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Examining Electronic
Commerce
Simanta C. Chakraborty
Sapient Corporation
18 November, 1998
Agenda
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Introduction
Internet Background
Internet Business Models
Trends and the Horizon
How to Capitalize on the Internet
Introduction
What is Electronic Commerce?
 The ability for buyers and sellers to
conduct business and/or exchange
information without real-time human
interaction
Electronic Commerce Vision
Products
Information
Support
The Internet
What is the Internet?
 Worldwide network of networks
 Overseen by governments but run by
private companies
 Driving force behind shift from voice to
data traffic over US public network
 World Wide Web has 2.5 million sites and
134 million users worldwide
Internet Facts / Trends
 Internet took four years to reach 50 million
users
 Digital economy 8% of US GNP
 E-Commerce market in US $14 billion in
1997, estimated to grow to $300 billion by
2002
Internet Consumer Demographics
 Ave Age: 35 years old
 54% have college degree
 64% make more than $30k, 25% make
more than $75k
 85% use the web at least once per day
and more than 4 hours per week
 Places / devices to access web are
proliferating
Brief Internet History
 Concept first generated in 1962
 United States Department of Defense
contract
 Communications after nuclear holocaust
 Envisioned to support remote login and
file sharing
Brief Internet History
(continued)
 ARPANET pioneers of packet switching
 Open Architecture networking
 Development of LANs, PCs, workstations
spur growth
 Email and web catalyst for
commercialization
 Businesses move to capitalize on business
to business commerce
Uses of Internet Technologies
 Internet
• Business to consumer
• Wide business to business
 Intranet
• Internal to company
 Extranet
• Partnered business to business
Physical Network
 The Internet is evolving
into more than a “data”
network
 The backbone
bandwidth is increasing
exponentially
What is the Significance of the
Internet?
 Medium for collaboration and interaction
without regard to geographic location, time
zone, etc.
 Advancing technology, organizations, and
communities
 Ubiquitous
Benefits
Buyers
Sellers
• More choices, more
power
• Personalization
• Anywhere, anytime
• Community
•
•
•
•
Real time feedback
Target marketing
New markets
24 hour/day
operation
• Lower costs
• Small guy look
big...
• Customer loyalty
The Internet and E-Commerce
 You can use the internet for the following
purposes:
• Automating existing internal processes to cut
costs
• Extend automated process outside the
enterprise to capture new business
opportunities
• Introduce a new process for service delivery
• Create a new business model
Internet Business Models
Internet Business Models
 Content
 Advertising
 Transactions (E-Commerce)
Content Model
What is “Content”?
 Content is information that is created /
packaged / distributed for a specific
audience
 Examples on the Web include AOL, WSJ,
C/NET, Boston.com, etc.
 Early pioneers of on-line content
(CompuServe, Prodigy, AOL) utilized
proprietary networks / software for
distribution
Early Content Efforts
 If it’s good enough, people will pay
 Users can subscribe or use micropayments
 Most people won’t pay for content
 People like user generated content
 Market growth slow - find new markets
 Results were below expectations
Advertising Business Model
What is Compelling about Internet
Advertising?
 The internet has the potential to be the
most effective direct marketing tool yet
 It’s possible to target specific messages to
an audience with specific demographics
and interests
 Internet first medium to allow brand
conversion to sale
 Internet less costly than direct mail
Online Branding/Marketing
Convergence
Internet Advertising Revenues
4500
4000
3500
3000
2500
Millions
2000
1500
1000
500
0
1997
1998
1999
Year
2000
2001
Transaction Business Model
(E-Commerce)
Examples of Internet Commerce
 Service offerings
• Wells Fargo
 Product / company specific sites
• Amazon
• Dell
 Business to business
• Cisco
Web Banking
WELLS FARGO
On-Line Bookstore
AMAZON
Amazon (Created New Business
Model)
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Virtual booksellers (2.5 million titles)
Store credit card and billing information
$137 million in sales (1997) up from $15.8
Multi-billion dollar market cap
Vision to become the “Walmart of the Web”
• Compact Disks
Electronic Channel
DELL COMPUTER
Dell (New Channel)
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Pioneered the direct computer sales model
$11 billion revenues
$3 million day over the internet
Target tech savvy and affluent buyer
Save $8 per order
Custom web pages for major customers
Cisco (Automation of an Existing
Process)
 Product information, order entry, status
 Eliminates errors, shortened order to
delivery time by 3 days
 40% of revenue (approx. $1.5 bil)
 Saved $230 million in operating costs
Trends and the Horizon
E-Commerce Trends
 Consumers are becoming more
comfortable with spending on the internet
 Companies are developing internet
strategies as integral parts of their
corporations
 Heavy investments in migrating to internet
technologies
 Business to business commerce is
becoming the focus
On the Horizon
 Greater bandwith and more mature
technology will converge media
• Data, Video, Telephony
 Personalization/customization will create
brand loyalty
 Businesses will form strong partnerships to
protect themselves from extremely free
markets
How to Capitalize on the
Internet
Components of a Solution
Business Strategy
Internet
Strategy
Cognitive
Engineering
Technology &
Architecture
Complexity of Implementation
E-Commerce Growth
III:
Enterprise Architecture
IV: Multi-channel integration
Business Logic re-use
Transform the Enterprise
Secure eCommerce
Legacy Integration
Intranet / Extranet
II: On-line Customer Service
Catalogs and Fulfillment
Search
I:Corporate Information
Multimedia
Increase in Business Value
Complexity of Implementation
Components of
an Internet
IV: +
Strategy
III:
II:
I:
+
+
•IT Transformation Plan
•Long Term Strategy
•Corporate Architectural Strategy
•Technical Migration Strategy
•Change Management Plan
•Long Term Plan
•Competitive Assessment
•Customer Segmentation
•Business Case
•Usability Testing Approach
•Long Term Vision
•Success Measurement Criteria
•Initiative Communication Plan
•Phasing Strategy
•Impact Analysis and
Mitigation Strategy
•Business Drivers
•Success Measurement Criteria
•Business Requirements Prioritization Approach
•Customer Service Strategy
•Vendor Criteria and Selection Strategy
•Navigation
•Metaphor
•Brand Extension
•Content Strategy
Increase in Business Value
Technology Recommendations
 Consider short term business and
technical needs, but build for the future
business needs
 Use component based architectures to
expedite time to market and manage
maintenance costs
 Execute within a well defined migration
strategy and plan
 Use proven technology
The Current Situation
Web
PC
DB
Phone
ATM
DB
Customer
Service
DB
The Future
Web
PC
Phone
ATM
Customer
Service
SBA: Common Business Functionality
DB
DB
Ecommerce Recommendations
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Get in early
Spend to attract customers
Provide “one to one” experience
Provide value proposition
•
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cheaper
faster
easier
exclusive
Summary
 The net is becoming mainstream
 The rate of advancement / learning is
astounding
 Re-visit your supply chain and customer
value proposition. Can you reach new
markets, build customer loyalty, cut costs?
 Don’t let someone change the game on
you
Thank You