Electronic

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Chapter 5 Electronic Commerce, Intranets, and
Extranets www.pearsoned.ca/jessup
Robert Riordan, Carleton University
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Learning Objectives

• Describe electronic commerce and how it has
  evolved
• Describe the strategies that companies are
  adopting to compete in cyberspace
• Explain the differences between extranets and
  intranets as well as show how organizations
  utilize these environments

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Learning Objectives
4. Describe the stages of business-to-consumer
electronic commerce and the key drivers for the
emergence of mobile commerce 5. Understand the
keys to successful electronic commerce
applications
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• Network Computing Spectrum

Intra- company
Inter- company
Team
Intranet
Internet (WWW)
LAN
Extranet
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Types of Electronic Commerce
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Types of Electronic Commerce
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Internet and the World Wide Web Capabilities
Information Dissemination
Integration
Transaction Support
World Wide Web
Collaboration
Interactive Communication
Mass Customization
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Internet and the World Wide Web Capabilities

• Information Dissemination
• A relatively economical mechanism to disseminate
  information globally to compete in new markets
  24/7
• Example Electronic company brochures

• Integration
• Web technologies allow Websites to integrate with
  corporate database to provide real-time
  information
• Example checking bank balances

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Intranets

• Intranets
• An internal, private network using Web
  technologies to securely transmit information
  within the organization.
• This private internal Web limits viewing access
  to authorized users within the organization

• Intranet Benefits
• Improved information access to authorized user
• Improved timeliness and accuracy of information
• Global reach allowing employees access from
  anywhere
• Cross-platform integration
• Low cost deployment
• Positive return on investment

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Intranet Architecture

• Intranet System Architecture
• Firewalls hardware devices with special
  software that prevent unauthorized access
• An intranet server is placed behind the firewall
• Packets are never routed outside the firewall,
  but remain within the organizations network

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Intranet Architecture
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Intranet Applications
Collaboration
Training
Intranet Hub
Online Entry of Information
Application Integration
Real-time Access To Information
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Intranet Applications

• Training
• Provides online access to a host of training
  functions including course catalogs,
  registration, content (video, slides, other
  materials) and evaluation
• Provides significant increases in productivity
  and standardization, and cost reductions (e.g.
  travel costs)

• Application Integration
• Allows for integration and consolidation of
  information from disparate systems into a single
  point of access
• Increases employee productivity and output quality

• Real-time Access to Information
• Allows employees access to real-time system
  information.
• This reduces customer service needs by giving all
  authorized and interested parties direct system
  access

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Intranet Applications

• Online Entry of Information
• Allows for direct online input to streamline
  routine business processes (e.g. expense
  reporting)
• Provides for significant cost reductions from
  reducing administrative support and shifting
  maintenance functions back to the employee (i.e.
  sick leave applications)

• Collaboration
• Allows employees to communicate business
  activities across geographic and departmental
  boundaries
• Allows for shorter development cycle times
• Allows employees to stay abreast of current
  projects, corporate, and market conditions

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Types of Electronic Commerce
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Internet and the World Wide Web Capabilities

• Information Dissemination
• A relatively economical mechanism to disseminate
  information globally to compete in new markets
  24/7
• Example Electronic company brochures

• Integration
• Web technologies allow Websites to integrate with
  corporate database to provide real-time
  information
• Example checking bank balances

• Mass Customization
• The ability to tailor products and services to
  meet a customers particular needs
• Example Configuring a PC online

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Electronic Data Interchange (EDI)

• Electronic Data Interchange
• The transmission of electronic business forms
  between business partners (e.g. purchase order)
• Typically used by large organizationsvery
  expensive
• The internet has opened this technology to
  smaller firms

• How it works
• EDI transactions are system generated by the
  sender and then transmitted to the receiver by a
  VAN
• VAN (Value Added Network) providers are private
  network operators that provide guaranteed delivery

• Standards
• Document types and formats are universally
  standardized
• Two standards exist ANSI X.12 and UN/EDIFACT

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Electronic Data Interchange (EDI) Example
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Business-to-Business Electronic Commerce

