E Commerce

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E Commerce

  1. 1. E Commerce Concepts and Issues David Miller Jay Roloff
  2. 2. E Commerce Definition <ul><li>The process of selling or buying products or services via the Internet </li></ul>
  3. 3. Questions <ul><li>Don’t Hesitate Ask Questions </li></ul>
  4. 4. Traditional Commerce Model <ul><li>Personal </li></ul><ul><ul><li>Retail Outlets </li></ul></ul><ul><ul><li>Shopping Malls </li></ul></ul><ul><li>Business </li></ul><ul><ul><li>Individual Purchasing Agents </li></ul></ul><ul><ul><li>Based on ERP requirements </li></ul></ul>
  5. 5. E Commerce Model <ul><li>Personal </li></ul><ul><ul><li>Web Based Retail Outlets </li></ul></ul><ul><ul><li>Amazon.com </li></ul></ul><ul><ul><li>BarnesAndNoble.com </li></ul></ul><ul><li>Comparison Services </li></ul><ul><ul><li>Shopper.com </li></ul></ul>
  6. 6. E Commerce Model <ul><li>Business </li></ul><ul><ul><li>e-Procurement </li></ul></ul><ul><ul><ul><li>Commerce One </li></ul></ul></ul><ul><ul><ul><li>Ariba </li></ul></ul></ul><ul><ul><li>Industry Purchasing Portals </li></ul></ul><ul><ul><ul><li>Airline Portal </li></ul></ul></ul><ul><ul><ul><li>TradeXchange </li></ul></ul></ul><ul><ul><ul><ul><li>GM Supply Power (Commerce One) </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Auto Xchange (Ford – Oracle) </li></ul></ul></ul></ul>
  7. 7. Building an E Commerce Site
  8. 8. Web Servers <ul><li>Apache ($free) 63% </li></ul><ul><li>Microsoft Internet Information </li></ul><ul><li>Server ($free) </li></ul><ul><li>Netscape Enterprise Server ($1,295) </li></ul><ul><li>Novell Enterprise Server ($1,295) </li></ul>
  9. 9. Database Servers <ul><li>IBM DB2 v7.1 </li></ul><ul><ul><li>Holds Transaction Processing Performance record with 440,000 TPM </li></ul></ul><ul><ul><li>32 Servers </li></ul></ul><ul><ul><li>$14.2 Million for Equipment </li></ul></ul><ul><li>Oracle8 </li></ul><ul><li>Microsoft SQL Server 2000 </li></ul>
  10. 10. Content Development <ul><li>Microsoft FrontPage </li></ul><ul><li>Microsoft InterDev </li></ul><ul><li>Site Builders </li></ul><ul><ul><li>Storefront 2000 (Frontpage 2000) </li></ul></ul><ul><ul><li>eStore Builder (Active Server) </li></ul></ul><ul><ul><li>ezMerchant (Lotus Domino) </li></ul></ul>
  11. 11. Active Server Pages <ul><li>Microsoft Technology </li></ul><ul><li>Runs on the Server </li></ul><ul><li>Creates Standard HTML code </li></ul><ul><li>Compatible with many different Browsers </li></ul><ul><li>Barnes and Noble </li></ul>
  12. 12. Content Development <ul><li>Back-end Integration can cost 25% </li></ul><ul><ul><li>Large ongoing Cost </li></ul></ul><ul><li>ERP Integration </li></ul><ul><ul><li>Oracle </li></ul></ul><ul><ul><li>mySAP </li></ul></ul><ul><ul><li>J.D. Edwards </li></ul></ul><ul><ul><li>Baan E-Enterprise </li></ul></ul><ul><ul><li>eStore (PeopleSoft) #12 </li></ul></ul>
  13. 13. B2B E Commerce <ul><li>2000 - $131 Billion </li></ul><ul><li>2003 - $1.55 Trillion </li></ul>
  14. 14. B2B Concepts <ul><li>Common Portals for Exchange </li></ul><ul><li>Ability to Integrate Data </li></ul><ul><li>Requisition to Sales Order </li></ul><ul><ul><li>Cost decrease from $100 to $20/Transaction </li></ul></ul><ul><li>Production Schedules feed Forecasts </li></ul>
  15. 15. B2B Portals <ul><li>Ariba </li></ul><ul><li>Commerce One </li></ul><ul><li>Provide Common Ground for Exchange </li></ul><ul><li>Replaces EDI for Transactions </li></ul>
