Chp 5 tech. revolutions and its effect on business
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  • In Luftman, the 3 main components of IT are Computing, Telecommunications, and Software Development.
  • Here is the summary
  • [READ]
  • [READ] For example USAA implemented a Documented Imaging System that placed all the companies paperwork online. What normally took 55 steps, umpteen people, two weeks and a lot of money was able to be achieved with a 5 minute phone call.

Chp 5 tech. revolutions and its effect on business Chp 5 tech. revolutions and its effect on business Presentation Transcript

  • CHAPTER 5 The Technological Revolution and Effects on Business DIPLOMA IN INTERNATIONAL BUSINESS (BUS2513)
  • Early milestones 5,000,000 BC Physical body with brainstem and cerebellum Natural gifts and endowments of ancient biped hominids Looked out over and moved through their dominions of grasslands and savannah Binocular vision, opposable thumb, running, walking, climbing, reaching, grasping, handling Brain development and three part brain Brain stem – governs basic requirements of life Cerebellum – governs movement, muscles, balance, co ordination Cerebrum – co ordinates thought, emotion, memory Complexity evolves from interactions with community and environment
  • 500,000 BC Fire probably discovered as natural occurrence and they learned to carry it and re create it Community and basic language development Hunting and weapons….stone and metals, jabbing and throwing, dynamics of mass, location Food preparation, containers, implements Early milestones 2,000,000 BC Need and insight drives innovation Homo habilis first toolsartifacts for scraping, cutting and pounding
  • Evolvement into Sapien and our Prisca Sapiente Collective knowledge of our past 200,000 BC onwards Learning to speak and articulate ideas Aware and thinking life remembering and acting, using our minds to think Observers, incorporating memories and participating in our cultures People, learning, endeavors, aspirations, lasting achievements Lasting contributions Important discoveries and ideas Important religions and founders and beliefs
  • Land for food production for geographical advantage for water, minerals, gifts from the earth Labour slaves, beasts, tenant farmers soldiers guilds of producer providers merchants and traders Capital goods and inputs for basic goods Basic tools, techniques Metal, leather, wood, bone, stone, clay Early economies Post Ice Age 8,000 BC through Megalithic through Feudal age
  • Advances in Methods and techniques Materials Tools and technology Early advancements what you do and what with Passage of time and learning Changing conditions and circumstance Capable individuals and milestones Do not think our ancestors were dumb Great accomplishments in buildings maths, sciences, business, philosophy etc
  • Progression to modern times From Feudal to Mercantile Exploration, navigation, metals and trade goods Need to move and transport goods and people Pulleys, levers, gears, screws, basic man powered machines Political organization still around kings and aristocracy and military Development of more socioeconomic classes and wealth Seminal event Ghengis Khan, Kublai Khan and Cathay, led to Marco Polo Search for new trade routes as silk road control fragmented
  • Industrial revolution Scientific principles Geography and flora and fauna, metals Machinery and locomotive power Utilities, fuel, coal More complex capital goods More complex production machinery New materials, methods Widening varieties of economic endeavor, markets Political economic development Decline in ancient privileges in lands and government Economic thinking and theories and formshow are resources shared Government and economies
  • Technology revolution More scientific discovery and uses and applications Electricity, oil, more forms of power to move objects Natural resources, metals Materials, atomic structure Road rail sea and sky vehicles Biology, medicine, genetic codes Environment and geography and flora and fauna Widening opportunities to provide things Well formed capital markets Well educated human resources Wide variety of economic endeavor More complex ideas and concepts
  • Individual sector growth and advancement and complexity Technology revolution Plastics Automotive Parts Film & CD’s Drugs Paints Foods & Flavours Clothing Building Materials Soaps & Detergents Forensics Medical Research Furniture Fertilizers Etc. Resins & Adhesives Modern Chemical Industry – variety of applications
  • STRATEGIC BREAKTHROUGHS
  • Energy and environment This crucial field should see major breakthroughs as the energy/environment challenge reaches critical levels over the coming decades.
  • Space Space Tourism may be the next major advance in this field, followed by Moon/Mars projects about 2020 and exotic technologies much later.
  • Manufacturing & Robotics TechCast follows only a few selected technologies as yet, and they all cluster at mid-range when manufacturing matures.
