Transcript ECT 250: Survey of eCommerce Technology David A. Schmelzer

ECT 250: Survey of eCommerce Technology
Sections 701 & 404
David A. Schmelzer
Course Objectives
1. Provide history, present state and future outlook
for eCommerce and the internet.
2. Survey and define the key technology drivers of
eCommerce including network, software, and hardware
components.
3. Review eCommerce infrastructures including
architecture models, security & payment systems.
4. Describe the general process of web design and
development including tools and required skills.
5. Identify business models surrounding eCommerce including
marketing strategies.
6. Explore international, ethical and tax issues surrounding
eCommerce.
7. Provide experience in basic skills in web page authoring
using Microsoft Frontpage.
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Course Requirements
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Attendance and participation in class lectures.
Perform assigned readings.
Completion of eight homework assignments;
all posted to a website.
Midterm exam – closed book.
Final exam – open book project posted on a
website
In class quizzes – optional extra credit.
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Class Policies
http://www.daschmelzer.com/ect250/ect250_policies.htm
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Attendance
Homework Submission
Exams
Readings
Class Notes
Plagiarism
Incomplete
Grading Weights and Schedule
Course Site
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The Course Site
www.daschmelzer.com/ect250
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Class Schedule
Reading Assignments
Homework Assignments
Grades
Syllabus
Lecture Notes
Class Policies
Helpful Links
DePaul/CTI Info and Links
Instructor Contacts
Discussion forum on Delphi
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Discussion Forum
www.delphi.com/ect250/start
 All class announcements are posted here.
 Questions or clarifications on homework
and admin issues pertinent to entire class.
 Additional information and links on current
topics in eCommerce.
 During instructor office hours, open chat for
students not able to travel to Loop.
 Distance learning class participation discussions.
 Used to explore concept of web enabled
communication and “community”.
 Please allow 24 hours for responses.
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Questions?
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Week One Topics
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What is eCommerce?
Electronic commerce prior to the Internet
Comparison to Traditional Commerce
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Buyers & Sellers Viewpoint
Business processes
Fundamental business goals
Why eCommerce?
Seven Unique Features of eCommerce Technology
Appropriateness of eCommerce
The Internet: What Was, Is and Shall Be.
Publishing on the Web for Homework 1.
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What is eCommerce?
In its broadest definition, eCommerce is digitally enabled
commercial transactions between and among organizations
and individuals.
 Digitally enabled means, for the most part, transactions
that occur over the Internet and World Wide Web(“Web”)
 Commercial transactions involve the exchange of value
(e.g. money) across organizational or individual
boundaries in return for products and services.
Differentiated from eBusiness which is digitally enabled
transactions and processes within a firm, involving
Information Systems controlled by the firm. Doesn’t involve
commercial transactions across organizational boundaries.
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Components of eCommerce
Major components of eCommerce:
1. B2B – Business to Business. Largest segment with
about $700B of all total $12 Trillion in 2001(est)
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Types include inter-business exchanges, edistributors, B2B service providers,
matchmakers and infomediaries
2. B2C – Business to Consumer. Much smaller with on
$65B in 2001(est).
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Buzzwords: Internet pureplay-located only on
the web. Clicks and Mortar-both web and
physical location.
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Components of eCommerce
Major components of eCommerce (continued):
1. C2C – Consumer to Consumer. Individuals selling
to each other through online market maker
(eBay.com). Estimated at $5B in 2001.
2. P2P – Peer to Peer. Allows iNet users to share files
and resources directly without having to go thru a
central web server. Napster is the most prevalent
example.
3. M-Commerce – Mobile commerce. Use of wireless
digital devices (Palm Pilots, cell phones) to conduct
transactions. Just emerging but expected to grow
rapidly.
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Electric commerce is not new
Banks have used electronic funds transfers (EFTs), also
called wire transfers, for decades.
Businesses have been engaging in electronic data
interchange (EDI) since the 1960’s. EDI occurs when
one business transmits computer readable data in a
standard format to another business.
Drawbacks to mass adoption by business was high cost
of implementation; expensive, proprietary software,
hardware, leased telephone lines.
EDI now adapting to the Internet at a much lower cost.
