E-Commerce Systems and Components
Course No.: CMPE296Z
Design and Implementation of E-Commerce Systems
Instructor: Jerry Gao, Ph.D.
Copyright@1999. Jerry Gao, Ph.D
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Learning Objectives
„ When you finish this chapter, you will:
Be able to identify the main components of eBusiness.
„ The functions of standard
„ Identify the system architectures and
components
„
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Topic: Components in E-Commerce Systems
E-Commerce Systems and Components
- Objectives, Requirements, Goals
- the Goals of Participants
- the Role of Standards
- System Users and Their Roles
- Business Functions & Capabilities
- System Architecture and Components
Copyright@1999. Jerry Gao, Ph.D
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Topic: Components in E-Commerce Systems
the Goals of Participants
Internet commerce involves different participants. Each has its
own needs and goals.
There are five types of participants:
•Buyers (customers)
•Retail customers
•Business customers
•Sellers
•Financial processors- operates the part of the credit processing
system that accepts transactions from merchants and forwards
them to the merchant’s bank.
•Government
•Technologists
Copyright@1999. Jerry Gao, Ph.D
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Topic: Components in E-Commerce Systems
the Goals of Participants
Customers:
Needs of retail customers:
•Convenience
•Price
•Selection
•Privacy
•Service
•Security
Needs of business customers:
•Personalization
•Ease of use
•Security
Sellers:
- Reach new markets
- Create and strengthen customer relationships
- Cost effectiveness
- Security
Copyright@1999. Jerry Gao, Ph.D
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Topic: Components in E-Commerce Systems
the Goals of Participants
Conflicts interests in sellers:
- MIS may be very reluctant to deploy an Internet commerce
system because it is new and different
- Sales department may feel threatened by the ability of the
Internet to collapse distribution channels.
Financial processors:
- Secured transactions
- Large transaction volume
- Cost structure
- Added services
- Minimize risk
Government:
- National security
- Legal controls
- Taxes
Copyright@1999. Jerry Gao, Ph.D
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Topic: Components in E-Commerce Systems
Roles of Standards
In information technology, a standard is a set of specifications that helps
enable system built by different parties to inter-operate.
In Internet commerce, standards serve two primary functions:
•Standards are a way of transferring power from vendors to customers.
•Reduce the cost of proprietary systems and technologies
•Standards are a way of assembling a complete system from multiple
vendors.
The major problem with standards -->
difficult to make them simple enough to be widely adopted,
complex enough to be useful.
Copyright@1999. Jerry Gao, Ph.D
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Topic: Components in E-Commerce Systems
Roles of Standards
Early versus Late Standardization:
Standards efforts tend to follow one of two paths: early or late standardization
Late Standardization:
- Various parties work together cooperatively to build the market,
or competing technologies arise and the market decides on a leader.
- When a proprietary system acquires such dominant market
share that it becomes a standard. This standard usually is
more complex due to its origins.
Early Standardization:
Multiple parties get together and jointly agree on specifications.
- This can work out for the benefit of everyone.
- This may cause a complex standard covering too much.
Copyright@1999. Jerry Gao, Ph.D
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Topic: Components in E-Commerce Systems
Roles of Standards
Standards for Internet Commerce:
- Standards aid interoperability
- The best is the enemy of the good
There is a strong benefit to consistency and standardization
that leads to ease of use.
- The good is the enemy of the best.
Standardization, and particularly premature standardization,
restricts innovation.
Copyright@1999. Jerry Gao, Ph.D
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Topic: Components in E-Commerce Systems
Systems Users and Their Roles
E-Commerce systems have three types of users:
- Buyers of goods and services
- Sellers of goods and services
- System operation personnel
Each user group has:
- its operational function sets
- its distinct role sets
Copyright@1999. Jerry Gao, Ph.D
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Topic: Components in E-Commerce Systems
E-Systems Users and Their Roles
Customer Roles:
A buyer play as different roles in the the process of buying goods and services.
They are: customer, consumer, purchasing agent, and so on.
In some cases, the same person plays all of the roles. However,
in the businesses, it is useful to consider the various roles:
•Specifier
•Approver
•Buyer
•Recipient
Copyright@1999. Jerry Gao, Ph.D
- this person selects what is to be purchased.
- this person approves a purchase recommended
by the specifier.