  • Transportation A wave of breakthroughs is likely to revolutionize transportation over the next 20 years
  • Medicine & Biogenetics These forecasts show that medicine & biogenetics will take 2-3 decades to realize the vast potential of the DNA revolution.
  • Major IT advances are likely to roll on for the next 2 decades, ending about 2020 with IT matures. Information Technology
  • Ecommerce These forecasts suggest that various commercial uses of E-Commerce should reach 30% adoption levels by 2015
  • All fields www.techcast.org Latest Strategic Analyses
  • Technological Revolution and Techno-Economic Paradigm (C Freeman and C Perez)
    • First: Industrial Revolution; UK, 1771-1830
    • Second: Age of Steam and Railway; UK, 1829-1873
    • Third: Age of Steel, Electricity, and Heavy Engineering; US and Germany to Euro, 1875-1918
    • Fourth: Age of Oil, Automobiles and Mass Production; US to Euro, 1908-1974
    • Fifth: Age of Information and Telecommunication; US to Euro and Asia, 1971-20??
  • Fourth: Age of Oil, Automobiles and Mass Production: 1908-1974
    • Mass production, mass markets, consumerism
    • Economies of scales (product and market volume)/ horizontal integration
    • Standardization of products
    • Energy intensity (mostly oil-based)
    • Synthetic materials (dyes, plastics, medicines)
    • Functional specialization/hierarchical pyramids
    • Centralization/ metropolitan centers-suburbanization
    • National powers, Int’l agreements and confrontation
      • Linear Innovation, Supply-sides dominate
      • National, Bi-lateral, and International
      • Human resource development
  • Constraints
    • Climate change/climate crisis
    • Environment deterioration, pollution
    • Water and foods and other natural resources
    • Perception by the general public of wide North-South disparity
    • Sense of inequity, frustration, violence, identity, etc,
    • Growing human population : 50% in last 25 years
    • Is Our Society Sustainable?
  • Age of Information and Telecommunication 1971-20??
    • Information-intensity (microelectronics-based ICT)
    • Decentralized and integration / network structures
    • Knowledge as capital / intangible value added
    • Heterogeneity, diversity, adaptability
    • Segmentation of markets / proliferation of niches/ branding
    • Economies of scope and specialization combined with scale
    • Globalization/ interaction between the global and the local
    • Inward and outward cooperation/ power of clusters
    • Instant contact and actions/ instant global communications
  • Key Components of ICT
    • Computing
      • All the hardware associated with gathering, processing and storing data
    • Telecommunications
      • The glue of systems, brings them closer together
    • Software development
      • The means of manipulating the hardware and data
  • Co-Evolution of Key IT Components
  • Early models – Anthony’s model
  • Stages of IT/IS evolution in relation to expenditure – Nolan and Gibson
  • The Three-‘Era’ Model
    • Data Processing
      • To improve efficiency
      • 1960s onwards
    • Management Information Systems
      • To increase management effectiveness
      • 1970s onwards
    • Strategic Information
      • To improve competitiveness
      • 1980s onwards
  • The Data Processing ‘Era’ (DP)
    • Automation of task/process through IT
    • Involves high volume of data
    • Data capture, validation, storage and transport
    • Even today, more than 50% of IT investment is focused on data processing
  • DP ‘Era’ - Internal to External View Managing the IS/IT activities Managing the IT/IS Department Relationships with other departments IS role in the Enterprise
  • Lessons learned from the DP ‘Era’
    • Developing of complete information systems, not just programs to process data
    • More analysis to improve system linkages
    • Better planning of interrelated set of systems
    • Coordination of user and DP functions
    • Appropriate justification of investment
  • Management Information Systems ‘Era’ (MIS)
    • Use of data for decision making purposes
    • New ways of manipulating data and data analysis
    • Return-on-investments calculations not as attractive for MIS than DP
  • MIS ‘Era’ - External to Internal View Managing the IS/IT activities Managing the IT/IS Department Relationships with other departments IS role in the Enterprise
  • Lessons learned from the MIS ‘Era’
    • Justification needs more than return on investment/financial analysis
    • Heavy user involvement for database restructuring projects
    • Need of IS source to move from production to service orientation
    • Need organizational policies
  • Strategic Information Systems ‘Era’ (SIS)
    • Moving away from the traditional analysis approach of deploying IT/IS
    • The ‘marriage’ of IT/IS investment with strategic development
    • Emphasis on competitive advantage and competitive position
  • Summary of Trends in Evolution
  • The 3 Era Model seen today…
  • 4 th Era?????? You are not alone…
    • Computer Networks
    • A computer network is a system for communicating between two or more computers and associated devices. It is an interconnection of computers for the purposes of sharing information and resources.
