106- Information Technology

Module 2
By
Dr. Kiran Kumar Thoti
E-Commerce
 What is E-Commerce?
• E-Commerce can be defined as …
• The conduct of selling, buying, logistics, or other
organization-management issues via the WEB.
• OR
• Technology mediated exchanges between parties
(individuals and/or organizations) as well as the
electronically based intra- or interorganizational
activities that facilitate such exchanges.
 Growth of E-Commerce 2002
1st Q
$743.8B
2000 2001 2002est
$28.91B $35.87B $51.48B

1996
$700M
 History of E-Commerce
• Background
E-commerce actually began in the 1970s when larger
corporations started creating private networks to share
information with business partners and suppliers.
• This process, called Electronic Data Interchange (EDI),
transmitted standardized data that streamlined the
procurement process between businesses, so that
paperwork and human intervention were nearly eliminated.
• EDI is still in place, and is so effective at reducing costs and
improving efficiency that an estimated 95% of Fortune 1,000
companies use it.
 History of E-Commerce
• Prodigy was running text
ads and selling flowers in
the early '80s
• The first documented
Online sale in 1994 was
what?

A CD
 History of E-Commerce
• Early EC was pioneered by Internet companies
that didn't (and still don't) perform traditional
retail. Called Pure Plays.
– such as Amazon.com and CDNow.
• More recently click and mortar stores have
moved online
– like Barnes and Noble, Best Buy, the Gap, and Wal-
Mart
 History of E-Commerce: Amazon.com
• Early in 1994, working for D.E. Shaw in New York City, Jeff
Bezos, a restless, 30-year-old hedge fund manager began
researching the commercial possibilities of the Net.
• A year later, Bezos drove west, raising venture funds for a
new small online book shop (originally called Cadabra.com),
to be launched from his garage in Bellevue, Wash.
• Running on a Website and a warehouse, by its third year
Bezos's precocious Amazon.com toppled $150 million in
annual sales — a milestone that Wal-Mart founder Sam
Walton needed 12 years (and 78 stores) to reach.
 History of E-Commerce: Stocks
• Electronic stock trading debuted 30 years ago with Instinet,
Reuters' computer network that allowed after-hours trading.
– Charles Schwab first offered a dial-up trading service called The
Equalizer in 1985.
– E*Trade founded in 1982 as an institutional trading service began
offering consumer trading in 1992 through America Online and
CompuServe.
• True Web-based trading arrived in 1994 with Chicago-based
NET Investor, which offered 15-minute delayed quotes and
charged $35 per trade.
• Ameritrade, Datek Online, and others followed, eventually
driving commissions to as low as $8 per trade, and forcing
the implementation of free, real-time stock quotes in 1998.
•
History of E-Commerce: Ads
In 1994, the first national consumer brand site -
www.zima.com - was launched for the Coor's owned
beverage Zima.
• In October of 1994, Wired magazine's HotWired, dished
up the first banner ads from 12 advertisers, including
AT&T, Club Med, and Volvo. Sales for the entire online ad
industry were $1 million that year, and HotWired owned
40 percent of it.
• In 1998, online ad revenues reached $2 billion, topping
the $1.6 billion spent on "outside" ads, such as billboards.
General Motors alone pumped in $12.7 million. Online ad
revenue is expected to reach $11.5 billion by 2003 that’s
5 percent of the total U.S. ad market.
 History of E-Commerce: Travel
• Booking a trip over the Web back in 1995 meant going
to a travel site and requesting a fare.
• In early 1997, Travelocity offered a paging service to its
Web customers that alerted them if their flight was
delayed.
• In the fall of 1997, Priceline.com launched its
innovative, bid-based market for discount airfares.
• Today you can bid on empty seats, name your price,
choose a seat from a diagram, and know of fare
bargains often before agents have that information.
 EC Advantages/Disadvantages
• EC Advantages
– Ability to reach new markets
– Reduces costs (for some businesses)
– Increased purchasing opportunities
– More efficient (electronic payments,
telecommuting, etc.)
 EC Advantages/Disadvantages
• EC Disadvantages
– Incompatibility for certain industries
– Limitations of the medium
– Costs!!!
– Skills required
– Cultural and legal issues
 Selling on the Web
• Selling goods and services
– Catalogs on the Web (e.g., Dell, LLBean)
– Digital content (LexisNexis, mp3 sites?)
• Advertising supported
– Make $ via advertising (like TV)
– Difficult to measure, gauge support, attract
repeat visitors
– Examples: Yahoo, news sites, other portals
 Selling on the Web
• Combined Advertising/Subscription
– Fee + advertising
– NY Times, Wall St Journal, Reuters, ESPN
• Fee for Transaction
– Travel sites
– eBay
– Stock sites? (some of ‘em…)
 Bus. To Bus. EC
• Purchasing activities
– Procurement can be a major activity
– Business/Supplier Relationships
– Purchasing commodities (MRO items)
• Delivering activities
– Logistics, shipping, warehousing
• Support activities
– HR, finance, benefits info.
 Future of E-Commerce
• eMarketer, an Internet technology (IT) research and
reporting firm, estimates that the dollar figure for e-
commerce will rise from approximately
– U.S. $18 billion in 1998 to
– U.S. $294 billion in 2002. US
– Or maybe $184 billion by 2004.
(Forrester, Business 2.0 Jan 2000)
• In Europe, consumers' internet purchases will jump from:
– US $2.9 billion in 1999 to
– US $174 billion in 2005.
• Online business-to-business e-commerce is projected to
speed past $1 trillion in annual revenue by 2003
 Future Trends to Watch in E-Commerce
• Women take control. Women make or influence 80
percent of household sales in the United States, according
to WomanTrend, despite the fact that they make up 51
percent of the population.
• The untapped get tapped. Two highly touted markets $509
million health and beauty, and $513 million grocery still lag
behind expectations.
• More "click and mortar." Traditional retailers Circuit City,
Crate and Barrel, Sears, Toys R Us, Wal-Mart, and Federated
Department Stores missed the boat in 1995 and 1996, but
rest assured they "get it" now, and are attempting re-entry,
this time around with more money and smarts. Watch out.
 Security
Issues are
Important
 Still a Long Way To Go
• Andersen Consulting and Forrester Research both
show shopping cart abandonment rates of 25%.
• E-commerce still accounts for less than 1% of
total retail sales
• Pure plays have struggled to maintain cash flow
and have either:
– Folded
– Cut back
– Been bought at cheap prices
E-Business – Technology and Networks
What is E-business?

