The purpose of this note is to give a brief idea about the basics of E Commerce & the Internet in terms of terms used , security aspects and future outlook. The internet is like a tidal wave sweeping the world and it is changing the world in a way not done in any such way before.
Before we actually get into the subject it would be a good idea to demystify various jargon and break them down to into simple and easily understandable definitions of these complicated subjects.
Definitions
1. Web site or URL 2. Domain name 3. Cybersquatting 4. Internet
5. E Commerce v/s E Business 6. Site visit
7. Page view 8. Hit
9. Click through 10. Encryption
11. Digital signature 12. Protocol or standard 13. Payment gateway 14. Cookies
15. SSL 16. SET
17. Public Key Infrastructure 18. Hash
19. Virtual Private network 20. TCP/ IP
21. FTP 22. Firewall
23. Modems Routers and gateways 24. Packet switching
25. Circuit switching 26. ISDN
27. WAP
Simple definitions
1.Web site or URL : - A web site is virtual location where the data pertaining to a site on the internet is located. URL stands for Universal Resource locator and is based on a standard naming convention followed the world over using world wide web ( WWW) , the respective domain names ( .com , .org, . edu) etc. It is like a postal address given in a capsule
2.Domain names : - These are given to countries or to organizations which intend to collate their offerings in a systematic way on the internet. It is like having an easy reference mechanism to search for books in library
3. Cybersquatting:- This reveals the ugly face of the internet where individuals secure famous domain names on a first come first served basis and then offer the sites at a price to genuine corporations who wish to use this domain name.
4.Internet : - The internet is a collection of computers ( actually servers ) which contain data about individual sites which can be accessed by anyone connected to the network in an open and free environment . Thus there is no restriction on the content ( read information ) available on the net. There is no source controlling the creation of this content, its access and dissemination across the network. The servers ( read users ) are connected thro’ the internet gateways provided by each country for its users . In India , Videsh Sanchar Nigam Ltd ( VSNL ) provides the only gateway in India. 5.E Commerce relates to the simple exercise of buying and selling goods
over the internet. It involves setting up software , connectivity issues, payment gateways etc. . E Business is a much wider and comprehensive term which covers the entire process of doing business on the net in a safer , secure, manner.
6.Site visit : - Every time a visitor enters the URL of a site and enters the site, he is logged in as a visitor. In case he logs out or his connections gets terminated , a fresh log in would normally be counted as a fresh visit. All sites have log files which record visits. Usually repetitive visits within a short time duration are ignored while computing visit statistics
7.Page view : - Every time a visitor visits a site , he encounters a home page which is something like the window of a shopping mall . Once he clicks on an icon or a picture a fresh page is served to him . Each such page which is served to him as per his request is called a page view.
which together constitute that page view. Each of these files when downloaded represents a hit.
9.Click through : - This is extremely important for advertisers. An advertiser puts a banner in a site which gives an opportunity to a visitor to the site to click thro' the banner and thereby see the advert shown by the advertiser. This represents a click through and the site is paid a fixed amount for each click through.
10. Encryption : - When data is sent across the internet, it is open to abuse , misuse, and tampering of the information while it is in transit. Encryption masks the message into a mass of unrecognizable characters during the transit so that data integrity is maintained while in transit. It is important that both users use the same encryption software so the receiver is able to decrypt the encrypted message and read it. This is a standard feature in private networks but is not available on the internet. This is explained in further detail later .
11. Digital signature: - This is not a signature either by hand or by computer. It is method to authenticate the sender of the message and to ensure the complete and total transmission of the message. This is done by using various methodologies like single key, double key etc.
12. Protocol or standard : These two words are used interchangeably very often in the IT world. A protocol is like language or a common set of instructions which enable different networks to talk to each other. This is stored in each PC ‘s networking area which enables it to talk to other PC’s. There are proprietary protocols like IPX belonging to Novell and public protocols like SS7 for telecom systems which is extensively used in implementing 1-800 type requirements ( receiving pays for the call ) and TCP – IP , the protocol which drives the internet.
13. Payment Gateway : - This is a mechanism to enable e commerce transactions in a way that would replace/ supplement existing payment mechanism’s like cash, cheque and credit card. A payment gateway can be established by bank, or a software company or a combinations of both. It enables customers to approach vendors and settle transactions without resorting to the above mentioned three modes of payment.
14. Cookies : - These are not biscuits , believe me these are small bits of information about the site visitor who is visits the site which are recorded in file in his PC. The same data is extracted when he next visits the site using the same PC. It is used for storing common information about the customer and is a prime enabler of personalization of the web.
