e-Commerce
e-Business
Sumit Sarkar & Varghese S. Jacob
University of Texas at Dallas
© Sumit Sarkar, UT Dallas
Overview
E-Commerce Part I
•Industry segments
•e-commerce/e-business drivers
•Business models
•Design elements
E-Commerce Part II
•Technology infrastructure
•Levels of online presence
Readings
Chapter 7 from the text
© Sumit Sarkar, UT Dallas
e-Commerce
 “…, electronic commerce is a way of
conducting, managing, and executing
business transactions using computer and
telecommunications networks.”
Frontiers of Electronic Commerce, Kalakota & Whinston, Addison-Wesley Publishing
Company, Inc., 1996
© Sumit Sarkar, UT Dallas
e-Business
 “…, redefining business models, with the
aid of technology, to maximize (customer)
value.”
e-Business: Roadmap for Success, Kalakota & Robinson, Addison-Wesley Publishing
Company, Inc., 1999
© Sumit Sarkar, UT Dallas
Industry Segments
 Within-business



Internal electronic mail and messaging
Knowledge management
Logistics, corporate finance, and personnel systems
 Business-to-business (B-to-B)


Supply chain management for inventory, distribution, and warehousing
Net markets and infomediaries
 Business-to-consumer (B-to-C)

Online publishing of corporate documents, catalogs, etc.
Convenience shopping, e.g., Books, Toys, Financial services
Tracking orders and shipments

