IS 425

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IS 425

• Enterprise Information LECTURE 7
• Spring 2005

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Session 7

• Exercise
• Debate
• E-Commerce and E-Business Systems
• Web Services
• Next Week

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Exercise

• You are the IT steering committee that will
  decide which hospital project to fund.
• From last weeks readings and lecture detail the
  steps that you would take in determining which
  hospital project to do.
• Based on the previous session readings and
  lecture (Session 6) 1. What two questions would
  you ask to find out which one should be
  implemented?2. How would you use the
  prioritization tiers decision tree?3.  How
  would you use the Prioritizing Potential Benefit
  tree?4.  What is the major problem with lagging
  indicators when developing new software?

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Debate

• How should team tasks be divided?
• Debater
• Interrogator
• Research
• Report writing
• Arguments

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eCommerce Will Penetrate Business and Consumer
Markets
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Types of E-Commerce

• Business-to-Consumer (B2C) Internet
• Purchasing, knowledge, entertainment, other
• Intra-Organizational Intranets (B2E)
• Business intelligence, enterprise portal,
  workgroup communications, corporate digital
  library, sales force productivity, workflow,
  datawarehousing
• Business-to-Business (B2B) Extranets
• Supply chain management, Customer relationship
  Mgt exchange
• Consumer-to-Consumer (C2C)
• Peer-to-Peer

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US eCommerce The First Five Years

• 1997 to 2002 explosive growth
• Spurred by consumers and VC support for dot-come
  and traditional retailer, a raging economy
• Online shopping households grew from 5m to 36.5m
  online sales from 2.4b to 72.1b
• Consumers continued shopping online for
  convenience, selection, and deals, especially
  travel, consumer electronics, and PCs
• CAGR of 97

Source Forrester Research
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US eCommerce The Next Five Years

• 2002 to 2007 consistent, rapid growth
• By 2007, households shopping online will increase
  by 26.4 m and grow to 63m, or 2/3 of all US
  households
• Sales will grow from 72.1b in 2002 to 217.8b in
  2007
• CAGR of 25 8 of total retail sales

Source Forrester Research
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The e-Commerce Value Chain
Get and keep customer interest
Turn interest into orders
Service customers
Manage orders
Attract
Act
React
Interact
Catalog Sales static dynamic
AdvertisingMarketing channels media
Order capture Payment Fulfillment goods
Customer service Order tracking
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Attract Customers (Marketing)

• Purpose
• Build brand awareness, attract customers, and
  entice them to buy
• Merchandizing Methods
• Advertising
• Coupons
• Sales and Promotions
• Frequent buyer programs
• 11 marketing

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Interact with Customers (Sales)

• Purpose
• Turn interest into orders
• Catalog, Product and Service
• Techniques
• Registration with Internet search engines
• Hyperlinks
• Onsite product search
• Product and price comparison
• Dynamic vs. static contents
• Pricing

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Act on Customer Instructions (Order Management)

• Purpose Manage order and shopping experience
• Order Processing
• Shopping cart and order aggregation
• Order validation Application of coupons or
  discounts
• Cross selling
• Calculation of sales, taxes, shipping and
  delivery charges, rolled-up order
• Payment handle multiple payment methods (cash,
  credit, credit cards, debit cards)
• Act Fulfillment
• Delivering the goods ordered to their destination
• Transmission of order information to warehouse,
  packing or order assembly for shipping, shipping
  and delivery

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React to Inquiries (Service)

• Purpose customer satisfaction, experience, and
  repeat visits
• Methods
• 24X7 service capacity
• Proactive and Immediate feedback voice and
  email
• Access to status information
• Self-help (FAQ)
• Multi-language support

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Value Proposition for Customers

• Transform customer relationship from
  supplier-centered to customer-centered values
• self service, 11 choices delivery to customer
  location customer needs choice of service hours
• Displace traditional source of values
• Physical vs. digital value (information)
• Economies of scale vs economy of scope
• Mass produced vs mass customized
• Information vs. knowledge value
• Distribution as constraints vs. enabler
• Local vs. global

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Value Proposition for Firms

• Ability to reach a global market
• Reduced marketing and selling expense
• Increased efficiency of operation
• Ability to target consumers more precisely
• Ability to convey more accurate product and
  availability information

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B2C Business Models Generating Revenues

• Merchant Model
• virtual merchants
• Click Brick
• Multi-Channel
• Shopping Malls
• Advertising Model
• Horizontal portal
• Vertical portal
• Personalized portal

• Intermediary (Brokerage)
• Buy/sell fulfillment
• Buyer/demand aggregator
• Virtual mall
• Hypermediary (financial settlement)
• Auction broker
• Reverse auction

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B2B E-Commerce

• Global B2B revenues to grow from 282 billion in
  2000, to 4.3 trillion by 2005, the bulk of B2B
  transactions will be made in the US.
• Compound annual growth rate (CAGR) of 73 in US,
  91 in Europe, and 109 in Asia
• lower costs, shorter cycle time, quicker
  response, and global markets

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B2B Models

• Firm-based Models
• Sell-side (1-to-many), Cisco
• Buy-side (many-to-1) , GE
• Many-to-Many Marketplaces Exchange and catalog
  models
• Vertical vs. Horizontal Marketplaces
• Virtual Service Industries in B2B
• Travel, Real estate, electronic payments, online
  financing and online trading, Logistics

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Sellers/suppliers
Buyers
Sell Side 1M eg. Cisco
Buy Side M1 e.g., GE
Buyers
Public or Private Marketplaces MM Catalogs
(Newark in One) Exchanges, Houstonstreet
Sellers suppliers
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Firm-based modelSell side B2B One to Many

