Chapter 5 Electronic Commerce, Intranets, and Extranets via networks – “EDI is the forefather of B2B” – Estimated that U.S. companies buy about $500 billion worth of goods

Electronic Commerce, Intranets, Internet, and

Extranets

Intranet

• An intranet is a computer network within an An intranet is a computer network within an organization that uses Internet technologies for r organization that uses Internet technologies for r members of the organization onlymembers of the organization only

• If a company has an existing network, than If a company has an existing network, than establishing an intranet is very inexpensive. All establishing an intranet is very inexpensive. All that is required is the server software and that is required is the server software and browsers for clients.browsers for clients.

• Most of the technologies mentioned earlier are Most of the technologies mentioned earlier are all available at no charge all available at no charge

Extranet• An extranet is similar to an intranet but it enables An extranet is similar to an intranet but it enables

the firm’s business partners (e.g., suppliers or the firm’s business partners (e.g., suppliers or customers) to access the firm’s intranetcustomers) to access the firm’s intranet

• With respect to an extranet, firms want to restrict With respect to an extranet, firms want to restrict access to business partners. A virtual private access to business partners. A virtual private network provides the security mechanism for network provides the security mechanism for accomplishing this. accomplishing this.

• The link between the firm’s network and the The link between the firm’s network and the Internet is often called a “tunnel.” A VPN Internet is often called a “tunnel.” A VPN provides a secure tunnel.provides a secure tunnel.

• VPNs are also required for firms with extensive VPNs are also required for firms with extensive intranets (multi-site firms)intranets (multi-site firms)

Electronic Commerce Defined

• E-Commerce – online exchange of goods, services, and money between firms, and between firms and their customers– More than just buying and selling:

• Pre-sale events and marketing

• After-sale customer service


• E-Commerce– Business-to-Consumer (B2C)

– Business-to-Business (B2B)

– Business-to-Employee (B2E)

– Consumer-to-Consumer (C2C)


• Internet and World Wide Web Capabilities– Expanding market

– Wider customer base

– More products

– Closer relationships with customers

Electronic Commerce Defined• Internet and World Wide Web Capabilities

– Real-time access to information• Web site linked to corporate database • Customers can check the balances of their frequent flier

accounts• Customers do not have to wait for monthly statement• Example: Alaska Airlines

– Mass customization• Tailoring products to a customers needs• Example: Lands’ End (Clothing retailer) developed a

virtual model so that customers can dress the model to select clothing

– Interactive communication• Improving firm’s image through responsiveness• Firms are augmenting telephone-based ordering, Web-

based customer support (Web chat)• Example: E*Trade

Electronic Commerce Defined• Internet and World Wide Web Capabilities

– Collaboration– Reduced transaction costs– Enhanced operational efficiency– Disintermediation

• Cutting out the “middleman”• Reaching customers directly


• Electronic Commerce Business Strategies– Brick-and-mortar

• Traditional, physical companies

– Click-only (“virtual”) companies

• Online only

• Example: eBay

– Click-and-mortar (or “Brick & Click”)• Both physical and virtual

– Challenge: increased IS complexity

Business-to-Business Electronic Commerce

• Electronic Data Interchange– Definition – EDI refers to the electronic

transmission of business documents between organizations via networks

– “EDI is the forefather of B2B”

– Estimated that U.S. companies buy about $500 billion worth of goods and services electronically per year via EDI networks

– EDI: usually over value-added networks (VANs)

EDI System Architecture


• Electronic Data Interchange– Advantages

• Wide variety of business documents

• Streamlines business processes

• Reduced document handling, reduces paperwork

• Shortens time of business transaction (from day to second)

• Reduces errors


• Electronic Data Interchange– Disadvantages

• Costly to implement

• Costly to maintain

• Requires skilled technicians

• EDI can cost up to $100,000 and monthly telecommunications charges associated with VANs can be several thousand dollars per month

• Often too costly for small or medium-sized companies


• The Internet Changed Everything– B2B now available to companies of all sizes

– Intranet – internal, private network using Web technologies to facilitate transmission of proprietary information within the organization

– Extranet – two or more firms using the Internet to do business together


• Intranet System Architecture– Firewalls – hardware devices with special software that

prevent unauthorized access

– An intranet server is placed behind the firewall

– Packets are never routed outside the firewall, but remain within the organizations network

Internet Architecture


• Intranet Applications– Training: Employee can access video lectures,

presentation slides from their desktop – Application Integration: Intranet integrates all

disparate applications installed in different environments to consolidate information• Enterprise Resource Planning (ERP)• Customer Relationship Management (CRM)• Sales Force Automation (SFA)

– Online Entry of Information– Real-Time Access to Information– Collaboration


• Extranet System Architecture– Extranet

• Connects two or more business partners

• Like an intranet

• Same software, hardware, and networking

• Additional component:– Virtual Private Network (VPN)

– Secure transmission of proprietary info


• Extranet System Architecture– Virtual Private Network (VPN)

• Tunneling– A technology that encapsulates, encrypts, and transmits data

over the Internet– A secure “tunnel” is created over the VPN connecting the

two intranets

• Authentication– Confirms the identity of the remote user who is attempting

to access information from the Web server


• Extranet Applications– Supply Chain Management

• Example: Dell Computers

– Real-Time Access to Information • Example: CSX railroad

– Collaboration• Example: Caterpillar


• Enterprise Portals– Enterprise portals

• Extranets for business partners

• Access points (or front doors) by which a business partner accesses secured, proprietary information from an organization


• Enterprise Portals– Distribution portals

• Automate the business processes in selling products to multiple buyers

– Procurement portals• Automate the business processes that occur before,

during, and after sales have been transacted

– Trading Exchanges• Electronic marketplaces run by 3rd-party vendors

• Revenues are from commissions on transactions

Business-to-Consumer Electronic Commerce

• B2C– Internet – fastest acceptance of any

communications technology

– Retail transactions between a company and end consumers

– Electronic retailing (e-tailing)

Business-to-Consumer Electronic Commerce

• Stages of B2C E-Commerce– E-Information

• Disseminate information globally

• Example: Ferrari

– E-Integration• Consumer-driven access to information

• Example: Allstate and Burlington Northern Santa Fe

– E-Transaction• Interactive communication and transaction support

• Example: eBay and Priceline.com

Formula for Electronic Commerce Success

• The Rules for Web Site Success– 1. Offer something unique

– 2. Web site must be aesthetically pleasing

– 3. Easy to use and fast

– 4. Motivate people to visit, stay, and return

– 5. Advertise your Web presence

– 6. Learn from your Web site

Documents

Chapter 5 Electronic Commerce, Intranets, and Extranets via networks – “EDI is the forefather of B2B” – Estimated that U.S. companies buy about $500 billion worth of goods