1 Information Systems Today: Managing in the Digital World5 Chapter Enabling Commerce Using the Internet “There is no physical analog for what Amazon.com is becoming.” Jeff Bezos Cofounder and long-time CEO of Amazon.com Information Systems Today: Managing in the Digital World

2 Information Systems Today: Managing in the Digital WorldLearning Objectives Information Systems Today: Managing in the Digital World

3 Information Systems Today: Managing in the Digital WorldLearning Objectives Information Systems Today: Managing in the Digital World

4 Information Systems Today: Managing in the Digital WorldElectronic Commerce Online exchange of goods, services and money Second quarter of 2006 2.7% of total retail revenue $24.8 billion in revenue Information Systems Today: Managing in the Digital World

5 Most Common Types of E-CommerceBusiness-to-consumer (B2C) A person buys a book from Amazon.com Business-to-business (B2B) Retailer like Wal-Mart ordering from distributors Business-to-employee (B2E) Employee uses the Web to change employee benefits Consumer-to-consumer (C2C) One person purchases from another on eBay Information Systems Today: Managing in the Digital World

6 Other Types of E-CommerceGovernment-to-citizen (G2C) A person filing income taxes online Government-to-business (G2B) Government purchases supplies using Internet-enabled procurement system Government-to-government (G2G) Foreign government accessing U.S. federal regulations Information Systems Today: Managing in the Digital World

7 Key Capabilities of the WebInformation Systems Today: Managing in the Digital World

8 Questions for class on Types of E-commerceGive One Example of a type of B2B ( Business to Business) E-commerce Website- What is the website and website URL? Give One Example of a type of G2B ( Government to Business) E-commerce Website-What is the website and website URL? Information Systems Today: Managing in the Digital World

9 Questions for class on Types of E-commerceGive One Example of a type of G2G ( Government to Government) E-commerce Website-What is the website and website URL? Information Systems Today: Managing in the Digital World

10 Information DisseminationFirms across the world have access to customers Economical medium for marketing products and services Increased geographical reach Information Systems Today: Managing in the Digital World

11 Information Systems Today: Managing in the Digital WorldIntegration Integration of information via Web sites Real-time access to personalized information No time lag between company decisions and customers’ ability to access these Information Systems Today: Managing in the Digital World

12 Information Systems Today: Managing in the Digital WorldExample: Integration Alaska Airlines customers can access their mileage program any time Real-time link between company database and customer Information Systems Today: Managing in the Digital World

13 Information Systems Today: Managing in the Digital WorldMass Customization Meeting particular customers’ needs on a large scale Timbuk2.com Custom Messenger Bag Builder Customers create a virtual bag Preference-tracking helps Timbuk2 in marketing efforts Information Systems Today: Managing in the Digital World

14 Interactive CommunicationImmediate feedback between company and customers notifications Customer service online chat Best Buy Geek Squad 24-hour computer support Information Systems Today: Managing in the Digital World

15 Information Systems Today: Managing in the Digital WorldCollaboration Virgin Entertainment Group Microsoft SharePoint Managers: spend more time selling products Head office: more time for strategic planning Information Systems Today: Managing in the Digital World

16 Questions about Capabilities of the WebFind an example of a Website that uses INTEGRATION on their website.-Type in the Website and Website URL Find an example of a Website that uses MASS CUSTOMIZATION on their website.-Type in the Website and Website URL Information Systems Today: Managing in the Digital World

17 Questions about Capabilities of the WebFind an example of a Website that uses INTERACTIVE COMMUNICATION on their website.-Type in the Website and Website URL CNM uses COLLABORATION web services. How do you suppose we use it? Information Systems Today: Managing in the Digital World

18 Information Systems Today: Managing in the Digital WorldTransaction Support Internet and the Web: Reduced transaction costs Enhanced operational efficiency Dell – automated transaction support Cost savings per sale Disintermediation Information Systems Today: Managing in the Digital World

19 E-Commerce Business StrategiesDifferentiated based on levels of physical/virtual presence Information Systems Today: Managing in the Digital World

20 Brick-and-Mortar Business StrategyPhysical locations only Traditional stores Cons: Limited geographical reach Information Systems Today: Managing in the Digital World

21 Click-Only Business StrategyBusiness conducted in cyberspace - no physical location Virtual companies Cons: Customers uncomfortable with online transactions No face-to-face interaction with customers Information Systems Today: Managing in the Digital World

22 Click-and-Mortar Business StrategyBricks-and-clicks business strategy Hybrid strategy Cons: Added complexity combining 2 different environments Information Systems Today: Managing in the Digital World