• Delivers a Web-based, private-trading sales
  channel over an extranet to business customers
• The seller can be a manufacturer, or a
  distributor
• Architecture similar to B2C
• Similar technology
• Sell by electronic catalogues, auction, or by
  contract
• Differences in commerce value chain

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Firm-based Model Direct sale form Catalogue

• Benefits
• Reduced order processing costs
• Speeds the ordering cycle
• Reduce errors in ordering and product
  configuration
• Reduced buyers search costs
• Customize products
• Different prices to different customers
  (personalization, customization)
• Improve service levels for low-volume customers
• Provide higher-quality information for customers

• Limitations
• Channel conflicts with existing distribution
  systems
• EDI (if used) is costly and could limit the
  participation

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B2B Value Proposition

• Reduced cost of selling
• Reduced order processing costs
• Improved service levels for low-volume customers
• Higher quality information for customers
• Accurate information

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B2B Commerce Value Chain--different from B2C

• Attract Advertising Marketing
• merchandising and branding
• become a p referred vendor
• Interact Catalogs
• Searching capability for large electronic catalog
• Customized catalogs -- special part number and
  pricing
• Security Requirements

• Act Order Processing
• Approval Workflow
• Delegation
• Act Payment
• Purchase Order, Procurement Cards, EFT
• Act Fulfillment
• Predefined ship-to address and order aggregation
• React Customer Service
• Training, Software maintenance, tech support

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Firm-Based Model Buy-Side Many to one,
E-Procurement

• Two types of purchases (what are purchased)
• Direct materials production materials go
  directly to the manufacture or assembly of a
  product or the creation of a service. Their use
  is scheduled, purchased in volume at
  pre-negotiated price
• Indirect materials used in maintenance, repairs,
  and operations (MRO), nonproduction materials

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Traditional EDI vs. Internet Enabled EDI (VAI)

• Standardized transfer of electronic documentation
  (Two Standards ANSI x.12 vs. EDIFACT)
• Manage supply and distribution relationships
  application or transaction based emphasize
  efficiency (purchase orders and invoices)
• Limitations
• Costly Proprietary VANs
• Participation sometimes through coercion and
  pressure
• Compatibility issue
• limited impact on process change
• VAI
• Common standards Flat pricing Security
• Easy/cheap access Infrastructure

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Why XML is Successful

• XML is a text format, can be processed by
  text-oriented tools
• Extensible to specific an industry or domain
• Neutral, an open source tool
• Easy to implement
• Interoperable across different platforms

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XML and B2B

• Improve compatibility between disparate systems
• Allows parties to exchange structured data over
  the Internet. XML tags define the meaning of data
  (catalogue) and business processes
• XML also supports Unicode that enables the
  display and exchange of most of the world's
  written languages.
• Benefits Reduce costs, competitive advantage,
  strengthen relationships with trading partners
  (processes)
• Simplifies application architecturea uniform
  framework

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Web Services

• A set of tools and protocols which enable
  software applications to communicate, pass data
  and issue commands to each other over the
  Internet or Intranet.

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Web Services XML
1.2 Online Auto Dealership

• An interface that describes a collection of
  operations that are network accessible thru
  standardized XML messaging.
• Self-contained, modular apps that are over the
  internet --described--published--located--invo
  ked

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Web Services

• Applications
• Talk to each other
• Pass data to each other
• Send commands back and forth
• Can be inside / outside the firm
• Standards
• Vendor specific with EAI or BPI
• None with Java
• Core set with XML
• XML transfer over HTTP or SOAP

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Web Services

• XML (Extensible Markup Language) customizable
  method for tag creation
• SOAP (Simple Object Access Protocol) msg protocol
  to encode XML
• UDDI (Universal Description, Discovery and
  Integration) distribute directory of web
  services available
• WSDL (Web Services Description Language) XML
  formatted language for web svc
• ebXML (electronic business Extensible Markup
  Language) modular suite of specs for
  standardizing XML globally for facilitating trade

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Web Services -- Limitations

• The HTTP reliance sessionless or eventless
  when one computer interacts with another
  across internet no ongoing connection between
  the two no memory of the transaction
• -- interaction done thru requests/responses but
  can not maintain info between requests
• Not good for complex transactions banking,
• Use SOAP as a work around

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Web Services -- Limitations

• Security authorization and encryption not
  basic
• -- non-repudiation messy (when company gets
  confirmation of PO can not be undone
• Work Around
• -- customized systems interacting with untouched
  web services at other firms messy
• -- no standard way to do interface
• Work Services Networks
• -- an integration hub available thru subscription

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Response to Information Management

• XML provides standardized means for capturing,
  storing, describing
• Information content and structure
• Rules and information about how that control s/be
  understood, managed, stored, and referenced
• How the content is transmitted, transformed
  and/or presented
• How content is related to each other

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Web Services Top Ten

• Think plumbing between computer pgms to pass
• Data/Content
• Command
• Web Services next logical step in integrating
  the Internet into the Enterprise
• Standards not really up to par yet many things
  need agreement before it can take off
• XML is the heart of web services
• Probably org is already using web services but
  not aware
• If implemented well, greatly decreases complexity
  of system integration for org
• Web Services will be THE protocol for data
  exchange over the Internet
• Sun Microsystems J2EE and MSs .NET 2 main
  platforms of choice for development
• Most Web Services is intraorganizational today
• Next growth phase B2B communications

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Internal and External Process Enablement
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Question

• EDI is electronic data interchange
• Uses traditional record format to record
  transactions between firms
• Has standards the X.25 for example
• Has been around since 1970s
• Used to transmit transactions between
  suppliers/customers
• Expensive to implement and maintain
• Will Web Services take over from EDI?