Introduction to E commerce

Introduction to E commerce

The purpose of this note is to give a brief idea about the basicsof E Commerce & the Internet in terms of terms used , securityaspects and future outlook. The internet is like a tidal wavesweeping the world and it is changing the world in a way not donein any such way before.

Before we actually get into the subject it would be a good idea todemystify various jargon and break them down to into simple andeasily understandable definitions of these complicated subjects.

Definitions

1. Web site or URL 2. Domain name 3. Cybersquatting 4. Internet5. E Commerce v/s E Business 6. Site visit 7. Page view 8. Hit 9. Click through 10. Encryption 11. Digital signature 12. Protocol or standard 13. Payment gateway 14. Cookies 15. SSL 16. SET 17. Public Key Infrastructure18. Hash 19. Virtual Private network 20. TCP/ IP21. FTP 22. Firewall 23. Modems Routers and gateways24. Packet switching 25. Circuit switching 26. ISDN 27. WAP 28. Internet telephony29. Cable modem

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30. Cable set top box

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Simple definitions

1.Web site or URL : - A web site is virtual location where thedata pertaining to a site on the internet is located. URL standsfor Universal Resource locator and is based on a standard namingconvention followed the world over using world wide web ( WWW) ,the respective domain names ( .com , .org, . edu) etc. It islike a postal address given in a capsule

2.Domain names : - These are given to countries or toorganizations which intend to collate their offerings in asystematic way on the internet. It is like having an easyreference mechanism to search for books in library

3. Cybersquatting:- This reveals the ugly face of the internetwhere individuals secure famous domain names on a first comefirst served basis and then offer the sites at a price togenuine corporations who wish to use this domain name.

4.Internet : - The internet is a collection of computers( actually servers ) which contain data about individual siteswhich can be accessed by anyone connected to the network in anopen and free environment . Thus there is no restriction on thecontent ( read information ) available on the net. There is nosource controlling the creation of this content, its access anddissemination across the network. The servers ( read users ) areconnected thro’ the internet gateways provided by each countryfor its users . In India , Videsh Sanchar Nigam Ltd ( VSNL )provides the only gateway in India.

5.E Commerce relates to the simple exercise of buying and sellinggoods over the internet. It involves setting up software ,connectivity issues, payment gateways etc. . E Business is amuch wider and comprehensive term which covers the entireprocess of doing business on the net in a safer , secure,manner.

6.Site visit : - Every time a visitor enters the URL of a site andenters the site, he is logged in as a visitor. In case he logsout or his connections gets terminated , a fresh log in wouldnormally be counted as a fresh visit. All sites have log fileswhich record visits. Usually repetitive visits within a shorttime duration are ignored while computing visit statistics

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7.Page view : - Every time a visitor visits a site , he encountersa home page which is something like the window of a shoppingmall . Once he clicks on an icon or a picture a fresh page isserved to him . Each such page which is served to him as perhis request is called a page view.

8. Hit : - A site is posted on the internet containing informationabout the company ‘s products, shopping opportunities, and otherinteractive activities. These involve, text data, spreadsheets,pictures, graphs, images and so on These are stored in aspecial form called HTML form which enables them to unfold whena visitor clicks an icon/picture. Thus when a visitor requestsfor a page, he may be requesting for say 20 such HTML fileswhich together constitute that page view. Each of these fileswhen downloaded represents a hit.

9.Click through : - This is extremely important for advertisers.An advertiser puts a banner in a site which gives an opportunityto a visitor to the site to click thro' the banner and therebysee the advert shown by the advertiser. This represents a clickthrough and the site is paid a fixed amount for each clickthrough.

10. Encryption : - When data is sent across the internet, it isopen to abuse , misuse, and tampering of the information whileit is in transit. Encryption masks the message into a mass ofunrecognizable characters during the transit so that dataintegrity is maintained while in transit. It is important thatboth users use the same encryption software so the receiver isable to decrypt the encrypted message and read it. This is astandard feature in private networks but is not available onthe internet. This is explained in further detail later .

11. Digital signature: - This is not a signature either by handor by computer. It is method to authenticate the sender of themessage and to ensure the complete and total transmission ofthe message. This is done by using various methodologies likesingle key, double key etc.

12. Protocol or standard : These two words are usedinterchangeably very often in the IT world. A protocol is likelanguage or a common set of instructions which enable differentnetworks to talk to each other. This is stored in each PC ‘snetworking area which enables it to talk to other PC’s. Thereare proprietary protocols like IPX belonging to Novell and

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public protocols like SS7 for telecom systems which isextensively used in implementing 1-800 type requirements( receiving pays for the call ) and TCP – IP , the protocolwhich drives the internet.

13. Payment Gateway : - This is a mechanism to enable e commercetransactions in a way that would replace/ supplement existingpayment mechanism’s like cash, cheque and credit card. Apayment gateway can be established by bank, or a softwarecompany or a combinations of both. It enables customers toapproach vendors and settle transactions without resorting tothe above mentioned three modes of payment.

14. Cookies : - These are not biscuits , believe me these aresmall bits of information about the site visitor who is visitsthe site which are recorded in file in his PC. The same data isextracted when he next visits the site using the same PC. It isused for storing common information about the customer and is aprime enabler of personalization of the web.