  16. 16. Case Study <ul><li>GM Supply Power (www.gmsupplypower.com) </li></ul><ul><ul><li>Quality Information (Real Time) </li></ul></ul><ul><ul><li>Engineering Information and Collaboration </li></ul></ul><ul><ul><li>Financial Information </li></ul></ul><ul><li>System Resources (Provided by Commerce One) </li></ul><ul><ul><li>Windows NT Server </li></ul></ul><ul><ul><li>Microsoft SQL Server Database </li></ul></ul>
  17. 17. GM TradeXchange <ul><li>Catalog </li></ul><ul><ul><li>Online catalog that are used to purchase standard parts through </li></ul></ul><ul><ul><li>Fulfillment was Costs $55 Buyer/$45 Seller </li></ul></ul><ul><ul><li>Now $10 total </li></ul></ul><ul><li>Auction </li></ul><ul><ul><li>Used for Special Catalog Purchases </li></ul></ul><ul><ul><li>RFQ’s or “reverse” auctions </li></ul></ul><ul><li>Bid-Quote </li></ul><ul><ul><li>Complex part Purchases </li></ul></ul>
  18. 18. GM TradeXchange <ul><li>Price Waterhouse Coopers </li></ul><ul><ul><li>Provide Back Office Integration </li></ul></ul><ul><ul><li>Work With Commerce One to Develop Portal </li></ul></ul><ul><ul><li>Developed Initial Portal in 3 Weeks (Dec 99) </li></ul></ul><ul><li>200,000 Catalog Items </li></ul><ul><li>$4,000,000 Supplies </li></ul><ul><li>First Bid/Quote for $147 Million </li></ul><ul><li>GM Currently Spends $87 Billion with 30k Suppliers </li></ul>
  19. 19. Automotive Trade Exchange <ul><li>GM TradeXchange </li></ul><ul><li>Ford AutoXchange </li></ul><ul><li>Daimler – Chrysler </li></ul><ul><li>$240 Billion of $500 Billion Total Big Three Purchases </li></ul><ul><li>Commerce One and Oracle </li></ul>
  20. 20. Airline Purchasing Portal <ul><li>Six Major Airlines </li></ul><ul><ul><li>American Airlines </li></ul></ul><ul><ul><li>Air France </li></ul></ul><ul><ul><li>British Airways </li></ul></ul><ul><ul><li>Continental </li></ul></ul><ul><ul><li>Delta </li></ul></ul><ul><ul><li>United </li></ul></ul>
  21. 21. Airline Purchasing Portal <ul><li>$32 Billion Annual Purchases </li></ul><ul><ul><li>Fuel </li></ul></ul><ul><ul><li>Fuel Services </li></ul></ul><ul><ul><li>Airframe </li></ul></ul><ul><ul><li>Avionics </li></ul></ul><ul><ul><li>Engine Components </li></ul></ul><ul><ul><li>Services </li></ul></ul>
  22. 22. B2B Future <ul><li>e-Business in Only 1 Year Old </li></ul><ul><li>By 2003, 2/3 of Online Transactions to be B2B </li></ul><ul><li>e-Supply Chain Synthesis </li></ul><ul><ul><li>Seamless integration from end to end </li></ul></ul><ul><li>Collaboration with Competition </li></ul>
  23. 23. Where To From Here? <ul><li>Eliminate Human Contact </li></ul><ul><ul><li>Current e-Commerce Sites have Poor Customer Service </li></ul></ul><ul><li>Sell Only Commodity Items </li></ul><ul><ul><li>Low Margins </li></ul></ul><ul><li>Have Lowest Price and Highest Selection </li></ul><ul><ul><li>No Profits From Sales </li></ul></ul>
  24. 24. The Future <ul><li>Voice Browsers </li></ul><ul><ul><li>2000 – 1.4 Million Users Worldwide </li></ul></ul><ul><ul><li>2005 – 300 Million Users Worldwide </li></ul></ul><ul><ul><li>Text – Speech Conversion </li></ul></ul><ul><li>MapQuest.com </li></ul><ul><ul><li>Request Direction via Phone </li></ul></ul><ul><ul><li>Directions Will Be Read Back </li></ul></ul><ul><ul><li>In the Future, Maps Will be Sent to PDA </li></ul></ul>
  25. 25. Issues Regarding E Commerce