• Electronic Data Interchange
• Advantages
• Wide variety of business documents
• Streamlines business processes
• Reduced document handling, reduces paperwork
• Shortens time of business transaction (from day
  to second)
• Reduces errors

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Business-to-Business Electronic Commerce

• Electronic Data Interchange
• Disadvantages
• Costly to implement
• Costly to maintain
• Requires skilled technicians
• EDI can cost up to 100,000 and monthly
  telecommunications charges associated with VANs
  can be several thousand dollars per month
• Often too costly for small or medium-sized
  companies

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Business-to-Business Electronic Commerce

• The Internet Changed Everything
• B2B now available to companies of all sizes
• Intranet internal, private network using Web
  technologies to facilitate transmission of
  proprietary information within the organization
• Extranet two or more firms using the Internet
  to do business together

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Internet and the World Wide Web Capabilities

• Interactive Communication
• Build customer loyalty by providing immediate
  feedback to/and from the customer demonstrating
  responsiveness
• Example Customer support through email and chat

• Collaboration
• A mechanism allowing users to interact, share,
  and store information and tools for specific
  purposes
• Example Product RD site with tools, storage,
  etc.

• Transaction Support
• Provides way for buyers and sellers to conduct
  business online without human assistance
• Example Buy a book online

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Impact of the Web Disintermediation

• Disintermediation
• Removal of the intermediary (middleman) in a
  sale.
• Companies can sell directly to customers (retail
  or wholesale) without assistance using the
  Internet

Manufacturer or Service Provider
Intermediary (Middleman)
Customer (Consumer or Business)
Sell Direct Disintermediation

• Example
• Airlines selling directly to flyers without a
  travel agent or customer service representative

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Extranets Business to Business Ecommerce

• Extranets enable two or more firms to use the
  Internet to do business together
• They are an excellent use of B2B to allow
  companies to achieve a positive return on their
  tech investments

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Extranets

• Extranets
• Extranets are secure networks that provide
  customers, suppliers, and employees with access
  to internal systems
• Have replaced EDI for smaller firms allowing them
  to participate in B2B markets directly

• Extranet Benefits
• Improves timeliness and accuracy of
  communications, thereby reducing errors and
  misunderstandings
• Allows central management of documents allowing
  single updates which are then available to all
  interested parties
• Uses standard web protocols allowing disparate
  computing platforms to communicate without
  additional investments
• Easy to use, requires little training
• Used to automate transactions, reducing cost and
  cycle time

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Extranet System Architecture

• Virtual Private Network
• (VPN) is a secure network technique to protect
  extranet communications
• Uses a technique called tunneling to encapsulate,
  encrypt, and transmit data over the Internet
• Requires server authentication (verify user with
  password) to allow operation

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Extranet Applications
Supply Chain Management
Real-Time Info Access
Procurement Portals
Exchanges
Distribution Portals
Collaboration
Enterprise Portals
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Extranet Applications

• Supply Chain Management
• Used to exchange supply and manufacturing
  information between customers and suppliers
• The extranet contains features allowing
  participants to purchase online, check supplier
  inventory, transfer design specifications, and
  other business related tasks

• Real-time Access to Information
• Allowing business partners and customers access
  to real-time system information
• This reduces customer service needs by giving all
  authorized and interested parties direct system
  access

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Extranet Applications

• Collaboration
• Allows companies to respond proactively to
  marketplace changes by working directly with
  suppliers and customers
• Allows for shorter development cycle times
• Allows for reorganization of the purchasing
  function turning buyers into supplier
  relationship managers

• Enterprise Portals
• These are access points (front doors) combined
  from multiple extranets where business partners
  access secure, proprietary company information
• This provides a single point of access for
  information that comes from a variety of
  disparate systems
• Benefits include faster access for business
  partners, reduced maintenance cost by reduction
  in total extranets

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Extranet Applications

• Trading Exchanges (Electronic Marketplaces)
• Allow many buyers and many sellers to come
  together
• Offer transaction processing, industry
  information, best sourcing, info resources, and
  invoicing (e.g. SciQuest.com)
• Revenues made through advertising and transaction
  fees

