E-Commerceppt - E-Commerce.ppt by handongqp


									                  “A modern business methodology
What‟s        ... to cut costs while improving the
              quality of goods and services and
Electronic    increasing the speed of service

             Frontiers of Electronic Commerce
             Ravi Kalakota, and Andrew B. Whinston
Evolution of Electronic Commerce

    From VANS to Internet

  Electronic Commerce has, so far, meant
  electronic data interchange (EDI) over Value
  added Networks (VANS) used by corporate
  organisations. That was computer-to-computer
  exchange of routine business documents in a
  standard format. Now, it has the scope to use the
  Internet too as the medium. The Internet enables
  customers, partners and users to access a
  company‟s EDI network, which earlier was
  closed to smaller companies, simply because of
  the costs involved.
Evolution of Electronic Commerce

From VANS to Internet
   While the Internet speeds up transaction
    times, another advantage it has over EDI
    transactions conducted over a private network
    is the connect charges applicable.
    Traditionally, VAN providers charge for EDI
    on a per-transaction basis. Organisations that
    use EDI therefore tend to send transactions in
    a batch to their customers once a day. Over
    the Internet where all connect charges are
    fixed, Organisations can well afford to send
    transactions at any time they want to, thus
    enabling real time commerce.
How can E-commerce be used?
   Community-based services: Payment of utility
    bills, traffic fines, donations to charity etc.
   Shopping: Buying and selling goods and
   Communication: E-mail, Net telephony
    products can be commerce-enabled and
    serviced via the Net.
   Biz-to-Biz applications where the purchase
    orders are generated and seamlessly integrated
    with EDI systems.
Electronic Trade

   A recent report by the Organisation for
    Economic Co-operation and Development
    (OECD) predicts Internet trading will grow
    from today‟s estimated $500 million to $5
    billion by 2001. In keeping with the trend
    worldwide, India has entered into over 50 tax
    treaties to follow the flow of the increasingly
    seamless worldwide electronic trade.
    With emerging payments standards such as
    the Secure Electronic Transaction (SET)
    protocol, E-Commerce practises are
    reportedly reaching the end of usefulness
Trends in Electronic Commerce
   Even though fewer than one in five of the
    largest retailers in the U.S. sell their wares
    on the Internet, consumers managed to
    spend more than $10 billion shopping on
    the Web in 1997. Over 10% of that was
    spent at a single Website--NetMarket, an
    online discount service created for its dues-
    paying members by CUC International.
    NetMarket handled over $1.2 billion in
    sales last year.
   The Internet will augment electronic commerce
    already being conducted between businesses--at a
    much lower cost--as well as will dramatically increase
    electronic commerce conducted with consumers.
    Critical issues such as how to handle electronic
    payment, security, privacy, and fraud prevention are
    being addressed with reliable commercial software,
    and businesses are beginning to use information
    technology on the Internet to exploit the advantages of
    conducting business electronically. Increasingly,
    business people are discovering important bottom-line
    benefits on the Web, including:

    Speedier, more accurate transactions
    through customer self-service
   The Internet can save time and money and improve
    accuracy by eliminating middlemen who offer little added
    value. We will eventually see complex, multiparty
    transactions conducted over the Internet with no human
    interaction at intermediate levels whatsoever. As a result of
    one click by the end-consumer, the order will be placed,
    paid for, the product depleted from inventory, the
    shipment arranged, replacement components ordered from
    suppliers, and a replenishment order initiated. As an
    example, an airline's Web site may perform the simplest
    duties of a travel agent--provide access to timetables and
    fares, and make single-provider reservations--thus
    removing the agent as an intermediary.

