matching process requirements with information technology to assess the efficiency of web...

Information Technology and Management 2, 193–210, 2001 2001 Kluwer Academic Publishers. Manufactured in The Netherlands.

Matching Process Requirements with InformationTechnology to Assess the Efficiency of Web InformationSystems

ARNO SCHARL [email protected] Systems Department, Vienna University of Economics, Austria

JUDITH GEBAUER [email protected] Center for IT & Marketplace Transformation, University of California, Berkeley, CA, USA

CHRISTIAN BAUER [email protected] of Electronic Commerce, University of Notre Dame, Australia

Abstract. Emerging information technologies play an increasingly important role, not only to automatetasks within organizations but also to provide the infrastructure to facilitate communication across orga-nizational boundaries, to implement one-to-one marketing strategies, or to manage business relationships.Web Information Systems (WIS) provide a platform that can help establish and manage customer relation-ships in ways that were not feasible with traditional business models and architectures. They facilitate thedelivery of customized content to end consumers, reflecting their unique needs and individual preferences.In order to establish electronic commerce as a new business paradigm, corresponding changes in informa-tion technology, organizational structure, and the corporate value chain are critical. This paper proposes aconceptual model to support the task of balancing flexibility needs with the specific requirements of elec-tronic transactions.

1. Introduction

Responsiveness and organizational flexibility are becoming key issues in a world of in-creasingly dynamic and global business environments, where companies see urgent needto focus their business activities on customer preferences in order to be able to respondinstantly to constantly changing demands. Simultaneously, overall costs and operationalefficiency have to be taken into account [7,12]. Emerging information systems provideunprecedented support for business processes, in particular in cases where they reachbeyond organizational boundaries [11,15,40]. Based on Internet technologies, more andmore virtual marketspaces are being created that are transforming the role of customersin fundamental ways. “Individual customers can act, if they choose to, as the analyst,the portfolio manager and the broker” [13].

After initially providing a rather simple, one-directional medium to disseminateinformation, Web-based systems are now covering the entire cycle of business-to-consumer (B2C) and business-to-business (B2B) transactions. In this paper, we fo-

194 SCHARL, GEBAUER AND BAUER

cus on the role of WIS in business-to-consumer relationships to target individual cus-tomers. Being characterized by interactivity, dynamic updating, hypertextuality, andglobal presence, WIS closely resemble electronic catalogs [36], which include any Web-page “that contains information about the products and services a commercial entityoffers” [46]. WIS represent a sub-category of mass information systems that typi-cally support on-line information retrieval and routine tasks by way of self-service fora large number (thousands or millions) of occasional users who are spread across manylocations [21,22]. Compared to business-to-business applications such as ElectronicData Interchange (EDI), horizontal and vertical trading hubs, or inter-organizationalinformation links, WIS address individual end-consumers. They differ from systemsthat facilitate consumer-to-consumer (C2C) transactions such asMarket Maker(for-merly known asKasbah; http://maker.media.mit.edu/) oreBay(http://www.ebay.com/),in that they are used by corporations as a non-mediated way to reach prospective cus-tomers [51].

Available WIS technologies can be categorized into four stages according to theirtechnical sophistication and ability to support interactive communication, knowledgemanagement, and decision processes of variable complexity: Static WIS, basic interac-tions, flexible automation and distributed process control (section 4 provides a detaileddescription and analysis of these four stages). Comprehensive support for the differentphases of business transactions requires the availability of the full range of communi-cation technologies. Adaptive systems that reach beyond the automation of operationsare necessary to manage ever more complex products and the changing requirements ofhighly demanding customers. They open up opportunities, but their long-term sustain-ability still requires economic efficiency.

This paper proposes a conceptual evaluation model to balance the desired flexibilityof individualized customer relationships with the requirements of electronic transactionprocesses. In the following section 2, we outline the structure of business transactionsand their specific feedback requirements, prior to introducing the evaluation model insection 3. Section 4 then applies the model to the development process of constantlyevolving WIS, before section 5 integrates the previous parts and provides an outlook ofhow new technologies impact efficiency considerations.

