e-Business B2B

The
Business of the Future
Information Collection for MBA II Sem e-Business
SRTMU By Dr.Dhande

Introduction to E-Commerce
E-Commerce is a generic term used for a range

of technologies available which transfer data

electronically:

fax, e-mail, voice mail, electronic catalogs, electronic

funds transfer (EFT),electronic data interchange (EDI),
electronic forms
two main types: business to consumer (B2C) and
business to business (B2B)
B2B EDI, used by 95% of the Fortune 1,000 companies,
is the most common form of e-commerce today

Advantages of E-Commerce
Shorten Procurement cycles through the use of on

line catalogues, ordering and payment

Cut costs on materials through competitive bidding
Gain access to world wide markets at a fraction of
traditional costs
Ensure product, marketing information and prices are
always up to date
Allow small and medium size businesses to compete
with large businesses over a common platform

Risks in E-Commerce
Can cause disintermediation which is the process of

cutting out the middleman by bypassing traditional

retail channels (retail stores and mail-order houses)
and selling directly to the customer
Lack of insurance available to cover losses due to
hackers destroying files, stealing inventory, trade
secrets or injecting viruses into the systems
Requires firms to rethink their business models and
ways of interacting with customers
Traditional audit trails change or disappear, making
error correction, disaster recovery, and application
testing more difficult

Business to Business E-Commerce

Most EDI was done over private networks but

there is a big push to establish common
standards to use it over the Internet:
Open Trading Protocol(OTP)-intended to
standardize a variety of payment-related activities,
including purchase agreements, receipts for
purchases, and payments

Open Buying on the Internet (OBI)- standard

created by the Internet Purchasing Roundtable to

ensure that all the different e-commerce systems can
talk to each other

These standards work in a similar fashion to the

ANSI X12, which you already learned about.

Business to Business E-Commerce

Example:
The automotive industry is investing in a new venture,
the Automotive Network Exchange (ANX). ANX is a
managed virtual private network (VPN) that runs over
the Internet and links manufacturers and suppliers
worldwide. This will electronically link those
suppliers who still communicate to manufacturers by
traditional means (phone,fax, e-mail). The network
will electronically route product shipment schedules,
CAD files for product designs, POs, payments and
other business information.
NOTE: VPNs provide secure data transfer over the
net--think of them like a tunnel for data

Business to Business E-Commerce

Example:
The Great Plains e.Order demo that you just did is a
great example of B2B over the web. It is done in a
client-server environment with a Great Plains
C/S+ back end (sometimes called back office) and a
front end developed in Microsoft tools. Front end is
simply the term used to describe what you, the user,
see. It is the GUI, the web browser screen you view
and/or interact with. Back end is the term used to
describe what is happening with the data that the user
doesnt see. Typically, that data may be in an
application program or a relational database such as
Oracle, DB2, SQL server, Sybase SQL server.

Business to Business E-Commerce

Example:
Just in case you never got a good understanding of
why client/server (C/S) is such a big deal, here is an
example. A customer calls to change their number.
Without C/S the accounts receivable clerk would have
to access the entire A/R master file from the file
server just to change one record. Since this is probably
thousands/millions of records and takes up lots of
bandwith on the network, it makes the system
crawl!!!! With C/S, the server selects out just the one
record and then sends only the one record to the A/R
clerk to be changed. By distributing processing in this
way the system is SIGNIFICANTLY faster!!!

Business to Business E-Commerce

At some point you are going to wonder how the back
end and the front end communicate. They often cant
since many companies still have back ends that were
not created to interface with (display) over the web.
The answer is Middleware. Middleware is simply the
glue or layer of software that allows the front ends
(often in Java, HTML, XML, CGI scripts, ASP pages)
to interact with the back end. Just like you need a
translator when someone who is speaking Spanish is
talking to someone who is speaking French, you often
need middleware for your front end to communicate
with your back end.

Business to Consumer E-Commerce

Its a little different with B2C:
The consumer moves through the internet to the
merchants website.
(i.e. Jay Crew, Amazon.com)
Decides to purchase a product. He is connected to an
online transaction server. All the information in this server
is encrypted.
After placing an order, the information moves through a
private gateway to a Processing Network.
The Processing Network is where the issuing and acquiring
banks complete or deny the transaction.
THIS ALL TAKES PLACE IN NO MORE THAN 5-7
SECONDS!

Business to Consumer E-Commerce

E-Commerce Implementation Issues

There are several ways to acquire a web presence and
obviously the amount of money you want to spend
and the in-house talent you have for
developing/maintaining the site are crucial in
making the decision whether to
Buy, Lease or Build an E-Commerce System

Buy, Lease or Build?

Option 1:
Buy a ready-made system that closely matches
your specifications.
Standardized set of features
Save money and time if it fits business needs
May become obsolete as more features
become necessary later in development
Extra to automate payments, tax and
shipping (although easy to install plug-ins
into system of the above)

Buy, Lease or Build?

Option 2:
Lease space in a network-based e-commerce
solution
Inexpensive
Include many common features
Fast because the business is administered
through the Internet
Dont need to install software just pick a
look, configure some settings, and input
product information
May not support the features or look you
want to convey

Buy, Lease or Build?