    • A popular example of a computer network is the internet, which allows millions of users to share information
    • Computer networks can be classified according to their size:
      • Personal area network (PAN)
      • Local area network (LAN)
      • Metropolitan area network (MAN)
      • Wide area network (WAN)
  • An example of a network Router Internet Segment Node Hub Hub Bridge
    • A PAN is a network that is used for communicating among computers and computer devices (including telephones) in close proximity of around a few meters within a room
    • It can be used for communicating between the devices themselves, or for connecting to a larger network such as the internet
    • PAN’s can be wired or wireless
      • PAN’s can be wired with a computer bus such as a universal serial bus: USB (a serial bus standard for connecting devices to a computer, where many devices can be connected concurrently)
      • PAN’s can also be wireless through the use of bluetooth (a radio standard designed for low power consumption for interconnecting computers and devices such as telephones, printers or keyboards to the computer) or IrDA (infrared data association) technologies
    Personal Area Network
    • A LAN is a network that is used for communicating among computer devices, usually within an office building or home
    • LAN’s enable the sharing of resources such as files or hardware devices that may be needed by multiple users
    • Is limited in size, typically spanning a few hundred meters, and no more than a mile
    • Is fast, with speeds from 10 Mbps to 10 Gbps
    • Requires little wiring, typically a single cable connecting to each device
    • Has lower cost compared to MAN’s or WAN’s
    Local Area Network
  • Types of Networks
    • Wide-area network (WAN)
    • A network that connects local-area networks over a potentially large geographic distance
    • M etropolitan-area network (MAN)
    • The communication infrastructures that have been developed in and around large cities
    • Gateway
    • One particular set up to handle all communication going between that LAN and other networks
  • Types of Networks Local-area networks connected across a distance to create a wide-area network
  • LAN basics
    • LAN’s can be either wired or wireless. Twisted pair, coax or fiber optic cable can be used in wired LAN’s
    • Nodes in a LAN are linked together with a certain topology . These topologies include:
      • Bus
      • Ring
      • Star
      • Branching tree
    • A node is defined to be any device connected to the network. This could be a computer, a printer, a router, etc.
    • A Hub is a networking device that connects multiple segments of the network together
    • A Network Interface Card (NIC) is the circuit board that has the networking logic implemented, and provides a plug for the cable into the computer (unless wireless). In most cases, this is an Ethernet card inserted in a slot of the computer’s motherboard
    • The Network Operating System (NOS) is the software (typically part of the operating system kernel) that communicates with the NIC, and enables users to share files and hardware and communicate with other computers. Examples of NOS include: Windows XP, Windows NT, Sun Solaris, Linux, etc..
  • Types of Networks
    • Ethernet
    • The industry standard bus technology for local-area networks
  • Network Topologies
    • Bus Topology
      • Each node is connected one after the other (like christmas lights)
      • Nodes communicate with each other along the same path called the backbone
    • Ring Topology
      • The ring network is like a bus network, but the “end” of the network is connected to the first node
      • Nodes in the network use tokens to communicate with each other
    Backbone
    • Star Topology
      • Each node is connected to a device in the center of the network called a hub
      • The hub simply passes the signal arriving from any node to the other nodes in the network
      • The hub does not route the data
    Hub
    • Branching Tree Topology
  • Access Control Methods
    • Two primary access control methods exist for computers to communicate with each other over the network
      • Token based access
      • Carrier Sense Multiple Access with Collision Detection (CSMA/CD)
  • Token based access
    • Used in bus and ring network topologies (token ring)
    • Each computer in the network can only send its data if it has the token. This prevents collisions that occur when data is sent at the same time over the network
    • The token is a special pattern of bits/bit in a frame that is directly detectible by each node in the network
    • A computer may only transmit information if it is in possession of the token
    • The message is sent to all other computers in the network
  • Types of LAN’s
