Rob Oshana Southern Methodist University

Rob OshanaSouthern Methodist

University

E-Commerce:E-Commerce:Architectures andArchitectures and

TechnologiesTechnologies

E-Commerce:E-Commerce:Architectures andArchitectures and

TechnologiesTechnologies

Who am I ?

• Robert Oshana

• Adjunct Professor at SMU, School of Engineering and Applied Science, Graduate Software Engineering Program

• Engineering Manager, Texas Instruments

Syllabus

Syllabus

• Web page:– http://www.seas.smu.edu/eets/8392

• Times– 0900 - 1200

• Location– SMU Main campus

• Instructor– Rob Oshana

http://www.seas.smu.edu/~roshana







Syllabus• Office hours; after/before class or by

appointment• Phone– 214-415-9690 or 281-274-3211

• Internet– [email protected]

• Book: “Scaling for E-Business”, by Daniel A. Menasce and Virgilio A.F. Almeida, Prentice Hall, ISBN 0-13-086328-9

Course Outline

• 08/26/00• Introduction– What is internet

commerce?– E-Commerce

technologies– Strategic Issues– Case Studies

• 09/02/00• Internet

technologies and infrastructure– Business to

Business

– Business to Consumer

• Models for E-Business

Course Outline

• 09/09/00• System Design

Issues– Network protocols– Intranets/Extranets– Client/Server– Design Principles

• 09/16/00• Customer Behavior

Models– CBMG– CVM

• Anatomy of E-Business functions

Course Outline

• 09/23/00• Infrastructure for

Electronic Business

• Quantitative analysis of authentication services and payment systems

• 09/30/00• Capacity planning

for E-Business• Performance

modeling concepts

Course Outline

• 10/07/00• Performance

models for E-Business sites

• Modeling contention for software servers

• 10/14/00• Midterm Exam

Course Outline

• 10/21/00• Characterizing E-

Business workloads

• Preparing for E-Business waves of demand

• 10/28/00• E-Commerce

Technologies– HTML– DHTML– Images, links, and

URLs

Course Outline


Technologies– XML– Cookies– CGI– personalization


Technologies– Java– Applets– Java Platform– Java Security

Course Outline


Technologies– JINI– Technology

Building Blocks– Enterprise Java

Beans– Active X

• 11/25/00• Thanksgiving

Vacation

Course Outline

• 12/02/00• E-Commerce tools

and building blocks

• 12/09/00• Final Exam

Student Evaluation

• The course grade will be computed as follows:

• Midterm Exam 40%

• Final Exam 40%

• Homework/Project 20%

Questions so far?

The World of E-The World of E-CommerceCommerce

Internet Economy

We Are Moving We Are Moving Towards a WorldTowards a World

of a Billionof a BillionConnectedConnectedComputersComputers

and a Trillion and a Trillion Connected DollarsConnected Dollars

E-Business• Business processes

automated among networked computers

• Once in a generation change in the way business is transacted– mechanical support for

intellectual and human-centered activities of business• strategy• marketing• customer relations

IndustryIndustry

HomeHome

EducationEducation

GovernmentGovernment

ServicesServices

E-Commerce• Sales transactions completed

on the Internet (agreement and payment)

• Business to Consumer (B2C)– personal payment,

personal information, trust• Business to Business (B2B)

– processes, documents, ongoing relationships

• Marketplaces (exchanges, etc)– many B and C meeting

together to do business

Phases of Public Excitement

• B2C

• Portals

• B2B

• e-Marketplaces

• e-Business

• Pervasive e-commerce

• Service-oriented Commerce

Phases of Public Excitement - Challenges

• B2C; storefront, images, payment, auction, authentication, privacy

• Portals; content, collaboration

• B2B; protocols, processes, robustness

• e-Marketplaces; negotiation, services, databases

Phases of Public Excitement - Challenges

• e-Business; business processes, models, stability, inter-organizational federated computing

• Pervasive e-commerce; scale, user experience, application and content adaptation

• Service-oriented Commerce; highly distributed computing, management

Fundamental Business Problem

Something to sell

Make it knownto potential

buyers

Accept payment

Deliver thegoods orservices

Provide appropriateservice

Why the internet and why now?