16. SET : This stands for Secure Electronic Transaction and is the new standard in secure transactions on the Web . It involves double/ triple key encryption, use of hash digests, and certification authorities
17. Public key infrastructure : - This involves the entire structure for doing secure business transactions in the Web in the future. The comprises of the public and private key, the hash digests, certifying authorities, etc. This is expected to be the way to go for most countries which intend to replace the conventional business models with e business models
18. Hash digest: This is a number which is generated out of an electronic message by an encryption software. It is used to ensure that a message has been received in the same manner in which it was sent. It is like a check digit used in computers.
19. Virtual Private Network: - A private network is one which is not open to the public world. Once a network is open to the world it is open to hackers , tricksters, fraudsters and others with malicious intent. A purpose of a Virtual Private Network is to avail the easy set up and install features of Internet technology along with the safety of a private network by creating an encrypted tunnel around the network . Every user has cryptography software installed in his/ her machine, so that data can be safely sent thro’ Internet. This will be increasingly used by companies with vendors, customers and by banks which intend to offer internet banking.
20. TCP/ IP : This is a short form for Transmission Control Protocol / Internet Protocol. This is what rules the Internet. This is publicly available network which was initially developed by US Defence Academy. It’s advantages are easy of use and installing, and scalability. But since it is an open system it is also open to abuse and lacks security. In order to make TCP/ IP a truly secure platform, one needs very good encryption software like PGP , a public key infrastructure, and a robust firewall solution.
21. FTP : - This is called File transfer Protocol and is the medium offered by TCP /IP for files used by one server can be accessed and extracted by another remote ( in a distant location) server. It is now a commonly used method of transmitting software deliverables rather than thro' floppies, tapes and where a dedicated link is not required between the two users. It is subject to various passwords/access controls which are provided but does not come with any standard encryption software.
22. Firewall : - This is simply the most important security device available to a company which is open to world thro’ a public network. It is expected to filter out who is accessing the network ( known or unknown source ) an what kind of data ( harmless or malicious ) is being brought into the network. They primarily work by tracking IP Addresses ( this is like a code of your PC known only to TCP/ IP ) . There are various complex firewall solutions giving various levels of security.
senders PC to analog data ( thro' telephone ) back into digital data in the receiver’s PC . Routers perform the complicated job of directing network traffic. It is like the virtual cousin of the Hag Ali Traffic signal which we are familiar with. It has manage all the traffic going thro' the network assigning priorities and deciding the path for the data to travel . A gateway is a server which enables systems using different platforms to talk to other systems . Thus you can have fax gateways , internet gateways etc.
24. Circuit switching: - This is followed in the conventional telephone lines . The circuit between the two telephone lines is activated once any of them dials the number and is terminated once the connection is cut. This has traditionally been used for all voice traffic.
25. Packet switching : - This is the method for transmitting data packets between two PC’s. In this case the data is packed into packets which are transmitted thro' the medium ( copper, fibre, glass) at varying speeds depending on modem speed . The telephone line is used only for the time of actual transmission thereby reducing the cost of transmission. This has traditionally been used for all data traffic.
26. ISDN : - This is a digital telephone line which avoids the use of modem for converting the data from digital to analog and vice versa. Thus an ISDN line can carry data, voice, images ( for video conferencing), internet browsing etc in the same line thereby using the line effectively .
27. Internet Telephony : - This is a technology by which voice messages can be transmitted using TCP IP protocol and not conventional telephone protocol by which due to use of packet switching the cost of an international phone call would become comparable to the cost of sending/receiving e mail messages. This technology is under development and is presently banned in India. The reason is that the use of this technology will distort the present arrangement of sharing revenues among telecom carriers of each country. As a result, this needs to reworked by various countries under the aegis of the International Telecom Union ( ITU).
28. WAP : - Wireless Application Protocol : - This is a new emerging technology which involves convergence of radiowave communication ( used in mobile phones ) and TCP IP used in Internet, It is meant to allow users to receive and send e mails from their cell phones and browse the internet suing their cell phones.
29. Cable modems : - These devices are alternate devices to regular data modems which connect thro’ a land line to the internet. A cable modem connects you to your cable operator who broadcasts a cable transmission ( with which I am sure all of us are familiar) . This cable modem eliminates the need to have a phone line and PC connected to the Net. One would still need an external hard disk to download information and keyboard to type it in .
The World of E Business
The internet has enabled a whole era in our times and has made possible what was considered impossible in the past. It has truly converted the world into a global village. It has resulted in what is popularly now called as the death of distance. It has broken down a number of existing business models and has given rise to a number of new business models which are the opposite of conventional business thinking.
It is therefore said that e Business has re written the rules of Business and very soon there will be no Business except E business . Thus every individual, small business, large corporate, institution, government body must realise the potential power of this medium and put himself or herself in the centre of this medium to address the needs of his clientele. If he refuses to do this, he runs the risk of having some upstart beginner take away his entire customer base which he has assiduously cultivated over many years .