2. The structure of electronic business transactions

In a very general sense, business transactions describe the exchange of goods and ser-vices. Similar to Gebauer, Schmid and Lindemann, and Ware et al. [17,44,50], we dis-tinguish between three core phases of a transaction: information, negotiation, and settle-ment. In the first phase, customers identify and evaluate their needs and sources to fulfillthem, while potential sellers arrange to provide their goods and identify potential cus-tomers. To a large extent, these steps evolve around the exchange of information, hencethe term information phase. Subsequently, prospective customers and sellers negotiatethe terms of a deal by jointly identifying possible solutions with the goal of reaching

MATCHING PROCESS REQUIREMENTS WITH INFORMATION TECHNOLOGY 195

Figure 1. Phases and communication patterns of electronic market transactions.

a consensus, usually in the form of a contract. Eventually, the contract is executed andgoods and financial compensation are exchanged according to the conditions stipulatedin the negotiation phase.

Gutman, Moukas and Maes [20] identify six fundamental stages guiding consumerbehavior: need identification, product brokering, merchant brokering, negotiation, pur-chase and delivery, as well as product service and evaluation. While stages one to fivecan be subsumed under the three phases outlined above, stage six (product service andevaluation) introduces a new aspect. This stage deals with all corporate activities that arerelated to a business transaction but take place after the actual delivery of the product.Given the increasing complexity of products and the importance of after-sales support intoday’s buyer-dominated markets, we incorporate it as a fourth phase into our transactionmodel as depicted in figure 1 (adapted from [44]).

A large amount of information is being processed and communicated between theparticipants of electronic markets. Catalog data, third party product evaluations, buyingcontracts, and shipping documents are being exchanged in addition to basic informa-tion about offerings and requests. It is usually not feasible for companies to acquire allnecessary information via direct communication with customers. Frequently, implicitinformation about consumer preferences and needs is obtained without active participa-tion of the customers and most often without their knowledge. Observations of customerinteraction and reports of market research institutions are the most important sources ofimplicit customer information today but need to be complemented by explicit forms ofcommunication such as customer surveys or focus groups. The table at the bottom offigure 1 contrasts the importance of implicit and explicit forms of data gathering with thephases of electronic business-to-consumer transactions. Organizations that are unable tocapture and exploit available customer information will inevitably loose competitivenessin the on-line economy [2].


Explicit forms of communication include all information that is consciously pro-vided by the users of the systems. This information can either be submitted inter-actively on-line (e.g., questionnaires submitted via electronic mail, on-line forms viaCGI-scripting, or more sophisticated approaches) or gathered from past records and off-line user surveys. Implicit communication between merchants and buyers is facilitatedthroughout all four phases of a transaction via methods such as detailed transaction logfiles or persistent client state HTTP cookies (HTTP= Hypertext Transfer Protocol). Im-plicit ways of gathering behavioral data and user preferences are usually less obtrusivethan their explicit counterparts, which require customers to actively provide informationbeyond the direct needs of a transaction [4]. Compared to traditional, off-line transac-tions, WIS extend the possibilities of implicit communication quite significantly. Theyoffer new ways to improve the effectiveness of marketing activities and help establishindividualized customer support.

3. Evaluating Web-based infrastructures

In this section, we introduce an evaluation model to assess the overall efficiency of aprocess throughout its lifetime taking into account short-term effects from the automa-tion of operations as well as the impacts on process flexibility and customer value. Theapproach is based on a conceptual framework that has been introduced by Gebauer [17].In the following, we first outline the original model before we introduce an extension thataccounts for the specific situation of Web-supported business-to-consumer relations.

3.1. Minimizing overall process costs – automation versus flexibility

The model provides a generic tool to assess the organizational structure of businessprocesses. Business processes represent corporate subsystems that serve a certain task(output), which is assumed to be constant thereafter. The framework adds to traditionalmethods of assessing organizational process structures, e.g., by measuring lead timesand operation costs [24]. It supplements established methods of evaluating costs andbenefits of information systems, which are often applied independently from the processchanges that accompany them [25,38,39]. In a broad sense, the deployment of processinfrastructure refers to all initial activities that are then leveraged for day-to-day opera-tions. It includes organizational measures such as the design and introduction of orderforms, the opening of an office for customer service, the establishment of a productionline, or all measures of standardization [9]. Infrastructure-related measures often re-fer to the flow of information and imply the introduction of additional communicationchannels, the set-up of appropriate database connectivity, or the development of on-lineordering systems.

