Chapter 5 Electronic Commerce, Intranets, and Extranets www.pearsoned.ca/jessup Robert Riordan, Carleton University

Learning Objectives Describe electronic commerce and how it has evolved Describe the strategies that companies are adopting to compete in cyberspace Explain the differences between extranets and intranets as well as show how organizations utilize these environments

Learning Objectives 4. Describe the stages of business-to-consumer electronic commerce and the key drivers for the emergence of mobile commerce 5. Understand the keys to successful electronic commerce applications

Network Computing Spectrum Intra- company Inter- company Global Network Team LAN Intranet Extranet Internet (WWW)

Types of Electronic Commerce

Types of Electronic Commerce

Internet and the World Wide Web Capabilities Information Dissemination Transaction Support Integration World Wide Web Collaboration Interactive Communication Mass Customization

Internet and the World Wide Web Capabilities Information Dissemination A relatively economical mechanism to disseminate information globally to compete in new markets 24/7 Example: Electronic company brochures Integration Web technologies allow Websites to integrate with corporate database to provide real-time information Example: checking bank balances

Intranets Intranets An internal, private network using Web technologies to securely transmit information within the organization. This private internal Web limits viewing access to authorized users within the organization Intranet Benefits Improved information access to authorized user Improved timeliness and accuracy of information Global reach allowing employees access from anywhere Cross-platform integration Low cost deployment Positive return on investment

Intranet Architecture Intranet System Architecture Firewalls – hardware devices with special software that prevent unauthorized access An intranet server is placed behind the firewall Packets are never routed outside the firewall, but remain within the organizations network

Intranet Architecture

Intranet Applications Collaboration Training Intranet Hub Online Entry of Information Application Integration Real-time Access To Information

Intranet Applications Training Provides online access to a host of training functions including course catalogs, registration, content (video, slides, other materials) and evaluation Provides significant increases in productivity and standardization, and cost reductions (e.g. travel costs) Application Integration Allows for integration and consolidation of information from disparate systems into a single point of access Increases employee productivity and output quality Real-time Access to Information Allows employees access to real-time system information. This reduces customer service needs by giving all authorized and interested parties direct system access

Intranet Applications Online Entry of Information Allows for direct online input to streamline routine business processes (e.g. expense reporting) Provides for significant cost reductions from reducing administrative support and shifting maintenance functions back to the employee (i.e. sick leave applications) Collaboration Allows employees to communicate business activities across geographic and departmental boundaries Allows for shorter development cycle times Allows employees to stay abreast of current projects, corporate, and market conditions

Types of Electronic Commerce

Internet and the World Wide Web Capabilities Information Dissemination A relatively economical mechanism to disseminate information globally to compete in new markets 24/7 Example: Electronic company brochures Integration Web technologies allow Websites to integrate with corporate database to provide real-time information Example: checking bank balances Mass Customization The ability to tailor products and services to meet a customers particular needs Example: Configuring a PC online

Electronic Data Interchange (EDI) The transmission of electronic business forms between business partners (e.g. purchase order) Typically used by large organizations…very expensive The internet has opened this technology to smaller firms How it works EDI transactions are system generated by the sender and then transmitted to the receiver by a VAN VAN (Value Added Network) providers are private network operators that provide guaranteed delivery Standards Document types and formats are universally standardized Two standards exist: ANSI X.12 and UN/EDIFACT

Electronic Data Interchange (EDI) Example

Business-to-Business Electronic Commerce Electronic Data Interchange Advantages Wide variety of business documents Streamlines business processes Reduced document handling, reduces paperwork Shortens time of business transaction (from day to second) Reduces errors

Business-to-Business Electronic Commerce Electronic Data Interchange Disadvantages Costly to implement Costly to maintain Requires skilled technicians EDI can cost up to $100,000 and monthly telecommunications charges associated with VANs can be several thousand dollars per month Often too costly for small or medium-sized companies

Business-to-Business Electronic Commerce The Internet Changed Everything B2B now available to companies of all sizes Intranet – internal, private network using Web technologies to facilitate transmission of proprietary information within the organization Extranet – two or more firms using the Internet to do business together

Internet and the World Wide Web Capabilities Interactive Communication Build customer loyalty by providing immediate feedback to/and from the customer demonstrating responsiveness Example: Customer support through email and chat Collaboration A mechanism allowing users to interact, share, and store information and tools for specific purposes Example: Product R&D site with tools, storage, etc. Transaction Support Provides way for buyers and sellers to conduct business online without human assistance Example: Buy a book online

