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Introduction to the Internet Definitions Internet,TCP/IP, WWW, B2B, B2C, B2#, B2G,C2C,VAN, VPN, intranet, extranet, e-commerce,e-marketspace The Internet The World Wide Web (WWW) Intranets and Extranets The New Economy Objectives: Internet and World Wide Web

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introduction to the internet
Introduction to the Internet
  • Definitions
    • Internet,TCP/IP, WWW, B2B, B2C, B2#, B2G,C2C,VAN, VPN, intranet, extranet, e-commerce,e-marketspace
  • The Internet
  • The World Wide Web (WWW)
  • Intranets and Extranets
  • The New Economy
objectives internet and world wide web
Objectives: Internet and World Wide Web

1. To describe major characteristics of the Internet

2. To describe the role of protocols for the Internet

3. To describe major characteristics of the World Wide Web

4. To describe major drivers of the Net/Web

5. To describe major models in the New Economy

6. To distinguish between Internet, intranet and extranet

objectives buyers sellers and electronic markets
Objectives: Buyers, Sellers, and Electronic Markets
  • Be able to describe the major characteristics in the buyer, seller and electronic marketplace models of Electronic Commerce
  • Discuss other internet business models (auctions, reverse auctions, net markets, portals, bricks and clicks, ASP, web services)
  • Discuss assumptions for electronic marketplace
  • Discuss the impact of e-commerce on intermediaries
  • Describe the new e-commerce intermediaries
  • Define network externality, Metcalf’s law
  • Discuss Kelly’s 12 new rules
  • Discuss the four laws of computer security
how long to reach 30 www cisco com facts and stats
How Long to Reach 30%? - Facts and Stats
  • Internet - 7 years
  • Television - 17 years
  • Telephone - 38 years
  • Electricity - 46 years
the internet today
The Internet Today
  • Metanetwork - network made up of interconnected networks of millions of individual computers with no central control.
  • Hard to shut down (because of interconnectivity)
  • Connected around the world via special computers called routers and hubs
the internet today6
The Internet Today
  • Connected over a grid called the backbone
  • Traffic funneled into backbone via network access points (NAPs)
  • Largest decentralized computer network in the world
the internet today7
The Internet Today
  • Phenomenal growth rate
  • Internet protocol: TCP/IP (Transmission Control Protocol/Internet Protocol)
  • Packet switching (hot potato routing)
  • Peer-to-peer communications
tcp ip protocols
TCP/IP Protocols
  • Data is subdivided into packets
  • Provide functionality for productive networking
  • Packets: fundamental grouping of data for transmission on a digital network
  • Internet Protocol (IP): address space for internetworks
  • Transmission Control Protocol (TCP): packet size
internet governance
Internet Governance
  • Not controlled by one body
  • No Internet police to enforce standards
  • Internet Society (ISOC)
internet society isoc
Internet Society (ISOC)
  • Professional society
  • Voluntary organization
  • Concerned with growth and evolution of worldwide Internet
  • Has subgroups
national science foundation nsf policy
National Science Foundation (NSF) Policy
  • NSF footed bill for US backbone
  • Had Acceptable Usage Policy (AUP)
  • Relaxed policy in 1991
  • New policies allow, “announcements of new products or services for use in research or instruction, but not advertising of any kind”
  • Fantastic growth in commercial users and providers
the information superhighway
The Information Superhighway
  • Also called the Net or the I-Way
  • Phrase used by newbies and Gore
  • High-speed global communications network
  • Many-to-many vs. one-to-one communications
  • Encompasses voice, data, telephony, cable television, satellite systems
internet the big picture
Internet: The Big Picture

what is the web
What is the Web?
  • World Wide Web, the Web, WWW
  • A popular way of accessing Internet information
  • Adds hypertext capabilities (HTML)
  • Incorporates multimedia - pictures, text, animation, sound
  • Format that is easy to learn and use
  • Accessed by browsers - Netscape, Mosaic, Explorer
universal resource locator url
Universal Resource Locator (URL)
  • Address for WWW browser to access information on Internet
  • Three components:
    • Service (protocol)
      • how to retrieve the file
    • A domain name with optional port
      • name of machine you are accessing from
      • server address
    • A path with optional file names
      • path and file name of item to be retrieved
      • may be missing
the www today
The WWW Today
  • Most WWW servers and sites run by commercial providers
  • Businesses charged for storage and throughput
  • Governments subsidize the Web
  • Number of web sites doubles every 53 days
  • E-commerce on WWW is rapidly evolving
driving forces for www net
Driving Forces for WWW/Net
  • Change in NSF policies
  • Digitalization: text, documents, graphics, video, audio
  • Globalization
  • Convergence of communication-related industries
    • Publishing
    • Entertainment
    • Computing
    • Communications
driving forces continued
Driving Forces (continued)
  • Increasing competition and cooperation
  • Critical mass
    • E-mail
    • PC’s
  • Virtualization
  • Falling cost and improved technology
    • Computers
    • Networking
  • Intranets - networks using TCP/IP exclusively within an organization; inaccessible to outsiders
  • Extranets - A company’s interorganizational information unavailable to users of its intranet or to the wider Internet community
  • Value-added networks (VANs)- non-internet network maintained privately
  • Virtual private networks (VPNs) -corporate networks run over the Internet to replace leased phone lines between offices
business use of internetworking technologies tcp ip
Business Use of Internetworking Technologies (TCP/IP)

