E-COMMERCE

UNIT 1 – ELECTRONIC COMMERCE

Introduction

E-commerce: The cutting edge for business today is electronic commerce. Broadly defined,
electronic commerce is a modern business methodology i.e. buying and selling of goods and
services via computer networks, that address the needs of organizations, merchants and
consumers to cut across the costs while improving the quality of goods and services and also
increasing the speed of service delivery.

It is also used to search and retrieve information in corporate decision making.

E- Commerce is well suited to facilitate the current reengineering of business processes occurring
at many firms.

Main goals of reengineering and e- commerce are:

(i) Reduced costs

(ii) Lower product cycle times.
(iii) Faster customer response
(iv) Improved service quality

The effort is to use electronic messaging technologies i.e. by reducing paperwork and increasing
automation.

The key element of e-commerce is Information processing. The information processing activity
is usually in the form of business transactions, for which several broad categories can be
observed:

(i) Transactions between a company and the consumer over public networks for the
purpose of home shopping use encryption for security & electronic cash, credit,debit
tokens for payment.
(ii) Transactions with trading partners using EDI
(iii) Transactions for information gathering such as
market research using barcode scanners,
information processing for decision making,
information manipulation for operations &
supply chain management.
(iv) Transactions for information distribution with prospective customers, including
interactive advertising, sales, and marketing.

Page 1
E-COMMERCE

Advantages of E-Commerce:

(1) Operates 24*7 (browsing, buying and selling)

(2) No geographic limitation.

(3) Wide range of products and services.

(4) Wide choice of payment options (cash, credit card, debit card, vouchers)

(5) Helps consumers compare different products.

Disadvantages of E-Commerce:

(1) Lacks tangibility( property having a tangible form)

(2) Susceptible to cyber attacks.

(3) Low customer loyalty.

(4) Highly competitive.

(5) Highly dependent on technology and needs to be continuously updated with the latest web
and CRM (Customer Relationship Management) tools.

Types of E-Commerce:

(i) Business –to-Business: Transactions between two business organizations.

1 2
Internet
4 3

(1) Hosts business

(2) Access product information

(3) Places an order for the product

(4) Receives order processes and dispatch the product

Ex: whole sale suppliers

Page 2
 E-COMMERCE
(ii) Business-to-Consumer: Transactions between business organization and consumers.

Ex: Flipkart, Amazon.

(iii) Consumer-to-Business: When consumer writes reviews or when consumer is a seller

and business is a buyer and also when consumer gives a useful idea for new product
development.
Ex: Naukri.com, Monster.com

(iv) Consumer-to-Consumer: Transactions between two consumers.

Ex: OLX
---------------------------------------------------------------------------------------------------------------------

Categories of E-Commerce:

The categories of e-commerce are:

1. Electronic Markets
• It is a foundation of E-Commerce
• It integrates advertising, product ordering, delivery and payment systems.
• Present a range of offerings available in a market segment so that the purchaser can
compare the prices of the offerings and make a purchase decision.
Example: Airline Booking System

Page 3
E-COMMERCE

Seller 1

info

info E-Market info Customer

Seller 2

info
Seller 3

product
Product Distribution Network

2. Electronic Data Interchange (EDI)

• It provides a standardized system
• Communicated from one computer to another without the need for printed orders and
invoices & delays & errors in paper handling
• It is used by organizations that a make a large no. of regular transactions.
• EDI is the way of transferring business documents in an organization internally between
its various departments or externally with suppliers, customers etc.
EDI Documents:
- Invoices
- Purchase orders
- Shipping requests
- Acknowledgements
- Business Correspondence letters
- Financial Information letters.

3. Internet Commerce
• It is used to advertise & make sales of wide range of goods & services.
• This application is for both business to business & business to consumer transactions.

• Commercial activities on the internet like auctioning, placing orders, making payments,
Page 4
E-COMMERCE
transfering funds, collaborating with trading partners.
• Internet-Commerce Includes:
- Full Sales and Marketing Cycle: Analyzing the online feedback to discover customer
needs.
- Identifying new markets: Exposure to global audience through www.
- Developing ongoing customer relationships: Achieving loyalty through ongoing
online mail interaction.

- Assisting potential customers with their purchasing decision: Guiding them through
good product choices.

- Providing round the clock point of sale irrespective of location

- Supply chain Management
- Customer Support.

FRAMEWORK OF E-COMMERCE:
Generic Framework of Electronic Commerce

Electronic Commerce Applications

businesstransactions,
documents, multimediacontents,
Technical standardsfor electronic
Supply Chain Management Online Marketing and Advertising
economical development,
Publicpolicy,legal,

Procurement & Purchasing Online Shopping

Audio and Video on Demand Online Financial Transaction
Entertainment and Gaming Education and Research

Common Business Services Infrastructure

(Security/Authentication, Electronic Payment, Directories/Catalogs)

Multimedia Content & Network Publishing Infrastructure

(Digital Video, Electronic Books, World Wide Web)

Messaging & Information Distribution Infrastructure

(EDI, E-Mail, HyperText Transfer Protocol)

Information Superhighway Infrastructure

(Telecom, Cable TV, Wireless, Internet)

• E-Commerce application will be built on the existing technology infrastructure

- A myriad of computers

- Communication networks

- Communication software

• Common business services for facilitating the buying and selling process

• Messaging & information distribution as a means of sending and retrieving information

Page 5
 E-COMMERCE
• Multimedia content & network publishing, for creating a product & a means to
communicate about it.
Movies=video + audio
Digital games=music + video + software
Electronic books=text + data + graphics + music + photographs + video
• The information superhighway- the very foundation-for providing the high way system
along which all e-commerce must travel.

• Any successful e-commerce will require the I-way infrastructure in the same way that
regular commerce needs.

• I-way will be a mesh of interconnected data highways of many forms like

- Telephone,wires,cable TV wire

- Radio-based wireless-cellular & satellite

• The two pillars supporting all e-commerce applications & infrastructure are:
- Public Policy: Issues like Universal access, Information pricing.
- Technical Standards: User Interfaces, Nature of Information publishing, Transport across
the network.
----------------------------------------------------------------------------------------------------------------------------

ANATOMY OF E-COMMERCE APPLICATIONS

E-Commerce applications are:
1. Multimedia Content for E-Commerce Applications

2. Multimedia Storage Servers & E-Commerce Applications

i. Client-Server Architecture in Electronic Commerce

ii. Internal Processes of Multimedia Servers

iii. Video Servers & E-Commerce

3. Information Delivery/Transport & E-Commerce Applications

4. Consumer Access Devices

Page 6
E-COMMERCE

FIG: ELEMENTS OF E-COMMERCE APPLICATIONS

1. Multimedia Content for E-Commerce Applications

• Multimedia content can be considered both fuel and traffic for electronic commerce
applications.
• The technical definition of multimedia is the use of digital data in more than one format,
such as the combination of text, audio, video, images, graphics, numerical data,
holograms, and animations in a computer file/document.
• Multimedia is associated with Hardware components in different networks.

• The Accessing of multimedia content depends on the hardware capabilities of the

customer.

Page 7
E-COMMERCE

2. Multimedia Storage Servers & E-Commerce Applications:

• E-Commerce requires robust servers to store and distribute large amounts of digital content
to consumers.
• These Multimedia storage servers are large information warehouses capable of handling
various content, ranging from books, newspapers, advertisement catalogs, movies, games,
& X-ray images.
• These servers, deriving their name because they serve information upon request, must
handle large-scale distribution, guarantee security, & complete reliability

i. Client-Server Architecture in Electronic Commerce

• All e-commerce applications follow the client-server model

• Clients are devices plus software that request information from servers or interact known
as message passing
• Mainframe computing , which meant for “dump”

• The client server model, allows client to interact with server through request-reply
sequence governed by a paradigm known as message passing.
• The server manages application tasks, storage & security & provides scalability-ability to
add more clients and client devices (like Personal digital assistants to Pc’s. See in fig.

Page 7
E-COMMERCE

ii. Internal Processes of Multimedia Servers

• The internal processes involved in the storage, retrieval & management of multimedia
data objects are integral to e-commerce applications.
• A multimedia server is a hardware & software combination that converts raw data into
usable information & then dishes out.

• It captures, processes, manages, & delivers text, images, audio & video.

• It must do to handle thousands of simultaneous users.

• Include high-end symmetric multiprocessors, clustered architecture, and massive parallel
systems.

iii. Video Servers & E-Commerce

The electronic commerce applications related to digital video will include
1. Telecommunicating and video conferencing

2. Geographical information systems that require storage & navigation over maps

3. Corporate multimedia servers

4. Postproduction studios

5. Shopping kiosks.

• Consumer applications will include video-on-demand.

• The figure which is of video–on demand consist video servers, is an link between the
content providers (media) & transport providers (cable operators)

Page 8
E-COMMERCE

3. Information Delivery/Transport & E-Commerce Applications

• Transport providers are principally telecommunications, cable, & wireless industries.

Transport Routers
Information Transport Providers Information Delivery Methods

• Telecommunication companies long-distance telephone lines; local telephone lines

• Cable television companies Cable TV coaxial, fiber optic & satellite lines

• Computer-based on-line servers Internet; commercial on-line service providers

• Wireless communications Cellular & radio networks; paging systems

4. Consumer Access Devices

Information Consumers Access Devices
• Computers with audio & video Personal/desktop computing capabilities
Mobile computing
• Telephonic devices Videophone

• Consumer electronics Television + set-top box Game systems

• Personal digital assistants (PDAs) Pen-based computing, voice-driven computing

Page 9
E-COMMERCE

E-COMMERCE CONSUMER APPLICATIONS:

• People needs entertainment on demand including video, games, news on-demand,
electronic retailing via catalogs etc.
• Currently now we are taking the video on-demand.

• Why most companies betting heavily on this?

1. 93 million homes have television

2. Americans spend nearly half their free time watching television

3. Every evening, more than one-third of the population is in front of a television

4. Sight, sound, and motion combine to make television a powerful means of marketing

1. Consumer Applications and Social Interaction:

• Lessons from history indicate that the most successful technologies are those that make
their mark social
• In 1945, in U.S no one had TV. By 1960 about 86percent of households did

• Now contrast with Telephone. Bell invented the telephone in 1876 and by1940, 40% of
U.S. households and by 1980 about 95-98 percent of households connected
• Penetration was slower for Telephone than for TV because of the effort needed to set up
the wiring infrastructure
 The impact of both was good on business, social, consumer behavior and entertainment
habits

 Radio began in 1960, and by 1989, almost 3 decades later, just 319 radio stations
followed the news format

 In 1994, their number exceeded 1000

What do Consumers really want?

1. They want quality and cost of service

2. If a new system requires more steps to do essentially the same things, consumers may
resist it
3. Some people fit that mold, but most of public prefers to lay back and just watch
television and let someone else do the work of figuring out the sequence of television
programming

Page 10
E-COMMERCE

What are Consumers willing to spend?

1. According to the video on-demand, consumers get the cable bill at basic charge they will
buy

2. If it is doubled they will not buy and at the service provider economics will increased
then network operators might look to advertises to fill the gap

Delivering products to Consumers

1. Packing and distribution must be considered

2. Blockbuster video collects the information and shows the typical consumer

3. Spends $12 a month on home video expenditures

4. Go to video store to select video on limited budget and has time to kill

5. Only periodically expends a large sum of money

Consumer Research and E-Commerce

Consumer opinion about interactive television is

 46% be willing to pay

 39% want video phone calls

 63% would pay for movies on-demand

 57% would pay for Television shows on-demand

 78% said their worry about it is that they will pay for something that they previously
received free of charge
 64% are think it make it harder for viewers to protect privacy

 41% are tell that it is too confusing to use.

--------------------------------------------------------------------------------------------------------------------

E-COMMERCE ORGANIZATIONAL APPLICATIONS

(i) Changing business Environment

1. The traditional business environment is changing rapidly

2. Many companies are looking outside and within to shape business strategies

3. These activities include private electronic connections to

customers,suppliers,distributors,industry groups etc

Page 11
E-COMMERCE
4. The I-superhighway will expand this trend so that it allow business to exchange
information.

(ii) E-Commerce and the retail Industry

1. Conditions are changing in the “new economy” with respect to the retail industry

2. Consumers are demanding lower prices, better quality, a large selection of in-season
goods.

3. Retailers are filling their order by slashing back-office costs, reducing profit margins,
reducing cycle times. buying more wisely and making huge investments in technology

4. Retailers are in the immediate line of fire and were first to bear the brunt of cost cutting

(iii) Marketing and E-Commerce

1. E-commerce is forcing companies to rethink the existing ways of doing target marketing
and even event marketing.

2. Interactive marketing is in electronic markets via interactive multimedia catalogs

3. Users find moving images more appealing than still image and listening more appealing
than reading text on a screen

4. Consumer information services are a new type of catalog business

(iv) Inventory Management and Organizational Applications

1. With borders opening up and companies facing stiff global competition

2. Adaptation would include moving to computerized, “paperless” operations to reduce

3. Once targeted business process is inventory management, solutions for these processes go
by different names
4. In manufacturing industry they’re known as just-in-time inventory systems, in the retail
as quick response programs, and in transportation industry as consignment tracking systems

Page 12
E-COMMERCE
Just-in-Time (JIT) Manufacturing
1. It is viewed as an integrated management system consisting of a number of different
management practices dependent on the characteristics of specific plants

2. The first principle is elimination of all waste.

3. The following management practices are focused factory, reduced set-up times, group
technology, total productive maintenance, multifunction employees, uniform workloads,
IT purchasing,kanban total quality control & quality circles

Quick Response Retailing (QR)

1. It is a version of JIT purchasing tailored for retailing
2. To reduce the risk of being of out of stock, retailers are implementing QR systems

3. It provides for a flexible response to product ordering and lowers costly inventory levels

4. QR retailing focuses on market responsiveness while maintaining low levels of stocks

5. It creates a closed loop consisting of retailer, vendor, & consumer chain,& as consumers
make purchases the vendor orders new deliveries from the retailer through its computer
network

(v) Supply Chain Management

1. QR and JIT address only part of the overall picture
2. Supply Chain Management (SCM) is also called “extending”, which means integrating
the internal and external partners on the supply and process chains to get raw materials to
the manufacturer and finished products to the consumer

3. It includes following functions

 Supplier management: The goal is to reduce the number of suppliers and get them to
partners.
 Inventory management: The goal is to shorten the order-ship-bill cycle. When a majority

Page 13
E-COMMERCE
of partners are electronically linked, information faxed or mailed
 Distribution management: The goal is to move documents (accurate data) related to
shipping

 Channel management: The goal is to quickly disseminate information about changing

operational conditions ( technical, product, and pricing information) to trading partners
 Payment management: The goal is to link company and the suppliers and distributors so
that payments can be sent and received electronically
 Financial management: The goal is to enable global companies to manage their money in
various foreign exchange accounts
 Sales force productivity: The goal is to improve the communication flow of information
among the sales, customer & production functions
In sum, the supply chain management process increasingly depends on electronic markets

(vi) Work group Collaboration Applications:

1. A internetwork that enables easy and inexpensive connection of various organizational
segments
2. It is to improve communications and information sharing and to gather and analyze
competitive data in real-time
3. Videoconferencing, document sharing and multimedia e-mail, are expected to reduce
travel and encourage telecommuting

4. Improves the distribution channel for documents and records to suppliers, collaborators
and distributors

Page 14
E-COMMERCE

E- COMMERCE and WWW

The need for E-commerce stems from the demand within business and government must make better use
of computing i.e. to better apply computer technology to improve business process and information exchange
both within the an organization and across the organization. E-commerce is used to devote proper exchange of
business information using EDI, E-mail, Electronic bulletin boards, EFT(electronic fund transfer) and other
similar technologies.

E-Commerce is used to describe a new online approach to perform traditional function such as payment and
fund transfer, order entry and processing inventory management involving cargo tracking, electronic catalogue
etc.
Advertising, marketing and customer support functions are also a part of E-commerce application.
No single technology can provide the full potential of E-commerce. Therefore we require an integrated
architecture which is revolving in the form of WWW as E-commerce is becoming more matured. Thus we need
to develop sophisticated applications on WWW.

