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  1. Examining Electronic Commerce Simanta C. Chakraborty Sapient Corporation 18 November, 1998

  2. Agenda • Introduction • Internet Background • Internet Business Models • Trends and the Horizon • How to Capitalize on the Internet

  3. Introduction

  4. What is Electronic Commerce? • The ability for buyers and sellers to conduct business and/or exchange information without real-time human interaction

  5. Products Information Support Electronic Commerce Vision

  6. The Internet

  7. What is the Internet? • Worldwide network of networks • Overseen by governments but run by private companies • Driving force behind shift from voice to data traffic over US public network • World Wide Web has 2.5 million sites and 134 million users worldwide

  8. Internet Facts / Trends • Internet took four years to reach 50 million users • Digital economy 8% of US GNP • E-Commerce market in US $14 billion in 1997, estimated to grow to $300 billion by 2002

  9. Internet Consumer Demographics • Ave Age: 35 years old • 54% have college degree • 64% make more than $30k, 25% make more than $75k • 85% use the web at least once per day and more than 4 hours per week • Places / devices to access web are proliferating

  10. Brief Internet History • Concept first generated in 1962 • United States Department of Defense contract • Communications after nuclear holocaust • Envisioned to support remote login and file sharing

  11. Brief Internet History (continued) • ARPANET pioneers of packet switching • Open Architecture networking • Development of LANs, PCs, workstations spur growth • Email and web catalyst for commercialization • Businesses move to capitalize on business to business commerce

  12. Uses of Internet Technologies • Internet • Business to consumer • Wide business to business • Intranet • Internal to company • Extranet • Partnered business to business

  13. Physical Network • The Internet is evolving into more than a “data” network • The backbone bandwidth is increasing exponentially

  14. What is the Significance of the Internet? • Medium for collaboration and interaction without regard to geographic location, time zone, etc. • Advancing technology, organizations, and communities • Ubiquitous

  15. Buyers More choices, more power Personalization Anywhere, anytime Community Sellers Real time feedback Target marketing New markets 24 hour/day operation Lower costs Small guy look big... Customer loyalty Benefits

  16. The Internet and E-Commerce • You can use the internet for the following purposes: • Automating existing internal processes to cut costs • Extend automated process outside the enterprise to capture new business opportunities • Introduce a new process for service delivery • Create a new business model

  17. Internet Business Models

  18. Internet Business Models • Content • Advertising • Transactions (E-Commerce)

  19. Content Model

  20. What is “Content”? • Content is information that is created / packaged / distributed for a specific audience • Examples on the Web include AOL, WSJ, C/NET, Boston.com, etc. • Early pioneers of on-line content (CompuServe, Prodigy, AOL) utilized proprietary networks / software for distribution

  21. Early Content Efforts • If it’s good enough, people will pay • Users can subscribe or use micro-payments • Most people won’t pay for content • People like user generated content • Market growth slow - find new markets • Results were below expectations

  22. Advertising Business Model

  23. What is Compelling about Internet Advertising? • The internet has the potential to be the most effective direct marketing tool yet • It’s possible to target specific messages to an audience with specific demographics and interests • Internet first medium to allow brand conversion to sale • Internet less costly than direct mail

  24. Online Branding/Marketing Convergence

  25. Internet Advertising Revenues

  26. Transaction Business Model (E-Commerce)

  27. Examples of Internet Commerce • Service offerings • Wells Fargo • Product / company specific sites • Amazon • Dell • Business to business • Cisco

  28. Web Banking WELLS FARGO

  29. On-Line Bookstore AMAZON

  30. Amazon (Created New Business Model) • Virtual booksellers (2.5 million titles) • Store credit card and billing information • $137 million in sales (1997) up from $15.8 • Multi-billion dollar market cap • Vision to become the “Walmart of the Web” • Compact Disks

  31. Electronic Channel DELL COMPUTER

  32. Dell (New Channel) • Pioneered the direct computer sales model • $11 billion revenues • $3 million day over the internet • Target tech savvy and affluent buyer • Save $8 per order • Custom web pages for major customers

  33. Cisco (Automation of an Existing Process) • Product information, order entry, status • Eliminates errors, shortened order to delivery time by 3 days • 40% of revenue (approx. $1.5 bil) • Saved $230 million in operating costs

  34. Trends and the Horizon

  35. E-Commerce Trends • Consumers are becoming more comfortable with spending on the internet • Companies are developing internet strategies as integral parts of their corporations • Heavy investments in migrating to internet technologies • Business to business commerce is becoming the focus

  36. On the Horizon • Greater bandwith and more mature technology will converge media • Data, Video, Telephony • Personalization/customization will create brand loyalty • Businesses will form strong partnerships to protect themselves from extremely free markets

  37. How to Capitalize on the Internet

  38. Components of a Solution Business Strategy Internet Strategy Cognitive Engineering Technology & Architecture

  39. Enterprise Architecture Multi-channel integration Business Logic re-use IV: Transform the Enterprise Secure eCommerce Legacy Integration III: Intranet / Extranet On-line Customer Service Catalogs and Fulfillment II: Search Corporate Information Multimedia I: E-Commerce Growth Complexity of Implementation Increase in Business Value

  40. Long Term Plan • Competitive Assessment • Customer Segmentation • Business Case • Usability Testing Approach • Long Term Vision • Success Measurement Criteria • Initiative Communication Plan • Phasing Strategy • Impact Analysis and • Mitigation Strategy • IT Transformation Plan • Long Term Strategy • Corporate Architectural Strategy • Technical Migration Strategy • Change Management Plan Components of an InternetStrategy IV: + III: + • Business Drivers • Success Measurement Criteria • Business Requirements Prioritization Approach • Customer Service Strategy • Vendor Criteria and Selection Strategy Complexity of Implementation II: + • Navigation • Metaphor • Brand Extension • Content Strategy I: Increase in Business Value

  41. Technology Recommendations • Consider short term business and technical needs, but build for the future business needs • Use component based architectures to expedite time to market and manage maintenance costs • Execute within a well defined migration strategy and plan • Use proven technology

  42. DB DB The Current Situation Customer Service Web PC Phone ATM DB

  43. DB DB The Future Customer Service Web PC Phone ATM SBA: Common Business Functionality

  44. Ecommerce Recommendations • Get in early • Spend to attract customers • Provide “one to one” experience • Provide value proposition • cheaper • faster • easier • exclusive

  45. Summary • The net is becoming mainstream • The rate of advancement / learning is astounding • Re-visit your supply chain and customer value proposition. Can you reach new markets, build customer loyalty, cut costs? • Don’t let someone change the game on you

  46. Thank You