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EBUS500.1 Week One
Lecture
Introduction
We describe electronic commerce as communication,
or information transfer, between two or more entities via electronic methods.
Considerations to give when setting up electronic commerce in an organization
include: the nature of the business and its products and services; and, the
needs and habits of the buyer. Ordinary details such as: availability of the
enabling technology; personnel and equipment to perform various functions; and,
system dependability; significantly influence the organization's chosen strategy
and tactics.
Today a variety of options are available for
establishing an electronic commerce system. Those options range from simple web
sites that offer the equivalent of a roadside billboard as an advertisement for
goods and services to systems that allow for more complex transactions
including: payments/billing; order tracking; product or service delivery;
inventory and production schedules; and, customer training and education. As
electronic commerce evolves over time, industry and government groups set
standards and protocols for both the computer systems and personnel to handle
various aspects of the business problem.
Implementation and
Execution
Depending upon the business needs, the organization
may choose from the various components that are available for establishing the
electronic commerce system. In the early 1980's, before the Internet became
commonly available, a corporation I worked for set up a system that simply
connected our nationwide sales force via email. While the system was freeform
and didn't control the content of the email messages, it was still highly
successful for several reasons.
First, it eliminated the necessity for the sales
force to play "phone-tag" in trying to communicate with fellow salespersons.
That gave the personnel more time to spend with the customer, complete
paperwork, and even time to pursue new customer leads and build sales. Second,
it improved the communication itself as to accuracy. This company dealt with
floor coverings for commercial and institutional use, and the sales force and
customer needed detailed information to consummate the sale. Transfer of
important information such as building dimensions, product specifications and
variations, was accomplished without loss of accuracy or
timeliness.
Before the use of that email system that same
information would have to be committed to paper or via voice to other office
personnel. In the later case, the information would often have to be
confirmed and possibly corrected due to verbal miss-communication or simple
miss-transcription of written information. The
email system enabled more timely and accurate communication of complex
information within the organization.
However, in setting up the system, the internal
corporate culture was resistant to change. At that time email was a new
invention, and the personnel in charge of the company's data processing center
assured management that the sales force probably could not cope with the
technology. In the end that was not true, in part because the email system was
included as an item in a comprehensive training program for the sales personnel.
The entire sales team called the system the "greatest thing since sliced bread,"
and the proof was a dramatic doubling of sales orders over a short span of time
through vastly improved internal communications.
Over the intervening years, we have seen the
addition of the Internet and a dramatic lowering of associated costs for such
systems. To put this into perspective, the equipment and service costs for that
early email system were such that only medium to large size corporations could
reasonably consider such solutions. Our modems communicated at 300 baud or less
(one-hundredth of the slowest connection speed commonly available today over
regular phone lines), and usage was not "unlimited." When users logged onto the
system, every second counted. "Always-on" connections were either not available
or affordable, and users certainly didn't take a coffee break during a
session.
A more recent example, highlighting cost and
accuracy factors, involves automotive parts supply houses and their primary
customers - small automotive mechanic shops. The supply houses provide the shops
with computers and connections to the supply houses internal systems as an
extranet. The time savings alone pay for the system by allowing both parties to
reduce the time spent on the phone looking for information and placing orders.
The supply house can reduce the staffing requirements for the order desk
and assign those employees to other tasks such as inventory management and
delivery. The mechanic's shop benefits by faster delivery of the correct parts
and less time spent waiting for an order clerk to thumb through paper catalogs
as in the past.
The common threads throughout these examples of
electronic commerce implementation are reduction of the time required to
complete the business transaction and improved communications accuracy. By
virtue of the lowered costs of entry for such systems, both in equipment
requirements and communications infrastructure, such solutions are available not
only to medium and large scale corporations, but also to small businesses and
individuals. Some examples of this democratization include independent
consultants, artists, musicians, and other small-business entrepreneurs.
Likewise, governments can provide services to citizens and advertise themselves
for economic development in ways that were prohibitively expensive or
technically unfeasible until just a few years ago.
The Impacts of Technical
Innovation
The constant innovations on the technical front
drive changes in human resource requirements and business processes of the
company. After all, since the discovery of the electron in the 1800's (the
physicist George J. Stoney, Jr. did not coin the term "electron" until 1891,
(William Collins and The World Publishing Company, 450) ), the
innovations of the telephone, vacuum tube, radio, radar, computers, television,
transistor, integrated circuits, personal computers, cell phones, CDs,
DVDs, fiber optics, and wireless devices and services, have been introduced to
society at an ever increasing rate, with the time between each becoming much
shorter. Today we observe advances in the fields of nanotechnology,
biotechnology, and optical computing as a result of that long list of previous
innovations.