Architectural frame work of E-commerce:

A Frame Work is intended to define and create tools that integrate the information found in today’s closed
system and allow the development of E-commerce applications.

Architectural framework should focus on synthesizing the diverse resources already in place incorporation to
facilitate the integration of data and software for better use and application.

The E-commerce applications architecture consists of 5 layers of functionality or services. They are

1. Application Services
2. Brokerage Services
3. Interface support layer
4. secure messaging & EDI
5. Middleware, structured document interchange.

1. Application services:

It will be composed of existing and future applications based on innate architecture. The three distinct
classes of E-commerce applications can be distinguished as
(a) Consumer to Business
(b) Business to Business
(c) Intra organization.

Page 1
E-COMMERCE
(a) Consumer to Business:
We call this enterprise market place transaction. In market place transaction customer learn about
product differently through Electronic publishing by them differently using Electronic cash and
secure payment and have them developed differently.
(b) Business to Business:
This is called as market link transaction. Here business, government and other organizations depend
on computer to computer communication as a fast, economical dependable way to conduct business
transactions. They include the use of EDI and E- mail for Purchasing goods and services, buying
information and consulting services, submitting requests for proposals and receiving proposals.

(c) Intra Organizational transactions:

This is called as market driven transaction. A company becomes market driven by dispersing
throughout the firm information about his customers and competitors by spreading strategic and
tactical decision making so that all units can participate and by continuously monitoring their
customer commitment.

A market driven business develops a comprehensive understanding of its customer business and how
customers in the immediate and downstream markets perceive value. Three major components of
market driven transactions are

(i) Customer orientation through product and service customization

(ii) Cross functional coordination through enterprise integration, marketing and advertising.
(iii) Customer service.

2. Information Brokerage and management:

This layer provides service integration through the notion of information brokerages. Information
brokerage is used to represent an intermediary which provides service integration between customer and
information providers, given some constraints such as low price, fast service, profit maximization for a
client.
Information brokerage addresses the issue of adding value to the information that is retrieved.
Brokerage function can support data management and traditional transaction services. Brokerage may
provide tools to accomplish more sophisticated tasks such as time delay updates or feature comparative
transaction.
At the heart of this layer lies the work flow scripting environment that is built on software agent model
that coordinate work and data flow among support services. Software agents are mobile programmers that
have been called as “healthy viruses”, “digital butlers”, and “intelligent agents”. Agents are
encapsulations of users instructions that perform all kinds of tasks in electronic market places spread
across the network.

Page 2
E-COMMERCE
3. Interface support service:
The third layer interface and support services will provide interface for e-commerce applications such as
interactive catalogues and will support directory services and other functions necessary for information
search and access. Interactive catalogues are customized interface to consumer applications such as
home shopping. An interactive catalogue is an extension of paper based catalogues and incorporates
additional features such as sophisticated graphics and video to make advertising more attractive.

Directories on the other hand operate behind the scenes and attempt to organize the huge amounts of
information and transactions generated to facilitate electronic commerce. Directory services databases
make data from any server appear as a local file. Thus directories play an important role in information
management functions.

4. Secure messaging and structure document interchange service:

The importance of fourth layer is secured messaging. Messaging is software that sits between the
network infrastructure and the clients or e-commerce applications.

Messaging services offer solutions for communicating non formatted data such as letters, memo, reports
etc as well as formatted data such as purchase order, shipping notices and invoice etc. messaging support
both for synchronous (immediate) and asynchronous (delay) messaging. When a message is sent work
continuous (software does not wait for response). This allows the transfer of messages through store and
forward methods.
With messaging tools people can communicate and work together more effectively, no matter where they
are located.
The main disadvantages of messaging are the new types of applications it enables, which appear to be
more complex especially to traditional programmers.

5. Middleware services:
Middleware is a relatively new concept that emerged only recently. Middleware is a mediator between
diverse software programs that enable them to talk with one another. It solves all the interface,
translation, transformation and interpretation problems that were driving application programmers crazy.

Another reason for Middleware is the computing shift from application centric to data centric. i.e.,
remote data controls all of the applications in the network instead of applications controlling data. To
achieve data centric computing middleware services focus on three elements.

(1) Transparency
(2) Translation security management
(3) Distributed object management and services

(1) Transparency:
Transparency implies that users should be unaware that they are accessing multiple systems.
Page 3
E-COMMERCE
Transparency is essential for dealing with higher level issues than physical media
interconnections that the underlying network infrastructure is in charge of. Transparency is
accomplished using middleware that facilitates a distributed computing environment. This
gives users and applications transparent access to data, computation and other resources
across collection of multi vendor heterogeneous systems.

(2) Transaction security management:

The two broad categories of security management services for transaction processing are

(a) Authentication
(b) Authorization.
Transaction integrity must be given for business that cannot afford any loss or inconsistency in
data. For E-commerce, middleware provides qualities expected in a standard transaction
processing system i,e. the so called ACID properties ( Atomocity, consistency, isolation,
Durability ). The Security in transaction security management is maintained through
confidentiality and integrity.

Confidentiality: when a message is sent electronically, the sender and receiver may desire that the
message remain confidential, and thus not read by any other parties.

Integrity: when a message is sent electronically, both the sender and receiver want to ensure that the
message received is exactly the same as the message transmitted by the sender. A message that has not
been altered in any way, either intentionally or unintentionally, is said to have maintained its integrity.
(3) Distributed Object Management:
Object orientation is proving fundamental to the proliferation of network based application for the
following reasons.
It is hard to write a network based application without either extensive developer retaining or
technology that adopts the difficulties of the network. Objects are defined as combination of data and
instructions acting on the data. Objects are an evolution of more traditional programming concept of
functions and procedures.

A natural instance of an object in E-commerce is a document. A document carries data and often carries
instructions about the action to be performed on the data.

Middleware acts as an integrator for various standard protocols such as TCP (Transmission Control
Protocol) IP (Internet protocol).
--------------------------------------------------------------------------------------------------------------------------

Page 4
E-COMMERCE
WEB BACKGROUND:

Hypertext Publishing
Web provides functionality necessary for e-commerce. The web has become an umbrella for wide range
of concepts and technology that differ markedly in purpose and scope which include hypertext publishing
concept, the universal reader concept and the client server concept.

Hypertext publishing promotes the idea of seamless information world in which all online information can
be accessed and retrieved. In a constant and simple way hypertext publishing is a primary application of
web interest in hypermedia. On the internet (called distributed or global hypermedia).

Hypertext Vs hypermedia:

Hypertext
Hypertext is an approach information management in which data are shared in the network of document
connected by links. This link represents relationship between nodes.

Hypermedia
A hypermedia system is made up of nodes (documents) and links (pointers). A node generally represents
a simple concept and idea. Nodes can contain texts, graphics, audio, video images etc. nodes are
connected to other nodes by links. The movement between nodes is made by activating links which
connect related concept or nodes links can be bidirectional.

Hypertext is a simple context based on the association of nodes through links. A node from which a
link is originated is called the reference node and a node at which a link ends is called referent node. The
movement between the links is made possible by activating links. The promise of hypertext lies in the
ability to produce large complex richly connected and crossed reference bodies of information.

Benefits of Hypermedia:

1. Hypermedia documents are much more flexible than conventional documents.

2. Hypermedia documents offer video sequences animation and even compute programs.
3. Its power and appeal increases when it is implemented in computing environments that include
network, micro computers, work stations, high resolution displays and large online storage.
4. It provides dynamic organization.
5. Hypermedia systems provides non-linear innovative way of accessing and restricting network
documents

Page 5
E-COMMERCE
TECHNOLOGY BEHIND THE WEB:

Information providers (publishers) run programs called servers from which the browsers can
obtain information. These programs can either be web servers that understand the hypertext
transfer protocol (HTTP), “gateway” programs that convert an existing information format to
hypertext, or a non-HTTP server that web browsers can access i.e FTP or Gopher servers.

Web servers are composed of two major parts.

1. The hypertext transfer protocol ( HTTP ) for transmitting documents between servers and
clients .
2. HTML format for documents.

The link between HTML files & HTTP server is provided by Uniform Resource Locator (URL).

Uniform Resource Locator:

The documents that the browsers display are hypertext that contains pointers to other documents.
The browser allows us to deal with the pointer in a transparent way that is select the pointer we are
presented with a text to which it points. This pointer is implemented by using a concept which is central to
web browser known as URL.

URL’s are streams used as address of objects (documents, images etc ) on the web. URL marks
the unique location on the internet so that a file or a service can be found.

URL’s follow a consistent pattern that the first part describes the type of the resources, second
part gives the name of the server posting the resources and the third part gives the full name of resources.
e.g : FTP://server.address / complete file.name

URL is central to web architecture. It is easy to address an object anywhere on the internet, it is
essential for the system to scale & for the information space to be independent on network and server
topology.

Hypertext Transfer Protocol ( HTTP ):

It is the simple request response protocol that is currently run over TCP and is the basis of WWW.
HTTP is a protocol for transferring information efficiently between the requesting client and server. The
data transferred may be plain text, hypertext images or anything else. When a user browse, the web objects
are retrieved in rapid succession from often widely dispersed servers.

Page 6
E-COMMERCE
HTTP is used for retrieving documents in an unbounded & extensible set of formats. It is an
internet protocol. It is similar in its readable, text based style to the file transfer ( FTP ) & the network
news (NNTP) protocols that have been used to transfer files and news on the internet for many years.

When objects are transferred over network, information about them is transferred in HTTP
Header. The set of headers is an extension of the multi purpose internet mail extension ( MIME ) set. This
design decision was taken to open the door to integration of hypermedia mail , news and information
access.

HTTPD Servers ( Hypertext transfer protocol domain )

The server that are used to publish information via WWW servers are called HTTPD servers.
While choosing a web server flexibility, ease of administrator, security features, familiarity and
performance are considered.

It is important to evaluate the tasks for which the web server is used. A server used for internet
based marketing & technical support task will need more powerful server than the web server used
internally within a firewall for distributing memos and bulletins. HTTPD servers are ideal for companies
that want tp provide multitude of services ranging from product information to technical support.

HTML ( Hypertext markup language )

At the heart of the web is a simple page description language called HTMl. It is a common basic
language of interchange for hypertext that forms the fabric of the web. It is based on an international
electronic document standard called Standard generalized markup language (SGML)

HTML enables document orientation for the web by embedding control codes in ASCII (
American standard code for information interchange ) text to designate titles, headings, graphics and the
hypertext links, making links of SGML’s powerful linking capabilities. HTML was meant to be a
language of communication which actually flows over the network HTML was designed to be sufficiently
simply as to be produced easily by the people and automatically generated by the programs.

HTML Forms
Forms support is an important element for doing online business. Forms are necessary for
gathering user information conducting surveys and also providing interactive services.
Forms make web browsing an interactive process for the user and the provider. They provide the
means to collect and act upon the data entered by end users. Forms also open up a number of possibilities
for online transactions such as restricting specific news articles, specifying such as request , soliciting
customer feedback or ordering products. Numbers of features are available for building forms including
text boxes, radio buttons, and check boxes.

Common Gate way Interface Services (CGI ):

Page 7
E-COMMERCE
An important aspect of web server development is application gateways. More specifically it is CGI. CGI
is a specification for communicating data between web server and other application server. CGI is used
whenever web server needs to send or receive data from another application.

A CGI script is a program that negotiate the movement between web server and an outside
application. CGI scripts may be written virtually any high level language such as C, Perl ( Practical
extraction and reporting language), Java scripts etc.
-----------------------------------------------------------------------------------------------------------------

SECURITY AND THE WEB:

Security and confidentiality are essential before business conduct, financial transactions over the
internet has become a big problem due to the increasing number of application oriented towards
commerce. Therefore commercial application requires that the client and server be able to authenticate
each other and exchange data confidentiality. This exchange has three basic properties.

1. Clients are confident about servers they are communicating with server authentication.
2. Client conversation with server is private using encryption.
3. Client conversation cannot be tampered or inter separated with data integrity.

Categories of Internet data & Transaction:

Several categories of data must be encrypted making internet data security an interesting
challenge.

Public Data :

Public data have no security distinctions and can be read by anyone. Such data should be
protected from unauthorized tampering or modification because a reader may perform damaging actions
on its contents.
Copyright Data:

Copyright data have content that is copyrighted but not secret. The Owner of the data is willing
to provide it but wishes to ensure that the user has paid for it. The objective is to maximize the revenue
and security.
Confidential Data:

Confidential data contains material that is secret but whose existence is not secret such data
include bank account systems, personal files etc. such material may be referenced by public or copyright
data.
Secret Data:

Page 8
E-COMMERCE
Secret data existence is a secret such data might include algorithms which is necessary to
monitor, log all access to secret data.

Despite the variety of data, security and verification are necessary for all
Types because of the sensitivity of information being transferred and to protect the consumer
form various forms of fraud and misconduct.

WWW based security schemes:

Several methods can provide security in the web framework. This includes the following.

1. SHTTP:- (Secured Hypertext Transfer Protocol )

SHTTP will enable the incorporation of various cryptographic messages, formats such as
digital signature Algorithms (DSA) & RSA standards into the both their client & servers.

2. SSL:- (Security Socket Layer )

SSL uses RSA security to wrap security information around TCP/IP based protocols. The
benefit of security socket layer over secured HTTP is that SSL is not restricted to HTTP. But
can also be used for security for FTP & TELNET.

3. SHEN :

It is the security scheme for the web sponsored by www. It is not non-commercial or more
research oriented security & is similar to SHTTP.

SHEN Security scheme for the web:

SHEN provides for three separate security – related mechanisms.

1. Weak authentication with low maintenance overhead and without patent or export
restrictions. A user identity must be established as genuine. Unauthorized access must be
improbable but need not be secure from all possible forms of attack.
2. Strong authentication via public key exchange. A user identity must be established as
genuine. Unauthorized access must be impossible except by random chance or by access
to unknown technology.
3. Strong encryption of message content. The data must not be transmitted in a form
comprehensible to a third party, an identified party acts as guarantor in this respect.

Messaging Security Issues:

In order to conduct electronic commerce on the internet, including the WWW, messages must be

Page 9
E-COMMERCE
electronically transmitted in some manner. In addition to the general concern of data security, a
primary concern is the non-refutable linking of message contents to individuals and businesses.
Several important security services are required to ensure reliable, trustworthy electronic
transmission of business messages. The primary security services are interrelated. The five
security services are:

1. Confidentiality: when a message is sent electronically, the sender and receiver may desire
that the message remain confidential, and thus not read by any other parties. Analogies can be
drawn to traditional mail and phone systems. In regular mail systems, the sender uses an
envelope to conceal the inside contents rather than writing the information on a post card.
For E-commerce, keeping order details and credit information confidential during the
transmission is a major security concern. Further, trading partners sharing design specifications
also want to ensure the confidentiality of their messages so that proprietary design specifications
can be viewed only by the sender and the intended receiver of the information. The most
effective technique for masking a message is encryption.

2. Integrity : when a message is sent electronically, both the sender and receiver want to ensure
that the message received is exactly the same as the message transmitted by the sender. A
message that has not been altered in any way, either intentionally or unintentionally, is said to
have maintained its integrity. For electronic commerce verifying that the order details sent by
purchaser have not been altered is one major security concern. An effective cryptographic means
of ensuring message integrity is through the use of hashing , where a “hash” of the message is
computed using an algorithm and the message contents. The hash value is sent along with the
message; then, upon receipt, a hash is calculated by the recipient using the same hashing
algorithm. The two hash values ( received and calculated) are compared, and a match can
indicate that the message is the same as that sent.

3. Authentication: when an electronic message is received by a user or a system, the identity of

the sender needs to be verified( i.e.authenticated ) in order to determine if the sender is who he
claims to be. To identify a user at least one of the following types of information is generally
required
 Something you have(e.g., a token)
 Something you know( e.g., a PIN) or
 Something you are (e.g., fingerprints or signatures)
4. Non-Repudiation: The term ‘repudiate’ means to accept as having rightful authority or
obligation as in refusing to pay a debt because one refuses to acknowledge that the debt exists.
For business transactions, unilateral repudiation of a transaction by either party un acceptable

Page 10
E-COMMERCE
and can result in legal action. Well designed electronic commerce system provide for non-
repudiation, which is the provision for irrefutable proof of the origin receipt, and contents of an
electronic message.