In the following sections we focus on the information infrastructure to set up Web-based applications. Throughout its entire lifetime, the information infrastructure hasa substantial impact on process efficiency by simultaneously determining the levels of


Figure 2. Corporate task and process parameters.

process automation and flexibility. The objective is to choose an infrastructure that max-imizes the efficiency of a process throughout its entire lifetime (see figure 4). In caseswhere output is held constant, this means minimization of the overall costs (input) re-quired to achieve this output. Infrastructure-related activities determine the costs of day-to-day operations, such as processing individual customer requests. They also define theperiod that the infrastructure is valid for.

Day-to-day operations can be divided into two groups, standard situations and ex-ceptions [28]. Standard situationsallow the use of the infrastructure in its intendedway. Especially in cases where a task is fully automated, this ensures low costs of op-eration and high short-term efficiency.Exceptional situationsprohibit the use of theinfrastructure at justifiable costs. Activities have to be handled “manually” and requireinternal adjustments or extended negotiations. Exceptions also apply to situations wherethe infrastructure provides poor results that have to be improved ex post in order tomatch desired standards. The more flexible a system, the lower the costs that unforeseensituations will cause. Figure 2 provides an overview of the model and the assumed in-terrelations between its elements. The long-term efficiency of a process is determinedby all three kinds of expenses (infrastructure, standard operational costs, and exceptionmanagement) throughout the entire period that the infrastructure is used. The length ofthe period plays an important role and is determined, among others, by the dynamics ofthe process environment. This time factor is usually not included in the assessment ofprocess performance.

It is assumed that the expenses necessary to build up a certain level of processinfrastructure mainly depend on three features of a task (also triggering feedback reac-tions): complexity, internal process structure, and uncertainty.Task complexityis deter-mined by the number of sub-processes and organizational units, their potential interde-pendencies, and their interactions with the process environment. A flexible infrastructureprocesses complexity ex ante, and thus reduces it for later operations. Thetask struc-ture also determines requirements regarding infrastructure quality. Picot and Reichwalddistinguish three types of tasks [37].Routine tasksoccur regularly in similar form, likewage accounting or ordering processes. Due to their high predictability, it is straightfor-ward to structure and automate them even in complex environments. At the other end of


the scale,innovative tasks(e.g., in the context of strategic management) limit automationin terms of determining operational steps ex ante. They require high flexibility. The thirdform, administrative tasks, reveals a combination of the mentioned characteristics andrequirements.Uncertaintyresults from the instability of dynamic process environments,and from the difficulty to predict the behavior of the organizational elements. The prob-ability and extent of changes play a central role. Predefined rules weaken uncertainty,since specific patterns of behavior are prescribed for certain situations. The more diffi-cult it is to predict developments and future situations, the more expensive it is to buildup a valid infrastructure.

The model reveals a certain trade-off between long-term and short-term efficiencyand supports the assumption that there is an “optimal degree of integration”, i.e., a bal-ance between complete automation and maximum flexibility with no structuring at all.The framework demonstrates the need for process design to determine the optimal ratiobetween expenses for infrastructure and operational activities, simultaneously consider-ing standard situations, changing requirements, and possible exceptions. Analyzing thecharacteristics of the task helps to predict requirements and to estimate infrastructuralcosts for different levels of complexity.

3.2. The notion of customer value – impacts on process results

The assessment model introduced above can be applied to assess different forms of in-formation infrastructure with regards to their impact on overall process expenses. Itassumes a constant level of output. With regard to WIS, this assumption seems insuf-ficient. In addition to relatively low investment requirements, most companies designand implement WIS to leverage the technology’s high popularity among potential cus-tomers and to deliver additional customer value [34]. By extending traditional formsof customer support, innovative Web technologies add substantial value to business-to-consumer transactions. They increase both the output level and the (information) prod-uct’s quality. This also refers to product representation, corresponding services, or theautomated packaging with complementary goods (non-product quality). In order to ac-count for these effects we extend the original model by introducing the notion of valuethat is delivered to the customer (customer delivered value). This parameter includesthe total costs for the consumer and the quality of products and services perceived bythe market participants (market-perceived quality), which is again based on product andnon-product quality (figure 3). By eliminating redundant data entry, improving naviga-tion functionality, streamlining user interfaces, or limiting the need to search for suitableproduct alternatives the level of total costs for the consumer can be lowered. Besideshard dollar figures, time savings should be taken into account.