15. SSL : - This is known as Secure Sockets layer which has beenin palace for many years and provides for single key encryptionand is one the methods for secure use of the net by using yourcredit/ debit card. This is slowly being replaced by SET invarious parts of the world

16. SET : This stands for Secure Electronic Transaction and isthe new standard in secure transactions on the Web . It involvesdouble/ triple key encryption, use of hash digests, andcertification authorities

17. Public key infrastructure : - This involves the entirestructure for doing secure business transactions in the Web inthe future. The comprises of the public and private key, thehash digests, certifying authorities, etc. This is expected tobe the way to go for most countries which intend to replace theconventional business models with e business models

18. Hash digest: This is a number which is generated out of anelectronic message by an encryption software. It is used toensure that a message has been received in the same manner inwhich it was sent. It is like a check digit used in computers.

19. Virtual Private Network: - A private network is one whichis not open to the public world. Once a network is open to the

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world it is open to hackers , tricksters, fraudsters and otherswith malicious intent. A purpose of a Virtual Private Networkis to avail the easy set up and install features of Internettechnology along with the safety of a private network bycreating an encrypted tunnel around the network . Every user hascryptography software installed in his/ her machine, so thatdata can be safely sent thro’ Internet. This will beincreasingly used by companies with vendors, customers and bybanks which intend to offer internet banking.

20. TCP/ IP : This is a short form for Transmission ControlProtocol / Internet Protocol. This is what rules the Internet.This is publicly available network which was initially developedby US Defence Academy. It’s advantages are easy of use andinstalling, and scalability. But since it is an open system itis also open to abuse and lacks security. In order to make TCP/IP a truly secure platform, one needs very good encryptionsoftware like PGP , a public key infrastructure, and a robustfirewall solution.

21. FTP : - This is called File transfer Protocol and is themedium offered by TCP /IP for files used by one server can beaccessed and extracted by another remote ( in a distantlocation) server. It is now a commonly used method oftransmitting software deliverables rather than thro' floppies,tapes and where a dedicated link is not required between the twousers. It is subject to various passwords/access controls whichare provided but does not come with any standard encryptionsoftware.

22. Firewall : - This is simply the most important securitydevice available to a company which is open to world thro’ apublic network. It is expected to filter out who is accessingthe network ( known or unknown source ) an what kind of data( harmless or malicious ) is being brought into the network.They primarily work by tracking IP Addresses ( this is like acode of your PC known only to TCP/ IP ) . There are variouscomplex firewall solutions giving various levels of security.

23. Modem’s , routers, and gateways. These are devices whatperform communication functions in a network. A modem is thedevice which helps a PC to talk to another PC. This is done byconversion of digital data in the senders PC to analog data( thro' telephone ) back into digital data in the receiver’s

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PC . Routers perform the complicated job of directing networktraffic. It is like the virtual cousin of the Hag Ali Trafficsignal which we are familiar with. It has manage all the trafficgoing thro' the network assigning priorities and deciding thepath for the data to travel . A gateway is a server whichenables systems using different platforms to talk to othersystems . Thus you can have fax gateways , internet gatewaysetc.

24. Circuit switching: - This is followed in the conventionaltelephone lines . The circuit between the two telephone lines isactivated once any of them dials the number and is terminatedonce the connection is cut. This has traditionally been usedfor all voice traffic.

25. Packet switching : - This is the method for transmittingdata packets between two PC’s. In this case the data is packedinto packets which are transmitted thro' the medium ( copper,fibre, glass) at varying speeds depending on modem speed . Thetelephone line is used only for the time of actual transmissionthereby reducing the cost of transmission. This hastraditionally been used for all data traffic.

26. ISDN : - This is a digital telephone line which avoids theuse of modem for converting the data from digital to analog andvice versa. Thus an ISDN line can carry data, voice, images( for video conferencing), internet browsing etc in the sameline thereby using the line effectively .

27. Internet Telephony : - This is a technology by which voicemessages can be transmitted using TCP IP protocol and notconventional telephone protocol by which due to use of packetswitching the cost of an international phone call would becomecomparable to the cost of sending/receiving e mail messages.This technology is under development and is presently banned inIndia. The reason is that the use of this technology willdistort the present arrangement of sharing revenues amongtelecom carriers of each country. As a result, this needs toreworked by various countries under the aegis of theInternational Telecom Union ( ITU).

28. WAP : - Wireless Application Protocol : - This is a newemerging technology which involves convergence of radiowavecommunication ( used in mobile phones ) and TCP IP used inInternet, It is meant to allow users to receive and send e

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mails from their cell phones and browse the internet suing theircell phones.

29. Cable modems : - These devices are alternate devices toregular data modems which connect thro’ a land line to theinternet. A cable modem connects you to your cable operator whobroadcasts a cable transmission ( with which I am sure all of usare familiar) . This cable modem eliminates the need to have aphone line and PC connected to the Net. One would still needan external hard disk to download information and keyboard totype it in .

30. Cable set top Box. This is an improvised device by which onecan use the Internet and watch the television and surf theinternet alternatively and not both at the same time.

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The World of E Business

The internet has enabled a whole era in our times and has madepossible what was considered impossible in the past. It has trulyconverted the world into a global village. It has resulted in whatis popularly now called as the death of distance. It has brokendown a number of existing business models and has given rise to anumber of new business models which are the opposite ofconventional business thinking.

It is therefore said that e Business has re written the rules ofBusiness and very soon there will be no Business except Ebusiness . Thus every individual, small business, large corporate,institution, government body must realise the potential power ofthis medium and put himself or herself in the centre of thismedium to address the needs of his clientele. If he refuses to dothis, he runs the risk of having some upstart beginner take awayhis entire customer base which he has assiduously cultivated overmany years .