5. Access Controls: Electronic commerce systems, particularly those using the internet and the
WWW, require a certain amount of data sharing. Limiting access to data and systems only to
authorized users is the objectives of access controls. Some form of authentication procedure is
typically employed in access controls in order to gain entry into the desired part of the system.
The emerging attribute certificate or “privilege management” technology promises to be a highly
effective form of access control provided it is implemented correctly. Firewalls can also be used
to implement additional screening mechanisms.

SECURITY ISSUE SECURITY OBJECTIVE SECURITY

TECHNIQUES
Confidentiality Privacy of messages Encryption
Message Interit Detecting message altering Hashing
Authentication Origin verification Digital signatures
challenge- Response
passwords Biometric
devices
Non-Repudiation Proof of Origin, receipt, and Bi-directional hashing
contents( sender cannot Digital signatures
falsely deny sending or Transaction certificates
receiving the message) Time Stamps Confirmation
services.
Access controls Limiting entry to authorized Firewalls Passwords
Users Biometric devices.

Page 11
 E-COMMERCE

WWW as Architecture:

 The web provides the functionality necessary for e-commerce.

 E-commerce depends on the assumption that computers cooperate efficiently for seamless information
sharing. This assumption of interoperability has not been supported by the realities of practical computing.
 The real effect of computing is too often for the prevention of data sharing due to incompatibilities in
architectures, data formats and communication protocols.
 The web community of developers and users is tackling these complex problems.
 The block diagram depicting the numerous pieces that constitute web architecture.
 The architecture is made up of 3 primary entities:
 Client Browser
 Web server / Database Server
 Third – party services /Application Server

The Client browser usually interacts with the www server, which acts as an intermediary in the interaction
with the third party services.

Local or Information Digital

company retrieval Library
specific data

www Data and Information

Browser transaction processing
management

Browser Secure Electronic

extensions messaging payment
services

Client browser www server functions Third party services

Fig: Block diagram depicting an e-commerce architecture

 The client browser resides on the user’s PC or work station and provides an interface to the various types of
content.

Page 12
E-COMMERCE

Web compasses of:

The web has become an umbrella for a wide range of concepts and technologies that differ
markedly in purpose and scope.
These include:
(i) Global hypertext publishing concept: Promotes the idea of a seamless information world in which
all online information can be accessed and retrieved in a consistent way.
(ii) Universal readership concept: Promotes the idea that, unlike the segmented of the past, we can use
one application- a universal user interface to read a variety of documents. This implies that once
information is published, it is accessible from any type of computer, in any country, and that any
(authorized) person can access it.

(iii) The client-server concept: Allows the web to grow easily without any centralized control. Anyone
can publish information, and any authorized can read and download it.
Publishing information requires a server program, and reading the data requires a client
browser. All the clients and al the servers are connected to one another by the internet. Various
protocols allow all clients to communicate with al servers.
Web hangs on a number of essential concepts, including:
 The addressing scheme known as Uniform Resource Locator (URL) makes the hypermedia
world possible despite many different protocols.
 A network protocol known as hypertext transfer protocol (HTTP) used by the client browsers
and servers offers performance and features.
 A mark-up language (HTML) which every web-client is required to understand, is used for
representation of hypertext documents containing text, list boxes & graphics information
across the net.

MS - UNIX [ Information
WINDOW Browsers]
S

URL + HTTP

[Info Servers]
FTP HTTP Database
WIAS
server server server
server

Page 13
E-COMMERCE

Unit- II
CONSUMER ORIENTED E-COMMERCE
Introduction:
Fundamental issues must be addressed before consumer oriented e-commerce can
become widespread, they are:
 Establishment of standard business processes for buying, selling products and services in
electronic markets.
 Development of widespread and easy-to-use implementations of protocols for order-
taking, online payment and service delivery.
 Development of transport and privacy methods.
To make consumer oriented e-commerce more effective, we need a better understanding of
the components of the business process from the initial search and discovery of the products/
services via online catalogs to the management of the order-to-delivery cycle.
Before delivering the details of the processes, we need to understand the genre of
applications.

Consumer oriented services:

Consumer Life-Style Needs Complementary Multimedia Services

 Entertainment Movies on demand, video cataloging, interactive

Ads, Multi-user games, on-line discussions.
• Financial Services and Home Banking, Financial services, Information,
Financial news.
• Essential Services Home Shopping, Electronic Catalogs, telemedicine,
remote diagnostics.

 Education and Training Interactive education, multiuser games, video

conferencing, on-line databases.

Consumer oriented Applications:

Different applications that explain the operational rule of evolution in different areas:
1. Personal Finance and Home Banking Management

(i) Basic Services

(ii) Intermediate Services

(iii) Advanced services

2. Home Shopping

Page 1
E-COMMERCE

(i) Television-Based Shopping

(ii) Catalog-Based Shopping

3. Home Entertainment

(i) Size of the Home Entertainment Market

(ii) Impact of the Home Entertainment on Traditional Industries

4. Micro transactions of Information

1. Personal Finance and Home Banking Management:

• The newest technologies are direct deposit of payroll, on-line bill payment and telephone
transfers

• The technology for paying bills, whether by computer or telephone, is infinitely more
sophisticated than anything on the market a few years ago
• In previous days, the technology choices for accessing services were limited. The range of
options has expanded to include PC’s, interactive te
• For home banking, greater demands on consumers and expanding need for information,
it’s services are often categorized as basic, intermediate and advanced

(i) Basic services

• These are related to personal finance

• The evolution of ATM machines from live tellers and now to home banking

• The ATM network has with banks and their associations being the routers and the ATM
machines being the heterogeneous computers on the network.
• This interoperable network of ATMs has created an interface between customer and bank
that changed the competitive dynamics of the industry. See in next figure

• Increased ATM usage and decrease in teller transactions

Page 2
E-COMMERCE

(ii) Intermediate Services

• The problem with home banking in 1980 is, it is expensive service that requires a PC, a
modem and special software. These problems are solved rather quickly.

• For the sophisticated customer, home banking offers the facility of paying bills,
transferring funds, opening new accounts from home etc.

• As the equipment becomes less expensive and as bank offers broader services, home
banking develop into a comprehensive package that could even include as insurance
entertainment
• Consider the computerized on-line bill-payment system

• It never forgets to record a payment and keeps track of user account number, name,
amount and the date and we used to instruct with payment instructions. See in Fig;

Page 3
E-COMMERCE

– Once the software is loaded, and the user sends their bank account number.
– You click on the check –writing software and a picture of a check pops up.
– Fill in the details like (name, amount, date , digital signature).
– Once you have written checks to everyone you need to pay, you instruct the
computer to transmit them.
– CheckFree processes those payments. The computer keeps track of these commands
and never forgets to record a payment.
(iii) Advanced Services
• The goal of advanced series is to offer their on-line customers a complete portfolio of
life, home, and auto insurance along with mutual funds, pension plans, home financing,
and other financial products.

Page 4
E-COMMERCE
• The services range from on-line shopping to real-time financial information from
anywhere in the world

• In short, home banking allows consumers to avoid long lines and gives flexibility.
• The key issue driving consumer acceptance is pricing. It is estimated that processing an
electronic transaction costs six times less than the cost of processing a check.

2. Home Shopping:
• It is already in wide use.
• This enable a customer to do online shopping

(i) Television-Based Shopping:

• It is launched in 1977 by the Home Shopping Network (HSN).
• It provides a variety of goods ranging from collectibles, clothing, small electronics, house
wares, jewelry, and computers.

• It works as, the customer uses her remote control at shop different channels with touch of
button. At this time, cable shopping channels are not truly interactive

(ii) Catalog-Based Shopping

• In this the customer identifies the various catalogs that fit certain parameters such as
safety, price, and quality

Page 5
E-COMMERCE
• The on-line catalog business consists of brochures , CD-ROM catalogs, and on-line
interactive catalogs.

3. Home Entertainment:
• It is another application for e-commerce

• Customer can watch movie, play games, on-screen catalogs.

The Telemart: Present and Future Functions

• Compressing and decoding The transition to digital satellite

a digital signal(images are and cable network head broad

compress to reduce quantity casting involves linking the TV

of information) to decoder to reconvert into an

analog signal

• Decoding a scrambled The broad casting of pay channel

signal requires the encryption of the

signal on emission & unscrambled

• Rapid loading of program An increase in the no. of individual

on memory interactive services is possible

only if n/w overloading is kept

minimum

• Electronic money or Interactivity

card payment terminal

Page 6
E-COMMERCE

Services:
Size of the home Entertainment Market:

• Entertainment services are play a major role in e-commerce

• This prediction is underscored by the changing trends in consumer behavior.

• It is shown in Table

Impact of Home entertainment on traditional industries:

• This will have devastating effects on theater business
• Economic issues might allow theaters to maintain an important role in the movie industry

• Today average cable bill is approximately $30 a month

Industry Estimates of consumer Expenditures

1980 ($4.7 bin) 1990 ($31.0 bin) 1993 ($37.8 bin)

Theaters 49.0% $2.3 14.5% $4.5 13.2% $5.0

Basic cable 35.0% $1.6 34.5% $10.7 36.9% $13.9

Premium cable 16.0% $0.8 16.5% $5.1 14.0% $5.3

Home video 33.8% $10.5 34.8% $13.2

Pay per view 0.7% $0.2 1.1% $0.4

4. Micro transactions of information:

• One change in traditional business forced by the on-line information business is the
creation of a new transaction category called small-fee transactions for micro services

• The customer by giving some information away for free and provide information bundles
that cover the transaction overhead.
• The growth of small-money transfers could foster a boom in other complementary
information services
• The complexity is also increased in micro services when an activity named, reverification
is entered.

• It means checking on the validity of the transaction after it has been approved

Desirable Characteristics of an Electronic marketplace

• Critical mass of Buyers and sellers: To get critical mass, use electronic mechanisms
Page 7
E-COMMERCE

• Opportunity for independent evaluations and for customer dialogue and discussion:
Users not only buy and sell products, they compare notes on who has the best products and
whose prices are outrageous
• Negotiation and bargaining: Buyers and sellers need to able to haggle over conditions of
mutual satisfaction, money, terms & conditions, delivery dates & evaluation criteria

• New products and services: Electronic marketplace is only support full information about
new services
• Seamless interface: The trading is having pieces work together so that information can
flow seamlessly

• Resource for disgruntled buyers: It provide for resolving disagreements by returning the
product.

----------------------------------------------------------------------------------------------------------------------------------

Mercantile Process models

• Mercantile processes define interaction models between consumers and merchants for on-
line commerce

Mercantile Models from the Consumer's Perspective

(i) Pre purchase preparation: The pre purchase preparation phase include search and discovery
for a set of products to meet customer requirements

(a) The consumer information search process.

(b) The Organizational search process.

(c) Consumer search experiences.

(d) Information brokers & brokerages.

(ii) Purchase consummation: The purchase consummation phase include mercantile protocols

(a) Mercantile process using digital cash.

(b) Mercantile transaction using credit cards.

(c) Costs of electronic purchasing.

(iii) Post purchase interaction: The post purchase interaction phase includes customer service &
support

Page 8
E-COMMERCE

(i) Pre purchase Preparation

• The purchase is done by the buyers, so consumers can be categorized into 3 types

• Impulsive buyers: Who purchase products quickly

• Patient buyers: Purchase products after making some comparisons

• Analytical buyers: Who do substantial research before making decision to purchase

products.

Marketing researches have several types of purchasing:

• Specifically planned purchases: The need was recognized on entering the store and the
shopper bought the exact item planned.

• Generally planned purchases: The need was recognized, but the shopper decided in-store
on the actual manufacturer of item to satisfy the need.
• Reminder purchase: The need was recognized by some store influence (ex: in-store
advertisements).

• Entirely unplanned purchases: The need was not recognized and entirely not planned.

(a) The consumer information search process:

• Information search is defined as the degree of care, perception,& effort directed toward
obtaining data or information related to the decision problem

• Problem Identification, Obtaining solution regarding the problem and evaluating the

Page 9
E-COMMERCE
alternatives for the solution.

(b) The Organizational search process:

• Organizational search can be viewed as a process through which an organization adapts

to such changes in its external environment as new suppliers, products, & services.

(c) Consumer Search Experiences

• The distinction between carrying out a shopping activity “to achieve a goal” (utilitarian)
as opposed to doing it because “ the interest in the activity”.

(d) Information Brokers and Brokerages

• To facilitate better consumer and organizational search, intermediaries called information

brokers or brokerages

• Information brokerages are needed for 3 reasons: Comparison shopping, reduced search
costs, and integration

(ii) Purchase Consummation

• Buyer contacts vendor to purchase

• Vendor states price

• Buyer and Vendor may or may not engage in negotiation

• If satisfied, buyer ask the payment to the vendor

• Vendor contacts billing service

• Billing service decrypts authorization and check buyers account balance

Page 10
E-COMMERCE
• Billing service gives to the vendor to deliver product

• Vendor delivers the goods to buyer

• On receiving the goods, the buyer signs and delivers receipt

• At the end of the billing cycle, buyer receives a list of transactions.

(a) Mercantile process using Digital Cash

• Buyer obtains e-cash from issuing bank

• Buyer contacts seller to purchase product

• Seller states price

• Buyer sends e-cash to seller

• Seller contacts his bank or billing service to verify the validity of the cash

• Bank gives okay signal

• Seller delivers the product to buyer

• Seller then tells bank to mark the e-cash as “used” currency

(b) Mercantile Transactions Using Credit Cards

• Two major components compromise credit card transactions in this process: electronic
authorization and settlement
• In retail transaction, a third-party processor (TPP) captures information at the point of
sale, transmits the information to the credit card issuer for authorization, communicates a
response to the merchant and electronically stores the information for settlement and
reporting.
• The benefits of electronic processing include the reduction in credit losses, lower
merchant transaction costs, & faster consumer checkout & merchant-to-bank settlement

A step-by-step account of retail transaction follows:

• Step1: A customer presents a credit card for payment at a retail location

• Step2: The point-of-sale software directs the transaction information to the local network
• Step3: System verifies the source of the transaction and routes it.

• Step4: In this, transaction count and financial totals are confirmed between the terminal
and the network
• Step5: In this, the system gathers all completed batches and processes the data in
preparation for settlement

Page 11
E-COMMERCE
A merchant client takes one of two forms:

• Merchants are charged a flat fee per transaction for authorization and data capture
services

• The other form of billing allows merchants to pay a ”bundled” price for authorization,
data capture, & settlement

Cost of Electronic Purchasing:

• Cash seems to be preferable to electronic payments, such as, on-line debit, credit, and
electronic check authorization

• Consumers appear to spend more when using cards then when spending cash

(iii) Post purchase Interaction:

• Returns and claims are an important part of the purchasing process

• Other complex customer service challenges arise in customized retailing are:

Inventory issues: To serve the customer properly, a company should inform a customer right
away and if the item is in stock, a company must able to assign that piece to customer

Database access and compatibility issues: Customers should get kind of services by easy
issues like calling an helpline number

Customer service issues: To clear the doubts of customer about product.

--------------------------------------------------------------------------------------------------------------------------

Mercantile Model from the Merchant's Perspective

• To better understand, this model is examined as the Order Management Cycle (OMC).

• The OMC includes eight distinct activities.

• The actual details of OMC vary from industry to industry and also for individual products
and services

(i) Order planning & Order generation.

(ii) Cost estimation & pricing.
(iii) Order receipt & entry.

(iv) Order selection & prioritization.

(v) Order Scheduling
(vi) Order fulfillment & delivery.
(vii) Order billing & account/payment management.

Page 12
E-COMMERCE

(viii) Post sales service.

(i) Order planning & order Generation

• Order planning leads to order generation.

• Orders are generated in a no. of ways in the e-commerce environment.