    • The three most popular types of LAN’s are:
      • Token ring
      • Ethernet
      • FDDI (Fiber Distributed Data Interface)
  • Operation of token ring
    • As an example, suppose node # 1 wants to send information to node # 4 over the network
    • Initially, an empty frame (network packet) circulates in the network
    1 2 3 4 5 6
    • Let’s see an animation of the token ring
  • CSMA/CD
    • Usually used in a bus topology
    • Used in Ethernet LAN’s
    • Unlike the token ring, all nodes can send whenever they have data to transmit
    • When a node wants to transmit information, it first “listens” to the network. If no one is transmitting over the network, the node begins transmission
    • It is however possible for two nodes to transmit simultaneously thinking that the network is clear
    • When two nodes transmit at the same time, a collision occurs
    • The first station to detect the collision sends a jam signal into the network
    • Both nodes back off, wait for a random period of time and then re-transmit
  • CSMA/CD Collision A B C D A B C D A B C D
  • Ethernet
    • First network to provide CSMA/CD
    • Developed in 1976 by Xerox PARC (Palo Alto Research Center) in cooperation with DEC and Intel
    • Is a fast and reliable network solution
    • One of the most widely implemented LAN standards
    • Can provide speeds in the range of 10Mbps- 10 Gbps
    • Used with a bus or star topology
  • Types of Ethernet LANs
    • 10Base-T
      • Operates at 10 Mbps
      • IEEE 802.3 standard
    • Fast Ethernet (100Base-T)
      • Operates at 100 Mbps
    • Gigabit Ethernet
      • Operates at 1 Gbps
      • Uses fiber optic cable
    • 10 Gbps Ethernet
      • Latest development of ethernet
      • Uses fiber optic cable
      • Developed to meet the increasing bandwidth needs of the LAN market
    • Wireless Ethernet
      • IEEE 802.11 standard
      • Operates at around 2.4 Gbps
  • Fiber-Distributed Data Interface (FDDI)
    • Fiber-Distributed Data Interface (FDDI) provides a standard for data transmission in a local area network that can extend in range up to 200 kilometers (124 miles).
    • The FDDI protocol uses as its basis the token ring protocol.
    • In addition to covering large geographical areas, FDDI local area networks can support thousands of users.
    • As a standard underlying medium it uses optical fiber (though it can use copper cable, in which case one can refer to CDDI).
    • FDDI uses a dual-attached, counter-rotating token-ring topology.
  • Fiber-Distributed Data Interface (FDDI)
    • An FDDI network contains two token rings, one for possible backup in case the primary ring fails.
    • FDDI has a larger maximum-frame size than standard 100 Mbit/s ethernet, allowing better throughput.
    • A small number of devices (typically infrastructure devices such as routers and concentrators rather than host computers) connect to both rings - hence the term "dual-attached".
    • Host computers then connect as single-attached devices to the routers or concentrators.
  • Types of Networks
    • Internet
    • A wide area network that spans the planet
    • So, who owns the Internet?
  • Internet Connections
    • Internet backbone
    • A set of high-speed networks that carry Internet traffic, provided by companies such as AT&T, GTE, and IBM
    • Internet service provider (ISP)
    • A company that provides other companies or individuals with access to the Internet
  • Internet Connections
    • Various technologies available to connect a home computer to the Internet
      • Phone modem converts computer data into an analog audio signal for transfer over a telephone line, and then a modem at the destination converts it back again into data
      • Digital subscriber line (DSL) uses regular copper phone lines to transfer digital data to and from the phone company’s central office
      • Cable modem uses the same line that your cable TV signals come in on to transfer the data back and forth
  • Internet Connections
    • Broadband
    • A connection in which transfer speeds are faster than 128 bps (bits per second)
      • DSL connections and cable modems are broadband connections
      • The speed for downloads (getting data from the Internet to your home computer) may not be the same as uploads (sending data from your home computer to the Internet)
  • Packet Switching
    • Packet
    • A unit of data sent across a network
    • Router
    • A network device that directs a packet between networks toward its final destination
    • Packet switching
    • Messages are divided into fixed-sized, numbered packets; packets are individually routed to their destination, then reassembled
  • Packet Switching Messages sent by packet switching Take a message, break it into three packets, and simulate this process
  • Open Systems
    • A logical progression...