Auctions


 Consumer-to-consumer (C-to-C)
 Also C2B, B2G, etc.
© Sumit Sarkar, UT Dallas
B-to-C: Retailing on the Web
Total consumer spending in 1999:
$17.3 Billion
Projected spending in 2003:
$86.3 Billion
Source: WSJ, October 23, 2000, p. R4 (citing Jupiter Research)
© Sumit Sarkar, UT Dallas
PEOPLE ONLINE: GLOBAL
 NUA Internet Surveys (www.nua.ie/surveys/)
AFRICA
ASIA/PACIFIC
EUROPE
MIDDLE EAST
CANADA & USA
LATIN AMERICA
WORLD TOTAL
© Sumit Sarkar, UT Dallas
MILLION's
1999
2000
1.72
3.11
33.61
89.68
47.15
105.89
0.88
2.40
112.40
161.31
5.29
15.26
201.05
377.65
INTERNET USAGE STATISTICS
 WEEKLY USAGE (Nielsen//NetRatings)
#'s for w eek ending:
No. of Sessions per Week
No. of Sites Visited
Time Spent per Session (Site!)
Total Time per Week
Duration of a Page Viewed
Frequent Internet users
Total U.S. Internet users
© Sumit Sarkar, UT Dallas
19-Sep-99
6
6
27:37
2:41:19
1.00
44,768,130
29-Oct-00
6
6
32.06
3:11:00
0.51
67,210,147
109,992,692 150,109,362
Internet Adoption Rates
 Number of years to reach 50 million users
• Radio: 38 years
• TV: 13 years
• Cable 10 years
• Internet: 5 years
© Sumit Sarkar, UT Dallas
B-to-C: Retailing on the Web
Projected revenue growth by retail category ($B)
1999
2001
2003
Air Travel
5.0
10.0
13.6
PC's
3.8
6.4
10.2
Books
1.3
2.7
4.9
Hotel
1.0
3.1
5.2
Software
0.9
1.8
3.5
Apparel
0.8
2.4
6.7
Cons. Electronics
0.4
1.0
2.1
Music
0.3
1.0
2.6
Event Tickets
0.3
0.9
2.6
Toys
0.3
0.7
1.6
Grocery
0.2
2.0
7.5
Furniture
0.0
0.2
1.4
Source: WSJ, October 23, 2000, p. R4 (citing Jupiter Research)
© Sumit Sarkar, UT Dallas
ECOMMERCE $$$’s in US
 FORRESTER RESEARCH ($Billions)
1998
1999
2000
2001
2002
2003
© Sumit Sarkar, UT Dallas
B-to-B
43
109
251
499
843
1331
B-to-C
8
18
33
52
76
108
Total
51
127
284
551
919
1439
Industry Segments:
Another View
 Pure play
• Amazon
• Yahoo
 Clicks and mortar
• Barnes and Noble
• Gateway
© Sumit Sarkar, UT Dallas
e-Commerce & Traditional Commerce
 Strategic decisions tightly linked to technology
• Content, storefront, customer service
 24*7 availability
• Consumer expectations altered
 Computer-based customer interface
• Less opportunity for human intervention
 Customer controls the interaction
• Time spent at each site, price comparison
 Knowledge of customer behaviour
• Track customer behaviour to provide customized offerings
 Competitive response in real time
• Competitors can relatively easily monitor a company’s offerings
© Sumit Sarkar, UT Dallas
Important Drivers
Moore’s Law
Metcalf’s Law
Transaction cost economics
Unleashing the Killer App, Larry Downes and Chunka Mui, Harvard Business School
Press, 2000
© Sumit Sarkar, UT Dallas
Moore’s Law
“Every eighteen months, processing power doubles, at constant cost.”
Transistors per Chip
1000,000,000
10,000,000
100,000
1000
1970
© Sumit Sarkar, UT Dallas
1980
1990
Year
2000
2010
Metcalfe’s Law
“The utility of a network is proportional to the square of the
number of its users.”
Metcalf's Law
2
Utility
Utility = Users
Point of Inflexion
Users
© Sumit Sarkar, UT Dallas
Transaction Costs
Search costs
Information costs
Bargaining costs
Decision costs
Policing costs
Enforcement costs
© Sumit Sarkar, UT Dallas
Coase’s “Nature of the Firm”
Firms are created because the additional cost of
organizing and maintaining them is cheaper than
the transaction costs involved when individuals
conduct business with each other in the open
market.
What functions should a firm conduct
internally? Those activities that cannot be
performed more cheaply in the market.
© Sumit Sarkar, UT Dallas
Technology and Transaction Costs
 Technology reduces several components of the transaction cost
 E.g., Bank transactions
• Branches - $1.07/transaction
• ATM - $0.27/transaction
• Internet - $0.10/transaction
 Implication: Firms should get bigger?
 Market also becomes more efficient!
• More competition
 “Friction-free” economy: should lead to virtual organizations
© Sumit Sarkar, UT Dallas
Impact on a firm’s Value Chain
A firm achieves competitive advantage when it
can link its value chain activities more cheaply,
or use these activities to provide more value,
than its competitors.
•May require reconfiguring activities in the value
chain
Firms also need to examine the value system for
opportunities to improve efficiencies
•E.g., more outsourcing
© Sumit Sarkar, UT Dallas
Impact on Value Chain (cont.)
Customer facing activities
Internal activities
Supply chain
© Sumit Sarkar, UT Dallas
SUPPORT
ACTIVITIES
Value Creation
FIRM INFRASTRUCTURE
HUMAN RESOURCE MANAGEMENT
TECHNOLOGY DEVELOPMENT
PROCUREMENT
PRIMARY
ACTIVITIES
MARGIN
INBOUND
LOGISTICS
OUTBOUND
LOGISTICS
OPERATIONS
SERVICE
SALES &
MARKETING
How can the Internet technologies impact these activities?
© Sumit Sarkar, UT Dallas
Impacting The Value Chain
FIRM INFRASTRUCTURE
Web based Knowledge Management
HUMAN RESOURCE MANAGEMENT Access to Benefits & Retirement Plans
TECHNOLOGY DEVELOPMENT
PROCUREMENT
Product Customization
Web based EDI
MARGIN
OPERATIONS
INBOUND
LOGISTICS
Scheduling
© Sumit Sarkar, UT Dallas
OUTBOUND
LOGISTICS
Web-based
Order
Processing
SALES &
MARKETING
Internet
Marketing
SERVICE
Electronic
Help Desks
Electronic Data Interchange (EDI)
 Computer-to-computer links between trading
partners

