models of e-business ecis560: information systems and e-commerce
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Models of E-Business
ECIS560: Information Systems and E-Commerce
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Consider this…
World-wide B2B ecommerce will reach $8.5 trillion by 2005Universities are offering MBA concentration in E-commerceInternet is growing faster than any other medium in history
Radio took 38 years to have 50 million listenersTV took 13 years to reach 50 million viewersThe Web reached 50 million users in 4 years.
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Properties of the Internet
Mediating technologyConnects people/businesses
UniversalityBoth enlarges and shrinks the world
Network externalitiesMetcalfe’s law
Distribution channelReplacement vs. extension effect
Time ModeratorInformation Asymmetry ShrinkerInfinite Virtual CapacityLow Cost Standard
Paid for by the US governmentCreative destroyer
New industries, transforming existing industriesTransaction Cost Reducer
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5-Cs
Developing and delivering value to customers involves several activities that rely on information exchange
CoordinationCommerceCommunityContentCommunication
The Internet has had tremendous impacts on all five Cs.
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Business Models
Four decisions/choices/issuesValue proposition or value cluster
Online customization allows targeting multiple segments
Marketspace offering Product, service, information, or combination
Unique, defendable resource system
A financial model
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1. The Value Cluster
Multiple rather than singular propositionTechnology allows focus on several segments and several benefits
Must identifyTarget Segment
Market size and growth, unmet needs, weak competition
Focal Customer benefitsOne or more benefits? Is there product commoditization on the web?
Differentiating factorsWhat is it about an online company that makes its offerings significantly better than competition?
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2. Marketspace Offerings
Three tasks for senior managementIdentify scope of offering
Category-specific (www.squashgear.com)Cross-category (www.thesportsauthority.com)Metamarkets (“customers tend to think in terms of activities while firms tend to think in terms of products” – Sawhney, 2001)
– Companies sometimes called metamediaries (www.babycenter.com)
Identify customer decision processMap offering to decision process
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3. Defendable System Resource
Choice of actions and assets used to deliver value cluster
Identify core benefits in value clusterIdentify capabilities needed to provide each benefitLink resources to each benefitIdentify degree to which firm can deliver capabilityIdentify partners who can complete capabilities
Stress in online world is on strategic partnershipsCan include
– portal agreements (AOL)– anchor-tenant agreements (major provider of service for retailers)– or promotion agreements (example, frequent flier miles with purchase)
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4. Financial Models
Revenue ModelsAdvertising, product sales, transaction fee, subscription
Shareholder ValueCompany plans to increase profits over timeExamples
Company-derived value creation– Best information, widest assortment,lowest prices, most personalized,
best experience, broadest user network…
User- and company-derived value creation– Metamarket switchboards (brings buyers and sellers together based
on common activity)– Traditional and Reverse Auctions– Category Switchboard
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Other Taxonomies of e-Business Models (Rappa and Timmers 2000)
BrokerageBring buyers and sellers togetherCharge transaction fee
Sub-typesBuy/sell fulfillmentMarket exchangeBuyer aggregatorVirtual mallMetamediaryAuction brokerReverse auctionDistributor
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More models
AdvertisingHas a site with useful content
Generates revenues through banners, buttons, etc.
Sub-typesGeneralized portal
Personalized portal
Specialized portal
Free model
Bargain discounter
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More models
InfomediaryCollects valuable information on consumers and then sells it to firms (data mining)
Can also collect information about firms and sell to consumers
Sub-typesRecommender system
Registration model
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More models
MerchantSell goods and services over the InternetMay be through list prices or auction
ManufacturingManufacturers try to bypass intermediaries and go directly to consumer
Affiliate Merchant has affiliates that have a click-through to merchant siteAffiliate paid a fee for every “click-through” that results in a sale
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More models
CommunityBased on community loyaltyGood market target
SubscriptionSpecialized content for a priceOften mixed with free content
UtilityFirms pay as they goOnly pay for services consumed
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Models of B2B transactions
Company-CentricSell-Side (one-to-many)Buy-Side (many-to-many)
E-Marketplace (many-to-many)Vertical exchangesHorizontal exchanges
E-Commerce ServicesE-infrastructure (consultants, standards developers)Web Hosting and SecurityE-process (payments, SC integration, etc.)E-markets (sales, advertisement, etc,)E-content (catalog management)E-service (CRM, directory services)
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Company-Centric B2B : Sell Side Model
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Company-Centric B2B : Buy Side Model
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E-Marketplace (many-to-many)
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Sell Side vs. Buy Side: Some transaction models
Sell SideForward auction
Sell from own site (Covisint)
Sell from intermediary (fairmarket.com)
Buy SideReverse Auction (shoppoint.co.kr)
Aggregation of supplier catalogs
Group purchasing plan (internal – GE, vs. external aggregations – mobshop.com)
Electronic Bartering
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Impact of B2B on intermediaries
DisintermediationElimination of retailer or distributor
ReintermediationChanging the role of the intermediary
HypermediationFew organizations able to sell directly to consumer
People want broad product variety to choose from
All types of intermediaries involved Content providers, affiliate sites, search engines, portals, etc.
