ebusiness notes

8/6/2019 Ebusiness Notes

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B2B Service Providers : Application Service Provider

Rents internet based software applications to businesses. Traditional software has been overtaken

in recent years by Web solutions, also known as ‘application service provider’, ‘software as a

service’ “online / hosted / on-demand software.”

Traditional software built on client-server architecture requires big up-front software investment

that's expensive to install and maintain. With an ASP rental model which follows a ‘pay-as-you-

go’ model held lower the price dramatically. It eliminates the need for a big up-front capital

investment thereby improving the ROI on Web based ASP model.

Traditional software implementations need 12 months or longer deployment time as compared to

ASP which happen in a matter of weeks or months.

With ASP solutions, basic customizations are easy, so even business users can make changes in

minutes via a point-and-click interface.

ASP provides unlimited scalability. Salesforce.com uses a multitenant approach, so there’s no

single instance of the software and you can scale your implementation fast—without incurring

high costs or waiting weeks or months.

ASP provide painless upgrades. Because deployments of new features are virtually

instantaneous, you’re always on the latest version with web-based CRM systems—so upgrades

are painless.

One area where this has been successfully applied is in Customer Relationship Management

(CRM) application. E.g. SalesForce.Com (ASP)

It is also known as Web-based CRM, hosted CRM, on-demand CRM, software-as-a-service

(SaaS) CRM, or cloud computing CRM—all these terms refer to the same thing: a new model

for delivering CRM over the Internet.

With this popular type of CRM offered by salesforce.com, there’s no software or hardware to

buy, install, maintain, or upgrade.



Virtual Distributors : The first generation of Net markets provided community features alone.

However, in the second generation, transaction revenue derived from buying and selling products

is becoming critical. Virtual distributors are an example of this genre of trading exchange.

Virtual distributors offer one-stop shopping for a fragmented buyer and seller community by

aggregating disparate product information, primarily associated with multiple catalogs, from

multiple suppliers (i.e., manufacturers) into one mega-catalog.

Virtual distributors help streamline the supply chain for direct goods and lower transaction costs

by issuing a single purchase order and parsing the order to each relevant supplier that ships the

product direct.

Many have added richer services, such as meshing with software that handles a company’s

backend operations — from order-taking to tracking inventory. Virtual distributors generally

don’t carry inventory, nor do they directly supply products. Instead, they assist buyers in

arranging for third-party carriers to transport the ordered goods.

Virtual distributors can serve specific industries or multiple industries. Grainger's

OrderZone.com sells supplies across many industries. Chemdex in life sciences and PlasticsNet

in polymers and resins focus on specific industries.

Corporate Procurement Portals : Corporations with substantial buying power are racing to

create private portals for the procurement of both production- related goods and other goods.

Production goods include raw materials, components, assemblies, and other items needed to produce finished goods. Other goods are items businesses need for their daily operations (e.g.,

capital equipment, office and industrial supplies, and travel and entertainment).

Industry Consortiums: Large companies are using their clout to create industry consortiums.

These consortia are of two types: buyer consortiums and supplier consortiums.

A) In a buyer consortium, a group of large companies aggregate their buying power; the premise

being that more buying power will drive down prices. Traditional industry players have a big

advantage over Net-born startups when it comes to starting exchanges for high-volume

commodity goods. Their advantage stems from instant commercial activity and liquidity.

For instance, Eastman Chemical spun off its logistics operation into ShipChem.com, which will

help chemical suppliers arrange shipments. PetroCosm is an example of an industry consortium

for the oil and gas industry — with Chevron and Texaco as anchor participants and Ariba

providing the technology. Another example is MetalSpectrum, which plans to be the online

neutral marketplace for aluminum, stainless steel, and other specialty metals.



B) Supplier-led consortiums also are emerging. These consortiums are forming in industries

where a few firms comprise a high concentration of market power. The big difference is that

supplier consortiums must give sponsors the opportunity to promote and differentiate their

products.

They must provide the most compelling environment for buyers by aggregating key industrysuppliers and offering a compelling amount of product depth, breadth, selection, and service. To

this end, supplier consortium sites will quickly evolve beyond the transactional focus of buyer-

centric markets to support value-added, pre- and post-sale support. These consortiums will likely

be most successful in segments where more complex products are traded.

i) The first hurdle is governance. Traditional competitors must form an independent

company that promotes the interests of all the participants.

ii) Technology selection is another hurdle. How will the consortium meet the

requirements of all its members, each of whom has its own technology standards and

systems?

iii) Antitrust is another issue that has to be worked out.

Pure e: Digital Products and Mobile Portals

Clearly, we’re entering the pure “e” decade: an era of digital products. A digital product is one

where the product is made online, stored online, sold online, delivered online, and consumed

online.

First-generation examples include music, software, books, and photos. Delivery of digital goods

has changed to become as an Internet service (e.g., streaming media) instead of as a packaged

product.

Even the means for creating digital content is changing. Factors contributing to the growth of

digital products:

i) The proliferation of Internet-access devices (e.g., set-top boxes, WebTV, and video game

consoles)

ii) Increasingly cheap and abundant bandwidth

iii) Falling prices for PCs

iv) The growing number of free PC programs

v) Industry standardization of Application Programming Interfaces (APIs).

vi) In the standards area, eXtensible Markup Language (XML) lets digital content be writtenso it interfaces with speech and handwriting systems. This means such content can appear

in different forms than it has in the past.



e-Portals, or business-to-consumer (B2C) models, have evolved in three phases in the last three

years. The first was saw looking towards increasing customer traffic and the second was towards

building better transaction capabilities. Now in the third phase, companies are beginning to

striving towards maintaining their differentiation over others and are engaging in partnershipswith Click-and-brick partnerships.