The termintegrated communicationis frequently used to describe the combinationof different marketing instruments for analyzing and manipulating information retrieval,decision processes, and usage patterns of active and potential customers [5]. With thecustomization of WIS, companies hope to identify new customers and tailor productsand their representations to the needs of existing customers [31]. According to Kotler


Figure 3. Customer delivered value.

and Armstrong [29], this target can be expressed by maximizing the customer deliveredvalue, which is calculated as the difference between thetotal customer value(product,services, personnel, image values) and thetotal customer costs(monetary, time andenergy). Cleland and Bruno, and Gale [10,16] present similar approaches, defining cus-tomer value as the market-perceived product and non-product quality, divided by theprice of the product. Figure 3 summarizes these approaches and provides the customer-oriented extension of the assessment model.

Due to the immaterial, non-tangible, and transitory nature of services and due tothe fact that production and consumption take place synchronously, the value of product-oriented market research in the traditional sense is drastically reduced. The focus onproducts has to be replaced by an in-depth analysis of customers and target groups in-cluding personal needs, preferences and expectations [26]. Analogous to traditionalmarkets, we can assume that WIS customers buy products and services from the (infor-mation) provider that they believe offers the highest customer delivered value.

3.3. Maximizing overall process efficiency

In the following, we combine the two parts of the assessment model introduced above.We discuss the effects that emerging Web-based applications have on the overall ef-ficiency of business-to-consumer processes. Economic efficiency refers to situationswhere either the output of a system is maximized for a given input (output efficiency),or the input required to reach a certain output is minimized (input efficiency). With theemergence of WIS, the value that can be delivered to consumers has been increased sig-nificantly. The combined model allows to set up information infrastructures in a waythat minimizes overall process costs (input) for a given level of customer value (output).This means maximizing input efficiency. The model can also be used to help justify theuse of WIS in situations that are not resulting in overall cost savings. In cases wherethe use of WIS improves the output of a process, however, overall efficiency can still be


Figure 4. Integrated framework to assess alternative process infrastructures.

increased. The highest level of output (customer value) that can be reached with a giveninput (WIS infrastructure) determines the maximum output efficiency.

Figure 4 provides a graphical overview of the combined model. The triangularmarkers on the left side of each object depict the effects that an investment in WISinfrastructure is likely to have on the parameters of the model. The symbols (+) and (−)indicate assumed relationships between the different task and process parameters.

The investment in infrastructure increases the input (total costs) of a process andthus tends to lower its overall efficiency. This effect can be offset in two ways: throughlowering the total costs for operations, or by achieving higher customer value (output).Often, both effects apply simultaneously. Besides the general strategy of a company,a variety of factors have an impact on this balance, such as size, organizational struc-ture, or the business sector’s specific characteristics. In cases where the level of output(customer value) remains constant, the investment in infrastructure is justified by lowercosts for day-to-day operations, i.e., lower expenses for standard operations or an in-creased range of situations that can be handled with the new system. Interactive Webcomponents allow customers to submit orders, instead of having to talk to a customerrepresentative or send in orders per postal mail, which then have to be re-keyed. Extend-ing the standard marketing brochure by providing comprehensive product and companydata on-line increases the range of situations that can be handled electronically. Thisenables customer representatives to focus on the most difficult customer questions. Theimpact on overall efficiency is positive in cases where the overall cost savings offset theinitial investment in WIS infrastructure, over the period that the WIS is being utilized.


If the effect on overall costs is positive (infrastructure-related costs plus changesof operational costs), overall efficiency can still be improved through a sufficiently highincrease in customer delivered value. For Web-based applications, this effect is oftenmore important than the effect on overall cost savings. As pointed out above, emerg-ing technologies allow the management of customer relationships in ways that were notfeasible before (see next section). By increasing the customer delivered value, com-panies hope to tighten customer relationships, to open new markets, and to increaseswitching costs. All these effects tend to have a positive impact on the overall businessvolume.

4. Evolving technologies for flexible process control

New technologies such as WIS have the potential to reach a higher level of automationwithout compromising the overall efficiency of business processes. Since the emergenceof the World Wide Web in 1991, adaptability has been an inherent feature of WIS andprovides the vertical dimension of figure 5 (the stages S1–S4 in figure 5 are described inthe corresponding sections 4.1–4.4).