• The sales force broadcasts ads (direct marketing), sends personalized e-mail to customers
(cold calls), or creates a WWW page

(ii) Cost Estimation & pricing

• Pricing is the bridge between customer needs & company capabilities.
• Pricing at the individual order level depends on understanding the value to the customer
that is generated by each order, evaluating the cost of filling each order; & instituting a
system that enables the company to price each order based on its value & cost

(iii) Order Receipt & Entry

• After an acceptable price Quote, the customer enters the order receipt & entry phase of
OMC.

• This was under the purview of departments variously titled customer service, order entry,
the inside sales desk, or customer liaison.

Page 13
E-COMMERCE

(iv) Order Selection & Prioritization

• Customer service representatives are also often responsible for choosing which orders to
accept and which to decline.

• Not, all customers’ orders are created equal; some are better for the business.

(v) Order Scheduling

• In this phase the prioritized orders get slotted into an actual production or operational
sequence.

• This task is difficult because the different functional departments- sales, marketing,,
customer service, operations, or production- may have conflicting goals, compensation
systems, & organizational imperatives:
Production people seek to minimize equipment changeovers, while marketing & customer
service reps argue for special service for special customers.

(vi) Order Fulfillment & Delivery

• In this actual provision of the product or service is made.

• It involves multiple functions and locations.

(vii) Order Billing & Account/Payment Management

• After the order has been fulfilled & delivered, billing is given by finance staff.
• The billing function is designed to serve the needs and interests of the company, not the
customer.

(viii) Post sales Service

• This phase plays an increasingly important role in all elements of a company’s profit
equation: customer, price, & cost.
• It can include such elements as physical installation of a product, repair & maintenance,
customer training, equipment upgrading & disposal.

Page 14
E-COMMERCE

ELECTRONIC PAYMENT SYSTEMS

Types of Electronic Payment Systems

• Electronic payment systems are proliferating in banking, retail, health care, on-line
markets, and even government—in fact, anywhere money needs to change hands.

• Organizations are motivated by the need to deliver products and services more cost
effectively and to provide a higher quality of service to customers.
• The emerging electronic payment technology labeled electronic funds transfer (EFT).

• EFT is defined as “any transfer of funds initiated through an electronic terminal, so as to

order, instruct, or authorize a financial institution.

EFT can be segmented into three broad categories:

• Banking and financial payments

– Large-scale or wholesale payments (e.g., bank-to-bank transfer)

– Small-scale or retail payments (e.g., automated teller machines)

– Home banking (e.g., bill payment)

• Retailing payments
– Credit Cards (e.g., VISA or MasterCard): A credit card is an electronic, plastic
card issued by a financial institution that lets an individual borrows money at the point
of sale (i.e. checkout) to complete a purchase.
The cardholder (i.e. borrower) must repay the bank for what they've purchased,
sometimes along with interest charges if they carry a balance on the card. A credit card
balance is the amount the card holder owes for unpaid purchases.

– Private label credit/debit cards (e.g., J.C. Penney Card) : A card allowing the
holder to transfer money electronically from their bank account when making a
purchase.

– Charge Cards (e.g., American Express): A credit card for use with an account which
must be paid in full, when a statement is issued.
A charge card is a type of electronic payment card that charges no interest but
requires the user to pay his/her balance in full upon receipt of the statement, usually on
a monthly basis. Charge cards are offered by a limited number of issuers. They can
include an uncapped spending limit with generous reward benefits for the cardholder.
E-COMMERCE
• On-line electronic commerce payments
1. Token-based payment systems

• Electronic cash (e.g., DigiCash)

• Electronic checks (e.g., NetCheque)

• Smart cards or debit cards

2. Credit card-based payments systems

• Encrypted Credit Cards (e.g., World Wide Web form-based encryption)

• Third-party Processors (e.g., First Virtual)

1. Digital Token-Based Electronic Payment Systems

Electronic tokens are three types:

- Cash or Real-time
• Transactions are settled with exchange of electronic currency.

• Ex: on-line currency exchange is electronic cash (e-cash).

- Debit or Prepaid
• Users pay in advance for the privilege of getting information.

• Ex: prepaid payment mechanisms are stored in smart cards and electronic purses that
store electronic money.

- Credit or Postpaid
• The server authenticates the customers and verifies with the bank that funds are adequate
before purchase.

• Ex: postpaid mechanisms are credit/debit cards and electronic checks.

(i) E- Cash:
(a) Properties of Electronic Cash:
• There are many ways that exist for implementing an e-cash system, all must incorporate a
few common features.

• Specifically, e-cash must have the following four properties:

1. Monetary value
2. Interoperability

3. Retrievability
E-COMMERCE
4. Security

(b) Electronic Cash in Action

• Electronic Cash is based on cryptographic systems called “digital signatures”.
• This method involves a pair of numeric keys: one for locking (encoding) and the other for
unlocking (decoding). (Through public key and private key).

(c ) Purchasing E-cash from Currency Servers

The purchase of e-cash from an on-line currency server (or bank) involves two steps:

• Establishment of an account and

• Maintaining enough money in the account.

Some customers might prefer to purchase e-cash with paper currency, either to maintain
anonymity or because they don’t have a bank account.

(d) Using the Digital Currency

• Once the tokens are purchased, the e-cash software on the customer’s PC stores digital
money undersigned by a bank.

• The users can spend the digital money at any shop accepting e-cash, without having to
open an account there or having to transmit credit card numbers.
• As soon as the customer wants to make a payment, the software collects the necessary
amount from the stored tokens.

 Transactions involving three party (seller, buyer, and bank), whereby the notes are sent to
the merchant, who immediately sends them directly to the digital bank.

 The bank verifies the validity of the ‘notes’ that they have not been spent before. In this
E-COMMERCE
case, every note can be used only once.

 In many business transactions, the chance of ‘double spending’ occurs, which is equivalent
to bouncing a check.

 To uncover double spending, banks must compare the note passed to it by the merchant
against a database of spent notes. Just as paper currency is identified with a unique serial
number, digital cash can also be protected.

(ii) Electronic Checks

• It is another form of electronic tokens.
• In the given model shown in fig, buyers must register with third-party account server
before they are able to write electronic checks.
• The account server acts as a billing service.

The advantages are:

 They work in the same way as traditional checks.

 These are suited for clearing micropayments

 They create float & availability of float is an important for commerce

 Financial risk is assumed by the accounting server & may result in easier acceptance.

(iii) Smart Cards & Electronic Payment Systems

• Smart cards have been in existence since the early 1980s and hold promise for secure
transactions using existing infrastructure.
• Smart cards are credit and debit cards and other card products enhanced with
microprocessors capable of holding more information than the traditional magnetic stripe.
E-COMMERCE
• The smart card technology is widely used in countries such as France, Germany, Japan,
and Singapore to pay for public phone calls, transportation, and shopper loyalty programs.

Smart cards are basically two types:

(a) Relationship-Based Smart Credit Cards
(b) Electronic Purses.

(a) Relationship-Based Smart Credit Cards:

 It is an enhancement of existing cards services &/ or the addition of new services that a
financial institution delivers to its customers via a chip-based card or other device

 These services include access to multiple financial accounts, value-added marketing

programs, or other information card holders may want to store on their card

 It includes access to multiple accounts, such as debit, credit, cash access, bill payment &
multiple access options at multiple locations

(b) Electronic Purses

• To replace cash and place a financial instrument are racing to introduce “electronic
purses”, wallet-sized smart cards embedded with programmable microchips that store
sums of money for people to use instead of cash for everything
• The electronic purse works in the following manner:
1. After purse is loaded with money at an ATM, it can be used to pay for candy in a vending
machine with a card reader.

2. It verifies card is authentic & it has enough money, the value is deducted from balance on
the card & added to an e-cash & remaining balance is displayed by the vending machine.
--------------------------------------------------------------------------------------------------------------------

2. Credit Card-Based Electronic Payment Systems

There are 2 types of credit card based payment systems:

(a) Encrypted credit cards
(b) Third party processors

(a) Encrypted Credit Cards:

 Encryption is instantiated when credit card information is entered into a browser or other
electronic commerce device and sent securely over the network from buyer to seller as an
encrypted message.
E-COMMERCE
 However, it does not meet important requirements for an adequate financial system, such as
non- refutability (without duplication), speed, privacy and security.

To make a credit card transaction truly secure and non-refutable, the following sequence of steps
must occur:

Send encrypted credit

Card number

Customer Merchant
Send information Server

Monthly Checks for

Purchase OK authenticity &
statement Sufficient funds
Verify Online credit
card
Customer’s
Authorize
Bank processor
E-COMMERCE

Fig: Processing payments using encrypted credit cards

Step 1: A customer presents his/her credit card information.

Step 2: The merchant validates the customer’s identity as the owner of the credit card account.
Step 3: The merchant relays the credit card charge information and signature to its bank or online
credit processors.
Step 4: The bank or processing party relays the information to the customer’s bank for authorization
approval.
Step 5: The customer’s bank returns the credit card data, charge authentication, and authentication
to the merchant.
Advantages:
• Payment cards provide fraud protection.
• They have worldwide acceptance (nearly!).

• They are good for online transactions.

Disadvantages:
• Payment card service companies charge merchants per-transaction fees and monthly
processing fees.

(b) Third party processors:

In third party processing, consumers register with a thirs party on the internet to verify
electronic transactions.

Ex: Companies that already provide Online Third Party Processors (OTPP) are

FirstVirtual(www.fv.com),OpenMarket(www.openmarket.com)
E-COMMERCE
E-COMMERCE

Steps:
1. The consumer acquires an OTPP account number by filling out a registration form.

2. To purchase an article, software or any other information online, the customer request the
item from the merchant by quoting their OTPP account number.

3. The merchant contacts the OTPP payment server with the customer’s account number.

4. The OTPP payment server verifies the customer’s account number for the vendor and
checks for sufficient funds.

5. The OTPP payment server sends an electronic message to the buyer.

6. If the OTPP payment server gets a Yes from the customer, the merchant is informed and
the consumer is allowed to download the material immediately.

7. The OTPP will not debit the buyer’s account until it receives confirmation from the
purchase completion.

Payment Acceptance and Processing

• Open loop (such as VISA) and closed loop (such as American Express) systems will
accept and process payment cards.

• A merchant bank or acquiring bank is a bank that does business with merchants who
want to accept payment cards.

• Software packaged with your electronic commerce software can handle payment card
processing automatically.

• Electronic cash is a general term that describes the attempts of several companies to
create value storage and exchange system that operates online in much the same way that
government-issued currency operates in the physical world.

• Concerns about electronic payment methods include:

(a) Privacy
(b) Security
(c) Independence
(d) Portability
(e) Convenience
E-COMMERCE

Electronic Cash Storage

• Two methods

(a) On-line
• Individual does not have possession personally of electronic cash

• Trusted third party, e.g. e-banking, bank holds customers’ cash accounts

(b) Off-line
• Customer holds cash on smart card or electronic wallet
• Fraud and double spending require tamper-proof encryption
--------------------------------------------------------------------------------------------------------------------------

Risks in Electronic Payment systems

• Customer's risks

(a) Stolen credentials or password

(b) Dishonest merchant
(c) Disputes over transaction
(d) Inappropriate use of transaction details
• Merchant’s risks

(a) Forged or copied instruments

(b) Disputed charges
(c) Insufficient funds in customer’s account
(d) Unauthorized redistribution of purchased items

Electronic payments Issues

• Secure transfer across internet

• High reliability: no single failure point

• Atomic transactions

• Anonymity of buyer
• Economic and computational efficiency: Allows micropayments

• Flexibility across different methods

• Scalability in number of servers and users
E-COMMERCE

Designing Electronic Payment systems

It includes several factors:

• Privacy. A user expects to trust in a secure system

• Security. A secure system verifies the identity of two-party transactions through “user
authentication” & reserves flexibility to restrict information/services through access
control

• Intuitive interfaces. The payment interface must be as easy to use and access.
• Database integration
• Brokers. A “network banker”-someone to broker goods & services, settle conflicts, &
‘financial transactions electronically.
• Pricing. One fundamental issue is how to price payment system services. For e.g., from
cash to bank payments, from paper-based to e-cash. The problem is potential waste of
resources.
• Standards. Without standards, the welding of different payment users into different
networks & different systems is impossible.
E-COMMERCE

UNIT - 3
INTER ORGANIZATIONAL COMMERCE & EDI
Electroinic Data Interchange:
• Electronic Data Interchange (EDI) - interposes communication of business information in
standardized electronic form
• Prior to EDI, business depended on postal and phone systems that restricted
communication to those few hours of the workday that overlap between time zones

Why EDI

• Reduction in transaction costs

• Foster closer relationships between trading partners

EDI & Electronic Commerce

• Electronic commerce includes EDI & much more

• EDI forges boundary less relationships by improving interchange of information between

trading partners, suppliers, & customers

Benefits of EDI

• Cost & time savings, Speed, Accuracy, Security, System Integration, Just-In-Time
Support.

• Reduced paper-based systems, i.e. record maintenance, space, paper, postage costs

• Improved problem resolution & customer service

• Expanded customer/supplier base or suppliers with no EDI program lose business

EDI layered architecture

(i) Semantic (or application) layer

(ii) Standards translation layer

(iii) Packing (or transport) layer

(iv) Physical network infrastructure layer

IT Page 1
E-COMMERCE

(i) EDI semantic layer:

 Describes the business application

 Procurement example

i. Requests for quotes

ii. Price quotes

iii. Purchase orders

iv. Acknowledgments
v. Invoices

 Specific to company & software used

(ii) Standards translation layer:

 Specifies business form structure so that information can be exchanged

 Two competing standards

- American National Standards Institute(ANSI)X12

- EDIFACT developed by UN/ECE, Working Party for the Facilitation of

International Trade Procedures

(iii) EDI transport layer:

 How the business form is sent, e.g. post, UPS, fax

 Increasingly, e-mail is the carrier

 Differentiating EDI from e-mail

- Emphasis on automation

IT Page 2
E-COMMERCE

- EDI has certain legal status

(iv) Physical network infrastructure layer
Dial-up lines, Internet, value-added network, etc.

-------------------------------------------------------------------------------------------------------------------------

EDI in Action
(i) Information flow without EDI:
 The fig shows the information flow when paper documents are shuffled between
organizations via the mailroom

 When the buyer sends a purchase order, then relevant data extracted & recorded on
a hard copy.

 This hard copy is forwarded to several steps, at last manually entered into system
by the data entry operators

 This process is somewhat overhead in labor costs & time delays.

(ii) Information flow with EDI are as follows:

1. Buyer sends purchase order to seller computer

2. Seller sends purchase order confirmation to buyer

3. Seller sends booking request to transport company

4. Transport company sends booking confirmation to seller

5. Seller sends advance ship notice to buyer

IT Page 3
E-COMMERCE

6. Transport company sends status to seller

7. Buyer sends Receipt advice to seller

8. Seller sends invoice to buyer

9. Buyer sends payment to seller

EDI as a fast, inexpensive & safe method

Benefits of EDI

 Cost & time savings, Speed, Accuracy, Security, System Integration, Just-In-
Time Support.

 Reduced paper-based systems, i.e. record maintenance, space, paper, postage

costs

 Improved problem resolution & customer service

 Expanded customer/supplier base or suppliers with no EDI program lose

business.
-------------------------------------------------------------------------------------------------------------------------

EDI Applications in Business

Four different scenarios in industries that use EDI extensively:

1. International or cross-border trade

2. Electronic funds transfer

3. Health care EDI for insurance claims processing

IT Page 4
E-COMMERCE

4. Manufacturing & retail procurement

1. International or cross-border trade:

 EDI has always been very closely linked with international trade.

 Trade efficiency, which allows faster, simpler, broader & less costly transactions

Role of EDI in international trade:

 EDI facilitates the smooth flow of information

 It reduces paper work

EDI benefits for international trade are:

 Reduced transaction expenditures

 Quicker movement of imported & exported goods

 Improved customer service through “track & trace” programs

 Faster customs clearance & reduced opportunities for corruption, a huge problem in
trade

2. Interbank Electronic Funds Transfer (EFT)

 EFTS is credit transfers between banks where funds flow directly from the payer’s bank
to the payee’s bank.

