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  • 1.
    • E-Commerce-The
    • Business Market
    • Space of the Future
    • Special thanks to Allison Buchholz
  • 2. Introduction to E-Commerce
    • E-Commerce is a generic term used for a range of technologies available which transfer data electronically:
      • fax, e-mail, voice mail, electronic catalogs, electronic funds transfer (EFT),electronic data interchange (EDI), electronic forms
      • two main types: business to consumer (B2C) and business to business (B2B)
      • B2B EDI, used by 95% of the Fortune 1,000 companies, is the most common form of e-commerce today
  • 3. Advantages of E-Commerce
    • Shorten Procurement cycles through the use of on-line catalogues, ordering and payment
    • Cut costs on materials through competitive bidding
    • Gain access to world wide markets at a fraction of traditional costs
    • Ensure product, marketing information and prices are always up to date
    • Allow small and medium size businesses to compete with large businesses over a common platform
  • 4. Risks in E-Commerce
    • Can cause disintermediation which is the process of cutting out the middleman by bypassing traditional retail channels (retail stores and mail-order houses) and selling directly to the customer
    • Lack of insurance available to cover losses due to hackers destroying files, stealing inventory, trade secrets or injecting viruses into the systems
    • Requires firms to rethink their business models and ways of interacting with customers
    • Traditional audit trails change or disappear, making error correction, disaster recovery, and application testing more difficult
  • 5. Business to Business E-Commerce
    • Most EDI was done over private networks but there is a big push to establish common standards to use it over the Internet:
    • Open Trading Protocol(OTP)- intended to standardize a variety of payment-related activities, including purchase agreements, receipts for purchases, and payments
    • Open Buying on the Internet (OBI)- standard created by the Internet Purchasing Roundtable to ensure that all the different e-commerce systems can talk to each other
    • These standards work in a similar fashion to the ANSI X12, which you already learned about.
  • 6. Business to Business E-Commerce
    • Example:
    • The automotive industry is investing in a new venture, the Automotive Network Exchange (ANX). ANX is a managed virtual private network (VPN) that runs over the Internet and links manufacturers and suppliers worldwide. This will electronically link those suppliers who still communicate to manufacturers by traditional means (phone,fax, e-mail). The network will electronically route product shipment schedules, CAD files for product designs, POs, payments and other business information.
    • NOTE: VPN’s provide secure data transfer over the
    • net--think of them like a tunnel for data
  • 7. Business to Business E-Commerce
    • Example:
    • The Great Plains e.Order demo that you just did is a great example of B2B over the web. It is done in a client-server environment with a Great Plains C/S+ back end (sometimes called back office) and a front end developed in Microsoft tools. Front end is simply the term used to describe what you, the user, see. It is the GUI, the web browser screen you view and/or interact with. Back end is the term used to describe what is happening with the data that the user doesn’t see. Typically, that data may be in an application program or a relational database such as Oracle, DB2, SQL server, Sybase SQL server.
  • 8. Business to Business E-Commerce
    • Example:
    • Just in case you never got a good understanding of why client/server (C/S) is such a big deal, here is an example. A customer calls to change their number. Without C/S the accounts receivable clerk would have to access the entire A/R master file from the file server just to change one record. Since this is probably thousands/millions of records and takes up lots of bandwith on the network, it makes the system crawl!!!! With C/S, the server selects out just the one record and then sends only the one record to the A/R clerk to be changed. By distributing processing in this way the system is SIGNIFICANTLY faster!!!
  • 9. Business to Business E-Commerce
    • At some point you are going to wonder how the back end and the front end communicate. They often can’t since many companies still have back ends that were not created to interface with (display) over the web. The answer is Middleware. Middleware is simply the “glue” or layer of software that allows the front ends (often in Java, HTML, XML, CGI scripts, ASP pages) to interact with the back end. Just like you need a translator when someone who is speaking Spanish is talking to someone who is speaking French, you often need middleware for your front end to communicate with your back end.
  • 10. Business to Consumer E-Commerce
    • It’s a little different with B2C:
    • The consumer moves through the internet to the merchant’s website.
    • (i.e. Jay Crew,
    • Decides to purchase a product. He is connected to an online transaction server. All the information in this server is encrypted.
    • After placing an order, the information moves through a private gateway to a Processing Network.
    • The Processing Network is where the issuing and acquiring banks complete or deny the transaction.
  • 11. Business to Consumer E-Commerce
  • 12. E-Commerce Implementation Issues
    • There are several ways to acquire a web presence and obviously the amount of money you want to spend and the in-house talent you have for developing/maintaining the site are crucial in making the decision whether to
    • Buy, Lease or Build an E-Commerce System
  • 13.
    • Buy, Lease or Build?
    • Option 1:
    • Buy a ready-made system that closely matches your specifications.
