UNIT – I

Electronic Commerce-Framework, anatomy of E-Commerce applications, E-Commerce Consumer

Applications, E-Commerce organization applications.

ECommerce is a modern business methodology that addresses the needs of organizations, merchants, and
consumers to cut costs while improving the quality of goods and services and increasing the speed of service
delivery.
Ecommerce is associated with buying and selling of information, products and services via computer networks
today and in the future via any one of myriad (countless) of networks that makeup Information Superhighway
(I-Way).
The broad goals of reengineering and eCommerce are remarkably similar:
o Reduced costs
o Lower product cycle times
o Faster customer response and
o Improved service quality

Electronic Commerce-Framework:
E-Commerce application will be built on the existing technology infrastructure –
 a myriad of computers
 Communication networks
 Communication software forming Information Superhighway (I-Way).
To understand various components of eCommerce better, consider following figure, which shows a variety of
possible eCommerce applications, including both inter organizational and consumer-oriented examples.
The components consists of
1. Common Business Services, for facilitating the buying and selling process.
2. Messaging and information distribution, as means of sending and retrieving information
3. Multimedia content and network publishing, for creating a product and means to communicate about it
4. Information Superhighway, for providing the highway system along which all eCommerce must travel

The two pillars supporting all eCommerce, applications and infrastructure, are:
1. Public policy, to govern such issues as universal access, privacy and information pricing.
2. Technical standards, to dictate the nature of information publishing, user interfaces and transport in the
interest of compatibility across the entire network.

To better understand the integration of various infrastructure components in the framework, let us use the
analogy of a traditional transport business.
To carry goods from point-to-point, a regular commerce needs interstate highway network I-way is not a
monolithic data highway designed according to long-standing, well-defined rules and regulations based on
well-known need. Similarly, any successful eCommerce application will require I-way infrastructure. It is still
under construction. I-way will be a mesh of interconnected data highways of many forms, viz., telephone
wires, cable TV wires, radio-based wireless-cellular and satellite.
Building various highways is not enough. Transport vehicles are needed, routing issues must be addressed and
transportation costs must be paid. Vehicles transport information or multimedia content. On the I-way, the
nature of vehicular traffic is extremely important. Revenues in eCommerce are based on vehicular traffic.
 The information or multimedia content determines what type of vehicle is needed?
ECommerce vehicle may vary widely in complexity and may even need to travel different routes on the I-way.
For example,
Movies = Video + Audio
Digital games = Music + Video + Software
Electronic Books = Text + Data + Graphics + Music + Photographs + Video
 Once these vehicles (multimedia content) are created, where they are stored?
In electronic highway system, multimedia content is stored in the form of electronic documents. The
documents are often digitized, compressed and stored in computerized libraries or multimedia storage
warehouses called “Servers”, that are linked to transport networks to each other and to the software/hardware
that allow customers to access them.
 What sort of distribution warehouses are needed to store and deliver their multimedia cargo?
In traditional transport business, diesel engines or gasoline powered motors move trucks along roadways. On
the I-way, messaging software fulfills this role, in any number of forms viz., email, Edi or point-to-point file
transfers.
In addition to develop new vehicles and systems, other key components of commercial transactions need to
be examined.
Anatomy of ECommerce Applications:
In Fig.1, eCommerce applications situated at the very top and this indeed indicative of how most applications
rest on the entire infrastructure and reach out to customers. It is important to understand that applications can
be found at all levels of infrastructure itself. Not only a multimedia content a part of the infrastructure that will
enable consumers to enjoy video on demand, but creation of that content is in itself an eCommerce application.
Similarly, e-mail can be considered as both messaging infrastructure and a purchasable end product.

Fig 2: Elements of eCommerce applications

Fig.2, examines eCommerce applications, viz.

1. Multimedia content
2. Multimedia storage servers
a. Client-Server Architecture in eCommerce
b. Internal Processes of Multimedia Servers
c. Video Servers
3. Information delivery system, the network providers that serve as access points and
4. The devices that function as interfaces for various eCommerce applications.

