6-1

Electronic Commerce

6-2

Foundations of Electronic Commerce (EC)

• Interorganizational Information System (IOS)

• Benefits and limitations of EC

• Future of EC

6-3

Electronic Commerce

Electronic commerce (EC) is an emerging concept that describes the buying and selling of products, services and information via computer networks, including the Internet.

6-4

Interorganizational Information System

An interorganizational information system (IOS) involves information flow among two or more organizations. Its major objective is efficient transaction processing, such as transmitting orders, bills, and payments using electronic data interchange (EDI).

6-5

IOS and Electronic Markets

• Drivers of IOS

• Types of IOS

• Electronic Markets (EM)

6-6

Drivers of IOS

• Reducing costs

• Improving the quality of information

• Compressing cycle time

• Eliminating paper

• Making the trading process easy for users

6-7

Types of IOS

• Electronic data interchange (EDI)

• Electronic funds transfer (EFT)

• Integrated messaging

• Shared databases

6-8

Benefits and Limitations of Electronic Commerce

• Benefits– Organizations– Consumers– Society

• Limitations– Technical– Nontechnical

6-9

EC: Benefits to Organizations

• Decreasing information costs

• Reduced inventories

• Reduced cycle time

• Supports BPR

• Lowers telecommunication costs

6-10

EC: Benefits to Consumers

• More choice• Less expensive products• Quick delivery• 24-hour availability• Quick access to information• Customized product at competitive prices• Virtual auctions• Interact with other EC customers

6-11

LimitationsTechnical

• Lack of security

• Insufficient telecommunication bandwidth

• Software tools still evolving

• Integration of internet and EC software

• Special Web servers

• Interoperability of software and hardware

6-12

LimitationsNontechnical

• Accessibility

• Legal issues

• Government regulations

• Difficult to measure benefits

• EC still evolving

• Customers resist change

6-13

LimitationsNontechnical

• Insufficient support services

• Perception that EC is expensive and insecure

• EC has not obtained a critical mass of sellers and customers

• EC - breakdown of human relationships

6-14

Business to Consumer Applications

• Advertising, online publishing and push technology

• Cyber banking, personal finance and stock trading

• Job market, auctions, bids and bartering

• Travel and real estate

• Electronic retailing and malls

6-15

Push Technology

Push technology is an approach designed to deliver only the information users want or need.

6-16

Advertising, Online Publishing and Push technology

• Own Web site

• Other organization’s Web site

• Electronic publisher’s Web site

• EC vendors’ pages (Netscape or Yahoo)

• Information kiosks

• Electronic malls and metamalls

• News groups

6-17

Personal Finance

• Bill paying

• Tracking bank accounts

• Portfolio management

• Investment tracking

• Quotes

• Budget organization

• Tax computations

• Retirement planning

6-18

The Job Market

• Job seekers

• Job offers

• Recruiting firms

6-19

Auctions

• Auctioning cars to dealers

• Live online auctions

• Art auctions

• Airlines

6-20

6-21

Business to Business Applications

• Electronic Data Interchange (EDI)

• Intranet commerce

6-22

Electronic Data Interchange (EDI)

EDI can be defined as the electronic movement of specially formatted standard business documents, such as orders, bills, and confirmations sent between business partners.

6-23

Electronic Data Interchange (EDI)

• Business transactions messages

• Data formatting standards

• EDI translators

• Private lines versus the Internet

6-24

6-25

Intranet Commerce

• Efficient transaction entry

• Common transaction processing

• Consistent internal controls

6-26

Intranet Examples

• Credit Lyonnais

• Harris

• Industry Canada

• Intel

• Fujitsu

6-27

Intranet Examples

• Post AG

• Sun Microsystems

• Sparbanken Sverige AB

• The Social Security Administration

6-28

The Customers

• Customers and their behavior– Market research– Customer service

• Electronic commerce agents– Bargain finder– Firefly and open sesame– Resume robot– Good stuff cheap– Negotiating agents

6-29

Customer Service:Life Cycle Approach

• Phase 1: Requirements

• Phase 2: Acquisition

• Phase 3: Ownership

• Phase 4: Retirement

6-30

Support and Implementation

• Electronic commerce infrastructure

• Electronic payments

• Support services

• Legal and security issues

• Implementation issues

6-31

Electronic Commerce Infrastructure

• Networks

• Web servers

• Web server supporting tools

• Web page design

• Transactional activities

6-32

Encryption

Encryption is the conversion of information into a form readable only with a decryption key.

6-33

Electronic Payments

• Obstacles

• Limitations of traditional payment instruments

• Public key, private key

• Digital signature

• Electronic certificates

6-34

Electronic Payments

• Secure electronic transaction protocol

• Electronic cash

• Electronic credit cards

• Electronic checks

• Electronic payment cards

• Electronic funds transfer

6-35

Electronic PaymentsObstacles

• Lack of security

• Handling micropayments

• Inconvenience

• Incompatibility

6-36

Limitations of Traditional Payment Instruments

• Delay due to verification and authorization

• Risk of loss or theft

• Processing cost for micropayments too high

• Less convenient

• Cash payment necessitates meeting between buyer and seller

6-37

Limitations of Traditional Payment Instruments

• Security risk

• Not everyone accepts credit cards

• Some buyers do not have credit cards

6-38

Support ServicesExamples

• ConnectUS

• The Global Business Alliance Incorporated

• CommerceNet

• BioMedNet

• World Insurance Network

6-39

Support ServicesExamples

• The Financial Services Technology Consortium and Smart Card Forum

• Joint Transmission Services Information Network

6-40

Legal and Security Issues

• Buyer protection

• Fair credit billing act

• Sellers protection

• Legal aspects of EFT

6-41

Implementation Issues

• Domain name

• Web tracking

• Taxes and fees

• Copyright

• Manipulating securities on the Internet

• Security

6-42

Managerial Issues

• Managing resistance to change

• Integration of electronic commerce into the business environment

• Lack of qualified personnel and outsourcing

• Alliances

• Implementation plan

• Privacy

6-43

Managerial Issues

• Justifying electronic commerce by conducting cost-benefit analysis

• The human element• Impact of EC

– organizational structure– people– marketing procedures– profitability

6-44

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