- this person negotiates the terms and conditions
of a purchase and arranges for payment.
- this person receives the delivered goods and
services
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Topic: Components in E-Commerce Systems
E-Systems Users and Their Roles
Business Roles:
A seller also play as different roles in the the process of selling goods and
services in an Internet commerce system.
Smaller businesses may have just a few people playing all the roles.
However, for larger businesses, it is useful to distinct the following roles:
•Business manager - plays as a business manager for the Internet commerce.
•Decide the business approach
•Make the decisions on production selections, pricing,and services
•Establish business relationships
•Commerce architect - a system analyst for an e-commerce system
•Conduct the system design and software design for business needs
•Content designer- a designer who is responsible for the look and feel of
•internet commerce system, including catalog, and GUI design,…
Copyright@1999. Jerry Gao, Ph.D
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Topic: Components in E-Commerce Systems
E-Systems Users and Their Roles
System Operational Roles:
The operations team installs and operates the Internet commerce system,
making sure that it is running and available for customers.
•Operations manager - manage all operational services of the Internet
commerce system
•System supervisor - manage the system staff.
•System administrator - responsible for technical operations of the computer
systems and networks.
•Security officer
- implement and maintain the security measures
of the system
•Fulfillment agent - Shipping and handling of goods or delivery of servers.
•Accountant
- maintain business records, and handle accounting
procedure.
Copyright@1999. Jerry Gao, Ph.D
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Topic: Components in E-Commerce Systems
E-Systems Users and Their Roles
System Operational Roles:
The operations team installs and operates the Internet commerce system,
making sure that it is running and available for customers.
•Operations manager - manage all operational services of the Internet
commerce system
•System supervisor - manage the system staff.
•System administrator - responsible for technical operations of the computer
systems and networks.
•Security officer
- implement and maintain the security measures
of the system
•Fulfillment agent - Shipping and handling of goods or delivery of servers.
•Accountant
- maintain business records, and handle accounting
procedure.
Copyright@1999. Jerry Gao, Ph.D
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Topic: Components in E-Commerce Systems
General Business Functions and Capabilities
Marketing and Sales:
- Create, update, maintain product catalog
- Create, update, distribute advertisement
- One-to-one marketing and sales
- Business-to-business marketing and sales
- Personalized Marketing and Sales
- Sales activities, demo, exhibits, live shows
Transaction Processing:
- Process purchasing orders
- Process payments
- Conduct authorization, verification, authentication
- Business record book keeping
Copyright@1999. Jerry Gao, Ph.D
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Topic: Components in E-Commerce Systems
General Business Functions and Capabilities
Customer Services:
- Pre-sale and post-sale services
- Delivery and shipping services
- Customer services
- Membership services
Security Functions:
- Authentication
- Authorization
- Certification
Copyright@1999. Jerry Gao, Ph.D
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Topic: Components in E-Commerce Systems
General Business Functions and Capabilities
Inventory management:
- warehouse management and book keeping
- product catalog integration
- transaction system integration
Accounting operation support:
- Sale tax processing
- Service tax processing
- Value-added tax
- Account book keeping
MIS and system administration:
- DB administration and management
- System maintenance
- System support
- Backup and recovery
Copyright@1999. Jerry Gao, Ph.D
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Topic: Components in E-Commerce Systems
Specific Business Functions and Capabilities
Business to consumers:
- order capture
- easy to use, one-line ordering
- consumer-oriented payment (credit card or check)
- personalized content and merchandising
- digital coupons
- advertising and email
- support for small and medium merchants
- smaller business use Internet hosting services
- large business keep their catalog in-house
Copyright@1999. Jerry Gao, Ph.D
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Topic: Components in E-Commerce Systems
Specific Business Functions and Capabilities
Business to Business:
- Payment mechanisms
- business-to-business version of credit cards
- purchase orders and invoicing
- check or electronic funds transfer
- new protocol, such as OBI.