Impact of the Web: Disintermediation Removal of the intermediary (middleman) in a sale. Companies can sell directly to customers (retail or wholesale) without assistance using the Internet Manufacturer or Service Provider Intermediary (Middleman) Customer (Consumer or Business) Sell Direct = Disintermediation Example Airlines selling directly to flyers without a travel agent or customer service representative

Extranets – Business to Business Ecommerce Extranets enable two or more firms to use the Internet to do business together They are an excellent use of B2B to allow companies to achieve a positive return on their tech investments

Extranets Extranets Extranets are secure networks that provide customers, suppliers, and employees with access to internal systems Have replaced EDI for smaller firms allowing them to participate in B2B markets directly Extranet Benefits Improves timeliness and accuracy of communications, thereby reducing errors and misunderstandings Allows central management of documents allowing single updates which are then available to all interested parties Uses standard web protocols allowing disparate computing platforms to communicate without additional investments Easy to use, requires little training Used to automate transactions, reducing cost and cycle time

Extranet System Architecture Virtual Private Network (VPN) is a secure network technique to protect extranet communications Uses a technique called tunneling to encapsulate, encrypt, and transmit data over the Internet Requires server authentication (verify user with password) to allow operation

Extranet Applications Supply Chain Management Procurement Portals Real-Time Info Access Exchanges Distribution Portals Collaboration Enterprise Portals

Extranet Applications Supply Chain Management Used to exchange supply and manufacturing information between customers and suppliers The extranet contains features allowing participants to purchase online, check supplier inventory, transfer design specifications, and other business related tasks Real-time Access to Information Allowing business partners and customers access to real-time system information This reduces customer service needs by giving all authorized and interested parties direct system access

Extranet Applications Collaboration Allows companies to respond proactively to marketplace changes by working directly with suppliers and customers Allows for shorter development cycle times Allows for reorganization of the purchasing function turning buyers into supplier relationship managers Enterprise Portals These are access points (front doors) combined from multiple extranets where business partners access secure, proprietary company information This provides a single point of access for information that comes from a variety of disparate systems Benefits include faster access for business partners, reduced maintenance cost by reduction in total extranets

Extranet Applications Trading Exchanges (Electronic Marketplaces) Allow many buyers and many sellers to come together Offer transaction processing, industry information, best sourcing, info resources, and invoicing (e.g. SciQuest.com) Revenues made through advertising and transaction fees Distribution Portals Designed to automate the business processes that occur before, during, and after a sales transaction between a supplier and multiple buyers Portal can be customized and personalized by the buyer or seller (e.g. Premier.Dell.com) Procurement Portals Designed to automate the business processes that occur before, during, and after a sales transaction between a buyer and multiple suppliers Provides supplier tools to update products, process orders, service buyers (e.g. Ford Supplier Portal)

Extranet Applications: Exchanges and Portals

Electronic Business Defined is using electronic information to improve performance, create value and enable new relationships between business and customers Electronic Commerce is the marketing, selling and buying of products and services on the Internet Internet Commerce is the online exchange of information and services utilizing network technologies Web Commerce

The Evolution of eBusiness 1 2 3 4 'Grassroots of e-business' 'Rise of the Internet' 'Stock market crash' 'Synergy' Points – 45% During the past decade, e-business companies have passed through four distinct periods, as is reflected in the evolution of the NASDAQ 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Year Launch of Amazon.com Source: NASDAQ quotes taken from Factiva.com.

Business Strategy Business Strategy Improve Profitability & Reduce Costs Reach Global Markets Solidify Business Relationships/ Improve Customer Service Maximize Technology Benefits Streamline Business Processes

Key Ingredients of a Business Model

Electronic Commerce Business Strategies Business Strategies come in one of the following three types. All require a sound business model to be successful (see next)

Brick-and-Mortar & Click-and-Mortar Strategies Operate a firm solely in traditional physical markets Approach business activities traditionally by operating physical locations (e.g. stores, offices, manufacturing plants) Click-and-Mortar Operate a firm in physical locations and has added an EC component to their business Requires maximization of business opportunities in both the physical and virtual environments This strategy requires a significant investment in systems and space

Click-Only Strategy Business transactions are only conducted virtually Can require significant expertise and investment in technology and systems staff There are many different revenue models

New Technologies for B2B Electronic Commerce XML - Extensible Markup Language Developed by the World Wide Web Consortium (W3C) to provide a global standard for documents Used for transmission of data between computers The Web documents contain tags, enabling definition, validation, transmission, and interpretation of data May potentially replace all forms of EDI EBRL - Extensible Business Reporting Language An XML-based specification for publishing financial information making it easier for companies to share information with each other, analysts & shareholders Includes tags such as annual and quarterly reports, general ledger information, government filings and accounting schedules

