IS 425
Enterprise Information
LECTURE 6
Summer I 2005-2006
Agenda
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Exercise
Debate
E-Commerce and E-Business Systems
Next Week : Quiz/homework #3
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Exercise
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You are the IT steering committee that will decide which hospital
project to fund.
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From last weeks readings and lecture detail the steps that you
would take in determining which hospital project to do.
Based on the previous session readings and lecture:
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1. What two questions would you ask to find out which one should
be implemented?
2. How would you use the prioritization tiers decision tree?
3. How would you use the prioritizing potential benefit tree?
4. What is the major problem with lagging indicators when
developing new software?
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Debate
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How should team tasks be divided?
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Debater
Research
Report writing
Arguments
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Growth of the Internet
Dot com bust begins
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eCommerce Will Penetrate Business and Consumer Markets
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Types of
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Business-to-Consumer (B2C): Internet
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Business intelligence, enterprise portal, workgroup
communications, corporate digital library, sales force
productivity, workflow, datawarehousing
Business-to-Business (B2B): Extranets
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Purchasing, knowledge, entertainment, other
Intra-Organizational: Intranets (B2E)
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E-Commerce
Supply chain management, Customer relationship
Mgt; exchange
Consumer-to-Consumer (C2C)
Peer-to-Peer
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US eCommerce: The First Five Years
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1997 to 2002: explosive growth
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Spurred by consumers and VC support for dot-come and
traditional retailer, a raging economy
Online shopping households grew from 5m to 36.5m;
online sales from $2.4b to 72.1b
Consumers continued shopping online for convenience,
selection, and deals, especially travel, consumer
electronics, and PCs
CAGR of 97%
Source: Forrester Research
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US eCommerce: The Next Five Years
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2002 to 2007: consistent, rapid growth
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By 2007, households shopping online will
increase by 26.4 m and grow to 63m, or 2/3 of all
US households
Sales will grow from $72.1b in 2002 to $217.8b in
2007
CAGR of 25%; 8% of total retail sales
Source: Forrester Research
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The e-Commerce Value Chain
Get and keep
customer interest
Attract
Turn interest
into orders
Manage orders
Interact
Act
Advertising
Marketing
Catalog
Sales
channels
media
static
dynamic
Order capture
Payment
Fulfillment
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Service
customers
React
Customer service
Order tracking
goods
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The e-Commerce Value Cycle
React
Attract
Act
Interact
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Attract Customers (Marketing)
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Purpose
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Build brand awareness, attract customers, and entice
them to buy
Merchandizing Methods
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Advertising
Coupons
Sales and Promotions
Frequent buyer programs
1:1 marketing
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Interact with Customers
(Sales)
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Purpose
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Turn interest into orders
Catalog, Product and Service
Techniques
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Registration with Internet search engines
Hyperlinks
Onsite product search
Product and price comparison
Dynamic vs. static contents
Pricing
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Act on Customer Instructions
(Order Management)
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Purpose: Manage order and shopping experience
Order Processing:
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Shopping cart and order aggregation
Order validation; Application of coupons or discounts
Cross selling
Calculation of sales, taxes, shipping and delivery charges, rolled-up
order
Payment: handle multiple payment methods (cash, credit,
credit cards, debit cards)
Act – Fulfillment
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Delivering the goods ordered to their destination
Transmission of order information to warehouse, packing or
order assembly for shipping, shipping and delivery
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React to Inquiries (Service)
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Purpose: customer satisfaction, experience, and
repeat visits
Methods
 24X7 service capacity
 Proactive and Immediate feedback – voice and
email
 Access to status information
 Self-help (FAQ)
 Multi-language support
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Value Proposition for Customers
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Transform customer relationship from suppliercentered to customer-centered values
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self service, 1:1; choices; delivery to customer location;
customer needs; choice of service hours
Displace traditional source of values
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Physical vs. digital value (information)
Economies of scale vs economy of scope
Mass produced vs mass customized
Information vs. knowledge value
Distribution as constraints vs. enabler
Local vs. global
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Value Proposition for Firms
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Ability to reach a global market
Reduced marketing and selling expense
Increased efficiency of operation
Ability to target consumers more precisely
Ability to convey more accurate product and
availability information
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B2C Business Models:
Generating Revenues
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Merchant Model
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virtual merchants
Click & Brick
Multi-Channel
Shopping Malls
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Advertising Model
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Horizontal portal
Vertical portal
Personalized portal
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Intermediary
(Brokerage)
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Buy/sell fulfillment
Buyer/demand
aggregator
Virtual mall
Hypermediary (financial
settlement)
Auction broker
Reverse auction
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B2B E-Commerce
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Global B2B revenues to grow from $282 billion in
2000, to $4.3 trillion by 2005, the bulk of B2B
transactions will be made in the US.
