Systems of Electronic Commerce

Prof. Jukka HeikkiläInformation systems, eBusiness

Dept. of CS & ISFaculty of Information Technology

University of Jyväskylä

tel:+358 50 581 8361email: jups@jyu.fi

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Terminology

eCommerce = sähköinen, elektroninen kaupankäynti– Transaction between

buyer and sellereBusiness = elektroninen liiketoiminta– Structuring the value

chain/business network for value add

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Fitting 5. with 1-4: b-to-c• E.g. standardised stages of

acquisition process• Purchases

– Inquiry– Offer / bidding– Order– Order confirmation– Delivery– Payment

• Exception handling• Complaints

– Reclamation processes– Returns

• Ancillary services• escrow, insurance, upgrades etc.

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N-tier architecture (Microsoft, 2000)

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Component-based

• ‘Functional’– necessary components for the business

• ’Non-functional’– necessary components for the operation of the

technical system, but not for the business

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Balancing strategy, processes, and components (Allen & Frost, 1998)

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Functional components for webstores (c.f. Porra, 1999)

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’Non-functional’ components for web-stores

• Depends...– logs– proxies– load balancers– access management– back-up & restore– availability assurance– monitoring– etc...

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An example:Product architect

ure blueprint (Mustikkamaa, 2001)

1) Terminal domain

2) Network domain

3) Enabling technology/

platform domain

4) Application domain

5) Content domain

Telecom Network

Mobile Network

IP Network

Service Gateways

User, Service & Security Management

Application Management

System Management Content & Data Management

Product Platform

Self-care concept

Trading concept

Communication concept

Business support concept

Entertainment concept

Information concept

Content Gateways

Content 1

Mobile phones

Computers PDA’s

6) Business domain

Content 2 Content 3 Content 4 Content 5 Content N

Content provider

1

Content provider

2

Content provider

3

Content provider

4

Content provider

5

Content provider

N

Application Gateways

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1) Terminal domain

2) Network domain

3) Enabling Technology/

platform domain

4) Application domain

5) Content domain

Telecom Network

Mobile Network

IP Network

Service Gateways

User, Service & Security Management

Application Management

System Management Content & Data Management

Information Systems Platform

Management applications

Product Development applications

Product Delivery &

Development applications

Sales & Marketing

applications

Customer Care a

plications

Billing applications

Content Gateways

Business data

Product data

Operation & manitenance

dataCustomer data Event

data

Mobile phones

Computers PDA’s

Business Data Management

Product Data Management

Operation Data Management

Customer Data & Event Management

Management

process

Product Delivery

Management process

Delivery and

Production process

Sales & Marketing

process

Customer Care

processBilling process

6) Business domain

An example: IS archi-tecture

blue-print (Mustikkamaa, 2001)

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What does it cost (adapted from Laudon & Traver, 2009)

• Your options horizon on cost factor 100€ - 1x107€– From scratch (LAMP-stack; Linux/Apache/MySQL,

Perl/Python/PHP)– Tailor from packaged components

(OpenCommerce) and toolsets (MS Commerce Server, IBM WebSphere)

– Pre-Built services (Amazon, GoogleApps etc.)• The technology cost has come down 50% since

year 2000• The system maintenance and content

development has come up constantly (24/7 and 360)

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Cost drivers (Laudon & Traver, 2009)

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Content Design And Development15 %

Hardware10 %

Software8 %

Telecomms10 %

System Development22 %

System maintenance35 %

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B-to-B transactions: POfor dyadic relationship

process

An example of PIP: It specifies the public process between companies. Public process specification creates a need for company’s internal processes (Anilinker & Iocore, 2002).

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Service oriented architecture and web services is claimed to be the next

general ICT trend (Gartner)

1970 1980 1990 2000

Ado

ptio

n R

ate

Time

Mai

nfra

me

Structured Programming

(1970s)

Clie

nt /

Serv

er

4GL (1986)

Object Oriented

Programming(1980s)

CORBA (1992)

ERP

Web

Netscape (1994)

J2EE (2000)

COM/DNA (1997)

SOA

/Web

Se

rvic

es

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A way of managing business processes and building systems utilizing layered BPM/SOA

Concepts

1 2 3 Intra-/Inter-OrganizationalProcesses Flow

Service 1 Service 1 Service 1External

Business Process Management

Business Rules

Corporate Systems & ComponentsERP, CRM, PDMLegacy Systems

Other Corporate SW Components

Vendors & PartnersSystems & Components

Old WayTraditional Monolith Systems with implicit business process management, rules and services and bad connectivity.

Business Process Management

Service Oriented Architecture / Web Services

Systems /software level

EAI, middleware

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What about earning logic?• Are we after

– cost savings?– productivity?– customer lock-in?– new markets?

• eBusiness is real business• participation fees• visibility/contact fees (ads)• click-throughs and referrals (banners, portals, agents)• transaction fees (provision)• investments in webstores

– establishing– running– upgrades, scaling-up and changes

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Three stages of development(Ash & Burn, 2003)

= the convergence of technologies for informationflow within and between organisations, e.g. e-ERP implementations;

= asset and competency sourcing for providingcheaper, faster, and improved quality of products and services

= the architecture of the firm and its network of partners for creating, marketing and delivering value.