E-business (electronic business) is the conducting of business on the Internet,

[ not only buying and selling but also servicing customers and collaborating with
business partners.

The processes and tools that allow an organization to use Internet-based

[ technologies and infrastructure, both internally and externally, to conduct day
to day business process operations.

Stands for electronic business and refers to any kind of sales, services,
[ purchasing or commerce on the Internet.

A new-tech jargon word used more for marketing than for technical
description. Most commonly it broadly refers to conducting business over the
[ Internet (email and web) by communicating and perhaps transacting (buying
and selling) with customers, suppliers, and business partners.
 What is E-business?

Web

Universal Access

Standards

e-business
Using internet technologies to
transform key business processes

IT

Data

Applications

Core business processes
e-business = Web + I/T 
Reliability, security
and availablitiy
E-business types:

C2C B2B
B2C

CONSUMERS BUSINESS
C2
A

A
B2
ADMINISTRATION
E-business category

[ E-banks

[ E-trade

[ E-consulting

[ E-engineer
[ E-learning

[ E-mail

[ E-marketing

[ E-transactions
An example for e-bank
An example for e-trade
An example for e-consulting
An example for e-engineering
An example for e-learning
An example for e-mail
An example for e-marketing
E-business infrastructure

INTERNET ACCESS,
SERVICES,
HARDWARE SOFTWARE E-payment,
CERTIFICATES,
ADVERTISEMENT
Virtual Markets

goods, services,
Needed, measure deadline and
price offer circumstances

buyers seller

mediators
buyers seller
Goods A Goods B

buyers seller
finished orders orders

Virtual connections to other

markets
The path of the deal

buyers seller

buyers seller

buyers seller
How safe are e-Business financial
transactions?