23 Example: Click-and-Mortar CompanyInformation Systems Today: Managing in the Digital World

24 Give One Example of EachGive different examples than your fellow groups A Brick-and-Mortar Business A Click-Only-Business Information Systems Today: Managing in the Digital World

25 Give One Example of EachGive different examples than your fellow groups and the book examples A Click-and-Mortar Business Information Systems Today: Managing in the Digital World

26 Ingredients of a Business ModelREAD SLIDE CAREFULLY Ingredients of a Business Model A plan of how to achieve EC success Information Systems Today: Managing in the Digital World

27 Common Revenue Models for ECREAD SLIDE CAREFULLY Common Revenue Models for EC Most important ingredient of business model How will the firm earn revenue? Information Systems Today: Managing in the Digital World

28 Information Systems Today: Managing in the Digital WorldLearning Objectives Information Systems Today: Managing in the Digital World

29 Business-to-Business E-CommerceExtranet Enables firms to do business together (B2B) One of best ways for organizations to gain return on technology-based investments Boeing 1,000 authorized business partners Nearly all Fortune 1,000 companies deploy some type of B2B applications Information Systems Today: Managing in the Digital World

30 Electronic Data Interchange (EDI)READ SLIDE CAREFULLY Electronic Data Interchange (EDI) Used prior to the introduction of the Internet EDI used for B2B systems Digital or electronic transmission of business documents between organizations Value-added networks (VAN) Dedicated circuit between companies Information Systems Today: Managing in the Digital World

31 Advantages and Disadvantages of EDIREAD SLIDE CAREFULLY Advantages and Disadvantages of EDI Advantages Streamlining business processes Reduction of error rates Disadvantages Costly Mid-size and small companies disadvantaged Information Systems Today: Managing in the Digital World

32 Information Systems Today: Managing in the Digital WorldREAD SLIDE CAREFULLY Extranets New, more affordable alternative to EDI Advantages Improved timelines and accuracy of information Central management of documents Cross-platform nature Low cost of adoption No specific user training required Information Systems Today: Managing in the Digital World

33 Extranet System ArchitectureInternet-based application Virtual private network (VPN) used to secure information transmission Used to manage supply chains Information Systems Today: Managing in the Digital World

34 Information Systems Today: Managing in the Digital WorldIntranets Business-to-employee (B2E) electronic commerce Internet based private network using Web technologies Boeing More than 1 million pages 200,000 employees Information Systems Today: Managing in the Digital World

35 Intranet System ArchitectureInternet-based application Firewalls used for security Software placed between LAN and the Internet VPN used to access intranet from remote locations Information Systems Today: Managing in the Digital World

36 Information Systems Today: Managing in the Digital WorldIntranet: Training Boeing Company 200,000 employees get trained Quality eTraining program Catalogue of courses Online course content Standardized courses Business improvements Cost reduction Eliminated travel cost Information Systems Today: Managing in the Digital World

37 Intranet: Application IntegrationInformation from separate applications can be consolidated and presented to the user Netegrity SiteMinder Information Systems Today: Managing in the Digital World

38 Intranet: Online Entry of InformationUse of Web browsers to enter information online E.g., Microsoft MSExpense Prior to MSExpense 136 different report templates Outdated versions With MSExpense Online submission of expense records Easy and centralized updates to templates Savings of $4.3 million a year Shortened period for reimbursement from 3 weeks to 3 days Etc. Information Systems Today: Managing in the Digital World

39 Intranet: Real-Time Access to InformationManage, update, distribute, and access corporate information Boeing News releases uploaded to the Intranet Previously sent to all corporate offices as video tapes Reduced distribution costs Efficient information sharing Company-wide access Information Systems Today: Managing in the Digital World

40 Intranet: CollaborationBoeing Information shared between employees across the world Reduced product development cycles Ability to stay current on projects Ability to stay current with the changing market conditions Information Systems Today: Managing in the Digital World

41 Information Systems Today: Managing in the Digital WorldLearning Objectives Information Systems Today: Managing in the Digital World

42 Use of Internet TechnologiesCharacteristics of the Internet, intranet and extranet B2B, B2E rely on extranet and intranet Internet provides an opportunity for B2C commerce Information Systems Today: Managing in the Digital World

43 Stages of B2C E-CommerceWebsites range from passive to active Information Systems Today: Managing in the Digital World

44 Information Systems Today: Managing in the Digital WorldE-Tailing Selling goods and services online Click-and-mortar Walmart.com Click only Amazon.com Virtual company Priceline.com Reverse pricing vs. menu-driven pricing Information Systems Today: Managing in the Digital World