  26. 26. Entry Into e-Commerce <ul><li>Barriers to Entry </li></ul><ul><ul><li>development of Web infrastructure </li></ul></ul><ul><ul><li>integration with existing infrastructure </li></ul></ul><ul><ul><ul><li>multiple databases </li></ul></ul></ul><ul><ul><ul><li>multiple transaction channels </li></ul></ul></ul><ul><ul><li>performance and scalability </li></ul></ul><ul><ul><ul><li>technology deployed </li></ul></ul></ul><ul><ul><li>changes in business processes </li></ul></ul><ul><ul><ul><li>customer/supplier relationships </li></ul></ul></ul><ul><ul><ul><li>data access </li></ul></ul></ul><ul><ul><ul><li>data ownership </li></ul></ul></ul>
  27. 27. Entry Into e-Commerce <ul><li>Barriers to Entry </li></ul><ul><ul><li>For successful, effective, sustainable strategy barriers are high. </li></ul></ul>
  28. 28. Entry Into e-Commerce <ul><li>It is expensive </li></ul><ul><ul><li>$750,000 for baseline technology </li></ul></ul><ul><ul><li>multiple vendors required </li></ul></ul><ul><ul><ul><li>transactions </li></ul></ul></ul><ul><ul><ul><li>security </li></ul></ul></ul><ul><ul><li>must be heavily marketed </li></ul></ul><ul><ul><ul><li>branding </li></ul></ul></ul><ul><ul><ul><li>mass marketing </li></ul></ul></ul>
  29. 29. Entry Into e-Commerce <ul><li>Must be a compelling business reason </li></ul><ul><ul><li>for many EDI serves purpose </li></ul></ul><ul><ul><li>few Amazon.com opportunities exist </li></ul></ul><ul><ul><li>in B-2-C, consumers prefer less subjective items like books, software to apparel </li></ul></ul><ul><ul><li>online sales less than 5% of total retail revenue </li></ul></ul><ul><ul><li>middlemen still necessary for B-2-B </li></ul></ul>
  30. 30. Entry Into e-Commerce <ul><li>Performance and size matter </li></ul><ul><ul><li>Brand power, trust and consumer confidence are critical </li></ul></ul><ul><ul><li>Credibility is gained through performance </li></ul></ul><ul><ul><li>smalls can enter the fray but price will prevail </li></ul></ul><ul><ul><li>Reliability, availability and service are still the necessary fundamentals . </li></ul></ul>
  31. 31. B-2-C Issues <ul><li>Consumer purchasing is on the increase </li></ul><ul><ul><li>acceptance of medium </li></ul></ul><ul><ul><li>trust </li></ul></ul><ul><ul><li>entry of big name creditors i.e. VISA </li></ul></ul><ul><li>Service and support are critical </li></ul><ul><ul><li>responding to e-mail inquiries </li></ul></ul><ul><ul><li>speed of response </li></ul></ul><ul><ul><li>volume capability </li></ul></ul><ul><ul><li>development of Web based systems </li></ul></ul><ul><ul><ul><li>chat, e-mail, voice, self-help </li></ul></ul></ul>
  32. 32. B-2-C Issues <ul><li>Service is the only means of differentiation. You must have price and selection. </li></ul><ul><ul><li>adding content </li></ul></ul><ul><ul><li>creating links to other sites and services </li></ul></ul><ul><ul><li>personalizing the shopping experience </li></ul></ul>
  33. 33. Security <ul><li>What parts of the transaction are vulnerable and in need of protection? </li></ul><ul><ul><li>data in transit </li></ul></ul><ul><ul><ul><li>susceptible to modification, monitoring </li></ul></ul></ul><ul><ul><li>web servers </li></ul></ul><ul><ul><ul><li>http server security flaws </li></ul></ul></ul><ul><ul><ul><li>common gateway interfaces </li></ul></ul></ul><ul><ul><li>customer data </li></ul></ul><ul><ul><ul><li>credit card #’s stored in unencrypted server databases </li></ul></ul></ul>
