Introduction
What is E-Commerce?
Electronic commerce (e-commerce) is an extension of traditional commerce, which is concerned with the activities of business, industry and trade, including nominally, the exchange of goods, services, information and money.
E-commerce is the projection of one's business into cyberspace. By business, it includes traditional business, individual consumers, household business, non-profit organizations, local and national governments.
Modern day e-commerce is not restricted to any particular scale due to the absence of a global boundary. Central to understanding e-commerce is an appreciation for the unprecedented growth of the Internet and the World Wide Web (WWW).
In an analogy to describe how traditional commerce relates to e-commerce present today, the Greek agora, the Persian bazaar or the Elizabethan market-faire, all from the past, provide valuable hints for understanding the high-tech e-commerce of today. Though from different cultures and periods in world history, commerce happened in the agora, bazaar or market-faire. People gathered in a common location at a common time for the purpose of making an exchange. This exchange, be it goods for services, services for goods, or money for either, is commerce. Commerce is exchange. Exchange is commerce. This was true 1000 years ago, and it still holds true today. In the past, a physical gathering facilitated this exchange, which involved the assembling of both goods and the promise of services in a central location. Now that the Internet is a vast, modern day market that brings everyone and everything to a common place for the purpose of making exchange. The important difference is that with the Internet, the physical concept of 'place' has lost its meaning. The Internet is everywhere and the Internet is nowhere.
Fig 1. Growth of Internet users per year Fig 2. Online Revenue from e-commerce
E-Commerce Models
Here are some general classifications of business models that have emerged from cyberspace:
* Business-to-Consumer (B2C)
This is type of e-commerce most recognisable to the general Internet public. Prime examples of this model are Amazon.com, Barnes and Noble.com, HomeGrocer.com, Buy.com, Drugstore.com, and so on.
* Consumer-to-Consumer (C2C)
This model is person-to-person and it is like a barter or community gathering. The largest example of this is of course http://www.ebay.com while another quite popular example is http://www.napster.com.
* Business-to-Business (B2B)
B2B e-commerce uses the global (public) Internet as an overlay to their private networks. The interconnectedness of the Internet allows for the exchange of information electronically by computers across networks in real time. B2B sites are those sites that provide goods, services or information to other businesses.
Fig 3. Growth of e-commerce (B2B &B2C) from 1998 to 2003 (projected)
* Business-to-Government (B2G) and Government-to-Business (G2B)
Government at all levels, be it locally or internationally, has extensive relationships with commercial business. Modern government often relies on private enterprise to provide material resources.
* Government-to-Consumer (G2C)
This e-commerce model is becoming more and more popular. Providing the general public with a host of services (e.g. income tax filing) and large source of information over the Internet constitutes this particular e-commerce model.
* Government-to-Government (G2G)
The exchange of services and information within the government and various levels and between different ministries makes up the basis of this e-commerce model.
Role of Management
The role of management in e-commerce is to provide vision, direction and funding. In most business proposition, it is the responsibility of the management to show everyone the ROAD (Requirements, Objectives, Assumptions and Dollars).
* Requirements
It is imperative to have a clear set of requirements before undertaking the development of an e-commerce system. The specific things that the web system must achieve (for example, taking credit cards online) and if the system that is in mind doesn't do these required things, then there is no point in building the system at all.
For complex projects, requirements and sub-requirements are often supported by technical specification documents, it is advisable to use case scenarios, plans for security and disaster recovery, network infrastructure, etc.
* Objectives
Objectives are ...
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* Requirements
It is imperative to have a clear set of requirements before undertaking the development of an e-commerce system. The specific things that the web system must achieve (for example, taking credit cards online) and if the system that is in mind doesn't do these required things, then there is no point in building the system at all.
For complex projects, requirements and sub-requirements are often supported by technical specification documents, it is advisable to use case scenarios, plans for security and disaster recovery, network infrastructure, etc.
* Objectives
Objectives are a necessary feedback mechanism, which allow the company to evaluate the success of the e-commerce venture. Objectives are the reasons why this e-commerce system is put together. Objectives are constantly being redefined but they must always be present.
Examples of common e-commerce objectives might be to increase sales, provide better customer service, reduce transaction costs or enable better business decisions.
Fig 4. Business Perception of the Importance of Objectives
* Assumptions
One must always look ahead and foresee what might be expected from his business. These include things such as the amount of expected traffic that a network must support, the technical knowledge of customers, the kinds of systems they use (browser type, operating system, Internet connection speed), and the customers' interests.
* Dollars
Dollars are just a metaphor for resources. These include the costs for hardware, software, programmers, marketing, etc. These costs can range from the hundreds of dollars (you can do it yourself) to tens of millions of dollars (very serious e-commerce). In the end, the dollars and requirements have to meet.
