP defines a connectionless service through
    which data is delivered from computer to computer

6
Figure 7.1 Comparison of Letter and TCP/IP Packet
7
E-Marketplaces
  • E-Marketplace special type of network that
    brings different companies together.
  • Sometimes called net-markets, they are typically
    built by a consortium of businesses in a market,
    or by an e-business interested in providing the
    marketplace.
  • Both vertical and horizontal e-marketplaces exist.

8
Types of E-Businesses
  • Pure-plays exist only in the virtual space.
  • Extensions of an existing physical business that
    have transitioned to the virtual space and offer
    a similar product line.
  • Extensions that have evolved into businesses
    distinct from their physical counterparts.
  • Partners that exist on another business website
    such as Toys R Us on e-Bay

9
EVOLUTION OF E-BUSINESS
10
Electronic Data Interchange (EDI)
  • Is the direct computer-to-computer transfer of
    business information between two businesses using
    a standardized format (e.g., ANSI X12)
  • EDI automates the information flow (next slide)
    and facilitates management of a business process,
    such as purchasing, shipping and payment
  • However, EDI never lived up to early growth
    projections due to the set-up effort required

11
Electronic Funds Transfers (EFT)
  • Preceded Internet but may now be by private line
    or Internet.
  • Use automated clearing house (ACH) to settle
    transactions and maintain audit trail.

12
Figure 7.11 Electronic funds transfer (EFT)
13
Basic Internet Business Models
  • B-to-B targets other businesses
  • B-to-C targets consumers
  • B-to-E (employee) companies provide service to
    employees of other companies.
  • B-to-G companies provide services to local,
    state and national governments
  • C-to-C Consumers interact with other consumers.
  • Hybrid combines B-to-B B-to-C models

14
Stages of Web-based Business Evolution
  • Content Provider an effective means of reaching
    millions of potential customers but without using
    the Webs interactive and multimedia capabilities
  • Transaction Forum focused on B2C but seen as a
    supplement to bricks and mortar
  • Integrator integrate the entire chain of sales,
    order processing, etc. with legacy systems
  • Catalyst for Industry Restructuring the result
    of the transforming effects of the Internet on
    traditions forms of commerce

15
E-Channel Patterns
  • An e-channel is a chain of electronic
    relationships between companies and
    partners/resellers
  • They can lead to industry restructuring when
    there are massive changes brought about by
  • e-channel compression (disintermediation next
    slide), and
  • channel expansion (the adding of brokering
    functionality)

16
A New Marketing Channel
  • EC is a new marketing channel that provides for
    delivery of products and services from the
    business to the consumer.
  • Four Ps apply Place, Promotion, Price, and
    Product

17
Figure 7.4 Example of Channel Compression
Adapted from Kalakota and Robinson, E-Business
2.0, 2001
18
Value-added Networks (VANS)
  • Are independent 3rd-party companies that provide
    connection and EDI transaction services to
    customer companies
  • Have allowed many-to-many relationships to become
    a reality by linking many buyers to many sellers

19
FRAMEWORK OF ELECTRONIC COMMERCE
20
Common Business Services Infrastructure
  • The common business infrastructure for electronic
    commerce consists of four main elements
  • Security
  • Authentication
  • Encryption
  • Electronic Payments

21
Authentication
  • Authentication is the security process of
    verifying that a user is who he or she says they
    are.
  • Passwords are the most common type of
    authentication.
  • Digital signatures are now gaining popularity for
    authenticating transmitted information.

22
Authentication Digital Signatures
  • Digital signatures take the place of ordinary
    signatures in online transactions to prove that
    the sender of a message is who he or she claims
    to be.
  • When received, the digital signature is compared
    with a known copy of the senders digital
    signature.
  • Digital signatures are also sent in encrypted
    form to ensure they have not been forged.

23
Encryption
  • Encryption systems translate data into a secret
    code.
  • Encryption systems include 4 main components
  • Plaintext the unencrypted message
  • An encryption algorithm that works like the
    locking mechanism to a safe
  • A key that works like the safes combination
  • Ciphertext is produced from the plaintext message
    by the encryption function.
  • Decryption is the same process in reverse (like a
    modulation/demodulation), but it doesnt always
    use the same key or algorithm. Plaintext results
    from decryption.

24
Encryption Techniques
  • The two main encryption techniques now in use
  • Symmetric encryption in which both sender and
    receiver use the same key.
  • Asymmetric or public key encryption, which uses
    two separate keys, called public and private keys.

25
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26
Symmetric Encryption
  • Symmetric or private key encryption, uses the
    same algorithm and key to both encrypt and
    decrypt a message.
  • Historically, this is the most common encryption
    technique.
  • Since the key must be distributed, however, it is
    vulnerable to interception. This is an important
    weakness of symmetric key encryption.
  • DES uses symmetric encryption.

27
Asymmetric or Public Key Encryption
  • A second popular technique is asymmetric or
    public key encryption (PKE).
  • PKE is called asymmetric since it uses two
    different one way keys
  • a public key used to encrypt messages, and
  • a private key used to decrypt them.
  • PKE greatly reduces the key management problem
    since the private key is never distributed.
  • PGP (pretty good privacy) is a popular form of
    PKE available as shareware.
  • RSA is a reliable and commonly used PKE

28
Secure servers
  • Secure Sockets Layer (SSL) is a standard for
    secure interactions use on the Web. SSL, uses a
    combination of private key encryption (using a
    one-time session key) and digital signatures to
    enhance the security of transmission.
  • Secure servers protect the privacy of the data
    they send and receive through encryption.