Below is an introduction to the subject of e business beginningwith business models, main players, benefits, tools and techniquesand pitfalls.

Part A : - What are the major Business Models / Profiles on theWeb : -

To understand e business one needs to have a helicopter view ofvarious participants and various consumers on the web.

◊ Business to Business This is supposed to be a huge opportunity area in the web.Companies have by and large computerized all the operationsworldwide and now they need to go into the next stage by linkingtheir customers and vendors. This is done by supply chainsoftware which is an integral part of your ERP application .Companies need to set up a backbone of B2B applications which willsupport the final customer requirements at the web . Many B2Bsites are company and industry specific catering to a community ofusers or a combination of forward and backward integration.Companies have achieved huge savings in distribution relatedcosts due to their B2B applications. The example which comes to

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mind immediately is that of CISCO Systems, who sell the networkingequipment which powers the Internet. ◊ Business to Consumer This is a direct application from a seller of products to an endconsumer of those products particularly the retailproducts.Amazon.com is a typical example. ◊ Consumer to BusinessThese refer to the applications emanating from a consumer to abusiness which are actually consumer items but need a businessintermediary. Most of the search engines are operating C to Bmodels. Priceline.com offers named price product offerings intravel, tickets, holidays etc is another example. The site asksfor a price from the customer and goes and finds out the bestmatch for that given price. ◊ Consumer to Consumer C to C applications are the ones involving consumers who deal witheach other on the web. They need a site like an online auctionsite for example to transact with each other. E Bay is an example. Message boards, community sites, chat forums are also C to Capplications . It doesn’t mean that the Internet is all about buying and sellinggoods or services or information. The internet works because of awhole industry works painstakingly to make it happen .

Part B : - Who are the main players in this industry and what aretheir roles.

1. Internet Service Providers This is like the telephone company which gives you gives you thephone connection. An ISP has linkages to an International gatewayand has further linkages to a local service provider ( saytelephone or cable service provider). It provides internet accessfor a fee based on the hours logged in by the user and the time ofday or night . The Govt. of India has committed to allow privateinternational gateways ( as against VSNL at present) and hasfixed a nominal fee of Rs 1 for an ISP license. The charge paid tothe local service provider needs to reviewed in respect ofinternet access. Most ISP’s need to set up content based portalsand search engines to augment revenue because an ISP as a

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standalone proposition is not viable. It is felt that ultimatelyone day the phone lines , the power cables and the internettraffic will all travel using the same medium. This is verybroadly referred to as a broadband network. 2. Search Engines & Portals

Search Engines are a basic necessity on the net as there are noknown directories of sites. It is also humanly impossible for oneagency to compile the same. The major search engines such asYahoo, Hotbot, Altavista, Infoseek, Askjeeves maintain a directoryof sites which visitors can get by giving appropriate searchcriterions. The sites also have links with thousands of othersites giving instant access. Every site wishing to do e businessneeds to be registered on these sites because 70-75 % of all sitetraffic arises out of search engines. There is huge amount ofresearch being done in the West on designing focussed searches andconfiguring sites to attract visitors thro search engines.Search engines usually get good Adv. revenues. Portals are like virtual libraries giving information on subjectswhich are of interest to its visitors. Since all ISP’s and searchengines get lots of visitors they usually set general purposeportals for everyday information like travel, weather, news,sport, investing etc. There are also vertical portals which caterto a particular class of people. Most of the information in theseportals is free and the future of a portal is getting a no ofloyal subscribers thereby getting some revenue streams along withadvertising. 3. E Commerce service providers

E commerce shopping sites are very hot, they provide for anythingfrom books , cassettes, CD’s, gifts, toys etc on the web. Thesesites usually have a back end sourcing centre which takes care oforder fulfillment and negotiate with manufacturers for hugediscounts on catalogue prices. These companies can also providethird party services for small companies which do not want tospend a huge amount on setting up a site and maintain it. 4. Application Service Providers

This has been explained earlier. It is believed that almost allsoftware companies will have a working ASP model in future andthis will be way to go in the future. 5. Payment Gateways

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These are financial intermediaries similar to VISA & MasterCardwhich take care of settlement of e commerce transactions. Apayment gateway can be set up by a bank but it need not necessarybe bank. It needs software which is linked to customers andsuppliers and which is used to set up all other validations andchecks. A typical e commerce transaction consists of billpresentment, bill payment and settlement. The payment gatewaysoftware needs to provide all these and more. Their revenue modelis based on % of transaction values/ numbers and it is paid by thee commerce service providers. There is also a small fee paid bythe consumer. Check free is the one of the well known gateways inUSA. 6. E solutions providers These are companies providing end to end solutions to clientswanting to use the web in a significant way. This involvesdesigning a web site, setting up performance parameters, settingup security and redundancy back ups. 7. Security solution providers : -

They specialise in making the web a safe place to do business.This involves cryptography solutions for credit card security,firewall based solutions etc 8. Content providers

There are various participants which generate valuable contentinformation which when posted on the net at popular sites has hugereference value. This is a very lucrative area because all ISP ‘sand e Comm sites want to depth in content so as keep thesubscriber hooked to their site. 9. Web hosting services

Every company which sets up its web site is not able maintain andupdate the same on a regular basis. This is more because web sitedevelopment and updation is a highly technical and creativeactivity. The activity involves conversion of content matter toHTML/ XML form, site design, server upgradation. The biggest testof web hosting comes when there is huge increase no of visitorsand the server is not able to take the load. Thus visitors haveto wait for connections and many times only some of them are ableto get through. 10. Server farms

There are companies which provide the entire back office job ofproviding server space for various web sites which generate hugetraffic and do a great job of managing hardware and disk spaceneeds of the these sites. They have huge server capacities whichare pressed into use when needed.