[ New security technology like 128-bit SSL encryption ensures the safety and privacy of both you
and your customers, and is built into the latest e-Business software tools. Your security and
privacy is a top priority with all e-Business providers.
Secure VPN

SERVER
WEBSERVER
SERVER
Merchant
Merchant
INTERNET Merchant
Storefront
Storefront
Storefront

WEB
WEB
Consumer SSL

Acquiring
BANK VIRTUAL
POS
Credit Card
Network
PAYMENT
GATEWAY
Can my business benefit from e-
Business?

[ Reduce administrative and operating costs

[ Reduce inventory costs

[ Reduce the cost of procurement

[ Improve customer service and satisfaction

[ Streamline procurement procedures

[ Increase communication efficiency and interaction with

employees, vendors, customers and strategic partners

[ Increase revenues and profit margins

 CRM
Customer Relationship Management
 What is CRM?
 An integrated approach to identifying, acquiring and
maintaining customers. siebel.com

 Allows companies to coordinate their approach across

channels, departments and also geographically. siebel.com
 History of CRM
 1980s: Database marketing emerges. ezinearticles.com

 1980s: Database helped larger organizations rather then

small who only got survey type info. ezinearticles.com

 1990s: CRM appears as a two-way communication device.

ezinearticles.com

 1990s: CRM leads to programs such as frequent flyer miles

and bonus points on credit cards. ezinearticles.com
 2000s: Internet has helped expand from stagnant database
and allows off-site information storage. ezinearticles.com
 2000s: Used most frequently in financial services, high tech
corporations and the telecommunications industry. ezinearticles.com
 What it does...
 Builds a database that describes the customers and the
relationship they hold with the company. whatis.com

 Database: a collection of information that is organized in a way that allows

it to be easily accessed,managed and updated. whatis.com

 Provides enough detail so that the company can offer the

client the product/service that matches their need the best.
whatis.com

 May contain information about their past purchases, who is

involved with the account and a summary of all
conversations.
 What to look for in CRM
software...
 Make sure the primary goal (ie: customer service) is standard
in the software. Customization is very expensive. ezinearticles.com

 Be able to integrate smoothly and flawlessly. ezinearticles.com

 Make sure the program doesn't offer more then you need.
ezinearticles.com

 Compare with other companies of equivalently the same size

who have purchased the same CRM software and examine
their results. ezinearticles.com
 Benefits of CRM
 Research has shown that companies that create satisfied, loyal
customers have more repeat business, lower customer-
acquisition costs and stronger brand value. Siebel.com

 Which equals better financial performance. Siebel.com

 Check this out... → → →

Satisfied customers pay off…
siebel.com
 CRM may...
 Help marketing departments identify and target their best
customers, manage campaigns as well as discover qualified
leads. whatis.com
 Qualified Leads: prospects who seem most likely to buy because of some
information known about them. Duncan, Tom

 Improve sales and streamline existing processes. whatis.com

 Form individualized relationships with customers. whatis.com

 Give employees information needed to improve customer

service and also to better understand customer needs. whatis.com
 It also...
 Is a fast way to identify and handle potential problems.
Wikipedia.org

 Tracks all points of contact between a customer and the

company. Wikipedia.org

 Provides all employees with product specs, product use

information and technical assistance. Wikipedia.org

 CRM quickly manages the scheduling of follow-up sales calls to

assess the satisfaction of customers and their repurchase
probabilities (when and how much). Wikipedia.org
 CRM leads to...
 Identifying prospects and helps them become customers.
Brillianceweb.com

 Closing sales more effectively and efficiently. Brillianceweb.com

 Allowing customers to perform business transactions quickly

and easily. Brillianceweb.com

 Providing better service and support following a sale.

Brillianceweb.com

 Which = Customer Service!!

 Customer Service
 Helps make call centers more efficient. Darwinmag.com

 Aids in cross and up selling products. Darwinmag.com

 Cross Selling: Provide additional products/services. Chonko...

 Up Selling: Upgrade existing products/services. Chonko...

 Helps sales staff close deals faster. Darwinmag.com

 Simplifies marketing and sales processes. Darwinmag.com

 Allows companies to discover new customers. Darwinmag.com

 It even ties into BI…
(Business Intelligence)

CRM is closely related to business intelligence

because both methods involve using technology
to gather, analyze and organize data in order to
develop relevant information.

