Presentation on E-commerce

Electronic Commerce (E-Commerce)

• Commerce refers to all the activities the purchase and sales of goods or services.– Marketing, sales, payment, fulfillment, customer service

• Electronic commerce is doing commerce with the use of computers, networks and commerce-enabled software (more than just online shopping)

.Electronic commerce, commonly known as (electronic marketing) e-commerce or eCommerce, consists of the buying and selling of products or services over electronic systems such as the Internet and other computer networks. The

Brief History

• 1970s: Electronic Funds Transfer (EFT)– Used by the banking industry to exchange account

information over secured networks

• Late 1970s and early 1980s: Electronic Data Interchange (EDI) for e-commerce within companies– Used by businesses to transmit data from one business to

another

• 1990s: the World Wide Web on the Internet provides easy-to-use technology for information publishing and dissemination– Cheaper to do business (economies of scale)– Enable diverse business activities (economies of scope)

Process E-commerce

E-commerce applications

• Supply chain management• Video on demand• Remote banking• Procurement and purchasing• Online marketing and advertisement• Home shopping• Auctions

contents

Part IPlanning E-commerce Initiatives

Part IIStrategies for developing e-commerce Web sites

Part IIIManaging Electronic Commerce Initiatives

.A successful business plan should include activities that:

Identify objectivesLink objectives to business strategy

Planning E-commerce Initiatives

Ecommerce infrastructure

• Information superhighway infrastructure– Internet, LAN, WAN, routers, etc.– telecom, cable TV, wireless, etc.

• Messaging and information distribution infrastructure– HTML, XML, e-mail, HTTP, etc.

• Common business infrastructure– Security, authentication, electronic payment,

directories, catalogs, etc.

The Main Elements of E-commerce

• Consumer shopping on the Web, called B2C (business to consumer)

• Transactions conducted between businesses on the Web, call B2B (business to business)

• Transactions and business processes that support selling and purchasing activities on the Web– Supplier, inventory, distribution, payment

management– Financial management, purchasing products and

information

Advantages of Electronic Commerce

• Increased sales– Reach narrow market segments in geographically

dispersed locations– Create virtual communities

• Decreased costs– Handling of sales inquiries– Providing price quotes– Determining product availability

• Being in the space

Disadvantages of Electronic Commerce

• Loss of ability to inspect products from remote locations

• Rapid developing pace of underlying technologies

• Difficult to calculate return on investment• Cultural and legal impediments

The process of e-commerce

1. Attract customers– Advertising, marketing

2. Interact with customers– Catalog, negotiation

3. Handle and manage orders– Order capture– Payment– Transaction– Fulfillment (physical good, service good, digital good)

4. React to customer inquiries– Customer service– Order tracking

Objectives businesses strife to achieve using e-commerce include:

.Increase sales in existing markets

.Launching out into new markets

.Improve service to existing customers

.Identifying new vendors

.Coordinating more efficiently with existing vendorsMore effective recruiting

Identifying Objectives

Web-based E-commerce Architecture

Client

Tier 1

Web Server

Tier 3Tier 2 Tier N

Application Server

Database Server

DMS

.Vary with the size of the organisation, for example:.companies might want to build a Web site to encourage customers to do business using existing channels.

A site offering only product or service information is less costly do design and implement

.Larger companies that might want to build sites that offer transaction handling, bidding, communication and other capabilities have to pay much more

Types of Objectives

SMART Objectives

• Objectives must be:– Specific– Measurable– Achievable– Results-based– Time-bound

Real process of Ecommerce

Example of Objectives

GIST To create a comprehensive tester's guide to the Icon Income system.

SCALE Percentage completed at the specified milestone

PLAN 50% (Icon 5.01), 100% (Icon 5.02).

MUST 25% (Icon 5.01), 75% (Icon 5.02).

ACTUAL 10% (Icon 5.01), 25% (Icon 5.02)

Linking Objectives to Business Strategy (III)

• E-commerce can inspire businesses to partake in activities such as:– Purchase products and services– Manage supply chains– Operate auctions– Build virtual communities

• However, these can not be done in an ad hoc manner. It is important to measure the benefit and cost of each activity

Measuring Benefit

• Some benefits are tangible and easy to measure, for example increase sales, decrease cost

• Others are intangible thus difficult to measure, for example increased customer satisfaction

• Managers need to try to set objectives that are measurable even for intangible benefits– E.g. increased customer satisfaction might be

measured by counting the number of first-time customers who return to the Web site and buy

Measuring Benefit (I)

Build brand Surveys or opinion polls that measure brand awareness

Enhance existing marketing program

Change in per-unit sales volume

Improve customer service Customer satisfaction surveys, quantity of customer complaints