• Distribution Portals
• Designed to automate the business processes that
  occur before, during, and after a sales
  transaction between a supplier and multiple
  buyers
• Portal can be customized and personalized by the
  buyer or seller
• (e.g. Premier.Dell.com)

• Procurement Portals
• Designed to automate the business processes that
  occur before, during, and after a sales
  transaction between a buyer and multiple
  suppliers
• Provides supplier tools to update products,
  process orders, service buyers (e.g. Ford
  Supplier Portal)

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Extranet Applications Exchanges and Portals
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Electronic Business Defined
Electronic Business
is using electronic information to improve
performance, create value and enable
new relationships between business and customers
Electronic Commerce
is the marketing, selling and buying of products
and services on the Internet
Internet Commerce
is the online exchange of information and
services utilizing network technologies
Web Commerce
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The Evolution of eBusiness
3
2
1
4
'Stock market crash'
'Synergy'
'Grassroots of e-business'
'Rise of the Internet'
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Points
During the past decade, e-business companies have
passed through four distinct periods, as is
reflected in the evolution of the NASDAQ
1995
1996
1997
1998
1999
2000
2001
2002
2003
1994
2004
2005
2006
2007
Year
Launch of Amazon.com
Source NASDAQ quotes taken from Factiva.com.
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• Business Strategy

Business Strategy
Improve Profitability Reduce Costs
Reach Global Markets
Solidify Business Relationships/ Improve Customer
Service
Maximize Technology Benefits
Streamline Business Processes
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Key Ingredients of a Business Model
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Electronic Commerce Business Strategies
Business Strategies come in one of the following
three types. All require a sound business model
to be successful (see next)
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Brick-and-Mortar Click-and-Mortar Strategies

• Brick-and-Mortar
• Operate a firm solely in traditional physical
  markets
• Approach business activities traditionally by
  operating physical locations (e.g. stores,
  offices, manufacturing plants)

• Click-and-Mortar
• Operate a firm in physical locations and has
  added an EC component to their business
• Requires maximization of business opportunities
  in both the physical and virtual environments
• This strategy requires a significant investment
  in systems and space

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Click-Only Strategy

• Business transactions are only conducted
  virtually
• Can require significant expertise and investment
  in technology and systems staff
• There are many different revenue models

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New Technologies for B2B Electronic Commerce

• XML - Extensible Markup Language
• Developed by the World Wide Web Consortium (W3C)
  to provide a global standard for documents
• Used for transmission of data between computers
• The Web documents contain tags, enabling
  definition, validation, transmission, and
  interpretation of data
• May potentially replace all forms of EDI
• EBRL - Extensible Business Reporting Language
• An XML-based specification for publishing
  financial information making it easier for
  companies to share information with each other,
  analysts shareholders
• Includes tags such as annual and quarterly
  reports, general ledger information, government
  filings and accounting schedules

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New Technologies for B2B Electronic Commerce

• RFID - Radio Frequency Identification
• Used for tagging and tracking physical items
• RFID system uses a transceiver and antenna to
  transfer information to a processing device from
  an RFID tag

• RFID Benefits
• RFID is more powerful than bar-code technology
  because it does not require visual line-of-sight
  reading
• RFID tags can be placed anywhere (e.g. clothes,
  pets, cars, parts, store items, etc.)

• RFID Issues
• Deployment is growing rapidly but it is still
  expensive
• There is no clear set of data standards
• Global radio frequencies differ between countries

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Types of Electronic Commerce
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Business-to-Consumer Electronic Commerce

• B2C
• Internet fastest acceptance of any
  communications technology
• Retail transactions between a company and end
  consumers
• Electronic retailing (e-tailing)