    Broader reach, larger potential
    customer base
   Retailers who embrace the Web enjoy the potential--and
    challenge--of selling to an ever-growing community of well-
    informed shoppers. Geographic boundaries become all but
    irrelevant (although state taxes and import duty can still apply)
    and operating hours are limited only by the software and
    hardware behind the Web site. As has often been observed, the
    Web is a great equalizer for businesses just starting up and
    facing very large competitors. For example, in the case of an
    on-line bookstore like www.amazon.com, the vastly larger
    population of potential customers on the Web renders it
    feasible for that single "store" to house a physical inventory not
    otherwise practical for a startup operation, and thus offers what
    previously only the "big guys" could.
    Better and richer information for the business,
     partners, suppliers, and consumer customers
   The Web delivers text, images, voice, and video to WAN-and
    LAN-connected users, organized onto hyperlinked HTML
    pages. This wide range of options enable the consumer or
    purchasing agent to view and interact with the business in the
    most appropriate, polished, appealing, and information-rich
    way. For example, a sophisticated Web server can personalize
    the catalog a given inquirer sees. Better and more consistently
    than any user registration card can, a Web site can capture and
    analyze the buyer's behavior for future planning, dynamic
    personalized marketing, and loyalty schemes. It can involve
    customers, partners, and suppliers in ways previously thought to
    be difficult or impossible (e.g., accept customer-furnished book
    reviews, support chat and e-mail for user groups, dynamically
    and automatically launch a sale based on the past 24-hours'
    buying patterns, etc.). A net-connected consumer, business
    customer, or supplier can train the business' Web site to keep
    special interests in mind and proactively notify the buyer via e-
    mail of relevant business changes.
E-Commerce and India
   While some blame the high cost of
    implementation, others worry about the lack
    of security. The systems needed to transact
    over the Net are in the early stages of
    development and are still costly and
    complicated for Indian Businesses to use. But
    it‟s clear that E-Commerce is in, and the
    combination of the Internet and the EDI
    (Electronic Data Interchange) is the next step
    in building competitive advantage.

If we consider some of the goals of businesses with
regards to electronic commerce: higher revenues
through exposure to additional customers; cost
reduction; lower product cycle times; faster customer
response; and improved service quality, we see how
dramatically a company's bottom line can be
influenced with the addition of electronic commerce.
A number of pioneering firms are implementing
electronic commerce solutions today and are finding
new ways to save and make money.
Success stories...
Lucent Technologies
Business-to-Consumer Electronic Commerce
   Lucent Technologies is using Oracle Universal
    Server and Oracle Web Application Server to
    power a high-traffic Internet commerce site for
    marketing and selling its business communications
    products. The site allows Lucent customers to
    browse up-to-the-minute information and images
    representing more than 1,000 Lucent products and
    place orders securely on-line.
Success stories...
Lucent Technologies-2
   Built in only six weeks, Lucent launched the site in July
    1996 at www.lucentdirect.com and has been continually
    upgrading the site without any performance hits. Lucent
    product managers are able to easily make updates on-line,
    such as price increases or product description changes, by
    simply entering the system through their browser, using a
    password, and making changes instantaneously to Lucent's
    electronic catalog in a word-processor format. The
    system's complexity is transparent to Lucent product
    managers who, with the proper security checks, can
    maintain their own content in a timely manner. This avoids
    involving an HTML programmer who would have to make
    those changes for the entire company.
Success stories...
    Lucent Technologies-3
   "Our customers and employees don't need to know
    the technology behind the site. The consumer
    wants to know that the information they are
    getting is correct and they don't want to wait for
    it; otherwise, they will buy somewhere else.
    Because our product managers are able to
    maintain their own product content on the site,
    updates are made quickly and easily. That
    functionality helps to keep Lucent's site successful
    and directly connects us with a whole new market,
    saving us considerable time and money."
                         –   Tom Catani, general manager of electronic
                                     commerce, Lucent Technologies
    Success stories...
    In Focus
    Business-to-Consumer Electronic Commerce
   In Focus® is the world-wide leader in manufacturing
    and developing multimedia projection products and
    services that make it easy to project the power of
    multimedia in business and sales presentations,
    software demos, education and training, and
    interactive workgroup meetings. The company uses
    Oracle Applications (Financials and Manufacturing) as
    the backbone of its business and uses the Web
    Customers module to allow its distribution partners
    (resellers) to track the progress and status of orders. In
    Focus was able to install and customize Web
    Customers in only eight weeks.
Success stories...