Measuring Benefit (II)

Reduce cost of after-sale support

Quantity and type (telephone, fax, e-mail) of support activities

Imply supplier chain operation

Cost, quality and on-time delivery of materials or services purchased

Hold auctions Quantity of auctions, bidders, sellers, items sold, registered participants, dollar value of items sold

Provide portals Number of visitors

Managing Cost

• IT projects are often difficult to estimate and control– E.g. web development technologies change rapidly,

thus it is difficult for managers to estimate cost• These cost include hardware and software

• Even though hardware cost tend to decrease, new software often demands new hardware, thus increase cost

Change Management

• Every project involves change• Change management is the process of helping

employees cope with change• Change management techniques include

– Communicating the need for change– Inclusion in the change decision process– Inclusion in the planning for the change

Post-Implementation Audits

• A formal review of a project after it is up and running

• Managers compare the the objectives, performance specifications, cost estimates, and scheduled delivery dates plans with the actuals

27

Regulations Administrations Policies

Telecommunications(fixed & mobile)

Computer Mass Coms

Technologies Legislations

INTERNET

* Refer to Table 1 in hand-out

Other Roles

• Web programmers– Design and write code for Web site

• Web graphics designers– A person trained in art, layout, composition

and understands how Web pages are constructed

• Content creators– Write original content

• Content managers/editors– Purchase existing material and adapt it

Application Specialist

• Maintain accounting, human resources, and logistics software

• Must maintain e-commerce software, e.g. catalogs, payment processing

Account Manager

• Keeps track of multiple Web sites in use by a project

• Or keeps track of projects that will combine to make a larger Web site

• The account manager supervises the location of specific Web pages and related software installations as they are moved from test, to demonstration, to production

• In smaller companies they handle the project and account management functions

Project Manager

• Specific training or skills in tracking costs and accomplishing project goals

• Certification might be useful (e.g. Project Management Institute) or MBA

• Skills in the use of project management software

Staffing for E-Commerce

• The internal team must determine the staffing needs for the e-commerce initiatives

• The general areas of staffing required are:– Business, project and account managers– Application specialists– Web programmers and graphic designers– Content creators, managers or editors– Customer service– System, and database administration– Network operations

New Methods for implementing Partial Outsourcing

• In the past five years new ways of implementing partial outsourcing have been creating– Incubators– Fast venturing

Internal Incubators

• Internal incubators are incubators that are set up by a company (using internal staff),– e.g. Kodak internal venturing program of the 1980s

• Most of these were unsuccessful because employees found it difficult to maintain an entrepreneurial spirit when what ever they developed would be taken away and controlled by the parent company

Incubators (I)

• When the company grows and can obtain venture capital financing or can publicly offer stock, the Incubator sells all or part of its interest and re-invests in a new incubator candidate

• Example:– Idealab (www.idealab.com/) was one of the first

Internet incubators and helped www.carsdirect.com/home

Incubators

• A company that offers start-up companies a physical location with offices, accounts and legal assistance, computers, and Internet connections at a very low monthly cost– Some also offer seed money, management advice an

marketing assistance

• In exchange the company gives 10-50% ownership of the company to the Incubator

Selecting a Web Hosting Service (I)

• The most important factors to use when evaluating a hosting service are:– Functionality– Reliability– Bandwidth and server scalability– Security– Backup and disaster recovery– Cost

Selecting a Web Hosting Service

• The internal team should be responsible for selecting the ISP to host the site– For smaller e-commerce projects teams can consult

an ISP dictionary (for ISPs, web hosting services or ASPs (application service provider))

– Larger companies should use consultants or other firms that rate service providers

Strategies For Developing E-commerce Web Sites (II)

• 1992 – Present Full Range of Automated Business Processes– Transaction processing, plus

• Personalisation• Interactive capabilities• Frequently updated content• Customer relationship• Management tools

Strategies For Developing E-commerce Web Sites (I)

• 1996 – 1999 Transaction Processing– Static brochures plus

• Complete product catalog• Shopping cart• Secure payment processing• Other information queries• Shipment tracking

Strategies For Developing E-commerce Web Sites

• 1994-1996 Static Brochures– Contact information– Logos and or other branding– Some product information– Financial statements

ROI Problems

• If managers rely only on ROI incorrect decision may be made– Due to biases towards short term cost and benefits

rather than long term

ROI Hidden Benefits Example

• CISCO systems created an on-line customer forum to discuss product issues

• The intended benefits were to– Reduce customer service costs– Increase customer satisfaction regarding the

availability of product information

• Additional (hidden) benefit– Cisco engineers were able to get feedback on

new products

Return On Investment (ROI)