      • Proprietary system
      • A system that uses technologies kept private by a particular commercial vendor
      • Interoperability
      • The ability of software and hardware on multiple machines and from multiple commercial vendors to communicate
      • Open systems
      • Systems based on a common model of network architecture and a suite of protocols used in its implementation
  • Open Systems
    • Open Systems Interconnection Reference Model
    • A seven-layer logical break down of network interaction to facilitate communication standards
    • Each layer deals with a particular aspect of network communication
    The layers of the OSI Reference Model
  • The Layers in the ISO/OSI RF Model Physical: Transmit raw bits over the medium. Data Link: Implements the abstraction of an error free medium (handle losses, duplication, errors, flow control). Network: Routing. Transport: Break up data into chunks, send them down the protocol stack, receive chunks, put them in the right order, pass them up. Session: Establish connections between different users and different hosts. Presentation: Handle syntax and semantics of the info, such as encoding, encrypting. Application: Protocols commonly needed by applications (cddb, http, ftp, telnet, etc).
  • Network Protocols
    • Network protocols are layered such that each one relies on the protocols that underlie it
    • Sometimes referred to as a protocol stack
    Layering of key network protocols
  • TCP/IP
    • Transmission Control Protocol (TCP)
    • Software that breaks messages into packets, hands them off to the IP software for delivery, and then orders and reassembles the packets at their destination
    • Internet Protocol (IP)
    • Software that deals with the routing of packets through the maze of interconnected networks to their final destination
  • TCP/IP
    • User Datagram Protocol (DP)
    • An alternative to TCP that is faster but less reliable
    • Ping
    • A program used to test whether a particular network computer is active and reachable
    • Traceroute
    • A program that shows the route a packet takes across the Internet
  • High-Level Protocols
    • Other protocols build on TCP/IP protocol suite
      • Simple Mail Transfer Protocol (SMTP) used to specify transfer of electronic mail
      • File Transfer Protocol (FTP) allows a user to transfer files to and from another computer
      • Telnet used to log onto one computer from another
      • Hyper Text Transfer Protocol (http) allows exchange of Web documents
    Which of these have you used?
  • High-Level Protocols Some protocols and the ports they use Port A numeric designation that corresponds to a particular high-level protocol
  • MIME Types
    • MIME type
    • A standard for defining the format of files that are included as email attachments or on websites
    • What does MIME stand for?
  • Firewalls
    • Firewall
    • A gateway machine and its software that protects a network by filtering the traffic it allows
    • Access control policy
    • A set of rules established by an organization that specify what types of network communication are permitted and denie d
    Have your messages ever been returned undelivered, blocked by a firewall?
  • Firewalls A firewall protecting a LAN
  • Network Addresses
    • Hostname
    • A name made up of words separated by dots that uniquely identifies a computer on the Internet
    • IP address
    • An address made up of four one-byte numeric values separated by dots that uniquely identifies a computer on the Internet
    • Is there a correspondence between the parts of a hostname and an IP address?
  • Network Addresses Class A: first byte network address and three bytes for host number Class B: first two bytes for network address and two bytes for host number Class C: first three bytes for network address and one byte for host number An IP address is stored in four bytes Where does the host number come from?
  • Domain Name System
    • Host number
    • The part of the IP address that specifies a particular host on the network Yes, but what is it?
    • Domain name
    • The part of a hostname that specifies a specific organization or group
    • Top-level domain (TLD)
    • The last section of a Domain name that specifies the type of organization or its country of origin
  • Domain Name System
    • e-web.uum.edu.my
    Computer name Domain name TLD
  • Domain Name System Top-level domains, including some relatively new ones
  • Domain Name System
    • Organizations based in countries other than the United States use a top-level domain that corresponds to their two-letter country codes
    Some of the top-level domain names based on country codes Do you email someone in another country ?
  • Domain Name System
    • Domain name system (DNS)
    • A distributed system for managing hostname resolution
    • Domain name server
    • A computer that attempts to translate a hostname into an IP address
  • The NEW Business Models
    • Brokerage
    • Advertising
    • Infomediary
    • Merchant
    • Manufacturer (Direct)
    • Affiliate
    • Community
    • Subscription
    • Utility
  • Brokerage Model
    • Brokers are market-makers: they bring buyers and sellers together and facilitate transactions. Brokers play a frequent role in business-to-business (B2B), business-to-consumer (B2C), or consumer-to-consumer (C2C) markets. Usually a broker charges a fee or commission for each transaction it enables. The formula for fees can vary.