• The top line– ability to reach new customers– create more intimate relationship with all

customers– every business has a global presence– computing and information technology

allows us to know more about our customers• use it to improve relationships and create sales

Why the internet and why now?

• The bottom line– drastic cost reductions for distribution and

customer service– internet lowers distribution costs for

information– improves ability to keep information current

• customers demanding more and more information about products and services

• information may be the product

Key properties of the internet

• Internet is interoperable– a computer is connected to the Internet

if it can communicate with any other computer connected to the Internet• standardized protocols• universal naming, addressing, routing• no prearranged agreements


• The Internet is global– based on universal connectivity– used to distribute software• worldwide base of users with a common set

of software• broad base of potential users


• The Web makes it easy– highly functional multimedia content

easily available to users worldwide– connection possible for people with

little or no computer experience


• Costs of network shared across multiple applications and borne by end users–most businesses and consumers

connected to Internet pay for their own connection

– network then free to use for various purposes


– provider of information does not need to pay for a distribution system• users of service pay for distribution• cost amortized by many applications and

many users

Access to a global market

• Internet accelerating globalization– worldwide high-bandwidth

communications– cost is the same whether next door or

around the world– everybody on the internet has a global

presence

Access to a global market

– still must deal with international issues• payment• currency• shipping• national,regional, local regulations

Dramatic Reduction in Distribution Costs

• Printed brochures can cost several dollars for each recipient

• “Brochureware” on web site is basically free (small one time setup charge)– up to the minute–more for less– accurate– searchable

“Digital” goods

• Selling information or software in-line– delivered over the net cheaply and

efficiently– no expensive packaging

• boxed• CD-ROMs• packing material

– cost is the same for customers everywhere

Strategic Issues

• Concentration vs Empowerment– great concentration of suppliers?– thousands of small and medium sized

suppliers in global niche markets?– probably both• few large music supersites• market serving critical mass for antique

buggy whips

Strategic Issues• New competitive challenges– not necessary to create an expensive

distribution channel to enter a new territory– formerly disjoint enterprises in direct

competition now• selling financial instruments

– done by banks and brokerages– publishers provided comparitive information– internet blurs these lines– is publisher in the trading business or is brokerage now a

publisher?– who owns the customer relationship?

What is “Internet Commerce”?• “The use of the global Internet for purchase

and sales of goods and services, including service and support after the sale”

• “Electronic commerce” is more general– longer history (behind the scenes)– includes the use of computing and

communication technology in financial business, on-line reservation systems, order processing, inventory management, etc

What is “Internet Commerce”?

• Electronic Data Interchange (EDI)– umbrella term for many different types of activities

• specialized for a perticular trading relationship• often a long process

– message types

– data formats

• EDI and the Internet do not exclude one another– EDI specifies types of messages

– Internet is a way of moving data

What is “Internet Commerce”?

• Internet commerce transcends many of the restrictions of EDI– communication over shared public network

rather then building a specialized network– spontaneous business transactions with

no prior relationship– once a relationship develops, EDI (or

another method) can be used to work more effectively

Business Issues in Internet Commerce

• Must have a clear idea of business goals– technology cannot help you achieve those– goals can change to take advantage of

technology– Internet may allow a company to achieve

those goals in way that would have been too expensive or difficult to achieve without it

Questions businesses must ask of any new idea

• How does it fit with our strategy? Should our strategy change?

• What does it mean to our competitive situation?

• Do we expect return in the short term, or is this a long-term investment?

• How much will it cost? What do we expect to accomplish?

Questions businesses must ask of any new idea

• How will we measure the success?• How does this affect our sales

channels, our partners, our suppliers?

Internet should not be exempted from Internet should not be exempted from such thinking!!such thinking!!

Investment can vary• Cost of getting started may be low– big difference between a few static web pages

and real-time catalog updating, customer profiling, etc

• Getting a web site up and running as soon as possible vs planning for growth and evolution

• Don’t wait until you build the perfect system– takes too long and technology changes too fast

Technology Issues in Internet Commerce

• 1. How to apply Internet technology to business problems–Web– databases– high-speed networking– cryptographic algorithms–multimedia


– putting all these technologies together can be challenging

– toolkits and packaged application software now available to help


• 2. Pace of change– fact of life on the internet– no end in sight– successful sights must be able to

incorporate new technologies quickly• coherent system architecture

• focus on the ends and the fundamental principles

• packaged software helps by amortizing cost over many customers

Who owns internet commerce in an Organization?