A common dilemma experienced in the business world today is to have increasing reliance and expectation on information technology, while at the same time controlling or limiting the funds allocated in this direction. This situation often leads to disappointment, experienced by both the business people who have inferior systems, and by the engineers, who do not have the resources necessary to execute. Cost awareness should be ever-present through the entire e-commerce lifecycle, but keep in mind that the company gets what it pay for.
Infrastructure
E-commerce requires an information technology infrastructure, the sophistication of which depends on the type and scale of the intended e-commerce activities. None of this would be possible, of course, without the global Internet and the World Wide Web. The information technology infrastructure is a complete system of interconnected, interrelated and interdependent components. There are a few factors to consider:
* Physical Factors
* Computer Networks: There are many kinds of computer networks. Networks that are based on computers that are all relatively close together (like in an office) are called Local Area Networks (LAN); for larger dispersions of computers, like within a city or a large university are Metropolitan Area Networks (MAN); the very largest networks are those that span great geographical spaces and are called Wide Area Networks (WAN). Among the first things for E business is to have some computers, and connection to the network. The Internet is often described as having client-server architecture. Simply speaking, the server is a computer that serves information to clients on the machines that make requests. So client makes a request, it goes across the network to the server, the server then responds to the request, serving the information to the clients. This is called a 2-tier architecture. If a database server is added, it would become a 3-tier architecture, and if multiple web servers or a special applications server is existent as well, N-architecture is built. To do e-commerce, a server, most likely a database server is needed.
In addition to the machines, some networks connections are needed. Within the office, a LAN, but more importantly, an Internet connection to make severs available to the customers is necessary. Generally speaking, the computers can be housed in the company's own facility or in a co-location facility. The advantage of bringing the connection to the company's facility is the fact that the equipment on the company's premises. The down side is that it is often less expensive for bandwidth at a co-location facility.
Bandwidth is a capacity to carry information and the speed with which this information is transmitted. The amount of bandwidth needed depends on the amount of traffic involved and the expense of the information (file size) the service has to serve. There is also a need to anticipate future growth of traffic.
Therefore, the greater the bandwidth, the greater the expense needed. The same can be said for quality of service. The better the service, the higher the cost.
* Servers and Clients: Servers are computers like any other, with the exception usually of having more memory, both RAM and hard drive space and faster processors. What distinguishes them, though, is the server software they're running, which gives it server characteristics. Popular servers include Microsoft Windows 2000, Server, Sun Solaris, etc. More about web-server software etc., will be touched on below. Clients on the other hand are normal PC's used by individuals, through which they can gain access to the office network and thus to the data on the servers.
* Databases
A database has one or more large structured sets of persistent data, usually associated with software to update and query the data. A simple database might be a single file containing many records, each record having the same set of fields where each field is a certain fixed width. A database can be illustrated as an electronic filing system.
A database management system (DBMS) is required to manage a database efficiently. A DBMS can be an extremely complex set of software programs that controls the organisation, storage and retrieval of data (fields, records and files) in a database. It also controls the security and integrity of the database. The DBMS accepts requests for data from the application program and instructs the operating system to transfer the appropriate data. When a DBMS is used, information systems can be changed much more easily as the organisation's information requirements change. New categories of data can be added to the database without disrupting the existing system. Data security prevents unauthorised users from viewing or updating the database. Query languages (SQL - structured query language/fourth-generation languages - 4GLs) and report writers (report generators) allow users to interactively interrogate the database and analyse its data.
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Business Logic
It is through web programming that e-commerce is enabled, allowing forms to be processed, orders sent, and bills collected automatically. Programs are the instructions that humans give to the computers. Programming happens all over the place - there is network programming, database programming, client-side and server-side programming. Sun's Java Server Pages (JSP) and Microsoft's Active Server Pages (ASP) have grown quite popular recently with developers of e-commerce systems. Without business practices to guide data, data is nothing and systems, meaningless.
* The User Interface
There must be a way for users to interact with the web content. This interface must succeed in terms of both form and function, so it has to look good and work well. On the public Internet, company intranet, or partner extranet, the user interface is most commonly found in the form of a website. A website is a collection of web pages, usually assembled around a common theme.
Design and colour matter just as much as beautifully sorted and comprehensible information. It is encouraged to be creative but exercise common sense. There is always the need to take time to use the system from the perspective of the user.
Important Parameters
There are many important parameters the company must consider in order to have a successful e-commerce business.
* Availability
The web is 24/7, available 24 hours a day, seven days a week. The web is everywhere and nowhere at once. The e-commerce system needs to be available when the customers come calling. To ensure that people can get to the system, it is essential to ensure that there is more than one path through the network to the front door. Networks go down, so relying on a single connection to the Internet is risky.