Estimates of $1 Trillion in transactions on the Internet by
2003.
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Technology and Business
(Commerce)
“Business drives Technology
Technology Enables Business”
To understand how Technology enables Business, or
Commerce, we must review traditional commerce.
Once activities, or business processes in traditional
commerce are identified, we can consider how they can be
improved through technology
Technology is not a panacea! Knowing when and when not
to apply technology to business problems is the key.
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Origins of commerce
Origins of commerce predate recorded history.
Commerce is based on the specialization of skills.
Instead of performing all services and producing all
goods independently, people rely on each other for the
goods and services they need.
Example: In early times, the local shaman would cast a
spell or intercede with the gods in exchange for food
and tools. This is called barter.
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Traditional commerce
Money has replaced bartering, but the basic mechanics
of commerce remain the same: one member of society
creates something of value that another member of
society desires.
Commerce is a negotiated exchange of valuable objects
or services between at least two parties and includes all
activities that each of the parties undertakes the complete
the transaction.
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Views of commerce
Commerce can be viewed from at least two different
perspectives:
1. The buyer’s viewpoint
2. The seller’s viewpoint
Both perspectives illustrate that commerce involves
a number of distinct activities, called Business
Processes.
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The Buyer’s perspective
From the buyer’s perspective, commerce involves
the following activities:
1. Identify a specific need
2. Search for products or services that will satisfy
the specific need
3. Select a vendor
4. Negotiate a purchase transaction including
delivery logistics, inspection, testing, and
acceptance
5. Make payment
6. Perform/obtain maintenance if necessary
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The Seller’s perspective
From the sellers’ perspective, commerce involves
the following activities:
1. Conduct market research to identify customer
needs
2. Create a product or service to meet those needs
3. Advertise and promote the product or service
4. Negotiate a sales transaction including delivery
logistics, inspection, testing, and acceptance
5. Ship goods and invoice the customer
6. Receive and process customer payments
7. Provide after sales support and maintenance
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Business Processes
Business processes are the activities that firms
engage in as they accomplish a specific element
of commerce
Examples include:
 Transferring funds
 Placing orders
 Sending invoices
 Shipping goods to customers
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Why eCommerce?
The Internet and eCommerce are new technologies to help
businesses increase profits.
So why are there no special textbooks or courses on “TV
Commerce”, “Radio Commerce”, “Railroad Commerce” or
“Highway Commerce”? These are also technologies that
have had profound impact on business in the 20th century
and account for more commerce than eCommerce.
Simply put, eCommerce technologies are more powerful
than any of the other technologies we have seen in the 20th
century.
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Unique Features of
eCommerce Technology
The features the set eCommerce Technology apart from
others used in traditional commerce are:
1. Ubiquity – internet/web technology is available
everywhere: at work, home and elsewhere via mobile
devices.
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Marketplace extended beyond traditional boundaries
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“Marketspace” is created, available 24/7/365
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Customer convenience increased, costs reduced.
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Unique Features of eCommerce Technology
(continued)
2. Global Reach – the technology reaches across national
boundaries, around the earth.
Commerce enabled across cultural and national boundaries
seamlessly.
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Potential customer reach extended.
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Reduces barriers to markets.
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Unique Features of eCommerce Technology
(continued)
3. Universal standards – there is one set of technology
standards, namely internet standards.
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Promotes technology adoption
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Reduces costs of adoption
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Unique Features of eCommerce Technology
(continued)
4. Richness – Video, Audio, graphical and text messages
are possible.
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Integration to a more powerful marketing message
and customer experience
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Unique Features of eCommerce Technology
(continued)
5. Interactivity – the technology allows active user
involvement.
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Consumers engage in dynamic dialog
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Experience adjusted to the individual based on
responses.
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Customer becomes co-participant in the process of
delivering goods to the market.
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Unique Features of eCommerce Technology
(continued)
6. Information Density - the technology reduces
information costs and increase quantity and quality.
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Information processing, storage and communication
costs drop dramatically.
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Accuracy and timeliness improve greatly.
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Information becomes plentiful, cheap and accurate.
