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Examining Electronic Commerce
Simanta C. Chakraborty
Sapient Corporation
18 November, 1998
Agenda
Introduction Internet Background Internet Business Models Trends and the Horizon How to Capitalize on the Internet
Introduction
What is Electronic Commerce?
The ability for buyers and sellers to conduct business and/or exchange information without real-time human interaction
Electronic Commerce Vision
Products
Information
Support
The Internet
What is the Internet?
Worldwide network of networks Overseen by governments but run by
private companies Driving force behind shift from voice to
data traffic over US public network World Wide Web has 2.5 million sites and
134 million users worldwide
Internet Facts / Trends
Internet took four years to reach 50 million users
Digital economy 8% of US GNP E-Commerce market in US $14 billion in
1997, estimated to grow to $300 billion by 2002
Internet Consumer Demographics
Ave Age: 35 years old 54% have college degree 64% make more than $30k, 25% make
more than $75k 85% use the web at least once per day
and more than 4 hours per week Places / devices to access web are
proliferating
Brief Internet History
Concept first generated in 1962 United States Department of Defense
contract Communications after nuclear holocaust Envisioned to support remote login and
file sharing
ARPANET pioneers of packet switching Open Architecture networking Development of LANs, PCs, workstations
spur growth Email and web catalyst for
commercialization Businesses move to capitalize on business
to business commerce
Brief Internet History (continued)
Uses of Internet Technologies
Internet• Business to consumer• Wide business to business
Intranet• Internal to company
Extranet• Partnered business to business
Physical Network
The Internet is evolving into more than a “data” network
The backbone bandwidth is increasing exponentially
What is the Significance of the Internet?
Medium for collaboration and interaction without regard to geographic location, time zone, etc.
Advancing technology, organizations, and communities
Ubiquitous
Benefits
Buyers• More choices, more
power• Personalization• Anywhere, anytime• Community
Sellers• Real time feedback• Target marketing• New markets• 24 hour/day
operation• Lower costs• Small guy look big...• Customer loyalty
The Internet and E-Commerce
You can use the internet for the following purposes:• Automating existing internal processes to cut
costs• Extend automated process outside the
enterprise to capture new business opportunities
• Introduce a new process for service delivery• Create a new business model
Internet Business Models
Internet Business Models
Content Advertising Transactions (E-Commerce)
Content Model
What is “Content”?
Content is information that is created / packaged / distributed for a specific audience
Examples on the Web include AOL, WSJ, C/NET, Boston.com, etc.
Early pioneers of on-line content (CompuServe, Prodigy, AOL) utilized proprietary networks / software for distribution
Early Content Efforts
If it’s good enough, people will pay Users can subscribe or use micro-
payments Most people won’t pay for content People like user generated content Market growth slow - find new markets Results were below expectations
Advertising Business Model
What is Compelling about Internet Advertising?
The internet has the potential to be the most effective direct marketing tool yet
It’s possible to target specific messages to an audience with specific demographics and interests
Internet first medium to allow brand conversion to sale
Internet less costly than direct mail
Online Branding/Marketing Convergence
Internet Advertising Revenues
1997 1998 1999 2000 20010
500
100015002000
2500300035004000
4500
Millions
1997 1998 1999 2000 2001
Year
Transaction Business Model (E-Commerce)
Examples of Internet Commerce
Service offerings• Wells Fargo
Product / company specific sites• Amazon• Dell
Business to business• Cisco
Web Banking WELLS FARGO
On-Line Bookstore AMAZON
Amazon (Created New Business Model)
Virtual booksellers (2.5 million titles) Store credit card and billing information $137 million in sales (1997) up from $15.8 Multi-billion dollar market cap Vision to become the “Walmart of the Web”
• Compact Disks
Electronic Channel DELL COMPUTER
Dell (New Channel)
Pioneered the direct computer sales model $11 billion revenues $3 million day over the internet Target tech savvy and affluent buyer Save $8 per order Custom web pages for major customers
Cisco (Automation of an Existing Process)
Product information, order entry, status Eliminates errors, shortened order to
delivery time by 3 days 40% of revenue (approx. $1.5 bil) Saved $230 million in operating costs
Trends and the Horizon
E-Commerce Trends
Consumers are becoming more comfortable with spending on the internet
Companies are developing internet strategies as integral parts of their corporations
Heavy investments in migrating to internet technologies
Business to business commerce is becoming the focus
On the Horizon
Greater bandwith and more mature technology will converge media• Data, Video, Telephony
Personalization/customization will create brand loyalty
Businesses will form strong partnerships to protect themselves from extremely free markets
How to Capitalize on the Internet
Technology &Architecture
Internet Strategy
CognitiveEngineering
Business Strategy
Components of a Solution
Co
mp
lexi
ty o
f I
mp
lem
enta
tio
n
Increase in Business Value
Intranet / ExtranetOn-line Customer ServiceCatalogs and Fulfillment
II:II:
SearchCorporate InformationMultimediaI:I:
Transform the EnterpriseSecure eCommerceLegacy Integration
III:III:
E-Commerce Growth Enterprise ArchitectureMulti-channel integrationBusiness Logic re-use
IV:IV:
Components of an InternetStrategy
Com
plex
ity o
f Im
plem
enta
tion
Increase in Business Value
I:I:•Navigation•Metaphor •Brand Extension•Content Strategy
II:II:•Business Drivers •Success Measurement Criteria•Business Requirements Prioritization Approach•Customer Service Strategy•Vendor Criteria and Selection Strategy
III:III:
•Long Term Vision •Success Measurement Criteria•Initiative Communication Plan•Phasing Strategy•Impact Analysis and Mitigation Strategy
•Long Term Plan•Competitive Assessment•Customer Segmentation•Business Case•Usability Testing Approach
IV:IV:•IT Transformation Plan•Long Term Strategy•Corporate Architectural Strategy•Technical Migration Strategy•Change Management Plan
+
+
+
Technology Recommendations
Consider short term business and technical needs, but build for the future business needs
Use component based architectures to expedite time to market and manage maintenance costs
Execute within a well defined migration strategy and plan
Use proven technology
Web PC Phone ATM CustomerService
DBDBDBDBDBDB
The Current Situation
The Future
Web PC Phone ATM CustomerService
SBA: Common Business Functionality
DBDBDB
Ecommerce Recommendations
Get in early Spend to attract customers Provide “one to one” experience Provide value proposition
• cheaper• faster• easier• exclusive
Summary
The net is becoming mainstream The rate of advancement / learning is
astounding Re-visit your supply chain and customer
value proposition. Can you reach new markets, build customer loyalty, cut costs?
Don’t let someone change the game on you
Thank You