Development of E-Commerce


E-commerce covers any form of business transaction or information exchange that is executed using any form of information and communications technology. This embraces business-to-business; business-to-consumer; and government-to-nation; as well as exchange of tools like the Internet and the World Wide Web, intranets, extranets, electronic mail and Electronic Data Interchange. (UK’s e-centre)

· Brief history of E-Commerce;
§ look at what drives E-Commerce;
§ look at the components of an E-Commerce system;
§ list the range of E-Commerce techniques; identifying them within different business contexts;
§ start to look at the impact of E-Commerce on the organisation.

· The application of advanced information technology to increase the effectiveness of the business relationships between trading partners. (Automotive Industry Action Group in North America)

The enablement of a business vision supported by advanced information technology improves efficiency and effectiveness within the trading process. (E-Commerce Innovation Centre at Cardiff University)

The development of E-Commerce in the context of technological developments of the IT world today;

As the current environment provides affordable, more powerful and user-friendly systems, this has promoted the need of a system as a tool provider for business.

The development of EDI (Electronic Data Interchange) brought about data to transfer from one system to another. EDI was widely used in the 1980s and early 1990s. The latter developments were of the X.400 and the Internet.

2.0 Electronic commerce (E-commerce)

· The process of buying, selling, transferring, or exchanging products, services and/or information via computer networks, including the Internet

· The origins of e-commerce first started with innovations such as electronic fund transfer (EFT) in which funds could be routed electronically form one organisation to another

· Then came Electronic Data Interchange (EDI), a technology used to electronically transfer routine documents, which expanded electronic transfers from financial transactions to other types of transaction processing such as ordering

· EDI required having expensive dedicated and private lines between the trading parties

· Internet and WWW overcome the shortcomings of EDI

3.0 Electronic Business

· A broader definition of EC, includes not just the buying and selling of goods and services, but also servicing customers, collaborating with business partners, and conduction electronic transactions within an organisation.
· E-Business is the use of the Internet and other information technologies to support commerce and improve business performance.
· Some view e-business as comprising those activities that do not involve buying and selling over Internet, such as collaboration and intrabusiness activities.

4.0 Types of EC organisations

· Brick and Mortar Organization - Old-economy organizations that perform most of their business off-line, selling physical products by means of physical agents. Purely physical organization.
· Virtual (Pure-Play) Organization – Organization that conduct their business activities solely.
· Click and mortar organization – organization that conduct some e-commerce activities, but do their primary business in the physical world.

5.0 World Wide Web

· Created in the early 1990s Tim Berners-Lee
· Software that allows users to exchange information as it was designed to help scientists share online information using a single, unified interface.
· Mid-1993, Marc Andressen, an undergraduate of University of Illinois, wrote a program called Mosaic, which made using the web as easy as pointing and clicking at pictures and underlined words
· Mosaic was the first graphical browser that was launched with 150 websites holding a few thousand web-pages.
· 1995 there were about 10,000 sites, a number that had grown to 4 - 5 m by mid-1999.
· Commercial use of the Internet has skyrocketed, with companies using the Internet to communicate with each other, with their customers, with their partners and with their suppliers.
6.0 Electronic markets

Classification of EC by the nature of the transactions / interactions:
1. Business-to-business (B2B) – all of the participants are businesses or other organizations e.g suppliers

2. Business-to-Consumer (B2C) / e-tailing – includes retail transactions of products and services from businesses to individual shoppers

3. Business-to-business-to-consumer (B2B2C) – a business provides some product or service to a client business that maintain its own customers

4. Consumer-to-business (C2B) – individuals who use the Internet to sell products or services to organisations, or individuals seek sellers to bid on products or services they need

5. Consumer-to-consumer (C2B) - consumers ell directly to other consumers

6. Peer-to-peer applications – technology that enables networked peer computers to share data and processing with each other directly, can be used in C2C, B2B, and B2C ecommerce

7. Mobile-commerce (m-commerce) – e-commerce transactions and activities conducted in a wireless environment

8. Intra-business EC – includes all internal organisational activities that involve the exchange of goods, services, or information among various units and individuals in an organisation

9. Location-based commerce (l-commerce) – m-commerce transactions targeted to individuals in specific locations, at specific times

10. Business-to-employees (B2E) – organisations deliver services, information or products to its individual employees

11. Collaborative commerce (c-commerce) – individuals or groups communicate or collaborate online

12. E-learning – online delivery of information for the purposes of training or education

13. Exchange-to-exchange (E2E) – electronic exchanges formally connect to one another for the purpose of exchanging information

14. E-government – a government entity buys or provides goods services, or information to businesses (G2B)or individual citizens (G2C)

7.0 Benefits

· Global reach – expands the marketplace to national and international markets. With minimal capital outlay, a company can easily and quickly locate the best supplier, more customers, and the most suitable business partners worldwide.
· Cost reduction – decrease the cost of creating, processing, distributing, storing, and retrieving paper-based information.
· Supply chain Improvements – supply chain inefficiencies, such as excessive inventories and delivery delays can be minimized with EC.
· Extended hours – 24/7/365 the business always open on the Web, with no overtime or other extra costs.

