Fundamentals of Information Systems Fourth Edition Chapter 5 Electronic and Mobile Commerce and Enterprise Systems

Principles and Learning Objectives Electronic commerce and mobile commerce are evolving, providing new ways of conducting business that present both opportunities for improvement and potential problems Describe the current status of various forms of e-commerce, including B2B, B2C, C2C, and m-commerce Identify several e-commerce and m-commerce applications Identify several advantages associated with the use of e-commerce and m-commerce Fundamentals of Information Systems, Fourth Edition

Principles and Learning Objectives (continued) E-commerce and m-commerce require the careful planning and integration of a number of technology infrastructure components Identify the key components of technology infrastructure that must be in place for e-commerce and m-commerce to work Discuss the key features of the electronic payment systems needed to support e-commerce Fundamentals of Information Systems, Fourth Edition

Principles and Learning Objectives (continued) An organization must have information systems that support the routine, day-to-day activities that occur in the normal course of business and help a company add value to its products and services Identify the basic activities and business objectives common to all transaction processing systems Identify key control and management issues associated with transaction processing systems Fundamentals of Information Systems, Fourth Edition

Principles and Learning Objectives (continued) A company that implements an enterprise resource planning system is creating a highly integrated set of systems, which can lead to many business benefits Discuss the advantages and disadvantages associated with the implementation of an enterprise resource planning system Identify the challenges multinational corporations must face in planning, building, and operating their TPSs Fundamentals of Information Systems, Fourth Edition

Why Learn About Electronic and Mobile Commerce and Enterprise Systems? Most organizations have an Internet presence Sales/marketing manager involved with e-commerce Customer service employees help develop Web site Human resource or public relations manger may provide Web content for employees and investors Must learn about e-commerce and m-commerce Many organizations use enterprise systems to perform business processes and to keep records Support various business activities: Supply chain management, customer relationship management Fundamentals of Information Systems, Fourth Edition

An Introduction to Electronic Commerce Electronic commerce: conducting business activities (e.g., distribution, buying, selling, marketing, and servicing of products or services) electronically over computer networks such as the Internet, extranets, and corporate networks Business activities that are strong candidates for conversion to e-commerce Paper-based Time-consuming Inconvenient for customers Fundamentals of Information Systems, Fourth Edition

Business-to-Business (B2B) E-Commerce Business-to-business (B2B) e-commerce: subset of e-commerce where all the participants are organizations Considerably larger and growing more rapidly than the business-to-consumer market Fundamentals of Information Systems, Fourth Edition

Business-to-Consumer (B2C) E-Commerce Business-to-consumer (B2C) e-commerce: customers deal directly with the organization, avoiding any intermediaries Elimination of intermediaries: Squeezes costs and inefficiencies out of supply chain Can lead to higher profits for companies and lower prices for consumers Fundamentals of Information Systems, Fourth Edition

Consumer-to-Consumer (C2C) E-Commerce Consumer-to-consumer (C2C) e-commerce: participants are individuals, with one serving as the buyer and the other as the seller eBay: example of a C2C e-commerce site Fundamentals of Information Systems, Fourth Edition

eGovernment eGovernment: use of information and communications technology to simplify the sharing of information, speed formerly paper-based processes, and improve the relationship between citizen and government Forms of eGovernment Government-to-consumer (G2C) Government-to-business (G2B) Government-to-government (G2G) Fundamentals of Information Systems, Fourth Edition

Mobile Commerce Mobile commerce (m-commerce) relies on the use of wireless devices, such as personal digital assistants, cell phones, and smart phones, to place orders and conduct business Fundamentals of Information Systems, Fourth Edition

Mobile Commerce in Perspective Market for m-commerce in North America is maturing much later than in Western Europe and Japan Western European and Japanese consumers are much more willing to use m-commerce Mobile phone gaming in the United States is expected to increase from about $380 million in 2006 to more than $1 billion by 2009 Fundamentals of Information Systems, Fourth Edition

Technology Needed for Mobile Commerce Handheld devices used for m-commerce have limitations that complicate their use Wireless application protocol (WAP): a standard set of specifications for Internet applications that run on handheld, wireless devices Fundamentals of Information Systems, Fourth Edition

