Commercializing the Internet

Chapter 4

Learn how to…

• Define e-commerce.

• List the technological components required for e-commerce.

• Define the payment models.

• Differentiate e-commerce solutions.

• Manage the development of an e-commerce solution.

• List the issues with trading internationally.

Defining E-Commerce

What Is E-Commerce

• Electronic commerce (e-commerce) is the integration of digital communications, data management, and security capabilities that allow organizations to exchange information related to the sale of goods and services.

Elements

• Digital communication

• Data management

• Security

Scenario

• A shopper browsers an online catalog and places items desired into a virtual shopping cart.– Shoppers can add or take out items at any

time from their shopping cart.

• The shopper goes to the virtual checkout.– The shopper decides on a delivery method.– The shopper uses digital cash or e-cash

drawn from a digital wallet, a digital check, or a regular credit card to pay for the purchases.

Who Uses E-Commerce

Kinds of E-Commerce

• Business-to-consumer (B2C) model is when an end user buys something from a company’s online storefront.

• Business-to-business (B2B) model is when companies conduct business electronically between themselves.– B2B2C is used when a business buys from

a wholesaler to sell to a consumer.

B2C Model

B2B Model

Enabling E-Commerce Technologies

Critical Elements

• Communications– A common digital language must be

understood.

• Security– Consumers need to feel confident in trading

online.

• Data Management– Transactions must be stored in a way that can

be audited and recover if there are outages.

EDI

• Electronic Data Interchange (EDI) is the computerized exchange of business information between trading partners over computer networks.– Standardized format that reduces cost and

saves time.– Reduces errors.– Speeds up transactions.

SET

• Secure Electronic Transactions (SET) is an open standard for conducting secure payment card transactions over the Internet.– SET uses encryption and digital certificates

from financial corporations.– Merchants never see the customer’s credit

card number.– For more info, visit

http://whatis.techtarget.com/definition/0,289893,sid9_gci214194,00.html.

XML Web Services

• A Web Service is a software system that uses an XML protocol to support interoperable machine-to-machine interaction over a network.– Computers can use different programming

languages.– For more info, visit www.w3.org.

UDDI

• Universal Description, Discovery, and Integration (UDDI) is an online yellow pages directory of Web Services that business computers can use to discover and learn how to use the B2B services offered by various companies over the Internet.– For more info, visit www.uddicentral.com

UDDI

WSDL

• The Web Service Description Language (WSDL) is an XML language for identifying the methods in a Web Service, defining how those methods behave, and instructing clients how to interact with the service.

SOAP

• The Simple Object Access Protocol (SOAP) is an XML language for exposing the methods and properties of a Web Service to a consumer, which is any Web client authorized to interact with the Web Service.– For more info, visit

www.w3.org/2000/xp/Group.

Processing Payments Online

Cash Model

• The cash model uses a digital wallet on the customer’s computer that contains digital cash or tokens that the customer uses to pay for goods and services purchased online – called eCash.– Online currency is paid by credit card, check,

or money order.– For more info, visit

www.cryptologic.com/ecash www.ecashdirect.co.uk.

Check Model

• The check model uses a digital checkbook on the customer’s computer that contains digital checks that the customer uses to pay for goods and services online.– For more info, visit www.checkfree.com– For example,

www.usps.com/paymentservices

Credit Model

• Credit cards can also be used to pay for purchases online.

• However, there are risks in giving your credit card number.– If a merchant is not using secure methods, a hacker

could intercept your number.– If a merchant maintains a database with your credit

card number in it, a hacker could potentially hack into the database.

– Single-use credit cards are available where a different credit card number is used for each transaction.

– See www.cardcops.com for info on credit card crime.

Smart Card Model

• A smart card is a credit-card sized plastic card with an embedded computer chip and memory that can store digital information. – The computer chip can handle digitally signed

and encrypted transactions.– See www.smartcardalliance.org. – A new Subscriber Identity Module (SIM) will

lead to a convergence of e-commerce and mobile phones.