Successful WIS design strategies, techniques and tools need to match changes incommunication models as they are commonly used. These processes follow predictablecurves as they move from innovation to maturity. The acceptance and adoption rate ofcustomers follow similar curves and track the technology itself [47]. Each stage of theWIS evolution shifts the focus and the timing of design and user feedback analysis intoa new context. Figure 5 visualizes these changes and the implications for design (D),feedback analysis (A), and negotiation (N).

Figure 5. Evolution of the WIS infrastructure [23,41].


Figure 6. Static WIS design and implementation.

4.1. Static applications without transaction support

In the first stage, stand-alone servers deliver simple hypermedia compound documentssubsequently being displayed by the browser. In this early stage of Web development,user feedback is disregarded, resulting in unidirectional information flows from theserver to the client. As core business processes cannot be supported with this technol-ogy, the effect on standard processing costs is neglectable. Potential customers benefitin the information phase of the transaction but have to use traditional sales channels toplace an order.

Nevertheless, the design efforts necessary for such WIS can be quite substantial inscale and require a planned, organized and structured approach. Such methods have beensuggested in the works of Bichler and Nussser, Isakowitz, Stohr and Balasubramanian,Nanard and Nanard, and Scharl [6,27,35,42]. Bauer and Scharl provide a classificationof various academic and commercial methodologies [1,41]. The development processfollows the rather simplistic model depicted in figure 6, which consists of only twophases: design and implementation. The design process is usually supported by a cor-responding design method and a suitable graphical tool, e.g., the Extended World WideWeb Design Technique (eW3DT) and WebDesigner as depicted in figure 6 [41,42]. Dueto a lack of (formal) feedback channels, redesigning WIS following this model usuallyrequires substantial investments in infrastructure.

4.2. Basic interactions

The planned analysis of user feedback starts to change the underlying business and com-munication models. While arguably every hypertext system represents an interactiveform of communication and therefore must contain some kind of (low-level) informa-tion feedback loop (figure 7), the distinction between the first two stages is based solelyon the processing of application-oriented (high-level) feedback. Depending on the sub-model (stages 2a–2c), the analytical process covers methods for gathering implicit andexplicit feedback. Traditional fields like demand-oriented market research or empiricalsocial research together with the corresponding statistical processing provide a soundbackground for utilizing the acquired information. Gathering, reporting, and visualizing


Figure 7. Integrated feedback cycle for developing dynamic WIS.

of implicit feedback usually require more sophisticated approaches [43]. They are stillunderutilized in many commercial Web applications despite the availability of an exten-sive array of suitable software solutions [32]. Not providing methods for the structuredanalysis of explicit and implicit sources of feedback represents a serious shortcoming ofprevalent WIS design methodologies.

The emergence of interactivity requires an extended development process that in-troduces formal feedback on the basis of WIS usage patterns (e.g., the sequence of HTTPrequests of individual users) and its subsequent analysis. The resulting feedback cycleheavily relies not only on the visualization of data but also on sophisticated data miningcapabilities, maintenance mechanisms ensuring consistency of the underlying databases,and on statistical methods to aggregate available information and derive significant cor-relations. Most available development tools, however, do not support such an integratedfeedback cycle or the handling of exceptional operations. Only standardized forms ofsettlement are feasible, with practically no adequate mechanisms for real-time negotia-tions during the preceding agreement phase. It is the last transaction phase, after-sales,that benefits most from the interactive nature of the improved communication model andby the organization’s ability to target related efforts more precisely.

4.3. The road to flexible automation

This section tries to answer the question whether it is possible to automate transactionson a larger scale and increase the organization’s flexibility at the same time. In the thirdstage, the concept of adaptivity is extended beyond visual design by building systemswith parameterized functionality, which promotes reuse of documents and their embed-ded link structures. Customized text and graphics, for example, may be attached to anexisting directed graph of links [8,22]. Available attributes and preferences of registeredusers are stored in profile databases and incorporated into WIS using simple rule-basedconstructs.


Granting different access privileges according to IP domain, personally addressingcustomers with dynamically generated documents, or determining purchase conditionsaccording to user category are typical scenarios which require sophisticated server-sidedatabase and application interfaces. Keeping track of user interactions and reasoningabout the user’s intentions [33], adaptive solutions avoid redundant repetition, facilitatenavigation, and increase the customer delivered value. With reduced barriers betweenproductive and dispositive data processing such as market analysis, Web-tracking, ordata warehouses, the widespread consideration of dynamic user models for customizingWIS will become a necessity for every serious commercial project.