Below is an introduction to the subject of e business beginning with business models, main players, benefits, tools and techniques and pitfalls.
Part A : What are the major Business Models / Profiles on the Web : -To understand e business one needs to have a helicopter view of various participants and various consumers on the web.
◊ Business to Business
This is supposed to be a huge opportunity area in the web. Companies have by and large computerized all the operations worldwide and now they need to go into the next stage by linking their customers and vendors. This is done by supply chain software which is an integral part of your ERP application . Companies need to set up a backbone of B2B applications which will support the final customer requirements at the web . Many B2B sites are company and industry specific catering to a community of users or a combination of forward and backward integration. Companies have achieved huge savings in distribution related costs due to their B2B applications. The example which comes to mind immediately is that of CISCO Systems, who sell the networking equipment which powers the Internet.
◊ Business to Consumer
This is a direct application from a seller of products to an end consumer of those products particularly the retail products.Amazon.com is a typical example.
◊ Consumer to Business
asks for a price from the customer and goes and finds out the best match for that given price.
◊ Consumer to Consumer
C to C applications are the ones involving consumers who deal with each other on the web. They need a site like an online auction site for example to transact with each other. E Bay is an example . Message boards, community sites, chat forums are also C to C applications .
It doesn’t mean that the Internet is all about buying and selling goods or services or information. The internet works because of a whole industry works painstakingly to make it happen .
Part B : - Who are the main players in this industry and what are their roles.
1. Internet Service Providers
This is like the telephone company which gives you gives you the phone connection. An ISP has linkages to an International gateway and has further linkages to a local service provider ( say telephone or cable service provider). It provides internet access for a fee based on the hours logged in by the user and the time of day or night . The Govt. of India has committed to allow private international gateways ( as against VSNL at present) and has fixed a nominal fee of Rs 1 for an ISP license. The charge paid to the local service provider needs to reviewed in respect of internet access. Most ISP’s need to set up content based portals and search engines to augment revenue because an ISP as a standalone proposition is not viable. It is felt that ultimately one day the phone lines , the power cables and the internet traffic will all travel using the same medium. This is very broadly referred to as a broadband network.
2. Search Engines & Portals
Search Engines are a basic necessity on the net as there are no known directories of sites. It is also humanly impossible for one agency to compile the same. The major search engines such as Yahoo, Hotbot, Altavista, Infoseek, Askjeeves maintain a directory of sites which visitors can get by giving appropriate search criterions. The sites also have links with thousands of other sites giving instant access. Every site wishing to do e business needs to be registered on these sites because 70-75 % of all site traffic arises out of search engines. There is huge amount of research being done in the West on designing focussed searches and configuring sites to attract visitors thro search engines. Search engines usually get good Adv. revenues.
Portals are like virtual libraries giving information on subjects which are of interest to its visitors. Since all ISP’s and search engines get lots of visitors they usually set general purpose portals for everyday information like travel, weather, news, sport, investing etc. There are also vertical portals which cater to a particular class of people. Most of the information in these portals is free and the future of a portal is getting a no of loyal subscribers thereby getting some revenue streams along with advertising.
3. E Commerce service providers
sourcing centre which takes care of order fulfillment and negotiate with manufacturers for huge discounts on catalogue prices. These companies can also provide third party services for small companies which do not want to spend a huge amount on setting up a site and maintain it.
4. Application Service Providers
This has been explained earlier. It is believed that almost all software companies will have a working ASP model in future and this will be way to go in the future.
5. Payment Gateways
These are financial intermediaries similar to VISA & MasterCard which take care of settlement of e commerce transactions. A payment gateway can be set up by a bank but it need not necessary be bank. It needs software which is linked to customers and suppliers and which is used to set up all other validations and checks. A typical e commerce transaction consists of bill presentment, bill payment and settlement. The payment gateway software needs to provide all these and more. Their revenue model is based on % of transaction values/ numbers and it is paid by the e commerce service providers. There is also a small fee paid by the consumer. Check free is the one of the well known gateways in USA. 6.E solutions providers
These are companies providing end to end solutions to clients wanting to use the web in a significant way. This involves designing a web site, setting up performance parameters, setting up security and redundancy back ups.
7. Security solution providers : -
They specialise in making the web a safe place to do business. This involves cryptography solutions for credit card security, firewall based solutions etc
8. Content providers
There are various participants which generate valuable content information which when posted on the net at popular sites has huge reference value. This is a very lucrative area because all ISP ‘s and e Comm sites want to depth in content so as keep the subscriber hooked to their site.
9. Web hosting services
Every company which sets up its web site is not able maintain and update the same on a regular basis. This is more because web site development and updation is a highly technical and creative activity. The activity involves conversion of content matter to HTML/ XML form, site design, server upgradation. The biggest test of web hosting comes when there is huge increase no of visitors and the server is not able to take the load. Thus visitors have to wait for connections and many times only some of them are able to get through.
