“ A modern business methodology ... to cut costs while improving the quality of goods and services and increasing the speed of service delivery .”. What’s Electronic Commerce?. Frontiers of Electronic Commerce Ravi Kalakota, and Andrew B. Whinston. Evolution of Electronic Commerce.
“A modern business methodology ... to cut costs while improving the quality of goods and services and increasing the speed of service delivery.”
Frontiers of Electronic Commerce
Ravi Kalakota, and Andrew B. Whinston
From VANS to Internet
Electronic Commerce has, so far, meant electronic data interchange (EDI) over Value added Networks (VANS) used by corporate organisations. That was computer-to-computer exchange of routine business documents in a standard format. Now, it has the scope to use the Internet too as the medium. The Internet enables customers, partners and users to access a company’s EDI network, which earlier was closed to smaller companies, simply because of the costs involved.
From VANS to Internet
If we consider some of the goals of businesses with regards to electronic commerce: higher revenues through exposure to additional customers; cost reduction; lower product cycle times; faster customer response; and improved service quality, we see how dramatically a company's bottom line can be influenced with the addition of electronic commerce. A number of pioneering firms are implementing electronic commerce solutions today and are finding new ways to save and make money.
Chrysler Corp., by linking to its suppliers through a Web-based network, reportedly saved more than $1billion in cost of materials in 1997. By 2000, Chrysler’s estimated annual average savings will amount to $2 billionThe Internet is a tempting channel for a Bank which can conduct an online transaction for five paise versus RS 1.50 through a teller.The biggest challenge for companies involved in electronic commerce isn’t the technology-it’s changing the corporate culture. “It requires an organisation to be bold.”
The Cisco Connection Web Site, now available in 14 languages and with 49 country pages, is claimed to be the largest Internet Commerce Site.John Chambers, President and CEO, Cisco Systems Inc., predicts that E-Commerce will be the primary means by which business will be conducted in the next 10 years.
Cisco’s sale through the Web has touched $ of a total of $ billion.
All you do is to select the books you want to buy, and place an order for them. You could then either pay for them through your credit card, or pay for the books when you receive them. Buying books from Amazon.com is thus much like buying items from a catalogue. What’s more you can view the book, and maybe read part or whole of it.This Online Bookstore has become so popular, that not only is it the number one bookseller on the web, but the number three bookseller overall.As many as 2,260,000 surfers who visited the web site bought books this quarter, an increase of nearly 50 percent from 1,510,000 customers account at the end of the fourth quarter 1997, and an increase of 564 percent from 340,000 customers accounts at the end of the year ago first quarter.
Here is an example of how an e-commerce transaction takes place. Consider the following case study
Consumer finds something she wants to buy at a “shop” on the Net
Verification and remittance of actual funds
Consumer sends on enciphered request for payment to her bank
The electronic bank sends back a secure packet of e-cash
Consumer Public Key
The shop sends the packet of cash to its bank
Consumer sends the e-cash to the shop
To help organisations conduct business on the Web without having to set up costly servers and devote dedicated personnel to monitor orders and deliveries and other transactions, a new breed of Agents or Internet E-commerce Solution providers have sprung up.
Another similar service provider’s site looks like this:
Like any other technology, there’s good and bad news.Thegood news is that E-Commerce is a round the clock advantage for the customer. It will eventually become standard. What’s more, e-commerce allows fast and flexible execution and response to market opportunities. The Web enables a company to introduce a new product, get immediate customer reaction, refine and perfect it, all without incurring huge investments in a physical distribution infrastructure. Companies betting on E-Commerce have begun to learn about their customer’s online buying habits.
The bad news is that customer reaction may actually be in jeopardy. Led to believe they’re transacting in real-time, they could become disillusioned and take their business to competitors or back to the offline world if their order is not fulfilled quickly.
While such a concern is shared by many users, the risk has now been reduced. This has come about due to the development of Secure Internet Protocols and Payment Systems, and Server solutions that can handle electronic transactions.The Secure Electronic transaction (SET) initiative that major Credit-Card issuers Visa International and Master Card are backing is expected to solve such security risks. The SET project, obtaining assistance from Microsoft Corp., IBM Corp., Netscape Communications Corp., SAIC, GTE, Teresa Systems and Verisign, aims to deliver a transparent encryption system suitable for all electronic transactions using PCs. The use of Public Key encryption may also go a long way in allaying users fear of safety.
The type of solutions available today include third-party payment organizations and credit card payment system on the Net. Digicash, France, was the first third party payment organization, in 1994, to implement a virtual money system, with which clients and merchants could transact business in relative safety. Digicash and later third-party payment organizations developed payment and merchant systems based on the RSA security system for transmitting encrypted data over the Internet. Taken in conjunction with the development of secure internet protocols (Netscape Secure Sockets Layer, Enterprise Integration Technologies’ Secure-HTTP, Master-Card and Visa International’s SET and the Joint Electronic Payment Initiative), third-party organizations have attracted banks and Credit Card Companies to the Internet.
Some of the third party payment offerings now available are CyberCash, Ecash, First Virtual Payment System and Clickshare.CyberCash is a realtime secure, digital signature-based credit card authentication service, developed by CyberCash Inc. It acts as an intermediary between the consumer, the merchant and the credit card clearing house. Ecash on the other hand is digital money that is downloaded by an Ecash client from a participating bank and stored on a customer’s local computer. Ecash can be spent at merchant systems that accept it; accepting merchants, in turn, must deposit Ecash receipts at a participating bank.Of the credit card payment systems available now on the Net, ICVERIFY, from ICVERIFY Inc. is the most popular. ICVERIFY processes and authorises credit card transactions online.
Last month, the World trade Organization came to a decision to keep global electronic commerce duty free, and agreed to evolve a programme to deal with its development on the Internet. The new agreement, involving trade ministers of 132 countries, bars governments from collecting any tariffs on such transactions for atleast a year. It ofcourse has incurred wrath from non-governmental organizations since such an exercise would benefit corporates of developed countries; governments, by the way, would lose the option of a revenue earning source.The Global Internet Project(GIP) presented the European Union (EU) with its recommendations on e-commerce last month. EU wants to develop a global charter covering technical standards, illegal content, licenses, encryption and data privacy on the Internet and other Electronic networks.
Shopping Cart(commerce server)
Payment module(Payment server)
Security issues(security server)
Netscape is not the only player to move towards facilitating its customers in e-commerce. IBM Corp is also gearing itself up to provide ‘e-business’ solutions. Other players such as Hewlett-Packard Co. and Compaq-Tandem have launched servers (hardware/software) that will cater to electronic commerce. Cognos Inc., a leader in business intelligence tools, has developed Data merchant that allows corporates to access business intelligence data from anywhere around the globe, anytime they want it.Finally, Microsoft and Sun Microsystems are also not far behind, as both their technologies - ActiveX and Java - are capable of providing solutions for developers with security strategies to base their products on.
Ricardo H. Dujua, general manager of EDINet Philippines, speaking at the Supermarket Show 97 last year predicted that soon more and more shoppers will use the Internet as the medium of Business. The Electronic system will eliminate the need to set up physical stores, warehouses and carry inventory.It is also probable that not only will the greater adoption of e-commerce change the way retailers conduct business, it may also bring pressure to bear on them to be more responsive to customers needs.The World is becoming increasingly networked, changing our methods of working and lifestyles. Once the hypes are cleared and the mist lifts, usage would be fun, business easy.