E-Commerce Architectures and Technologies Rob Oshana

E-Commerce Architectures and Technologies Rob Oshana
Southern Methodist University

Agenda Business Models Business to Business and Business to Consumer
The beginning - Electronic Data Interchange (EDI) Network Architectures Internet and Web Architectures E-Commerce Architectures Intranet, Extranet, Internet IBM E-Commerce Success Steps

Corporation Manufacturer
Indirect supplier 1 Indirect supplier 2 Business to Business Direct Suppliers Transportation of Supplies Corporation Government Manufacturer Financial Institution Sales IT Marketing Services Credit Card Processing Business to Consumer Distribution Electronic Store Front UPS/Fedex

Layered Architecture for eBusiness
Electronic Commerce Applications (Supply chain management, video on demand, on-line marketing and advertising, home shopping) Common Business Services Infrastructure (security/authentication, electronic payment, directories/catalog) Messaging and information distribution infrastructure (EDI, , HTTP) Multimedia content and network publishing infrastructure (HTML, Java, WWW) Network Infrastructure (telecom, cable TV, wireless, internet)

Vendor Centric Versus Customer Centric
Customer A Customer B Vendor Vendor Centric Customer C Customer D Vendor A Vendor B Customer Customer Centric Vendor C Vendor D

Web Architecture Firewall Buyer Supplier Supplier connection Server
Internal External Server User Buyer Procurement Browser Intranet Browser Server Internal Admin Intranet Functional Units User Production Other Supplier Firewall Supplier User Internet connection Functional Units Server External Browser Intranet Web Architecture Server External Server Internal

The Web Commercial Community
Consumer Software Developers University Quicken Online resources Search Engines Simulations GDSS Mutual Fund DB Online Magazines Web catalogs Virtual Reality Web DBMS Online Services Payment System Bank WebAd Manager Products on the Web Cybermediaries Web compatible software Supplier Delivery Service

Web-based Transactions
Web Business Community Buyer Seller 1. Select product via browsers. 1. Provide product and pricing information. 2. Update info periodically. 3. Buyer pays by credit cards Payment System Browser 2. Put selected merchandise into shopping cart. 5. Ship product to buyer 4. Authorization from bank or credit card company ProductAd Manager Web catalog system Manages product ad etc. Bank Web Catalog Product Product

Components of the Web DB Web Browser TCP/IP based network (HTTP) CGI
Content Web Clients Web Servers (web pages) Software applications 1. Browser establishes connection with server. 2. Browser issues request to server. 3. Server sends a response (page or graphics) 4. Both browser and server disconnect and the transaction ends. Common Gateway Interface (CGI) CGI defines how external applications can interact with Web servers HTML describes the contents of each Web page

Business-to-Business and Business-to-Consumer

Business-to-Business
The selling of products and services between corporations and the automation of systems via integration Typical players involved suppliers distributors manufacturers stores

Most of the transactions occur directly between two systems automation of the supply chain Supply Chain Management; the process of tying together multiple suppliers of goods to create a final product Daimler-Chrysler Corporation over 20,000 suppliers of parts SPIN B2B solution increased productivity over 20% in first year

Other forms of B2B E-Commerce Malls QVC; offers a common interface for buyers to access different supppliers Buyers manage their own back end DBs (product information) Helps retailers collaborate with worldwide supply chain

Other forms of B2B E-Commerce Catalogs Used for purchases between companies Allow corporate buyers to search for products based on features or price Single interface for individual sellers or multiple sellers of similar products Benefits include ease of use flexibility easy updating

Key Themes for B2B B2B will be much larger than B2C The timing is now
Exchanges will introduce unprecedented market transparency B2B winners will establish platforms that link deeply with customers (e-hub) Many B2B business models will fail Buyers and Suppliers win

What Problems are We Solving?
Commerce is fragmented by geography Most interactions between businesses are complex and labor- and information sensitive Supply chains are bloated with excess inventory because of the inability to see and plan for the right mixes and volume of products

A Question of Transparency
Price transparency Availability transparency Supplier transparency Product transparency

Customer Feeding Frenzy: e-retailers vie for $185 billion
Latest consumer e-commerce forecasts estimate at least a five-fold increase in sales from 1999 to Forrester Research issued the most detailed - and aggressive - outlook, predicting $185 billion in U.S. e-commerce sales by 2004.