29
SSL and SET Common Characteristics
  • Confidentiality of information, and protection
    against hacking or other interception during
    transmission across a public network, through the
    encryption of data.
  • Integrity of data (like SET, SSL has the
    capability to determine if messages have been
    altered).

30
SSL and SET Common Characteristics
  • Verification that the merchant has been certified
    by a trusted Certificate Authority. (While it may
    not be widely known, this capability exists today
    with SSL for the cardholder to verify that the
    merchant site is legitimate. If merchants want to
    conduct transactions in a secure environment,
    they must provide business licenses and other
    notarized proof of ownership to be certified by
    the CA.)

31
SSL and SET Differences
  • SET authenticates the cardholder, SSL does not.
  • SET does solve the issue of identifying the
    cardholder in electronic transactions. But there
    s a real cost involved in doing that, and is it
    really the area of greatest risk? It is generally
    agreed that the greatest risk with e-commerce is
    catastrophic losses from large-scale theft of
    credit card numbers. If that occurred, it would
    more likely happen with break-ins to file
    servers, and not during the transmission of
    transactions through a secure pipe.
  • SSL still remains the most widely used standard

32
Firewalls
  • Firewalls block intruders from entering a website
    or possibly blocking access to the outside by
    employees in a company.
  • For example, an intruder (hacker) trying to
    attack a corporate website might encounter a
    firewall making it more difficult to get access
    to the servers.
  • Likewise, an employee trying to get outside the
    corporate intranet might be block from doing so
    by a firewall.

33
Electronic Payments
  • Includes credit cards, electronic checks, EFT,
    smart cards, and e-cash.
  • Common types of e-payments systems are
  • Virtual terminals (online equivalent to credit
    card swipe machine)
  • Transaction processors (www.itransact.com)
  • Internet checking services (www.redicheck.com)
  • Electronic funds transfer
  • Digital Cash (www.digicash.com)

34
Figure 7.10 Internet checking
35
Figure 7.12 Digital cash
36
Directory and Search Engines
  • Directory services industrial strength
    databases that keep track of who and what
    (servers, databases) is where on the Internet.
  • Search engines keeps track of information
    (files) on the world wide web (WWW) by allowing a
    user to enter key words that the engine then uses
    to index collected documents for easy review.
  • Commercial Servers a suite of software
    components designed to create and manage Web
    storefronts.
  • Personalization is the selective delivery of
    content and services to customers and prospective
    customers.

37
Messaging and Information Distribution
Infrastructure
  • Second building block of supporting framework for
    e-commerce. Used for moving messages over the
    Internet.
  • E-mail (including listserv)
  • Instant Messaging
  • Pt-to-pt file transfers (FTP)
  • Groupware (Lotus Notes, CU-SeeMe, NetMeeting)

38
Multimedia Content
  • Includes standards for various multimedia file
    types. Examples of materials transported in this
    way include
  • Video
  • Audio
  • Text/Electronic documents
  • Graphics Photos
  • Realtime/Non-realtime applications
    (prioritization)

39
Internet Infrastructure
  • Includes data communications circuits over which
    information travels. Includes
  • Packet-switched networking (telephony is
    circuit-switched)
  • Packets contain overhead information including
    addressing
  • They are also routed, like mail
  • All of this flows across Internet backbones
  • Newer Internet access technologies include
    wireless access, cable access and DSL.

40
Public Policy
  • Public policy issues include
  • universal access,
  • privacy,
  • information pricing,
  • information access.
  • Privacy issues include what information is
    private and/or who should have the right to
    use/sell information about Internet users
  • Requesting personal information on visiting a web
    site
  • Creating customer profiles
  • Leaving electronic footprints when visiting a web
    site

41
Technical Standards
  • Standardization is the second supporting pillar
    for e-Commerce. Standards are critical for
    electronic interaction.
  • Secure Electronic Transaction (SET) for secure
    payments of online credit card transactions is
    one of the most heavily promoted standards
  • Other application standards include file transfer
    protocol (FTP), hypertext transfer protocol
    (HTTP), simple network management protocol
    (SNMP), post office protocol (POP), and
    multimedia internet mail extensions (MIME)

42
Internet Governance
  • IOS Internet Society is main governing body
  • IAB Internet Architecture Board defines
    standards
  • IETF Internet Engineering Task Force issues
    standards via RFCs
  • ICANN Internet Corporation for Assigned Names
    and Numbers controls the IP addressing policies.
  • Most funding is from non-profits.

43
FOOD FOR THOUGHT 1 E-LEARNING
44
E-Learning
  • E-learning is using the Internet to enable
    learning and is providing a major challenge to
    class-based traditional forms of teaching.
  • In addition, the market for education is growing
    as businesses now want their employees to be
    continuous learners.
  • If learning can be embedded within business
    processes executed by workers, then organizations
    can make major changes in their business strategy
    and their organization strategy.

45
Figure 7.14 Types of E-Learning
46
Potential for E-learning
  • E-learning is a relatively new concept enabled by
    the Internet.
  • It is allowing many organizations to rethink how
    they disseminate knowledge, information and
    training in the workplace.
  • This new form of teaching will also likely
    represent a major challenge to traditional
    schools and universities.

47
FOOD FOR THOUGHT II IS THERE REALLY A NEW
ECONOMY?
48
Michael Porters Argument
  • The new economy is nothing other than the old
    economy that has access to new technology
  • By focusing on e-Business as a separate entity
    and failing to integrate the Internet into their
    proven strategies, well-established businesses
    are unable to leverage the Internets
    capabilities
  • Most companies can compete successfully only when
    they use the Internet to complement traditional
    ways of competing

49
END OF CHAPTER 7
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