45 Information Systems Today: Managing in the Digital WorldE-Tailing Benefits Product benefits Unlimited number and variety of products Easier comparison shopping E.g., AllBookstores, BizRate, or SideStep Place benefits Anywhere, anytime Purchasing on global scale Price benefits Higher inventory turnover rate No expenditures for physical retail space Information Systems Today: Managing in the Digital World

46 Information Systems Today: Managing in the Digital WorldThe Long Tail Traditional stores Focus on mainstream needs Target the average customer E.g., Blockbuster E-Tailers Can focus on niche markets E.g., Netflix Information Systems Today: Managing in the Digital World

47 Information Systems Today: Managing in the Digital WorldE-Tailing Drawbacks Product delivery drawbacks Delay between product order and delivery Except for products that can be downloaded Direct product experience drawbacks Lack of sensory information Smell, taste, feel Lack of the social element Cannot replace going to the mall with friends Information Systems Today: Managing in the Digital World

48 Attracting and Retaining Online CustomersBasic rule of commerce Offer valuable products/services at fair prices Additional e-commerce rules The Web site should offer something unique The Web site must be aesthetically pleasing The Web site must be easy to use and fast The Web site must motivate people to visit, stay and return You must advertise your presence on the Web You should learn from your Web site Information Systems Today: Managing in the Digital World

49 Information Systems Today: Managing in the Digital WorldWeb Site Rules: Rule 1 Offer something unique Offer hard-to-find goods Global audience Reasonable prices Information Systems Today: Managing in the Digital World

50 Information Systems Today: Managing in the Digital WorldWeb Site Rules: Rule 2 Website must be aesthetically pleasing Use of color schemes, backgrounds, high quality images Clear, concise and consistent layout Increases chances of return Can separate a Web site from the competition Information Systems Today: Managing in the Digital World

51 Information Systems Today: Managing in the Digital WorldWeb Site Rules: Rule 3 Website must be easy to use and fast Easy navigation Fast download speed Average user will wait only a couple of seconds for a website to download Present brief summary information with hyperlinks Allows users to “drill down” Information Systems Today: Managing in the Digital World

52 Information Systems Today: Managing in the Digital WorldWeb Site Rules: Rule 4 Web site must motivate people to visit stay and return Create a community GardenWeb Users share tips Buy from each other Information Systems Today: Managing in the Digital World

53 Information Systems Today: Managing in the Digital WorldWeb Site Rules: Rule 5 Advertise your presence on the Web Pull marketing A passive method of attracting to a specific site Include the Web site address on all promotional materials Advertise your Web site on other sites Information Systems Today: Managing in the Digital World

54 Information Systems Today: Managing in the Digital WorldWeb Site Rules: Rule 5 Advertise your presence on the Web (II) Pay-per-click Only pay for advertising when user clicks on it Affiliate marketing – Web site owners post ads on their site Problem: click fraud – artificially clicking on ads to create revenue Network click fraud Competitive click fraud Information Systems Today: Managing in the Digital World 5-54

55 Information Systems Today: Managing in the Digital WorldWeb Site Rules: Rule 6 Learn from your Web site Who are your customers? What are they doing? Web analytics Analyze behavior of visitors Path the visitors take Length of the visit Number of pages viewed Page from which they exit Information Systems Today: Managing in the Digital World

56 Search Engine MarketingPaid inclusion Fee paid to the search engine to appear in the results Cannot influence order, thus companies may use: Search engine advertising Search engine optimization Information Systems Today: Managing in the Digital World

57 Search Engine AdvertisingSponsored search Pay to ensure a spot on top of search results page Company in control of ad positioning Pay-per-click Can get costly Information Systems Today: Managing in the Digital World

58 Questions about Online CustomersDid the e-commerce website you studied for TEST ONE meet all of the six criteria for “Attracting and Retaining Online Customers”? Why or Why not? Information Systems Today: Managing in the Digital World

59 Search Engine OptimizationPosition within search results based on complex formula Site owner has no control over the position of the ad Optimization based on Web site updates Use of key terms Unethical “tricks” Information Systems Today: Managing in the Digital World

60 Securing Payments in the Digital World90 % of users have changed online behavior because of fear of identity theft 1/3 of online purchasers cut back on the volume of purchasing More than 1/2 of shopping carts are abandoned Need for secure forms of online payment Information Systems Today: Managing in the Digital World

61 Information Systems Today: Managing in the Digital WorldCredit and Debit Cards Customer Verification Value (CVV) Three-digit code on the back of a card Added to combat fraud in online purchases Not included in the magnetic strip information Code used for authorization by bank Information Systems Today: Managing in the Digital World