Forecasting the future in this environment is
exceedingly difficult at best. Take for example the much cited forecast by
Thomas Watson of International Business Machines that there would be a world
market for, at most, four or five computers! It didn't take too many years to
make it obvious that his forecast was considerably inaccurate.
In electronic commerce we are currently at the
first stages of fiber optic deployment and multimedia content distribution over
the Internet. Other innovations to the existing equipment, such as Intel's
recent announcement (Neel, Dan, 2002,
February 13; Kennedy, Randall C., 2002, February 25) of a software-based
"virtual machine" application called "hyperthreading" that makes the computer's
operating system believe that the system contains multiple CPUs (processors)
while it physically only contains one CPU, have a dramatic potential impact.
With Intel's innovation, the resulting throughput on certain operations is
increased by 40 to 50 percent depending upon the actual programmed process.
Similar innovations have resulted in the physically small yet large capacity
data disks that can be found in laptop computers, digital cameras, and other
modern electronic devices. Beyond the technical marvel, Intel's hyperthreading
has a noteworthy impact on software licensing in cases where the license is
granted on a "per CPU" basis (Kennedy,
Randall C., 2002, February 25).
While those technical innovations primarily drive
the cost and dependability of the equipment, they also drive change in the
underlying business processes used by any organization. Training of employees,
for installation and maintenance and general usage, is an important factor for
the company's internal staff and for the company's customers. Other
infrastructure factors external to both the company and its customers, such as
the reliability of electric power and transportation facilities, must also be
considered. Examples of this include the power crisis experienced in 2001 with
rolling blackouts wreaking havoc on operations schedules and
availability.
To exemplify those issues, consider the following
two cases.
With the proliferation of new area codes in the
telephone system, imagine the surprise to the companies and customers when,
suddenly, without warning, phone calls between certain major metropolitan areas
stopped working. The reason? Personnel in the telephone companies were unaware
that someone had to manually update the phone systems database to recognize the
new area code. That particular item either had been left off or ignored on the
individual's job description.
External factors defeated the purpose of
just-in-time manufacturing when the highway system serving an automotive
manufacturing facility was blocked. The trucks carrying supplies and parts
necessary for the operation could not physically get to the plant. That event
was followed with a threat from the company to sue the municipality for economic
loss estimated at $50,000 per hour of lost production.
While those types of events may be uncommon, they
still deserve attention in the planning of strategy and tactics used in both
electronic and traditional methods of commerce.
In electronic commerce specifically, we must make
considerations for the customers' facilities and for security of communications.
If customers have low-speed modem connections, as compared with high-speed DSL,
cable, satellite, or T1/T2 connections, the site should be designed to reduce
the required data transfer between user interactions. If a page from the site
takes a "long" time to be transferred, one may face losing the customer for
psychological reasons as well as for technical failures such as noise on the
phone line and resultant broken communications.
This is one of my favorite Internet web site
complaints - when visiting a site with several files to be downloaded and saved,
the site is designed so that one has to manually click on the various links for
each item, rather than clicking on just a "download-it-all-at-once" type link.
The impact is that I waste time giving multiple commands, one for each
downloaded item, rather than sending one command and letting the machine finish
the job while I go on to more productive labors. While we may apply software
agents on the client end to this type of problem, the site's design can make
this less of an issue by examining customer needs in greater
detail.
If the information is personal or proprietary in
content, one must consider the potential economic loss should someone intercept
the data transmission. The security concern also extends to the
accuracy/reliability of the information transferred depending upon the business
process.
Summary
The principal impacts of economic commerce on
organizations include timeliness, system reliability/dependability, training and
education issues, and the resultant costs and benefits. The strategic planning
for such systems should include controllable internal and external events, and
for uncontrollable external events and potential technological changes. Nothing
exemplifies those statements more than the much discussed "dot bomb" which saw
many electronic commerce organizations fail due to misdirected strategic
planning and/or implementation.
Over the next five workshops, we will examine those
issues in greater detail. Workshop Two will examine electronic commerce
infrastructure and the use of intranet and extranet networks in the
organization. Please be sure to read Chapters 7 and 11 in your Electronic
Commerce text.