Collaborative Click and Brick

Brick and mortar + click and order = click and brick (C&B).

So-called bricks and mortar (BAM) companies are looking increasingly like new-economy

enterprises as they harness technology for greater productivity. A growing number of BAM

companies (e.g., Merrill Lynch, Circuit City, Toys ’R’ Us, Wal-Mart, and Barnes & Noble) have

adopted a digital business model.

Meanwhile, several Internet-based companies are also looking to build a physical channel in

addition to their virtual one. They want to move beyond selling strictly through the Net. So, the

most likely e-tail trend is adoption of the C&B model, a hybrid online / offline model requiring

both physical and digital assets and activities.

The C&B model allows an existing, offline business to profit from partnering with an emergingonline presence. A great example is discount stockbroker Charles Schwab.

Schwab’s success has proved that storefronts can drive traffic to Websites. Thefirm continues to

open new storefront offices every year because that’s where customers feel most comfortable

signing up for their accounts. But once the relationship is established, most customers use

Schwab’s Website to monitor and manage their accounts. The online customer costs less to

serve. This lesson has not been lost on other retailers, who are finally starting to see benefits of



combining e-commerce with old-fashioned department-store service. An established retailer’s

name has tangible advantages in cyberspace, where consumers face too many choices.

A new variation in C&B strategy unfolded when Amazon.com revealed a 10-year partnership

with Toys ’R’ Us. Toys ’R’ Us will provide products and Amazon will sell and deliver them

through a new co-branded Website featuring toys and video games. Visitors to Toysrus.com will be redirected to Amazon.com. Amazon will receive periodic fixed payments, per-unit payments,

and a single-digit percentage of revenue. Many analysts see this strategic move as an

acknowledgement by Amazon that it can’t compete outside its core markets without significant

help selling such things as hardware, lawn and garden supplies, and furniture.

Online Auctions: Auctions are markets in which prices are variable and based on competition

among participants who are buying or selling products and services.

Variable Pricing: The price of the product varies, depending directly on the demand

characteristics of the customer and the supply situation of the seller. The merchants change their prices based on both their understanding of how much value the customer attaches to the product

and their own desire to make a sale. Likewise, customers change their offers to buy based on

both their perceptions of the seller’s desire to sell and their own need for the product.

Auctions are used in all the different E-Commerce segments – B2B, B2C, C2C, C2B, B2G.

Types of Auctions:

English Auctions: It is the easiest and most common type of auction. Typically, there is a single

item up for sale from a single seller. There is a time limit when the auction ends, a reserve price

below which the seller will not sell and a minimum incremental bid set. Multiple buyers bidagainst one another until the auction time limit is reached. The highest bidder wins the item.

Dutch Auctions: It is used where sellers start by listing a minimum starting bid for one item, and

the number of items for sale. Bidders specify both a bid price and the quantity they want to buy.

If there are more buyers than items, the earliest successful bids get the goods.

Reverse Auctions: It is reverse English Auction. Multiple sellers bid against one another until the

time limit is reached. The lowest-price provider wins the item.

Name Your Own Price Auctions: This type of auction was pioneered by Priceline.com and is a

type of Reverse Auction. In this type of auction, the users specify what they are willing to payfor goods and services, and multiple providers bid for their business. Prices do not descend and

are fixed: the initial consumer offer is a commitment to purchase at that price. The incentive to

the providers is to be able to sell perishable services such as airline seats, hotel rooms, rental

cars, vacation packages and cruises on a last minute basis.

When to Use Auctions (and For What): There are many situations when auctions are the

appropriate channel for businesses to consider.



F1) Type of Product: Online auctions are most commonly used for rare and unique products for

which prices are difficult to discover, and there may have been no market for the goods.

F2) Product Life Cycle: By and large businesses have traditionally used auctions for goods at the

end of their product life cycle and for products where auctions yield a higher price than fixed-

price liquidation sales.

However for digital content such as music, books, games and digital appliances, they are being

sold at the beginning of their life cycle to highly motivated early adopters who want to be the

first in their neighborhood with new products

F3) Type of Auction: English ascending-price auctions are best for sellers when there are large

numbers of buyers and as the number of bidders increases, the higher the price tends to move.

F4) Initial pricing: Research suggests that auction item should start out with low initial bid prices

in order to encourage more bidders to bid. The lower the price, the larger the number of bidders

will appear and the higher the prices move

F5) Bid Increments: It is generally safest to keep bid increments low so as to increase the number

of bidders and the frequency of their bids.

F6) Auction Length: In general, the longer the duration of the auction, the larger the number of

bidders and the higher the prices can go. However, once the new bid arrival rate drops off and

approaches zero, bid price stabilize. Most eBay auctions are scheduled for 3 days.

F7) Number of Items: When a business has a number of items to sell, buyers usually a ‘volume

discount’ and this expectation can cause lower bids in return. Therefore, sellers should consider

breaking up very large bundles into smaller bundles auctioned at different times.

F8) Price allocation Rules: Most buyers believe it is ‘fair’ to pay the same price in a multi-unit

auction, and a uniform pricing rule is recommended. Therefore, sellers who want to discriminate

based on price should do so by holding auctions for the same goods on different auction markets,

or at different times, to prevent direct price comparison.

F9) Closed or Open Bidding: Closed bidding has many advantages for the seller, and sellers can

have price discrimination without offending buyers. However, open bidding carries the

advantage of ‘herd effects’ in which consumers’ competitive instincts to ‘win’ drive prices

higher than even closed bidding.

ebusiness notes

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