Economic Spotlight: IT and Net Industries Drive U.S. Economy
The U.S. Department of Commerce has compiled the latest analysis on the impact of the information technology and Internet industries in "The Emerging Digital Economy II." Available at the report shows these industries contributed 29 percent of the nation's economic growth in 1998.

The Economic Impact of E-commerce
Toy-giant Mattel will spend $50 million to launch an e-commerce venture that the company says will bring in $60 million this year, at gross margins greater than those of its traditional business. Sound good? A report from the Organization for Economic Cooperation and Development policy group has compiled over 150 pages of economic reasons why governments and businesses worldwide should pay attention to the ramifications of digital commerce.

“The Economic and Social Impact of Electronic Commerce” report says business-to-business sales will help drive e-commerce revenues to $1 trillion in the 2003 to 2005 time frame. Companies like Mattel are taking advantage of the economic efficiencies of e-commerce: low-cost distribution, ordering and customer service, improved productivity and tighter inventory control. The OECD says the Net economy will result in lower prices for consumers, better information access and increased competitiveness of small and midsize businesses. It will also pave the way for a true global trading community.

Equal access to e-commerce benefits is critical to the Internet Economy. Rich folks are more likely to have Internet access than poor folks in every country studied by the OECD. The report warns of a continuing worldwide shortage of skilled technology professionals. But an OECD analysis shows that, in the U.S. at least, traditional retail and information workers will have less to fear from a digital marketplace than their European counterparts.

B-to-B Forecasts

B-to-B Forecasts But Gartner’s corporate focus is understandable, given the way b-to-b conversion happens. “B-to-b gets adopted in chunks,” says Knight. “You’ve got entire companies, entire supply chains adopting e-commerce. It’s like a snowball effect.” Despite methodological and definitional variations, everyone agrees b-to-b will be big: in the neighborhood of $2 trillion in the U.S. by 2003, up from approximately $100 billion in 1999.

Behind the Numbers: The Mystery of B-to-B Forecasts Revealed
One of the segments expected to grow the fastest is “e-marketplaces,” third parties that bring together multiple buyers and sellers online. According to Gartner, there were about 30 e-marketplaces in January 1999 and 300 by December. Forrester Research predicts that by 2004 more than half of all online b-to-b trade will be marketplace-driven.

Online Population Spotlight: Net Businesses Go Back to College
Every year, marketers spend millions of dollars targeting college students just entering their prime as consumers. Now dozens of Net firms want in on the act. Source: Student Monitor Source: Cyber Dialogue

Geographic Market Fragmentation
S B S B S S B B S S B B B S B S Premier buyer S Geography 1 B B S S Geography 3 B Premier seller B S Geography 2 Source: Morgan Stanley Dean Witter Internet Research

Enhanced Buyer and Seller Discovery
Source: Morgan Stanley Dean Witter Internet Research

The Implications Strong competitors become dominant in efficient markets Weaker competitors get weaker Intermediaries at risk Suppliers become more specialized Buyers initiate/terminate relationships more easily Uniform prices

Time is Right for B2B Infrastructure ready Board room acceptance
Speed and simplicity Lure of cost savings and efficiency Early adopters common Year of evaluation behind us Buyers are getting equity Vendors are pushing the next thing Well financed start ups and a good economy

B2B - Past, Present, and Future
Phase 1 - Batch EDI Phase 2 - Basic E-Commerce Phase 3 - Communities of commerce Phase 4 - Collaborative commerce

Business-to-Consumer
Interactions and transactions between a company and its consumers Focus is on selling goods and services and marketing to the consumer Dell, Amazon.com, eBay

Traditional vs Direct Selling Chain
Manufacturer Distributor Supplier Reseller Wholesaler Customer Supplier Manufacturer Distributor Wholesaler Reseller Customer

Business Models

Introduction to Business Segments
Consumer Retail businesses selling physical goods to an individual end consumer Business-to-Business cataloging businesses with online catalogs selling products to other businesses Information commerce businesses distributing digital goods