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Part F : - What benefits do I get out of e business : - 1. Direct Interaction with customers : - This is the greatest

advantage of e business. The unknown and faceless customerbuying the products of a large MNC like say HLL or Procter &Gamble thro distributors, channels, shops etc ; now he has aname , face, and a profile . Large MNC’s pay a fortune forthis information on customer buying patterns .

2. Focussed sales promotion : - This information gives authenticdata about client likes , dislikes and preferences and thushelp the company bring out focussed sales promotion driveswhich are aimed at the right audience

3. Building customer loyalty: - It has been observed that on linecustomers can be more loyal than other customers if they aremade to feel special and their distinct identity is recognisedand concerns about privacy are respected. It has also beenseen that once customers develop a binding relationship with asite/ product on the web they don’t like to shift loyalties toanother site/ product and re enter their profile informationall over again

4. Scalability : - The web is open 24 hours a day and seven days aweek. Thus provides an access never known before to thecustomer. This access is across locations and time zones. Thusa company is able to handle much more customers on much widergeographical spread if it uses an e business model. The companycan set up a generic parent site for all locations and makeregional domains to suit such requirements. This model isbeing used by Microsoft very successfully. The additional costof servicing additional customers comes down drastically once acritical mass is reached.

5. Savings in distribution costs : - A company can huge savingsin distribution, logistical and after sales support costs bysing e business models. Typical examples are of computercompanies , airlines, and telecom companies. This is becausethe e business models involve the customer in the businessinteraction to such a level that they are able to avoid settingup the huge backbone of sales and support force whichordinarily would have to set up.

Part G : - What are the tools and techniques at my disposal

It is important to know the right marketing strategies which wouldbe required to sell successfully and profitably over the web .

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The web as a medium provides to you with a unique platform toenable various strategies which would not have been possible toexecute in a conventional scenario. Some of these are : -

◊ Use of Pricing as a tool There is wealth of research on pricing used as a tool to generatesales on the net. The biggest e tailer of them all , Amazon.commade it big by giving substantial discounts. Part of thesediscounts are attributable to the distributor level commissionswhich are being passed on to the customer. Apart from this ,companies have started giving things free on the net in order toget a critical mass of subscribers which helps in getting Adv.revenues. The best example is that that Apple IMac’s being givenfree in case the buyer agrees to buy a certain minimum value ofpurchases using Apple’s e commerce web site. ◊ Use of Application Service Provider model

This is an old model of the Seventies which was used amongmainframes and Dumb Terminals which is being revisited with avengeance. Software companies are offering their packages not inCD’s and boxes but thro’ the web. The customer can log in over thenet and access the software from the web server of the company andneed not download it into his PC. This goes one step further inthe age of the Network PC where on need not use even a hard diskand all critical application data is kept on the web and can beaccessed anywhere in the world. These services ( they are notproducts ) are being offered at say 5 Dollars an hour. ◊ Use of generic models which are known for efficiency as well aspersonalised attention to individual customers

The web has given rise to a new partnership between brick andmortar manufacturers, e tailers ,and express delivery companieslike Fed Ex. These take care of the individual elements of thecustomer , the order fulfillment and the post sale complaints ifany. ◊ Target key influencers to a purchase so they act as catalysts ◊ Web based auctions

An auction is a new concept which has sprung up on the web. Itenables people to sell and buy used items which the seller wantsto dispose and dos’ent know who to contact. Here the seller postsitems for sale in a web site and buyers bid for it. The best pricegets the deal. The auction site gets a commission. ◊ Use of smart cards , cyber wallets

The web has spawned a totally new generation of monetaryinstruments ( Alvin Toffler calls it para money ) . These threaten

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to make the conventional instruments like cash, cheques, andcredit cards obsolete over the long term . The smart card is aplastic card with an embedded chip which contains financialdetails . It will help you buy gas( we call it petrol ) , maketelephone calls, and use virtually any retail product or serviceusing Internet kiosks . And this will not be tied with any oneproduct, supplier or location. A similar application is thecyber wallet which is actually an amount of cyber cash stored inthe hard disk of your PC and which enables you to do internetshopping without using your debit / credit cards. ◊ Use of comparison shopping

The internet has brought in a whole new concept of price matchingand comparison shopping. Today there are sites which will go throhundred’s of sites for you to find the cheapest product fittingyour specifications. This would never have been possible withoutthe internet. Junglee. Com is said to perfected price andcomparison software.

Part J : - What are some common myths about the internet and ebusiness in general

1. When I throw open my site to the world I will get a lot ofvisitors

This is toughest lesson one learns at the net . It is true thatthere is no entry barrier on net., Anybody has access to a anyinformation , anybody can set up a site, anybody with some amountof initial funding can set up reasonably good site. But isprecisely these issues which go against the new upstarts. There isa certain limit on the number of sites that any one person wouldsurf say in a week . This no can go up to 5 , 10 or 20 but notmuch more than that. In this way the Internet can become a Winnertakes it all game with about the top 2 or three sites in anycategory being viable and the others getting consigned to the dustheap. The use of search engines has also become a major conduit tolocating web sites.