Traffic is also an issue. Anticipate increases in user traffic if the business turns out to be a hit. There are many reasons why networks go down and destinations become unavailable but from the customers' perspective, the server is down or unreachable. This will leave a bad impression on the customers. Hence, to ensure availability, it is imperative to have multiple connections to the Internet (at least two) preferably from two different network service providers. A common, cost-effective choice made by many businesses today is to go with either third-party web hosting or a co-location facility. With co-location it is like putting the equipment in someone else's facility. With web hosting, someone else's equipment is used as well. Therefore, weigh the options and consider which option is best for the company.
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Reliability
The system must be working when customers arrive. It must be reliable and fault-tolerant. At the heart of fault-tolerance is the notion that there can be no single point of failure. Not in the network, not in the computers, not in the software. In the network, it usually means multiple connections to the Internet, multiple domain servers and extra routers prepared when the inevitable occurs. Fault tolerance for computers is often facilitated the implantation of Redundant Array of Inexpensive Disks (RAID). If one disk fails (which will happen at some point) there are other disks to take over the job. Reliability in software comes from following good software engineering practice - requirements, specifications, and extensive testing.
* Scalability
The system assembled must anticipate the current and future needs of the business. It must scale appropriately. There is quite a difference between serving 100 customers and 100,000 of them. The design of the e-commerce system should be informed by concerns for scalability from the very beginning. The issue of scalability must be considered throughout the entire enterprise. It is not just the website but the complete end-to-end e-commerce system that must be responsive to increased demand.
* Manageability
Once deployed, e-commerce systems must be managed. Yet they are typically more difficult to manage when systems are complex. Hence, compromises have to be made. Sophisticated sites offer more features but require more maintenance and support. Less complex systems will cost less to maintain, but they may not achieve organization objectives. Get the right balance.
* Security
Security is an integral aspect of e-commerce. It is vital to the smooth functioning of e-commerce as a whole. Customers must have confidence in the transmission of sensitive financial and personal information to web merchants.
Businesses must be certain in the knowledge that payment information collected over web storefronts is indeed valid.
Furthermore, merchants must undertake additional precautions to ensure that hackers or malicious employees do not compromise databases with confidential information from their customers. In today's security arena,
a large variety of security systems to counteract the various way in information is mishandled. E-commerce requires a large variety of these security tools in order to run problem-free, minimising losses.
* Privacy
E-business web sites should clearly explain to website visitors their privacy policies on how users' personal information will be kept secure and in what ways will it be used in the future.
* Legal
When setting an e-business of any sort, legalities play an important part. An e-business should have any legal policies and disclaimers which are relevant to their users on their website.
Fig 2. Important features that website visitors look out for in a commercial website
Conversely, a number of factors, including infrastrutural and managerial, that hinder the establishment of e-commerce systems by businesses is found in a recent survey and the data is as following:
Fig 5. Factors inhibiting take-up of e-commerce
Implementation Strategies
When the decision is made that the company wishes to engage in electronic commerce it will be necessary to consider a wide array of implementation strategies that are available. Any course of action should be based on a sound cost and benefit analysis. While the potential benefits are many, do not be blind to the costs, which are not insignificant. There are basically three ways to develop an e-commerce platform: build it, buy it or rent it. Real-world implementations are often achieved through a mixture of the three.
* Build It
The sure way to get exactly what the business wants is to build-it-yourself. This route is only for organizations with robust Information Technology departments - both in terms of personnel and capital resources. With the sure control afforded by in-house development comes the responsibility of maintaining and evolving the system across time. Unless the core business is information technology itself, diversion of resources from regular business operations for the purpose of maintaining a sophisticated e-commerce infrastructure may not be wanted.
While the organization will likely need to support a Local Area Network (LAN) it is nonsensical to build a nationwide network to connect remote locations when it is now possible to tunnel securely through the existing Internet with a Virtual (VPN) for this purpose. Likewise, nowadays no one would consider building servers and workstations when so many companies exist for the purpose of producing hardware on demand to precise specification. In addition to hardware and network connectivity, there are many software components that the business may not want to build from scratch, for example, web browsers or financial systems, since there are perfectly good, reasonably priced alternatives.
* Buy It
There is no getting around the buying of stuff. When a business is started, purchasing items essential to the basic functioning and more is a necessity. The question is how much, what kind, and to which degree.
* Rent It
This is the way always for network connectivity but now is becoming a possibility for full blow applications or application components. Witness the explosion of Application Service Providers. No boundaries.
Conclusion
The future of e-commerce is rather promising despite smaller players having to close down. There will always be a demand for e-commerce as it offers products and information anytime, anyplace and anywhere - all you need is a connection to the Internet. How far it goes and how fast developments take place however is still uncertain; e-commerce is evolving everyday!
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