      • Standardized set of features
      • Save money and time if it fits business needs
      • May become obsolete as more features become necessary later in development
      • Extra to automate payments, tax and shipping (although easy to install plug-ins into system of the above)
  • 14.
    • Buy, Lease or Build?
    • Option 2:
    • Lease space in a network-based e-commerce solution
      • Inexpensive
      • Include many common features
      • Fast because the business is administered through the Internet
      • Don’t need to install software just pick a look, configure some settings, and input product information
      • May not support the features or look you want to convey
  • 15.
    • Buy, Lease or Build?
    • Option 3:
    • Build the system from scratch
      • Exact Solution
      • Requires expertise, time and a sizeable budget
      • Can build features and functions to be unique and competitive in the market space
      • Any programming language can be used to create a commerce program
      • Design databases from scratch and integrate tax, shipping and payment processing modules into the main application
      • Will need Professional Systems Developer(s)
  • 16.
    • Exploring the Options Further
  • 17. E-Commerce Implementation Issues
    • Other Issues to consider are:
    • Digital Certificates
    • Establishing Payment Systems
    • Security
    • What about the AICPA’s WebTrust??? Ask me in class!
  • 18.
    • Digital Certificate
      • Password-protected, encrypted data file that has been digitally signed by the Certificate Authority
      • Data file consists of a public and private key pair (a pair of numbers that have no association with any identity)
      • Two types:
        • Public-used by individuals/businesses
        • Private-generated by a business entity to control access to information sites and ensure secure communication
      • Includes Name of Subscriber, e-mail address, public key of subscriber, validity period for certificate, name of issuing CA, certificate serial number
  • 19.
    • Certificate Authority (CA)
      • A Trusted Third Party
      • Reviews information submitted by company requesting a certificate, ensure that it was properly registered and proper paperwork has been filed to operate as a company
      • Issues the certificates in ascending levels of assurance (i.e. Classes 1,2,3, where Class 3 offers most assurance)
      • Provides services for the digital certificate
      • Only a few Internet-wide CA’s, including:
        • VeriSign (
        • Thawte (
  • 20.
    • How the Digital Certificate Works
      • With a Certificate and CA, two authenticated parties exchange their public key certificates, encrypt and digitally sign session data to remove the possibility of eavesdropping or tampering with data.
      • This encryption technology is known as “Public Key Cryptography”
      • One key encrypts the data and only the other key in the pair can decrypt the data
  • 21.
    • Establishing a Payment System
    • When using Credit Card Payment over the Web you need to select a Merchant Account Provider (MAP)
      • Determine Company Needs
        • Real-Time or Manual Processing
        • Is software compatible with MAP
      • Understand Merchant Account Costs
        • Internet Discount Rate -fixed percentage taken from every online transaction (usually 2-3%) whichever
        • is higher
        • Transaction Fee -MAP fixed charge per transaction (usually 25-70 cents)
  • 22.
    • Establishing a Payment System
        • Monthly Fees and minimums -Statement fees, monthly minimums for total charges, excess usage fees, etc.
        • Holdbacks -MAP may reserve a percentage of your transaction receipts to cover contested charges
        • Chargebacks -MAP may apply fees against your account when transactions are successfully contested
      • Research Merchant Account Providers
        • Compare at least 5 price quotes
  • 23.
    • Establishing a Payment System
    • Choose a Secure Electronic Payment System
      • Provides consumer with 2 levels of security
        • ensures safe credit card information during authorization and following the completion of the transaction
        • enables consumer to appeal credit card charge if damaged or defective products
      • MAP must support system
      • Most use Secure Electronic Transaction (SET) standard, which contains extra security measures and antifraud technologies
      • Examples: CyberCash, DigiCash, Verifone,CyberSource, OpenMarket
  • 24.
    • Establishing a Payment System
    • How Credit Card Transactions are processed
      • Authentication -make sure valid numbers, that is has been issued and is not a stolen card number
      • Authorization -check availability of funds and put a reservation on the funds
      • Settlement -once products are shipped or delivered bank releases the funds reserved and the money will make its way into the businesses account
  • 25.
    • Online Information Security
    • Security Sockets Layer (SSL)- encryption technology that scrambles a message so that only the recipient can unscramble it
      • URLs that begin with https:// are using SSL
    • A company needs to do the following to enable SSL technology:
      • determine what kind of browser visitors/partners are using (some browsers are not SSL savvy, such as older versions of AOL)
      • have a digital certificate to install and configure the SSL on the server
  • 26. Top 10 E-Commerce Businesses Source: PC Data Online
  • 27. E-Commerce Information Sites
    • E-Commerce Times
    • ZDNet E-Business
    • CommerceNet
    • Electronic Commerce Guide