Internet applicationsE-commerce [Archives:2003/675/Education]

October 9 2003

Najeeb Yahya
NCC Education – Yemen

The term electronic commerce has only been around since the early to mid-1990s. And since then it became difficult to avoid as it springs up all over the Internet, on television advertising, and in our newspapers. So what is creating all the fuss?
These days it is all too common to see electronic commerce (or Ecommerce as it is often written) dismissed as 'buying goods over the Internet with a credit card'. However, this is just the retail front-end of Ecommerce that the consumer experiences. In reality, E-commerce comprises a host of techniques designed to make businesses more efficient, competitive and even collaborative.
These have been brought together to provide companies with a suite of methods which, properly managed, can enable them to:
– improve the way in which they run their businesses;
– improve relationships with trading partners;
– Expand their businesses, either globally or into new markets.
The Automotive Industry Action Group in North America defines Ecommerce as:
'The application of advanced information technology to increase the effectiveness of the business relationships between trading partners.'
A variation used by the eCommerce Innovation Centre at Cardiff University, defines it as: 'the enablement of a business vision supported by advanced information technology improve efficiency and effectiveness within the trading process'.
Such broad definitions are struggling to describe the use of a variety of trading techniques which have been classified together as E-commerce, but which may be used to provide a whole host of differing business solutions. In the end these solutions depend on the type of business, the size of business, and the vision of the employees or consultants.
We already know that E-commerce is about using data for commercial purposes by transmitting the data electronically between computer systems in a standard format. But what are the key drivers behind the major growth that we are now seeing in E-commerce systems and applications? Well over the past 20 years computer hardware has become much cheaper. Operating Systems and, particularly, the software that runs on them, have become more powerful and (arguably) more user-friendly, providing a wider range of solutions to the business market. At the same time, communication options have diversified and improved.
As a result, various industry sectors began to see the potential of linking their computer systems either directly or via communications networks. Once such links were in place, then it was a natural progression to begin exchanging information between trading partners. The requirement for some sort of structure and standardization to these exchanges of business information was recognized, hence the development of Electronic Data Interchange (EDI).
We then saw the development and tremendous growth of the Internet as a business tool, with few companies not able to identify specific business benefits that it could deliver. The sorts of questions that organizations were being asked in relation to how they might benefit from the use of the Internet included:
– Do you have business partners and trading partners overseas?
– Do you make use of faxes and international phone calls?
– Do you need to find market information regularly?
– Do you travel regularly to business meetings by plane or train?
– Do you need to keep in touch with company news?

Positive answers to these types of questions pushed organizations into using the Internet for e-mail and access to the World Wide Web. The growth in business use was then mirrored by the explosion in the number of Internet users within the home, providing a vast potential market for
the many business-to-consumer services that are now emerging.

Initially the growth of E-commerce practices was bound to be slow. A number of forward-thinking companies pioneered various techniques for transferring data in formats that enabled it to be processed on receipt. In a sense, it was an act of blind faith, and much of the work that was done laid the foundations for other companies.
At this time the terms E-commerce or EDI did not exist, but that is what companies were trying to achieve. The most important realization was that common data formats were needed for such transfers to work between communities of traders. This led to the creation of standards bodies in Europe and the US, and saw the co-operation of industry groups in defining message requirements. A number of pilots were set up, not all of which were successful in trading terms, but which helped to elevate the subject in public awareness. Two of the better known ones were in the shipping industry and were known as DISH and SHIPNET. A number of port community
systems were created across Europe. Felixstowe, Southampton, Rotterdam and Amsterdam all set up import/export systems which are still in use.
During the 1980s, a number of communications companies introduced Value Added Network Services (VANs) to provide secure communications channels for business usage. The VANs' awareness raising activities, alongside work being done by the standards bodies, helped to start build communities of users in a variety of business sectors, such as the retail industry. These particular communities could grow rapidly as the main ones, such as major supermarkets and shopping chains, could make EDI capability (specifically the ability to receive electronic orders) a prerequisite of selecting a supplier. The suppliers needed the business and had to
Smaller VANs have emerged to cater for the requirements of specific sectors, such as education. The airline industry, freight forwarding community and shipping community have all, at some stage, created networks for transmission of EDI and E-mail data.