 The two biggest funds transfer services in the United States are the Federal Reserve’s
system, Fed wire, & the Clearing House Interbank Payments System (CHIPS) of the New
York clearing house

Automated Clearinghouse (ACH) Transfers

 ACH transfers are used to process high volumes of relatively small-dollar payments for
settlement in one or two business days

 It provides services: preauthorized debits, such as repetitive bill payments; & consumer-
initiated payments.

3. Health care EDI for insurance EDI

 Providing good & affordable health care is a universal problem

 EDI is becoming a permanent fixture in both insurance & health care industries as
medical provider, patients, & payers

 Electronic claim processing is quick & reduces the administrative costs of health care.

 Using EDI software, service providers prepare the forms & submit claims via
communication lines to the value-added network service provider

IT Page 5
E-COMMERCE

 The company then edits sorts & distributes forms to the payer. If necessary, the insurance
company can electronically route transactions to a third-party for price evaluation

 Claims submission also receives reports regarding claim status & request for additional
information.
4. Manufacturing & retail procurement using EDI

 These are heavy users of EDI

 In manufacturing, EDI is used to support just-in-time.

 In retailing, EDI is used to support quick response

Just-In-Time & EDI

 Companies using JIT & EDI calculates how many parts are needed each day based on the
production schedule & electronically transmit orders.

 Delivery has to be responsive, or it will cost too much in money & time.

 Getting data to suppliers quickly

 A major benefit of JIT & EDI is a streamlined cash flow.

Quick Response & EDI

 For the customer, QR means better service & availability of a wider range of products

 For the retailer & supplier, QR may mean survival in a competitive marketplace

 Much focus of QR is in reduction of lead times using event-driven EDI.

 In QR, EDI documents include purchase orders, shipping notices, invoices, inventory
position, catalogs, & order status.

-----------------------------------------------------------------------------------------------------------------------

EDI: Legal, Security, & Privacy Issues

Legal Status of EDI Messages

 The three modes of communication types: Instantaneous communication, delayed

communication via the U.S. Postal Service (USPS), & delayed communication via non-
USPS couriers;

1. Instantaneous: If the parties are face to face or use an instantaneous communication

medium such as the telephone
2. Delayed (USPS): The “mailbox rule” provides that an acceptance communicated via
USPS mail is effectively when dispatched

IT Page 6
E-COMMERCE

3. Delayed (non-USPS): Acceptances transmitted via telegram, mailgram, & electronic

messages, are communicated & operable upon receipt.

Digital Signatures & EDI

 Digital signatures might be time-stamped or digitally notarized to establish dates & times

 If digital signatures are to replace handwritten signatures, they must have the same legal
status as handwritten signatures.

 It provides a means for a third party to verify that notarized object is authentic.

-------------------------------------------------------------------------------------------------------------------------

EDI & Electronic Commerce

New types of EDI are traditional EDI & open EDI

(i) Traditional EDI

It replaces the paper forms with almost strict one-to-one mappings between parts of a
paper form to fields of electronic forms called transaction sets.

It covers two basic business areas:

1. Trade data Interchange (TDI): encompasses transactions such as purchase orders,
invoice & acknowledgements.

2. Electronic Funds Transfer (EFT): It is the automatic transfer of funds among banks &
other organizations

It is divided into 2 camps: old EDI & new EDI.

Old EDI

 Automating the exchange of information pertinent to business activity

 It is referred as the current EDI-standardization process where it allows every company to

choose its own, unique, proprietary version

New EDI

 It is refocusing of the standardization process.

 In this, the structure of the interchanges is determined by the programmer who writes a
program.

 It removes long standardization process.

IT Page 7
E-COMMERCE

(ii) Open EDI

 It is a business procedure that enables e-commerce to occur between organizations where

the interaction is of short duration.

 It is process of doing EDI without the upfront trading partner agreement that is currently
signed by the trading partners

 The goal is to sustain ad hoc business or short-term trading relationships using simpler
legal codes.

 It is a law of contract within the context of e-commerce where transactions are not
repeated over long period of time.

-----------------------------------------------------------------------------------------------------------------------

Standardization & EDI

Standards translation

 Specifies business form structure so that information can be exchanged

 Two competing standards

– American National Standards Institute (ANSI) X12

– EDIFACT developed by UN/ECE, Working Party for the Facilitation of
International Trade Procedures

Structure of EDI transactions

– Transaction set is equivalent to a business document, such as a purchase order

– Data Segments are logical groups of data elements that together convey
information

– Data elements are individual fields, such as purchase order no, invoice etc.

Comparison of EDIFACT & X.12 Standards

 These are comprised of strings of data elements called segments.

 A transaction set is a set of segments ordered as specified by the standard.

ANSI : ANSI standards require each element to have a very specific name, such as order date
or invoice date.

EDIFACT:

 EDIFACT segments, allow for multiuse elements, such as date.

 EDIFACT has fewer data elements & segments & only one beginning segment (header),

IT Page 8
E-COMMERCE

but it has more composites.

 EDIFACT’s use of fewer components facilitates updating and expanding a system.

 Fast update makes EDIFACT an ever- evolving platform, so trading Partners often use
different versions of the standard.

-----------------------------------------------------------------------------------------------------------------------------

EDI Software Implementation

EDI software has 4 layers:

1. EDI Business application layer

2. EDI Translator Layer

3. EDI communication layer

4. EDI envelope for message transport.

1. EDI Business Application Layer

 It creates a document, an invoice.

 Sends to EDI translator, reformats the invoice into an EDI standard.

 If there are on the same type of computer, the data move faster.

IT Page 9
E-COMMERCE

EDI translator software changes the

Enter the information in EDI
EDI form to fit the EDI standard
form specified for that particular
that the targeted application can
business transaction.
understand.

The translator wraps the

document in an electronic
envelope “EDI package” that has
an ID for your trading partner.

2. EDI translator Layer:

 It converts the data into a format that the trading partners can use.

 If EDI is done without translation, companies run a great risk of transmitting data that
trading partners may not be able to read.

For Ex: If a word processing file is uploaded and the recipient tries to open it in database
program, the result is a mess of characters instead of expected information.

Disadvantages:

 Very restrictive

 Difficult to update

 Unsupportive.

3. EDI communication layer:

Three types of access methods are available:

(a) Direct dial (or) modem to modem connection:

A direct computer to computer transfer of documents through a modem requires that both
computer applications read the same format, such as ASCII text or use translators.

(b) Limited VAN :

Limited VAN often provide very basic technical services such as protocol conversion,
data error correction, directing and delivering EDI traffic to thousands of buyers and sellers.

IT Page 10
E-COMMERCE

(c) Full service Third party VAN:

Full third party service provides more than just communication between two or more
parties.

 Extra features include access control for security and document tracking, which allows
users to track their own documents as they pass through the system.

How much it costs:

 Expected volume of electronic documents.

 Economics of the EDI translator software

 Implementation time.

4. EDI envelope for message transport:

X.400 & X.435 envelopes:

 X.400 tries to be universal mail standard for fax, paper mail & software binaries.

 X.435 inserts a special field in an X.400 envelope to indentify an EDI message.

Term Definition
X.400(1984) Store and forward messaging application

X.400(1988) New additions such as message storage and

new message contents.

X.400(1992) Minor enhancements including voice parts and

new file attachments.

X.435 Standard for transmission of electronic data

interchange messages over X.400.

IT Page 11
E-COMMERCE

Value Added Networks (VAN):

 A VAN is a communication network that typically exchanges EDI messages among

trading partners.

 It provides services, including holding messages in “electronic mailboxes”, interfacing

with other VANs and supporting many telecommunication modes and transfer protocols.

 Traditionally it acts as a middleman between trading companies allowed automatically and

securely exchanges purchase orders, invoices and payments.

 The only disadvantage in EDI-enabling VANs is that they are slow & high-priced,
charging by the no. of characters transmitted.

For ex: A business that wants to use EDI with some fifty trading partners has several
communication choices:

(i) A company can buy a multiport modem capable of handling fifty incoming phone
lines, install fifty phone lines, add communication lines and allow trading partners to
communicate.
(ii) Tightly arranged schedule for each trading partner(12:00 AM, 12:11 AM, 12:22 AM..)

(iii) Allow trading partners not to have any blockage for smooth transmission of trading
between partners.

IT Page 12
E-COMMERCE

VAN pricing structures:

3 types:

 Account start up costs

 Variable costs

 Interconnect costs
a) Account start up costs: Opening a account with a VAN incurs start up costs as well as
other variable costs such as mail box/ network fees. The network usage fee includes a
mailbox fee for maintaining an account and a password.

b) Variable Costs: If a user agrees to cover all the transaction costs, the VAN can charge
twice for each transaction.
When the user sends or receives.

When a trading partner sends or receives.

c) Interconnect costs: Transaction or document fee that is no: of documents/characters sent

will be chargable.

VAN usage fee:

Range Fee

$0 - $1.00 Session fee: Each log on to the network.

$ 0.07 - $ 0.35 Transaction fee: depends on characters sent.

$ 0.15 - $ 0.37 Envelope fee: Non time sensitive transactions

into one envelope.

25% - 75% Volume discounts: Monthly variable costs on

number of documents sent.

Transaction fee structure:

Cost Scenario Monthly fixed Variable cost

VAN A to trading partner on Mail box - $ 25 Session fee $ 0.0

same VAN
Interconnect - $ 15 Envelope $ 0.15
---------- Trans. Fee $ 0.10
$ 40 ----------
---------- $ 0.25

IT Page 13
E-COMMERCE

Purchase order VAN A to a Mail box - $ 25 Session fee $ 0.0

trading partner on VAN B
Interconnect - $ 15 Envelope $ 0.15
---------- Trans. Fee $ 0.10
$ 40 ----------
---------- $ 0.25
+

Usage fee : $ 0.10

--------------

$ 0.35

---------------

VAN service providers:

AT& T, British telecom, Cable & wireless, GEIS, Advantis, Infonet, Saturn , Scitor, Sprint,
Transpac, Unisource.

------------------------------------------------------------------------------------------------------------------

Internet-Based EDI
Several factors make internet useful for EDI:

 Flat-pricing: That is not dependent on the amount of information transferred

 Cheap access : With low cost of connection- often a flat monthly fee for leased line 0r
dial- up access

 Common mail standards: Proven networking & interoperable systems; another attraction
is that internet mail standards are non proprietary and handle congestion and message
routing. It has been noted that sometimes on a VAN network an e-mail message can take
hours or days to reach its destination, while on the internet it usually takes seconds to
minutes.

 Security--Public-key encryption techniques are being incorporated in various electronic

mail systems. This will enable systems to ensure the privacy of EDI messages and gives
users a way to verify the sender or recipient.

IT Page 14
E-COMMERCE

INTRAORGANIZATIONAL ELECTRONIC COMMERCE

 Internal commerce is the application of electronic commerce to processes or operations.
 Specifically, we define internal commerce as using methods and pertinent technologies
for supporting internal business processes between individuals, departments, and
collaborating organizations.

 It is of two types

1. Private commerce
2. Public commerce

 In a general sense, the term Information System (IS) refers to a system of people, data
records and activities that process the data and information in an organization, and it
includes the organization's manual and automated processes.
 In a narrow sense, the term information system (or computer-based information system)
refers to the specific application software that is used to store data records in a computer
system and automates some of the information-processing activities of the organization.

 These forces are commanding a rethinking of the importance of the networks-computers

and communications and their role in the better utilization of corporate information in
operational and analytical decision making.

Global suppliers
public electronic commerce

The information

banks superhighway
I
firewall
Accounting engineering

and finance Corporate secure

Customer service

Marketing & advertising internet

production

sales R&D management

public electronic commerce

E-CO MMERCE

IT Page 1
E-COMMERCE

 Information architecture (IA) is the art of expressing a model or concept of information

used in activities that require explicit details of complex systems.

 Among these activities are library systems, content Management Systems, web
development, user interactions, data base development, programming, technical writing,
enterprise architecture, and critical system software design.

What Is Cross-functional Management?

 Cross-functional management (CFM) manages business processes across the traditional
boundaries of the functional areas.
 CFM relates to coordinating and sneering the activities of different units for realizing the
super ordinate cross-functional goals and policy deployment.
 It is concerned with building a better system for achieving for achieving such cross-
functional goals as innovation, quality, cost, and delivery.

MACROFORCES AND INTERNAL COMMERCE

 Macro forces and internal commerce highlights the changes taking place in organization
structure and explores how technology and other economic forces are molding
arrangements within firms.

 The common focus in most of these modern management particles is the use of
technology for improving efficiency and eliminating wasteful tasks in business
operations.
 Efficient operations of the macro forces and internal commerce are:

 Total quality management

 Business process improvement or business process reengineering.

 The words improvement and reengineering are often used interchangeably, creating
confusion.
 Although the goal of these two are same I.e. productivity gains, cost savings, quality and
service improvements, cycle-time reduction.

 One main reason for reengineering is to better complete in global markets.

__________________________________________________________________________

Global Markets: Definition and Characteristics

Global marketing:
 The Oxford University Press defines global marketing as “marketing” on a worldwide
scale reconciling or taking commercial advantage of global operational differences,
similarities and opportunities in order to meet global objectives.”

IT Page 2
E-COMMERCE

 When a company becomes a global marketer, it views the world as one market and creates
products that will only require weeks to fit into any regional marketplace. Marketing
decisions are made by consulting with marketers in all the countries that will be affected.
The goal is to sell the same thing the same way everywhere.
The Four elements of global marketing of marketing:

Product:
 A global company is one that can create a single product and only have to tweak elements
for different markets. For example coca-cola uses two formulas (one with sugar, one
with corn syrup) for all markets.

Price:
 Price will always vary from market to market. Price is affected by many variables: cost
of product development (produced locally or imported), cost of ingredients, cost of
delivery (transportation, tariffs, etc.), and much more.

Placement:
 How the product is distributed is also a country-by-country decision influenced by how
the competition is being offered to the target market. Using Coca-Cola as an example
again, not all cultures use vending machines.

Promotion:
 After product research, development and creation, promotion is generally the largest line
item in a global company’s marketing budget. At this stage of a company’s development,
integrated marketing is the goal.
 The global corporation seeks to reduce costs, minimize redundancies in personnel and
work, maximize speed of implementation, and to speak with one voice.

Global marketing Advantages and Disadvantages

Advantages:

 Economies of scale in production and distribution

 Power and scope

 Consistency in brand image

 Ability to leverage good ideas quickly and efficiently

 Uniformity of marketing practices

 Helps to establish relationships outside of the "political arena“

IT Page 3
E-COMMERCE

Disadvantages:
 Differences in consumer needs, wants, and usage patterns for products

 Differences in consumer response to marketing mix elements.

 Differences in brand and product development and the competitive environment.

 Differences in administrative procedures and Differences in product placement.

___________________________________________________________________________

Marketing Research:
 It involves the identification, collection, analysis, and dissemination of information. Each
phase of this process is important.

 Finally, the findings, implications and recommendations are provided in a format that
allows the information to be used for management decision making and to be acted upon
directly.
 It should be emphasized that marketing research is conducted to assist management in
decision making and is not: a means or an end in itself.

Marketing Research Characteristics:

 Marketing research is systematic: Thus systematic planning is required at all the stages
of the marketing research process.
 The procedures followed at each stage are methodologically sound, well documented, and
as much as possible, planned in advance.
 Marketing research uses the scientific method in that data are collected and analyzed to
test prior notions or hypotheses.
 Marketing research is objective: It attempts to provide accurate information that reflects a
true state of affairs. It should be conducted impartially.

Organizational structure:

 Organizational structure is a mostly hierarchical concept of subordination of entities that

collaborate and contribute to serve one common aim.
 Organizations are a number of clustered entities. The structure of an organization is
usually set up in one of a variety of styles, dependent on their objectives and ambience.
 Organizational structure allows the expressed allocation of responsibilities for different
functions and processes to different entities.
Common success criteria for organizational structures are:

IT Page 4
E-COMMERCE

-Decentralized reporting

-Flat hierarchy

-High transient speed

-High transparency

(i) Vertical Organization:

 Hierarchically structured organization where all management activities are controlled by a

centralized management staff.
Vertical organization has two problems:

 First, it creates boundaries that discourage employees in different departments from

interacting with one another.