    • Marketplace Exchange -- offers a full range of services covering the transaction process, from market assessment to negotiation and fulfillment. Exchanges operate independently or are backed by an industry consortium. [ Orbitz , ChemConnect
    • Buy/Sell Fulfillment -- takes customer orders to buy or sell a product or service, including terms like price and delivery. [ CarsDirect , Respond.com ]
    • Demand Collection System -- the patented "name-your-price" model pioneered by Priceline.com. Prospective buyer makes a final (binding) bid for a specified good or service, and the broker arranges fulfillment. [ Priceline.com ]
    • Auction Broker -- conducts auctions for sellers (individuals or merchants). Broker charges the seller a listing fee and commission scaled with the value of the transaction. Auctions vary widely in terms of the offering and bidding rules. [ eBay ]
    • Transaction Broker -- provides a third-party payment mechanism for buyers and sellers to settle a transaction. [ PayPal , Escrow.com
    • Distributor -- is a catalog operation that connects a large number of product manufacturers with volume and retail buyers. Broker facilitates business transactions between franchised distributors and their trading partners.
    • Search Agent -- a software agent or "robot" used to search-out the price and availability for a good or service specified by the buyer, or to locate hard to find information.
    • Virtual Marketplace -- or virtual mall, a hosting service for online merchants that charges setup, monthly listing, and/or transaction fees. May also provide automated transaction and relationship marketing services. [zShops and Merchant Services at Amazon.com ]
  • Advertising Model
    • The web advertising model is an extension of the traditional media broadcast model. The broadcaster, in this case, a web site, provides content (usually, but not necessarily, for free) and services (like email, IM, blogs) mixed with advertising messages in the form of banner ads. The banner ads may be the major or sole source of revenue for the broadcaster. The broadcaster may be a content creator or a distributor of content created elsewhere. The advertising model works best when the volume of viewer traffic is large or highly specialized.
    • Portal -- usually a search engine that may include varied content or services. A high volume of user traffic makes advertising profitable and permits further diversification of site services. A personalized portal allows customization of the interface and content to the user. A niche portal cultivates a well-defined user demographic. [ Yahoo! ]
    • Classifieds -- list items for sale or wanted for purchase. Listing fees are common, but there also may be a membership fee. [ Monster.com , Craigslist , Match.com ]
    • User Registration -- content-based sites that are free to access but require users to register and provide demographic data. Registration allows inter-session tracking of user surfing habits and thereby generates data of potential value in targeted advertising campaigns. [ NYTimes ]
    • Query-based Paid Placement -- sells favorable link positioning (i.e., sponsored links) or advertising keyed to particular search terms in a user query, such as Overture's trademark "pay-for-performance" model. [ Google , Overture ]
    • Contextual Advertising / Behavioral Marketing -- freeware developers who bundle adware with their product. For example, a browser extension that automates authentication and form fill-ins, also delivers advertising links or pop-ups as the user surfs the web. Contextual advertisers can sell targeted advertising based on an individual user's surfing activity.
    • Content-Targeted Advertising -- pioneered by Google, it extends the precision of search advertising to the rest of the web. Google identifies the meaning of a web page and then automatically delivers relevant ads when a user visits that page. [ Google ]
    • Intromercials -- animated full-screen ads placed at the entry of a site before a user reaches the intended content. [ CBS MarketWatch ]
    • Ultramercials -- interactive online ads that require the user to respond intermittently in order to wade through the message before reaching the intended content. [ Salon in cooperation with Mercedes-Benz]
  • Infomediary Model
    • Data about consumers and their consumption habits are valuable, especially when that information is carefully analyzed and used to target marketing campaigns. Independently collected data about producers and their products are useful to consumers when considering a purchase. Some firms function as infomediaries (information intermediaries) assisting buyers and/or sellers understand a given market.
    • Advertising Networks -- feed banner ads to a network of member sites, thereby enabling advertisers to deploy large marketing campaigns. Ad networks collect data about web users that can be used to analyze marketing effectiveness. [ DoubleClick ]
    • Audience Measurement Services -- online audience market research agencies. [ Nielsen//Netratings ]
    • Incentive Marketing -- customer loyalty program that provides incentives to customers such as redeemable points or coupons for making purchases from associated retailers. Data collected about users is sold for targeted advertising. [ Coolsavings ]
    • Metamediary -- facilitates transactions between buyer and sellers by providing comprehensive information and ancillary services, without being involved in the actual exchange of goods or services between the parties. [ Edmunds ]
  • Merchant Model
    • Wholesalers and retailers of goods and services. Sales may be made based on list prices or through auction.