CRM is just a more specific form of BI that

concentrates strictly on customer’s behaviors
and actions, for both past and future
information.
See the results...
siebel.com
 Technical Functionality
 Scalability: CRM may be used on a large scale while also being
able to be reliably contracted/expanded to whatever scale is
necessary. So.. the data is flexible and won’t distort when
adjusted. Wikipedia.org

 Multiple communication channels: the ability to interface with

users via many different devices (phone, WAP, internet etc.)
Basically, you can get what you want, when you want
wherever you are. Wikipedia.org
 The Players
The Top 11 CRM Manufactures Are:

Company Product name

1. Microsoft Microsoft Dynamics CRM 3.0
2. Sage Software SalesLogix CRM
3. SAP America Inc. SAP Business One CRM
4. Parature Inc. Parature
5. Entellium Entellium CRM
6. Pivotal corp. Pivotal CRM
7. Maximizer Software Maximizer Enterprise CRM
8. Netsuite Inc. NetSuite CRM+
9. Oncontact Software Oncontact V
10. ADAPT Software Applications ADAPT crm
11. Exact Software North America e-Synergy
Where is Siebel??
2020software.com
Supply Chain Management
 What Is a Supply Chain?
Flow of products and services from:
– Raw materials manufacturers
– Intermediate products manufacturers
– End product manufacturers
– Wholesalers and distributors and
– Retailers
• Connected by transportation and storage
activities
• Integrated through information, planning, and
integration activities
• Cost and service levels
1.1 What Is Supply Chain Management?

• Supply chain management is a set of

approaches utilized to efficiently integrate
suppliers, manufacturers, warehouses, and
stores, so that merchandise is produced and
distributed at the right quantities, to the right
locations, and at the right time, in order to
minimize system wide costs while satisfying
service level requirements.
 Two Other Formal Definitions
The design and management of seamless, value-added
process across organizational boundaries to meet the
real needs of the end customer
Institute for Supply Management
Managing supply and demand, sourcing raw materials
and parts, manufacturing and assembly, warehousing
and inventory tracking, order entry and order
management, distribution across all channels, and
delivery to the customer
The Supply Chain Council
 PC Industry Supply Chain
Tracing back the screen you stare at for the bulk of your time.
Cisco’s Value Network
 SCM Definition
Material Flow

Converter
Supplier Retailer
Distributor

Source
Converter Consumers
Distributor End-User
Supplier

Value-Added Services

Funds/Demand Flow

Information Flow

Reuse/Maintenance/After Sales Service Flow

 The SCM Network

FIGURE 1.1: The logistics network

 Key Observations
• Every facility that impacts costs need to be
considered
– Suppliers’ suppliers
– Customers’ customers
• Efficiency and cost-effectiveness throughout the
system is required
– System level approach
• Multiple levels of activities
– Strategic – Tactical – Operational
 Other Related Observations
• Supply chain strategy linked to the
Development Chain
• Challenging to minimize system costs and
maximize system service levels
• Inherent presence of uncertainty and risk
 Global Apparel Value Chain
Tracing back the dress you are wearing
Globally Dispersed Manufacturing
An Illustration: How Li & Fung Limited Might Make a Dress

Product
ProductDesign
Design QC
QC& &Shipping
Shipping
[Hong
[HongKong]
Kong] [Hong
[HongKong]
Kong]

Yarn
YarnSpinning
Spinning Weaving
Weaving Stitching
Stitching
[Korea]
[Korea] [Taiwan]
[Taiwan] [Indonesia]
[Indonesia]

Zippers+…
Zippers+…
[Japan+…]
[Japan+…]
 What is ERP?

• The practice of consolidating an enterprise’s

planning, manufacturing, sales and marketing
efforts into one management system.1
• Combines all databases across departments into a
single database that can be accessed by all
employees.2
• ERP automates the tasks involved in performing a
business process.1

Sources:
1. http://www.cio.com/summaries/enterprise/erp/index.html, viewed September 19, 2002
2. CIO Enterprise Magazine, May 15, 1999. 67
 Evolution of ERP

Source: http://www.intelligententerprise.com/020903/514feat2_1.shtml, viewed September 19, 2002. 68

 How Do ERP Systems Work?
Managers and
Stakeholders
Financial
Reporting Applications
Human
Sales and
Resource Applications
Delivery
Management
Applications
Applications
Sales Force Central
Manufacturing Back-office
Customers And Customer Database
Service Reps Applications Administrators Suppliers
And Workers