Slower than Expected Growth
By the end of the 1980s there were high expectations for EDI, and analysts repeatedly made predictions of unprecedented growth. It was widely agreed that only one per cent of potential users had implemented EDI and the number of users was predicted to double every year. It was said that no-one could stay in business without EDI. For some reason, though, the growth never matched expectations. The new business 'revolution' was only taking off at a modest pace. There are a number of reasons for this, but the most often cited is that international standards have taken a long time to be developed to a level where they match business requirements. More practical reasons were also to blame. For a start, the process was too complicated for many would be users. Although there were some off the-shelf EDI packages, integrating them with in-house systems (such as accounts) could prove very expensive. As a result, those who did invest in EDI did not always gain benefits. A large retail company could benefit by purchasing from its (multifold) suppliers, but this does not always benefit those suppliers. Unless they have integrated their EDI application and their order processing system, then they will probably have printed out the orders for processing. Someone in that position was unlikely to be introducing EDI to their own suppliers further down the supply chain. By the early 1990s, EDI had reached a respectable level of awareness among businesses. There were a few newsletters and magazines dedicated to it, conferences and exhibitions, the odd article in a national paper. X.400, another internationally agreed standard for the exchange of E-mail (and other data types), had a similar (perhaps lower) level of publicity. Then came the Internet.

The Internet
You will already be aware that the growth of the Internet has been phenomenal. In February 2000, an Irish consultancy firm, Nua, estimated the number of Internet users worldwide to be 276 million. Of these, 136 million were in the United States and Canada, 72 million in Europe (with
14 million in the UK, and 12 million in Germany), and 55 million in the Asia/Pacific region.
The global figure is a huge increase on the 115 million that Nua estimated were online in April 1998, and the US Computer Industry Almanac predicts that the number of Internet users worldwide will have grown to 720 million by the end of 2005. However, it is interesting to note how much more popular media attention has been given to 'the Net' than was ever afforded EDI. Is it because it is available globally, or because it is easy of use, or as a result of major industry players such as Microsoft and Novell developing interfaces to it? All of these have had an impact. Perhaps the most significant factor, though, is that the Internet offers a range of messaging techniques, all of which work rapidly. The standards used to make it work are not all ratified by international standards bodies, but they do work. The factor of not having to wait for standards to be agreed has surely accelerated the growth in the number of Internet users. An equally significant factor is that, with the existing level of awareness of E-commerce practices, the Internet can easily be identified by companies as a means of exchanging business data. It is a phenomenally well-advertised medium which offers access to a range of business applications:
– FTP;
– E-mail;
– Voice-mail;
– conference;
– bulletin boards;
– marketing;
– advertising;
– credit card transfer;
– EDI;
– on-line catalogues;
– stock broking;
and many, many more.

Identifying the Business Potential
The developments in communications and standardization over the past 20 years will undoubtedly continue, and will lead to improvements in the ways industry trades. We now have a range of communications options:
Telephone networks, ISDN, X.400, the Internet, satellite and mobile communications, and others, such as digital radio, will doubtless become popular. What is important is how these options are used.
It is vital from the outset for any organization looking to move into Ecommerce, particularly business-to-consumer, to clearly understand whether the products and services they offer are suitable for selling online. Some general guidance on the potential for E-commerce can be
gauged by asking the following questions:
– Is the organization looking to sell to the correct demographic group in terms of geography (where the potential customers are located) and the type of person (is the potential customer likely to have access to Internet services and the ability to pay for transactions online)?
– Can the products be delivered digitally (for example, software, music, videos, books) or services accessed digitally (e.g. train tickets, airline tickets, holidays)?
– Can value be added to specific services by making them available online (e.g. online auctions or stock broking can significantly change the existing business models)?
– Does the organization have products that can be sold from a Web site, even though they may need to be delivered and paid for conventionally (e.g. cars, household electrical goods, even houses)?
– Are they very specialist products, where the web can increase their exposure to (perhaps) overseas markets, or standard products that can easily be sold via a catalogue? The decision to proceed with an E-commerce project would probably require a 'yes' to many (although not all) of these questions. In any event, whether the potential application is business-to-business or business-to-consumer, the key requirement is to develop a clear business case that supports the decision to proceed. This business case should address a variety of key issues including:
– statement of business benefits to be achieved;
– projected sales and overall revenue over 1, 3 and 5 years;
– level of investment required (both in terms of IT, staffing levels and other resources);
– projected profitability;
– unique selling points of the new venture;
– a clear evaluation of the risks in moving forward with such a venture (and indeed the risks associated with not moving forward);
– Systems and resources required to handle integration with back-office systems such as order processing, order fulfillment, stock control etc.).