62 Conducting Safe Transactions OnlineUse a secure browser with the latest encryption capabilities Check the site’s privacy policy Read and understand refund and shipping policies Keep personal information private Give payment information only to those you know and trust Keep records of online transaction Review your monthly credit card and bank statements Information Systems Today: Managing in the Digital World

63 Questions about Safe Transactions OnlineDid the e-commerce website you studied for TEST ONE meet all of the six criteria for “Conducting Safe Transactions Online”? Why or Why not? Information Systems Today: Managing in the Digital World

64 Information Systems Today: Managing in the Digital WorldPayment Services Online transactions without sharing private information with actual seller PayPal (owned by eBay) Can send and receive money if you have an account Google Checkout Linked with Google search Users can see if merchants offer this option E-Gold Service backed by real gold Information Systems Today: Managing in the Digital World

65 Example: Payment Servicese-Gold Backed by real gold Person-to-person transfer Information Systems Today: Managing in the Digital World

66 Managing Financial Transactions in the Digital WorldFinancial institutions now offer: Online banking Management of credit card, checking and savings accounts Electronic bill pay Bill payment online Online investing Growing in popularity Information Systems Today: Managing in the Digital World

67 Information Systems Today: Managing in the Digital WorldLearning Objectives Information Systems Today: Managing in the Digital World

68 Information Systems Today: Managing in the Digital WorldTypes of C2C E-Commerce C2C commerce has always been present 17% of American adults have sold online C2C relationships characterized by Number of buyers Number of sellers Information Systems Today: Managing in the Digital World

69 Opportunities and Threats of C2C E-CommerceInformation Systems Today: Managing in the Digital World

70 Information Systems Today: Managing in the Digital WorldE-Auctions Forward auction Sellers post goods or services for sale Buyers bid on these items Highest bid wins Reverse auction Buyers post a request for quote (RFQ) Seller proposes a bid Lowest seller bid wins Used frequently in B2B e-commerce Information Systems Today: Managing in the Digital World

71 Information Systems Today: Managing in the Digital WorldE-Auctions (II) eBay Transaction fee-based revenue system 2006 revenue - $6 billion Mostly forward auctions Information Systems Today: Managing in the Digital World

72 Information Systems Today: Managing in the Digital WorldE-Auction Fraud E-auctions marred with more fraud than any other Internet activity 42% of all Internet-fraud related complaints Average loss: $1,155 Types of e-Auction fraud Bid luring Reproductions Bid shielding Shipping fraud Payment failure Nonshipment Information Systems Today: Managing in the Digital World

73 Social Online CommunitiesMySpace.com 4.5% of all Internet site visits in mid 2006 Over 100 million users About 230,000 new users a day Original purpose – social network based on music interests 2005 – purchased by NewsCorp for $580 million Income from targeted ads $2.17 per user per year Information Systems Today: Managing in the Digital World

74 Information Systems Today: Managing in the Digital WorldCyworld Successful social online community Asian market South Korea – Cyworld’s per capita penetration greater than MySpace in the US Sale of virtual items $7 per user per year Information Systems Today: Managing in the Digital World

75 Information Systems Today: Managing in the Digital WorldSelf-Publishing Consumers can voice their opinions with no editorial review Original material by the author Traditional B2B becoming C2C Publishing from home Print-On-Demand Blogging Information Systems Today: Managing in the Digital World

76 Information Systems Today: Managing in the Digital WorldPrinting-On-Demand Customized printing Small batches Attractive for first time authors Select providers Lulu Blurb BookSurge Amazon End-to-end service Information Systems Today: Managing in the Digital World

77 Information Systems Today: Managing in the Digital WorldBlogging Weblogging Online text diary Chronological entries Power of bloggers “Rathergate” Vlogging Video blogging Information Systems Today: Managing in the Digital World

78 Information Systems Today: Managing in the Digital WorldM-Commerce Electronic transactions using wireless mobile devices Mobile networks Wireless Switched public network Smart phones High-speed data transfer “Always-on” connectivity Information Systems Today: Managing in the Digital World

79 Popular Technologies for M-CommerceInformation Systems Today: Managing in the Digital World

80 M-Commerce ApplicationsInformation Systems Today: Managing in the Digital World

81 Location-Based M-CommerceHighly personalized mobile services Based on location GPS functionality Bluetooth Pull-based – consumers seeking information Push-based – companies sending (unrequested) information to the consumer Information Systems Today: Managing in the Digital World

82 Enhanced 911 and Phone LocatorFederal mandate Correct routing of emergency calls GPS specifies location within 50 meters Phone locator Location of family members’ cell phones Alerting system when child leaves a certain area Information Systems Today: Managing in the Digital World

