Chapter 7:Electronic Commerce and

Interorganizational Systems

Electronic Commerce

Definition(s)

– Using IT for business-to-business transactions and for business-end customer retailing

– Any electronic transaction with clientcompanies and end customers

– Anything electronic that "tightens" your company's relationship with potential and existing customers & suppliers

Interorganizational Systems (IOS)

Definition

– Business-to-business electronic commerce applications, typically linking customers with suppliers but may also link competitors

– Classic example: SABRE reservation system of American Airlines

– Most common form: Electronic data interchange

Electronic Data Interchange (EDI)

Definition

– A set of standards and hardware and software technology that permit computers in separate organizations to transfer documents electronically

– Typical documents exchanged include:– purchase orders– invoices– shipping notices– price listings

Potential Benefits of EDI

Faster speed of doing business

Reduction in required working capital

Cost savings

Improved customer/supplier relationships

Enables international trade

EDI Standards

In U.S. ANSI X.12 (American National Standards Institute)

In Europe (and to some extent U.S.) EDIFACT

Other national standards

Trend: convergence of standards

Electronic Commerce via the Web

Definition– The use of the Internet to conduct commerce with

customers, including other businesses or the end-consumers

Benefits include 5 benefits for EDI plus:– Cheaper distribution of digitized products/documents– New customer support capabilities– New marketing channel– New sales channel

Al Gore's Vision:The Information Superhighway

– linking homes, businesses, government for

information, education, buyer/seller transactions.

– with high speed transmission ofmultimedia (text, audio, images, video)...all streaming seamlessly into everyone's home

– without "haves" and "have-nots"

Bill Gates' Vision (Microsoft CEO) 1995 bestseller; now a Penguin paperback "upgrade"

– Telephone lines & television cables "generalized into" a single, digital utility

– Easy-to-use information appliances: lap desks, TV set-top boxes, wallet PCs, E-books…

– Easy-to-use navigation systems:to query, filter, hyperlink, spatially navigate, under a smart agent

Domain Names on the Internet Network Solutions Inc. (Virginia) has the task of registering Internet domain names

Three-character suffix specifies type of organization

.com .edu

.gov .mil

.org .net

Two-character suffix specifies country of origin (outside of U.S.)

Constraints to EC on the Web: The Potholes

Security

Traffic Overload

Censorship Difficulties

Measurement Tools

Security Internet not designed to be public utility

Two issues: How to control access

How to ensure that security of a given communication is not violated

Security #1: How to control access

Primary method: "Firewalls"A device that sits between the Internet and an organization’s internal network in order to block intrusions from external unauthorized users

#2: Ensure secure communication Primary method: Encryption

Today based on enciphering key that is the product of two prime numbers.

This key is factored into these two prime numbers via an algorithm, and then one is used to encipher (code) a message, the other to decipher it

Traffic Overload Evidenced by:

slow response time occasional blackouts lack of capacity/bandwidth

Censorship Difficulties

Web site “blocking” from within businesses “Acceptable Use” policies Monitoring of usage

U.S. legislative attempt: Communications Decency Act ruled unconstitutional: violates free speech and due process rights

Does the global nature of the Internet allow for “censorship” on a national basis ?

How does an organization measure the utility of an external Web site application?

Usage tracking using “cookies” Hits and return visitors Web movements

Visitor registration & comments (e-mail)

Measurement Tools

Types of Web Applications

External Web site– Fully accessible to the global Internet user

Extranets– Internet-based applications for key trading partners– Allows access to systems “inside” the firewall– Some are EDI application replacements– Others are totally new applications, exploiting the

multimedia capabilities of the Web

Intranets

Examples of External Web Applications

Manufacturing - 3M

Retailing - Amazon.com

Distributor network - Fruit-of-the-Loom

E-Communities - GeoCities.com

Web Strategies

Existing firms (3M, Fruit-of-the-Loom)

New Web-based businesses (Amazon, GeoCities)

Unproven pioneers

Emerging Role: Webmaster

Developer of Web sites– combination of programmer & creative

artist

Responsible for Web server operations and security

May be responsible for monitoring “acceptable use” by employees

The Future of EC

Major changes in retailing, including possible disintermediation (e.g., eliminate wholesalers)

Ubiquitous information highway that handles telephone, television, e-mail, Web, etc.

Major societal impacts