2. Advertising is a good source of revenue for e commerce serviceproviders

This has not been substantiated with any level of credibility.What is actually being observed is the dot com companies aresplashing pages and pages of advertising in newspapers to getattention and awareness. It will take years for portals to get

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significant ad revenues .What is also seen that a most the Adrevenues are monopolized by a few sites like Yahoo etc. 3. If I set up a jazzy site , I will get more visitors This is a painful story that most site owners learn mid way throtheir journey. Most consumers have dial up connections which usethe existing phone network which was never meant to take such data, pictures, images. The networking equipment ( modem speeds ) maybe the latest , but if your phone is not able to take it, thedownload speed will not improve. The result is slow downloads ,frequent connections getting cut, and resultant frustration. It isadvisable for all sites to give text options where downloads arefaster. And site developers need to keep quick downloads and easynavigability as most critical elements of web site design. 4. The internet is a bubble , it will collapse one day The is the most life and death type of question which hangs overthe Internet. The net being is such a an open medium which cutsacross all known barriers of time and space is open to a lot ofabuse and governments are not geared to understanding the nuancesof this technology and cutting the abuse and acting promptlyagainst the abusers. There is also great deal of confusion andsoul searching about the line to be drawn between restrictingcreative license of persons, and freedom of expression andprotecting public interest . The internet is a young medium andthere is still a lot to learn about its weaknesses and failures.

There is a certain amount of skepticism about the net being aviable place for conducting business transactions. It is felt thatthe net can collapse anytime. While this partly true , looking atthe recent instances of sites like Yahoo, Amazon and E bay but onemust note that the Internet is set up using mesh topology whereall users are connected to everybody due to which collapse of oneserver does not affect other users. This theory needs to takenwith a pinch of salt because if Yahoo’s site goes down thenpeople who use its message boards to communicate are not able todo so. As a result , they are affected. The more the dependenceon the net for business transactions, the more it will have to bemade failsafe. 5. A ISP giving me free access to the Net is a great deal

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This is biggest myth of the net. A provider who gives you a jerkyconnection which keeps going down is not giving you a freeconnection. The cost of Internet access is a combination of localline access charges and internet access charges. The cost of localcall access can be as high as Rs 20-25 per hour .

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Customer strategies on the Web

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The question arises as to how a company should weave a strategy towin the loyalties of its customers on the web. The book “Customers. Com “ by Patricia Seybold addresses this veryimmediate issue. It talks of broad generic strategies on the roadto e transformations and gives practical examples as diverse asairlines, e tailers , universities.

I have below encapsulated the concepts explained in the book alongwith valuable nuggets of wisdom given in the book.

Part A : - There are five stages in the route to e transformation

1. Supply product information or brochurewareEvery company begins the process by putting its product details orits service offerings on the net. This is meant to enablepotential customers, investors, suppliers, general public etc toget some information about the company. It has now becomeextremely common for a potential customer to ask a company abouttheir web site . It is often said that just like the airports of anation are the first thing seen by a traveller, a company’s website is usually the first form of interaction between a companyand a lay person . So if you get the first impression right, therest of the going is easy. 2. Support basic customer requirements and enable interactions with

the company. At this stage the company starts getting responses and feedbackfrom site visitors about what they expect from the company. Atthis stage, post sales service, warranty claims, problemidentification are typical areas one can do using the web. Thishelps the customer know more about the company’s product offering,use it for his requirements and help himself wherever required.A company which did this right and was able to scale up its webpresence dramatically was Dell Computers. 3. Enable on line transaction processing thro all stages

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At this stage , the company needs to represent the entire processof buying and selling and map this process on the web . Theseprocesses must be customer friendly at the same time not be toointrusive. It should bring pleasurable experience giving him areason to visit again. It should cater to all kinds of visitors,like the first time visitor, the regular visitor, the sporadicvisitor. Amazon has actually done this. They have a walk throprocess for the first customer, FAQ’s on safe shopping for thedoubting Thomas and 1 Click processing for frequent user. 4. Personalize interactions with the customerThis is a stage where the customer identifies himself with a siteand treats it like an extended family. His views need to belistened , his concerns need to be addressed. The entire processof accessing the site for information , doing transactions,checking up on past transactions , choosing preferences would bedone with rapid efficiency but the method of interaction would bepersonalized so as to reflect the distinct identity of a customer.It’s like a person entering his own store with all the itemsarranged the way he would like it to be for easy access and quickretrieval. Amazon . com has really succeeded in doing thesethings. 5. Foster a community feeling among groups of customers

People don’t like to shop alone . They like to be identified witha cause ( say the Clean Air Group) , a passion ( the golf playersclub or fans club of a soccer team ) , a location or acommunity or an educational institution ( say a Harvard alumni ).When such groups get together on the net , they really sticktogether. They are fiercely loyal to their beliefs , likes andfeelings. A site which brings such people together is likely toget very loyal customers .It creates special “ Members only “areas , creates Message Boards, and chat forums.

Part B : - The building blocks used in implementing any ebusiness strategy will involve the following : -

1. Customer profiles. Customer profiles are at the very heart of personalization of theweb. They are used in sending e mail alerts about new products ,in judging your taste in books, in giving you your preferred seatin an airplane. 2. Business rules

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These are the rules or the business logic which the site uses inits interactions with customers. It is based on customer profiles,study of consumer behavior and psychology and on the company’sobjectives. This can lead to giving loyalty programs, free offers,discounts etc. 3. Business events These are the various activities that a customer does when hevisits a web site. These need to be studied to make theinteraction easier, and the problem quick and hassle free. Forexample I check my bank balance, checking order status. Thishelps flow of data between systems to enable smooth execution.