Electronic and Mobile Commerce Applications: Retail and Wholesale Electronic retailing (e-tailing): the direct sale from business to consumer through electronic storefronts, typically designed around an electronic catalog and shopping cart model Cybermall: a single Web site that offers many products and services at one Internet location Manufacturing, repair, and operations (MRO) goods and services Fundamentals of Information Systems, Fourth Edition

Manufacturing To raise profitability and improve customer service, many manufacturers move their supply chain operations onto the Internet Electronic exchange: an electronic forum where manufacturers, suppliers, and competitors buy and sell goods, trade market information, and run back-office operations Fundamentals of Information Systems, Fourth Edition

Manufacturing (continued) Figure 5.2: Model of an Electronic Exchange Fundamentals of Information Systems, Fourth Edition

Marketing Market segmentation: the identification of specific markets to target them with advertising messages Technology-enabled relationship management: use of detailed information about a customer’s behavior, preferences, needs, and buying patterns to set prices, negotiate terms, tailor promotions, add product features, and otherwise customize the entire relationship with that customer Fundamentals of Information Systems, Fourth Edition

Investment and Finance Online stock trading has brought many investors to the Web Online banking Online bill payment facility Electronic bill presentment: a method of billing whereby a vendor posts an image of your statement on the Internet and alerts you by e-mail that your bill has arrived Fundamentals of Information Systems, Fourth Edition

Auctions eBay: synonymous with online auctions for both private sellers and small companies Hundreds of other online auction sites cater to newcomers to online auctions and to unhappy eBay customers Most frequent complaints Increases in fees Unscrupulous buyers Fundamentals of Information Systems, Fourth Edition

Anywhere, Anytime Applications of Mobile Commerce M-commerce devices are ideal for accessing personal information and receiving targeted messages because of having a single user Companies can reach individual consumers to establish one-to-one marketing relationships and communicate whenever it is convenient—in short, anytime and anywhere Fundamentals of Information Systems, Fourth Edition

Advantages of Electronic and Mobile Commerce Table 5.1: Advantages of Electronic and Mobile Commerce Fundamentals of Information Systems, Fourth Edition

Technology Infrastructure Required to Support E-commerce and M-commerce Successful implementation of e-business requires: Significant changes to existing business processes Substantial investment in IS technology Poor Web site performance drives consumers to abandon some e-commerce sites Fundamentals of Information Systems, Fourth Edition

Figure 5.3: Key Technology Infrastructure Components Technology Infrastructure Required to Support E-commerce and M-commerce (continued) Figure 5.3: Key Technology Infrastructure Components Fundamentals of Information Systems, Fourth Edition

Hardware Storage capacity and computing power required of the Web server depends on: Software that will run on the server Volume of e-commerce transactions Web site hosting Fundamentals of Information Systems, Fourth Edition

Web Server Software Web server software is used to perform fundamental services, including: Security and identification Retrieving and sending Web pages Web site tracking Web site development Web page construction Fundamentals of Information Systems, Fourth Edition

Web Server Software (continued) E-commerce software must support: Catalog management Product configuration Shopping cart facilities E-commerce transaction processing Web traffic data analysis Fundamentals of Information Systems, Fourth Edition

Web Server Software (continued) Figure 5.4: Electronic Shopping Cart Fundamentals of Information Systems, Fourth Edition

Electronic Payment Systems Digital certificate: an attachment to an e-mail message or data embedded in a Web page that verifies the identity of a sender or a Web site Secure Sockets Layer (SSL): a communications protocol used to secure sensitive data during e-commerce Electronic cash: an amount of money that is computerized, stored, and used as cash for e-commerce transactions Fundamentals of Information Systems, Fourth Edition

Electronic Payment Systems (continued) Credit card Charge card Debit card Smart card Fundamentals of Information Systems, Fourth Edition

An Overview of Enterprise Systems: Transaction Processing Systems and Enterprise Resource Planning Enterprise system: a system central to the organization that ensures information can be shared across all business functions and all levels of management to support the running and managing of a business Eliminates the problems of lack of information and inconsistent information caused by multiple transaction processing systems Fundamentals of Information Systems, Fourth Edition

Transaction Processing Systems and Enterprise Resource Planning (continued) Enterprise resource planning systems support supply-chain processes Transaction processing systems capture and process detailed data necessary to update records about the fundamental business operations of the organization Include order entry, inventory control, payroll, accounts payable, accounts receivable, and the general ledger Fundamentals of Information Systems, Fourth Edition