In the advanced scenario of stage three, user feedback is processed instantly withinthe expected system response time. It goes without saying that scaling such a task withtraditional tools and architectures becomes difficult to handle considering exponentiallyincreasing numbers of on-line users. Therefore, adaptive technologies like neural net-works, genetic algorithms, natural language generation [33], case based reasoning [14],or related soft computing approaches are propagated in stage three. Incorporating meth-ods that originate from these established fields increase the functionality of deployed ap-plications, independent of the complex infrastructure being necessary for mobile agentsin stage four. However, they are still based on the same, slightly advanced network infor-mation infrastructure of the preceding stages one and two, but improve communicationand transactions with dynamic responses generated on-the-fly. Adaptive applications ofstage three cannot be designed without a clear understanding of the appropriate parame-ters on which the adaptive behavior relies on. The definition of these parameters requiresa detailed economic and socio-behavioral analysis as well as an assessment whether itwill be technically and economically feasible to gather and use the required informa-tion on a large scale. The adaptability of stage three applications is a prerequisite forelectronically handling all four transaction phases, from information to after-sales, viaa common platform (WIS) and without the need to refer to other media or traditionalcommunication models. Nevertheless, an optimum between the main cost categoriescan be difficult to determine. While the costs of the infrastructure necessarily increase,the costs for standard operations are reduced substantially. Furthermore, although thecosts for exceptional operations may increase, the extended area of validity ensures thatonly very few cases have to be handled manually.

Web developers usually employ visual development methods and tools for the cre-ation of real-time commercial applications. Such methods are derived from prevalentWIS modeling methods by extending their functionality with immediate responsivenessand dynamic site management. Integrated tools for designing and analyzing WIS are anecessity in this stage (A and D in figure 5). They generate the hypertext documents in-cluding customized link structures and are required to incorporate many new additions tothe repository of Web technologies, such as methods derived from research on artificialintelligence, data mining, (dynamic) user modeling, or advanced knowledge represen-tations. The termimplementationin this context denotes document presentation, i.e.,the rendering of HTML (Hypertext Markup Language) or XML (Extensible MarkupLanguage) documents in contrast to their structure or content. The move from HTML


Figure 8. Adaptive sub-processes responsible for document generation and presentation.

to XML is likely to significantly affect the customizability of WIS documents [49].Whereas HTML as presentational markup language imposes a lowest common denom-inator for document rendering and inextricably mixes presentation and representation(content and structure), XML as a semantic markup language is extensible, validatableby external modules, and provides self-documenting tags [18]. The separation of seman-tic meaning attached to markup and document presentation is responsible for the XML’sexcellent adaptability. By being interpretable by both human operators and computers,XML documents provide an incremental path to flexible business process automation,whereby certain tasks are gradually transferred to digital agents of stage four (see sec-tion 4.4 and [19]).

While not necessarily being visible to the customer, the internal processes undergoa dramatic change. Based on a central user model (e.g., stereotype or domain overlaymodels), the WIS is automatically (re-)designing and presenting the documents withouthuman intervention, which is depicted as a set of secondary (automated) developmentcycles in figure 8 within the boundaries defined by the primary (manual) developmentprocess. One of the basic differences to the preceding stage is the higher frequency ofthis automated feedback cycle for instant response.

4.4. Distributed process control

More ambitious efforts in stage four focus on digital agents, especially for informationretrieval [48] and complex negotiations. These agents promise to increase flexibility fur-ther and to change the inherent characteristics of electronic commerce radically. Theyare characterized by a number of attributes which determine their usually cooperativebehavior [45]: Proactivity and reactivity (ability to initiate processes and react to inter-nal or external events), intentionality and goal-orientedness (ability to actively chooseappropriate methods for pursuing a certain goal), adaptivity (ability to learn and adapt tochanges in the environment), autonomy (ability to act in an independent manner without


direct intervention by the principal), and mobility (ability to migrate between differentinformation systems within the boundaries of complex software environments).