10. Server farms
Part F : - What benefits do I get out of e business : -
1.Direct Interaction with customers : - This is the greatest advantage of e business. The unknown and faceless customer buying the products of a large MNC like say HLL or Procter & Gamble thro distributors, channels, shops etc ; now he has a name , face, and a profile . Large MNC’s pay a fortune for this information on customer buying patterns .
2.Focussed sales promotion : - This information gives authentic data about client likes , dislikes and preferences and thus help the company bring out focussed sales promotion drives which are aimed at the right audience 3.Building customer loyalty: - It has been observed that on line customers
can be more loyal than other customers if they are made to feel special and their distinct identity is recognised and concerns about privacy are respected. It has also been seen that once customers develop a binding relationship with a site/ product on the web they don’t like to shift loyalties to another site/ product and re enter their profile information all over again 4.Scalability : - The web is open 24 hours a day and seven days a week.
Thus provides an access never known before to the customer. This access is across locations and time zones. Thus a company is able to handle much more customers on much wider geographical spread if it uses an e business model. The company can set up a generic parent site for all locations and make regional domains to suit such requirements. This model is being used by Microsoft very successfully. The additional cost of servicing additional customers comes down drastically once a critical mass is reached.
5.Savings in distribution costs : - A company can huge savings in distribution, logistical and after sales support costs by sing e business models. Typical examples are of computer companies , airlines, and telecom companies. This is because the e business models involve the customer in the business interaction to such a level that they are able to avoid setting up the huge backbone of sales and support force which ordinarily would have to set up.
Part G : - What are the tools and techniques at my disposal
It is important to know the right marketing strategies which would be required to sell successfully and profitably over the web . The web as a medium provides to you with a unique platform to enable various strategies which would not have been possible to execute in a conventional scenario. Some of these are : -
◊ Use of Pricing as a tool
There is wealth of research on pricing used as a tool to generate sales on the net. The biggest e tailer of them all , Amazon.com made it big by giving substantial discounts. Part of these discounts are attributable to the distributor level commissions which are being passed on to the customer. Apart from this , companies have started giving things free on the net in order to get a critical mass of subscribers which helps in getting Adv. revenues. The best example is that that Apple IMac’s being given free in case the buyer agrees to buy a certain minimum value of purchases using Apple’s e commerce web site.
◊ Use of Application Service Provider model
are offering their packages not in CD’s and boxes but thro’ the web. The customer can log in over the net and access the software from the web server of the company and need not download it into his PC. This goes one step further in the age of the Network PC where on need not use even a hard disk and all critical application data is kept on the web and can be accessed anywhere in the world. These services ( they are not products ) are being offered at say 5 Dollars an hour.
◊ Use of generic models which are known for efficiency as well as personalised attention to individual customers
The web has given rise to a new partnership between brick and mortar manufacturers, e tailers ,and express delivery companies like Fed Ex. These take care of the individual elements of the customer , the order fulfillment and the post sale complaints if any.
◊ Target key influencers to a purchase so they act as catalysts ◊ Web based auctions
An auction is a new concept which has sprung up on the web. It enables people to sell and buy used items which the seller wants to dispose and dos’ent know who to contact. Here the seller posts items for sale in a web site and buyers bid for it. The best price gets the deal. The auction site gets a commission.
◊ Use of smart cards , cyber wallets
The web has spawned a totally new generation of monetary instruments ( Alvin Toffler calls it para money ) . These threaten to make the conventional instruments like cash, cheques, and credit cards obsolete over the long term . The smart card is a plastic card with an embedded chip which contains financial details . It will help you buy gas( we call it petrol ) , make telephone calls, and use virtually any retail product or service using Internet kiosks . And this will not be tied with any one product, supplier or location. A similar application is the cyber wallet which is actually an amount of cyber cash stored in the hard disk of your PC and which enables you to do internet shopping without using your debit / credit cards.
◊ Use of comparison shopping
The internet has brought in a whole new concept of price matching and comparison shopping. Today there are sites which will go thro hundred’s of sites for you to find the cheapest product fitting your specifications. This would never have been possible without the internet. Junglee. Com is said to perfected price and comparison software.
Part J : - What are some common myths about the internet and e business in general
2.Advertising is a good source of revenue for e commerce service providers
This has not been substantiated with any level of credibility. What is actually being observed is the dot com companies are splashing pages and pages of advertising in newspapers to get attention and awareness. It will take years for portals to get significant ad revenues .What is also seen that a most the Ad revenues are monopolized by a few sites like Yahoo etc.