New Technologies for B2B Electronic Commerce RFID - Radio Frequency Identification Used for tagging and tracking physical items RFID system uses a transceiver and antenna to transfer information to a processing device from an RFID tag RFID Benefits RFID is more powerful than bar-code technology because it does not require visual line-of-sight reading RFID tags can be placed anywhere (e.g. clothes, pets, cars, parts, store items, etc.) RFID Issues Deployment is growing rapidly but it is still expensive There is no clear set of data standards Global radio frequencies differ between countries

Types of Electronic Commerce

Business-to-Consumer Electronic Commerce B2C Internet – fastest acceptance of any communications technology Retail transactions between a company and end consumers Electronic retailing (e-tailing)

Stages of Business-to-Consumer Transactions Web sites that globally disseminate only static information about the company and its products available 24/7. (e.g. Electronic Brochure) Web sites that are integrated with corporate databases to extract and display the appropriate information for a customer request. (e.g. displaying a bank balance) Web sites that allow customers to enter orders and make payments directly online (e.g. buying a book)

The Formula for Electronic Commerce Success Rule 1: The website should offer something unique Providing visitors with something they can find nowhere else leads to success. Hard to find goods are popular on the web Rule 2: The website must be aesthetically pleasing Successful firms have websites that are nice to look at. People are more likely to visit, stay at, and return to a site that looks good Rule 3: The website must be easy to use and be fast! Users are less likely to stay at, or return to a site, if they have trouble finding things, navigating the links, or have to wait for screens

The Formula for Electronic Commerce Success Rule 4: The website must motivate people to visit/return People use websites that provide useful information and links or free goods and services Rule 5: You must advertise your presence on the web Companies must draw, or pull visitors to, their website by: 1) publish address on company materials; 2) register with a search engine; advertise on other commerce sites e.g. Yahoo (very expensive) Rule 6: You should learn from your website A firm can track the path that a user takes though the site as well as information about date, time, etc. and use this information to improve the site

Types of Electronic Commerce

Examples of Transactions – Bus | Consumer | Gov’t 47

Web 2.0

Web 2.0 The term Web 2.0 is commonly associated with web applications that facilitate interactive information sharing, interoperability, user-centered design,[1] and collaboration on the World Wide Web. A Web 2.0 site gives its users the free choice to interact or collaborate with each other in a social media dialogue as creators (prosumer) of user-generated content in a virtual community, in contrast to websites where users (consumer) are limited to the passive viewing of content that was created for them. Examples of Web 2.0 include social-networking sites, blogs, wikis, video-sharing sites, hosted services, web applications, mashups and folksonomies.

Web 2.0 Features and Services Blogs Personal Web page that typically contains a series of chronological entries by its author, and links to related Web pages Really Simple Syndication (RSS) Program that allows users to have digital content automatically sent to their computers over the Internet

Web 2.0 Features and Services Podcasting Audio presentation stored as an audio file and available for download from Web Wikis Allows user to easily add and edit content on Web page New music and video services Videocasts Digital video on demand

Web 2.0 Features and Services Internet telephony (VOIP) Uses Voice Over Internet Protocol (VOIP) and Internet’s packet-switched network to transmit voice and other forms of audio communication over the Internet Internet television (IPTV) Telepresence and video conferencing

Web 2.0 Features and Services Online software and Web services Web apps, widgets, and gadgets Digital software libraries, distributed storage M-commerce applications Beginning to take off

Integrator: site that hosts the web application Web Mashup Mashup: A web application that performs browser-side integration of content or services from multiple sources Integrator: site that hosts the web application Provider: site the provides content to the mashup Component: a piece of active content from a provider

housingmaps.com Wii Finder Clockr popurls.com Yahoo vs. Google Web Mashups housingmaps.com Wii Finder Clockr popurls.com Yahoo vs. Google Google Gadgets

All Mashed Up What are Web mashups and what technology makes them possible? Why would Google and others allow their software to be combined with other software? What is the potential benefit to consumers? If mashups ultimately make money, how will the revenues be divided? Why would mashups be supportive of contextual advertising?

M-Commerce and the Key Drivers for Growth Any electronic transaction or information interaction conducted using a wireless, mobile device, and mobile networks, that leads to transfer of real or perceived value in exchange for information, service, or goods (MobileInfo, 2004) Driver One: Interest in the Internet The exponential growth of consumer interest and adoption of the Internet and electronic commerce Driver Two: Deployment of High Speed Networks The development and deployment of 2.5G & 3G cellular networks enabling faster data transmission Driver Three: Growth in Mobile Devices The tremendous growth in mobile telephony and availability of powerful wireless, handheld devices

M-Commerce Applications

Issues in M-Commerce