Chrysler Corp.
Chrysler Corp., by linking to its suppliers through a
Web-based network, reportedly saved more than
$1billion in cost of materials in 1997. By 2000,
Chrysler‟s estimated annual average savings will
amount to $2 billion
The Internet is a tempting channel for a Bank which
can conduct an online transaction for five paise
versus RS 1.50 through a teller.
The biggest challenge for companies involved in
electronic commerce isn‟t the technology-it‟s
changing the corporate culture. “It requires an
organisation to be bold.”
Success stories...

 The Cisco Connection Web Site, now available in
 14 languages and with 49 country pages, is
 claimed to be the largest Internet Commerce Site.
 John Chambers, President and CEO, Cisco
 Systems Inc., predicts that E-Commerce will be
 the primary means by which business will be
 conducted in the next 10 years.
 Cisco‟s sale through the Web has touched $ of a
 total of $ billion.
Success stories...
  Dell Computers

   Dell   Computers made waves in
     industry circles when they announced
     that they sold over a billion dollars
     worth of Personal Computers directly
     off the Web in 1997.
         Lessons learnt from the
            Dell Experience
   Increasing margins and revenues. Dell
    understood that the web could take the place
    of their customer call center replacing sales
    representatives and technical support staff.
    Phone and material costs decreased while
    also speeding up the sales process.
        Lessons learnt from the
           Dell Experience
   Value-added for the customer heightened
    the web experience. The web also offered
    new ways to help people choose computers
    and price them without sending faxes of
    information. Pricing and comparing
    configurations became easier.
         Lessons learnt from the
            Dell Experience
   Synergies with current business systems.
    Even if the user doesn‟t buy over the web,
    the percentage of voice calls into Dell show
    that a very high percentage did their pre-
    sales “shopping” by visiting their web site!
    Customers needed to spend less time with
    representatives on the phone saving even
    more money.
        Lessons learnt from the
           Dell Experience
   The perfect target market for consumer
    sales. The web demographics of young
    professionals who already are computer
    literate and disposed to a computer (by
    being on the web) was a marketing match
    made in heaven.
         Lessons learnt from the
            Dell Experience
   The perfect way emerged for business
    sales. Business users can also find their way
    onto Dell‟s site and Dell is now providing
    internal “virtual” web stores within large
    corporate Intranets to aid the purchasing
    process. This is a new growth segment for
    Dell‟s web-based sales.
How do you Buy On-Line?

 World  Avenue, IBM‟s electronic
 shopping mall on the Web, being beta
 tested, has been used to generate 5,500
 orders from 200,000 online customers,
 for some $275,000 worth of caps,
 mugs and other Olympics
How do you buy Online?

