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Chapter 1: Defining E-Commerce
The evolution of the Internet is one of the most exciting technological advances in recent history. One of the most interesting aspects of this evolution is the emergence of electronic commerce (e-commerce) as a mainstream and viable alternative to more traditional methods of commerce. Commerce itself is a part of human civilization that dates back to the beginning of human production. It should be no surprise that, as the rapid rise of e-commerce shakes the very basic assumptions we hold about commerce, a great many people find themselves a little overwhelmed.
The challenges for technologists in the realm of e-commerce are particularly intriguing. Not only are we faced with changing technologies, but we are also faced with changes to the business models we have come to expect. Companies on the cutting edge of e-commerce are setting new trends and breaking new ground in creating new business models and using technology in increasingly innovative ways.
In this chapter, we'll discuss some of the fundamentals of e-commerce. It's important for all of the players in an e-commerce project to have a good idea of what e-commerce is about and how to approach some of the core concepts. As such, this chapter (and the other chapters in this section) will discuss:
- Where e-commerce comes from
- Where e-commerce is now and where it is going
- The fundamentals of developing appropriate strategies for this business environment
- The different manifestations of e-commerce and their unique characteristics
- How to gather the necessary requirements for an e-commerce application
- How to manage and plan an e-commerce initiative
- The role that Java plays in e-commerce applications
- Specific technologies, techniques and approaches that are useful when attempting an e-commerce initiative
However, before jumping deeply into the specifics of e-commerce implementation, it is still very important to understand the basic concepts of e-commerce and its role in the electronic business (e- " business) landscape. By building on these core definitions, we will be better placed to understand the specific details of e-commerce applications.
Defining E-Commerce in the Shadow of E-Business
The definition of e-commerce is impossible without first discussing the concept of e-business.
E-business is defined as the process of using electronic technology to do business.
Since e-business occurs anytime a company uses electronic technology in the course of conducting business, e-business can be anything from a sales pitch on a website to an electronic exchange of data.
Before we can begin e-business, we must realize that utilizing electronic technology effectively requires a fundamental re-examination of the way in which we do business. Many companies have chosen to embrace e-commerce because they feel that it is a way to improve efficiency, offer new and innovative services, and increase the quality of their business. While a lot of companies find success in e-business, many others find themselves ill prepared for the realities of e-business. In large part, companies that are successful in e-business recognize that this is a fundamentally different way of doing business, instead of being just a new tool to fit to old methods.
For example, if a carpenter has used a hand-held manual saw for many years, he would probably find a great increase in productivity if he were to toss aside his manual saw and purchase an electric power saw instead. However, if he did not recognize that this new tool requires a new way of using it, he would have little success. Imagine this carpenter trying to use an electric saw without plugging it in, but instead simply sawing manually back and forth as was his custom. This sounds ridiculous, but is a good example., of the way many companies try to use the new tools of e-business using their old methods.
Just as the carpenter tried to use his new tool without learning a new technique, many companies try to bypass the important exercise of re-evaluating their business and instead jump directly into e-business initiatives. A successful e-business strategy must be integrated into all facets of an organization with ample discussion and thought given to planning for the future of the company in the face of e-business.
E-commerce can be defined as a subset of e-business, and is the subset of e-business that focuses specifically on commerce.
Commerce is the exchange of goods and services for other goods and services or for some other farm of payment. E-commerce is simply a company conducting commerce using electronic technology. Since commerce is a type of business and e-commerce is about conducting that business electronically, e-commerce is clearly a type of e-business. This implies that all the same keys to success for e-business also apply- for e-commerce.
Success in the e-commerce arena requires a focus on e-business across the company as a whole. E-commerce can't be done in a vacuum in any sense of the word. In addition to requiring a comprehensive e-business strategy, e-commerce also requires input from a large portion of the company in order to be successful.
Developing an E-Business Strategy
Since successful e-commerce requires an e-business strategy, it is important to consider what that means. For some companies, particularly those formed in the wake of the Internet economy, there is little distinction between a business strategy and an e-business strategy. While the success of such Internet-focused companies has varied widely, there is something to be learned from this concept.
If a company has decided that the Internet and other types of electronic technology are a critical component to the success of the business, there should be little difference between a business strategy and an e-business strategy simply because e-business becomes the company's business. However, even if a company does not base their success or failure on e-business, there is still a necessity for a company determined to launch an e-business initiative to consider and plan their strategy for success in the e-business arena.
While the exact details of an e-business strategy are generally different from industry to industry and from company to company, there are a few very general questions every company should ask in framing an e-business strategy. These are important for the management of a company to understand, but it is also important for developers to understand these issues. If a company approaches a team, internal or external, with a request for an e-business solution, these questions must be addressed. If they are not addressed prior to the formation of a project team, the task of asking these questions falls to the team and perhaps even to the developers. In an ideal world, a team would not proceed until the basic strategy for e-business was in place.
Some important questions to consider are:
- What is our business strategy as a whole?
- Why do we want to do business electronically?
- What is the overall measure of success for this company?