3.If I set up a jazzy site , I will get more visitors
This is a painful story that most site owners learn mid way thro their journey. Most consumers have dial up connections which use the existing phone network which was never meant to take such data , pictures, images. The networking equipment ( modem speeds ) may be the latest , but if your phone is not able to take it, the download speed will not improve. The result is slow downloads , frequent connections getting cut, and resultant frustration. It is advisable for all sites to give text options where downloads are faster. And site developers need to keep quick downloads and easy navigability as most critical elements of web site design.
4.The internet is a bubble , it will collapse one day
The is the most life and death type of question which hangs over the Internet. The net being is such a an open medium which cuts across all known barriers of time and space is open to a lot of abuse and governments are not geared to understanding the nuances of this technology and cutting the abuse and acting promptly against the abusers. There is also great deal of confusion and soul searching about the line to be drawn between restricting creative license of persons, and freedom of expression and protecting public interest . The internet is a young medium and there is still a lot to learn about its weaknesses and failures.
There is a certain amount of skepticism about the net being a viable place for conducting business transactions. It is felt that the net can collapse anytime. While this partly true , looking at the recent instances of sites like Yahoo, Amazon and E bay but one must note that the Internet is set up using mesh topology where all users are connected to everybody due to which collapse of one server does not affect other users. This theory needs to taken with a pinch of salt because if Yahoo’s site goes down then people who use its message boards to communicate are not able to do so. As a result , they are affected. The more the dependence on the net for business transactions, the more it will have to be made failsafe.
5.A ISP giving me free access to the Net is a great deal
The question arises as to how a company should weave a strategy to win the loyalties of its customers on the web. The book “ Customers. Com “ by Patricia Seybold addresses this very immediate issue. It talks of broad generic strategies on the road to e transformations and gives practical examples as diverse as airlines, e tailers , universities.
I have below encapsulated the concepts explained in the book along with valuable nuggets of wisdom given in the book.
Part A : - There are five stages in the route to e transformation 1. Supply product information or brochureware
Every company begins the process by putting its product details or its service offerings on the net. This is meant to enable potential customers, investors, suppliers, general public etc to get some information about the company. It has now become extremely common for a potential customer to ask a company about their web site . It is often said that just like the airports of a nation are the first thing seen by a traveller, a company’s web site is usually the first form of interaction between a company and a lay person . So if you get the first impression right, the rest of the going is easy.
2. Support basic customer requirements and enable interactions with the company.
At this stage the company starts getting responses and feedback from site visitors about what they expect from the company. At this stage, post sales service, warranty claims, problem identification are typical areas one can do using the web. This helps the customer know more about the company’s product offering, use it for his requirements and help himself wherever required. A company which did this right and was able to scale up its web presence dramatically was Dell Computers.
3. Enable on line transaction processing thro all stages
At this stage , the company needs to represent the entire process of buying and selling and map this process on the web . These processes must be customer friendly at the same time not be too intrusive. It should bring pleasurable experience giving him a reason to visit again. It should cater to all kinds of visitors, like the first time visitor, the regular visitor, the sporadic visitor. Amazon has actually done this. They have a walk thro process for the first customer, FAQ’s on safe shopping for the doubting Thomas and 1 Click processing for frequent user.
This is a stage where the customer identifies himself with a site and treats it like an extended family. His views need to be listened , his concerns need to be addressed. The entire process of accessing the site for information , doing transactions, checking up on past transactions , choosing preferences would be done with rapid efficiency but the method of interaction would be personalized so as to reflect the distinct identity of a customer. It’s like a person entering his own store with all the items arranged the way he would like it to be for easy access and quick retrieval. Amazon . com has really succeeded in doing these things.
5. Foster a community feeling among groups of customers
People don’t like to shop alone . They like to be identified with a cause ( say the Clean Air Group) , a passion ( the golf players club or fans club of a soccer team ) , a location or a community or an educational institution ( say a Harvard alumni ). When such groups get together on the net , they really stick together. They are fiercely loyal to their beliefs , likes and feelings. A site which brings such people together is likely to get very loyal customers .It creates special “ Members only “ areas , creates Message Boards, and chat forums.
Part B : - The building blocks used in implementing any e business strategy will involve the following : -
1. Customer profiles.
Customer profiles are at the very heart of personalization of the web. They are used in sending e mail alerts about new products , in judging your taste in books, in giving you your preferred seat in an airplane.
2. Business rules
These are the rules or the business logic which the site uses in its interactions with customers. It is based on customer profiles, study of consumer behavior and psychology and on the company’s objectives. This can lead to giving loyalty programs, free offers, discounts etc.
3. Business events
These are the various activities that a customer does when he visits a web site. These need to be studied to make the interaction easier, and the problem quick and hassle free. For example I check my bank balance, checking order status. This helps flow of data between systems to enable smooth
execution.
4. Business objects
These are the all important items which will identified and will have to be defined. Typical examples are an account, a customer, an order, a product or a service etc.