 Second, departmental goals are typically set in a way that could cause friction among
departments.
 A vertical market is a group of similar businesses and customers which engage in trade
based on specific and specialized needs.
 An example of this sort of market is the market for point-of-sale terminals, which are
often designed specifically for similar customers and are not available for purchase to the
general public.

 A vertical market is a market which meets the needs of a particular industry:

 Vertical market software is software aimed at addressing the needs of any given business
within a discernible vertical market

(ii) Horizontal organization:

 A horizontal market is a market which meets a given need of a wide variety of industries,
rather than a specific one.

Examples
 In technology, horizontal markets consist of customers that share a common need that
exists in many or all industries.

 For example, customers that need to purchase computer security services or software exist
in such varied industries as finance, healthcare, government, etc.

 Horizontal marketing participants often attempt to meet enough of the different needs
of vertical markets to gain a presence in the vertical market.

 An example could be software that manages services in hotels - amenities solutions.

IT Page 5
E-COMMERCE

Vertical organization Comparison with horizontal organization:

 A vertical market is a market which meets the needs of a particular industry: for
example, a piece of equipment used only by semiconductor manufacturers.
 A horizontal market is a market which meets a given need of a wide variety of
industries, rather than a specific one: for example, word processing software.

New forms of organizational structure:

Two new forms of organizational structures are:

Prominent-virtual organizational structure:

 In recent years, virtual enterprises have gained much attention as more and more firms
from computer chip manufacturing to aircraft manufacturing.
 Virtual organization is defined as being closely coupled upstream with its suppliers and
downstream with its customers.
 Virtual organization has been variously referred to as network organizations, organic
networks, hybrid networks and value-adding partnership.

Brokerages organizational structure:

 The main goal of electronic brokerages organization is to increase the efficiency of the
internal marketplace.
 Internal markets are beginning to appear not only in corporations but even in non business
institutions like the government.
 They are created inside organizations, allowing firms, suppliers, government agencies to
meet the new challenges of the fast-changing environment.

IT Page 6
E-COMMERCE

Types of electronic brokerages in internal markets:

customer

customer
internal markets
customer Order
Design
customer management
customer order & financial brokerages
accounting
Manufacturing

shipping planning and

delivery scheduling
brokerages

Logistics &
Production
SCM
brokerages
E-CO MMERCE
brokerages
_____________________________________________________________________________________________________________________________ ____________________________________________

WORK FLOW AUTOMATION AND COORDINATION

 In last decade, a vision of speeding up or automating routine business tasks has come to
be known as “work-flow automation.

 This vision has its root in the invention of the assembly line and the application of Taylor's
scientific management principles.
 Today, a similar trend is emerging in the automation of knowledge-based business
processes called work-flow automation.

 The goal of work-flow automation is to offer more timely, cost-effective, and integrated
ways to make decisions.

 Typically, work-flows are decomposed into steps or tasks, which are task oriented.

 Work-flows can be simple or complex.

 Simple work-flows typically involve one or two steps or tasks.

 Another way of looking at work-flow is to determine the amount of cross-functional
activity.
 In other words, companies must adopt an integrated process view of all the business
elements

 Organizational integration is extremely complex and typically involves three steps

 Improving existing processes by utilizing technology where appropriate.

 Integrate across the business function offer identifying the information needs for each

IT Page 7
E-COMMERCE

process.

 Integrating business functions, application program interface, and database across

departments and groups.

 Complex work-flows involve several other work-flows, some of which Executes

simultaneously.

Work-Flow Coordination:
 The key element of market-driven business is the coordination of tasks and other resources
throughout the company to create value for customer.

 To this end, effective companies have developed horizontal structures around small
multifunctional teams that can move more quickly and easily than businesses that use the
traditional function-by-function, sequential approach.
 Some of the simplest work-flow coordination tools are electronic forms routing
applications such as lotus notes.

 As the number of parties in the work flow increases, good coordination becomes crucial.

Work-flow related technologies:

 Technology must be the “engine” for driving the initiatives to streamline and transform
business interactions.
 Large organizations are realizing that they have a middle-management offer all the drawn
sizing and reorganization of fast few years.
 Pressures for more comprehensive work-flow systems are building rapidly.

 Work-flow system are limited to factory like work process.

Middleware is maturing:
 By this users or third-party providers need to learn how to develop work-flow applications
within middleware environment.

___________________________________________________________________________

CUSTOMIZATION AND INTERNAL COMMERCE

 Technology is transforming consumer choices, which in turn transform the dynamics of
the marketplace and organizations themselves.

 Technology embodies adaptability, programmability, flexibility, and other qualities so

essential for customization.

 Customization is explained as :

IT Page 8
E-COMMERCE

 Mass customization, in marketing, manufacturing, and management, is the use of

flexible computer-aided manufacturing systems to produce custom output.
 Those systems combine the low unit costs of mass production processes with the
flexibility of individual customization
 "Mass Customization" is the new frontier in business competition for both manufacturing
and service industries.

Implementation:
 Many implementations of mass customization are operational today, such as software-
based product configurations which make it possible to add and/or change functionalities
of a core product or to build fully custom enclosures from scratch.

 Companies which have succeeded with mass-customization business models tend to

supply purely electronic products.
 However, these are not true "mass customizers" in the original sense, since they do not
offer an alternative to mass production of material goods.

Four types of mass customization:

 Collaborative customization - Firms talk to individual customers to determine the precise
product offering that best serves the customer's needs.

 Adaptive customization - Firms produce a standardized product, but this product is

customizable in the hands of the end-user.
 Transparent customization - Firms provide individual customers with unique products,
without explicitly telling them that the products are customized.

 Cosmetic customization - Firms produce a standardized physical product, but market it

to different customers in unique ways.
Supply chain management (in separate pdf)

IT Page 9
Scanned by CamScanner
Scanned by CamScanner
Scanned by CamScanner
Scanned by CamScanner
Scanned by CamScanner
Scanned by CamScanner
E-COMMERCE

UNIT-4 – CORPORATE DIGITAL LIBRARY

THE CORPORATE DIGITAL LIBRARY
 DIMENSIONS OF THE INTERNAL ELECTRONIC COMMERCE SYSTEM
 MARKETING A BUSINESS CASE FOR A DOCUMENT LIBRARY

 TYPES OF DIGITAL DOCUMENTS

 ISSUES BEHIND DOCUMENT INFRASTRUCTURE
 CORPORATE DATA WAREHOUSES

DIMENSIONS OF THE INTERNAL ELECTRONIC COMMERCE SYSTEM

These are the following dimensions for internal electronic commerce organization:

User modeling and interaction:

 User models are interposing between the user interface and information sources to
filter the available information according to the needs of the task and user.
 It associates with each task or each person is a user agent or set of user agents.
 Tasks of user agents are:
- Maintaining of model & current state of the task

- Determining of information for each step of the task

- Appropriate combining of information with user.

 Addressing the issue of displaying information to the user.

 Considering of wide range of display devices.
 Determining the most appropriate methods for display.
 In this user agent tackle two issues:
1. Generation of documents

2. Presentation of documents.

1. Effective utilization of information

 Organization decision making cannot be supported with a single tool, a set technology
tools are required for effective utilization of information.
 Organization needs online –transactions for design, production, logistics and

IT Page 1
E-COMMERCE

profitability.

Types of On-line transaction:

 Two types of on-line transaction are :
1. On-line transaction processing (OLTP).

2. On-line analytical processing (OLAP).

 OLTP involves the detailed, day-to-day procedures such as order entry & order
management.
 OLAP refers to the activity involved in searching the wealth of data residing
throughout an enterprise for trends, opportunities.

Navigating the info sphere

 It involves two elated activities:
- Information search, discovery and retrieval.

- Presentation of retrieved Information.

Search, Discovery and Retrieval:

 This view is changing in three ways.
(i) Characterization of accessible information

(ii) Search concepts from this information.

(iii) Development of information filter

2. Presentation or visualization:
 It is used for easy understanding of information.
 Organization must predefine rules for visualization.

 This process will highlight the trouble spots and area of opportunities.
 Presentation increases the fallowing tasks of information :
1. Accessing ability of information.

2. Collecting of information.

3. Queue of information.

4. Organizing of information.

IT Page 2
E-COMMERCE

Digital Library Layer

 Many organizations manage their information through corporate library, if it provide
the architecture to model, map, integrate & information in digital documents is called
digital library.
 It provides information structures by this organizations &workers access vast amount
of data encoded in multimedia formats.
 Digital libraries are of two types:

1. Electronic document-based digital libraries.

2. Data-base oriented warehouses.

Document digital library:

 The term document is used to denote all non data records I.e. books, reports, e-files,
videos and audios.
 Digital library is simply a distributed network of interlinked information.

Data warehouses:
 It is a central repository for combining and storing vast amount of data from diff sources.
 Sources are main frame database, lint-server database, text reports….etc.
_______________________________________________________________________

MAKING A BUSINESS CASE FOR DOCUMENT LIBRARY

 This section highlights the role that documents play in today’s organization and how
business can better meet their customers’ needs by improving document management support.

Logical cases
Customers Government
&stake-holders & contracts
regulations

R&D
Sales &
Corporate engineering
marketing Human
Service and digital library
resources
supports Manufacturing
Documentation,
and
manuals, Accounting
production
records
and finance

IT Page 3
E-COMMERCE

Digital Document Management Issues and Concerns

 Ad hoc documents: Letters, finance reports, manuals are called ad hoc documents,
which are prepared by managers &professionals.
 Process-specific documents: invoices and purchase orders which are created,
constructed and distributed by support personnel. These are form based.
 Knowledge-oriented documents: these are technical documents, catalogs of product
information, and design documents.
_______________________________________________________________________

Types of Digital Documents:

Four types of digital documents are:
 Document Imaging
 Structured Documents
 Hypertext Documents
 Active Documents

Document Imaging
 Document imaging emulates microfiche and microfilm.
 An imaging system passes appear document through a scanner that renders it digital
and then stores the digital data as a bit-mapped image of document.
 The problem with the imaging approach is that the output contains only images not

text. The following imaging standards are prominently used:

 TIFF (tag image file format): format for interchange of bit-mapped images.
 ITU-TSS (international telecommunication union-telecommunication standardization
sector) Group IV T.6 facsimile: this standard is used for compression and exchange of
bit-mapped files.

Structured Documents
 A structured document provides clear description of document content.
 Structured documents apply data-base structuring capabilities to individual documents
and document collections.
Standard for structured documents are:

IT Page 4
E-COMMERCE

SGML (Standard Generalization Markup Language):

 It is an ISO standard for interchange & multi formatting description of text document
in terms of logical structure.
ODA (Office Document Architecture):
 It is an ANSI & ISO standard for interchange of compound office documents.ODA
specifies both content & format.
CDA (Compound Document Architecture):
 It defines set of rules for content and format .It defines services for compound
documents.
RTF (Rich –Text Format):
 It is developed by Microsoft for interchanging of desk top documents.

Hyper Text Documents

 Hyper text is a way of making document-based information more

mobile. Reasons for mobility of information are:

 Information in enterprises is seldom located on server but is distributed throughout the
organization.
 Accessing & retrieving large monolithic document is time consuming.
 Reuse of document for composing new documents is difficult task.
 In this relationships between documents can be represented through hypermedia links
i.e. hyperlinks.

Standards of Hypermedia:
 HyTime: it adds time based relationships like synchronization, it is extension of SGML.
 HTML: developed by WWW to support distributed hypermedia.
 MHEG(multimedia /hypermedia encoding/exporting Group):standard for presenting
objects in multimedia

Active documents
 Active document represents what is known as document oriented computing.
 Active document provide an interactive interface between documents.
 Active documents are especially powerful because they combine composition of
information with the distributed nature of information.

IT Page 5
E-COMMERCE

 Ex: spreadsheet, word-processing..etc

___________________________________________________________________________
Issues behind Document Infrastructure
Document infrastructure addressed these questions:
 What is the proper architecture for the corporate digital library?
 What are appropriate model?
 What protocols required?
 What are the best human interfaces?
 How does one represent and manipulate the information processing activities occurred
in the digital library?

Document Constituencies:
The emerging document processing & management strategies must address these
constituencies.

(i) End users: End users want to do more with the information in their documents than
merely store them to disk or occasionally print them. They need systems to access
distributed repositories and to manipulate them in a number of ways.

(ii) Developers: Developers need a framework to prevent ad hoc system design and
assure the longevity and flexibility of documents and the information they include
in the face of new technological advancements.

(iii) Document Librarians: Developers and information providers acquire and maintain
materials at one end of the spectrum, and at the other end, end users utilize the
information.
.

Document-oriented processes
Components of Document-oriented processes are:
 Document creation: End users want to be able to create mission-critical documents
cooperatively on disparate systems and applications, so links between these systems
need to be seamless. For instance, a document created in WordPerfect on a DOS- based
PC may be transmitted via a LAN to a Macintosh system running PageMaker so that a
graphic designer can prepare it for presentation.

 Document media conversation: End users are looking for systems that accept multiple
forms of input- hardcopy, image, text, numeric data, video and sound.
 Document production and distribution: End users need interfaces between document

IT Page 6
E-COMMERCE

creation, document production, and document distribution systems.

They want to:

- Direct document output via networks to print on demand systems

- Exploit just-in-time document production using page description languages, image

retrieval, and network storage technologies.
- Simplify document production by integrating finishing into high speed production
processes.

 Document storage and retrieval: End users seek integrated archival storage and
retrieval support with easy access to whole documents as well as document elements
such as text passages and illustrations.

Document-based framework flows:

The following Four activities make up the document-based framework flow:
 Document modeling: it defines the structure and processes the document.
 Transformation: creates modules for capturing and validating, transforming, and
applying key operational concepts.
 Synthesizing: creates value-added information from the combination of two or more
documents.
 Business modeling: defines the structure and processes of the business environment.

----------------------------------------------------------------------------------------------------

Corporate Data Warehouses

 Architecture of the data warehouse is as follows:

Data migration Data replicated

Corporate data

from operational from operational

warehouse
database database
Query monitors

search and
clients clients
retrieval
Middleware for

data access

 Data warehouse is used store information of the organization.

 Data warehouse is needed as enterprise wide to increase data in volume and complexity.

IT Page 7
E-COMMERCE

Characteristics of data warehouse are:

 An information-based approach to decision making.
 Involvement in highly competitive & rapidly changing markets with a large, diverse
customer base for a variety of products.

 Data stored in many systems and represented differently.

 Data stored in complex, technical, difficult to decipher formats, making conversion for
analysis difficult.

Functions performed by data warehouse are:

 Allow existing transactions and legacy systems to continue in operation.
 Consolidates data from various transaction systems into a coherent set.
 Allows analysis of virtual information about current operations of decision support.

Types of data warehouses

There are four types of data warehouses:
Physical data warehouse: It gathers corporate data along with the schemas and the
processing logics.

Logical data warehouse: It contains all the Meta data and business rules and processing logic
required to scrub, organize, package and preprocess the data.

Data library: This is sub set of the enterprise wide data warehouse.

Decision support system (DSS): These systems are not data ware houses but applications that
make use of data warehouse

Building an end –to-end data ware house:

Three elements are crucial to having a complete data warehouse that will truly optimize
business analysis:
- Back End: Accessing and organizing data easily from disparate sources.
- Preparing data for analysis: Querying, searching, and governing the data.
- Front End: Providing means for effective analysis of the information.

Managing data
To manage data fallowing steps are needed:

 Translation: Prior to analysis, data might require translation because data loaded into
data warehouse are from many separate applications and may be encoded differently.

IT Page 8
E-COMMERCE

 Summarizing: In this step, relational data are grouped into views more convenient and
useful to managers.
 Packaging: The detailed or summarized data is put into more usable formats such as
spreadsheets, text documents, charts, other graphical presentations, personal databases
and animation.