1.4.1 Multimedia Content:

Multimedia content can be considered both fuel and traffic for eCommerce applications. The technical
definition of multimedia is the use of digital data in more than one format, such as combination of text, audio,
video and graphics in a computer file/document as shown in fig. 3
 Fig 3: Possible components of multimedia

o Multimedia mimics the natural way people communicate. Its purpose is to combine the interactivity of
a user-friendly interface with multiple forms of content. Multimedia is associated with the combination
of computers, television and telephone capabilities in a single device.

o Multimedia systems do much more than conventional database systems. The goal of multimedia is to
increase the utility of all information through the processing and distribution of new forms such as
images, audio and video.

o Traditional, separate business divisions are presented in Table1.

Table 1: Traditional Division of content by Industry

Industry Content Produced
Entertainment producers Cartoons, games, movies, video, music
Broadcast television productions Game shows, documentaries, entertainment
programs
Print publishing Books, reference collections, directories,
catalogs
Computer software Software programs: animation, games,
productivity-enhancing tools

o Access to multimedia content depends on the hardware capabilities of the customer. With resource-
hogging, the gap between hardware and software application is narrowing. Application software is rich
in multimedia content: electronic books, real-time information, movies, videos and interactive services
such as CD-ROM titles.

o Telecommunications and cable companies, now aware of the importance of content for the future
eCommerce applications.

o Success of eCommerce applications also depends on the variety and innovativeness of multimedia
content and packaging.
1.4.2. Multimedia Storage Servers:
Ecommerce requires robust servers to store and distribute large amounts of digital content to consumers. These
multimedia storage servers are large information warehouses capable of handling various content, ranging
from books, newspapers, advertisement catalogs, movies, games images. These servers, upon request, must
handle large-scale distribution, guarantee security and complete reliability.
1.4.2.1 Client-Server Architecture in eCommerce

All eCommerce application follows Client-Server architecture as shown in fig 4.

Fig 4: Distribution of processing in multimedia client-server world

Clients are devices plus software that request information from Server. The client-server model, allows the
client to interact with the server through a request-reply sequence governed by paradigm known as message
passing.
The Server manages application tasks, handles storage and security and provides scalability. The Client
handles the user interface. Multimedia Server handles the critical elements distribution, connectivity, security,
and accounting more cost effectively.
1.4.2.2 Internal Processes of Multimedia Servers

The internal processes involved in the storage, retrieval and management of multimedia data objects are
integral to eCommerce applications. In general, Multimedia Server is a hardware and software combination
that converts raw data into usable information and then sends out this information where and when user needs
it. It captures, processes, manages and delivers text, images, audio and video.
Most Multimedia Serves provide a core set of functions to display, create and manipulate multimedia
documents; to transmit and receive multimedia documents over computer networks and to store and retrieve
multimedia documents.
To make interactive multimedia a reality, a server must do the following:
o handle thousands of simultaneous users
o manage transactions of these users (e.g., purchases, specific information requests, customer billing
etc.)
o deliver information streams to consumers at affordable costs.

The technical challenge is obvious when compared to traditional models of information management.
1. First, the data differ radically.
2. Secondly, the computing platforms pose bottlenecks when trying to deliver large pieces of
complex data.
For example, let us consider video on-demand. Here, a single 90-minute video consuming over 100 gigabytes
of storage space must be distributed to large number of consumers. For these new requirements, platform
choices include high-end symmetric multiprocessors, clustered architecture and massive parallel systems. To
address these technical challenges, new types of video server are being developed.
1.4.2.3 Video Servers

Ecommerce applications related to digital video will include

o telecommunicating and video conferencing,
o geographical information systems that require storage and navigation over maps
o corporate multimedia servers
o postproduction studios and
o shopping kiosks
Consumer applications will include
o Video on-demand
o Range of interactive services such as shopping, video navigation (e.g., interactive TV guides) and
o Directories (e.g., interactive telephone yellow pages)
The need for large-scale video storage has led to development of new video servers. The block diagram of
video server architecture is shown in Fig5.
Video Servers are an important link between the content providers (entertainment / media) and transport
providers (telecoms / wireless / cable operators).
One important difference between video servers and current client-server computer systems used extensively
for data processing; video servers are designed to deliver information to hundreds of consumers
simultaneously via public telecommunications and cable networks.