 •As you browse through the store, that
 runs an „e-commerce server‟, such as the
 HP domain commerce server or is part of
 an „electronic mall‟, such as IBM‟s
 Net.Commerce, the server helps you
 select an item (say an Olympic souvenir
 mug), and place an order. Such servers
 carry software to verify transactions,
 perform accounting duties, guarantee
 payments, and even create digital money.
How Do you pay Online?
   Wishing to pay for the item, you send an
    enciphered request for payment to your
    bank/third-party payment provider. Your bank will
    then remit to you, a secure packet of „e-cash‟.
    Using Cybercash‟s wallet application , you send
    an enciphered payment request to Cybercash‟s
    server. Once the credit is authorised by Cybercash
    over secure lines to your bank, „money‟ in Wallet
    is used to complete the purchase.
How Do you pay Online?-2
 You  then send the exact amount of e-
 cash needed to buy the Olympic
 souvenir to the virtual store. The server
 at the store then sends that packet of
 cash to its bank. The merchant bank
 then sends a request for transfer of
 funds to your bank, which the latter,
 after verification, performs. This is
 where actual funds are transmitted
 from your bank to the merchant bank.
 Buying Books Online
All you do is to select the books you want to buy, and place an
order for them. You could then either pay for them through
your credit card, or pay for the books when you receive them.
Buying books from Amazon.com is thus much like buying
items from a catalogue. What‟s more you can view the book,
and maybe read part or whole of it.
This Online Bookstore has become so popular, that not only is
it the number one bookseller on the web, but the number three
bookseller overall.As many as 2,260,000 surfers who visited
the web site bought books this quarter, an increase of nearly
50 percent from 1,510,000 customers account at the end of the
fourth quarter 1997, and an increase of 564 percent from
340,000 customers accounts at the end of the year ago first
 E-Commerce :
  How a Transaction Takes Place-1
Here is an example of how an e-commerce transaction takes
  place. Consider the following case study
 Musba Book Suppliers has a large and good selection of
  computer books; reference and computer-based training
  materials. Sales are effected through the bookstore and an
  on-line virtual bookstore at www.books.com.
 Musba Book Suppliers wants to set up a web site in which
  everything, from the moment a customer placed an order to
  shipment of that order, was fully automated.
 The challenging aspect was that the company ships some
  200 books a day, and numerous transactions are called for
E-Commerce :
How a Transaction Takes Place-2
   A customer order triggers a MS-Access stored query. The
    customer sees real-time stock status on a HTML page. As
    new titles arrive in the warehouse, a Microsoft Visual
    Basic module loads incoming stock to the websites‟
    database. Another Visual Basic module copies the order to
    the customer service database and removes the order
    information from the web, for security reasons. A separate
    Visual Basic Module processes the order; handles
    customer service needs, and exports the information to a
    system that calls the company‟s credit card. This same
    application also prints a packing slip, which goes to the
E-Commerce :
How a Transaction Takes Place-3
   Warehouse staff pull the books ordered and type
    the reference number into the shipping system,
    which is linked by an ODBC connection directly
    to the customer database. With the reference
    number, the shipping system knows who the
    customer is and where the books are going. The
    warehouse staff attaches shipping labels which
    goes to the shipping dock. A Visual Basic-based
    application recognizes that the order has been
    shipped and creates a “shipping confirmed” mail
    message that is automatically sent to the customer.
    The cycle is complete
    1   Consumer finds                                              6
        something she wants to                                   Verification and
        buy at a “shop” on the                                   remittance of actual
        Net                                                      funds

2       Consumer sends on
        enciphered request for
        payment to her bank

        The electronic bank              Consumer’s Bank
3       sends back a secure                                                Consumer
        packet of e-cash                                                   Public Key

                              Merchant             The shop
                              Server         5     sends the
                                                   packet of
                                                   cash to its
        sends the e-
4       cash to the
        shop                   Shop                                     Merchant Bank
  Agents and Intermediaries

To help organisations conduct business on the Web without
having to set up costly servers and devote dedicated personnel
to monitor orders and deliveries and other transactions, a new
breed of Agents or Internet E-commerce Solution providers
have sprung up.
        Agents and Intermediaries
Another similar service provider‟s site looks like this:
 Good News, Bad News
Like any other technology, there‟s good and bad news.
The good news is that E-Commerce is a round the clock
advantage for the customer. It will eventually become standard.
What‟s more, e-commerce allows fast and flexible execution
and response to market opportunities. The Web enables a
company to introduce a new product, get immediate customer
reaction, refine and perfect it, all without incurring huge
investments in a physical distribution infrastructure. Companies
betting on E-Commerce have begun to learn about their
customer‟s online buying habits.
The bad news is that customer reaction may actually be in
jeopardy. Led to believe they‟re transacting in real-time, they
could become disillusioned and take their business to
competitors or back to the offline world if their order is not
fulfilled quickly.
 How do you pay Online
       How safe would it be to use your
            Credit Card Online
While such a concern is shared by many users, the risk has now
been reduced. This has come about due to the development of
Secure Internet Protocols and Payment Systems, and Server
solutions that can handle electronic transactions.
The Secure Electronic transaction (SET) initiative that major
Credit-Card issuers Visa International and Master Card are
backing is expected to solve such security risks. The SET
project, obtaining assistance from Microsoft Corp., IBM Corp.,
Netscape Communications Corp., SAIC, GTE, Teresa Systems
and Verisign, aims to deliver a transparent encryption system
suitable for all electronic transactions using PCs. The use of
Public Key encryption may also go a long way in allaying users
fear of safety.
How do you pay Online