 Distributing: The warehouse data is distributed to appropriate groups to increase

availability and accessibility.
 Garbage collection: A data warehouse becomes cluttered if useless data are ignored. To
help maintain the vitality of the warehouse data, older data, which can no longer be
economically maintained within the core warehouse, must be sent off to a hierarchical
storage archive.

Advantages of data warehouse:

 Timely and accurate information become an integral part of the decision-making
process.
 User can manage and access large volumes of in one cohesive framework.
 Data warehousing has wide spread applicability.

 It provides point-of-sales reports instead of end-of –day reports.

_________________________________________________________________________

Advertising and Marketing on the Internet

 The new age of information-based marketing.
 Advertising on the internet.
 Marketing research.

(1) The New Age of Information-Based Marketing:

The new age of information-based marketing differentiate interactive marketing into four
areas:
 Retailers vs manufacturers
 Target and micromarketing
 Small business vs large business
 Regulatory and legal implications of cyberspace marketing.

Retailers’ vs Manufacturers:
 The role of Retailers and manufacturers are fast reversing in electronic commerce.

IT Page 9
E-COMMERCE

Retailer’s vs Manufacturers have the fallowing methods:

 Market research and customer prospecting.

 Market presence method

 Product or services building method

 Information-based products pricing and priority method.

Target and Micromarketing:

 Electronic commerce, technology has put target and micromarketing within the
research of small business.
 It gives information to the micro marketers not only about its own business but also
consumer’s information.
 Consumer target is two-way flow of communication between seller and buyer.

 Direct mail and telemarketing are two fast growing ways to micro market.
 Technology is an essential tool in micromarketing.

There are two main types of micromarketing:

 Direct-relationship micromarketing: is aimed at stimulating sales at retail
establishments through direct contacts with consumers.
 Direct-order micromarketing: is focused on selling products directly to consumers in
their homes or businesses.

Small vs large: Thread avoid vs goliath syndrome

 The key distinction between small and large business remains access to national and
international marketing for advertising purposes.
 Today, exorbitant advertising cost represents the barrier to reaching the customer
effectively. Internet and other networks plays good role in advertising.
 The major difference between the internet and other I-way advertising media are
ownership and membership fees.
 Due to the empowering effect of internet-facilitated advertising however, the balance
of power between large and small companies may change in future.

(2) Advertising on the Internet:

 The notion of advertising and marketing became inevitable after 1991 when the

IT Page 10
E-COMMERCE

internet was opened for commercial traffic.

 There are very good reasons for embracing the inevitability of growing of commercial
advertising on the internet:
- Advertising conveys much needed information

- Advertising generates significant revenue

Key components for making internet advertising effectively are:

 Advertising process
 Core content
 Supporting content
 Market and consumer research
 Repeat customers

On-line advertising paradigms:

 Two different advertising paradigms are emerging in the on-line world, they are:
1. Active or push-based advertising

2. Passive or pull-based advertising

(i) Active or push-based advertising:

Active or push-based advertising is of two types they are :
The broadcast model:
 Broadcasting message provides a means for reaching a great number of people in short
period of time.
 It mimics the traditional model, in which customer id exposed to the advertisement
during TV programming.
 It basically uses direct mail, spot television, cable television.

 Text-based broadcast messages also used in advertising in Usenet news

groups. The junk mail model:

 Disadvantage of the direct mail include relatively high cost per contact.
 Junk mail is the just poorly targeted direct mail.

 It is most intrusive of all forms of internet advertising, because it is easily implemented

IT Page 11
E-COMMERCE

using electronic mail.

 Junk mail creates unwanted expense as well as an annoyance.

(ii) Passive or pull-based advertising:

Pull-based advertising provide a feedback loop, company and customers.

On-line pull-based advertising includes the following:

 Billboards
 Catalogs or yellow pages directories:
 endorsements
Based on the above three we have the fallowing models:

The billboards or www model:

 Billboard advertising is often used to remind the customer of the advertising messages
communicated through other media.
 The advantage of this model is no customer charges.
 In this message must be simple, direct.

Catalog and yellow pages directory model:

 Traditionally, the most visible directory service of advertising is the yellow pages.
 Catalog model is the least intrusive model but requires active search on the part of
customer.
 Yellow pages are low in cost in terms of production and placement.
 Disadvantage of yellow page include lack of timeliness and little creative flexibility.

Customer endorsement model:

 In endorsements people tell their experiences with products and services.
 These are in question and answer format.

(3) Marketing Research:

 Market research is extremely important for companies in terms of how they allocate
their advertising dollars in sales promotions, how they introduce new products, how
they target new markets.

IT Page 12
E-COMMERCE

Broadly marketing research is divided into three faces:

 Data collection
 Data organization

 Data analysis and sense making

Data collection:
 Markets mainly relied on source database for understanding consumer behavior.

 Source data base mainly comprise of numeric information.

 Delivery of source database services fallows two main patterns.

 Data collect and collate data, making it available by data base producers.
 Data collect and collate data, making it available by central hosts like CompuServe,
American online..etc.

Data organization:
 Everyone is collecting data from electronic commerce, but very few are organizing it
effectively for developing a marketing strategy.
The key abilities in their environment are:
 Leverage its established database into customized offerings by audience and markets.
 Leverage its established database in terms of horizontal growth.

Data analysis and sense making:

 The ability to link database to analytic tools like econometric programs and forecasting
models is called data analysis.
 Market research is undergoing major changes; the next generation of source database
will definitely include multimedia information.

-----------------***----------------

IT Page 13
E-COMMERCE

Unit-V(A)
SEARCH AND RESOURCE DISCOVERY PARADIGMS
Three information search and resource discovery paradigms are in use:

 Information search and retrieval

 Electronic directories & catalogs.

 Information filtering.

Information search and retrieval:

 Search and retrieval begins when a user provides a description of the information being to
an automated discovery system.
 Using the knowledge of the environment, the system attempts to locate the information
that matches the given description.
 An information retrieval method depends on the libraries.

 The challenge is to develop user in domains such as electronic shopping.

 Search and retrieval methods that refine queries through various computing techniques
such as nearest neighbors, them variants of original query.

Electronic catalogs and directories:

 Information organizing and browsing is accomplished using directories or catalogs‘

 Organizing refers to how to interrelate information, by placing it in some hierarchy.

 Maintaining large amount of data is difficult.

Information filtering:

 Goal of information filtering if selecting of data that is relevant, manageable and

understandable.
 Filters are of two types

1. Local filter

2. Remote filter
 Local filters: local filters work on incoming data to a PC, such as news feeds.

 Remote filters: remote filters are often software agents that work on behalf of the user
and roam around the network from one data base to another.

IT Page 1
E-COMMERCE

CONSUMER SEARCH AND RETRIVAL

 SEARCH AND RESOURCE DISCOVERY PARADIGMS

 INFORMATION SEARCH AND RETRIEVAL

 ELECTRONIC COMMERCE CATALOGS OR DIRECTORIES

 INFORMATION FILTERING

(1) INFORMATION SEARCH AND RETRIEVAL

 Information search is sifting through large volumes of information to find some target
information.

 Search & retrieval system are designed for unstructured & semi structural data.

 The process of searching can be divided into two types:

The end-user retrieval phases: consists of three steps

 First is, the user formulates a text based query to search data.

 Second is, the server interprets users query, performs the search and returns the user a list
of documents.
 Third is, the user selects documents from the hit list and browses them, reading and
perhaps printing selected portions of retrieved data.

The publisher indexing phase:

 It consists of entering documents in to the system and creating indexes and pointers to
facilitate subsequent searches.
 The process of loading a document and updating indexes is normally not a concern to the
user.

 These two phases are highly interdependent

WAIS (Wide Area Information Service):

 It enables users to search the content of the files for any string of text that they supply.

WAIS has three elements:

(i) Client Sever Indexer:

 It uses an English language query front end a large assortment of data bases that contains

IT Page 2
E-COMMERCE

text based documents.

 It allows users search the full text of all the documents on the server.

 Users on diff platforms can access personal, company, and published information from
one interface I.e. text, picture, voice, or formatted document.
 Anyone can use this system because it uses natural language questions to find relevant
documents.

 Then the servers take the user questions and do their best to find relevant documents.

 Then WAIS returns a list of documents from those users selects appropriate documents.
 Today, the Netscape or NCSA mosaic browser with the forms capability is often used as
a front-end to talk to WIAS sever.
(ii) Search Engines:

 WAIS is a sophisticated search engine.

 The purpose of the search engine in any indexing system is simple

 To find every item that matches a query, no matter where it is located in the file system.

 Search engines are now being designed to go beyond simple, broadband

 Searches for which WIAS is so popular.

 It uses both keywords and information searching to rank the relevance of each document.

 Other approaches to data searching on the web or on other wide area networks are
available.

(iii) Indexing methods:

 To accomplish accuracy and conserve disk space, two types of indexing methods are
used by search engines.
They are:

1. File-level indexing
2. Word-level indexing

File-level indexing:

 It associates each indexed word with a list of all files in which that word appear at least
once.
 It does not carry any information about the location of words within the file.

IT Page 3
E-COMMERCE

Word-level indexing:
 It is more sophisticated and stores the location of each instance of the word.
 The disadvantage of the word-level indexing is that all the extra information they contain
gobbles up a lot of disk space, it is 35-100 percent of the original data.
 The process of indexing data is simple one ,it has large number of indexing packages:

 These indexing packages are categorized into three types, they are:

1. The client-server approach

2. The mainframe-based approach

3. The parallel-processing approach

Search and new data types:

We have the following search technologies for effective search:
Hypertext: richly interwoven links among items in displays allow users to move in relatively ad
hoc sequences from display to display with in multimedia.

Sound: speech input and output, music and wide variety of acoustic cues include realistic sounds
that supplement and replace visual communication.

Video: analog are digital video input from multiple media, including video tapes, CD-ROM,
incorporated broadcast videos turners, cables and satellites.
3D-images: virtual reality displays offer a 3D environment in which all portions of the user
interface are 3D.

Searching using these new types of information poses interesting challenges that need to be
addressed soon.

 Www Robots, wanderer, and Spiders

 Robots, Wanderer, And Spiders are all programs that traverse the www automatically
gathering information

------------------------------------------------------------------------------------------------
(2) ELECTRONIC COMMERCE CATALOGS OR DIRECTORIES
 A directory performs an essential support function that guides customers in a maze of
options by enabling the organizations of the information space.
Directories are of two types:

1. The white pages

IT Page 4
E-COMMERCE

2. Yellow pages

 The white pages are used to people or institutions and yellow pages are used to
consumers and organizations.

(1) Electronic white pages:

 Analogues to the telephone white pages, the electronic white pages provide services from
a static listing of e-mail addresses to directory assistance.
 White pages directories, also found within organizations, are integral to work efficiency.
 The problems facing organizations are similar to the problems facing individuals.

 A white pages schema is a data model, specifically a logical schema, for organizing the
data contained in entries in a directory service, database, or application, such as an
address book.

 A white pages schema typically defines, for each real-world object being represented:

 What attributes of that object are to be represented in the entry for that object.

 What relationships of that object to other objects are to be represented?

 One of the earliest attempts to standardize a white pages schema for electronic mail use
was in X.520 and X.521, part of the X.500 a specification that was derived from the
addressing requirements of X.400.
 In a white pages directory, each entry typically represents an individual person that
makes the use of network resources, such as by receiving email or having an account to
log into a system.

 In some environments, the schema may also include the representation of organizational
divisions, roles, groups, and devices.
 The term is derived from the white pages, the listing of individuals in a telephone
directory, typically sorted by the individual's home location (e.g. city) and then by their
name.

White pages through x.500:

 One of the first goal of the X.500 project has been to create a directory for keeping track
of individual electronic mail address on the internet.

 X.500 offers the following features:

-Decentralized maintenance

-Each site running x.500 is responsible only for its local part of the directory.

IT Page 5
E-COMMERCE

Searching capabilities: x.500 provides powerful searching capabilities i.e. in the white pages;
you can search solely for users in one country. From there you can view a list of organizations,
then departments, then individual names.

This represents the tree structure.

 Single global name space: x.500 provides single name space to users.

 Structured information framework: X.500 defines the information framework used in

the directory, allowing local extensions.
 Standards-based directory: X.500 can be used to build directory applications that
requires distributed information.

WHITE PAGES DIRECTORY INFORMATION TREE

(2) ELECTRONIC YELLOW PAGES:

 The term Yellow Pages refers to a telephone directory of businesses, categorized
according to the product or service provided.
 The traditional term Yellow Pages is now also applied to online directories of businesses.

 To avoid the increasing cost of yellow paper, the yellow background of the pages is
currently printed on white paper using ink. Yellow paper is no longer used.
 The name and concept of "Yellow Pages" came about in 1883, when a printer in
Cheyenne, Wyoming working on a regular telephone directory ran out of white paper and

IT Page 6
E-COMMERCE

used yellow paper instead.

 In 1886 Reuben H.Donnelley created the first official yellow pages directory, inventing
an industry.

 Today, the expression Yellow Pages is used globally, in both English-speaking and non-
English speaking countries.

 In the US, it refers to the category, while in some other countries it is a registered name
and therefore a proper noun.

 Third-party directories can be categorized variously:

 Basic yellow pages: These are organized by human-oriented products and services.

 Business directories: This takes the extended information about companies, financial-
health, and news clippings.
 State business directories: this type of directory is useful in businesses that operate on a
state or geographic basis.
 Directories by SIC :( standard industrial classification) directories are compiled by the
government.
 Manufacturer’s directories: if your goal is to sell your product or service to
manufacturers, then this type of directory is used.

 Big-business directory: This directory lists companies of 100 or more employees.

 Metropolitan area business directory: It develops sales and marketing tools for specific
cities.

 Credit reference directory: this directory provides credit rating codes for millions of US
companies.
 World Wide Web directory: this lists the various hyperlinks of the various servers
scattered around the internet.

-------------------------------------------------------------------------------------------------------------------
(3) INFORMATION FILTERING
 An Information filtering system is a system that removes redundant or unwanted
information from an information stream using (semi)automated or computerized methods
prior to presentation to a human user.
 Its main goal is the management of the information overload and increment of the
semantic signal-to-noise ratio. To do this the user's profile is compared to some reference
characteristics.

IT Page 7
E-COMMERCE

 A notable application can be found in the field of email spam filters.

 Thus, it is not only the information explosion that necessitates some form of filters, but
also inadvertently or maliciously introduced pseudo-information.
 On the presentation level, information filtering takes the form of user-preferences-based
newsfeeds, etc.

 Recommender systems are active information filtering systems that attempt to present to
the user information items (movies, music, books, news, webpage) the user is interested
in.
 Information filtering describes a variety of processes involving the delivery of
information to people who need it.
 This technology is needed as the rapid accumulation of information in electronic
databases.
 Information filtering is needed in e-mails, multimedia distributed system and electronic
office documents.

The features of the information filtering are:

 Filtering systems involves large amounts of data (gigabits of text).

 Filtering typically involves streams of incoming data, either being broadcast by remote
sources or sent directly by other sources like e-mails.

 Filtering has also been used to describe the process of accessing and retrieving
information from remote database.
 Filtering is based on descriptions of individual or group information preferences, often
called profiles.

 Filtering system deal primarily with textual information.

Email filtering:
 It is the processing of e-mail to organize it according to specified criteria.
 Most often this refers to the automatic processing of incoming messages, but the term
also applies to the intervention of human intelligence in addition to anti-spam techniques,
and to outgoing emails as well as those being received.

 Email filtering software inputs email.

 For its output, it might pass the message through unchanged for delivery to the user's
mailbox, redirect the message for delivery elsewhere, or even throw the message away.
 Some mail filters are able to edit messages during processing.

 Common uses for mail filters include removal of spam and of computer viruses.
IT Page 8
E-COMMERCE

 A less common use is to inspecting outgoing e-mail at some companies to ensure that
employees comply with appropriate laws.

 Users might also employ a mail filter to prioritize messages, and to sort them into folders
based on subject matter or other criteria

Mail-filtering agents:
 Users of mailing-filtering agents can instruct them to watch for items of interest in e-mail
in-boxes, on-line news services, electronic discussion forums, and the like.