You need to be extremely about the target audience that you are expecting to visit your site. Now, surprise this may not actually be your customer. For example , National Semiconductor has targeted Design Engineers of user companies in Technology sector as its target audience. The design engineer needs quick access and fast download of drawings, specifications and samples of semiconductors for the applications that the company offers. It is important to note here that the design engineer does not make the purchase but he is one of the key influencers of the same. 2. Own the experience
3. 360 Degree view of the customer
4. Streamline customer facing processes
Most companies don’t realize that the physical world has a lot of support processes which ensure that the customer is serviced in a satisfactory manner. These are essentially manual backups which understand consumer psychology and thereby act as a physical safety net . But the net is shorn of all such backups and thereby the customer is left all alone. It’s imperative that the process facing the customer work smoothly and efficiently at the same time not seeming too remote or distant.
5. Help the customers do their jobs
Customers actually want to know more about the products and services of a company, often as much as information as the company has about itself. They would also do tings themselves. This actually helps the company because it does not have to keep a large back office team for the purpose. A typical example is the courier company which gives tracking information on packages on its web site. For every visitor who obtains any useful information / data from the web site there is a corresponding reduction in phone calls to the sales/service staff of the company.
6. Personalize contact and foster community
Part D : - What are the tips for success in the e business world
◊ Customer Loyalty v/s profitability per customer ( individual or a class/ grouping )
This is a very profound example which goes to the heart of customer philosophy. A company needs to assess profitability of its customers and not just products. Thus it can find which customers are adding to the bottom line and those which are eroding the bottomline. This helps the company to evolve strategies to retain these profitable customers and prevent their defection to the competition. The more loyal a customer is the more profitable he will be to the company .
The various stages that customers generally go thro are something like this : -
The base revenue that each customer gives . This is what he buys from you irrespective of brand loyalty at a base price.
The add on revenue which accrues as a result of a customer buying other products offered by the company.
The price premium a loyal customer pays for the product for which he would not defect to a competitor’s product even if available at a lower price ◊ Foster community and loyalty
◊ Generate referrals
◊ Allow the customer to help himself ◊ Give him the choice to lead or be led ◊ Reduce cost of new customer acquisition
◊ Create stickiness by personalising interactions
◊ Eventually the most loyal customer are the most profitable customer as they are willing to pay a premium price
Conclusion : - What are the issues/pitfalls I need to be aware
:
-1. Privacy
Abroad , this has become the single most sensitive issue covering the net. The use of customer personalization and cookies has put personal information about every individual in the hands of a group of people.
All the well known sites have privacy policies posted in their site and also have certifications by WEBTRUST or VEISIGN to reassure users about privacy concerns.
But the actual implementation of these policies and accountability issues relating to the same by site owners remains a gray area.
2. E Phobia
A whole generation of people have grown up in the world without direct exposure to computers . They have been exposed to the printed word thro newspapers, to the news by radio, and to visual medium by TV only.
This large proportion of our population , especially senior citizens remain wary of this interactive phenomenon called the internet . The use of the mouse, the remembering of passwords , the navigation of the site seems a dreadful thing to them. It is likely that the present generation may remain outside this net revolution and as a result would be deprived of its benefits. 3. First mover advantage
The first mover advantage has given huge benefits to companies like Amazon, Dell, Cisco, Yahoo etc. This has lead to feverish activity among net companies to capture mindspace of consumers and has also lead to ridiculous prices being paid for companies having an ostensible first mover advantage. The Satyam Infoway deal with India World is an example. Some of these based on a pyramid which has to collapse some time.
4. Cyber laws
The rapid acceptance of the internet in everyday life would largely depend on the enactment of cyber laws in each country. Apart from this , countries would have to reach agreements with each other on minimum standards of internet usage and cooperation in case of cyber crimes .
5.Taxes
There are two issues about taxes on the internet : the first issue is whether transactions over the net should be taxed at all and if so who should get the right to tax a transaction and based on what principles.
There are certain states in the US which don’t tax a company for on line sales in case the seller does not have a situs ( physical presence in terms of property, office, phone listing ) in the state where the goods are delivered. This is treated like a mail order operation. Logically a company could operate in all such states but not have a situs in USA but instead base it in say Jamaica and thus not pay any taxes on its products.
Various countries of the world need to work together to sort out these issues. Once abroad agreement is reached , one needs to write good software which will track transactions and enforce payments of the taxes.
6. Role of Intermediaries : -
A great deal has been said about the Internet heralding the death of distance as it were. This means that anybody can sell a product to anybody else anywhere in the world . This ordinarily would spell doom for local wholesalers, retailers and a whole set of intermediaries. While this may be technically true, issues like after sales service, a need to look and feel the product, and local personal equations will ensure that intermediaries will remain for along time to come.