Compound annual growth rate (CAGR) of 73% in
US, 91% in Europe, and 109% in Asia
lower costs, shorter cycle time, quicker
response, and global markets
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B2B Models
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Firm-based Models
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Sell-side (1-to-many), Cisco
Buy-side (many-to-1) , GE
Many-to-Many Marketplaces – Exchange and
catalog models
Vertical vs. Horizontal Marketplaces
Virtual Service Industries in B2B
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Travel, Real estate, electronic payments, online financing
and online trading, Logistics
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Sell Side: 1:M
eg. Cisco
Sellers
suppliers
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Buyers
Sellers/suppliers
Public or Private Marketplaces M:M
Catalogs (Newark in One)
Exchanges, Houstonstreet
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Buy Side: M:1
e.g., GE
Buyers
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Firm-based model
Sell side B2B: One to Many
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Delivers a Web-based, private-trading sales channel
over an extranet to business customers
The seller can be a manufacturer, or a distributor
Architecture similar to B2C
Similar technology
Sell by electronic catalogues, auction, or by contract
Differences in commerce value chain
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Firm-based Model: Direct sale form Catalogue
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Benefits
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Reduced order processing
costs
Speeds the ordering cycle
Reduce errors in ordering
and product configuration
Reduced buyers’ search
costs
Customize products
Different prices to different
customers (personalization,
customization)
Limitations
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Channel conflicts with
existing distribution
systems
EDI (if used) is costly
and could limit the
participation
Improve service levels for lowvolume customers
Provide higher-quality
information for customers
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B2B Value Proposition
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Reduced cost of selling
Reduced order processing costs
Improved service levels for low-volume
customers
Higher quality information for customers
Accurate information
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B2B Commerce Value Chain--different from B2C
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Attract: Advertising &
Marketing
 merchandising and
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branding
 become a p referred vendor
Interact: Catalogs
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 Searching capability for
large electronic catalog
 Customized catalogs -
special part number and
pricing
 Security Requirements
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Act: Order Processing
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Approval & Workflow
Delegation
Act: Payment
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Purchase Order,
Procurement Cards, EFT
Act: Fulfillment
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Predefined ship-to address
and order aggregation
React: Customer Service
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Training, Software
maintenance, tech support
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Firm-Based Model: Buy-Side:
Many to one, E-Procurement
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Two types of purchases (what are purchased)
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Direct materials: production materials go directly
to the manufacture or assembly of a product or
the creation of a service. Their use is scheduled,
purchased in volume at pre-negotiated price
Indirect materials: used in maintenance, repairs,
and operations (MRO), nonproduction materials
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Traditional EDI vs. Internet
Enabled EDI (VAI)
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Standardized transfer of electronic documentation (Two
Standards: ANSI x.12 vs. EDIFACT)
Manage supply and distribution relationships; application or
transaction based; emphasize efficiency (purchase orders and
invoices)
Limitations:
 Costly; Proprietary VANs
 Participation sometimes through coercion and pressure
 Compatibility issue
 limited impact on process change
VAI:
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Common standards; Flat pricing; Security
Easy/cheap access; Infrastructure
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Why XML is Successful
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XML is a text format, can be processed by
text-oriented tools
Extensible to specific an industry or domain
Neutral, an open source tool
Easy to implement
Interoperable across different platforms
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XML and B2B
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Improve compatibility between disparate systems
Allows parties to exchange structured data over the
Internet. XML tags define the meaning of data
(catalogue) and business processes
XML also supports Unicode that enables the display
and exchange of most of the world's written
languages.
Benefits: Reduce costs, competitive advantage,
strengthen relationships with trading partners
(processes)
Simplifies application architecture—a uniform
framework
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Internal and External Process Enablement
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E-Commerce Application Building Blocks
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Sell-Side E-Commerce Systems
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Examples of e-Commerce Web
Site Engineering
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http://condor.depaul.edu/~schan/455home/E
CTgallery.htm
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Question:
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EDI is electronic data interchange –
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Uses traditional record format to record
transactions between firms
Has standards the X.25 for example
Has been around since 1970’s
Used to transmit transactions between
suppliers/customers
Expensive to implement and maintain
Will XML / Web Services take over from EDI?
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