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Stages of Business-to-Consumer Transactions
Web sites that globally disseminate only static
information about the company and its products
available 24/7. (e.g. Electronic Brochure)
Web sites that are integrated with corporate
databases to extract and display the appropriate
information for a customer request. (e.g.
displaying a bank balance)
Web sites that allow customers to enter orders
and make payments directly online (e.g. buying a
book)
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The Formula for Electronic Commerce Success
Rule 1 The website should offer something unique
Providing visitors with something they can find
nowhere else leads to success. Hard to find goods
are popular on the web Rule 2 The website must
be aesthetically pleasing Successful firms have
websites that are nice to look at. People are
more likely to visit, stay at, and return to a
site that looks good Rule 3 The website must
be easy to use and be fast! Users are less likely
to stay at, or return to a site, if they have
trouble finding things, navigating the links, or
have to wait for screens
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The Formula for Electronic Commerce Success
Rule 4 The website must motivate people to
visit/return People use websites that provide
useful information and links or free goods and
services Rule 5 You must advertise your
presence on the web Companies must draw, or pull
visitors to, their website by 1) publish address
on company materials 2) register with a search
engine advertise on other commerce sites e.g.
Yahoo (very expensive) Rule 6 You should learn
from your website A firm can track the path that
a user takes though the site as well as
information about date, time, etc. and use this
information to improve the site
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Types of Electronic Commerce
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Examples of Transactions Bus Consumer Govt
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Web 2.0
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Web 2.0

• The term Web 2.0 is commonly associated with web
  applications that facilitate interactive
  information sharing, interoperability,
  user-centered design,1 and collaboration on the
  World Wide Web.
• A Web 2.0 site gives its users the free choice to
  interact or collaborate with each other in a
  social media dialogue as creators (prosumer) of
  user-generated content in a virtual community, in
  contrast to websites where users (consumer) are
  limited to the passive viewing of content that
  was created for them.
• Examples of Web 2.0 include social-networking
  sites, blogs, wikis, video-sharing sites, hosted
  services, web applications, mashups and
  folksonomies.

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Web 2.0 Features and Services

• Blogs
• Personal Web page that typically contains a
  series of chronological entries by its author,
  and links to related Web pages
• Really Simple Syndication (RSS)
• Program that allows users to have digital content
  automatically sent to their computers over the
  Internet

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Web 2.0 Features and Services

• Podcasting
• Audio presentation stored as an audio file and
  available for download from Web
• Wikis
• Allows user to easily add and edit content on Web
  page
• New music and video services
• Videocasts
• Digital video on demand

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Web 2.0 Features and Services

• Internet telephony (VOIP)
• Uses Voice Over Internet Protocol (VOIP) and
  Internets packet-switched network to transmit
  voice and other forms of audio communication over
  the Internet
• Internet television (IPTV)
• Telepresence and video conferencing

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Web 2.0 Features and Services

• Online software and Web services
• Web apps, widgets, and gadgets
• Digital software libraries, distributed storage
• M-commerce applications
• Beginning to take off

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Web Mashup

• Mashup A web application that performs
  browser-side integration of content or services
  from multiple sources

• Integrator site that hosts the web application
• Provider site the provides content to the mashup
• Component a piece of active content from a
  provider

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Web Mashups

• housingmaps.com
• Wii Finder
• Clockr
• popurls.com
• Yahoo vs. Google
• Google Gadgets

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All Mashed Up

• What are Web mashups and what technology makes
  them possible?
• Why would Google and others allow their software
  to be combined with other software?
• What is the potential benefit to consumers?
• If mashups ultimately make money, how will the
  revenues be divided?
• Why would mashups be supportive of contextual
  advertising?

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M-Commerce and the Key Drivers for Growth
Any electronic transaction or information
interaction conducted using a wireless, mobile
device, and mobile networks, that leads to
transfer of real or perceived value in exchange
for information, service, or goods (MobileInfo,
2004)
Driver One Interest in the Internet The
exponential growth of consumer interest and
adoption of the Internet and electronic commerce
Driver Two Deployment of High Speed Networks The
development and deployment of 2.5G 3G cellular
networks enabling faster data transmission
Driver Three Growth in Mobile Devices The
tremendous growth in mobile telephony and
availability of powerful wireless, handheld
devices
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M-Commerce Applications
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Issues in M-Commerce