Transaction Processing Systems and Enterprise Resource Planning (continued) Figure 5.5: TPS, MIS/DSS, and Special Information Systems in Perspective Fundamentals of Information Systems, Fourth Edition

Traditional Transaction Processing Methods and Objectives Batch processing system: method of computerized processing in which business transactions are accumulated over a period of time and prepared for processing as a single unit or batch Online transaction processing (OLTP): computerized processing in which each transaction is processed immediately, without the delay of accumulating transactions into a batch Fundamentals of Information Systems, Fourth Edition

Traditional Transaction Processing Methods and Objectives (continued) Figure 5.6: Batch Versus Online Transaction Processing Fundamentals of Information Systems, Fourth Edition

Transaction Processing Activities TPSs Capture and process data that describes fundamental business transactions Update databases Produce a variety of reports Transaction processing cycle: the process of data collection, data editing, data correction, data manipulation, data storage, and document production Fundamentals of Information Systems, Fourth Edition

Transaction Processing Activities (continued) Figure 5.8: Data-Processing Activities Common to Transaction Processing Systems Fundamentals of Information Systems, Fourth Edition

Data Collection Data collection: capturing and gathering all data necessary to complete the processing of transactions Data should be: Collected at source Recorded accurately and in a timely fashion Fundamentals of Information Systems, Fourth Edition

Data Editing Data editing: the process of checking data for validity and completeness Example: quantity and cost data must be numeric and names must be alphabetic; otherwise, the data is not valid Fundamentals of Information Systems, Fourth Edition

Data Correction Data correction: the process of reentering data that was not typed or scanned properly Example: a scanned UPC code must match a code in a master table of valid UPCs Fundamentals of Information Systems, Fourth Edition

Data Manipulation Data manipulation: the process of performing calculations and other data transformations related to business transactions Includes classifying data, sorting data into categories, performing calculations, summarizing results, and storing data in the organization’s database for further processing Fundamentals of Information Systems, Fourth Edition

Data Storage Data storage: the process of updating one or more databases with new transactions After being updated, this data can be further processed and manipulated by other systems and made available for management reporting and decision making Fundamentals of Information Systems, Fourth Edition

Document Production and Reports Document production: the process of generating output records and reports Hard-copy paper reports Displays on computer screens (soft copy) Fundamentals of Information Systems, Fourth Edition

Control and Management Issues: Disaster Recovery Plan Disaster recovery plan (DRP): formal plan describing the actions that must be taken to restore computer operations and services in the event of a disaster Necessary for preventing a lengthy disruption in the operation of any of a company’s critical business information systems that directly affect its cash flow Fundamentals of Information Systems, Fourth Edition

Transaction Processing System Audit Transaction processing system audit: a check of a firm’s TPS systems to prevent accounting irregularities and/or loss of data privacy Attempts to answer four basic questions Does the system meet the business need for which it was implemented? What procedures and controls have been established? Are these procedures and controls being used properly? Are the information systems and procedures producing accurate and honest reports? Fundamentals of Information Systems, Fourth Edition

Traditional Transaction Processing Applications Table 5.2: Systems That Support Order Processing, Purchasing, and Accounting Functions Fundamentals of Information Systems, Fourth Edition

Order Processing Systems Traditional order processing transaction processing systems include: Order entry Sales configuration Shipment planning Shipment execution Inventory control Accounts receivable Fundamentals of Information Systems, Fourth Edition

Order Processing Systems (continued) Figure 5.10: Traditional TPS Systems That Support the Order Processing Business Function Fundamentals of Information Systems, Fourth Edition

Purchasing Systems Purchasing transaction processing systems include: Inventory control Purchase order processing Receiving Accounts payable Fundamentals of Information Systems, Fourth Edition

Accounting Systems Accounting transaction processing systems include: Budget Accounts receivable Payroll Asset management General ledger Fundamentals of Information Systems, Fourth Edition

Figure 5.11: Enterprise Resource Planning System Enterprise Resource Planning, Supply Chain Management, and Customer Relationship Management Enterprise resource planning (ERP): a set of integrated programs that manage a company’s vital business operations for an entire multisite, global organization Figure 5.11: Enterprise Resource Planning System Fundamentals of Information Systems, Fourth Edition

