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INTRODUCTION TO E-COMMERCE

IS524Corporate Information Systems

byChandra Amaravadi

PRESENTATION OUTLINE

Introduction & basic concepts E-commerce architectures &

infrastructures Electronic Payments & Security Business and revenue models

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INTRODUCTION &BASIC CONCEPTS

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BUYER SELLERInternet

WHAT IS E-COMMERCE? Business conducted on the web Buyers and sellers interact electronically

Products/services

Payments

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TYPES OF ECOMMERCE

Cust to business (C2B, B2C)products, books, software, music, appliances, services, banking & finance, stock trades

Business to Business (B2B)products, raw materials, commodities, content, services

Customer to Customer (C2C)used books, computers, CDs, antiques, services

Intra-orginventory ordering & charge out, etc. e.g. MS Markethelpdesk, etc.

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What might be differences between B2C and B2B?

PRIMARY MOTIVATOR FOR ONLINE PURCHASES*

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$0 $20 $40 $60 $80 $100

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Consumer electronics / appliances

Groceries

Apparel

TYPICAL ACQUISITION COST PER CUSTOMER

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NET SHOPPERS’ KEY DEMOGRAPHICS

Average Income: $65,000

Average Age: 42

Male/Female: 44-56

% of Population:75%

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Most common small-ticket items : Apparel Toys/video games Books Software Music Health and Beauty Office supplies

Most common big-ticket items : Plane tickets Computer hardware Hotel reservations Consumer electronics Car rental

MOST COMMONLY PURCHASED

AN EXTENDED VIEW OF E-COMMERCE

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EXTENDED VIEW

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BUYER

PAYMENT

SELLERInfrastructure

Banks Intermediaries Banks

E-commercesystemInternet

SECURITY

E-COMMERCE INFRASTRUCTURE The Internet

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THE INTERNET

INTERNET

Webclient

Host/nodes

Webclient

E-commercesystem

Router

The web client (i.e. browser) sends a request, which isresponded to by a web server (i.e. web site) and routedby routers

DNSserver

Webclient

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ISP

E-commerce takes place by making use of the internet infrastructure

Web clients consist of computers that access web servers – usually use browsers

Host/node – This could be the ISP host or it could be a host dedicated for internet services. Host has IP address.

E-commerce system – consists of the web client, web servers and the e-commerce software

DNS server – The ultimate reference for all web site addresses. DNS servers poll web sites in their area i.e. take ‘attendance’.

Routers– Components that forward data at network branches.

Service providers (ISP) provide internet access.

COMPONENTS OF THE ARCHITECTURE

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E-COMMERCE INFRASTRUCTURE E-Commerce System

E-COMMERCE REFERENCE DIAGRAM

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BUYER

PAYMENT

SELLERInfrastructure

Banks Intermediaries Banks

E-commercesystem

Internet

SECURITY

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Attract and interface with visitors capture site traffic Store profiles

Display products/services (in the case of ‘sales model’) Process payments (for ‘sales model’) payment/shipment confirmation Update databases

E-COMMERCE SYSTEM PURPOSEThe functions of an e-commerce system are:

(these are discussed later)

Attracting Visitors

RATIO OF BUYERS TO VISITORSCalled conversion ratio – (5% for small companies)

90

80

70

60

50

40

30

20

10

Buyers Browsers

Nu

mb

er o

f U

sers

(in

mil

lion

s)

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Web clients (already discussed) Servers (see ‘server architecture’) E-commerce site (Web site ) E-commerce application

InterfaceBusiness logicDatabase backend

COMPONENTS OF AN E-COMMERCE SYSTEM

An E-Commerce System consists of:

WEB SERVER FUNCTIONS

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hosts web site and provides web pages provides authentication site traffic

Backend layer

Application Server layer (E-commerceServer)

Web Server layer (handleincoming requests)

Web client

MainframeERP SystemDatabase

SERVER ARCHITECTURE

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E-COMMERCE SITE (WEB SITE)

The Physical Layout of a typical web site is as follows:

left panel

banner

side bar content

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WEB SITE CONTENT

Text and graphics (HTML format)Data (XML) Code -- (part of E-commerce application)

Client side -- Java script Server side -- Applets, Servlets (ASP/JSP)

An E-commerce site or web site consists of Web pages with ‘content’:

HYPERTEXT MARKUP LANGUAGEHTML – Hypertext Markup Language, language used to format web content.