purchase orders

invoices

confirmations

shipping notices
• Reduces cycle time, streamlines business processes
 WALMART: Moving towards zero inventories
© Sumit Sarkar, UT Dallas
EDI: Illustration
Buyer Inventory System
Buyer EDI Format
Part No:
Description:
Price:
Quantity-on-hand:
...
Part No: BZYTRW
Description:
Price:
QuantityOrdered:
...
Virtual Private
Network
Seller Inventory System
Seller EDI Format
Part No:
Description:
Unit Price:
Quantity-on-hand:
...
Part No: A12345
Description:
Price:
QuantityOrdered:
...
© Sumit Sarkar, UT Dallas
Web-based EDI: Example
 Nuovo Pignone (turbine maker in Italy)
• Few large suppliers ~ 70-80% of supplies
• Many small suppliers ~ 20-30% of supplies
• JIT Manufacturing: Must track ALL incoming
shipments
 Developed protected web site
• Suppliers can use browser to interface with the system
 Currency of information: From 1 week to 1 day
© Sumit Sarkar, UT Dallas
B-to-B: Evolution
 Non web-based EDI
• Standardized formats for information exchange
• Point-to-point
 Web-based EDI
• Hub and Spoke (and not point-to-point)
• Secure, Cheaper, Easier to use, Scalable,
Flexible
 Infomediaries
• Provide marketplace for fragmented buyers and
sellers
© Sumit Sarkar, UT Dallas
B-to-B: Characteristics
 Huge Market Opportunity
 Business Models Can be Enormously Profitable
 Higher Barriers to Entry (than B-to-C)
•
Relatively higher switching costs
 More Capital Intensive
•
•
•
Technology
Customer Acquisition
Brand Building
© Sumit Sarkar, UT Dallas
Web-based EDI
 International Data Corporation (IDC) forecast
EDI Services
Web-based
© Sumit Sarkar, UT Dallas
1999
2003
$1.1B
$2.3B
12%
41%
Business Models
 A value proposition for the customer
• Target segment
 Market
size and growth rates
 Unmet
or insufficiently met customer needs
• Customer benefits
• Competitive advantage
 Marketpower
 Cost
advantage
 Differentiaition capabilities
 Value cluster: combination of benefits
© Sumit Sarkar, UT Dallas
Types of Business Models
 Merchant
• Sale of products or services (Dell, Cisco)
 Subscription
• Subscriber fees (newspapers, magazines, etc.)
 Brokerage
• Fee based on transaction facilitated by site (eTrade,
Chemdex)
 Advertising
• Banner ads, interstitials, site sponsorships (Yahoo)
 Affiliate
• Direct customer to merchant site (Associates for
Amazon)
© Sumit Sarkar, UT Dallas
Example: ISP Market
AOL and NetZero
AOL Cost Structure:
Subscription rate ~$20
Average communication cost/subscriber hr ~ $0.40
Average communication time/subscriber ~ 27 hours
Average communication cost/subscriber ~ $10
(Exclusive of people, overheads, etc.)
How does NetZero generate revenues?
© Sumit Sarkar, UT Dallas
Advertising on the Net
Web Vs Total Advertising Expenditures
(estimates)
Year
1997
1998
1999
Web
$600M
$4B
$7B
Non-Web
$133 billion
$155 billion
$175 billion
Source: Veronis Suhler & Associates and BancAmerica Corp., 1998
© Sumit Sarkar, UT Dallas
ADVERTISING REVENUE (Est.)
Projected Ad Revenues in the US (Billion $)
IDC
FORRESTER
COWLES/SIMBA
JUPITER
1996
0.26
0.02
0.24
0.30
ACTIVMEDIA
IAB
YANKEE GROUP
0.27
0.22
1997
0.55
0.50
0.60
0.94
0.40
0.91
0.63
1998
1.20
1.00
0.98
1.90
1.70
2.00
1.20
1999
2.00
1.75
1.58
3.00
4.70
2000
3.30
4.10
2.46
4.40
11.20
1.85
2.20
2001
2002
5.60
8.10
5.80
23.50
7.70
43.30
3.80
6.50
www.nua.ie/surveys/
© Sumit Sarkar, UT Dallas
Another Example: E-Trade
 Efficient back office
 Front-office automation
• Eliminate humans
 Marketing
• Access