Pay Cash over the Net
The type of solutions available today include third-party
payment organizations and credit card payment system on the
Net. Digicash, France, was the first third party payment
organization, in 1994, to implement a virtual money system,
with which clients and merchants could transact business in
relative safety. Digicash and later third-party payment
organizations developed payment and merchant systems based
on the RSA security system for transmitting encrypted data
over the Internet. Taken in conjunction with the development of
secure internet protocols (Netscape Secure Sockets Layer,
Enterprise Integration Technologies‟ Secure-HTTP, Master-
Card and Visa International‟s SET and the Joint Electronic
Payment Initiative), third-party organizations have attracted
banks and Credit Card Companies to the Internet.
How do you pay Online

Some of the third party payment offerings now available are
CyberCash, Ecash, First Virtual Payment System and
CyberCash is a realtime secure, digital signature-based credit
card authentication service, developed by CyberCash Inc. It
acts as an intermediary between the consumer, the merchant
and the credit card clearing house.
 Ecash on the other hand is digital money that is downloaded
by an Ecash client from a participating bank and stored on a
customer‟s local computer. Ecash can be spent at merchant
systems that accept it; accepting merchants, in turn, must
deposit Ecash receipts at a participating bank.
Of the credit card payment systems available now on the Net,
ICVERIFY, from ICVERIFY Inc. is the most popular.
ICVERIFY processes and authorises credit card transactions
Duty Free on the Net
Last month, the World trade Organization came to a decision
to keep global electronic commerce duty free, and agreed to
evolve a programme to deal with its development on the
Internet. The new agreement, involving trade ministers of 132
countries, bars governments from collecting any tariffs on
such transactions for atleast a year. It ofcourse has incurred
wrath from non-governmental organizations since such an
exercise would benefit corporates of developed countries;
governments, by the way, would lose the option of a revenue
earning source.The Global Internet Project(GIP) presented the
European Union (EU) with its recommendations on e-
commerce last month. EU wants to develop a global charter
covering technical standards, illegal content, licenses,
encryption and data privacy on the Internet and other
Electronic networks.
Major components of E-COM

Shopping Cart (commerce server)
   An application which helps the shopper to
    browse through the product list and place an
    order. Application should be capable of
    maintaining the state information about the
    shopper purchase details and his ID.It should
    also be able to maintain the product
    list.(Usually this is implemented with the help
    of components(COM OBJECTS)). The
    components interact with the database for
    transaction processing.ASP provides support
    for this.(Cookies too can be used for this).
    Major components of E-COM
    Payment module(Payment server)