Person-to-Person

• Since individuals are buying and selling from each other, there is now customer-to-customer (C2C) e-commerce.

• PayPal started a person-to-person payment model.– You can pay money to anyone with an

e-mail account.– The buyer must have a PayPal account from

www.paypal.com

Person-to-Person

• PayPal continued…– Buyers pay for purchases using PayPal; they

pay PayPal by credit card, bank account debit, or a stored balance.

– PayPal makes money by charging a small fee for each transaction.

Choosing an E-Commerce Solution

Instant Storefronts

• An instant storefront is a preprogrammed e-commerce system into which you enter your catalog of products and begin conducting business online.– Online allows you to develop your storefront

online.– Offline allows you to develop your storefront

offline and then upload it.

Instant Storefronts

• Some Instant Storefront sites are:– www.shoppingcartsplus.com – www.storefront.com – www.ThriftEstore.com – www.aacard.com – www.kagi.com – www.digibuy.com

Auctions

• eBay is the leading online auction.– Search for the item you want.– Buy the item now or place a bid.– Pay for the item if you win the bid.

• Other auction sites are:– http://auctions.yahoo.com – http://creativeauction.com– http://auctionaddict.com

• For more info, see http://internetauctionlist.com

bCentral

• Microsoft bCentral’s e-commerce product has been phased out. Use Commerce Manager on Microsoft’s Small Business Center Web site.

• To get an E-commerce account, go to Microsoft’s Small Business Center at www.microsoft.com/smallbusiness/products/online/cm/detail.mspx – Scroll to the bottom of this Web site and

choose Start Commerce Manger Demo.

Commerce Manager

• To use Commerce Manager, you need to:1. Set up your account with credit card information and

company information, payment options, tax rates, credit card security settings, shipping rules, and privacy policy.

• Include e-mail notifications to your customers and yourself.

2. Create departments for your products.• Then, add products and pictures individually or from an

Excel spreadsheet or Access database or any CSV file.

Commerce Manager

3. Set up your marketplaces.• Product Gallery provides your own personal

marketplace that looks how you want it to look.• Configure a shopping cart.

4. Process orders.• Customers use a simple online form when they

are ready to check out using 128-bit encryption for security.

5. View orders at any time.• Print a shipping and billing invoice if you wish.

6. View reports in ten different ways.

Developing an In-House E-Commerce System

In-House Solution

• Developing an in-house e-commerce solution avoids the cost of commissions and gives you greater control.– However, you will need a team of people:

• Web designers• Database engineers• Application programmers• Security officers

ADDIE

• ADDIE represents the five stages of software development.– Analysis: Task analysis into goals based on

business and customer needs– Design: Uses a storyboard that shows what

will appear on each screen of the application– Development: Banners, logos, programming

code, database development, Web site creation

ADDIE

– Implementation: Pilot with a small number of users initially

– Evaluation: Has the project met its goals?

• This model must continue to be used after the initial project is finished– New features & products– New capabilities– Enhanced security

Project Management

• Project management includes these fundamentals:– Scheduling using milestones for each task– Budgeting– Evaluating risks– Contingency planning– Preventing scope creep (broadening the

project goals)

Project Management

– Defining roles of each team member– Piloting to make sure the software works– Reporting by each project member on their

progress

Regulating Copyrights, Licenses, Patents, and

Trademarks

Copyright

• Article I, Section 8 of the United States Constitution grants Congress the power “to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”

Copyright Act of 1976

• The Copyright Act of 1976 defines and allocates rights associated with “original works of authorship fixed in any tangible medium of expression, now known or later developed, or otherwise communicated, either directly or with the aid of a machine or device.”

Copyright Penalties

• Civil copyright infringement penalties range up to $100,000 per software title.

• A criminal violation’s fine goes up to $250,000 and 5 years imprisonment.

• See www.siia.org for recent actions.

Web Pages

• Web pages are copyrighted by default.

• To add to your legal strength, include the following on your Web page:– Copyright © 20xx by your_name.

All rights reserved

Registering a Copyright

• Go to www.copyright.gov and choose Literary Works.