 The mail agent will pull the relevant information and put it in the users personalized
newspapers at predetermined intervals.

 Example of Apple’s Apple Search software. Mail filters can be installed by the user,
either as separate programs (see links below), or as part of their e-mail program (e-mail
client).
 In e-mail programs, users can make personal, "manual" filters that then automatically
filter mail according to the chosen criteria.

 Most e-mail programs now also have an automatic spam filtering function.

 Internet service providers can also install mail filters in their mail transfer agents as a
service to all of their customers. Corporations often use them to protect their employees
and their information technology assets.

News-filtering agents:

 These deliver real-time on-line news.

 Users can indicate topics of interest, and the agent will alert them to news stories on those
topics as they appear on the newswire.

 Users can also create personalized news clipping reports by selecting from news services.
 Consumers can retrieve their news from through the delivery channel of their choice like
fax, e-mail, www page, or lotus notes platform.

IT Page 9
E-COMMERCE

UNIT -5(B)
MULTIMEDIA AND DIGITAL VIDEO
 KEY MULTIMEDIA CONCEPTS

 DIGITAL VIDEO AND ELECTRONIC COMMERCE

 DESKTOP VIDEO PROCESSING

 DESKTOP VIDEO CONFERENCING

KEY MULTIMEDIA CONCEPTS

Multimedia: the use of digital data in more than one format, such as the combination of text,
audio and image data in a computer file.

The theory behind multimedia is digitizing traditional media likewords, sounds, motion and
mixing them together with elements of database.

Multimedia data compression:

Data compression attempts to pack as much information as possible into a given amount of
storage. The range of compression is 2:1 to 200:1.

Compression Methods:
 Sector-oriented disk compression (integrated into the operating system, this
compression is invisible to end user)
 Backup or archive-oriented compression(Compress file before they are downloaded
over telephone lines)
 Graphic & video-oriented compression(Compress graphics & video file before they are
downloaded)

 Compression of data being transmitted over low-speed network(tech used in

modems, routers)
Data compression in action:

 Data compression works by eliminating redundancy.

 In general a block of text data containing 1000 bits may have an underlying information
content of 100 bits, remaining is the white space.
 The goal of compression is to make the size of the 1000-bit to 100-bit (size of underlying
information).this is also applicable to audio and video files also.

SCCE_CSE Page 10
E-COMMERCE

Compression Techniques:
 Compression techniques can be divided into two major categories:

Lossy:
 Lossy compression means that it given a set of data will undergo a loss of accuracy or
resolution after a cycle of compression and decompression. it is mainly used for voice,
audio and video data.

 The two popular standards for lossy tech is MPEG, JPEG.

Lossless:
 Lossless compression produces compressed output that is same as the input. It is mainly
used for text and numerical data.

Symmetric Multiprocessing

n/w
Print Database Communicati
services reuest Disk ip/op File system service
on services
s

scheduler

processor1 processor2 processor3 processor4

E-COMMERCE 9

Multimedia Server:
 A server is h/w & s/w systems that turns raw data into usable information and provide
that to users when they needed.
 E-commerce application will require a server to manage application tasks, storage,
security, transaction management and scalability.
To manage multimedia information we need the fallowing.

Multiprocessing:

SCCE_CSE Page 11
E-COMMERCE

 Current execution of several tasks on multiple processors. this implies that the ability to
use more than one CPU for executing programs. processors can be tightly or loosely
coupled.

Symmetric multiprocessing:

 Symmetric multiprocessing treats all processors as equal I.e. any processor can do the
work of any other processor. It dynamically assigns work to any processor.

Multitasking:
 Multitasking means that the server operating systems can run multiple programs and
give the illustration that they are running simultaneously by switching control between
them.

 Two types of multitasking are:

1. Preemptive

2. Non preemptive

Multithreading:
 Multithreading is a sophisticated form of multitasking and refer to the ability to support
separate paths of execution within a single address space.

 In this a process broken into independent executable tasks called threads

Asymmetric Multiprocessing

n/w
Print Database Communicati
Disk ip/op
services reuest
File system service
on services

processor1 processor2 processor3 processor4

E-COMMERCE 12

Multimedia Storage Technology

 Storage technology is becoming a key player in electronic commerce because the storage
requirements of modern-day information are enormous.
SCCE_CSE Page 12
E-COMMERCE

 Storage technology can be divided into two types:

1. Network-based (disk arrays)

2. Desktop-based (CD-ROM)

Disk arrays:

 Disk arrays store enormous amounts of information and are becoming an important
storage technologies for firewall servers and large servers.
 Range provided for small arrays is 5-10 gigabytes.

 Range provided for large arrays is 50-500 gigabytes

 Technology behind disk array is RAID(redundant array of inexpensive disk)

 RAID offers a high degree of data capacity, availability, and redundancy.

 Current RAIDs use multiple 51/2 –inch disks.

CD-ROM:
 CD-ROM is premiere desktop stop storage.

 It is a read only memory, to read CD-ROM a special drive CD-ROM drive is required.

 The mail advantage is the incredible storage density.

 That allows a single cd-rom disc contains 530MB for audio CD.

 That allows a single cd-rom disc contains 4.8 GB for video CD.

CD-ROM Technology Exhibits The Following:

High information density:

 It is with optical encoding, the CD can contain some 600-800 MB of data.

Low unit cost:

 Unit cost in large quantities is less than two dollars, because CDs are manufactured by
well-developed process.

Read only memory:

 CD-ROM is read only memory so it cannot be written or erased.

Modest random access performance:

 Performance of the CDs is better than floppies because of optical encoding methods.

SCCE_CSE Page 13
E-COMMERCE

The Process of CD proceeds as follows:

 CD-ROM spiral surface contains shallow depressions called pits. These pits used to
scatter light.
 CD-ROM spiral surface contains spaces between indentations called lands .these lands
are used to reflect light.

 The laser projects a beam of light, which is focused by the focusing coils.

 The laser beam penetrates a protective layer of plastic & strikes the reflective aluminum
layer on the surfaces
 Light striking a land reflects back to the detector.

 Light pulses are translated into small electrical voltage to generate 0’s & 1’s.

---------------------------------------------------------------------------------------------

DESKTOP VIDEO AND ELECTRONIC COMMERCE:

DIGITAL VIDEO AND ELECTRONIC COMMERCE

 Digital video is binary data that represents a sequence of frames, each

representing one image.
 The frames must be shown at about 30 updates per sec.
 Digital video as a core element:

Desktop
Telecom Consumer
computing
services electronics
Broadcast & Digital video
Electranic
cable sevices
Content publishing
On-line

20 services creation
E-COMMERCE

Characteristics of Digital Video:

Several Characteristics of digital video differentiate it from traditional analog video.

 It can be manipulated, transmitted and reproduced with no discernible image generation.

 It allows more flexible routing packet switching technology.

 Development of digital video compression technology has enabled the of new
applications in consumer electronics, multimedia computers and communications market.
 It poses interesting technical challenges; they are constant rate and continuous time media
instead of text, image, audio and video.

 Compression rate are 10 mb /min of video.

SCCE_CSE Page 14
E-COMMERCE

Digital video compression/decompression:

 Digital video compression takes the advantage of the fact that a substantial amount of
redundancies exist in video. The hour-longer video that would require 100 CDs would
only required one CD if video is compressed.
 The process of compression & decompression is commonly referred to as just
compression, but it involves both processes.
 Decompression is inextensible because once compressed, a digital video can be stored
and decompressed many time.

 The adaptations of international standards are called codec.

 Mostly used codec today's are loss compression.

Types of Codec's:

 Most codec schemes can be categorized into two types:

1. Hybrid

2. Software-based.

Hybrid: hybrid codec use combination of dedicated processors and software. It requires
specialised add-on hardware.
Best examples of hybrid codec are

 MPEG (moving picture expert group)

 JPEG(joint photographic expert group)

MPEG (moving picture expert group):

 Moving Picture Expert Group is an ISO group; the purpose of this is to generate high
quality compression of digital videos.

MPEG I (Moving Picture Expert Group I):

 MPEG I defines a bit steam for compressed video and audio optimized to a bandwidth of
Mbps, it is the data rate of audio CDs & DATs.

 The standard consists of three parts audio, video, and systems. A system allows the
synchronization of video & audio.
 MPEG I implemented in commercial chips .resolution of the frames in MPEG I is
352X240 pixels at 30 frames per second.
 The video compression ratio for this is 26:1

MPEG II (Moving Picture Expert Group II):

SCCE_CSE Page 15
E-COMMERCE

 MPEG II specifies compression signals for broadcast-quality video. It defines a bit steam
for high-quality “entertainment-level” digital video.
 MPEG-2 supports transmission range of about 2-15 Mbps over cable, satellite and other
transmission channels.
 The standard consists of three parts audio, video, and systems. A system allows the
synchronization of video & audio.

 MPEG II implemented in commercial chips.

 Resolution of the frames in MPEG I is 720X480 pixels at60 frames per second.

 A data rate of the MPEG-2 is 4 to 8 Mbps.

 Future promising of this is rapid evolution of cable TV’s news channels.

 Two other MPEG standards are

MPEG-3(1920X1080 and data rates are 20 to 40)

MPEG-4(consisting of speech and video synthesis)

JPEG (Joint Photographic Expert Group):

 JPEG is a still-image compression algorithm defined by the joint photographic expert
group and serves as the foundation for digital video.

 JPEG is used in two ways in digital video world:

1. as apart of MPEG
2. as motion JPEG

 JPEG standard has been widely adopted for video sequences.

 JPEG compression is fast and can capture full-screen, full-rate video.

 JPEG was designed for compressing either full-color or gray-scale Digital images of real-
world scenes.

 JPEG is a highly sophisticated technique that uses three steps:

The first step, a technique known as DCT (discrete cosine transformation).

Next, a process called quantization manipulates the data and compresses strings of identical
pixels by run length encoding method.

Finally, the image is compressed using a variant of Huffman encoding.

 A use full property of the JPEG is the degree of looseness.

---------------------------------------------------------------------------------------------------------------------
SCCE_CSE Page 16
E-COMMERCE

DESKTOP VIDEO PROCESSING

 Video on the desktop is a key element in turning a computer into a true multimedia
platform.

 PC has steadily become a highly suitable platform for video.

 Desktop Video Processing includes upgrade kits, sound cards, video playback accelerator
board, video capture hardware and editing software.
 Microphones, speakers, joystik, and other peripherals are also needed.

Desktop video hardware for playback and capture:

 Desktop video require a substantial amounts of disk space and considerable CPU horse-
power.
 It also requires specialized hardware to digitize and compress the incoming analog signal
from video tapes.
 .The two lines of video playback products become available in the marketplace I.e. video
ASIC chips and board level products.

Video playback:
 The two lines of video playback products become available in the marketplace I.e. video
ASIC chips and board level products.

 Broadly speaking, two types of accelerator boards are available:

-Video

-Graphics
Video capture and editing:

 Video capture board are essential for digitizing incoming video for use in multimedia
presentations or video conferencing

 Video capture program also include video-editing functions that allows users crop, resize
and converts formats and add special effects for both audio and video like fade-in,
Embosses, zooma and echo's.
 Developers are crating next generation editing tools to meet business presenters and
video enthusiasts.
 The best graphical editing tools make complex procedures accessible even to novice
users.

Desktop video application software:

SCCE_CSE Page 17
E-COMMERCE

 The text that appear in the movie. Any PC wants to handle digital video must have a
digital-video engine available.

 Two significant digital video engines are :

1. Apple’s QuickTime

2. Microsoft’s video for windows

 These two are software's only; they don’t need any special hardware.
Apple’s QuickTime:

 QuickTime is a set of software programs from apple that allows the operating system to
pay motion video sequences on a PC without specialized hardware.
 QuickTime has it s own set of compression/decompression drivers.

 Apple’s QuickTime was the first widely available desktop video technology to treat video
as a standard data type.
 In this video data could not be cut, copied, and pasted like text in a page composition
program.
 Apple’s QuickTime movie can have multiple sound tracks and multiple video tracks.

 Apple’s QuickTime engine also supports synchronize

Microsoft’s video for windows:

 Microsoft’s video for windows is a set of software programs from Microsoft that allows
the operating system to pay motion video sequences on a PC without specialized hardware.

 Microsoft video for windows has its own set of compression/decompression drivers.

 Microsoft chooses a frame-based model, in contrast to QuickTime-based model.

-------------------------------------------------------------------------------------------------
DESKTOP VIDEO CONFERENCING
 Desktop video conferencing is gaining momentum as a communication tool. Face-to-face
video conferences are already a common practice, allowing distant colleagues to
communicate without the expense and inconvenience of traveling.
 Early video conferencing utilized costly equipment to provide room-based conferencing,
but now it becoming fast due to desktop video conferencing in this we participated by sit
at their own desks, in their own offices, and call up others using their PCs much like
telephone.

SCCE_CSE Page 18
E-COMMERCE

 The Economics:
 Three factors have made desktop video conferencing:

 Price: The price fallen from 500,000$ to 500-1000$

 Standards: standards allowing interoperable communications between machines from
diff vendors.

 Compression: It uses better and faster compression methods.

Types of desktop video conferencing:

 Desk top video conferencing system coming onto the market today are divided into Three
types they are based on plain old telephone lines:

1. POST

2. ISDN

3. Internet

(1) Using POST for video conferencing:

 POST systems are especially attractive for Point-to-Point conferencing because no
additional monthly charges are assessed and special arrangements with the telephone
company are unnecessary.

 The drawback with a POST solution is a restriction to the top speed of today’s modems
of 28.8 Kbps.
 It need a s/w ,once properly installing a s/w users allows to pipe video,audio,and data
down a standard telephone line.

Point-to-Point video conferencing using POTS

Sender with video Receiver

Telephone

• network

High speed High-peed

modem modem

41

SCCE_CSE Page 19
E-COMMERCE

(2) Using ISDN for video conferencing:

 ISDN lines mostly offer considerable more bandwidth up to 128 Kbps, but it require the
installation of special hardware.
 The use of ISDN has been restricted to companies especially in private residence.
 The fallowing fig explains the basic architecture for television or video conferencing
using ISDN network transport switching.
 This architecture is commonly found in videophones. Networks required for video
conferencing are fiber optic cable or analog POST.

 For video compression and decompression, the ISDN networks uses the H.261
technology, it is specified by the international telegraph and telephone consultative
committee algorithm.

sender

Video phone

Receiver
H.261 decoder

Telephone ISDN
network

ISDN video or teleconferencing architecture E

(3) Using the Internet for Video Conferencing:

 The two video conferencing programs are available on the internet:

1. CU- See Me
2. MBONE

CU- See Me:

 CU- See Me is the first software available for the Macintosh to support real-time
multiparty video conferencing on the internet.
 CU- See Me provides a one-to-one , one-to-many , several-to- several and several-to-
many conferencing depending on the user needs with minimal cost.

SCCE_CSE Page 20
E-COMMERCE
Internet

Reflector

Sender
with video
camera

Receivers

One-to-many video conferencing

MBONE:
 It is a virtual network built on top of the Internet

 Invented by Van Jacobson, Steve Dearing and Stephen Caner in 1992.

 The purpose of MBONE is to minimize the amount of data required for multipoint audio
/ video-conferencing
 MBONE is free; it uses a network of m routers that can support IP Multicast.

 It enables access to real-time interactive multimedia on the Internet

 MBONE uses a small subset of the class D IP address space(224.0.0.0 -
239.255.255.255) assigned for multicast traffic.

 MBONE uses 224.2.0.0 for multimedia conferencing

Characteristics:
 topology: combination of mesh and star networks

 IP addresses: 224.2.0.0; routing schemes: DVMRP, MOSPF

 session registration: IGMP protocol

 traffic requirement: audio 32-64 kbit/s, video 120 kbit/s

MBONE tools:
 Videoconferencing: vic -t ttl destination-host/port (supports: NV, H.261, CellB,
MPEG, MJPEG)

 Audio conferencing: vat -t ttl destination-host/port (supports: LPC, PCMU, DVI4,

GSM)

---------------*-----------------
SCCE_CSE Page 21