83 Location-Based ServicesNext thing: cell phone social networking Information Systems Today: Managing in the Digital World

84 Key Drivers of M-CommerceGeneral interest in adoption of the Internet and e-commerce Real-time transfer of data over 3G and 4G cellular networks “Always-on” connectivity Growth in mobile telephony 2007 M-commerce market: $250 billion Information Systems Today: Managing in the Digital World

85 Information Systems Today: Managing in the Digital WorldCrowdsourcing Use of everyday people as cheap labor force iStockphoto.com Amateurs take pictures Cost of picture $1 - $5 Revenue shared with the photo creator Eli Lilly – InnoCentive Companies post scientific problems Anyone can try to solve them Reward paid to a successful solver Decreased R&D costs E-lancing Information Systems Today: Managing in the Digital World

86 Online Entertainment IndustryDigital rights management (DRM) Technological solution for control of digital media Restrictions Devices which will play it How many times it can play Prevention of illegal copying and distribution Watermark – illegal copy can be traced to original purchaser Information Systems Today: Managing in the Digital World

87 Information Systems Today: Managing in the Digital WorldSlingbox Acts as a personal media server “Placeshifts” television content to any Internet-enabled device Television signal received at the user’s house Relayed over the Internet to be accessed from anywhere Information Systems Today: Managing in the Digital World

88 Information Systems Today: Managing in the Digital WorldLearning Objectives Information Systems Today: Managing in the Digital World

89 Information Systems Today: Managing in the Digital WorldE-Government Providing information about public services To citizens To organizations To other governmental agencies 1998 – Government Paperwork Elimination Act Information Systems Today: Managing in the Digital World

90 Government-to-CitizensInteractions between the government and its constituents IRS – e-filing Grants.gov e-voting initiatives Information Systems Today: Managing in the Digital World

91 Government-to-BusinessRelationships between businesses and the government E-procurement Forward auctions Businesses buy surplus government equipment Auctionrp.com Online application for export licenses Information Systems Today: Managing in the Digital World

92 Government-to-GovernmentInteractions between countries Regulations.gov Export.gov Interactions between different levels of government Information Systems Today: Managing in the Digital World

93 Information Systems Today: Managing in the Digital WorldThreats to E-Commerce The USA PATRIOT Act Taxation Net Neutrality Censorship Information Systems Today: Managing in the Digital World

94 Information Systems Today: Managing in the Digital WorldThreats to E-Commerce The USA PATRIOT Act Introduced after 9/11 terrorist attacks in 2001 More power given to governmental agencies to protect Americans Critics – Civil Liberties Union Reduced checks and balances on surveillance Lack of focus on terrorism Surveillance on Americans Information Systems Today: Managing in the Digital World

95 Examples of Provisions Allowed by the USA PATRIOT ActInformation Systems Today: Managing in the Digital World

96 What do you feel about the following?The USA Patriot Act when it has to do with the Web/Internet? Information Systems Today: Managing in the Digital World

97 Information Systems Today: Managing in the Digital WorldInternet Taxation The Internet Tax Freedom Act – 1998 Created as an incentive for EC businesses Internet sales treated as mail-order sales No sales taxes paid in states where the company has no presence Problem Loss of tax incomes Unfair advantage for e-tailers Information Systems Today: Managing in the Digital World

98 Internet Taxation (II)Solutions: Use tax Consumers required to pay their state’s sales tax Part of some income tax returns Streamlined Sales Tax Project Simplification of tax codes Collection of taxes by out-of-state sellers Information Systems Today: Managing in the Digital World 5-98

99 Arguments For and Against Internet TaxationInformation Systems Today: Managing in the Digital World

100 What do you feel about the following?Internet Taxation? Information Systems Today: Managing in the Digital World

101 Information Systems Today: Managing in the Digital WorldNet Neutrality Data sent over the Internet is handled in a neutral manner All traffic treated the same way ISPs and telephone companies argue for prioritization Traditional Internet traffic suffers ( ) due to high bandwidth applications Example: YouTube.com not paying their fair share, should be deprioritized Information Systems Today: Managing in the Digital World

102 Approaches to Net NeutralityInformation Systems Today: Managing in the Digital World

103 What do you feel about the following?Net Neutrality? Information Systems Today: Managing in the Digital World

104 Information Systems Today: Managing in the Digital WorldCensorship Governmental attempts to control Internet traffic Limiting citizens from viewing content E.g., China, North Korea Strict guidelines on what can be viewed Key words and topics blocked United States Child Online Protection Act (COPA) Age verification for certain content Information Systems Today: Managing in the Digital World

105 What do you feel about the following?Censorship on the Web? Information Systems Today: Managing in the Digital World