Today’s Strategic Imperative: E-Business Chapter 3 Information Systems Management In Practice 5E McNurlin & Sprague

Copyright 2002 by Prentice Hall, Inc. 3-2 Introduction “Strategic use” of IT is defined as “having a significant, long-term impact on a firm’s growth rate, industry, and revenue.” Historically, the strategic use of IT has followed an evolution from improving internal processes and structures of a firm, to improving the products, services, and relationships with its customers, and then with its partners. These evolution stages are characterized as: Looking inward Looking outward Looking across

Copyright 2002 by Prentice Hall, Inc. 3-3 Introduction  What is e-business? The use of telecommunications networks, particularly the Internet, to conduct business transactions.  Three categories of e-business (see Figure 3.2):  Business-to-employee: Intranet-based applications internal to a firm  Business-to-consumer: Internet-based applications for a firm’s customers  Business-to-business: Extranet-based applications for a firm’s business partners  Originally the term e-commerce was used to refer to these three categories. However, the term is now only used to refer to business-to-consumer applications, and the term e-business is used to refer to these three categories.

Copyright 2002 by Prentice Hall, Inc. 3-4 E-Business Drivers  Key Components that have accelerated the acceptance of e- business:  Wide access to a public network  Standard communication protocol  Standard user interface  E-business applications run over the Internet, drastically reducing access and communications costs.  With standardized communication protocols and user interfaces, implementation and training costs are far lower.  As a result, a much broader set of users and firms has access to the systems, allowing rapid growth.

Copyright 2002 by Prentice Hall, Inc Looking Inward: Business-to-Employee  Intranets  Intranets are private company networks that use Internet technologies and protocols, and possibly the Internet itself.  Benefits of using intranets  Wider access to company information  More efficient and less expensive systems development  Decreased training

Copyright 2002 by Prentice Hall, Inc Managing Intranets  Managerial concerns  How to integrate legacy systems into the intranet  Deciding how much control of the systems should be decentralized  Proposed solutions  Create a corporate portal to act as the gateway to the firm’s internal resources, information, and Internet services.  Develop separate departmental or divisional portals, such as sales, HR, operations, and finance portals.

Copyright 2002 by Prentice Hall, Inc Looking Outward: Business-to-Consumer  The E-Business Model  Redefining Customer Value  “Demanding on-demand”: reduces the time it takes to respond to customer requests  Convenience: allows gathering and managing customer information  Access to a wide range of competitive prices and sellers for products

Copyright 2002 by Prentice Hall, Inc Looking Outward: Business-to-Consumer  Redesigning Relationships with Business Partners  E-business allows:  “disintermediation”: bypassing intermediaries by directly linking customers to the manufacturer.  the development of “virtual organizations,” where a firm does not own parts of the value chain, but rather controls the coordination of other firms to appear as a single firm.

Copyright 2002 by Prentice Hall, Inc Looking Across: Business-to-Business IT has been used to reduce costs and time of interorganizational transactions, for example: Interorganizational Systems (IOS)  Reservation systems, electronic funds transfer systems, Electronic Data Interchange Systems (EDI)  Electronic Data Interchange Systems (EDI)  Transmission, in standard syntax, of data for business transactions between computers of independent organization

Copyright 2002 by Prentice Hall, Inc Electronic Data Interchange  Goal: Eliminate paper documents involved in business transactions  Barriers: 1.Technology available 2.Standards/lack of standards  X12  EDIFACT  Value-added network (VAN): Third party companies that provide communication links and EDI services to other companies

Copyright 2002 by Prentice Hall, Inc Electronic Data Interchange  Traditional Versus Internet–Based EDI  Overcomes many technical barriers to EDI  Eliminates the need for expensive telecommunication network  Flexible systems  Multimedia documents rather than simple streams of text

Copyright 2002 by Prentice Hall, Inc Supply Chain Integration Supply chain includes processes such as: logistics, procurement, production, and distribution  Strategic options  Build-to-order mode of operation  Elimination of intermediaries  Redesign the procurement process

Copyright 2002 by Prentice Hall, Inc Integration with Back-End Systems  Challenge  Variety of platforms  Incompatible  Approach  Database Management Systems (DBMS)  ERP Systems  Extranet

Copyright 2002 by Prentice Hall, Inc Technical Considerations A.Evolution of the Internet: Quality of Service  Next Generation Internet (NGI)  Research and develop advanced network technologies  Deploy high-speed test bed networks  Develop and demonstrate revolutionary applications that demand high-speed networks not currently available on today’s internet  University Consortium for Advanced Internet (UCAID)  Internet 2 (advanced academic network)  Abilene (support the demands of the advanced research applications of the UCAID)

Copyright 2002 by Prentice Hall, Inc Technical Considerations B.Security - ranks as one of the top management and consumer concerns C.Divided into three categories: 1.Sniffing: interception and reading of electronic messages as they travel over the communication networks  Protection: Encryption (DES, RSA) 2.Spoofing: assumption of a false identity and the execution of fraudulent transactions  Protection: Authentication (RSA) 3.Hacking: unauthorized access to a host computer  Protection: Firewall

Copyright 2002 by Prentice Hall, Inc Legal and Ethical Considerations  Privacy  Intellectual Property Rights  Copyrights  Patents  Trademarks  Trade Secrets  Legal Jurisdiction  Content Regulation

Copyright 2002 by Prentice Hall, Inc Conclusion IT is a strategic asset that can be used to: Look outward to incorporate products and services Look inward to re-design and create new business processes Look across to link with other organizations make permanent changes in the nature of business with e-business