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Unique Features of eCommerce Technology
(continued)
7. Personalization/Customization – the technology reaches
allows personalized messages to be delivered to
individuals as well as groups.
Commerce enabled across cultural and national
boundaries seamlessly.
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Potential customer reach extended.
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Reduces barriers to markets.
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Fundamental Business Goals
The fundamental goal of a business is to earn a profit.
Performing business processes in the most efficient way
possible furthers this goal.
Firms are increasingly interested in eCommerce because
it can help increase profits.
All the advantages of eCommerce can be summarized in
one statement:
eCommerce can Increase Sales and Decrease Costs.
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Examples of eCommerce
Enabling Business Goals
Increase Revenues
A company is able, through publishing its catalogs
online, to reach more customers for the same costs as
printing and mailing its catalogs. (LL Bean)
Decrease Costs
The same company can provide more timely product
information by updating its catalog online, than by
mailing its catalog four times a year.
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Appropriateness
It is important to identify which business processes
can be streamlined using eCommerce technologies.
It is equally important to realize that some processes
make effective use of traditional commerce and can’t
be improved upon using technology.
Technology is not a panacea. Using it when it is
not necessary or helpful can be a costly mistake.
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Well-suited for eCommerce
Business processes that are well-suited for electronic
commerce:
• Sale/purchase of new books and CDs
• Online delivery of software
• Advertising and promotion of travel services
• Online tracking of shipments
The business processes that are especially well-suited
to eCommerce include Commodity items.
A Commodity is a product or service that has
become so standardized and well-known that buyers
cannot detect a difference in the offerings of various
sellers and decide to buy based on price.
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Best for Traditional Commerce
Business processes that are well-suited to traditional
commerce:
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Sale/purchase of high fashion clothing
Sale/purchase of perishable food products
Small-denomination transactions
Sale of expensive jewelry and antiques
Exceptions?
In general, products that buyers prefer to touch, smell,
or otherwise closely examine are difficult to sell using
eCommerce.
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Questionable cases
Would eCommerce or traditional commerce work
best for the following activities?
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Sale/purchase of rare books
Browsing through new books
Sale/purchase of shoes
Sale/purchase of collectibles (trading cards,
plates, etc.)
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Combinations of both
Some business processes can be handled well using
a combination of electronic and traditional methods:
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Sale/purchase of automobiles
Online banking
Roommate-matching services
Sale/purchase of investment/insurance products
Consumers can research products online and make final
transactions in person.
In any business problem it is good practice to weigh the
advantages and disadvantages of a particular approach.
Evaluating the application of eCommerce technology is no
Different.
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Advantages of eCommerce
For the seller:
 Increases sales/decreases cost.
 Makes promotion easier for smaller firms.
 Can be used to reach narrow market segments.
For the buyer:
 Makes it easier to obtain competitive bids
 Provides a wider range of choices
 Provides an easy way to customize the level of
detail in the information obtained
 Allows anonymity and less pressure to buy.
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Advantages of eCommerce II
In general:
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Increases the speed and accuracy with which
businesses can exchange information.
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Electronic payments (tax refunds, paychecks, etc.)
cost less to issue and are more secure.
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Can make products and services available in
remote areas.
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Enables people to work from home, providing
scheduling flexibility.
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Disadvantages of
eCommerce
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Some business processes are not suited to
eCommerce, even with improvements in
technology.
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Many products and services require a critical
mass of potential buyers (e.g. online grocers).
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Costs and returns on eCommerce can be
difficult to quantify and estimate.
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Cultural impediments: People are reluctant to
change in order to integrate new technology.
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The legal environment is unclear and full of
conflicting laws; regulation has not kept up.
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The Internet
What Was….
What Is….
And What Shall Be…….
But First…………..
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What is the Internet?
The Internet is defined as a loosely configured global
wide area network. A network is the means of
connecting computers together.
The Internet includes more than 31,000 different
networks in over 100 different countries. It
currently has about 110 million hosts.
Since each host can include multiple computers, it is
very difficult to estimate the actual number of
computers that are connected to the Internet.
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The Internet Evolution
The Innovation Phase 1961 – 1974
Milestones
Early 1960’s - Given the rise of both the nuclear age and
communism (cold war), the Department of Defense became
concerned that a nuclear attack could destroy computer
systems required to run their weapons systems.