Segment Granularity, Market Size, and Timing
Segmentation because of focus concentrating on exactly those elements that are essential to the application or market not diverting effort towards those elements that are either not needed or not appreciated by the customer

Segment Granularity, Market Size, and Timing
Difficult to get right too broad => development resources may not stretch across all necessary features too narrow => market may not be large enough to support the business

Segment Similarities and Differences
All have the need to attract customers, present products, assemble orders, do transactions, accomplish fulfillment, and deliver customer service Retail segment has more need for merchandising capability

Segment Similarities and Differences
B2B have a greater need for payment by purchase order and for approval workflow Information commerce has a great need for online fulfillment

Consumer Retail - Value Proposition
Ability to reach a global market Reduced marketing and selling expenses Increased efficiency of operations Ability to target consumers more precisely Ability to convey more accurate product and availability information

Consumer Retail - System Functionality
Small shop static catalog and simple requirements Medium sized direct marketing product database and display templates Large Retailer Enterprise Resource Planning (ERP)

Attract - Advertising and Marketing
banners on popular sites newsletters listings on widely used search engines Expense for the retailer Revenue to a vendor in the information commerce segment

Coupons internet-based digital coupons may directly link to a transaction service Sales Promotions Frequent buyer programs

One-to-One marketing Internet removes geographical basis for convenience price is always a difficult basis for competition leaves quality of service knowing a lot about the customer helps provide high quality service

Interact - Content Registration with Internet search engines
Printed hypertext links on traditional menus, catalogs, and advertising Internet advertising on popular or related sites

Act - Order Processing Shopping cart or order aggregation function
logical DB ot items considered for purchase Order validation validation based on business rules Application of coupons or other discounts affinity programs and quantity discounts

Act - Order Processing Cross selling
offer buyer additional merchandise based on contents of shopping cart Calculation of sales and other taxes complex rule sets involving tax classification of product, location and tax status of buyer and seller Calculation of shipping and delivery charges bundled into price or extra and different forms

Act - Order Processing Presentation of the rolled-up order to the buyer reduces downstream issues customer service return dispute handling

Act - Order Processing Electronic cash Microtransactions and tokens
low transaction cost Microtransactions and tokens fractions of a penny transactions Transaction Aggregation charging multiple events by the batch taxi meter or charge up meter accumulates usage charges parking meter or pay down buyer prepays a lump sum

Act - Fulfillment Traditional channels for physical goods
On line for information commerce Downloading charge for the download itself appropriate for small downloads (unlikely to fail) charge for access rights to the download area access for a reasonable amount of time to do all the downloads

Act - Fulfillment Subscriptions; ongoing access
charge for a license key delivering the key and content separately may be difficult planning for download failures Subscriptions; ongoing access Push Content; actively delivered by the content service

React - Customer Service
Key issues are the same I didn’t buy that I didn’t receive the delivery (or broken) I didn’t like what I received I was charged the wrong amount With E-Commerce technology ensures that “I didn’t receive the delivery” is rare

Copy Protection and Rights Management
Digital content can be copied Don’t worry about it Make copying very difficult container technology or license keys Make tracing the thief easy register each copy (fingerprint or watermark) Make paying for copies easy honest customers will use it

Electronic Data Interchange

EDI Inter-organizational exchange business documents
standardized electrical form directly between computer applications purchase orders invoices material releases easy and inexpensive and structured

Industries that use EDI
Automotive Retail Chemical Electronics Petroleum Metals Paper and Office products Still a relatively small percentage (about 100,000 companies)

Key Aspects of EDI Utilization of an electronic transmission medium (VAN) Use of structured formatted messages Relatively fast delivery of electronic documents (hours or minutes) Direct communication between applications (rather than just systems)

EDI costs Reaching a legal agreement (lawyers!)
Building and installing the EDI system Modifying and interfacing with the existing computer system Obtaining network services Testing and installation Reengineering of internal processes Training

EDI Costs Rate-of return analysis should be done Cost shifting
# transactions to amortize the cost effectively turnkey systems payment about 36 months Cost shifting dominant purchaser better economies of scale smaller companies have higher transaction cost Open architectures reducing cost