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Product = goods and services(Levitt, 1960)

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Relationship of the stages(modified based on Ash & Burn, 2003)

Cost leadershipin the segment

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1. Integration for efficiency: (c.f. IBM)

Business Strategy + Process

Web + IT Integration

E-Commerce Services

Enablement Services

Knowledge Management

Business Intelligence

SCM ERP CRMSuppliers Customers

Technology Value

Business Value

E.g. data mining

I.e., tailoringOutsourced development,

operation, security, etc.

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2. Integrating for differentiation: Customer centric product life cycle

(based on Ives, 1999)

Needs e.g. AIDA- marketing

Abandonment?- reflecting- returning- reselling

- recycling- disposing

Ownership/service provision-assembling, installing, setting up- training- using- following up- maintaining/serving- upgrading- supplying

Acquistion- selling- ordering - paying- delivering- reception

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3. Differentiating for value added

- exceptions’ handling

Retirement

Persuasion

AcquisitionOwnership

User Satisfaction Expectations mgmt

Org. learning Best practices

Learning from exceptions from/with customers/users

Designing and implementing business models for interorganizational network

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Key Design Issues:

• How are customer needs and processes brought into design?– How to gain right information and how to describe:

• Customer pain/problem and behavioural cycles– commitments

• Flow of transactions– Web stores, auctions, exchanges, joint purchases

• How to integrate the supply network to match the process desired

• How to manage transactions?– Technically– Can we change and implement the design rapidly

• What to do by ourselves, what to outsource?– Earning logic?– Risks of contracting (long lasting commitments)

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From business model to processes

• What are the means to describe business models in a meaningful way to achieve the targets?

• How are customer needs and processes brought into design?

– How to gain right information and how to describe:

• Customer pain/problem and behavioural cycles

– commitments

• Flow of transactions

– Web stores, auctions, exchanges, joint purchases

• How to integrate the supply network to match the process desired

• How to manage transactions?

– Technically

– Can we change and implement the design rapidly

• What to do by ourselves, what to outsource?

– Earning logic?

– Risks of contracting (long lasting commitments)

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An early example

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The Two Generic Processes of Handling Transactions

(c.f. Kambil & Van Heck, 1998)

SeeCCLC &

CRM

Legislation,lex

mercatoria,codes of conduct

Integration,tailoring,

BPR

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Basic Trade Processes(c.f. Kambil & Van Heck, 1998)

• Search• Valuation (Price negotiation)

– from purchasing to auctions• Logistics• Payment and settlements• Authentication

– Identification, – Authorization, – Conformance to the agreement, – Non-repudiation

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Trade Context Processes(c.f. Kambil & Van Heck, 1998)

• Product representation– how the product attributes can be described– how the product attributes is to described

• Legitimation– Valid and binding forms of exchange agreement

• e.g. property vs. flat

• Influence structures and processes– credible commitments, incentives, recommender/

reputation systems, sanctions (defined e.g. in LOI)

• Dispute resolution– negotiation, arbitration, courts– warranty, guarantees, consumer protection

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Multichannel model (c.f. Heikkilä et al., 1998; Haapanen & Vepsäläinen, 2000)

Persuasion

Deliveries

Commitments

Financing

Raw

materials

Consumption

Production Wholesale Retail

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Commitments

Past and present: each link does everything

Persuasion

Delivery

Financing

Raw

materials

Production Wholesale Retail

Consumption

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Specializing channels for transactions

• Persuasion - creating brands– product info, SP, PR, CRM, feedback

• Finance - to minimize payment risks– payment systems, credit, guarantees/securities, risk

management, chargeback• Commitments - trust is essential

– Documenting transactions: identification, authorization and responsibilities

• creating, tracking and keeping records for non-repudiation, reclamations, disputes, warranties, etc.

• Delivery - eThing builds on logistics– in addition to delivery, value-added services, such as

storing, maintenance, recycling, disposing

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Why channels separate?

• Efficiency and core competence– e.g., marketing, finance, contracts, transportation

• Instances of customers are different– e.g., customer profile, account#, transaction

record, delivery address(es)...• Roles and responsibilities of the suppliers

– mediahouse, creditor/lessor/insurer, trusted third party, coordinator

• Legislation is channel specific– marketing, financing/granting credit, product

liability, shipping, etc.• Specialised ISs and organizations• Specialised education and research

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E.g., publishing: facing the Infoeconomy

• Multiple simultaneous changes– Production

• all-digital

– Product: from physical to digital• Journals and periodicals (e.g. Springer-Verlag and thousands

periodicals),

• net-magazines,

• appendice (e.g. Talouselämä)

• evolving editions (e.g. Encyclopedia Britannica)

– Distribution channel• more digital

– Reading (customer behaviour)• from tourists to dwellers

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The Finnish way of the 90’s

Book storesLibrariesPublishers

and

printing houses

Book storesLibraries

Production

Reading

LogisticsPosti

Home banking

Direct marketing

Ordering systems

- Bookstore- Stockmann- Kiosks- Student bookshops- Supermarkets

outsourced

in-house

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Producer and client influence (c.f. Heikkilä et al., 1998)

Persuasion

Delivery

Commitments

Financing

Tuotanto

Kulutus

Productstage‘Back-End’

Clientstage‘Front-End’;

’Store-front’

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