4. Business objects These are the all important items which will identified and willhave to be defined. Typical examples are an account, a customer,an order, a product or a service etc. Part C :- What should be your broad customer strategy on theweb : - 1. Target the right customers You need to be extremely about the target audience that you areexpecting to visit your site. Now, surprise this may not actuallybe your customer. For example , National Semiconductor hastargeted Design Engineers of user companies in Technology sectoras its target audience. The design engineer needs quick accessand fast download of drawings, specifications and samples ofsemiconductors for the applications that the company offers. It isimportant to note here that the design engineer does not make thepurchase but he is one of the key influencers of the same. 2. Own the experience 3. 360 Degree view of the customer 4. Streamline customer facing processes Most companies don’t realize that the physical world has a lot ofsupport processes which ensure that the customer is serviced in asatisfactory manner. These are essentially manual backups whichunderstand consumer psychology and thereby act as a physicalsafety net . But the net is shorn of all such backups and therebythe customer is left all alone. It’s imperative that the processfacing the customer work smoothly and efficiently at the same timenot seeming too remote or distant. 5. Help the customers do their jobs

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Customers actually want to know more about the products andservices of a company, often as much as information as the companyhas about itself. They would also do tings themselves. Thisactually helps the company because it does not have to keep alarge back office team for the purpose. A typical example is thecourier company which gives tracking information on packages onits web site. For every visitor who obtains any useful information/ data from the web site there is a corresponding reduction inphone calls to the sales/service staff of the company. 6. Personalize contact and foster community

Part D : - What are the tips for success in the e business world

◊ Customer Loyalty v/s profitability per customer ( individualor a class/ grouping )

This is a very profound example which goes to the heart ofcustomer philosophy. A company needs to assess profitability ofits customers and not just products. Thus it can find whichcustomers are adding to the bottom line and those which areeroding the bottomline. This helps the company to evolvestrategies to retain these profitable customers and prevent theirdefection to the competition. The more loyal a customer is themore profitable he will be to the company .

The various stages that customers generally go thro are somethinglike this : -

The base revenue that each customer gives . This is what he buysfrom you irrespective of brand loyalty at a base price.

The add on revenue which accrues as a result of a customerbuying other products offered by the company.

The referrals given by him to other customers who bring in morerevenue

The price premium a loyal customer pays for the product forwhich he would not defect to a competitor’s product even ifavailable at a lower price

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◊ Foster community and loyalty ◊ Generate referrals◊ Allow the customer to help himself ◊ Give him the choice to lead or be led ◊ Reduce cost of new customer acquisition◊ Create stickiness by personalising interactions ◊ Eventually the most loyal customer are the most profitablecustomer as they are willing to pay a premium price

◊ Ultimately the basic value proposition should remain intact.Otherwise the customer will defect over a period of time.

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Conclusion : - What are the issues/pitfalls I need to beaware : -

1. Privacy Abroad , this has become the single most sensitive issue coveringthe net. The use of customer personalization and cookies has putpersonal information about every individual in the hands of agroup of people. All the well known sites have privacy policies posted in theirsite and also have certifications by WEBTRUST or VEISIGN toreassure users about privacy concerns. But the actual implementation of these policies and accountabilityissues relating to the same by site owners remains a gray area.

2. E Phobia A whole generation of people have grown up in the world withoutdirect exposure to computers . They have been exposed to theprinted word thro newspapers, to the news by radio, and to visualmedium by TV only. This large proportion of our population , especially seniorcitizens remain wary of this interactive phenomenon called theinternet . The use of the mouse, the remembering of passwords ,the navigation of the site seems a dreadful thing to them. It islikely that the present generation may remain outside this netrevolution and as a result would be deprived of its benefits. 3. First mover advantage The first mover advantage has given huge benefits to companieslike Amazon, Dell, Cisco, Yahoo etc. This has lead to feverishactivity among net companies to capture mindspace of consumers andhas also lead to ridiculous prices being paid for companieshaving an ostensible first mover advantage. The Satyam Infowaydeal with India World is an example. Some of these based on apyramid which has to collapse some time. 4. Cyber laws The rapid acceptance of the internet in everyday life wouldlargely depend on the enactment of cyber laws in each country.Apart from this , countries would have to reach agreements witheach other on minimum standards of internet usage and cooperationin case of cyber crimes . 5. Taxes

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There are two issues about taxes on the internet : the first issueis whether transactions over the net should be taxed at all andif so who should get the right to tax a transaction and based onwhat principles. There are certain states in the US which don’t tax a company foron line sales in case the seller does not have a situs ( physicalpresence in terms of property, office, phone listing ) in thestate where the goods are delivered. This is treated like a mailorder operation. Logically a company could operate in all suchstates but not have a situs in USA but instead base it in sayJamaica and thus not pay any taxes on its products.

There are similar issues in Europe over on line sales in EUcountries without using a physical base in those countries.

Various countries of the world need to work together to sort outthese issues. Once abroad agreement is reached , one needs towrite good software which will track transactions and enforcepayments of the taxes.

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6. Role of Intermediaries : - A great deal has been said about the Internet heralding the deathof distance as it were. This means that anybody can sell a productto anybody else anywhere in the world . This ordinarily wouldspell doom for local wholesalers, retailers and a whole set ofintermediaries. While this may be technically true, issues likeafter sales service, a need to look and feel the product, andlocal personal equations will ensure that intermediaries willremain for along time to come.