  34. 34. Security <ul><li>Advances in technology </li></ul><ul><ul><li>html extension languages </li></ul></ul><ul><ul><ul><li>greater control given to client system </li></ul></ul></ul><ul><ul><li>more powerful programming languages like JAVA and Visual Basic </li></ul></ul><ul><ul><ul><li>creation of credit card stealing applet </li></ul></ul></ul><ul><ul><li>ability to access keystrokes </li></ul></ul><ul><ul><ul><li>circumvent encryption </li></ul></ul></ul>
  35. 35. Security <ul><li>Current security technology </li></ul><ul><ul><li>Firewalls </li></ul></ul><ul><ul><ul><li>Hardware and software to protect internal network from external attack </li></ul></ul></ul><ul><ul><ul><li>Location of web server is critical </li></ul></ul></ul><ul><ul><ul><ul><li>Ahead of firewall </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>site is vulnerable but more user friendly and less cumbersome </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>data must be moved behind firewall for safety </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><li>Behind firewall </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>site is secure </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>data can be stored in server database </li></ul></ul></ul></ul></ul>
  36. 36. Security <ul><li>Current security technology </li></ul><ul><ul><li>Encryption </li></ul></ul><ul><ul><ul><li>uses a public/private key pair to encode, authorize and decode data transmissions </li></ul></ul></ul><ul><ul><ul><li>data is encoded with a 48 to 126 bit random alphanumeric string </li></ul></ul></ul><ul><ul><ul><li>the message then can only be opened with the proper key located at the receiving end. </li></ul></ul></ul><ul><ul><ul><li>attempts are being made to use this public key technology to handle e-commerce transactions </li></ul></ul></ul>
  37. 37. Security <ul><li>Current security technology </li></ul><ul><ul><li>Encryption </li></ul></ul><ul><ul><ul><li>SSL(Secure Sockets Layer) </li></ul></ul></ul><ul><ul><ul><ul><li>authenticates server to client </li></ul></ul></ul></ul><ul><ul><ul><li>SHTTP(Secure http) </li></ul></ul></ul><ul><ul><ul><ul><li>authenticates both client and server </li></ul></ul></ul></ul><ul><ul><ul><li>SET(Secure Electronic Transactions) </li></ul></ul></ul><ul><ul><ul><ul><li>authenticates both client and server </li></ul></ul></ul></ul><ul><ul><ul><ul><li>securely carries payment through to bank </li></ul></ul></ul></ul>
  38. 38. Security <ul><li>Current security technology </li></ul><ul><ul><li>3rd party payment systems </li></ul></ul><ul><ul><ul><li>Cybercash </li></ul></ul></ul><ul><ul><ul><ul><li>intermediary between merchant and customer/bank </li></ul></ul></ul></ul><ul><ul><ul><ul><li>merchant never sees customer credit card # </li></ul></ul></ul></ul><ul><ul><ul><li>Digicash </li></ul></ul></ul><ul><ul><ul><ul><li>digital tokens used like travelers checks </li></ul></ul></ul></ul><ul><ul><ul><li>Virtual PIN </li></ul></ul></ul><ul><ul><ul><ul><li>payments authorized via e-mail </li></ul></ul></ul></ul><ul><ul><ul><ul><li>difficult to intercept </li></ul></ul></ul></ul><ul><ul><ul><ul><li>credit card enrollment via phone </li></ul></ul></ul></ul>
  39. 39. Security <ul><li>Current security technology </li></ul><ul><ul><li>Uniform standards must be developed and adopted to provide interoperability between systems. </li></ul></ul><ul><ul><li>Current payment systems require both the client and the server to register. </li></ul></ul><ul><ul><li>As standards are developed and proposed they must be easy to employ. </li></ul></ul><ul><ul><li>The entire transaction process must be incorporated; from the point of sale to the merchant to the bank and to the credit clearing house. </li></ul></ul>
