Introduction to the Internet

1. Introduction to the Internet • Definitions • Internet,TCP/IP, WWW, B2B, B2C, B2#, B2G,C2C,VAN, VPN, intranet, extranet, e-commerce,e-marketspace • The Internet • The World Wide Web (WWW) • Intranets and Extranets • The New Economy

2. Objectives: Internet and World Wide Web 1. To describe major characteristics of the Internet 2. To describe the role of protocols for the Internet 3. To describe major characteristics of the World Wide Web 4. To describe major drivers of the Net/Web 5. To describe major models in the New Economy 6. To distinguish between Internet, intranet and extranet

3. Objectives: Buyers, Sellers, and Electronic Markets • Be able to describe the major characteristics in the buyer, seller and electronic marketplace models of Electronic Commerce • Discuss other internet business models (auctions, reverse auctions, net markets, portals, bricks and clicks, ASP, web services) • Discuss assumptions for electronic marketplace • Discuss the impact of e-commerce on intermediaries • Describe the new e-commerce intermediaries • Define network externality, Metcalf’s law • Discuss Kelly’s 12 new rules • Discuss the four laws of computer security

4. How Long to Reach 30%? www.cisco.com - Facts and Stats • Internet - 7 years • Television - 17 years • Telephone - 38 years • Electricity - 46 years

5. The Internet Today • Metanetwork - network made up of interconnected networks of millions of individual computers with no central control. • Hard to shut down (because of interconnectivity) • Connected around the world via special computers called routers and hubs

6. The Internet Today • Connected over a grid called the backbone • Traffic funneled into backbone via network access points (NAPs) • Largest decentralized computer network in the world

7. The Internet Today • Phenomenal growth rate • Internet protocol: TCP/IP (Transmission Control Protocol/Internet Protocol) • Packet switching (hot potato routing) • Peer-to-peer communications

8. TCP/IP Protocols • Data is subdivided into packets • Provide functionality for productive networking • Packets: fundamental grouping of data for transmission on a digital network • Internet Protocol (IP): address space for internetworks • Transmission Control Protocol (TCP): packet size

9. Internet Governance • Not controlled by one body • No Internet police to enforce standards • Internet Society (ISOC)

10. Internet Society (ISOC) • Professional society • Voluntary organization • Concerned with growth and evolution of worldwide Internet • Has subgroups

11. National Science Foundation (NSF) Policy • NSF footed bill for US backbone • Had Acceptable Usage Policy (AUP) • Relaxed policy in 1991 • New policies allow, “announcements of new products or services for use in research or instruction, but not advertising of any kind” • Fantastic growth in commercial users and providers

12. The Information Superhighway • Also called the Net or the I-Way • Phrase used by newbies and Gore • High-speed global communications network • Many-to-many vs. one-to-one communications • Encompasses voice, data, telephony, cable television, satellite systems

13. Internet: The Big Picture http://navigators.com/internet_architecture.html

14. What is the Web? • World Wide Web, the Web, WWW • A popular way of accessing Internet information • Adds hypertext capabilities (HTML) • Incorporates multimedia - pictures, text, animation, sound • Format that is easy to learn and use • Accessed by browsers - Netscape, Mosaic, Explorer

15. Universal Resource Locator (URL) • Address for WWW browser to access information on Internet • Three components: • Service (protocol) • how to retrieve the file • A domain name with optional port • name of machine you are accessing from • server address • A path with optional file names • path and file name of item to be retrieved • may be missing

16. URL Address Components

17. The WWW Today • Most WWW servers and sites run by commercial providers • Businesses charged for storage and throughput • Governments subsidize the Web • Number of web sites doubles every 53 days • E-commerce on WWW is rapidly evolving

18. Driving Forces for WWW/Net • Change in NSF policies • Digitalization: text, documents, graphics, video, audio • Globalization • Convergence of communication-related industries • Publishing • Entertainment • Computing • Communications

19. Driving Forces (continued) • Increasing competition and cooperation • Critical mass • E-mail • PC’s • Virtualization • Falling cost and improved technology • Computers • Networking

20. Internet Sales by Products(Millions of Dollars) Forrester Research, 1997

21. Definitions • Intranets - networks using TCP/IP exclusively within an organization; inaccessible to outsiders • Extranets - A company’s interorganizational information unavailable to users of its intranet or to the wider Internet community • Value-added networks (VANs)- non-internet network maintained privately • Virtual private networks (VPNs) -corporate networks run over the Internet to replace leased phone lines between offices

22. Business Use of Internetworking Technologies (TCP/IP) A Business Individuals & Other Businesses www site general public fire wall business partners intranet extranet intimate trading partners

23. Easy navigation Accessible to most computing platforms Can integrate into distributed computing systems Scaleable (start small and grow) Intranet Features

24. Intranet Features (cont) • Extensible to many media types • Can be tied to legacy systems • Event driven vs. calendar driven • Great for B2E

25. What Typically “Flows” through the Public Web Site? • Information • firm history, financial, public relations • products/services overview • employment opportunities • Product/Service Orders • FAQs • Product catalogs • Order handling/verification • Customer Service/Support • FAQs • order tracking

26. What Typically “Flows” through the Intranet? • Information • employees, procedures, org. charts • products, components, suppliers, customers, competitors • human resource bulletins and record (updates) • financial data • Knowledge • discussion groups, bulletin boards, mediated archives • collaboration tools • Workflow • internal transfer of & access to electronic documents

27. What Typically “Flows” through the Extranet? • Information • employees, procedures, organizational charts • Product/Service Orders • “tailored” catalogs • transaction handling/verification • Knowledge • discussion groups, bulletin boards, mediated product/service/problem archives • collaboration tools • Workflow • internal transfer of & access to electronic documents • access to product, order, manufacturing, inventory databases • Customer Service/Support • FAQs • question/problem diagnosis/handling