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Advantages of B2B?
Reduced Purchasing Costs (through process integration)
Increased market efficiency (increased market base with lower acquisition costs)
Greater market intelligence (statistical analysis of market activity)
Decreased inventory levels
Collaborative platform for buyers and sellers
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Online Transaction Security
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What is network security
DefinitionProtection against accidental or intentional loss, destruction, or misuse of systems
Threats to securityany situation or event, whether intentional or accidental, that will adversely affect a system and consequently, the organization
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Security Precautions
Restrict user views
Authorization rules
User-defined procedures
Encryption procedures
Authentication schemes
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Security Issues for Transactions Over the Internet
PrivacyParties assured details of transactions kept confidential
IntegrityTransaction details cannot be altered without detection
AuthenticityParties to the transaction are who they say they are
Non-repudiationNo illegal backing out of a transaction
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Security Measures for the Internet Age
Encryption
Digital Signatures
Digital Certificates
Secure Electronic Transactions (SET)
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Encryption
Method by which email, data files are scrambled to make them secure
Four parts of cryptographyPlaintext, ciphertext, encryption algorithm, key
Involves use of digital keys to lock or unlock the data
Different keys produce different ciphertext with the same algorithm
Uses both public and private keysReceivers make available a public key that anyone can use
Only the receiver has the key to unlock the message
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Encryption Standards
Data Encryption Standard (DES)Uses 56 bit keyBoth sender and receiver must know the keyOnly took three days to crack in 1998 (see www. distributed.net)
Triple DES (3DES)Encrypt the DES message three times
Advanced Encryption Standard (AES)Successor to the 3DES standard (128 bit)US Government has chosen Belgian Algorithm called Rijndael
Pretty Good Privacy (PGP)Product that uses the DES but is 128 bitTwo keys – public and private
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Key sizes and time
Key Size in bits
No. Possible Keys Time to check all keys (1.6 million/sec)
Time to check all keys (10 million/sec)
40 1,099,511,627,776 8 days 109 seconds
56 72,057,594,037,927,900 1427 years 83 days
64 18,446,744,073,709,600,000
365,388 years 58.5 years
128 3.42082^38 6.73^24 years 1.0728^21 years
Source: Howard, 2000)
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Public Key Infrastructure
Involves hardware, software, data transport mechanism, smart cards, governing policies and protocols
Requires services ofRegistration Authority
Certificate Authority
Data Repositories
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Private vs. Public Key Encryption
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Digital Signatures
Consists of two pieces of information the data being transmitted
The private key of the individual or organization sending the data
The private key acts as a digital signature to verify that the data is from the stated source
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Digital Signatures: An Example
I. Create email message with contract in itII. Use special software to hash messageIII. Use private key to encrypt message (your
digital signature)IV. Email message and encrypted hash to
other partyV. Company uses same software to hash
messageVI. Company uses public key to decrypt
message hash sent to them – if it matches their hash, it is verified to be from you
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Digital Signatures, contd.
As of October 1, 2000, digital signatures have same legal standing as ink signatures
By the Electronic Signatures in Global and National
Commerce Act
Act does not specify that PKI should be used
Companies exploring other technologiesIllumin.com (digital handshaking)
Signonline.com (digital signatures and e-docs)
Litronics (biometrics)
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Digital Certificates (DC)
An attachment to an encrypted message
Purpose is to verify the sender of a message is who they say they are
Sender wishing to transmit an encrypted message applies for a DC from a certificate authority (CA)
Certificate contains (IETF X.509 v. 3.0)Sender’s name
Validity period
Sender’s public key
Hashed contents of certificate signed with CA’s private key
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Using a DC
i. Individuals/companies apply for DC to CA by sending public key and identifying information
ii. CA verifies information and issues DC containing applicant's public key and identifying information
iii. If someone wants to send applicant a messagei. Sender requests recipient to send their DCii. Sender decrypts DC using CA’s public keyiii. Now confident of recipient’s identity, sender uses recipients
enclosed public key to encrypt message
iv. Sender only needs to know CA’s public key in advance
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Non-Computer based controls
establishing a security policy and contingency plansecure positioning of equipmentsecure data and softwareescrow agreements (source code held by 3rd party)building controlsEmergency arrangements (cold, warm and hot sites)
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I-Way Infrastructure (telecom, cable, etc.)
Multimedia content
Messaging and Information Distribution
Common business services (eg. security)
Apps: PC banking, Advt., video-on-demand
An Electronic Commerce FrameworkAn Electronic Commerce Framework
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Some Problems with EC
Pornography
Privacy
Censorship
Haves and have-nots
Neo-luddites
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Other Issues and RisksTransborder data flowsElectronic fraudHacker attacksCopyright issuesLegal questions
validity of electronic signaturesliabilitylegality of electronic contracts
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Issues....
Public Policyrole of governmentcensorshipregulations
Net potatoesQuality of contentGetting lost in cyberspace (info overload)Overload of networks