- Fulfillment through a Fulfillment API to legacy systems
- Custom catalog
- digital tickets and digital queries (customer DB API)
- customized part numbers, reserved inventory
- display of contract and pricing…
- real-time, complete and accurate product information
Copyright@1999. Jerry Gao, Ph.D
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Topic: Components in E-Commerce Systems
Specific Business Functions and Capabilities
Information commerce:
- Business models
- buy-and-sale model
- auction model
offered products and offered customers
- subscription model
- Payment models:
- traditional styles, such as credit cards,…
- micro-transactions, such as parking-meter prepay,
taxi-meter post-pay styles
- Customer services:
- pre-sale services
- post-sale services
Copyright@1999. Jerry Gao, Ph.D
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Topic: Components in E-Commerce Systems
Basic Components in E-Commerce Systems
Purchasing
Server
Account
Server
Administration
Servers
Content
Server
Payment
Server
Security
Servers
Advertising
Server
Customer Service
Server
Shipping &
Delivery Server
Copyright@1999. Jerry Gao, Ph.D
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Topic: Components in E-Commerce Systems
Basic Functions of A Content Server
•Formatting
•Multimedia
Presentation
•Publishing
•DB connector
•Authoring
•Maintain & Edit
•Archiving
•Custom Content
•Management Content
Copyright@1999. Jerry Gao, Ph.D
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Topic: Components in E-Commerce Systems
Functions of A Payment Server
•Credit card payment processing
•Check payment processing
•Cash and Micro-payment processing
Consumer credit
Immediate payment
Insurance
Financial clearing house
Global service
Record keeping
Enable merchant trust
Enable consumer trust
•Money order processing
•Coupons processing
•Smart card processing
Get a fixed discount
Get a percentage discount
Buy one, get one free
Buy X get a discount on Y.
After N purchases, the next one is free.
Portable storage
Secure storage
Trusted execution env.
Copyright@1999. Jerry Gao, Ph.D
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Order Pipeline
Offer
Creation
User profile
Authentication
Order
Digital
Merchandising
Capture
Offers &
Approval
Coupons
Tax
Incomplete
Order
Orders
Completion
Shipping
Complete
Orders
E-mail
Payment
Authorization
Invoices
Fax
Other
Other
Fulfillment
HTML
ERP System
Settlement
Digital Receipt
Digital Ticket
Queries
Credit
Copyright@1999. Jerry Gao, Ph.D
Customer
Service
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Order Pipeline
•Offer and coupon creation:
•The seller creates commerce-enabled content using desktop publishing
software web development tools. The content may be static or dynamic.
The order items flow from the content system to Transact as digital
offers and digital coupons.
•Order capture:
•gather customer information, billing address, shipping address,
payment method, quantities.
•Order completion:
•order processing, including tax and shipping cost computation.
•Payment authorization:
•conduct credit card authorization.
•Fulfillment:
•is responsible for settlement operations, including invoices, and shipping.
•Payment settlement:
•completes the financial transactions begun in the authorization.
Copyright@1999. Jerry Gao, Ph.D
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Topic: Components in E-Commerce Systems
System Architecture of A Virtual Warehouse
Catalog System Interface
Query
Reserve
Commit
Relationships
Reports
Virtual
Warehouse
Administration
System Interface
Data
Store
Transition System Interface
Allocate
Report
Merchant Interface
Copyright@1999. Jerry Gao, Ph.D
Query
Allocate
Commit
Enterprise Resource
Planning Interfaces
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Topic: Components in E-Commerce Systems
Open Market Commerce Architecture
Business
Catalog
Server
SecureLink
fulfillment
networks
Transact
financial
networks
Retail
Content
Server
internet
Information
Content
Server
End User
Copyright@1999. Jerry Gao, Ph.D
Merchant
Transact Op
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Topic: Components in E-Commerce Systems
internet
Firewall 1
transaction
server
tax
server
subscription
server
Firewall 2
log server
Copyright@1999. Jerry Gao, Ph.D
DB
fax server
Front host
post code
server
Back host
settlement
server
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Topic: Components in E-Commerce Systems
There are several logical servers:
•Transaction server:
•Store information about users, such as buyers, sellers, and operators.
•Subscription server:
•maintain an access control database. It performs periodic payment
processing.
•Tax server:
•calculates per-item U.S. sales taxes and other services taxes at
other places.
•Postcode server:
•maps addresses to GEO codes.
•Log server:
•collects and records log and audit events from all the other servers.
•Settlement server:
•is responsible for real-time authorization an batch settlement operations.
•Fax server
•optional component which is used to deliver advice or order messages
to sellers by fax.
Copyright@1999. Jerry Gao, Ph.D
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Overview
„ What is the Internet?
