ISE316ISE316E-CommerceE-Commerce

History and TrendsHistory and Trends

Daniel L. Silver 2

OutlineOutline

History of E-Commerce/E-BusinessHistory of E-Commerce/E-Business Effects of E-Commerce/E-BusinessEffects of E-Commerce/E-Business Trends effecting E-Commerce/E-BusinessTrends effecting E-Commerce/E-Business The Rules of E-BusinessThe Rules of E-Business Constructing the E-Business ArchitectureConstructing the E-Business Architecture

Daniel L. Silver 3

History of E-CommerceHistory of E-Commerce

ARPAnet created in 1969 (evolved to TCP/IP)ARPAnet created in 1969 (evolved to TCP/IP) Personal computers exploded in 1981Personal computers exploded in 1981

– Processing power increases, cost decreases Processing power increases, cost decreases

LANs and WANs became requirements in 1980sLANs and WANs became requirements in 1980s The Internet was of significant size by mid 1980sThe Internet was of significant size by mid 1980s WWW started in 1990 with HTTP and HTMLWWW started in 1990 with HTTP and HTML General browser technology created in 1993 (used General browser technology created in 1993 (used

HTTP, ftp, gopher, and .gif and .jpg images)HTTP, ftp, gopher, and .gif and .jpg images) Search engines soon followed (Search engines soon followed (AltaVista, LycosAltaVista, Lycos))

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History of E-CommerceHistory of E-Commerce

Businesses transformed Internet technologies into Businesses transformed Internet technologies into intranets, extranets to solve integration problemsintranets, extranets to solve integration problems

Object Oriented Programming (Java) and the Web provide Object Oriented Programming (Java) and the Web provide new client-server paradigmnew client-server paradigm

Audio (.wav), video (.mpg), animation (Flash) standardsAudio (.wav), video (.mpg), animation (Flash) standards Broadcast and Push technologies, e.g. PointCastBroadcast and Push technologies, e.g. PointCast Portals, intelligent web agents, personalizationPortals, intelligent web agents, personalization General telecom (audio, video) over IPGeneral telecom (audio, video) over IP Wireless Internet access (cell phones and PDAs) … Wireless Internet access (cell phones and PDAs) …

pervasive computingpervasive computing

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Key Technologies Enabling Key Technologies Enabling E-Commerce EvolutionE-Commerce Evolution

Decreasing cost of increasingly more powerful Decreasing cost of increasingly more powerful hardware – GHz processors, Mb nets,GB driveshardware – GHz processors, Mb nets,GB drives

Integration of voice, data, image, video dataIntegration of voice, data, image, video data Distributed database methodsDistributed database methods Graphical user interfaces (GUI)Graphical user interfaces (GUI) Communications (TCP/IP, HTTP) protocols and Communications (TCP/IP, HTTP) protocols and

content/ publication (HTML, XML) standardscontent/ publication (HTML, XML) standards Object oriented methods (Java, J2EE, ORB)Object oriented methods (Java, J2EE, ORB) Lightweight electronics for mobile IT (Palm, RIM, Lightweight electronics for mobile IT (Palm, RIM,

Pocket PC)Pocket PC)

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Business Evolution on WebBusiness Evolution on Web

Publishing

Time or Maturity

Fun

ctio

nali

ty

Interactivity

Transactions

Processes

Static web pages

Dynamic web pages

Web-enabled applicatons

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Effects of E-CommerceEffects of E-Commerce

SpamSpam Bandwidth load shiftBandwidth load shift Work load time shiftWork load time shift Work place shiftWork place shift Play time shiftPlay time shift Growth of on-line “virtual communities”Growth of on-line “virtual communities” Privacy challenges / new privacy productsPrivacy challenges / new privacy products

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Effects of E-CommerceEffects of E-Commerce Liberalization of pornographyLiberalization of pornography Promises of wealth creation beyond your wildest Promises of wealth creation beyond your wildest

dreams … seemed unbelievable … well it was!!dreams … seemed unbelievable … well it was!! Reducing TV consumption?Reducing TV consumption? Dynamic and free contentDynamic and free content Uncharted legal issuesUncharted legal issues Reinforcing media / converging mediaReinforcing media / converging media Access to commodities such as prescription drugs Access to commodities such as prescription drugs

without normal levels of controlwithout normal levels of control

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Effects of E-commerceEffects of E-commerce Credit card fraudCredit card fraud Tax avoidanceTax avoidance Many new copyright issuesMany new copyright issues Free access to informationFree access to information

– How to save a life (CPR, FirstAid, choking)How to save a life (CPR, FirstAid, choking)– How to build a bomb, or counterfeiting instructionsHow to build a bomb, or counterfeiting instructions

Accuracy of information sources in questionAccuracy of information sources in question Hacking and computer viruses Hacking and computer viruses Shifting barriers of competitionShifting barriers of competition Disintermediation and reintermediationDisintermediation and reintermediation

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Where has E-Commerce Had the Where has E-Commerce Had the Greatest Impacts?Greatest Impacts?