The enhanced functionality of autonomous agents negotiating with each other overa network requires rethinking, reinventing, and rebuilding virtual business and commu-nication models. The distinction between standard and exceptional operations becomesless relevant as individual negotiations provide maximum flexibility. Principal-agent re-lations replace the traditional client-server approach with agent software acting as clientand server at the same time [23]. Digital agents consider the principal’s preferences,employ predefined and standardized coordination mechanisms, and adapt to the situa-tional requirements of their tasks. The “request-response” model predominant duringthe first three stages and the underlying protocol (HTTP) will be dissolved by the directinteraction of equal partners in an agent-driven communication network environment.Nevertheless, every innovation in this specific segment will have to provide backward-compatibility and interoperability to enable seamless integration [30]. The describeddevelopment becomes most apparent in the automation of complex negotiation mecha-nisms and models for commercial applications. The communication model dominatingstage four, therefore, does not refer to design or analysis any more, but replaces thesetraditional concepts by the term negotiation (N). Negotiation processes between businessentities are characterized by high degrees of unpredictability, complexity, and strategicimportance to organizations [3]. It can be assumed that a number of design methodolo-gies for commercial utilization will be made available with the progress of this technol-ogy. With full negotiation support, the seamless integration and effective automation ofall transaction phases finally becomes a reality.

The transformation of the client/server-infrastructure into an agent environmentwith multi-lateral interaction between independent participants requires the extension ofthe modeling approaches to include Web development at both ends. Figure 9 incorpo-rates the feedback loops for the development of two (commercial) negotiation systemsinteracting via a brokered electronic market. The developers on both ends will complete

Figure 9. Dual feedback loops connected via standardized transaction environments.


the same cycle of design, implementation, usage, and analysis for optimizing the agent’sbehavior. The design of a negotiation agent deals with the same challenges as the WISfrom earlier stages, but has to additionally address the complex infrastructural require-ments of transaction agents and, most importantly, to fulfil the principal’s strategies.The implementation of agent infrastructure initially requires a substantial investment.To compensate for this, the cost parameter for exceptional operations is practically elim-inated from the assessment model. In the usage phase agents are less passive comparedto earlier stages of WIS evolution, actively identifying negotiation partners in their spe-cific transaction environment. It is the usage phase were the agents and their underlyingdevelopment loops are tangent to each other, with their interaction facilitated by a WISinfrastructure for electronic markets. Following the usage phase, principals will evaluatethe agent and critically review negotiation processes and their outcomes. Insights gainedin this analysis phase will then be incorporated into the design specifications of the nextagent.

5. Conclusion

In this paper, we presented a conceptual model to describe, analyze, and evaluate theeconomic impacts of Web Information Systems (WIS) on corporate business processesand their overall efficiency. The different phases of a market transaction – information,agreement, settlement, and after-sales – were discussed with a special focus on technicalinfrastructures based on evolving WIS. The architectures that are available to date rangefrom simple, associatively linked collections of static hypertext documents to adaptive,customizable, integrated solutions and agent-based negotiation support.

While the information phase is supported by practically every WIS, reaching amutually satisfactory agreement is generally more challenging in both technical and or-ganizational terms (see figure 10). Information systems belonging to one of the firsttwo stages fall short in providing the necessary mechanisms. In stage three explicitagreements become feasible. But only the digital agents of stage four enable real-timenegotiations on a truly individual level (as compared to a predefined set of conditionaloffers, which is typical for stage three). As far as infrastructure requirements are con-cerned, settlement is easier to accomplish. Standardized solutions are already commonin stage two, but offer a limited area of validity and are considerably enhanced by cus-tomized process control in stage three. Characterizing the after-sales phase is not easy, asrelated activities are very heterogeneous and range from simple electronic mail servicesto sophisticated electronic helpdesks or complex electronic maintenance manuals. Dueto their limited functionality and broadcast characteristics, stage one solutions can onlysupply static information, while interactive dialogues and customized services becomepossible with the implementation of higher-level technologies.

For smaller entities, the initial investment required to set up the infrastructure mighthave a prohibitive effect. Large organizations, however, are likely to benefit from simul-taneous improvements in both, input and output efficiency. In many cases, the investmentin infrastructure is offset by significant cost reductions for standard operations and – due


Figure 10. Support for electronic market transactions by evolving WIS infrastructures.

to the increased flexibility – less need for the handling of exceptional operations. On theoutput side, the customer delivered value is pushed to a higher level by increasing thequality of existing products and services, and by providing additional features that arenot feasible without WIS technology.

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