 Shoppers can make payments through credit
  cards. Credit card No. is sent to the server
  which can be stored in the database which
  can be verified against a bank manually
 Another method is to use payment servers
  which allows on-line verification of credit
  card numbers with the bank. It also provides
  mechanisms for checksum verification.
Major components of E-COM
    Security issues(security server)
   Payments to the server is enabled with the help of a number of
    security mechanisms
   Browser-to-Web server data encryption and integrity with
    SSL 3.0
   Browser to database password authentication by use of
    encrypted digests (Kerberose,Identix,Cybersafe)
   Protection for corporate databases with protocol-enabled
    firewalls proxying and authenticating user connection requests
    (Oracle has supplied sql*net proxy to all firewall vendors).
   Web Application Server to Browser authentication by use of
    digital signatures.
   Security Server provides a Certificate Authority (CA)
    function, including generation of public key/private key pairs
    and issuance of industry-standard X.509 certificates.
 Players in E-Commerce
Netscape is not the only player to move towards
facilitating its customers in e-commerce. IBM Corp
is also gearing itself up to provide „e-business‟
solutions. Other players such as Hewlett-Packard Co.
and Compaq-Tandem have launched servers
(hardware/software) that will cater to electronic
commerce. Cognos Inc., a leader in business
intelligence tools, has developed Data merchant that
allows corporates to access business intelligence data
from anywhere around the globe, anytime they want
it.Finally, Microsoft and Sun Microsystems are also
not far behind, as both their technologies - ActiveX
and Java - are capable of providing solutions for
developers with security strategies to base their
products on.
Players in E-Commerce
   Software companies that have made a mark
    for themselves in providing E.Commerce
    solutions out of the box are:
    –   OpenMarket (LiveCommerce, Transact,
    –   Sterling Commerce
    –   iCat (Commerce Publisher, E.Commerce Suite)
    –   Microsoft (Commerce Server)
    –   Netscape (
       Is E-Business all about the
   No, the basic foundation for e-business can
    be laid without the Internet. It‟s all about
    connecting your offices, suppliers, retailers
    and streamlining your processes. It‟s about
    letting your left hand know what your right
    hand is doing and extending it to your
    customers. That‟s it. Later when you feel
    you‟re ready or interested in reaching
    millions of customers, the Internet may be
    your answer.
But is it for me?

   Of course, Today you can buy garments, music,
    magazines, movie tickets and even vegetables on
    the net. Many companies keep their branch offices
    and employees informed of the latest
    developments whether internal or external through
    an intranet or even simple E-mail. No matter what
    the nature and size of your business, companies
    like IBM, Oracle etc.have ready solutions which
    will make it more cost effective.
Is it safe?

   Nobody would want to get into something
    that wasn‟t secure. So when you are ready
    for e-business you‟ll find that many
    organisations have developed solutions like
    Real Time Intrusion Detection and Anti
    Virus software. These along with personal
    codes and passwords make sure that any
    transaction that takes place or any
    information that is shared is seen only by
    the people it‟s meant for.
Will I have to change my existing setup?

   Certainly not! There‟s only no problem
    even if you are using different hardware and
    software systems to do your work today.
    There are companies that will help them all
    work together, using cross-platform
    technologies like Java to build smoothly
    integrated, open e-business solutions that
    work with both IBM and non-IBM
    technology. Of course, it would be easier
    for you if your system is scalable. Because
    then you can add to it as your business
        What the Future Holds

Ricardo H. Dujua, general manager of EDINet
Philippines, speaking at the Supermarket Show 97 last
year predicted that soon more and more shoppers will use
the Internet as the medium of Business. The Electronic
system will eliminate the need to set up physical stores,
warehouses and carry inventory.
It is also probable that not only will the greater adoption of
e-commerce change the way retailers conduct business, it
may also bring pressure to bear on them to be more
responsive to customers needs.
The World is becoming increasingly networked, changing
our methods of working and lifestyles. Once the hypes are
cleared and the mist lifts, usage would be fun, business
In Future
 While E-Commerce may not completely
  replace other forms of Commerce, it is
  likely to be the dominant mode of the
  commercial transactions in the future.
 Colleges and Schools including Business
  Schools should reflect this trend in the
  curriculum to train the future generation of
Consumer Applications and Social
 In the long run, the e-commerce application
  winners will be those that can change the
  way consumers think and the way they do
  business. One example might be
  applications oriented toward social
  interaction. Lessons from history indicate
  that the most successful technologies are
  those that make their mark socially.
 The TV and the Telephone are examples.
In Sum
 In sum, the most successful marketplaces
  are expected to be those that cater to
  consumer's loneliness, boredom, education
  and career. For instance, look at the success
  of on-line chats and home shopping
 But debates rage over whether interactive
  TV or on-line computer services will
  become pivotal medium for solving
  consumer loneliness.

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