28. Virtual Private Networks • Uses open, distributed infrastructure of the Internet to transmit data between corporate sites • Companies set up connections to the local connect points (points-of-presence) of their ISP • ISP’s handle connectivity details • Security can be provided for businesses and mobile workers

29. Virtual Private Networks • Security: authentication, access control, confidentiality, data integrity • Tunnels - senders encapsulate data in encrypted IP packets that hide the underlying routing and switching infrastructure from senders and receivers • Virtual - network is dynamic with connections set up to org. needs

30. Benefits - Virtual Private Networks • Costs savings • no installation fee • tiered pricing based on usage • Allows for different types of connections (ISDN, T1, xDSL) without installing equipment at corporate headquarters • Reduced technical support rqmts

31. Value of E-Commerce “The value of e-commerce transactions while still small relative to the size of the economy continues to grow at a remarkable rate. More significant than the dollar amount of these transactions are the new business processes and models that e-commerce enables.” Alan Greenspan

32. Definition of Electronic Commerce • Electronic Commerce is the ability to execute more effective and economically efficient business transactions over a network..... • Kalakota and Whinston, 1996 • Network of preference..... Internet • Electronic Business

33. Internet Economy • Small but growing at a phenomenal rate • The total US Internet economy more than doubled between 1996 and 1997 ---$15.5B to $38.8B • Revenues grew 68% last year: $507B (up $200B from last year) USA Today10/27/99 • Jobs grew from 1.6 million to 2.3 million in 1999 • Business to Business (B2B) e-commerce --largest share of the Internet economy • Internet economy is going through stages

34. Stage 1 (1995-1999): B2C Websites • $180- $300 billion • Business evolution on Internet (Kosiur) • Publishing • Interactivity • Transactions • Fulfillment settlement workflow

35. $1.8 to $3.2 Trillion in 2003 Focus on improving core activities Dynamic pages Gateways to legacy systems IBM Procurement example maverick buyers vs. economies of scale 30 days to 1 day for generating PO tell valued suppliers about out-of-line pricing Total savings (1999): $6 billion Stage 2 (now): Business Transformation - B2B

36. Stage 3 (2000-2005): Industry Restructuring • Empowers users and providers • New intermediaries • New players • Some disintermediation • Inter and intranet mergers • Focus on transforming and leveraging

37. B-to-E B-to-G C-to-C Hybrid Business-to- Employee – companies that provide services other companies can use to interface with employees Business-to-Government – companies who sell the bulk of their goods and services to state, local and national governments Consumer-to-Consumer – sites that primarily offer goods and services to assist consumers to interact A combination of B-to-B and B-to-C models Other Basic Business Models

38. Steps in Buyer/Seller Models

39. Steps in Buyer/Seller Models

40. Marketplace vs. Marketspace • E- Marketplace • Network that brings together different companies • Sometimes called net-markets (buyers and sellers can find each other) • Types: horizontal and vertical • Exchanges (web services) • E-Marketspace • Virtual market where the transactions taking place are all based on information exchange, rather that the exchange of goods and services • Company typically does not own or hold inventory

41. (Horizontal) Electronic Marketplace Assumptions • There are many buyers and sellers • none of the buyers or sellers represents a significant fraction of total demand or supply • The goods or service to be transacted is homogenous or standardized • doesn’t have standardized or idiosyncratic features • Buyers and sellers are well-informed about quality and price

42. Electronic Marketplace Principles • Intermediaries can reduce uncertainty of transaction • Markets will do business with other markets • Electronic marketplace may disrupt/destroy old value chains and enable new forms of value • Value chains will be extended to explore B2B relationship/process changes • Intermediaries are separating economics of information from economics of things

43. Electronic Marketplace: Implications? • Customer-centered • Pricing • Fraud • Quality • Intermediaries

44. Impact of E-Commerce on Intermediaries? Will middlemen be disintermediated in e-commerce environments?

45. New Intermediaries- Market Makers • Market makers (brokers) -bring buyers and sellers together • ONSALE • eBay • priceline • Dangers of online auctions • poor quality • overpaying • nondelivery

46. New Intermediaries - Buyer and Seller Agents • Seller agents - make markets more accessible to providers • Firefly (customer profiles) • Buyer agents - perform search and evaluation tasks on goods and services for purchasers (more examples of these agents) • Amazon.com • Auto-By-Tel

47. New Intermediaries • Context Providers - help buyers and sellers by simplifying the virtual terrain • ISPs - America Online • Portals- Yahoo!, Excite • Online communities - GeoCities • Payment enablers -handle purchase transactions and their related funds transfers, as well as risk management • Verisign • PayPal

48. New Intermediaries - Fulfillment specialists • Fulfillment specialists - handles the transfer and storage of goods and coordinate allied information, such as the management of shipping logistics • Fed Ex • UPS • E-commerce has helped their business

49. Disintermediation • Enables more efficient and effective interaction between companies and their end customers • Also called compression • May create problems between established distributors and online distribution channels • Disintermediation may be a threat to some enterprises, but it creates opportunities for others

50. Auctions Reverse Auctions Portals ASP Sellers place descriptions of items or services on the auction site and buyers bid for them (e-bay) Buyers state what they want to buy and sellers offer items or services to meet the request (Price.line) Site offers a customized homepage for the individual, offering information , services and links to other sites customized based on user’s state preferences (Yahoo) ASP Site offers business process functionality to customers, who use this site as their own internal business process (Agillion) Business Models - Definitions