• Sales and marketing?

• MIS group?

• Accounts receivable group?

• Answer is critical to success

• Confusion results when more than one group thinks it is responsible– duplicate efforts and investments

Who owns internet commerce in an Organization?

• A combined effort – strengths of many groups required• sales and marketing; effective presentation

of products/services on the Net• MIS; operating/outsourcing 24/7 commerce

systems• etc

Buyer/Seller Transactions

Payment flow

Information flow

Onlinetransactions

Seller

•Digital data anddocuments•Multimedia content•Software programs•Products/services

Buyer

•Digital Products•Services•Information

Product type Transactions

Onlineproduction

process

Producers

•Digital data anddocuments•Multimedia content•Collateralinformation•Customerparticipation

Consumer

•Digital Products•Services•Processed orders

Network enabled business practices

Network enabledBusiness practices

Electronicdata interchange

(procurement)

Electronicmail

(communication)

Documentworkflowsystems

Desktopvideo

conferencing

Outsourcing and

coordinationof logistics

Virtual andteam basedenterprises

Masscustomization

(demand-drivenmanufacturing)

Technicaldata

interchange(engineering)

Internet Business Strategy

Commerce and Technology Revolutions

• Changes in technology or infrastructure affect commerce in two phases– improve old processes or business models– completely reinvent the business

• Railroad transition took 50 years

• Internet transition occurring much more quickly

Changes from rail transportation

• Before railroad– travel between

Boston and New York in four days

– 8,000 US time zones

– Vacation near home

– 5-15 cents per mile for a ton of goods

• After the railroad– travel between

Boston and New York in less than one day

– 4 US time zones– Vacation away from

home– 1 cent per mile for

one ton of goods

Comparison of Railroad and Internet Infrastructure

Railroad (1825-1890)

Internet (1969-1999)

Newinfrastructure

First water-independenttransportationinfrastructure

First globalpublicinformationinfrastructure

Originalpurpose (notcommerce)

Passenger traffic,military

Military andcivil defense;research

Importance ofstandards

Width of tracks(gauge)

Network andcommunicationprotocols(TCP/IP)

New securitystandards

Railway policehired to managenew crimes

Securityprotocols andstandards

Source ofinnovation

Steel production,accounting,logistics

Software,networking,fiber optics

Acceleratefundamentaleconomic trends

Industrial age (keyenabler: steamengine)

Informationage (keyenabler;computer)

Historical Analogy

• “The utility of a network increases as the square of the number of nodes connected” Metcalfe

• Routing goods between arbitrary factories vs routing information between arbitrary computers

Other Factors• Economies of scale– larger operations now possible (one store)

• Source of competitive advantage– single sites can offer full services

• Inventory needs– just in time delivery of goods (or none at all!)

• Variety, choice and availability– distribution bottlenecks eliminated

• New opportunities

Internet Value Proposition• Used to transform customer relationships

Supplier-centered Customer-centeredSupplier chooses hours ofoperation

Supplier always available,customer chooses hours

Supplier chooseslocations of service

Service delivered atcustomer location

Supplier delivers services Customer serves himselfFocus on supply chain Focus on customer needsOne to many One to one

Internet Value Proposition

• Displace the source of value

Physical world Information worldAtoms BitsPhysical value Digital valueEconomies of scale Economies of scopeMass produced Mass customizedInformation value Knowledge valueDistribution as a constraint Distribution as an enablerLocal Global

Internet Business Strategies

• Channel master

• Customer magnet

• Value chain pirate

• Digital Distributor

Channel Master

• Use the internet to build deeper relationships with customers in order to sell one’s traditional goods and services

• Organized around products and the best possible delivery

• Re-engineer customer-facing strategies• Must integrate into existing operations

Channel Master• Cisco– Attract; get and keep customer interested

• full online catalog; price change notification

– Interact; turn interest into orders• online catalog for searching; intelligent agents

– Act; coordinate order fulfillment• order management DBs; order status

– React; provide after-sales service• comprehensive self help; Bug Alert mechanism