8.0 Limitations

· costs of a technological solution
· some protocols are not standardized around the world
· reliability for certain processes
· insufficient telecommunications bandwidth
· Software tools are not fixed but constantly evolving (ie. Netscape 3,4,4.7,4.75 etc.)
· integrating digital and non-digital sales and production information
· access limitations of dial-up, cable, ISDN, wireless
· some vendors require certain software to show features on their pages, which is not common in the standard browser used by the majority
· Difficulty in integrating e-Commerce infrastructure with current organizational IT systems
9.0 E-Marketplace

An online marketplace where buyers and sellers meet to exchange goods, services, money or information.
E-markets may be supplemented by interorganizational or intraorganizational information systems.

The Internet has had such a huge impact on the world (in business, media and society) that it is easy to overlook the technology that preceded it, that enabled it and that has evolved subsequently. In eCommerce terms, though, this does not mean that this technology is any less valid. Remember, we are trying to find the right tools for the right job.

Networks are electronic/data highways which link computers together for the purpose of sharing resources. They are characterised by:

• the type of data transmission technology they use;
• whether they carry voice, data, or voice and data;
• whether they are public or private (i.e. who can use them);
• the nature of connection - dial-up, dedicated or virtual connections;
• the types of physical links (such as optical fiber, coaxial cable, and copper wire).

The type of data transmission refers to the protocol they use, i.e. the set of rules for communicating that the end points in a connection use when they exchange signals. Both endpoints must understand and observe the protocol. The Internet uses TCP/IP protocols, which includes TCP (Transmission Control Protocol) and IP (Internet Protocol), HTTP, FTP and other protocols, each with a defined set of capabilities.

Local Area Networks (LANS)
LANs link a number of computers by relatively short lengths of cable, usually within the same room or building . Typically, a more powerful computer, called a server, will serve data and applications to a number of desktop PCs. Due to the short length of the cables, data transmission is very fast (MegaBits or even GigaBits per second). Company LANs are usually controlled by a member of the IT department called the network administrator.
It is important to recognise LANs as part of the communications infrastructure because they are often the basis of a company's IT systems. As such, any implementation of eCommerce will require integration of the LAN with external communications media. A LAN that uses Internet.Protocols is, essentially, an intranet, and can support applications run on the Internet if appropriate server software is installed.
The purpose of an intranet is to allow everyone to share information and facilitate group work processes. Like any other network, it holds file directories and allows resource sharing. Intranets are still very much in their infancy as regards the level of sophistication around the types of applications and information held on them. According to recent research completed by InformationWeek the most common applications on intranets are policy and procedure manuals, document sharing and corporate phone directories.
The intranet must have a firewall to prevent unauthorised access from outside the company. Firewalls are hardware/software combinations that allow people from outside an intranet to access data on the Internet, but keep intruders from getting onto the intranet. Depending on how secure a site needs to be and how much time, money and resources can be spent on a firewall, there are many kinds that can be built. Most of them, however, incorporate the following elements:
• proxy servers;
• routers;
• bastion hosts.

Wide Area Networks (WANs)
WANs connect a number of computers, or LANs using long-distance connections. The connections may be along private cables, microwave or satellite links or may be leased from a network provider, such as an Internet Service Provider (ISP) or a telecoms operator. A WAN may contain a number of switching and relaying computers called 'nodes' or 'gateways'. A connection between two major nodes is called a 'backbone'. The Internet itself is a very large WAN. The extension of a simple LAN to the WAN is also the basis for the similar extension of the concept of the intranet to an extranet, which is a key component of business-to-business eCommerce. Essentially an extranet is a private network that uses the Internet protocols and the public telecommunication system to securely share part of a business's information or operations with suppliers, vendors, partners, customers, or other businesses. An extranet can be viewed as part of a company's intranet that is extended to users outside the company. Therefore, the same benefits that Internet technologies have brought to the Internet and to corporate intranets are now being made available to accelerate business between businesses.

An extranet requires security and privacy. These require firewall server management (in much the same way as intranets) and, increasingly, the use of Virtual Private Networks (VPN's - see below) that are able to tunnel securely through the public network.

The reasons why extranets are, potentially, so important to the area of business-to-business eCommerce, are that they allow organisations to:

• exchange large volumes of data using EDI;
• share product catalogues exclusively with wholesalers or distributors;
• collaborate with other companies on joint development efforts;
• jointly develop and use training programs with other companies;
• provide or access services provided by one company to a group of other companies, such as an online banking application managed by one company on behalf of affiliated banks;
• share news of common interest exclusively with trading partner companies.

Virtual Private Networks
Historically, organisations that needed to construct networks that would serve multiple sites, or maybe allow communication with their clients or suppliers, would achieve this by constructing a virtual private network,or VPN.