„
A “network” of “networks”
„ Lasting Impact on Human Society???
„ What does the Internet mean to business?
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Overview
„ e-business versus e-commerce
Microsoft’s Encarta World English Dictionary defines
e-commerce (short for electronic commerce) as
“transactions conducted over the Internet, either by
consumers purchasing goods and services, or
directly between businesses.”
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Overview
„ e-business versus e-commerce
At IBM’s “on-demand glossary” site, e-commerce is
defined as
“the ability to buy and sell products and services over
the Internet. Includes the online display of goods and
services, ordering, billing, customer service and all
handling of payments and transactions.”
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Overview
„ e-business versus e-commerce
At IBM’s “on-demand glossary” site, e-business is
defined as
“the process of using Web technology to help businesses
streamline processes, improve productivity and increase
efficiencies. Enables companies to easily communicate with
partners, vendors and customers, connect back-end data
systems and transact commerce in a secure manner.”
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Overview
„ e-business versus e-commerce
. “e-Business” is a broad, high-level term that
encompasses the processes, strategies and
technologies necessary to support “e-commerce”.
“e-Commerce” is a narrower term specifically
focused on aspects of conducting business
transactions over the Internet.
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Overview
„ B-2-B versus B-2-C
Business-to-Business
Connecting the Supply Chain
“Extranet”
Adding Value to the relationship
Business-to-Consumer
Connecting Supply & Demand
Cost, Choice, Convenience
Adding Value to the Relationship
“disintermediation”
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E-Commerce / E-Business
„
„
Electronic Commerce: buying and selling of products,
services and information via computer networks,
primarily the Internet
Electronic Business: a broader definition that
includes
„
„
„
„
buying and selling, plus
servicing customers
collaborating with business partners
conducting electronic transactions within an
organization
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E-Commerce History and Scope
„
History
„
„
„
„
Began in the early 1970s (long before the Internet was open
to commercial use)
Limited to large businesses initially
Electronic Fund Transfer (EFT) and Electronic Data
Interchange (EDI)
Scope Today Includes
„
„
„
„
„
„
„
„
advertising
home banking
shopping in electronic stores and malls
buying stocks
finding a job
conducting an auction
collaborating electronically with business partners around
the globe
providing customer service
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E-Commerce Framework
Electronic Commerce Applications
People
Public Policy
Marketing and
Advertising
Supply
Chain
Infrastructure:
Business services infrastructure, Information Distribution,
Mutlimedia content and Publishing Infrastructure,
Network Infrastructure, Interfacing Infrastructure
Management
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Electronic Commerce
Requirements
„
Infrastructure – hardware, software, and networks needed to
„
Electronic Payment Mechanisms
conduct transactions, communicate, and collaborate
„
Electronic checks
„
Customer opens account with a bank
„
the customer e-mails an encrypted electronic
check signed with a digital signature
„
the merchant deposits the check in his or her
account; money is debited in the buyer’s account
and credited to the seller’s account
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EC Benefits
„ Organizations
„
„
„
„
Increased customer base:
Reduced cost:
Reduced cycle time:
Helps small businesses compete against large companies
„ Customers
„
„
Choice
Convenience
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Types of E-Commerce
„
„
„
„
„
Business-to-business EC (B2B)
Business-to-consumer EC (B2C)
Consumer-to-businesses (C2B)
Consumer-to-consumer (C2C)
Intrabusiness (intraorganizational) commerce
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Business-to-Consumer EC
„
Electronic Storefronts and Malls
„
„
Services Online
„
„
„
„
„
„
Electronic retailing can be conducted via solo
storefront or as a part of cybermall
Banking (www.sfnb.com)
Securities trading (Schwab Online)
Job markets (Monster Board)
Travel (Expedia.com)
Real estate (Realtor.com)
Auctions (eBay.com)
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Business-to-Consumer EC
(continued)
„ Personalization – ability to customize product,
service, advertisement, or customer service
„ B2C EC enables personalization at low cost
„ Internet enables marketing research
„
„
Questionnaires
„
Usually involve some inducement
Direct behavior observation
„
Cookies or site tracking services
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Business-to-Consumer EC
(continued)
„
Use of intelligent agents
„
„
„
„
Online advertising
„
„
„
„
„
Help customers determine what to buy
Search for and compare vendor prices
Collect information and develop customer profiles
Banners
Direct email
Pop-up windows
Electronic catalogs / customized catalogs
Coupons online
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Business-to-Business EC
„
„
„
„
Composes the majority of EC volume
Enables organizations to form electronic relationships
Covers all activities along the supply chain
Business Models:
„
„
„
Sell-Side Marketplace
„
Organizations sell products to other organizations
electronically.