A Business

Individuals & Other Businesses

www site

general public

fire wall

business partners



intimate trading partners

intranet features
Easy navigation

Accessible to most computing platforms

Can integrate into distributed computing systems

Scaleable (start small and grow)

Intranet Features
intranet features cont
Intranet Features (cont)
  • Extensible to many media types
  • Can be tied to legacy systems
  • Event driven vs. calendar driven
  • Great for B2E
what typically flows through the public web site
What Typically “Flows” through the Public Web Site?
  • Information
    • firm history, financial, public relations
    • products/services overview
    • employment opportunities
  • Product/Service Orders
    • FAQs
    • Product catalogs
    • Order handling/verification
  • Customer Service/Support
    • FAQs
    • order tracking
what typically flows through the intranet
What Typically “Flows” through the Intranet?
  • Information
    • employees, procedures, org. charts
    • products, components, suppliers, customers, competitors
    • human resource bulletins and record (updates)
    • financial data
  • Knowledge
    • discussion groups, bulletin boards, mediated archives
    • collaboration tools
  • Workflow
    • internal transfer of & access to electronic documents
what typically flows through the extranet
What Typically “Flows” through the Extranet?
  • Information
    • employees, procedures, organizational charts
  • Product/Service Orders
    • “tailored” catalogs
    • transaction handling/verification
  • Knowledge
    • discussion groups, bulletin boards, mediated product/service/problem archives
    • collaboration tools
  • Workflow
    • internal transfer of & access to electronic documents
    • access to product, order, manufacturing, inventory databases
  • Customer Service/Support
    • FAQs
    • question/problem diagnosis/handling
virtual private networks
Virtual Private Networks
  • Uses open, distributed infrastructure of the Internet to transmit data between corporate sites
  • Companies set up connections to the local connect points (points-of-presence) of their ISP
  • ISP’s handle connectivity details
  • Security can be provided for businesses and mobile workers
virtual private networks29
Virtual Private Networks
  • Security: authentication, access control, confidentiality, data integrity
  • Tunnels - senders encapsulate data in encrypted IP packets that hide the underlying routing and switching infrastructure from senders and receivers
  • Virtual - network is dynamic with connections set up to org. needs
benefits virtual private networks
Benefits - Virtual Private Networks
  • Costs savings
    • no installation fee
    • tiered pricing based on usage
  • Allows for different types of connections (ISDN, T1, xDSL) without installing equipment at corporate headquarters
  • Reduced technical support rqmts
value of e commerce
Value of E-Commerce

“The value of e-commerce transactions while still small relative to the size of the economy continues to grow at a remarkable rate. More significant than the dollar amount of these transactions are the new business processes and models that e-commerce enables.”

Alan Greenspan

definition of electronic commerce
Definition of Electronic Commerce
  • Electronic Commerce is the ability to execute more effective and economically efficient business transactions over a network.....
          • Kalakota and Whinston, 1996
  • Network of preference..... Internet
  • Electronic Business
internet economy
Internet Economy
  • Small but growing at a phenomenal rate
    • The total US Internet economy more than doubled between 1996 and 1997 ---$15.5B to $38.8B
    • Revenues grew 68% last year: $507B (up $200B from last year) USA Today10/27/99
    • Jobs grew from 1.6 million to 2.3 million in 1999
  • Business to Business (B2B) e-commerce --largest share of the Internet economy
  • Internet economy is going through stages
stage 1 1995 1999 b2c websites
Stage 1 (1995-1999): B2C Websites
  • $180- $300 billion
  • Business evolution on Internet (Kosiur)
    • Publishing
    • Interactivity
    • Transactions
    • Fulfillment settlement workflow
stage 2 now business transformation b2b
$1.8 to $3.2 Trillion in 2003

Focus on improving core activities

Dynamic pages

Gateways to legacy systems

IBM Procurement example

maverick buyers vs. economies of scale

30 days to 1 day for generating PO

tell valued suppliers about out-of-line pricing

Total savings (1999): $6 billion

Stage 2 (now): Business Transformation - B2B
stage 3 2000 2005 industry restructuring
Stage 3 (2000-2005): Industry Restructuring
  • Empowers users and providers
  • New intermediaries
  • New players
  • Some disintermediation
  • Inter and intranet mergers
  • Focus on transforming and leveraging
other basic business models