With the advent of the Internet, along with relatively cheap broadband access technologies, interest in constructing VPNs across the Internet has grown considerably because it has the potential to offer a VPN service at significantly lower cost than would be the case with networks constructed from dedicated leased lines. However, the very public nature of the Internet means that, although it is possible still to construct trusted VPNs in this environment, many users require a higher degree of assurance that their communications over the VPN will be secure. Hence, this has given rise to the use of technologies that allow secure VPNs to be constructed. The basic concept behind a secure VPN is that all communications taking place across the VPN are encrypted, thus preventing the data from being read in any meaningful form, even if a potential eavesdropper is able to examine the data packets being transmitted on the network. The devices communicating over the network, or the network users, or both, may well also need to be authenticated, to ensure that only trusted individuals or equipment can be attached to the network. Most current implementations of secure VPNs are based on a family of encryption technologies known as IPSec, which is used to construct a secure 'tunnel' across the Internet that can carry the client's data.

VPN technology is accessible to business users in a variety of forms. The telecommunications service providers have offered trusted VPN services for a number of years and, increasingly, are also offering secure VPN services. In both cases, the offering is a managed service, having the advantage of off-loading the maintenance and management of the network from the user. Perhaps the most interesting aspect of secure VPNs is that it is possible for these services to be provided and managed by the businesses that use them. As they rely on encryption technology that can be installed either as software in a PC or as add-ons to existing LANs, VPN services can potentially be used by all sizes of business user, from the SME up to the multi-national.
VPNs can significantly improve the security of communication within a distributed organisation. This can be important for:

• Internal communications within the organisation;
• Communications with client or trading partners, where confidentiality of commercially sensitive information may be a requirement;
• Providing secure networking for home workers.

The same secure VPN technology can also be applied as a means of overcoming the present shortcomings in wireless LAN security; if all information transmitted over the wireless LAN is properly encrypted using the IPSec mechanisms, it is no longer a concern that an eavesdropper might be able to 'see' the data packets being communicated, since it will be impossible to decrypt the data. Secure VPNs can, in many ways, be viewed as a means of making the other networking technologies safer to use in a commercial environment; hence, coupled with the other technologies mentioned in earlier sections, VPNs become an essential factor in delivering the benefits that can accrue from these technologies.
A major benefit with managed VPN services is that they significantly reduce the costs associated with constructing and managing a wide area data network. This can be significant for all sizes of business. Even the larger multinationals often cannot afford the expense of running a truly private WAN, whereas the established telecommunications suppliers can offer a managed service at a much more affordable cost.
Virtual private network technology is not only available today from companies specialising in VPNs, but also from operating system vendors (e.g. Microsoft) and traditional firewall vendors. There is limited interoperability between products from different vendors today, since standards are only now being finalised. Therefore, the user is likely to need software from the same vendor for both end points of the tunnels. The key standard that is emerging is IPsec (secure IP), whilst others include SOCKS and Layer 2 Tunneling Protocol (L2TP). The L2TP standard combines attributes of Microsoft's Point to Point Tunneling Protocol (PPTP) and Cisco's L2F (layer 2 forwarding.)
The development of E-Commerce in the context of business developments

1. Options:
• Telephone: dial-up or leased line
• ISDN: basic rate or primary rate
• Value Added Networks
• X.400: ISO standard secure messaging
• Networks: local area networks, wide area networks or intranets
• Internet: messaging, file transfer, Telnet, World Wide Web, XML

2. Standards:
• Standards are the means by which data is sent in an agreed format by eCommerce trading partners.
• In Electronic Data Interchange (EDI), standards pertain specifically to the syntax used to prepare messages for exchange. They enable, for example, one accounts system to understand an electronic version of an invoice sent out by another accounts system because the relevant pieces of data (e.g. invoice number) are always located in the same part of the message.
• In the case of EDI, these standards are generally nationally and
• The means which data is sent in an agreed format by E-commerce trading partners.
• EDI: syntax used to prepare message for exchange
• Gif and JPG: graphic standards
• World Wide Web:HTML, PERL, Javascript, Java, Software

3. The e-commerce software function includes:
• Data extraction from relevant application or data entry
• Data encoding to agreed standard format
• Data transmission to recipients.
• Data receipt by recipients.
• Data decoding for internal applications.
• Data insertion into relevant applications

Business-to-Business E-commerce
Key areas in B2B e-commerce:
• Electronic Data Interchange (EDI)
• Enhanced messaging: e-mail, voice-mail, fax
• Teleconferencing
• Integrated Systems: intranets/extranets, database publishing, workflow

Supply Chain E-commerce

1.0 Defining E-Commerce

• Key areas in B2B e-commerce:
1. Stock control
2. Just-in-time delivery
3. Transportation
4. Warehouse management
5. Automatic Identification: Barcodes, Transponders
Business-to-Consumer E-commerce
B2C e-commerce application includes:
1. Database application
2. Kiosks
3. Internet store fronts
4. Downloadable software and software support
5. Internet auctions
6. Advertising on the Internet
7. Interactive TV



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