But nevertheless , it must be said that every intermediary in the sales cycle needs to add value to the chain or he/ she will find survival very difficult . This has already been proved correct in respect of floor traders of traditional stock exchanges who are in the danger of being swamped by internet based online trading which practically eliminates all human intervention in equity trades thro’ stock exchanges. The story of how Charles Schwab & Co brought down brokerage rates and captured a large chunk of share broking business is now well known. Merrill Lynch was reluctant to enter on line trading in a big way because it was fearful that its brokers might lose their incomes.
Security on the net
Security on the net is a much hyped and talked about issue and has exercised the mind of most people who would like to make the cyberworld a secure place to do business .
When business is done over the internet the following issues become very important
◊ Identification of the persons doing business i.e. the customer and the vendor or the sender and the receiver
◊ Protection of the sent message from unauthorized additions, deletions, and other modifications
◊ Confidentiality of the participants and information contents ◊ Non repudiation of transaction by both parties at a later date
In a normal paper transaction a letter is written probably on a company letterhead giving specific instructions and is physically signed at the end of it by an authorized signer. The document is hand delivered or faxed to the counterparty. This party assumes that the document has been read before it has been signed, it has been signed by the authorized person. This type of transaction in today’s context has a high degree of confidence among the general public.
Any e business transaction will have to meet all the above tests conclusively in order to able to replace the conventional paper transaction. Unless this happens. People will not gain confidence over this “ new “ way of transacting. We therefore need to understand as how we deal with the twin issues of identification and encryption on the net.
Introduction to Identification : -
Identification is the very tenet of transaction integrity. At present the physical signature is the sole evidence of a physical transaction. In the electronic age efforts have been made to overcome the obvious limitations of a physical signature which by itself at best a mediocre security device. The newer identification devices rely on any of the following: -
◊ What you know : - Password etc
◊ What you have : - Your credit/ debit / smart card/ PIN no
◊ What you are : - Biometric identification like voice, retina image, dental image
Different levels of these devices are used at different places depending on the sensitivity of the location/ application and the possible risks arising out of a break in.
impersonator. This can be achieved by a process called a digital signature where an independent third party confirms the identity of both the parties so that the identity of both parties is established beyond doubt.
Introduction to Encryption : -
Encryption : - This is the only way to ensure that the message conveyed by a sender is not intercepted by an unauthorized persons. In order to do this we need to ensure that :
◊ An unauthorized person should not be able to intercept the message ( This is the biggest challenge to ensure on a public network like the internet ) . ◊ Even if somebody intercepts the message there must be a mechanism to
make the message unintelligible.
◊ Only the authorized receiver of this message should be able to read its contents.
◊ In case the message is added, deleted, modified or changed in any manner it should be detected and thrown out.
◊ Sensitive information about the sender or receiver which does not affect the integrity of the transaction should not be divulged.
Encryption is a mathematical algorithm written by academics in USA to create a combination of numbers by which it would be virtually impossible for an impostor to crack a message purely by applying various permutations and combinations. This generally uses combinations of prime numbers and is expressed in the order of say 56K or 128K or 448K. It actually means that ones needs to work out 2 raised to the power of 56 combinations to arrive at the repeat combination. There is a software at the customer’s end ( sender) which encrypts a message and the same software is to be used by the merchant ( receiver) to decrypt the message.
Methods of Encryption : - Encryption via SSL : -
This is a secure network layer which provides end to end security and privacy of data from the client ( user) say Mr. A to the server( merchant ) say Mr. B when a transaction is initiated thro the Internet using well known browsers like Netscape and Internet Explorer. It does this by ensuring privacy, authenticity, integrity, and non repudiation. It is explained below how the same is done.
Privacy : - A set of two keys, public and private ( actually nothing but very large number combinations ) is used for transacting over the web. Every browser gives a set of keys for each individual which comprises of public and private keys. The arrangement is that in order to open a message which has been encrypted using the public key , it can be decrypted using only the private key or the other way around. Usually the public key of an individual is available freely over the net and the private key of an individual remains in his browser and does not travel over the Net.
As a practical example, B gives A his public key and then sends an encrypted message which has been locked with his private key. A can open the message with B’s public key.
Authenticity : - This is meant to ensure that the person ( say A ) who receives the public key is actually and not an imposter. This is done by certification. This is done by a third party certification agency which has the public keys of both A & B.
As a practical example A’s public key is used by the certification agency to decrypt the message which has been encrypted by A’s private key thereby ensuring that both the combinations match and the authenticity of A is established without doubt.
Integrity : - This is meant to ensure that the message is transmitted in its totality. This is done by inserting a hash digest ( numerical combination) as a part of the message. This hash gets changed in case of tampering of the message in any way. The hash is verified to be correct after the message is decrypted by the receiver. In case the message is tampered , the hash would not tally thus exposing the tampering.
