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Chapter 7:Electronic Commerce and
Interorganizational Systems
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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
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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
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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
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Potential Benefits of EDI
Faster speed of doing business
Reduction in required working capital
Cost savings
Improved customer/supplier relationships
Enables international trade
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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
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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
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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"
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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
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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.)
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Constraints to EC on the Web: The Potholes
Security
Traffic Overload
Censorship Difficulties
Measurement Tools
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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
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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
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Traffic Overload Evidenced by:
slow response time occasional blackouts lack of capacity/bandwidth
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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 ?
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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
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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
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Examples of External Web Applications
Manufacturing - 3M
Retailing - Amazon.com
Distributor network - Fruit-of-the-Loom
E-Communities - GeoCities.com
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Web Strategies
Existing firms (3M, Fruit-of-the-Loom)
New Web-based businesses (Amazon, GeoCities)
Unproven pioneers
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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
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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