Customer Magnet• Internet used to attract a customer group– knowledge sharing environment– aggregated supplier access

• Organized around customer group• Broad range of products and services• Destination of choice for a whole category of

customers• Must integrate many value chains into a

customer-facing whole

Customer Magnet• Tripod (320,000 Gen X’ers!)– Attract; get and keep customer interested

• free information; links to many sites

– Interact; turn interest into orders• partners with banks for home banking service

– Act; coordinate order fulfillment• 24 hour home banking service; access to account

– React; provide after-sales service• 24/7 customer service; online forums for advice

Value Chain Pirate• Capturing someone else’s margins by

displacing them from the value chain• Leapfrog upstream and downstream

providers to more directly connect suppliers with customers

• Seeks the positions on the value chain which offers the greatest leverage

• Must use the commerce chain to support a new buyer/supplier relationship

Value Chain Pirate

• ONSALE (24 hr online auction for computers and consumer electronics)– Attract; get and keep customer

interested• customers notified of upcoming auctions

(profiles)

– Interact; turn interest into orders• auctions open 24 hours a day

Value Chain Pirate

– Act; coordinate order fulfillment• Automated shipping and tracking over net

– React; provide after-sales service• inquiries managed by e-mail (customer

profiles)

Digital Distributor

• Eating away at traditional value propositions– focus on pieces that can be delivered better

over the internet

• Organized around disaggregating traditional bundles of products and reaggregating for more efficient delivery over the web

• Must create a new customer value chain from scratch

Digital Distributor• Classified2000 (web based classified

advertising in many categories)– Attract; get and keep customer interested

• free links to sites related to purchases

– Interact; turn interest into orders• e-mail to customers with new profiles postings

– Act; coordinate order fulfillment• links to intermediary to handle transactions

– React; provide after-sales service• campaign reports sent to advertisers

New Competitive Threats

• Channel master– Can competitors create superior

channels to your customers?

• Customer magnet– Can competitors attract your customers

and sell them your products?

New Competitive Threats

• Value chain pirate– Can competitors hijack your position in

the value chain?

• Digital Distributor– Can competitors disaggregate your

value proposition?

Example - traditional full service broker

• Channel master– Another brokerage goes online with full

services and more convenient channel

• Customer magnet–Motley Fool forms a community of avid

investors and offers brokerage services under their brand

Example - traditional full service broker

• Value chain pirate– E*Trade bumping traditional brokers out

of their value chain

• Digital Distributor–Wall Street City selling analysis without

trading services from their web site

New Creative Opportunities

• Channel master– Can you improve your customers

buying experience by improving cost, convenience?

• Customer magnet– Do your customers share broad

interests that lend themselves to new bundles of products?

New Creative Opportunities

• Value chain pirate– Can you jump over your direct suppliers

or customers and capture their margins?

• Digital Distributor–What parts of other companies value

chain can you improve by selling them over the web?

E-Business Technology

Introduction

• Electronic business growing rapidly• So are the problems associated with this

growth• Download times cause potential

customers to leave• High availability is a must• Cannot just wing it!• Need quantitative analysis and models

Quantitative Approach

• What determines the quality of service of an E-Commerce site?– Site architecture– network capacity– system software structure

• Unpredictable public behavior– usage patterns can change quickly

• breaking news for a newspaper• advertising campaign

Quantitative Approach

• Can I handle the surge in volume?

• How can I justify a costly site expansion?

• Do I have enough servers to handle the peak traffic?

• How can I guarantee quality of service different scenarios?

• How fast can I scale my architecture?

Electronic Business Challenges

• Computers are becoming more pervasive

• Wireless internet devices will add an order of magnitude to the traffic

• Local access technologies will change workloads arriving from traditional end systems

• Software agents will lead to more traffic

Electronic Markets

• Definition: any form of business transaction in which the parties interact electronically

• A transaction involves a number of different interactions between parties–marketing

– ordering

– payment

– fulfillment

Electronic Markets

• Allows participating buyers and sellers to exchange goods and services with the support of information technology

• Three main functions–matching buyers and sellers– facilitating commercial transactions– providing legal infrastructure

Electronic Markets

• Players;– businesses– individuals– government organizations

Documents

Rob Oshana Southern Methodist University