IS 425 Enterprise Information LECTURE 6 Summer I

IS425 Winter Session 62 Agenda Exercise Debate E-Commerce and E-Business Systems Next Week : Quiz/homework #3

IS425 Winter Session 63 Exercise You are the IT steering committee that will decide which hospital project to fund. From last weeks readings and lecture detail the steps that you would take in determining which hospital project to do. Based on the previous session readings and lecture: 1. What two questions would you ask to find out which one should be implemented? 2. How would you use the prioritization tiers decision tree? 3. How would you use the prioritizing potential benefit tree? 4. What is the major problem with lagging indicators when developing new software?

IS425 Winter Session 64 Debate How should team tasks be divided? Debater Research Report writing Arguments

IS425 Winter Session 65 Growth of the Internet Dot com bust begins

IS425 Winter Session 66 eCommerce Will Penetrate Business and Consumer Markets

IS425 Winter Session 67 T ypes of E-Commerce Business-to-Consumer (B2C): Internet Purchasing, knowledge, entertainment, other Intra-Organizational: Intranets (B2E) Business intelligence, enterprise portal, workgroup communications, corporate digital library, sales force productivity, workflow, datawarehousing Business-to-Business (B2B): Extranets Supply chain management, Customer relationship Mgt; exchange Consumer-to-Consumer (C2C) Peer-to-Peer

IS425 Winter Session 68 US eCommerce: The First Five Years 1997 to 2002: explosive growth Spurred by consumers and VC support for dot-come and traditional retailer, a raging economy Online shopping households grew from 5m to 36.5m; online sales from $2.4b to 72.1b Consumers continued shopping online for convenience, selection, and deals, especially travel, consumer electronics, and PCs CAGR of 97% Source: Forrester Research

IS425 Winter Session 69 US eCommerce: The Next Five Years 2002 to 2007: consistent, rapid growth By 2007, households shopping online will increase by 26.4 m and grow to 63m, or 2/3 of all US households Sales will grow from $72.1b in 2002 to $217.8b in 2007 CAGR of 25%; 8% of total retail sales Source: Forrester Research

IS425 Winter Session 610 The e-Commerce Value Chain AttractActReactInteract Get and keep customer interest Turn interest into orders Manage orders Service customers Advertising Marketing channels media Catalog Sales static dynamic Order capture Payment Fulfillment goods Customer service Order tracking

IS425 Winter Session 611 React Act Attract Interact The e-Commerce Value Cycle

IS425 Winter Session 612 Attract Customers (Marketing) Purpose Build brand awareness, attract customers, and entice them to buy Merchandizing Methods Advertising Coupons Sales and Promotions Frequent buyer programs 1:1 marketing

IS425 Winter Session 613 Interact with Customers (Sales) Purpose Turn interest into orders Catalog, Product and Service Techniques Registration with Internet search engines Hyperlinks Onsite product search Product and price comparison Dynamic vs. static contents Pricing

IS425 Winter Session 614 Act on Customer Instructions (Order Management) Purpose: Manage order and shopping experience Order Processing: Shopping cart and order aggregation Order validation; Application of coupons or discounts Cross selling Calculation of sales, taxes, shipping and delivery charges, rolled-up order Payment: handle multiple payment methods (cash, credit, credit cards, debit cards) Act – Fulfillment Delivering the goods ordered to their destination Transmission of order information to warehouse, packing or order assembly for shipping, shipping and delivery

IS425 Winter Session 615 React to Inquiries (Service) Purpose: customer satisfaction, experience, and repeat visits Methods 24X7 service capacity Proactive and Immediate feedback – voice and Access to status information Self-help (FAQ) Multi-language support

IS425 Winter Session 616 Value Proposition for Customers Transform customer relationship from supplier- centered to customer-centered values self service, 1:1; choices; delivery to customer location; customer needs; choice of service hours Displace traditional source of values Physical vs. digital value (information) Economies of scale vs economy of scope Mass produced vs mass customized Information vs. knowledge value Distribution as constraints vs. enabler Local vs. global

IS425 Winter Session 617 Value Proposition for Firms Ability to reach a global market Reduced marketing and selling expense Increased efficiency of operation Ability to target consumers more precisely Ability to convey more accurate product and availability information

IS425 Winter Session 618 B2C Business Models: Generating Revenues Merchant Model virtual merchants Click & Brick Multi-Channel Shopping Malls Advertising Model Horizontal portal Vertical portal Personalized portal Intermediary (Brokerage) Buy/sell fulfillment Buyer/demand aggregator Virtual mall Hypermediary (financial settlement) Auction broker Reverse auction