• Download Form TX, complete it, and make a copy for your own records.

• Mail the application and a printout of the work with a $30 registration fee to the Library of Congress, Copyright Office, 101 Independence Avenue, S.E., Washington, D.C. 20559-6000

Fair Use

• Notwithstanding the provisions of section 106 [which grants authors exclusive rights], the fair use of a copyrighted work, including such use by reproduction in copies or phonorecords or by any other means specified by that section, for purposes such as criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research, is not an infringement of copyright.

Fair Use

The factors to be considered shall include:1. The purpose and character of the use, including

whether such use is of a commercial nature or is for nonprofit educational purposes.

2. The nature of the copyrighted work.

3. The amount and substantiality of the portion used in relation to the copyrighted work as a whole.

4. The effect of the use upon the potential market for or value of the copyrighted work.

– For more info, see http://fairuse.stanford.edu

WIPO & DMCA

• The World Intellectual Property Organization (WIPO) deals with international copyright issues.– See www.wipo.org for more information.

• The Digital Millennium Copyright Act (DMCA) was used to bring the United States into conformance with the WIPO treaties with other countries.

TEACH Act

• The Technology Education and Copyright Harmonization (TEACH) Act extends the concept of Fair Use to distance learning courses.– Allows the use of reasonable and limited

portions of audiovisual works and sound recordings.

– Permits educators to create digital copies for such usage.

Licensing

• A license is a permission to use goods or services provided by a third party who owns the goods or provides the services.– Software is not bought; it is licensed.

Types of Licenses

• Single-user licenses gives an individual the right to use the software.– Often that includes the right to install the software on

multiple computers provided only that one user is using the software.

• Site licenses allow usage throughout the workplace on multiple computers but usually does not allow using it at home.

• Open source licenses make the source code freely available but often you will have to pay for technical support if needed.– For more info, see www.opensource.org

Patents

• A patent is the granting to an inventor of a property right for an invention to exclude others from making, using, offering for sale, or selling the invention in the United States or “importing” the invention into the United States.– Provides the inventor an opportunity to profit

from the invention for a reasonable period of time (i.e. 20 years) before the patent expires.

– All patents are online at www.uspto.gov

Compton’s Patent

• One of the most blatant cases of patent abuse occurred when Compton announced at the 1993 Fall COMDEX convention that they had been awarded a patent that would require all multimedia developers to pay them royalties.– This resulted in the rescinding the patent and

improvements by the patent office.

Unisys GIF Patent

• Unisys owns the patent on the compression scheme used in the GIF file format.– In 1994, Unisys began charging a licensing

fee for using the GIF file format but backed down after an uproar.

– They tried again in the late 1990s.– As a result, the PNG patent-free replacement

for GIF was developed.

Eolas ‘906 Patent

• Covers the technology used by browsers to launch automatically the appropriate applet or plug-in to display embedded content, such as a Flash animation, within a hypermedia document.– This patent is under review.– For more info, go to

www.w3.org/2003/09/public-faq.html

Trademarks

• A trademark is a word, phrase, symbol, or design, or a combination of words, phrases, symbols, or designs, that identifies and distinguishes the source of the goods of one party from those of others.– Register trademarks via the Trademark

Electronic Application System (TEAS) at www.uspto.gov/teas

Trading Internationally

Multiple Currencies

• If a customer purchases a product in a country that differs from that of the merchant, the customer needs to pay in a foreign currency.

• Most of the major turnkey systems, such as Microsoft bCentral, handle currency conversion for you.

• Check out the international currency calculator at www.bankrate.com

Shipping Overseas

• When shipping overseas, you need to be careful not to violate any customs regulations.

• Include shipping charges upfront in your e-commerce transaction.

• Some companies that ship overseas are:– www.fedex.com – www.dhl.com

Language Issues

• For international e-commerce, use the Unicode option for character encoding.

• There are several sites where you can enter the text of a Web page in English and have the page automatically translated into a variety of foreign languages.– Always have someone who knows the

language double-check the translation.