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<html><h1> MIDWEST SOFTWARE CONSULTING INC. </h1> <p> We are the #1 consultants in the midwest for databases and web technologies. Here are some past projects </p><ol><li> UKTI database </li><li> iExcel web site </li><li> Howard city web site </li></ol></html>

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XTENDED MARKUP LANGUAGE

<xs:element name="note"><xs:complexType> <xs:sequence> <xs:element name="to" type="xs:string"/> <xs:element name="from" type="xs:string"/> <xs:element name="heading" type="xs:string"/> <xs:element name="body" type="xs:string"/> </xs:sequence></xs:complexType></xs:element>

<note><to>IS524</to><from>Amaravadi</from><heading>Reminder</heading><body>Don't forget assignments coming up!</body></note>

XML – Xtensible Markup Language. Uses user-specified tags e.g. <ecom>, <TP>, <ERP> etc. to mark up content – associated with semantic web

Semantic = meaningful

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<bookstore><book category="CHILDREN"> <title>Harry Potter</title> <author>J K. Rowling</author> <year>2005</year> <price>29.99</price> </book><book category="WEB"> <title>Learning XML</title> <author>Erik T. Ray</author> <year>2003</year> <price>39.95</price> </book></bookstore>

ANOTHER EXAMPLE OF XML

Note: XML – Xtended Markup Language; HTML – Hypertext Markup Language

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<html><body> <button onclick = “greetClass()"> Greet Class</button>

<script>function greetClass(){ alert("Hello 524!");}</script>

</body></html>

Java Script Example

CLIENT SIDE – JAVA SCRIPTJavascript is an Object Oriented 4th GL that is used to carry out actions on the client side like form validation or popup windows. The compiler is part of browser.

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SERVER SIDE -- APPLETS

package org.me.hello;  import java.applet.Applet; import java.awt.Graphics;  public class MyApplet extends Applet { @Override public void paint(Graphics g) { g.drawString("Hello applet!", 50, 25); } }

MyApplet is a classwith ‘paint’ as theFunction/method

required to perform actions (authenticate, get prod info etc.) – written in Java, PHP or ASPGenerally involves calling ‘functions’ ‘scripts’ or pre-coded mini modulesFunctions embedded in HTML or stored in serverCalls are placed in HTML

<applet code="org.me.hello.MyApplet" archive="HelloApplet.jar"></applet>

Code is included

E-COMMERCE APPLICATION

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AN E-COMMERCE APPLICATION

Interface

Business

Back End

GetClientInfo()

VerifyInfo()

DisplayAvailablePkgs()

SelectPkg()

PriceThePkg()

GetPayment()

ProcessPayment()

ConnectDatabase()

UpdateDatabase()

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THE U.S. CELLULAR SYSTEM

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THE U.S. CELLULAR SYSTEM..

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THE U.S. CELLULAR SYSTEM 3

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CODE SAMPLES (FYI)getClientInfo ()

<soapenv:Envelope xmlns:soapenv="http://schemas.xmlsoap.org/soap/envelope/" xmlns:typ="http://xml.****.com/types" xmlns:ser="http://xml.****.com/shopping/services" xmlns:typ1="http://xml.****.com/shopping/types"> <soapenv:Header> <typ:requestHeader> <typ:timestamp>?</typ:timestamp> <typ:sourceSystemId>?</typ:sourceSystemId> <!--Optional:--> <typ:sourceSystemUserId>?</typ:sourceSystemUserId> <typ:sourceServerId>?</typ:sourceServerId> <typ:trackingId>?</typ:trackingId> </typ:requestHeader> </soapenv:Header> <soapenv:Body> <ser:presentEligibleOffers> <ser:request> <!--Optional:--> <typ1:linesOfBusiness> <typ1:lineOfBusiness>?</typ1:lineOfBusiness> </typ1:linesOfBusiness> <typ1:customerStatus>?</typ1:customerStatus> <typ1:customerType>?</typ1:customerType> <typ1:newMarketId>?</typ1:newMarketId> <typ1:channelName>?</typ1:channelName> <!--Optional:--> <typ1:locationId>?</typ1:locationId> <!--Optional:--> <typ1:billingIdentifiers> <typ1:activeIds> <!--Zero or more repetitions:--> <typ1:string>?</typ1:string> </typ1:activeIds> <typ1:currentCharges>?</typ1:currentCharges> </ser:request> </ser:presentEligibleOffers> </soapenv:Body></soapenv:Envelope>

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VerifyInfo()