Service Human
Applications Resource Inventory
Management And Supply
Applications Applications

Employees

Source: Davenport, Thomas, “Putting the Enterprise into the Enterprise System”, Harvard Business Review, July-Aug. 1998.
69
 ERP Components
• Finance: modules for bookeeping • Manufacturing and Logistics: A
and making sure the bills are paid group of applications for planning
on time. Examples: production, taking orders and
– General ledger delivering products to the
– Accounts receivable
customer. Examples:
– Accounts payable
– Production planning
• HR: software for handling
– Materials management
personnel-related tasks for
corporate managers and – Order entry and processing
individual employees. Examples: – Warehouse management
– HR administration
– Payroll
– Self-service HR

Source: http://www.computerworld.com/printthis/1998/0,4814,43432,00.html, viewed September 19, 2002.

70
 An ERP Example: Before ERP

Orders
Parts
Sends report Customer
Demographic
Sales Dept. Files Customers

Checks for Parts

Calls back “Not in stock”
Accounting “We ordered the parts”
Files

Accounting
Invoices Sends report
Sends report accounting
Ships parts
Vendor
Warehouse
Order is placed
“We Need parts #XX”
with Vendor
Inventory
Purchasing Files
Files “We ordered the parts”
Purchasing
71
 An ERP Example: After ERP

Orders
Parts Inventory Data
If no parts,
order is placed
Customers Sales Dept. through DB Accounting

Financial Data exchange;

Books invoice against PO

Order is submitted
to Purchasing. Database
Purchasing record Books inventory
order in DB against PO

Order is placed
with Vendor

Warehouse
Vendor Purchasing

Ships parts
And invoices accounting 72
 Who are the main ERP vendors?

• Baan
• JD Edwards
• Oracle
• PeopleSoft
• SAP

73
 Why ERP?
3 Major Reasons:
• To integrate financial data.
• To standardize manufacturing processes.
• To standardize HR information.

Source: http://www.cio.com/summaries/enterprise/erp/index.html, viewed September 19, 2002.

74
 ERP Project and Time

• Real transformational ERP efforts will usually run

between 1 to 3 years, on average.
• Short implementations (3 to 6 months):
– small companies,
– implementation limited to a small area of the company, or
– the company only used the financial pieces of the ERP
system.
• The important thing is not to focus on how long it will
take but to understand why you need ERP and how
you will use it to improve your business.
Source: http://www.cio.com/summaries/enterprise/erp/index.html, viewed September 19, 2002.
75
 Total Cost of Ownership of
ERP
Total cost of ownership (TCO) is a model developed by Gartner
Group to analyze the direct and indirect costs of owning and
using hardware and software. TCO essentially helps a company
determine whether it wins or loses from specific technology
implementations.

• Metagroup study among 63 companies surveyed showed

that:
– the average TCO was $15 million (the highest was $300
million and lowest was $400k),
– the average TCO per user was $53,320.
Source: http://www.cio.com/summaries/enterprise/erp/index.html, viewed September 19, 2002.
76
 Total Cost of Ownership of
ERP

• It also found that:

– it took 8 months after the system was in to see any benefits,
– but that the median annual savings from the system was
$1.6 million per year.

Source: http://www.cio.com/summaries/enterprise/erp/index.html, viewed September 19, 2002.

77
 Hidden Costs of ERP
• Training
• Integration and testing
• Data conversion
• Data analysis
• Consultants
• Replacing best and brightest staff after implementation
• Implementation teams can never stop
• Waiting for ROI
• Post-ERP depression

Source: http://www.cio.com/summaries/enterprise/erp/index.html, viewed September 19, 2002.

78
 Benefits of ERP Systems

• Improving integration, flexibility

• Fewer errors
• Improved speed and efficiency
• More complete access to information
• Lower total costs in the complete supply chain
• Shorten throughput times
• Sustained involvement and commitment of the
top management
79
 Benefits of ERP Systems (cont’d)
• Reduce stock to a minimum
• Enlarge product assortment
• Improve product quality
• Provide more reliable delivery dates and
higher service to the customer
• Efficiently coordinate global demand, supply
and production

80