Fig 5: Block diagram of a generic video on-demand system

Video servers tackle “simultaneous overlapping” on-demand to large number of homes, that arises supply
problem. This problem can be approached either from hardware or software.

In case of hardware solutions, servers can harness the power of massive parallel architecture that is, using
thousands of inexpensive microprocessors that are interlinked to create an illusion of one large computer. Each
processor acts as a “video dump” and distributes portion of the film so that a single film can be viewed by
numerous household on-demand.

All video servers need not be hardware based. As hardware problem is solved with massive parallel machines,
Microsoft has approached a problem as a customizable software issue. This software architecture developed
under the code name Tiger is based on Windows NT Operating System. Tiger can be implemented in many
ways:
o on PCs for individual or workgroup use
o as corporate servers for small – or mid-sized private networks and
o as large servers for large-scale consumer use.

The goal is to provide the power, functionality and scalability to give users split-second access to thousands
of media files to allow laser disc-type functions such as
o pause,
o reverse,
o fast-forward and
o jump ahead to user specified locations.
Only time, economics and customer preferences will decide which approach will dominate.

1.4.3. Information Delivery / Transport

Transport providers are physically
o telecommunications,
o cable and
o wireless industries.
Computer networks including commercial networks such as CompuServe or America Online and public
network such as Internet.
Transport system does not function as a monolithic system; instead, the architecture is a mix of many forms
of high-speed network transport whether it is land-based telephone, air-based wireless, modem-based PCs or
Satellite transmissions. Literally, transport routes for eCommerce applications are boundless.
Table 2: Transport Routes

Information Transport Providers Information Delivery Methods

Telecommunication companies Long-distance telephone lines;

Local telephone lines

Cable television companies Cable TV coaxial, fiber optic, and satellite lines

Computer-based on-line servers Internet; commercial on-line service providers

Wireless communications Cellular and radio networks; paging systems

The distribution of information has become a competitive market with a combination of offense and defense.

o Playing with defense are telephone companies and cable television companies. Have enjoyed monopoly
for decades.
o Playing offense are computer companies that offer new hardware capabilities and software programs with
the potential to define new markets are public networks such as Internet. Another emerging threat will be
wireless communication known as personal communication services.

Each highway route faces different challenges:

o Telecom-based: These providers include long-distance and local telephone services. For phone companies,
the breakthrough for eCommerce applications came in 1991 when scientists found it is impossible to
squeeze a video signal through a telephone wire. The technology, known as asymmetric digital
subscriber line (ADSL), has resolved some drawbacks. It cannot handle live transmissions and the picture
it produces is not clear as that provided by a well-tuned cable hookup.

Researchers have recently improved the quality of picture and with further compression to accommodate
several channels of live video over a single telephone wire.
o Cable-based: These providers depend on fiber optic cable or coaxial cable as the delivery medium and as
transport roads and will help determine which broadband applications and services the viewing public
prefers.
The strategy among cable companies is to develop “network neutral” content that use digital compression
and is adaptable to alternative delivery systems, such as wireless and satellites.
o Computer network-based: These providers are often dial-up linkages of lower bandwidth when compared
to telecom and cable highways. Bandwidth is analogous to number of lanes on a highway.
Examples of on-line transport architecture are CompuServe, Prodigy and American Online, which often
tend to serve as both transport road and content providers.
o Wireless: These operators are typically radio-based – Cellular, Satellite and light-based – infra-red. New
wireless-based systems require new ways of thinking about information delivery.

1.4.4. Consumer Access devices:

How majority of users will access eCommerce applications is heavily linked to access device they opt to use.
A myriad of devices can provide access to information: video phones, PCs capable of handling multimedia,
personal digital assistants like Apple’s Newton, television capable of two-way transmission, cellular phones,
mobile and portable computers.

