Case 1
Office Depot is a major player in the business to consumer (B2C) space. Its Web-based sales reached $350 million in 1999, and were estimated at $800 million for 2000, or approximately 9 percent of its revenue. It is a leader in the move from “bricks and mortar” (a traditional company structure) to “bricks-and-clicks,” an organization that views the Internet as an alternative marketing channel to traditional interactions with customers. The company has garnered significant
e-commerce sales agreements with many large companies such as General Electric and Procter &
Gamble. In addition to permitting online sales, Office Depot also helps customers by supplying online business tools, forms, human resource handbooks, and other useful Internet links. Much of the suc- cess of the site is attributable to the integration between its distribution channels and its Order-to- Cash process (e.g., order processing and billing) in its enterprise system. The system has also formed the basis of an extranet with vendors that feeds into the Purchase-to-Pay business process. Vendors are able to set up product information in Office Depot’s enterprise system and check inventory levels at each location without human intervention, speeding replenishment and reducing stockouts.
Case 2
One type of business that is particularly compatible with e-business is one in which the goods or services can be delivered across the Internet instantaneously, much the same as payment is pro- vided by the customer. TheStreet.com is one company that has implemented such a business plan.
TheStreet.com is in the business of providing financial information that is valuable, unique, and timely. The company philosophy is that if it fails in any of these three attributes for the information it delivers, customers will stop coming. Despite the many business publications on the market, TheStreet.com has quickly risen as a leading provider of financial information by being both cheaper and timelier. It is one of the few information providers able to provide subscription service solely through the Internet. This is one form of the so-called Internet cottage industry whereby new small businesses spring up on the net to provide unique services.
Case 3
Wal-Mart is one of many retailers who are setting up electronic storefronts on the Internet to sell its goods directly to customers. Wal-Mart takes the customer’s order and credit card number over the Internet, electronically processes the order, and sends the order directly to the manufac- turer, who ships the product to the customer. The company’s Web site becomes little more than a for-fee electronic interface between the customer and the manufacturer.
Sources:Eric Berkman, “Clicklayer,” CIO Magazine,Volume 14, issue 8, (February 1, 2001): 92–100; Eric Hall, “Information Wants To Be Free? Not at TheStreet.com,” Infoworld(December 8, 1997): 94–96; Linda Rosencrance, “TheStreet.com Looks for Road to Profitability,” Computerworld Online(November 16, 2000); Todd R. Weiss, “Walmart.com Site Back Online After 28-day Overhaul,” Computerworld Online(October 31, 2000).
Client-Server Relationship (circles 1 and 7)
The connection created be- tween the customer and the vendor is a Web-enabled extended form of client-server applications. The customer (circle 1) is the client node—dictating that during con- nection, the customer computer environment should be secure and essentially inac- cessible via the network. The vendor (circle 7) is the server node and therefore must have the capability to receive the customer’s transmission and translate that trans- mission into processable data for use in the vendor’s application programs. This trans- lation is made through common gateway interface (CGI) software. The vendor, acting as the server part of the relationship, then provides the necessary correspondence back to the customer (client) in an understandable format (i.e., an Internet-based language such as Java or XML). To use the Lands’ End example again, when you place your or- der, your computer should be inaccessible (i.e., secure) over the Internet, and the type of computer and software you are using will be unknown on the system. The Lands’End computer receives your order and uses CGI to translate your message into a form their program can understand and process. Similar to EDI environments, once the business event data have been collected by the vendor, applications can be completed through any of the modes of business event data processing. For instance, Lands’ End used a periodic mode approach to process batches of sales several times an hour.4