1961 – Leonard Kleinrock (MIT) publishes paper on “packet
switching” networks. The enabling technology for the
internet is conceived.
1962 to 1963 – J.C.R. Licklider (MIT) writes memos calling
for a “Galactic Network” of computers. He becomes head of
Advanced Research Project Agency Network Development
for Department of Defense. The vision of a global network
is born.
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The Internet Evolution
The Innovation Phase 1961 - 1974
Milestones
1972 - eMail invented. First “killer app” of internet born.
1973 - Ethernet and Local Area Networks are invented.
Client-server computing is invented.
1974 – “Open Architecture” networking and Transfer
Control Protocol/Internet Protocol (TCP/IP) concepts
are presented. TCP/IP enabled a single “open”
protocol to potentially connect any of thousands
disparate local area networks with a common
addressing scheme to send and deliver data.
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The Internet Evolution
The Institutional Phase 1980 - 1993
Milestones
1980 – DOD adopts TCP/IP as standard protocols. The
singles larges computing organization in the world
adopts and legitimizes TCP/IP and packet switching
networks
1980 – Personal computers invented. PCs represent
enabling technology for millions of people to connect
to the internet.
1983 – DOD creates separate military network (MILNET).
ARPANET contains only civilian university traffic.
Idea of “Civilian” internet is born.
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The Internet Evolution
The Institutional Phase 1980 - 1993
Milestones
1983 – Telnet and File Transfer Protocol (FTP) deployed on
internet as new “killer apps”.
1989 – A world wide network of hyperlinked documents is
proposed based on a common language called Hyper
Text Markup Language (HTML). The concepts of an
internet supported service called the World Wide
Web is born.
1993 – First graphical Web Browser (Mosaic) is invented.
Mosaic made it easy for ordinary users to connect to
HTML documents anywhere on the Web.
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The Internet Evolution
The Commercialization Phase 1994 - Present
Milestones
1994 – National Science Foundation (NSF) report plans
development of an “Information Superhighway”
supporting research, education, commercial and
private interests.
1995 – NSF privatizes internet backbone and turns control
over to major carriers ATT, Sprint, GTE and UUNet
as primary Network Access Providers (NAP). The
fully commercial civilian internet is born.
1995 – Jeff Bezos starts Amazon.com. First major early
entry onto WWW as an “internet pure play”.
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The Internet Evolution
The Commercialization Phase 1994 - Present
Milestones
1996 to 2000 – Amount of venture capital backing Internet
start-up companies grows from $3.1 to $72.4 Billion.
Huge run up of stock market based on demand for
new internet stocks going public in Initial Public
Offerings (IPOs). Countless internet entrepreneurs
become (paper) millionaires from stock options.
2001 to Present – Reality sets in as dot com companies
mount huge losses. Demonstration of faulty
business models. VC money dries up, many internet
companies go broke, stock market slides.
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The Growth of the Internet
The Internet has grown, and (most probably) will
continue to grow, at high rate:
Year
Internet Hosts
1969
4
1979
188
1989
159,000
1993
2,056,000
1996
21,819,000
1999
56,218,000
2000
93,047,785
2001(est) 110,000,000+
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Factors behind growth
Some of the Main factors that led to the surge in
popularity of the Internet:
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The web-like ability to link from site to site enabled
through HTML and HTTP.
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The ease of use provided by the browsers’ graphical
user interface.
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The growth of personal computers and local area
networks that could be connected to the Internet.
 The TCP/IP standard and packet switching.
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Evolution of Web Programming
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A Different Perspective
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And What Shall Be…………
Pundits and experts have a variety of opinions. Some
areas, however, that will continue to grow, albeit at a slower
pace(and as much venture capital!?!)
 mCommerce: Mobile computing
 Broadband: higher speed lines for both business and
individuals as infrastructure matures.
 B2B: Integration of web “front ends” to back office
“mission critical” systems to allow more access by
customers.
 TCP/IP v6.0 and the X-Internet: The Xtended internet, a
wider variety of devices hooked up to the internet;
televisions, appliances, etc.
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