But nevertheless , it must be said that every intermediary in thesales cycle needs to add value to the chain or he/ she will findsurvival very difficult . This has already been proved correct inrespect of floor traders of traditional stock exchanges who are inthe danger of being swamped by internet based online tradingwhich practically eliminates all human intervention in equitytrades thro’ stock exchanges. The story of how Charles Schwab &Co brought down brokerage rates and captured a large chunk ofshare broking business is now well known. Merrill Lynch wasreluctant to enter on line trading in a big way because it wasfearful that its brokers might lose their incomes.

There are also instances where intermediaries can actually addvalue to e business. One example is that of PC Service whichmanages warranty service and maintenance of PC’s for a no ofbranded PC makers. It keeps the customer database, manages thecustomer interaction , warehouses the components, and executesorders for service.

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Security on the net

Security on the net is a much hyped and talked about issue andhas exercised the mind of most people who would like to make thecyberworld a secure place to do business .

When business is done over the internet the following issuesbecome very important

◊ Identification of the persons doing business i.e. the customerand the vendor or the sender and the receiver

◊ Protection of the sent message from unauthorized additions,deletions, and other modifications

◊ Confidentiality of the participants and information contents ◊ Non repudiation of transaction by both parties at a later date

In a normal paper transaction a letter is written probably on acompany letterhead giving specific instructions and is physicallysigned at the end of it by an authorized signer. The document ishand delivered or faxed to the counterparty. This party assumesthat the document has been read before it has been signed, it hasbeen signed by the authorized person. This type of transaction intoday’s context has a high degree of confidence among the generalpublic.

Any e business transaction will have to meet all the above testsconclusively in order to able to replace the conventional papertransaction. Unless this happens. People will not gain confidenceover this “ new “ way of transacting.

We therefore need to understand as how we deal with the twinissues of identification and encryption on the net.

Introduction to Identification : -

Identification is the very tenet of transaction integrity. Atpresent the physical signature is the sole evidence of a physicaltransaction. In the electronic age efforts have been made toovercome the obvious limitations of a physical signature which byitself at best a mediocre security device. The neweridentification devices rely on any of the following: -

◊ What you know : - Password etc

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◊ What you have : - Your credit/ debit / smart card/ PIN no ◊ What you are : - Biometric identification like voice, retinaimage, dental image

Different levels of these devices are used at different placesdepending on the sensitivity of the location/ application and thepossible risks arising out of a break in.

In an electronic transaction it becomes very important to be surethat the person who purports to be say Mr. X is actually Mr. X andnot a masquerader or impersonator. This can be achieved by aprocess called a digital signature where an independent thirdparty confirms the identity of both the parties so that theidentity of both parties is established beyond doubt.

Introduction to Encryption : -

Encryption : - This is the only way to ensure that the messageconveyed by a sender is not intercepted by an unauthorizedpersons. In order to do this we need to ensure that :

◊ An unauthorized person should not be able to intercept themessage ( This is the biggest challenge to ensure on a publicnetwork like the internet ) .

◊ Even if somebody intercepts the message there must be amechanism to make the message unintelligible.

◊ Only the authorized receiver of this message should be able toread its contents.

◊ In case the message is added, deleted, modified or changed inany manner it should be detected and thrown out.

◊ Sensitive information about the sender or receiver which doesnot affect the integrity of the transaction should not bedivulged.

Encryption is a mathematical algorithm written by academics in USAto create a combination of numbers by which it would be virtuallyimpossible for an impostor to crack a message purely by applyingvarious permutations and combinations. This generally usescombinations of prime numbers and is expressed in the order of say56K or 128K or 448K. It actually means that ones needs to work out2 raised to the power of 56 combinations to arrive at the repeatcombination. There is a software at the customer’s end ( sender)

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which encrypts a message and the same software is to be used bythe merchant ( receiver) to decrypt the message.

Methods of Encryption : - Encryption via SSL : -

This is a secure network layer which provides end to end securityand privacy of data from the client ( user) say Mr. A to theserver( merchant ) say Mr. B when a transaction is initiated throthe Internet using well known browsers like Netscape and InternetExplorer. It does this by ensuring privacy, authenticity,integrity, and non repudiation. It is explained below how the sameis done.

Privacy : - A set of two keys, public and private ( actuallynothing but very large number combinations ) is used fortransacting over the web. Every browser gives a set of keys foreach individual which comprises of public and private keys. Thearrangement is that in order to open a message which has beenencrypted using the public key , it can be decrypted using onlythe private key or the other way around. Usually the public keyof an individual is available freely over the net and the privatekey of an individual remains in his browser and does not travelover the Net. Usually the keys are available in the web browser of the client’sPC.

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As a practical example, B gives A his public key and then sendsan encrypted message which has been locked with his private key.A can open the message with B’s public key.

Authenticity : - This is meant to ensure that the person ( sayA ) who receives the public key is actually and not an imposter.This is done by certification. This is done by a third partycertification agency which has the public keys of both A & B.As a practical example A’s public key is used by the certificationagency to decrypt the message which has been encrypted by A’sprivate key thereby ensuring that both the combinations match andthe authenticity of A is established without doubt.

Integrity : - This is meant to ensure that the message istransmitted in its totality. This is done by inserting a hashdigest ( numerical combination) as a part of the message. Thishash gets changed in case of tampering of the message in any way.The hash is verified to be correct after the message is decryptedby the receiver. In case the message is tampered , the hash wouldnot tally thus exposing the tampering.