Buy-Side Marketplace
„
Buyers post needs; sellers submit bids
Electronic Exchanges
„
Electronic marketplaces link many buyers and
many sellers
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Business-to-Business EC (continued)
„ Collaborative Commerce – non-buying/selling
activities between businesses
„
„
„
„
„
„
Planning and scheduling
Design
New product information
Product content management
Order management
Sourcing and procurement
46
Electronic Commerce Innovations
„ E-Government – deliver information and public
services to citizens and members of the public sector
„ Consumer-to-consumer EC – direct interaction
facilitated by auctions, classifieds, and bartering
„ Intrabusiness EC – business units interact or
employees interact with employers
47
Technology Infrastructure
48
Fig 8.6
49
Major components of an EC
Infrastructure
„ Networks
„ Web Servers
„ Web server support and software
„ Web site activity tracking; database connectivity;
software for creating electronic forms; software for
creating chat rooms and discussion groups
„ Electronic catalogs
„ Product description, multimedia use, customized
catalogs, inclusion in Web site design and
construction, templates for construction
50
Major components of an EC
Infrastructure (con’t)
„ Web page design and construction software
„ Transactional software
„ Search engines for finding, comparing, products;
encryption and payment; ordering inventory
„ Internet access components
„ TCP/IP package, Web browsers, Internet connection
device
„ Others
„ Firewalls, smart cards, HTTP
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E-Commerce Software
„ Catalog management
„ Product configuration
„ Shopping cart
„ Transaction processing
„ Traffic data analysis
52
Electronic Payment
Systems
53
Electronic Payment Mechanisms
„
Electronic credit cards
„
„
„
Unencrypted payments - the buyer e-mails her or his credit card
number to the seller on the Internet
Encrypted payments - credit card details encrypted for security
Electronic cash in PC
„
bank provides special software to consumer
„
customer buys “electronic money” from the bank
through software
„
the bank sends electronic money note to this
customer, endorsing it with a digital signature
„
the money is stored on the buyer’s PC and can be
spent in any electronic store that accepts e-cash
„
the software is also used to transfer the e-cash from
the buyer’s computer to the seller’s computer
„
the seller either deposits the e-cash in a bank or uses
54
the e-cash to make purchases elsewhere
Electronic Payment Mechanisms
„
„
„
„
„
„
Electronic payment cards with e-cash
„
Credit cards using magnetic strips
„
Card holds information about prepaid cash which
can be used to make payments
Smart cards
„
Cards with microprocessors can hold much more
information
Person-to-person payment systems
„
Transfer of funds between individuals (PayPal)
EFT (Electronic fund transfer)
Electronic wallets
Purchasing cards
55
Use of Digital Cash for Individual
Purchase
56
Use of EFT for a Credit Card Purchase
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Payment Security
„ Authentication
Digital certificate
„ Certificate authority (CA)
„
„ Encryption
Secure Sockets Layer (SSL)
„ Secure Electronic Transaction Protocol (SET)
„
58
Threats to E-Commerce
„ Privacy
Online profiling
„ Clickstream data
„
59
Strategies for Successful
E-Commerce
60
Developing an Effective Web
Presence
„ Obtain information
„ Learn about products or services
„ Buy products or services
„ Check order status
„ Provide feedback or complaints
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Putting Up a Web Site
„ In-house development
„ Web site hosting companies
„ Storefront brokers
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Driving Traffic to Your Web Site
„ Domain names
„ Meta tags
„ Traffic logs
63
Overview
„ Advantages of e-business
„
Lower costs, Economies of Scale, Higher
Margins
„
Improved Customer Service ??
„
Comparison Shopping
„
Productivity Gains
64
Overview
„ Disadvantages / Limitations of e-business
„
Security Risks
„
Improved Customer Service ??
„
Scalability
„
Integrity
„
Infrastructure Costs
„
Fulfillment Challenges
65
Overview
„ Quick Overview of the History of the Internet
„ Internet Infrastructure - Exercise
66