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IS 425

IS 425. Enterprise Information LECTURE 6 Summer I 2005-2006. Agenda. Exercise Debate E-Commerce and E-Business Systems Next Week : Quiz/homework #3. Exercise. You are the IT steering committee that will decide which hospital project to fund.

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IS 425

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  1. IS 425 Enterprise Information LECTURE 6 Summer I 2005-2006

  2. Agenda • Exercise • Debate • E-Commerce and E-Business Systems • Next Week : Quiz/homework #3 Session 6

  3. Exercise • You are the IT steering committee that will decide which hospital project to fund. • 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: 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? Session 6

  4. Debate • How should team tasks be divided? • Debater • Research • Report writing • Arguments Session 6

  5. Growth of the Internet Dot com bust begins Session 6

  6. eCommerce Will Penetrate Business and Consumer Markets Session 6

  7. Types of E-Commerce • Business-to-Consumer (B2C): Internet • Purchasing, knowledge, entertainment, other • Intra-Organizational: Intranets (B2E) • Business intelligence, enterprise portal, workgroup communications, corporate digital library, sales force productivity, workflow, datawarehousing • Business-to-Business (B2B): Extranets • Supply chain management, Customer relationship Mgt; exchange • Consumer-to-Consumer (C2C) • Peer-to-Peer Session 6

  8. US eCommerce: The First Five Years • 1997 to 2002: explosive growth • 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 Session 6

  9. US eCommerce: The Next Five Years • 2002 to 2007: consistent, rapid growth • 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 Session 6

  10. The e-Commerce Value Chain Get and keep customer interest Turn interest into orders Service customers Manage orders Attract Interact Act React Catalog Sales static dynamic AdvertisingMarketing channels media Order capture Payment Fulfillment goods Customer service Order tracking Session 6

  11. The e-Commerce Value Cycle Attract React Interact Act Session 6

  12. Attract Customers (Marketing) • Purpose • Build brand awareness, attract customers, and entice them to buy • Merchandizing Methods • Advertising • Coupons • Sales and Promotions • Frequent buyer programs • 1:1 marketing Session 6

  13. Interact with Customers (Sales) • Purpose • Turn interest into orders • Catalog, Product and Service • Techniques • Registration with Internet search engines • Hyperlinks • Onsite product search • Product and price comparison • Dynamic vs. static contents • Pricing Session 6

  14. Act on Customer Instructions (Order Management) • Purpose: Manage order and shopping experience • Order Processing: • 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 • Delivering the goods ordered to their destination • Transmission of order information to warehouse, packing or order assembly for shipping, shipping and delivery Session 6

  15. React to Inquiries (Service) • 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 Session 6

  16. Value Proposition for Customers • Transform customer relationship from supplier-centered to customer-centered values • self service, 1:1; choices; delivery to customer location; customer needs; choice of service hours • Displace traditional source of values • 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 Session 6

  17. Value Proposition for Firms • 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 Session 6

  18. Merchant Model virtual merchants Click & Brick Multi-Channel Shopping Malls Advertising Model Horizontal portal Vertical portal Personalized portal Intermediary (Brokerage) Buy/sell fulfillment Buyer/demand aggregator Virtual mall Hypermediary (financial settlement) Auction broker Reverse auction B2C Business Models: Generating Revenues Session 6

  19. B2B E-Commerce • 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 Session 6

  20. B2B Models • Firm-based Models • 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 • Travel, Real estate, electronic payments, online financing and online trading, Logistics Session 6

  21. Sellers/suppliers Buyers Sell Side: 1:M eg. Cisco Buy Side: M:1 e.g., GE Buyers Sellers suppliers Public or Private Marketplaces M:M Catalogs (Newark in One) Exchanges, Houstonstreet Session 6

  22. Firm-based modelSell side B2B: One to Many • 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 Session 6

  23. Benefits 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) Improve service levels for low-volume customers Provide higher-quality information for customers Limitations Channel conflicts with existing distribution systems EDI (if used) is costly and could limit the participation Firm-based Model: Direct sale form Catalogue Session 6

  24. B2B Value Proposition • Reduced cost of selling • Reduced order processing costs • Improved service levels for low-volume customers • Higher quality information for customers • Accurate information Session 6

  25. Attract: Advertising & Marketing merchandising and branding become a p referred vendor Interact: Catalogs Searching capability for large electronic catalog Customized catalogs -- special part number and pricing Security Requirements Act: Order Processing Approval & Workflow Delegation Act: Payment Purchase Order, Procurement Cards, EFT Act: Fulfillment Predefined ship-to address and order aggregation React: Customer Service Training, Software maintenance, techsupport B2B Commerce Value Chain--different from B2C Session 6

  26. Firm-Based Model: Buy-Side: Many to one, E-Procurement • Two types of purchases (what are purchased) • 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 Session 6

  27. Traditional EDI vs. Internet Enabled EDI (VAI) • 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: • Common standards; Flat pricing; Security • Easy/cheap access; Infrastructure Session 6

  28. Why XML is Successful • 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 Session 6

  29. XML and B2B • 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 Session 6

  30. Internal and External Process Enablement Session 6

  31. E-Commerce Application Building Blocks Session 6

  32. Sell-Side E-Commerce Systems Session 6

  33. Examples of e-Commerce Web Site Engineering • http://condor.depaul.edu/~schan/455home/ECTgallery.htm Session 6

  34. Question: • EDI is electronic data interchange – • 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? Session 6

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