<soapenv:Envelope xmlns:soapenv="http://schemas.xmlsoap.org/soap/envelope/"> <soap:Header xmlns:soap="http://schemas.xmlsoap.org/soap/envelope/"> <requestHeader xmlns="http://xml.****.com/types"> <timestamp>2013-07-30T16:55:37.406-04:00</timestamp> <sourceSystemId>ESP-POSRETAIL</sourceSystemId> <sourceSystemUserId>posretailuser</sourceSystemUserId> <sourceServerId>RETAILSERVICE</sourceServerId> <trackingId>401317257</trackingId> </requestHeader> </soap:Header> <soap:Body xmlns:soap="http://schemas.xmlsoap.org/soap/envelope/"> <ns2:searchCustomerProfile xmlns="http://xml.****.com/saleschannelmanagement/types" xmlns:ns2="http://xml.****.com/saleschannelmanagement/services" xmlns:ns3="http://xml.****.com/types" xmlns:ns4="http://xml.****.com/payment/types"> <ns2:searchCustomerProfileRequest> <UserInfo xsi:nil="true" xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance"/> <customerSearch> <address> <country xsi:nil="true" xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance"/> <city xsi:nil="true" xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance"/> <unitType xsi:nil="true" xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance"/> <zipCode>******</zipCode> <state xsi:nil="true" xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance"/> <unitNumber>*****</unitNumber> <zip4Code xsi:nil="true" xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance"/> <streetAddress1>***********</streetAddress1> <streetAddress2 xsi:nil="true" xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance"/> <presentationElement xsi:nil="true" xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance"/> </address> <telephoneNumber xsi:nil="true" xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance"/> <sessionId>********************</sessionId> </customerSearch> </ns2:searchCustomerProfileRequest> </ns2:searchCustomerProfile> </soap:Body></soapenv:Envelope>

CODE SAMPLES (FYI)..

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CODE SAMPLES (FYI)..getCustomerinfo Response :

<env:Envelope xmlns:env="http://schemas.xmlsoap.org/soap/envelope/" xmlns:xsi="http://www.w3.org/2001/XMLSchema-instance"> <env:Header/> <env:Body> <m:searchCustomerProfileResponse xmlns:m="http://xml.****.com/saleschannelmanagement/services"> <m:searchCustomerProfileReturn> <typ:customerProfiles xmlns:typ="http://xml.****.com/saleschannelmanagement/types"> <typ:customerProfile> <typ:firstName xsi:nil="true"/> <typ:lastName xsi:nil="true"/> <typ:telephoneNumber xsi:nil="true"/> <typ:marketName xsi:nil="true"/> <typ:id>*******</typ:id> <typ:address> <typ:country xsi:nil="true"/> <typ:city>*****</typ:city> <typ:unitType>APT</typ:unitType> <typ:zipCode>19962</typ:zipCode> <typ:state>DE</typ:state> <typ:unitNumber>****</typ:unitNumber> <typ:zip4Code>1434</typ:zip4Code> <typ:streetAddress1>****</typ:streetAddress1> <typ:streetAddress2 xsi:nil="true"/> <typ:presentationElement xsi:nil="true"/> </typ:address> <typ:isExistingCustomer xsi:nil="true"/> </typ:customerProfile> </typ:customerProfiles> <typ:messages xsi:nil="true" xmlns:typ="http://xml.****.com/saleschannelmanagement/types"/> </m:searchCustomerProfileReturn> </m:searchCustomerProfileResponse> </env:Body></env:Envelope>

SECURITY & PAYMENTS

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0 10 20 30 40 50 60 70

Web Site vandalism

Denial of service attack

Unauthorized access or misuse

Financial Fraud

SECURITY PROBLEMS

Percent of web sites

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SECURITY AND PAYMENT

Need secure environment Physical security via

Firewalls (not discussed) E-cash/E-accts

Transaction security via Encryption methods (SSL, SET) Authentication schemes (certificates)

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TRANSACTION SECURITY

SSL (Secure Sockets Layer) https (Enables SSL)

SET (Secure Electronic Transaction)

Encryption Decryption

Transfer $1000 Transfer $1000

Public key105

Private keys15, 7

0111 0110111000110

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When an e-commerce transaction is in progress, it mustbe invisible to all except the parties of the transaction:

DIGITAL CERTIFICATESA digital certificate is an attachment to an email message or a program embedded in a web page that verifies the identity of a party in a transaction.