Postal servicePostal service Real estate Real estate CommunicationsCommunications Radio / TVRadio / TV Finance (banks)Finance (banks) EntertainmentEntertainment Travel agentsTravel agents Stock brokersStock brokers

What do all these Businesses have

in common?

Information = $Time = $Client self-service is acceptable

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Pre- dot.com CrashPre- dot.com Crash8 Rules of E-Business8 Rules of E-Business

1.1. Technology is the cause and driver, it is Technology is the cause and driver, it is no longer an after thoughtno longer an after thought

2.2. Information collection, integration and Information collection, integration and timely dissemination is the businesstimely dissemination is the business

3.3. Outdated business processes must go or Outdated business processes must go or your business will dieyour business will die

4.4. Create flexible outsourcing that excites Create flexible outsourcing that excites customerscustomers

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Pre- dot.com Crash Pre- dot.com Crash 8 Rules of E-Business8 Rules of E-Business

5.5. E-Commerce means: “the cheapest”, “the E-Commerce means: “the cheapest”, “the most familiar” or “the best”most familiar” or “the best”

6.6. Enhance the entire experience around the Enhance the entire experience around the product (selection, order, receipt, service)product (selection, order, receipt, service)

7.7. Promote reconfigurable business models Promote reconfigurable business models to meet customer needsto meet customer needs

8.8. The tough task: Align business strategies The tough task: Align business strategies and processes fast, right, and all at onceand processes fast, right, and all at once

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Before the dot.com CrashBefore the dot.com Crash

1995-2000 $125B in financial capital sunk into the 1995-2000 $125B in financial capital sunk into the new dot.com companies from venture capitalists new dot.com companies from venture capitalists and later mutual fund holdersand later mutual fund holders

The vision was an easily accessible world-wide The vision was an easily accessible world-wide market that was self-regulatedmarket that was self-regulated

The extraordinary profits would go to first movers The extraordinary profits would go to first movers – the new – the new intermediariesintermediaries

The first E-Commerce period was driven by gold-The first E-Commerce period was driven by gold-rush feverrush fever

Few real objectives, few business plans, few Few real objectives, few business plans, few winners winners

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Reasons for the dot.com CrashReasons for the dot.com Crash

Corporate America was rebuilding their Corporate America was rebuilding their internal business systems in 1999-2000, internal business systems in 1999-2000, when this completed – Crash!when this completed – Crash!

Huge competition in the telecomm. Industry Huge competition in the telecomm. Industry caused revenue to – Crash!caused revenue to – Crash!

Xmas 1999 showed that E-Comm shopping Xmas 1999 showed that E-Comm shopping was not really that popular – Crash! was not really that popular – Crash!

Re-valuations of IT companies (dot.coms) – Re-valuations of IT companies (dot.coms) – Crash!Crash!

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Lesson from the dot.com CrashLesson from the dot.com Crash

From technology perspective – “E-” !From technology perspective – “E-” !– Ramp-up from 1000’s to 1000000’s of users Ramp-up from 1000’s to 1000000’s of users – A solid technological base (DC,DP,DB)A solid technological base (DC,DP,DB)

From business perspective – “-Commerce”?From business perspective – “-Commerce”?– Only ~ 10% of dot.coms survivedOnly ~ 10% of dot.coms survived

» Remember eToys.com, Furniture.comRemember eToys.com, Furniture.com

– Yet B2C sales growing at ~50% per yearYet B2C sales growing at ~50% per year– Users have learned to use the web for Users have learned to use the web for

information about products andservicesinformation about products andservices

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Trends effecting Trends effecting E-Commerce/E-BusinessE-Commerce/E-Business

Consumer TrendsConsumer Trends– Speed of Service, Self-Service (empowerment)Speed of Service, Self-Service (empowerment)– Integrated solutions, not piecemeal productsIntegrated solutions, not piecemeal products

Service/Process TrendsService/Process Trends– Convergence of sales and serviceConvergence of sales and service– Long-term Customer Relationship Management Long-term Customer Relationship Management – Flexible fulfillment and service deliveryFlexible fulfillment and service delivery

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Trends effecting Trends effecting E-Commerce/E-BusinessE-Commerce/E-Business

Organizational TrendsOrganizational Trends– Brand not capital: contract JIT manufacturingBrand not capital: contract JIT manufacturing– Retain the core, outsource the restRetain the core, outsource the rest– Increase process visibility Increase process visibility (to customers, suppliers)(to customers, suppliers)

– Employee retention, cont. learning/innovationEmployee retention, cont. learning/innovation Technology Use TrendsTechnology Use Trends

– Enterprise wide applications, use middleware for Enterprise wide applications, use middleware for integrationintegration

– Integrate voice, data, video comm. channelsIntegrate voice, data, video comm. channels– Handheld and wireless – an explosion !Handheld and wireless – an explosion !