Phone, Internet

Uncomplicated pricing
• Low price
• Advertising, positioning
© Sumit Sarkar, UT Dallas
Brand Name
 Building Trust
• Deliver quality product/service
• Generate good word-of-mouth
• Strategic alliances
© Sumit Sarkar, UT Dallas
Brand Name (Cont.)
MARKETING BUDGET FOR 1998
•
•
•
•
Amazon
$133 M
eTrade
$71.3M
BarnesandNoble.com
$70.4M
CDNow Inc
$44.6M
Cost to launch a new consumer brand on the web ~ $50M-$100M
Should click and mortar firms use new or existing brands?
© Sumit Sarkar, UT Dallas
Design Elements: The 7 C’s
 Shift from people-mediated to technology mediated
interface has important design implications
•Context
•Content
•Commerce
•Community
•Customization
•Communication
•Connection
 These elements must be compatible
E-Commerce: J. F. Rayport and B. J. Jaworski, McGraw Hill, 2001
© Sumit Sarkar, UT Dallas
Design Elements: Context
 Aesthetic and functional look and feel
 Function
•Pagination and linking structure (usability)
•Navigation tools
•Response times
•Reliability
 Aesthetics (form)
•Visual theme
•Color, images, fonts, etc.
© Sumit Sarkar, UT Dallas
Design Elements: Content
 Subject matter on the site
 Geared towards providing goods and services
•Books
•Flowers
•Airline tickets
 Information products
•News
•Stock quotes
•Weather reports
 Mixed offerings
•Stock quotes and stock trading
© Sumit Sarkar, UT Dallas
Design Elements: Commerce
 Ability to execute transactions
 Prominent features
•Registration
•Shopping cart
•Security
•Order tracking
•Delivery options
 Pricing options
•Catalog price
•Auction (buyers bid)
•Reverse auction (sellers bid)
•Demand aggregation (e.g., Mercata.com)
•Net markets (e.g., stock trading)
© Sumit Sarkar, UT Dallas
Design Elements: Community
 Provide users a sense of involvement
•E.g., LandsEnd has “Shop With a Friend” feature
 Dimensions
•Interactive (e.g., chat, buddy lists)
•Non-interactive (e.g., member web pages)
 Types of communities (one classification)
•Just friends
•Enthusiasts (special interest groups)
•Support groups (friend in need)
•Players (game-playing)
•Traders
© Sumit Sarkar, UT Dallas
Design Elements: Customization
 Geared to user preferences
•Cookies (temporary files in local machines)
 Personalization (initiated by user)
•Registration
•Content and layout configuration
 Tailoring (sites dynamically customized)
•Past behavior
•Collaborative filtering
© Sumit Sarkar, UT Dallas
Design Elements: Communication
 Dialog between organization and user
 Broadcast
•Mass mailings
•FAQ’s
 Interactive
•E-mails (regarding order placement, tracking, delivery,
etc.)
© Sumit Sarkar, UT Dallas
Design Elements: Connection
 Linkages between a site and other sites
 Destination sites
•Site generated content, with few links to other sites
 Portals
•Gateway to a large number of other sites
 Affiliate
•Directs users to destination sites (referral services)
© Sumit Sarkar, UT Dallas
Design Elements & Business Model
 Elements should support the value proposition
 Schwab.com
•Commerce centered, with emphasis on content and
function (context)
•Some degree of customization
•Community is less important
 Yahoo.com
•Context, community, and connection are important
•Content, commerce less important
© Sumit Sarkar, UT Dallas
Case: JusticeLink, Inc.
• Enables electronic filing, electronic
certified service, and electronic storage of
documents generated by multiparty litigation
suits
• Provides electronic document management
and improved access to case files
• Reduces physical space requirements of
document storage
© Sumit Sarkar, UT Dallas
JusticeLink, Inc.
•
•
•
•
•
•
Which activities of a court’s value chain are being
impacted by JusticeLink’s offering? Which activities of a
law firm’s value chain are being impacted by
JusticeLink’s offering?
What should Justice-link’s business model be in the
short term?
If JusticeLink wants to charge for its services, how
should they price their services? Should the pricing
scheme be the same for law firms as it is for the courts?
What organizational issues affect adoption of these
services by courts? by law firms?
What are key technology issues for JusticeLink?
How should JusticeLink’s business model evolve in the
long term? What would be their competition?
© Sumit Sarkar, UT Dallas
Overview
E-Commerce Part I
•Industry segments
•e-commerce/e-business drivers
•Business models
•Design elements
E-Commerce Part II
•Technology infrastructure
•Levels of online presence
© Sumit Sarkar, UT Dallas
Technology Issues
 Internet services
 HTML, XML, and WML standards
 Static and dynamic content delivery
 Performance issues
 Getting people to visit your site
© Sumit Sarkar, UT Dallas
The Internet
Collection of independently operated networks
that exchange traffic using open standards
Uses TCP/IP as the communication protocol
Network carries packets
Multiple types of information can be
communicated using these services
•Voice, data, image, and video
Who manages the Internet?
Reference: http://www.isoc.org/
© Sumit Sarkar, UT Dallas
Important Internet Services
 Mail
•E-mail and mailing lists
 Remote file transfer
•FTP: File Transfer Protocol
 Remote login
•Telnet: Remote Terminal Protocol
 World Wide Web
•Computers supporting hypertext and related functions (e.g.,
HTTP: Hyper Text Transfer Protocol)
 Others ...
© Sumit Sarkar, UT Dallas
The World Wide Web & Browsers
 WWW: Collection of hyper-linked web sites on the
internet
 Mosaic: First graphical Internet document display
program (Web browser) developed by NCSA
 Netscape: Continued development of Mosaic
•hypertext and hypermedia
•formatted electronic text (bold, italics)
•layout elements (frames, tables, bullets)
•plug-ins (audio, video, encryption, ...)
 Internet Explorer (Microsoft)
 Several others ...
© Sumit Sarkar, UT Dallas
IP Addresses
 Each computer (host) on the Internet has an IP-address
• 32 bits long (4 bytes)
• e.g., 129.110.10.20
 The four numbers in an IP address are used to identify a
particular network and a host on that network
 Original design: five classes of networks
• Class A – first byte fixed (first byte between 0-127)