  40. 40. Security <ul><li>Recent Developments </li></ul><ul><ul><li>Microsoft fix </li></ul></ul><ul><ul><ul><li>Active Setup download program which detects which files are needed and downloads relevant ones. </li></ul></ul></ul><ul><ul><ul><li>Microsoft files are automatically downloaded without approval </li></ul></ul></ul><ul><ul><ul><li>can specify download locations on user’s hard disk </li></ul></ul></ul><ul><ul><ul><li>vulnerable to denial-of-service attacks </li></ul></ul></ul>
  41. 41. Security <ul><li>Recent Developments </li></ul><ul><ul><li>Approximately 50% of organizations in a 1997 survey reported security breaches </li></ul></ul><ul><ul><ul><li>up from 37% in the previous year </li></ul></ul></ul><ul><ul><li>Nike.com </li></ul></ul><ul><ul><ul><li>hackers seized domain name and routed users to an Australian site with anti-Nike messages </li></ul></ul></ul><ul><ul><ul><li>problem lasted for days due to ISPs’ use of cached versions of web pages to speed access </li></ul></ul></ul>
  42. 42. Privacy <ul><li>The need for e-Marketing information </li></ul><ul><ul><li>How do you turn browsers into purchasers? </li></ul></ul><ul><ul><li>How do you identify and retain repeat customers? </li></ul></ul><ul><ul><li>Who are the most profitable customers? </li></ul></ul><ul><ul><li>What marketing and promotional efforts attract them? </li></ul></ul><ul><ul><li>What content leads them to buy? </li></ul></ul><ul><ul><li>What products should be marketed through which channels? </li></ul></ul><ul><ul><li>You cannot personalize the shopping experience without some knowledge of the individual. </li></ul></ul>
  43. 43. Privacy <ul><li>How is this accomplished without jeopardizing privacy? </li></ul><ul><ul><li>Technology has been focused on the marketer </li></ul></ul><ul><ul><ul><li>consumers cannot manage personal data </li></ul></ul></ul><ul><ul><li>Value, Control and Security </li></ul></ul><ul><ul><ul><li>must have a perceived benefit </li></ul></ul></ul><ul><ul><ul><li>must have control as to how information is used </li></ul></ul></ul><ul><ul><ul><li>must be secure from theft, unauthorized modification </li></ul></ul></ul><ul><ul><li>Demographics may be skewed </li></ul></ul><ul><ul><ul><li>data could be misleading if only those willing to release information can be tracked </li></ul></ul></ul>
  44. 44. Privacy <ul><li>Recent Developments </li></ul><ul><ul><li>FTC involvement </li></ul></ul><ul><ul><ul><li>from consumer protection standpoint, many online privacy policies are confusing, contradictory and ambiguous </li></ul></ul></ul><ul><ul><ul><li>changing its stance on self-regulation </li></ul></ul></ul><ul><ul><ul><li>congressional action possible </li></ul></ul></ul>
  45. 45. Privacy <ul><li>Recent Developments </li></ul><ul><ul><li>Essential Elements of Privacy Policies (FTC) </li></ul></ul><ul><ul><ul><li>Notification defining privacy policies </li></ul></ul></ul><ul><ul><ul><li>Choice as to what data are collected and how it can be used </li></ul></ul></ul><ul><ul><ul><li>Customer access to data </li></ul></ul></ul><ul><ul><ul><li>Assurances of security from theft and improper usage </li></ul></ul></ul><ul><ul><li>Effects on business </li></ul></ul><ul><ul><ul><li>consumer choice could hurt many business models based on data warehousing and data mining </li></ul></ul></ul><ul><ul><ul><li>requirements for access would increase expenditures for technology and security </li></ul></ul></ul>