• Return on Investment techniques measure the amount of income (return) that will be provided by a specific expenditure– ROI requires that all costs are stated in a dollar

amount– ROI focuses on benefits that can be predicted

• Many benefits are often hidden– ROI tends to emphasize short-term benefits over

long term benefits

Comparing Benefits to Costs

Identify benefits

Identify costs

Determine value of benefits

Determine value of costs

Compare valueof benefits to value of cost

Change Management

• Every project involves change• Change management is the process of helping

employees cope with change• Change management techniques include

– Communicating the need for change– Inclusion in the change decision process– Inclusion in the planning for the change

Web Site Costs

• The cost required for a large company to build an entry-level e-commerce site is $1 million– 79% is labour cost– 10% software cost– 11% hardware cost

– Source: International Data Corporation and Gartner Inc.

Change Management (I)

• If change is not properly managed, employees feel– Uncomfortable– Inadequate– Stressed which leads to reduced work performance– Unable to do the job properly– Powerless

Linking Objectives to Business Strategy (II)

• E-commerce can inspire businesses to partake in activities such as:– Build brands– Enhance existing marketing programs– Sell products and services– Sell advertising– Develop a better understanding of the

customer’s need– Improve after sales support and service

Linking Objectives to Business Strategy (I)

• Businesses can use downstream strategies to improve the value that the business provides to customers

• Or can pursue upstream strategies that focus on reducing cost or generating value by working with suppliers or inbound shipping and freight service providers

Linking Objectives to Business Strategy

• After identifying objectives a company must – identify business strategies that will help to realise

these objectives• E.g. a small company’s object might be to

become a global player within a year and as a result one of its activities is to build a brand

E-commerce Technologies

• Internet• Mobile technologies• Web architecture• Component

programming • Data exchange• Multimedia• Search engines• Data mining• Intelligent agents

• Access security• Cryptographic security• Watermarking• Payment systems

Infrastructure for E-commerce

• The Internet – system of interconnected networks that spans the

globe– routers, TCP/IP, firewalls, network infrastructure,

network protocols

• The World Wide Web (WWW) – part of the Internet and allows users to share

information with an easy-to-use interface– Web browsers, web servers, HTTP, HTML

• Web architecture– Client/server model– N-tier architecture; e.g., web servers, application

servers, database servers, scalability

E-Commerce Software

• Content Transport – pull, push, web-caching, MIME

• Server Components– CGI, server-side scripting

• Programming Clients• Sessions and Cookies• Object Technology

– CORBA, COM, Java Beans/RMI

• Technology of Fulfillment of Digital Goods– Secure and fail-safe delivery, rights management

System Design Issues

• Good architectural properties– Functional separation – Performance (load balancing, web caching)– Secure– Reliable– Available– Scalable

Creating and Managing Content

• What the customer see• Static vs. dynamic content• Different faces for different users• Tools for creating content• Multimedia presentation• Integration with other media• Data interchange• HTML, XML (Extensible Markup Language)

Cryptography

• Keeping secrets– Privacy: interceptor cannot use information– Authentication: sender’s identity cannot be forged– Integrity: data cannot be altered– Non-repudiation: sender cannot deny sending

• How to evaluate cryptography• Secret key (symmetric) cryptography; e.g., DES• Public key (asymmetric) cryptosystems; e.g, RSA• Digital signatures, digital certificates• Key management; e.g., PKI

Security

• Concerns about security• Client security issues• Server security issues• Security policy, risk assessment• Authentication methods

– Something you know: passwords– Something you have: smart card– Something you are: biometrics

• Firewalls, proxy servers, intrusion detection• Denial of service (DOS) attacks, viruses,

worms

Payment Systems

• Role of payment• Cash

– properties: wide accept, convenient, anonymity, untraceability, no buyer transaction cost

• Online credit card payment, Smart Cards– Secure protocols: SSL, SET

• Internet payment systems– Electronic cash, digital wallets

• Micro-payments• Wireless devices

Transactions Processing

• Transactions and e-commerce• Overview of transaction processing• Transaction processing in e-commerce• Keeping business records, audit, backup• High-availability systems• Replication and scaling• Implementation

Other System Components

• Taxes• Shipping and handling• Search engines• Data mining• Intelligent agents• Inventory management, enterprise resource

planning (ERP)• Customer relation management (CRM)

Course Outline

• Overview of e-commerce• The Internet and the WWW• E-commerce software building blocks and tools• Scalability, high-performance servers, web

caching• Basic cryptography• Security, watermarking, firewalls• Payment systems• Current and future directions

Life cycle