supports 16 million hosts on each of 128 networks

supports 65,000 hosts on each of 16,000 networks

supports 254 hosts on each of 2 million networks

reserved for special purposes
• Class B – first two bytes fixed (first byte between 128-191)
• Class C – first three bytes fixed (first byte between 192-223)
• Classes D and E – (first byte 240 or higher)
© Sumit Sarkar, UT Dallas
Domain Names
 IP-address are inconvenient to remember
•e.g., 129.110.10.20
 Domain names are aliases for IP addresses
•e.g., www.utdallas.edu
 Two types of Top-Level Domains (TLD’s)
 Generic Domains
•.com, .org, .net, .edu, .gov, .mil, .int
•7 new ones added recently: .biz, .info, .pro, .name, .aero,
.coop, .musuem (should become available Summer 2001)
 Country Code Domains
•.uk, .de, .jp, .in, etc.
© Sumit Sarkar, UT Dallas
DNS: Domain Name System
 Phone book for the Internet: Distributed database (DNS) keeping
track of IP-addresses and corresponding IP-number
 To identify (reach) a computer on the Internet, can use either the
IP-address or the IP-number
 Tree Structure (currently 13 root level servers worldwide)
ROOT
.GOV
UTD
.EDU
.NET
SMU
TI
www.utdallas.edu
SOM
EECS
cyclops.utdallas.edu
© Sumit Sarkar, UT Dallas
.COM
.ORG
.MIL
NORTEL
.INT
Who Assigns Domain Names?
 Managed by Internet Corporation for Assigned Names
and Numbers (ICANN) {http://www.icann.org/}
 Non-profit private organization established in 1998
•Coordinates the assignment of globally unique
IP addresses
Internet
domain names
•Root server system management
 Several companies registered with ICANN provide
Domain Name registration services
•e.g., DomainRegistry.com charges $30 to register (per year)
© Sumit Sarkar, UT Dallas
Domain Names and IP Addresses
Are there enough IP Addresses?
• Static addresses and dynamic addresses
• IPv6: 16-byte addresses (currently IPv4)