E-Business Chapter 4 131
Figure 4.7 Typical Electronic Communications Connection for e-commerce
3
1 2
Network
provider Providing Internet access
4
CPA or CA firm
6 5 7
Internet Phone
line, DSL or Cable modem Customer
Uses web browser to access vendor's
web page
Network provider Server
Vendor server
• Application program
• Server
• Gateway interface VeriSign WebTrust
seal
4 Lands’ End, “Security on the Lands’ End Web Site,” http://www.landsend.com, December 2000.
Network Providers (circles 2 and 5)
As with EDI, to participate in the busi- ness event, both parties must have the capability to communicate over the Internet. For many companies and organizations (as well as some individuals), this access comes through a direct connection between the entity’s computer networks (or a single server) and the Internet. For other companies and organizations, as well as the vast majority of individuals, it will be more desirable to gain access through a network provider.Network providersare companies that provide a link into the Internet by mak- ing their directly connected networks available to fee-paying customers. Most net- work providers bring a host of other benefits along with Internet access. Common benefits include e-mail access, electronic mail boxes, space allocation for personal Web pages, and remote connection to other computer sites (e.g., telnet and FTP connec- tion). Many organizations will also use network providers to run their servers when assuming that role in the client-server relationship. In Figure 4.7, circle 5 denotes a network provider who would be providing server management services for the CPA or CA firm denoted by circle 6. Hence, when the business event is being completed between the customer and the vendor, information from the accounting firm would be acquired from a server operated by the firm’s network provider.
Assurance Providers (circles 4 and 6)
A major concern for most organi- zations and individuals participating in e-commerce has been Internet security. Secu- rity is the most critical factor that has hampered the growth of e-commerce. One early survey showed that 90% of Internet users felt increased security was necessary before they would transmit personal information (e.g., credit card information) across the In- ternet.5Many stories have circulated about the risk of credit or debit card information being pirated off the network, with large sums of money being expended by unautho- rized users. Additionally, the Internet has spawned a whole array of cottage industries that have no physical storefronts, but rather are operated completely from Internet server-supported Web pages. Many Internet users are rightfully concerned about the possibility that a company may be fictitious, with the electronic storefront merely be- ing a means by which to gather credit card and debit card information for illicit use.These concerns over security have spurred the development of a new line of business—
Internet assurance services. Internet assuranceis a service provided for a fee to ven- dors in order to provide limited assurance to users of the vendor’s Web site that a site is in fact reliable and data security is reasonable. Technology Application 4.4 provides a more detailed discussion of Internet certification programs and assurance services.
Figure 4.7 demonstrates how one common type of assurance provider operates using the WebTrust program as discussed in Technology Application 4.4. The ven- dor (circle 7) displays the WebTrust certification seal and a reference to the assurance provider on its server Web page. When the customer accesses the vendor’s Web page, he or she can click on the WebTrust symbol to assure it continues to be applicable.
Clicking on the WebTrust symbol executes a link to the VeriSign server (circle 4) for verification of the authorized use of the symbol. VeriSign verifies the symbol’s ap- propriate use by sending a message to the customer (circle 1). The customer can also get a report on the level of assurance provided with the certification by clicking on the Web link (contained on the vendor’s web page) for the accounting firm. Clicking this link connects to the accounting firm’s (circle 6) server—provided by its network 132 Part II Technology for Business Processes and Information Systems
5 J. Walker Smith, “Who Are the New, Interactive Consumers?” Commerce in Cyberspace: A Conference Report (The Conference Board, New York, 1996): 13–15.
Review Question
What role do network providers play in the e-commerce environment?
Review Question
What types of assurances are provided by Internet assurance services?
provider in this case (circle 5)—and the auditor’s Internet assurance report for the vendor displays on the customer’s computer (circle 1).
Internet Connection (circle 3)
To obtain an Internet connection you must have a link to one of the networks that connect to the Internet and indicate the In- ternet site with which the client wants to connect. A connection is then made be- tween the client and the desired site—the server.A couple of other issues related to the organization of the Internet and its impact on e-commerce should be noted. First, the nature of the Internet as a public network-based infrastructure has greatly leveled the field in e-business. Only fairly large businesses could afford EDI’s communications hardware and software. The creation of a public network and the subsequent creation of XML and relatively inexpensive (or even free) software for using the network have brought the costs of e-business within the ranges of eco- nomic feasibility for most small- and medium-sized entities. This change in cost struc- ture and ease of use are the two forces driving the strong growth in e-commerce.
E-Business Chapter 4 133
Review Question
Why is EDI moving to the Internet?
Technology Application 4.4