Option 3:
Build the system from scratch
Exact Solution
Requires expertise, time and a sizeable
budget
Can build features and functions to be
unique and competitive in the market space
Any programming language can be used to
create a commerce program
Design databases from scratch and integrate
tax, shipping and payment processing
modules into the main application
Will need Professional Systems Developer(s)

Exploring the Options Further

Option 1:
Buy the system
Option 2:
Lease Space
Option 3:
Build the system

Intershop 3.0
iCat Pro
IBM Net.Commerce
Intershop Pages
iCat Commerce
Yahoo Store
Allaire ColdFusion
Microsoft Site Server
Commerce Edition
Pandesic 3.0

E-Commerce Implementation Issues

Other Issues to consider are:
Digital Certificates
Establishing Payment Systems
Security
What about the AICPAs WebTrust??? Ask me in class!

Digital Certificate

Password-protected, encrypted data file that has been

digitally signed by the Certificate Authority
Data file consists of a public and private key pair (a pair
of numbers that have no association with any identity)
Two types:
Public-used by individuals/businesses
Private-generated by a business entity to control access to
information sites and ensure secure communication

Includes Name of Subscriber, e-mail address, public key

of subscriber, validity period for certificate, name of
issuing CA, certificate serial number

Certificate Authority (CA)

A Trusted Third Party
Reviews information submitted by company
requesting a certificate, ensure that it was properly
registered and proper paperwork has been filed to
operate as a company
Issues the certificates in ascending levels of
assurance (i.e. Classes 1,2,3, where Class 3 offers most

assurance)

Provides services for the digital certificate

Only a few Internet-wide CAs, including:

VeriSign (www.verisign.com)
Thawte (www.thawte.com)

How the Digital Certificate Works

With a Certificate and CA, two authenticated parties
exchange their public key certificates, encrypt and
digitally sign session data to remove the possibility
of eavesdropping or tampering with data.
This encryption technology is known as Public Key
Cryptography
One key encrypts the data and only the other key in
the pair can decrypt the data

Establishing a Payment System

When using Credit Card Payment over the

Web you need to select a Merchant Account
Provider (MAP)

Determine Company Needs

Real-Time

or Manual Processing
Is software compatible with MAP

Understand Merchant Account Costs

Internet

Discount Rate-fixed percentage taken from

every online transaction (usually 2-3%) whichever
is higher
Transaction Fee-MAP fixed charge per transaction
(usually 25-70 cents)

Establishing a Payment System

Monthly

Fees and minimums-Statement fees, monthly

minimums for total charges, excess usage fees, etc.
Holdbacks-MAP may reserve a percentage of your
transaction receipts to cover contested charges
Chargebacks-MAP may apply fees against your
account when transactions are successfully contested

Research Merchant Account Providers

Compare

at least 5 price quotes

Establishing a Payment System

Choose a Secure Electronic Payment System

Provides consumer with 2 levels of security

ensures safe credit card information during authorization
and following the completion of the transaction
enables consumer to appeal credit card charge if damaged
or defective products

MAP must support system

Most use Secure Electronic Transaction (SET)
standard, which contains extra security measures
and antifraud technologies
Examples: CyberCash, DigiCash,
Verifone,CyberSource, OpenMarket

Establishing a Payment System

How Credit Card Transactions are processed

Authentication-make sure valid numbers, that is
has been issued and is not a stolen card number
Authorization-check availability of funds and put a
reservation on the funds
Settlement-once products are shipped or delivered
bank releases the funds reserved and the money will
make its way into the businesses account

Online Information Security

Security Sockets Layer (SSL)- encryption technology

that scrambles a message so that only the recipient
can unscramble it
URLs that begin with https:// are using SSL
A company needs to do the following to enable SSL
technology:
determine what kind of browser visitors/partners
are using (some browsers are not SSL savvy, such as
older versions of AOL)
have a digital certificate to install and configure the
SSL on the server

Top 10 E-Commerce Businesses

Site

Rank

Top 20 E-Taile rs of June 1999

Projected
Purchaser
Number of
Purchase
Time spent
Purchasers
Rate
on Site
(thousands) (percentage)
(hh:mm)

NonPurchaser
time spent on
Site (hh:mm)

amazon.com

789

7.1

0:53

0:12

buy.com

314

12.1

0:59

0:11

barnesandnoble.com

289

7.5

0:49

0:06

ticketmaster.com

269

12.6

0:33

0:08

planetrx.com

256

15.5

0:38

0:07

mothernature.com

241

12.6

0:32

0:06

drugstore.com

191

17.6

0:32

0:06

gatew ay.com

167

7.4

0:42

0:10

cdnow .com

95

1.8

1:22

0:20

10

smarterkids.com

93

5.4

0:30

0:03

11

chipshot.com

80

21

0:12

1:00

12

hallmark.com

80

13.1

0:31

0:05

13

egghead.com

73

4.5

0:34

0:08

14

yahoo.com

67

0.2

2:20

2:41

15

of f icemax.com

65

6.3

0:21

0:10

16

etoys.com

57

5.2

1:10

0:10

17

jcrew .com

52

4.7

0:41

0:04

18

spree.com

52

2.4

1:32

0:17

19

compaq.com

51

4.2

0:22

0:16

20

tow errecords.com

43

4.2

1:11

0:07

Source: PC Data Online

E-Commerce Information Sites

E-Commerce Times
ZDNet E-Business
CommerceNet
Electronic Commerce Guide