3.2 * 1038 unique addresses
Trademarks and Domain Names
• US trademark law allows multiple concurrent use of
same name by


Different people in same business in different places
Substantially different businesses in same place
• The Internet requires exactly one organization (person)
have a single second-level domain


Cybersquatters
Arbitration based on Uniform Dispute Resolution Policy (ICANN)
Ref: Communications of the ACM, Feb 2001, Vol. 44, no. 2, pp. 91-97
© Sumit Sarkar, UT Dallas
Web Content
 Small static content
• HTML pages, small images
 Large static content
• Audio/video

Streaming media
 Dynamic content
• Queries to databases
 Key issues
• Communication protocols (e.g., http: hypertext transfer
•
•
protocol)
Standard encoding of content (e.g., HTML: HyperTEXT
Markup Language)
Web-database integration (CGI: Common Gateway Interface)
© Sumit Sarkar, UT Dallas
Web Servers
 A Web server is a computer with
• an IP address
must be connected to the Internet
• publicly readable directory
location of Web pages
• Web server software


manages
file access and protection
 When you read a Web page
• your Web browser requests transfer of the file that contains
•
the page (including all the files read by that page)
your Web browser displays the page based on the rules
contained in the file (HTML, Java, Perl, etc.)
© Sumit Sarkar, UT Dallas
HTML: Hyper Text Markup Language
 URL: Uniform Resource Locator
• E.g.: http://www.utdallas.edu/~sumit/index.htm
 Enables text formatting
 Hypertext links to other documents
 Hypertext links to other locations in the same
document
 Embed images, sound files, etc.
© Sumit Sarkar, UT Dallas
HTML Example
 Example: Output as viewed using a browser
List of employees
Alan, abc@zzz.com
Bing, bcd@zzz.com
 HTML code
<h1>List of employees</h1>
<p> <b>Alan</b>, abc@zzz.com</p>
<p> <b>Bing</b>, bcd@zzz.com</p>
© Sumit Sarkar, UT Dallas
XML: Extensible Markup Language
 HTML documents are unstructured and so it is difficult
to build intelligent applications based on HTML content
 XML is a Meta markup language
 XML focuses on the structure of the document
 Important component for automating workflow
technology, e.g., allow specification of procurement
rules in software (how orders get routed for approval)
 Broad industry support
 Parsers bundled with leading browsers
http://msdn.microsoft.com/xml/tutorial
© Sumit Sarkar, UT Dallas
XML: Example
List of employees
Alan, abc@zzz.com
Bing, bcd@zzz.com
<table>
<description>List of Employees</description>
<people>
<person>
<name>Alan</name>
<email> abc@zzz.com</email>
</person>
<person>
<name>Bing</name>
<email> bcd@zzz.com</email>
</person>
</people>
</table>
© Sumit Sarkar, UT Dallas
XML (Cont.)
 Does not provide any instructions on how data is to
be displayed
 Such instructions are provided in separate stylesheets
 XSL: XML Stylesheet Language
 Applications can understand XML data (in theory)
 Limitations
• XML is not completely defined
• Companies need to extend XML to enable interactions
•
(plug-and-play is not a reality yet)
Vendors (Ariba, CommerceOne) are in a standards battle
© Sumit Sarkar, UT Dallas
Static Web Pages
Web
Server
HTML Page
© Sumit Sarkar, UT Dallas
Browser
Web Database Integration
 CGI: Common Gateway Interface
• Programs written in Perl, C, etc.
• Called scripts
• When a link to a CGI script is activated, the CGI
program is executed (instead of a document served
to requester)
 Vendor specific application programming
interfaces (API’s)
• Active Server Pages, Cold Fusion Markup
Language, Server Side Java Script
© Sumit Sarkar, UT Dallas
Web-Databases on the Internet
Scripts
Database
Server
Database
© Sumit Sarkar, UT Dallas
Web-toDatabase
Middleware
HTML Page
Web
Server
Browser
WML: Wireless Markup Language
 Markup Language used on micro browsers running
on handheld devices
 WML is an XML Data Type Definition (DTD)
 WAP: Wireless Access Protocol
• Defacto standard for mobile access to Internet-based
content
© Sumit Sarkar, UT Dallas
Performance Issues
End-to-end response time