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Five Major Predictions for the Five Major Predictions for the E-Commerce FutureE-Commerce Future

1.1. E-Commerce technology take-up will continue to E-Commerce technology take-up will continue to grow by ~50% until about ~2006grow by ~50% until about ~2006

2.2. E-Commerce prices will rise to cover real costs E-Commerce prices will rise to cover real costs of doing business on the webof doing business on the web

3.3. E-Commerce profits will rise to meet levels of E-Commerce profits will rise to meet levels of bricks and mortar storesbricks and mortar stores

4.4. Major players will become the experienced Major players will become the experienced Fortune 500 companies who have been watching Fortune 500 companies who have been watching (eg. WalMart, Sears, JC Penny, the Gap)(eg. WalMart, Sears, JC Penny, the Gap)

5.5. The number of successful dot.coms will further The number of successful dot.coms will further reduce and adopt “clicks and bricks “ strategies reduce and adopt “clicks and bricks “ strategies

Daniel L. Silver 19

Constructing the E-Business Constructing the E-Business ArchitectureArchitecture

EnterpriseResourcePlanning

SupplyChain

Management

CustomerRelationshipManagement

SellingChain

Management

ProcurementManagement

KnowledgeManagement

The New Era of Cross-Functional The New Era of Cross-Functional Integrated ApplicationsIntegrated Applications

Middleware

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Constructing the E-Business Constructing the E-Business ArchitectureArchitecture

The New Era of Cross-Functional Integrated The New Era of Cross-Functional Integrated ApplicationsApplications– CRM = Customer Relationship ManagementCRM = Customer Relationship Management

– ERP = Enterprise Resource PlanningERP = Enterprise Resource Planning

– SupCM = Supply Chain ManagementSupCM = Supply Chain Management

– SellCM = Selling Chain ManagementSellCM = Selling Chain Management

– PM = Procurement (Operational Resource) PM = Procurement (Operational Resource) ManagementManagement

– Middleware = Integration ApplicationsMiddleware = Integration Applications

– KM = Knowledge Management (DW/Analytics)KM = Knowledge Management (DW/Analytics)

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Constructing the E-Business Constructing the E-Business ArchitectureArchitecture

CRM = Customer Relationship CRM = Customer Relationship ManagementManagement– Marketing, Sales, ServiceMarketing, Sales, Service

ERP = Enterprise Resource PlanningERP = Enterprise Resource Planning– Forecasting and PlanningForecasting and Planning– Purchasing and Material ManagementPurchasing and Material Management– Inventory ManagementInventory Management– Finished Porduct distributionFinished Porduct distribution– Accounting and FinanceAccounting and Finance

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Constructing the E-Business Constructing the E-Business ArchitectureArchitecture

SupCM = Supply Chain ManagementSupCM = Supply Chain Management– Market demandMarket demand

– Resource and capacity constraintsResource and capacity constraints

– Real-time schedulingReal-time scheduling

SellCM = Selling Chain ManagementSellCM = Selling Chain Management– Product CustomizationProduct Customization

– Pricing, Contract and Commission ManagementPricing, Contract and Commission Management

– Quote and Proposal GenerationQuote and Proposal Generation

– Promotions ManagementPromotions Management

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Constructing the E-Business Constructing the E-Business ArchitectureArchitecture

PM = Procurement ManagementPM = Procurement Management– Office Supplies, Business Travel, Entertainment, Office Supplies, Business Travel, Entertainment,

Service contracting, IT h/w, s/w and networkingService contracting, IT h/w, s/w and networking

KM = Knowledge Management (DW/Analytics)KM = Knowledge Management (DW/Analytics)– Data WarehousingData Warehousing

– Business Analytics (data mining)Business Analytics (data mining)

– Executive Info Systems, Decision Support Systems Executive Info Systems, Decision Support Systems

Middleware = Integration ApplicationsMiddleware = Integration Applications– e.g. SAP (ERP) to SAS (KM)e.g. SAP (ERP) to SAS (KM)

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The E-Business ArchitectureThe E-Business Architecture

SupCM

SellCM

Partners, Suppliers

Customers, Distributors

CRM

ERP

PM

KM

Middleware

Employees Stakeholders