Non repudiation : - This is meant to ensure that Mr. A does not repudiate a transaction after it has been competed over the web. For example he can refuse to pay for goods he ordered etc, . This is done by the date and time stamps reported by the certification agency and certain hardware tokens of the users.
SSL has substantial inroads in developed countries and has been very successful in enabling secure e commerce transactions . But there are some other issues to be addressed before we can sleep peacefully
1. Till now we thought that Mr. A was the suspicious character whose identity was suspect and his intentions were doubtful. But these same issues could also be debated about Mr. B. These issues can be resolved by server certification for E commerce service providers. This certification would show that the consumer is transacting with a trustworthy source and his personal information would be protected against wrongful use. Prominent certification agencies are WEBTRUST and VERISIGN.
Secure Electronic Transaction ( SET) : -
This is a new standard in e commerce which aims to improve upon the shortcomings of SSL and build an entire super structure across companies, networks, and countries which will eliminate risks and ensure secure e commerce. This protocol has been sponsored by Visa and Master card and aims to remove consumer misgivings over giving credit card numbers over the net. The essential elements of SET are : -
◊ SET is a total solution platform involving all participants like the credit card holder, the merchant, the card issuer, a banking arm, the payment processing agency etc.
◊ Each and every one of these participants needs to be certified by a certifying agency
◊ Payment information of the credit card holder is not disclosed to the merchant.
◊ The merchant completes the transaction after receiving confirmation of the cardholder’s status from his banker.
Implementing SET across all the above participants is a huge task. It involves a whole lot of issues such as : -
◊ Setting up of required hardware and software infrastructure among all participants
◊ Setting up the certification agencies and maintenance of the public key infrastructure
◊ It should not result in additional costs to the consumer
◊ The time taken to complete this process cannot take very long ( it should be completed in seconds)
◊ Ongoing maintenance of this infrastructure at all times with necessary back ups’ and required scalability
SET requires different levels of certification agencies which will maintain the entire Public key infrastructure . These agencies can be large corporate, banks, accounting firms, legal firms etc. Their major functions are key management ( allotment, storage, cancellations ) and certificate management ( issue, access, revocations ). Standardization of operations and interoperability among different agencies is very critical to the success of SET.
SSL v/s SET
SET has been slow in gaining popularity in the western world mainly due to the absence of certifying agencies. But is expected to gain ground in the coming months and the general consensus among industry experts is that this is the way to go in the future. But it will require significant initiatives at Governments in all countries to embrace this new protocol and make it an industry standard.
Issues related to Information Technology Bill 1999 The IT Bill broadly covers the following areas : -
1. Digital Signature for Authentication of electronic records 2. Electronic Governance covering
◊ Legal recognition of electronic records ◊ Recognition of digital signature
◊ Use of the same by Got agencies ◊ Retention of electronic records ◊ Publication of Electronic Gazette
3. Attribution, Acknowledgement of Receipt, Date and Time stamp 4. Secure Electronic Record, digital signature
◊ Based on a Security procedure 5. Appointment of Officers
◊ Controller of CA’s
◊ Recognition of Domestic & Foreign CA's ◊ Controller to be repository of Public keys 6. Procedure for Digital Signature Certificate
◊ Issue requirements, suspension, revocation 7. Duties of Subscribers
◊ Acceptance of digital signature, duties on private key 8. Penalties for damage to network, failure to furnish a document 9. Appointment of Cyber appellate Tribunal
10. Offences listed in the Act ◊ Tampering with source documents ◊ Publishing of obscene information
◊ Failure to observe directions to decrypt ◊ Unauthorized Access to a protected system ◊ Misrepresentation to CCA/ CA
◊ Publishing DSA false in particulars ◊ Breach of privacy
◊ Act to apply for acts done outside India
Enabling provisions have been made in the Indian Evidence Act, the Indian Penal Code, the Bankers Book Evidence, and the RBI Act.
The IT Bill is a good effort considering the very evolving nature of the industry. But it will a huge implementation exercise along with a massive infrastructure back up. It provides a generic model for e commerce and electronic record keeping. It provides specific provisions for cyber crime, banking transactions, and legal evidence
◊ There may be many industry/ function specific requirements it has missed out. These will have to be covered in respective legislation .
◊ It does not talk about changes to be made to the contract act. There are divergent views on this subject since the Contract Act is over 100 years old and it does not provide for a written contract.
◊ It does not talk about the responsibilities of the network service providers, internet service providers etc who transmit the electronic messages.
◊ It needs provisions on archiving of electronic data and secure storage of such archive on a periodic basis.
◊ The IT bill needs to provide for third party storage of archived data. It may also require an independent audit/ validation of entities using the electronic medium ( similar to server certification )