  46. 46. Privacy <ul><li>Recent Developments </li></ul><ul><ul><li>U.S./Europe hammer out safe harbor agreement designed to set policy for U.S. based firms to engage in e-commerce in Europe </li></ul></ul><ul><ul><ul><li>establishment of an independent body and process for handling consumer complaints </li></ul></ul></ul><ul><ul><ul><li>compensation for damages from violations of privacy rules </li></ul></ul></ul>
  47. 47. Privacy <ul><li>Recent Developments </li></ul><ul><ul><li>Toysmart attempted sale of customer data as part of its bankruptcy liquidation. </li></ul></ul><ul><ul><ul><li>Toysmart had a contract with TRUSTe a privacy watchdog group </li></ul></ul></ul><ul><ul><ul><li>TRUSTe is suing for breach of contract </li></ul></ul></ul>
  48. 48. Ethical/Legal Issues <ul><li>B-2-B exchanges </li></ul><ul><ul><li>Created to achieve marketplace efficiencies </li></ul></ul><ul><ul><li>Targets of Antitrust investigations </li></ul></ul><ul><ul><ul><li>price signaling </li></ul></ul></ul><ul><ul><ul><li>collusion </li></ul></ul></ul><ul><ul><ul><li>freezing out competitors </li></ul></ul></ul><ul><ul><li>Threat of one online marketplace for each industry via shakeouts and mergers </li></ul></ul>
  49. 49. Ethical/Legal Issues <ul><li>Methods to avoid legal issues </li></ul><ul><ul><li>FTC recommendations </li></ul></ul><ul><ul><ul><li>keep prices and trade secrets private </li></ul></ul></ul><ul><ul><ul><li>establish firewalls and procedures to keep competitors from learning one another’s prices from e-catalogs, bids and auctions </li></ul></ul></ul><ul><ul><ul><li>allow competitors to move freely from one marketplace to another </li></ul></ul></ul><ul><ul><li>Identify which players will be hurt by an exchange </li></ul></ul><ul><ul><ul><li>limit their exposure </li></ul></ul></ul><ul><ul><ul><li>where there are losers there will be litigation </li></ul></ul></ul>
  50. 50. Ethical/Legal Issues <ul><li>Methods to avoid antitrust litigation </li></ul><ul><ul><li>MetalSite.com </li></ul></ul><ul><ul><ul><li>extensive controls and audits </li></ul></ul></ul><ul><ul><ul><li>require antitrust education for employees </li></ul></ul></ul>
  51. 51. Ethical/Legal Issues <ul><li>Recent ethical and legal developments </li></ul><ul><ul><li>Nike.com </li></ul></ul><ul><ul><ul><li>a recent attack sent users to a Scotland based web hosting firm, tying up its system </li></ul></ul></ul><ul><ul><ul><li>web hosting company is threatening legal action against Nike and its internet provider </li></ul></ul></ul><ul><ul><ul><li>who bears the responsibility for such injuries? </li></ul></ul></ul>
  52. 52. Ethical/Legal Issues <ul><li>Recent ethical and legal developments </li></ul><ul><ul><li>Napster Inc. - Internet music sharing service </li></ul></ul><ul><ul><ul><li>allows users to share MP3 files </li></ul></ul></ul><ul><ul><ul><li>suits brought on by record labels and music industry institutions for copy right infringement </li></ul></ul></ul><ul><ul><ul><li>company claims it is a ‘mere conduit’ for digital information </li></ul></ul></ul><ul><ul><ul><li>claims that fair use doctrine applies </li></ul></ul></ul>
  53. 53. Questions

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