System Approach Single dedicated PC
Group of computer performing many related functions Individual modems or modem pool Server as the interface to outside other computers for business applications dialup with a ISDN or dedicated link

Layered Architecture of EDI
EDI semantic layer Application level services EDI Standard layer EDIFACT business form standards ANSI X12 business form standards EDI transport layer Electronic mail X.435, MIME Point to Point FTP, Telnet WWW HTTP Physical layer Dial up lines, Internet

Information flow without EDI
Buyer Seller Finance department Purchase request initiated in the organization Finance department Bill Payment Purchase department Paper based mailroom Paper based mailroom Sales department Order delivery Order confirm Inventory and warehousing Receiving department Shipping department Manufacturing department Product delivery

Information flow with EDI
Buyer Seller Finance department Purchase request initiated in the organization Finance department Billing details Payment details Purchase order delivery Purchase department EDI capable computer EDI capable computer Sales department Automated order confirmation Inventory and warehousing Receiving department Shipping department Manufacturing department Product delivery

EDI Process Network Vendor Buyer receive send send ack receive ack

EDI software Application software Message translator Routing manager
Communication handler Shrink wrapped software available that provides many EDI functions

Communication approach
Dial up is entry level Companies internal networks limit who you can interact with (VAN) Lots of competition between companies Internet is an appealing alternative

Open EDI Using the internet
Cost of transferring messages is cheaper on the internet More cost effective movement of large files supplement purchase orders with product descriptions, graphics, video clips, etc

EDI across the Internet
FTP login ID and password required for all trading partners directory names and files name agreement more secure less administration may not be able to handle large documents SMTP treats EDI as printable text (use MIME)

Challenges Internet security
use encryption and digital signatures Not all VANs have connection to the internet may not have staff/expertise to switch MIME formatted EDI headers cannot be interpreted by VANs SMTP only supports negative delivery notifications use functional acknowledgment transaction

Network Architecture

On-Line Services Internet Service Providers vBNS Backbone Internet Society Internet Registry Regional Network Internet Registrar

Regional Network Modem Modem Router Satellite link Internet Provider Network Access Point Regional Network T3 line Router Backbone Router Network Access Point Ethernet Network T1 line

Communications Network Architectures
THE OPEN SYSTEM INTERCONNECTION (OSI) MODEL Network User Network User Node B Logical Flow Node A Application Layer Transaction Services Provides application services, such as distributed database access and document interchange, to network users Transaction Services Presentation Layer Presentation Services Formats data for different presentation media and coordinates resource sharing Presentation Services Session Layer Data Flow Control Synchronizes flow between end-points, correlates exchanges and group related data into indivisible units Data Flow Control Transport Layer Transmission Control Paces data exchange to match end-point processing capacity and Enciphers user data, if needed security Transmission Control Network Layer Path Control Routes data in “packets” between source and destination and controls traffic and congestion in the network Path Control Data Link Layer Data Link Control Transmits data reliably between adjacent nodes all along any route Data Link Control Physical Layer Physical Control Connects adjacent nodes physically and electrically Physical Control Physical Flow

ISP Service Categories
Web Hosting Services Security Services Dial-up Internet Access Managed Router Services Wholesale transit Services Dedicated Internet Access Colocation Provider VPN Services

Basic Network Regardless of the size of the ISP network, basic components are the same access devices data forwarding network elements (routers) information servers

ISP Size Small ISPs Larger ISPs modem pools (access concentrator)
24 modems connected to a local exchange carrier (LEC) via a T1 or primary rate ISDN Larger ISPs add more Points of Presence (POP) increase density of current POP POP is a location where the service provider is allowed to install equipment may be owned by somebody else

Internet Components Regional Point of Presence Major Point of Presence
Residential Subscriber Backbone Modem Pool Router Routers Data Backbone

Routers Hardware and/or software that determines the next network point to forward a packet of data Connected to at least two network pathways Determines which pathway to route each information packet based on understanding of the state of the networks