An Overview of Enterprise Resource Planning ERP systems evolved from materials requirement planning systems (MRP) developed in the 1970s 1980s - early 1990s: organizations recognized that their legacy transaction processing systems lacked integration Result: higher costs and poorer customer service Realization of a need for a system to coordinate activities and share valuable information across all the business functions of the firm, i.e., an ERP system Fundamentals of Information Systems, Fourth Edition

Advantages of ERP Improved access to data for operational decision making Elimination of costly, inflexible legacy systems Improvement of work processes Upgrade of technology infrastructure Fundamentals of Information Systems, Fourth Edition

Disadvantages of ERP Systems Expense and time in implementation Difficulty implementing change Difficulty integrating with other systems Risks in using one vendor Risk of implementation failure Fundamentals of Information Systems, Fourth Edition

Production and Supply Chain Management ERP systems follow a systematic process for developing a production plan Sales forecasting Sales and operations plan Demand management Detailed scheduling Materials requirement planning Purchasing Production Fundamentals of Information Systems, Fourth Edition

Customer Relationship Management and Sales Ordering Customer relationship management (CRM) system: a system that helps a company manage all aspects of customer encounters, including marketing and advertising, sales, customer service after the sale, and programs to retain loyal customers Goals of CRM Understand and anticipate the needs of current and potential customers to increase customer retention and loyalty Optimize the way products and services are sold Fundamentals of Information Systems, Fourth Edition

Customer Relationship Management and Sales Ordering (continued) Sales ordering: set of activities that must be performed to capture a customer sales order Essential steps include: Recording the items to be purchased Setting the sales price Recording the order quantity Determining the total cost of the order including delivery costs Confirming the customer’s available credit Fundamentals of Information Systems, Fourth Edition

Financial and Managerial Accounting General ledger: main accounting record of a business Assets Liabilities Revenue Expenses Equity Fundamentals of Information Systems, Fourth Edition

Financial and Managerial Accounting (continued) In an ERP system, input to the general ledger occurs simultaneously with the input of a business transaction Financial accounting: capturing and recording all transactions that affect a company’s financial state and using these documented transactions to prepare financial statements to external decision makers, such as stockholders, suppliers, banks, and government agencies Fundamentals of Information Systems, Fourth Edition

Financial and Managerial Accounting (continued) Managerial accounting: use of historical and estimated data to provide information that management uses in conducting daily operations, in planning future operations, and in developing overall business strategies Fundamentals of Information Systems, Fourth Edition

Hosted Software Model for Enterprise Software Target market: small-to-medium businesses Offered by vendors such as NetSuite, Salesforce.Com Inc., Everest Software, and SAP Appealing to small businesses because they: Can experiment with powerful software capabilities without major financial investment Do not need to employ a full-time IT person to maintain key business applications Can expect additional savings from reduced hardware costs Fundamentals of Information Systems, Fourth Edition

International Issues Associated with Enterprise Systems Challenges that must be met by an enterprise system of a multinational company include: Different languages and cultures Disparities in information system infrastructure Varying laws and customs rules Multiple currencies Fundamentals of Information Systems, Fourth Edition

Summary In business-to-business (B2B) e-commerce, the participants are organizations In business-to-consumer (B2C) e-commerce, customers deal directly with the organization In consumer-to-consumer (C2C) e-commerce, participants are individuals, with one serving as the buyer and the other as the seller Mobile commerce (m-commerce) uses wireless devices to place orders and conduct business Fundamentals of Information Systems, Fourth Edition

Summary (continued) Transaction processing systems (TPSs): process the detailed data necessary to update records about the fundamental business operations Transaction processing cycle: data collection, data editing, data correction, data manipulation, data storage, and document production Order processing TPSs: order entry, sales configuration, shipment planning, shipment execution, inventory control, and accounts receivable Fundamentals of Information Systems, Fourth Edition

Summary (continued) Purchasing TPSs: inventory control, purchase order processing, receiving, and accounts payable Accounting TPSs: budget, accounts receivable, payroll, asset management, and general ledger Primary benefits of implementing ERP: improved access to data for operational decision making, elimination of inefficient or outdated systems, improvement of work processes, and technology standardization Fundamentals of Information Systems, Fourth Edition