• 8-second rule: experiments have shown that clickout rates increase rapidly after that
• Includes server-side response time + network time
Site availability
• 99.5% or higher
Session throughput
• E.g., 30,000 sessions per day
© Sumit Sarkar, UT Dallas
Capacity Planning: Load
Workload forecasting (peak loads)
• Number of visitors to site
• Number of requests per visitor
• Future growth
© Sumit Sarkar, UT Dallas
Capacity Planning: Resources
Resources
• Network
 Connection
to the Internet (e.g., T1 line)
 Local Area Networks (e.g., 100BaseT Ethernet)
• Servers – Hardware (and Software)
 Web
servers (e.g., Apache)
 Application servers (e.g., ColdFusion)
 Database servers (e.g., ORACLE)
© Sumit Sarkar, UT Dallas
Configuration alternatives
 Use Benchmarking to identify potential bottlenecks
• Device utilizations for current and future demands
• Several tools available (e.g., Loadrunner from
MercuryInteractive)
 Configuration alternatives
• Connection to the Internet (DSL, Fractional T1, T1, T3, etc.)
• LAN’s (10BaseT, 100BaseT, 1000BaseTX)
• Mirror web server or replace with faster server
• Increase storage capacity and reliability (RAID technologies)
• DBMS versions (TPC benchmarks)
© Sumit Sarkar, UT Dallas
Getting People to Visit Your Site
Basic techniques
• Advertisements

TV, print, outdoor, mailers (email and regular mail),
banners
• Links from other sites
• Word of mouth
• Citations in news media (magazines, newspapers,
etc.)
• Search engines

A majority of users use search engines to locate sites of
interest
© Sumit Sarkar, UT Dallas
Search Engine Strategies
Search engines rank sites based on “match”
between search terms and site content
How do you make your site appear on top of list?
• Register with search engines- Some search engines
have free registration, while others have a charge
Identify
relevant category
• Reverse engineer search engine algorithms
Role
of Meta tags, headers, title, frequency of search term in
page
• Can consider different versions for different search
engines (version management may be costly)
© Sumit Sarkar, UT Dallas
Other Important Issues in e-Commerce
 Security
• Web sites
• customer sites (viruses)
• payment information
 Privacy
• sniffer programs (vendors collecting information from
browsing customers)
• anonymity of purchases (credit cards leave a trail that can
be followed)
 Trust
• What do you know about your customer?
• What do you know about the vendor?
• How is it different from face-to-face interaction?
© Sumit Sarkar, UT Dallas
Security Issues
 Confidentiality
 Message integrity
 Authentication
 Non-repudiation
 Access control
© Sumit Sarkar, UT Dallas
Firewalls
 Mechanism to control access between
Trusted private network & Untrusted outside network
 Protects the integrity of the network as well as
the confidential information held within it
 Implemented using routers or special purpose
computers that examine data flowing into and out
of a network
 Placed between organisation’s network and
every connection to the internet
 Two commonly used types
•Packet level firewall
•Application level firewall
© Sumit Sarkar, UT Dallas
The Intranet
External
WWW
Users
© Sumit Sarkar, UT Dallas
INTRANET
Firewall
Server
The Extranet
Company A
INTRANET
Company B
Extranet
Serv
er
Firewall
Firewall
External
WWW
Users
© Sumit Sarkar, UT Dallas
Se
rv
er
INTRANET
E-Commerce Development
 Six levels of online activities
• Minimal online presence
• Online catalog
• Online order entry
• Automated value chain
• Market site
• Super market site
Reference: The six levels of E-Commerce development, Steve Marchak,
The Info-Tech Research Group
© Sumit Sarkar, UT Dallas
I. Minimal online presence
 Motivation: pressure from media, employees,
customers, competitors
 Corporate website
• Promote the company
• Non-transactional functions like Human Resources
•
and Financial data
E-mail links to specific employees in public relations
 Management/Technology Implementation issues
• Decide what goes online
• Technology requirements are minimal
© Sumit Sarkar, UT Dallas
II. Online Catalog
 Motivation: prospective customers asking for more