Current Internet Network Architecture
Very High Speed Backbone (operated by MCI) Backbone Network Access Provider Washington (MFS) California (PacBell) Chicago (Ameritech) New York (Sprint) Internet Access Provider Sprint MCI AT&T AOL UUNet PSI Local Access Provider Local Providers Local Providers Local Providers Local Providers Local Providers Local Providers End users Home Customers Small Bsinesses Large Businesses Government

Internet Topology Home Users dial into a local access provider using a PC modem use twisted pair existing telephone lines relatively slow businesses may choose faster access ISDN (Integrated Digital Systems Network) T-1 lines (1.544 Mbps) T-3 lines (45 Mbps)

Internet Topology All lines routed to a local access provider
users switched through the direct connect access provider to the closest network access point (NAP) These access providers have proprietary, high-speed nationwide communication networks these are the local access points also called Points of Presence (POP) allow access to Internet with phone line

Internet Topology POPs necessary to reduce toll charges Established in major cities (local call for users) Modem pools and network interfaces convert analog dial-up signals from user into digital for more efficient transport to the backbone POPs connected by high speed telephone circuits to central hubs Hubs are connected to high-capacity network backbone physically connected to the Internet at geographically dispersed access points

Hardware in a POP Server Platform Networking Infrastructure
powerful system for multiple users (Sun Workstation) Networking Infrastructure routers, terminal servers, switches provides POP to the internet Leased telecommunication lines from a local telephone company

Hardware in a POP Modems
batch of modems to allow users to access the IAP racks of single or digital modems

Structure of a Point of Presence
National Independent Backbone Internet T3 T3 ATM Switch T1 connections to customers Fast ethernet T1 56K connections to customers 28.8 Kbps or ISDN connections ISDN terminal server Distribution router Analog modems Terminal Server Inside a typical point of presence USENET server 9.6, 14.4, 28.8 Kbps

Dial up Access Connectivity
Residential Subscriber Public Switched Telephone Network ISP Point of Presence (POP) Modem Internet Backbone Modem Router Voice Switch

Dial up Access POP Major Point of Presence Regional Point of Presences
Modem Router Web Cache Major Point of Presence Residential Subscriber Backbone Regional Point of Presences Router Voice Switch Web Cache Router Public Switched Telephone Network Residential Subscriber Modem Router Web Cache Backbone

ISP dial up POPS are similar
Access concentrator device that connects several modems into a single chassis Access concentrator connected to a colocated router across a LAN within the POP (ethernet hub) Router connected through telecom carrier to the ISPs IP transit provider (or upstream POP)

Digital Subscriber Access
xDSL asymmetric (most common) symmetric very high speed Typical deployment 1.5 Mbs from ISP to customer 128Kbs back channel Similar to dial up connectivity with modem or NIC DSL modems connect to PC with ethernet

Digital Subscriber Line Access Multiplexer
Modem ISP Point of Presence DSL Access Multiplexer Modem Router Residential Subscriber Internet Modem Voice Switch Residential Subscriber

Network Infrastructure for Electronic Commerce
The Internet Architecture World Wide Web Concept and Architecture Protocol Gateway interfaces Web extensions Intranet Extranet

Information Superhighway Infrastructure
I-way—the network infrastructure for electronic commerce Network Access Equipment Global Information Distribution Networks Local On-ramps Telecom-based infrastructure Cable TV-based infrastructure Consumer/ business premises equipment Backbone communications and satellite networks Wireless infrastructure Commercial on-line infrastructure

Internet Access Providers
Telco companies—long distance telephone companies who traditionally focus on large business users and are now moving into consumer access market (e.g. AT&T, MCI, Sprint) Cable companies—access providers for home users via cable modems. May bundle Internet with other services (e.g. Time Warner, TCI)

Online companies—companies that package a range of information and Internet access for a monthly fee via local telephone number (e.g. America Online, CompuServe, Microsoft Network) National independents—for-profit entities that offer connectivity services nationwide or internationally

Targets business users and other smaller providers who do not have resources to provide widespread coverage (e.g. PSI, UUNET) Regional—nonprofit university affiliated enterprises that forming strategic alliances with larger players (e.g. SURAnet, NEARnet).

Local service providers—small businesses operate in one physical location and offer services within a single metropolitan area.

Internet Architectures