- What are the results we want?
- How will we know that we have been successful?
- What parts of our business are best suited for the electronic world?
- What parts of our business are least suited for the electronic world?
- What new aspects of our business do we expect or hope to develop using this technology?
Obviously- there is a lot more to a comprehensive e-business strategy than these few questions, but any company that cannot easily answer these questions is not prepared to attempt an e-commerce initiative. At times, this is an acceptable outcome. A company should not proceed with an e-business initiative simply because e-business is popular. Some companies simply do not have a business model that makes sense to include e-business.
If the company really does feel that e-business is the right move for their business, but is still unable to address the questions posed above, the company needs to re-evaluate their positions. The questions listed here are extremely high-level indicators of whether a company is aware of the reasons and goals of their e-business initiatives. A company that cannot answer these questions is not ready to provide the clear direction that an e-business initiative requires in order to be successful.
The Basics of E-Commerce
As previously defined, e-commerce is fundamentally about conducting commerce utilizing electronic technology. While that might sound like an obvious statement, in reality few people understand the t scope of e-commerce. We tend to think about e-commerce as limited to the Internet, and more specifically to the World Wide Web (often simply called the web). This type of thinking limits the scope of possibilities for what e-commerce is and can become. E-commerce can mean conducting commerce over the Internet, but it can also mean other forms of electronic communications.In reality, the roots of e-commerce lie not in the Internet, but in other forms of electronic communication. Technologies like Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT) predate the emergence of e-commerce on the Internet. These older, high-powered technologies form the roots of the e-commerce we see today. For example, if credit card companies had not long ago effectively used technology to process the many transactions that they receive, we would not be able to have the proliferation of websites selling goods and services.
However, the important distinction between these older technologies and the emerging Internet-based e-commerce applications is that these older technologies were only designed to connect one business to one other business. In fact, the protocols themselves were biased toward point-to-point communication. The more recent advances in e-commerce tend to be more akin to e-markets and are based around a network-to-network model. This approach allows for a one-to-many or many-to-many approach to e-commerce, greatly expanding the potential reach of any single business.
It's ironic, considering the roots of e-commerce, that we tend to think of it as all about the Internet. Conducting commerce electronically may mean a web site selling books to consumers, but it can also mean a book distributor sending his order for books to the publisher using EDI. This book will discuss some of the more traditional uses of the Internet for e-commerce, as well as some of the still-emerging ways to conduct e-commerce (,such as wireless communications).
The other core issue in understanding e-commerce is that e-commerce is not merely a focus on the electronic aspect of conducting commerce electronically. E-commerce, like e-business, requires a reexamination of the ways in which we use this new tool. What's interesting and exciting about commerce in the e-commerce age is that as the landscape (the platforms, the medium, and the bandwidth) changes, we will also see a dramatic change in the way in which we approach commerce, and the expectations that we have about it. This change in expectations occurs for both businesses and consumers, and thus we see a redefinition in the approach both parties have in entering an e-commerce exchange.
The Growth of E-Commerce jumping into the world of e-commerce, it's important to consider this recent trend in the context of the overall evolution of the Internet. Of course most developers are aware of the origins of the Internet in the 1960's in the form of the ARPANET, the original United States government sponsored network that eventually became the Internet. What is important to the understanding of e-commerce is not the evolution of the hardware or underlying network but the evolution of the usage of the Internet, and the role that it plays in the lives of users. Clearly as bandwidth increases and higher speed network access reaches consumers, these factors play a role in consumer adoption of e-commerce. As the technology becomes more convenient and more accessible, it is easier for people to use it. However, there remains a disparity between a user having the ability to access the Internet and a user actually logging on and making e-commerce a part of their daily lives.
There is a great deal of money available to people who are able to understand and harness the factors that make people spend their money and time on a particular product or service. Further, if the product becomes a part of everyday life, there is even more money to be made. Ideally the creator of something new wants a lot of people to buy it and use it. But if the excitement is fleeting and the product is merely a fad, the revenue stream quickly fades. For e-commerce to be successful and beneficial to companies, it must survive to be more than a fad and become a part of the way people live their lives.
The first step in the adoption of a new thing is to make it accessible. Clearly, e-commerce companies have tried very hard to do that, and the advances in hardware and software have made it easier and cheaper to reach consumers and other business. However, as we previously mentioned, people don't always use that which is available. Fundamentally, for something to stick, it must make lives better in such a way that the benefit is greater than the cost. This is what e-commerce companies are trying to do with advertising and marketing. For example, e-commerce ads often talk of the ease of avoiding crowds at stores as one part of the e-commerce business proposition.
Making e-commerce a part of our cultures and a part of our lives may be an excellent way to increase revenues for companies. While many companies do see an increase in sales, profit margin, and other critical factors, there are also companies that have seen a marked decrease in revenues from physical stores, so there is clearly a balance to be struck. However, as more companies strive for the perceived benefits of e-commerce it is important to consider the advances in the Internet over the last few years as they relate to the ultimate experience of the user...