Non repudiation : - This is meant to ensure that Mr. A does notrepudiate a transaction after it has been competed over the web.For example he can refuse to pay for goods he ordered etc, . Thisis done by the date and time stamps reported by the certificationagency and certain hardware tokens of the users.

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SSL has substantial inroads in developed countries and has beenvery successful in enabling secure e commerce transactions . Butthere are some other issues to be addressed before we can sleeppeacefully

1. Till now we thought that Mr. A was the suspicious characterwhose identity was suspect and his intentions were doubtful.But these same issues could also be debated about Mr. B. Theseissues can be resolved by server certification for Ecommerce service providers. This certification would showthat the consumer is transacting with a trustworthy source andhis personal information would be protected against wrongfuluse. Prominent certification agencies are WEBTRUST andVERISIGN.

2. One of the major deficiencies of SSL is that the merchant( Mr. B ) is able to receive critical personal informationabout Mr. A ( consumer) which now rests in his server. Despitethe certification of his site and so on, the consumer is stillput to a risk as to the future misuse of this information.

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Secure Electronic Transaction ( SET) : -

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This is a new standard in e commerce which aims to improve uponthe shortcomings of SSL and build an entire super structure acrosscompanies, networks, and countries which will eliminate risks andensure secure e commerce. This protocol has been sponsored byVisa and Master card and aims to remove consumer misgivings overgiving credit card numbers over the net. The essential elementsof SET are : -

◊ SET is a total solution platform involving all participants likethe credit card holder, the merchant, the card issuer, a bankingarm, the payment processing agency etc.

◊ Each and every one of these participants needs to be certifiedby a certifying agency

◊ Payment information of the credit card holder is not disclosed tothe merchant.

◊ The merchant completes the transaction after receivingconfirmation of the cardholder’s status from his banker.

Implementing SET across all the above participants is a huge task.It involves a whole lot of issues such as : -

◊ Setting up of required hardware and software infrastructure amongall participants

◊ Setting up the certification agencies and maintenance of thepublic key infrastructure

◊ It should not result in additional costs to the consumer ◊ The time taken to complete this process cannot take very long( it should be completed in seconds)

◊ Ongoing maintenance of this infrastructure at all times withnecessary back ups’ and required scalability

SET requires different levels of certification agencies whichwill maintain the entire Public key infrastructure . Theseagencies can be large corporate, banks, accounting firms, legalfirms etc. Their major functions are key management ( allotment,storage, cancellations ) and certificate management ( issue,access, revocations ). Standardization of operations andinteroperability among different agencies is very critical to thesuccess of SET.

SSL v/s SET

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SET has been slow in gaining popularity in the western worldmainly due to the absence of certifying agencies. But is expectedto gain ground in the coming months and the general consensusamong industry experts is that this is the way to go in thefuture. But it will require significant initiatives at Governmentsin all countries to embrace this new protocol and make it anindustry standard.

SSL has been operated successfully in many Western countries atvarying levels of Security.

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Issues related to Information Technology Bill 1999

The IT Bill broadly covers the following areas : -

1. Digital Signature for Authentication of electronic records2. Electronic Governance covering

◊ Legal recognition of electronic records ◊ Recognition of digital signature ◊ Use of the same by Got agencies ◊ Retention of electronic records ◊ Publication of Electronic Gazette

3. Attribution, Acknowledgement of Receipt, Date and Timestamp

4. Secure Electronic Record, digital signature ◊ Based on a Security procedure

5. Appointment of Officers ◊ Controller of CA’s ◊ Recognition of Domestic & Foreign CA's ◊ Controller to be repository of Public keys

6. Procedure for Digital Signature Certificate ◊ Issue requirements, suspension, revocation

7. Duties of Subscribers ◊ Acceptance of digital signature, duties on private key

8. Penalties for damage to network, failure to furnish a

document 9. Appointment of Cyber appellate Tribunal 10. Offences listed in the Act

◊ Tampering with source documents ◊ Publishing of obscene information◊ Failure to observe directions to decrypt ◊ Unauthorized Access to a protected system ◊ Misrepresentation to CCA/ CA ◊ Publishing DSA false in particulars ◊ Breach of privacy ◊ Act to apply for acts done outside India

Enabling provisions have been made in the Indian Evidence Act, theIndian Penal Code, the Bankers Book Evidence, and the RBI Act.

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The IT Bill is a good effort considering the very evolving natureof the industry. But it will a huge implementation exercise alongwith a massive infrastructure back up. It provides a generic modelfor e commerce and electronic record keeping. It provides specificprovisions for cyber crime, banking transactions, and legalevidence

There are certain issues relating to the bill and the likelyproblems it will face.: - There are as follows: -

◊ There may be many industry/ function specific requirements ithas missed out. These will have to be covered in respectivelegislation .

◊ It does not talk about changes to be made to the contract act.There are divergent views on this subject since the ContractAct is over 100 years old and it does not provide for a writtencontract.

◊ It does not talk about the responsibilities of the networkservice providers, internet service providers etc who transmitthe electronic messages.

◊ It needs provisions on archiving of electronic data and securestorage of such archive on a periodic basis.

◊ The IT bill needs to provide for third party storage ofarchived data. It may also require an independent audit/validation of entities using the electronic medium ( similar toserver certification )

◊ There are debates on the highly technical nature of the subjectand doubts whether the existing Executive and Judiciary brancheshave the necessary competence to administer the law and exercisejurisprudence. There are views that law enforcement agencies andjudges should either be technically qualified or appropriatelytrained to be able to do justice to the subject.

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Introduction to E commerce

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