Table 3: Information Access Devices

Information Consumers Access Devices

Computers with audio and video Personal/desktop computing (workstations,

capabilities multimedia PC), Mobile computing (Laptop and
Notebook), CD-ROM equipped computers

Telephone Devices Videophone

Consumer Electronics Television + Set-top box

Game Systems

Personal Digital Assistants (PDAs) Pen-based computing

Voice-driven computing

Software Agents
Of all these devices, interactive TV has been touted as the information access device of the future. All devices
need not be hardware-based, Anew breed of software-based devices called Software Agents is being created
that will act as the consumer’s PDA.
Other issues include:
o Which Operating System will be predominant player on these access devices?
o Who will define the user interface?
The choice of Operating System will depend to some extent on which transport highway consumers ride and
the user interface they prefer.
If on-line services are used, then there is high portability that PC-based access may predominant. Here,
Microsoft is well positioned with its Windows 95 Operating System.
To delve into the interface design, consider video on-demand. Presenting consumer with 500 films without
any clips would be a highly ineffective marketing method. Currently, companies are bypassing the entire
issue of effective user interface design and focusing on getting the basics to work.

Ecommerce Consumer Applications:

Consumer desires are very hard to predict pinpoint or decipher in electronic markets whose shape, structure
and population are still in early stages. Needs envisioned include:
o Entertainment on-demand, including 500 channel TV, video on-demand, games on-demand, and news
on-demand.
o Electronic retailing via catalogs and kiosks and home shopping networks
o Interactive distance education
o Collaboration through desktop video conferencing
o Medical consultations etc.

Predicting which application will be the winners need experiment to be done, for which it requires
infrastructure. To plan infrastructure, hard choices about winning application have to be made – a classic
chicken / egg problem.
Currently, the application of choice among cable and telecom providers who are developing the infrastructure
is video on-demand.
Video on-demand is seen as a part of an overall long-term trend from the passive delivery vehicles of movies,
radio and TV to consumer interactive platforms. In future, viewers will decide what they want to see and what
they want to participate. Consumers will be given greater control over scheduling these activities.
Consumer Applications and Social Interaction: In long run, eCommerce application winners will be those
changes the way consumers think and the way they do business. Most successful technologies are those that
make their applications oriented toward social interaction.
The most successful marketplaces are expected to be those that cater to consumers’ loneliness, boredom,
education and career. For example, on-line chat services and home shopping channels etc.
What Do Consumers Really Want? : Do Consumers want new services and will they pay for them? To
accurately gauge consumer intentions with respect to services they do not yet understand is very difficult.
What Are Consumers willing to Spend? : As in all commerce, economics is a key issue. How much are
consumers willing to spend and how should products is priced? Consider the following projected cable
subscriber bill projected for the year 2000, for example:
 Recurring fees: Usage fees:

Standard service channels $9.75 Pay-per-view $0.75

Expanded basic video 7.00 Movies-on demand 13.00

Premium channels 8.00 Time-shifted television 2.75

Audio music broadcasts 0.25 Music videos-on-demand 2.50

Converter boxes 8.75 Interactive games 5.50

Educational Programs 2.75

Total Monthly charges: $61.00

Subtotal: $33.75 Total Monthly charges: $61.00

Contrast this charge with current bill for basic service is doubled from $30 to $60 a month. Look at the
economics of service provider:
o The cost of network operator to run fiber to the home is around $1000
o The cost of a intelligent set-top box is around $1000
o The cost of network enhancements per subscriber is around $1000

A GTE corporation study showed that video on-demand’s popularity decreases very rapidly.
If consumers are unwilling to spend the amounts needed to fully recover the costs of entertainment to their
homes, then network operators might look to advertisers to fill the gap.
Delivering Products to customers: In addition to developing eCommerce applications, packaging and
distribution must be considered. For example, Blockbuster Video believing that its traditional distribution
through stores is obsolete is actively exploring electronic media as a distribution channel. Clearly Blockbuster
knows what consumers want in entertainment.
Consumer Research and eCommerce: Many businesses are navigating the electronic market place without
proper consumer and market research. This can be disastrous, given that even preliminary research shows
some surprising results. Consider an example, Interactive television.
i) Surveys suggest that some degree of consumer interest and willing to pay $20 a month for a selection of
interactive television. Movies on-demand attracts the most interest, followed by news.
ii) Another survey, 63% are interested in interactive television and of them 68% said they would use a news
channel.
These results contradict the directions of most companies. These companies argue that surveys are
misleading in that they indicate consumers don’t yet know what interactive television is.