E-mail E-commerce EFT (funds transfer)

Certificate authority

Buyer Seller

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STRUCTURE OF A DIGITAL CERTIFICATE*

Owner: name, organization, address

Owner’s public key

Validity date

Serial number

Issuing authority (IA)

IA’s digital signature

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ELECTRONIC PAYMENTS

Payments are made when a transaction for a product/serviceis taking place. Payments can be in the form of:

credit/debit cards smart card electronic check cashing electronic accounts

What issues arise in processing payments during web based commerce?

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DIGITAL CASH OR ELECTRONIC PAYMENTS

Early technology problematic (1st Gen) imitated conventional cash needed machine no standards, no anonymity Cybercash, Digicash, Scrips, Beenz and Flooz

Move towards electronic accounts, 3rd Party payment (2nd G) e.g. Token, Paypal, Verisign, RBS worldpay protects privacy & can be used anywhere

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Digital cash is electronic cash. It used to mimic conventional cash,but now the trend is towards electronic payments.

ELECTRONIC PAYMENT SYSTEMS (FYI)

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E-COMMERCE BUSINESS MODELS

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E-COMMERCE BUSINESS MODELS

E-tailerTransaction BrokerMarketplace CreatorContent ProviderCommunity ProviderGatewayService Provider

A business model refers to a particular method of operation.

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E-COMMERCE BUSINESS MODELS..CATEGORY DESCRIPTION EXAMPLES

E-tailer Sells physical products directly to either other businesses or consumers.

AmazonWal-mart.com

Transaction broker Processes online sales transactions for users, charging a fee for each transaction in order to save those users both time and money.

E-trade.comExpedia

Market place Provides an environment for buyers and sellers to interact and sell products/services

e-BayPriceline.com

Content provider Provides content over the web. WSJ.comGettyImages.comItunes.com

Community provider Facilitates information/social exchange between people with similar interests

Facebook.com

Gateway Serves as an initial point of entry to the web providing additional services as well.

YahooGoogle

Service Provider Provides web 2.0 services such as photo sharing and online backup to users

Photobucket.comDropbox

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E-COMMERCE REVENUE MODELS

Advertising Revenue ModelSales Revenue ModelSubscription Revenue ModelFree/Freemium Revenue ModelTransaction Fee Revenue ModelAffiliate Revenue Model

A revenue model refers to a particular method of deriving income.

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E-COMMERCE REVENUE MODELS…

Model Description

Advertising Revenue Model Revenue is generated by attracting audience and subjecting them to a large volume of advertisements

Sales Revenue Model Revenue is obtained from selling: goods, information, or services to customers.

Subscription Revenue Model Revenue is generated from the charging of a subscription fee in exchange for access to the provided content.

Free/Freemium Revenue Model Revenue is generated from a premium that is charged for access to additional services above and beyond the basic services which are provided for free.

Transaction Fee Revenue Model Revenue is generated from charging a transaction fee for each transaction that a company generates.

Affiliate Revenue Model Revenue is generated from by web sites that send visitors to other web sites in exchange for a referral fee.

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What are some reasons other than value & convenience for customers to shop online?

What is the purpose of the e-commerce layer in the e-commerce architecture?What is the conversion ratio? What might be reasons for low conversion ratios? How can it be improved? What is the difference between HTML and XML? What issues might an e-commerce company in a less developed country

face? “Deviantart.com” is a company that brings together various types of artists.

What business model is this? “Dictionary.com” provides free dictionary information to internet users, but

for subscribers it provides premium content. What revenue model is this? Are e-commerce transactions “friction-free”?

DISCUSSION QUESTIONS

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The core technology that keeps Amazon running is Linux-based. As of 2005, Amazon had the world’s three largest Linux databases, with capacities of 7.8 TB, 18.5 TB, and 24.7 TB. The central data warehouse of Amazon is made of 28 Hewlett Packard servers with four CPUs per node running Oracle database software. Amazon’s technology architecture handles millions of back-end operations every day, as well as queries from more than half a million third-party sellers. With hundreds of thousands of people sending their credit card numbers to Amazon’s servers every day, security becomes a major concern. Amazon employs Netscape Secure Commerce Server using the Secure Socket Layer protocol which stores all credit card details in a separate database. The company also records data on customer buyer behavior which enables them to offer or recommend to an individual specific item, or bundles of items based upon preferences demonstrated through purchases or items visited

WHAT E-COMMERCE CONCEPTS ARE HIGHLIGHTED HERE?

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THE END