    • Virtual Merchant --or e-tailer, is a retail merchant that operates solely over the web. [ Amazon.com ]
    • Catalog Merchant -- mail-order business with a web-based catalog. Combines mail, telephone and online ordering. [ Lands' End ]
    • Click and Mortar -- traditional brick-and-mortar retail establishment with web storefront. [ Barnes & Noble ]
    • Bit Vendor -- a merchant that deals strictly in digital products and services and, in its purest form, conducts both sales and distribution over the web. [ Apple iTunes Music Store ]
  • Manufacturer (Direct) Model
    • The manufacturer or "direct model", it is predicated on the power of the web to allow a manufacturer (i.e., a company that creates a product or service) to reach buyers directly and thereby compress the distribution channel. The manufacturer model can be based on efficiency, improved customer service, and a better understanding of customer preferences. [ Dell Computer ]
  • Affiliate Model
    • In contrast to the generalized portal, which seeks to drive a high volume of traffic to one site, the affiliate model, provides purchase opportunities wherever people may be surfing. It does this by offering financial incentives (in the form of a percentage of revenue) to affiliated partner sites. The affiliates provide purchase-point click-through to the merchant. It is a pay-for-performance model -- if an affiliate does not generate sales, it represents no cost to the merchant. The affiliate model is inherently well-suited to the web, which explains its popularity. Variations include, banner exchange, pay-per-click, and revenue sharing programs. [ Barnes & Noble , Amazon.com ]
    • Banner Exchange -- trades banner placement among a network of affiliated sites.
    • Pay-per-click -- site that pays affiliates for a user click-through.
    • Revenue Sharing -- offers a percent-of-sale commission based on a user click-through in which the user subsequently purchases a product.
  • Community Model
    • The viability of the community model is based on user loyalty. Users have a high investment in both time and emotion. Revenue can be based on the sale of ancillary products and services or voluntary contributions; or revenue may be tied to contextual advertising and subscriptions for premium services. The Internet is inherently suited to community business models and today this is one of the more fertile areas of development, as seen in rise of social networking.
    • Open Source -- software developed collaboratively by a global community of programmers who share code openly. Instead of licensing code for a fee, open source relies on revenue generated from related services like systems integration, product support, tutorials and user documentation. [ Red Hat ]
    • Open Content -- openly accessible content developed collaboratively by a global community of contributors who work voluntarily. [ Wikipedia ]
    • Public Broadcasting -- user-supported model used by not-for-profit radio and television broadcasting extended to the web. A community of users support the site through voluntary donations. [ The Classical Station ( WCPE.org )]
    • Social Networking Services -- sites that provide individuals with the ability to connect to other individuals along a defined common interest (professional, hobby, romance). Social networking services can provide opportunities for contextual advertising and subscriptions for premium services. [ Flickr , Friendster , Orkut ]
  • Subscription Model
    • Users are charged a periodic -- daily, monthly or annual -- fee to subscribe to a service. It is not uncommon for sites to combine free content with "premium" (i.e., subscriber- or member-only) content. Subscription fees are incurred irrespective of actual usage rates. Subscription and advertising models are frequently combined.
    • Content Services -- provide text, audio, or video content to users who subscribe for a fee to gain access to the service. [ Listen.com , Netflix ]
    • Person-to-Person Networking Services -- are conduits for the distribution of user-submitted information, such as individuals searching for former schoolmates. [ Classmates ]
    • Trust Services -- come in the form of membership associations that abide by an explicit code of conduct, and in which members pay a subscription fee. [ Truste ]
    • Internet Services Providers -- offer network connectivity and related services on a monthly subscription. [ America Online ]
  • Utility Model
    • The utility or "on-demand" model is based on metering usage, or a "pay as you go" approach. Unlike subscriber services, metered services are based on actual usage rates. Traditionally, metering has been used for essential services (e.g., electricity water, long-distance telephone services). Internet service providers (ISPs) in some parts of the world operate as utilities, charging customers for connection minutes, as opposed to the subscriber model common in the U.S.
    • Metered Usage -- measures and bills users based on actual usage of a service.
    • Metered Subscriptions -- allows subscribers to purchase access to content in metered portions (e.g., numbers of pages viewed). [ Slashdot ]