information
Provide product/service information online
•
•
•
•
•
Offer better service to existing customers
Attract new customers (comparison shopping)
Customers use existing offline ordering processes
Reduce workload for customer support activity (maybe)
E.g., car manufacturers
 Management/Technology Implementation issues
•
•
High volume of information - high maintenance
May need to integrate with offline systems depending on
complexity
© Sumit Sarkar, UT Dallas
III. Online Order Entry
 Motivation: Internet as another distribution channel
 Customers place orders online
•
•
Catalogs integrated with transaction processing systems
Customer information recorded automatically

Reuse address information, Credit card information, etc.
•
•
Reduce transaction costs (company? customer?)
Suggestive selling
•
•
•
•
•
Fulfillment - inhouse or outsourced
Build traffic to site (Pure play Vs Click and mortar)
Secure services
Integrate with other operational systems
Potential channel conflict
 Management/Technology Implementation issues
© Sumit Sarkar, UT Dallas
IV. Automated Value Chain
 Motivation: Reduce cycle times (and costs)
 Orders tied to manufacturing plan, purchasing, and

supplier systems
Customers place and track orders online
•
•
Sales and post sales support
Personalization of products and services
•
Access to inventory information
 Vendors can provide JIT deliveries
 Management/Technology Implementation issues
•
•
•
Which parts of the value chain can be automated
How much information to share with vendors/customers
May lead to major organizational change (e.g., vertical
integration)
© Sumit Sarkar, UT Dallas
V. Market Site
 Motivation: One stop shop for competing products and

services
Role of an intermediary
•
•
•
•
Customers find information on all competing products on one site
with the ability to purchase
Vendors have access to customer data
Chat groups enabling suppliers and customers to interact
E.g., Chemdex
•
•
•
Build a critical mass of transactions
Include as many competitors as possible
Convince customers that information is objective
 Management/Technology Implementation issues
© Sumit Sarkar, UT Dallas
VI. Super Market Site
 Motivation: Transact complementary products and


services - focus is on volume of transactions
Customers find information on all competing and
complementary products on one site with the ability to
purchase
E.g., VerticalNet
 Management/Technology Implementation issues
•
How to move into other markets
© Sumit Sarkar, UT Dallas
Review
 Online strategy is closely tied to business
model (value proposition for customers)
 Execution is critical
• Must consider design elements carefully in the
context of the business model
• Design elements drive technology
requirements
• Plan for change
© Sumit Sarkar, UT Dallas
Future of the Internet
“It is difficult to make predictions,
especially about the future”
Yogi Berra
© Sumit Sarkar, UT Dallas
Case: VerticalNet
 What criteria does VerticalNet use in choosing
markets to enter?
 What design elements are key to their strategy?
 What is the current business model? Does it need
rethinking?
 How should VerticalNet transition the selling
effort?
 Is there a first mover advantage in this market
space?
© Sumit Sarkar, UT Dallas