Business-to- Employee – companies that provide services other companies can use to interface with employees

Business-to-Government – companies who sell the bulk of their goods and services to state, local and national governments

Consumer-to-Consumer – sites that primarily offer goods and services to assist consumers to interact

A combination of B-to-B and B-to-C models

Other Basic Business Models
marketplace vs marketspace
Marketplace vs. Marketspace
  • E- Marketplace
    • Network that brings together different companies
    • Sometimes called net-markets (buyers and sellers can find each other)
    • Types: horizontal and vertical
    • Exchanges (web services)
  • E-Marketspace
    • Virtual market where the transactions taking place are all based on information exchange, rather that the exchange of goods and services
    • Company typically does not own or hold inventory
horizontal electronic marketplace assumptions
(Horizontal) Electronic Marketplace Assumptions
  • There are many buyers and sellers
    • none of the buyers or sellers represents a significant fraction of total demand or supply
  • The goods or service to be transacted is homogenous or standardized
    • doesn’t have standardized or idiosyncratic features
  • Buyers and sellers are well-informed about quality and price
electronic marketplace principles
Electronic Marketplace Principles
  • Intermediaries can reduce uncertainty of transaction
  • Markets will do business with other markets
  • Electronic marketplace may disrupt/destroy old value chains and enable new forms of value
  • Value chains will be extended to explore B2B relationship/process changes
  • Intermediaries are separating economics of information from economics of things
electronic marketplace implications
Electronic Marketplace: Implications?
  • Customer-centered
  • Pricing
  • Fraud
  • Quality
  • Intermediaries
impact of e commerce on intermediaries
Impact of E-Commerce on Intermediaries?

Will middlemen be disintermediated in e-commerce environments?

new intermediaries market makers
New Intermediaries- Market Makers
  • Market makers (brokers) -bring buyers and sellers together
    • ONSALE
    • eBay
    • priceline
  • Dangers of online auctions
    • poor quality
    • overpaying
    • nondelivery
new intermediaries buyer and seller agents
New Intermediaries - Buyer and Seller Agents
  • Seller agents - make markets more accessible to providers
    • Firefly (customer profiles)
  • Buyer agents - perform search and evaluation tasks on goods and services for purchasers (more examples of these agents)
    • Auto-By-Tel
new intermediaries
New Intermediaries
  • Context Providers - help buyers and sellers by simplifying the virtual terrain
    • ISPs - America Online
    • Portals- Yahoo!, Excite
    • Online communities - GeoCities
  • Payment enablers -handle purchase transactions and their related funds transfers, as well as risk management
    • Verisign
    • PayPal
new intermediaries fulfillment specialists
New Intermediaries - Fulfillment specialists
  • Fulfillment specialists - handles the transfer and storage of goods and coordinate allied information, such as the management of shipping logistics
    • Fed Ex
    • UPS
  • E-commerce has helped their business
  • Enables more efficient and effective interaction between companies and their end customers
  • Also called compression
  • May create problems between established distributors and online distribution channels
  • Disintermediation may be a threat to some enterprises, but it creates opportunities for others
business models definitions

Reverse Auctions



Sellers place descriptions of items or services on the auction site and buyers bid for them (e-bay)

Buyers state what they want to buy and sellers offer items or services to meet the request (Price.line)

Site offers a customized homepage for the individual, offering information , services and links to other sites customized based on user’s state preferences (Yahoo)

ASP Site offers business process functionality to customers, who use this site as their own internal business process (Agillion)

Business Models - Definitions
the myth of the first mover
The Myth of the First Mover
  • Advantage due to high switching costs
  • But Internet may reduce switching costs
    • Open systems (XML)
    • Ease of switching (e-wallets, PayPal)
  • Internet brands are difficult to build
axioms of traditional business
Axioms of Traditional Business
  • Axiom 1: Value comes from scarcity
  • Axiom 2: When things are made plentiful, they become devalued
axiom for the new economy
Axiom for the New Economy

Value is derived from plentitude

or: What good is a single fax machine?

tipping points
Tipping points
  • Metcalf’s Law important for critical mass:

Network value = (nodes/number of people using)2

  • Critical mass depends not on absolute numbers, but on reach relative to the domain
  • Company with greatest reach has the advantage
  • Reach begets reach
  • Expand network externalities
  • Reduce uncertainty
  • Reduce customer lock-in
  • Moves competition away from features to price
  • Moves competition away from systems to components
who wins and loses from new standards
Who Wins and Loses from New Standards

+ Customers (though remember QWERTY)

+ Complementors (usually)

- Incumbents

+ Innovators (collectively)