Ecommerce Organization Applications:

It is not clear which eCommerce applications corporations will use internally. Corporations do not buy
information and communications technology simply because it is new. Companies adopt technology to save
money and improve the bottom line. Fig6 shows the pressures influencing business.
 Fig 6: Pressures influencing business

1.Changing business Environment

1. The traditional business environment is changing rapidly
2. Many companies are looking outside and within to shape business strategies
3. These activities include private electronic connections to customers,suppliers,distributors,industry groups
etc
4. The I-superhighway will expand this trend so that it allow business to exchange information.

2.E-Commerce and the retail Industry

1. Conditions are changing in the “new economy” with respect to the retail industry
2. Consumers are demanding lower prices, better quality, a large selection of in-season goods.
3. Retailers are filling their order by slashing back-office costs, reducing profit margins, reducing cycle times.
buying more wisely and making huge investments in technology.
4. Retailers are in the immediate line of fire and were first to bear the brunt of cost cutting

3.Marketing and E-Commerce

1. E-commerce is forcing companies to rethink the existing ways of doing targetmarketing and even event
marketing.
2. Interactive marketing is in electronic markets via interactive multimedia catalogs
3. Users find moving images more appealing than still image and listening moreappealing than reading text
on a screen
4. Consumer information services are a new type of catalog business

4.Inventory Management and Organizational Applications

1. With borders opening up and companies facing stiff global competition
2. Adaptation would include moving to computerized, “paperless” operations to reduce
3. Once targeted business process is inventory management, solutions for these processes go by different
names
4. In manufacturing industry they’re known as just-in-time inventory systems, in the retail as quick response
programs, and in transportation industry as consignment tracking systems
 Just-in-Time (JIT) Manufacturing
1. It is viewed as an integrated management system consisting of a number ofdifferent management practices
dependent on the characteristics of specific plants
2. The first principle is elimination of all waste.
3. The following management practices are focused factory, reduced set-up times, group technology, total
productive maintenance, multifunction employees, uniform workloads, IT purchasing,kanban total quality
control & quality circles

 Quick Response Retailing (QR)

1. It is a version of JIT purchasing tailored for retailing
2. To reduce the risk of being of out of stock, retailers are implementing QR systems
3. It provides for a flexible response to product ordering and lowers costly inventory levels
4. QR retailing focuses on market responsiveness while maintaining low levels of stocks
5. It creates a closed loop consisting of retailer, vendor, & consumer chain,& as consumers make purchases
the vendor orders new deliveries from the retailer through its computer network

5.Supply Chain Management

1. QR and JIT address only part of the overall picture
2. Supply Chain Management (SCM) is also called “extending”, which means integrating the internal and
external partners on the supply and process chains to get raw materials to the manufacturer and finished
products to the consumer
3. It includes following functions
 Supplier management: The goal is to reduce the number of suppliers and get them to partners.
 Inventory management: The goal is to shorten the order-ship-bill cycle. When a majority of partners
are electronically linked, information faxed or mailed.
  Distribution management: The goal is to move documents (accurate data) related to shipping.
 Channel management: The goal is to quickly disseminate information about changing operational
conditions ( technical, product, and pricing information) to trading partners.
 Payment management: The goal is to link company and the suppliers and distributorsso that payments
can be sent and received electronically.
 Financial management: The goal is to enable global companies to manage their money in various
foreign exchange accounts.
 Sales force productivity: The goal is to improve the communication flow ofinformation among the
sales, customer & production functions In sum, the supply chain management process increasingly
depends on electronic markets
6.Work group Collaboration Applications
1. A internetwork that enables easy and inexpensive connection of various organizational segments
2. It is to improve communications and information sharing and to gather and analyze competitive data in real-
time
3. Videoconferencing, document sharing and multimedia e-mail, are expected to reduce travel and encourage
telecommuting
4. Improves the distribution channel for documents and records to suppliers, collaborators and distributors