IS425 Winter Session 619 B2B E-Commerce Global B2B revenues to grow from $282 billion in 2000, to $4.3 trillion by 2005, the bulk of B2B transactions will be made in the US. Compound annual growth rate (CAGR) of 73% in US, 91% in Europe, and 109% in Asia lower costs, shorter cycle time, quicker response, and global markets

IS425 Winter Session 620 B2B Models Firm-based Models Sell-side (1-to-many), Cisco Buy-side (many-to-1), GE Many-to-Many Marketplaces – Exchange and catalog models Vertical vs. Horizontal Marketplaces Virtual Service Industries in B2B Travel, Real estate, electronic payments, online financing and online trading, Logistics

IS425 Winter Session 621 Sell Side: 1:M eg. Cisco Buy Side: M:1 e.g., GE Public or Private Marketplaces M:M Catalogs (Newark in One) Exchanges, Houstonstreet Buyers Sellers/suppliers Sellers suppliers Buyers

IS425 Winter Session 622 Firm-based model Sell side B2B: One to Many Delivers a Web-based, private-trading sales channel over an extranet to business customers The seller can be a manufacturer, or a distributor Architecture similar to B2C Similar technology Sell by electronic catalogues, auction, or by contract Differences in commerce value chain

IS425 Winter Session 623 Firm-based Model: Direct sale form Catalogue Benefits Reduced order processing costs Speeds the ordering cycle Reduce errors in ordering and product configuration Reduced buyers’ search costs Customize products Different prices to different customers (personalization, customization) Improve service levels for low- volume customers Provide higher-quality information for customers Limitations Channel conflicts with existing distribution systems EDI (if used) is costly and could limit the participation

IS425 Winter Session 624 B2B Value Proposition Reduced cost of selling Reduced order processing costs Improved service levels for low-volume customers Higher quality information for customers Accurate information

IS425 Winter Session 625 B2B Commerce Value Chain--different from B2C Attract: Advertising & Marketing merchandising and branding become a p referred vendor Interact: Catalogs Searching capability for large electronic catalog Customized catalogs -- special part number and pricing Security Requirements Act: Order Processing Approval & Workflow Delegation Act: Payment Purchase Order, Procurement Cards, EFT Act: Fulfillment Predefined ship-to address and order aggregation React: Customer Service Training, Software maintenance, tech support

IS425 Winter Session 626 Firm-Based Model: Buy-Side: Many to one, E-Procurement Two types of purchases (what are purchased) Direct materials: production materials go directly to the manufacture or assembly of a product or the creation of a service. Their use is scheduled, purchased in volume at pre-negotiated price Indirect materials: used in maintenance, repairs, and operations (MRO), nonproduction materials

IS425 Winter Session 627 Traditional EDI vs. Internet Enabled EDI (VAI ) Standardized transfer of electronic documentation (Two Standards: ANSI x.12 vs. EDIFACT) Manage supply and distribution relationships; application or transaction based; emphasize efficiency (purchase orders and invoices) Limitations: Costly; Proprietary VANs Participation sometimes through coercion and pressure Compatibility issue limited impact on process change VAI: Common standards; Flat pricing; Security Easy/cheap access; Infrastructure

IS425 Winter Session 628 Why XML is Successful XML is a text format, can be processed by text-oriented tools Extensible to specific an industry or domain Neutral, an open source tool Easy to implement Interoperable across different platforms

IS425 Winter Session 629 XML and B2B Improve compatibility between disparate systems Allows parties to exchange structured data over the Internet. XML tags define the meaning of data (catalogue) and business processes XML also supports Unicode that enables the display and exchange of most of the world's written languages. Benefits: Reduce costs, competitive advantage, strengthen relationships with trading partners (processes) Simplifies application architecture—a uniform framework

IS425 Winter Session 630 Internal and External Process Enablement

IS425 Winter Session 631 E-Commerce Application Building Blocks

IS425 Winter Session 632 Sell-Side E-Commerce Systems

IS425 Winter Session 633 Examples of e-Commerce Web Site Engineering CTgallery.htm CTgallery.htm

IS425 Winter Session 634 Question: EDI is electronic data interchange – Uses traditional record format to record transactions between firms Has standards the X.25 for example Has been around since 1970’s Used to transmit transactions between suppliers/customers Expensive to implement and maintain Will XML / Web Services take over from EDI?