Introduction to

e-Business

Chapter 3
Learning Objectives
1. Explain what e-business is and
how it affects organizations.
2. Discuss methods for increasing
the likelihood of success and for
minimizing the potential risks
associated with e-business.
3. Describe the networking and
communications technologies
that enable e-business.
Introduction: E-Business

E-business refers to all uses

of advances in information
technology (IT), particularly
networking and
communications technology,
to improve the ways in which
an organization performs all
of its business processes.
Introduction: E-Business

E-business encompasses
an organization’s external
interactions with its:
◦ Suppliers
◦ Customers
◦ Investors
◦ Creditors
◦ The government
◦ Media
E-business includes the use of IT to
redesign its internal processes.
For organizations in many
industries, engaging in e-business
is a necessity.
Engaging in e-business in and of
itself does not provide a
competitive advantage.
However, e-business can be used
to more effectively implement its
basic strategy and enhance the
effectiveness and efficiency of its
value-chain activities.
E-Business Models
Business to Consumers (B2C):
Interactions between individuals
and organizations.
Business to Business (B2B):
Interorganizational e-business.
Categories of E-Business
Type of E- Characteristics
Business

B2C Organization-individual
Smaller dollar value

One-time or infrequent transactions

Relatively simple

B2B Interorganizational
B2G Larger dollar value

B2E Established, on-going relationships

Extension of credit by seller to

customer
More complex
E-Business Effects on
Business Processes
Electronic Data Interchange (EDI):
Standard protocol, available since
the 1970s, for electronically
transferring information between
organizations and across business
processes.
EDI:
◦ Improves accuracy
◦ Cuts costs
 Recent EDI Facilitators
Traditional EDI was
expensive.
New developments that have
removed this cost barrier are:
◦ The Internet: Eliminates the
need for special proprietary
third-party networks.
◦ XML: Extensible Markup
Language – Set of standards for
defining the content of data on
Web pages.
 Integrated Electronic Data
Interchange (EDI)
Reaping the full benefits of EDI
requires that it be fully integrated
with the company’s AIS.

EDI
Suppliers Company
Purchase orders AIS
EDI
Customers Customer orders
 E-Business Effects on Value Chain Activities
Value Chain – E-Business Opportunity
Primary Activities
 Inbound logistics  Acquisition of digitizable products
 Reduced inventory “buffers”
 Operations  Faster, more accurate production

 Outbound logistics  Distribution of digitizable products

 Continuous status tracking
 Sales and Marketing  Improved customer support
 Reduced advertising costs
 More effective advertising

 Post-sale Support and Service  Reduced costs

 24/7 Service availability

 Purchasing  Source identification and reverse

 Human Resources auctions

 Employee self-service
 Infrastructure
 EFT, FEDI, other electronic payments
 Information Flows in
Electronic Commerce
1. Inquiries
Buyer Seller
2. Responses

3. Orders

4. Acknowledgment

5. Billing

6. Remittance data
Explanations:
EDI = Steps 1-6 7. Payments
EFT = Step 7
FEDI = Steps 1-7
Financial Electronic Data
Interchange (FEDI)
The use of EDI to exchange information
is only part of the buyer-seller
relationship in business-to-business
electronic commerce.
Electronic funds transfer (EFT) refers to
making cash payments electronically,
rather than by check.
EFT is usually accomplished through the
banking system’s Automated Clearing
House (ACH) network.
◦ An ACH credit is an instruction to your bank to
transfer funds from your account to another account.
◦ An ACH debit is an instruction to your bank to
transfer funds from another account into yours.
Financial Electronic Data
Interchange (FEDI)

Company A Company B
Remittance data
and payment
instruction
Company A’s Company B’s
bank bank
Remittance data and funds
E-Business Success
Factors
The degree to which e-business
activities fit and support the
organization’s overall business
strategy.
The ability to guarantee that e-
business processes satisfy the
three key characteristics of any
business transaction
◦ Validity
◦ Integrity
◦ Privacy
 Digital Signatures and
Digests
Digitalsignature: An electronic
message that uniquely identifies
the sender of that message.
Digest: The message that is used to
create a digital signature or digital
summary.
◦ If any individual character in the
original document changes, the value
of the digest also changes. This
ensures that the contents of a
business document have not been
altered or garbled during transmission
Digital Certificates & Certificate
Authorities
Digital Certificate: Used to verify the identity of
the public key’s owner.
◦ A digital certificate identifies the owner of a
particular private key and the corresponding
public key, and the time period during which
the certificate is valid.
Digital certificates are issued by a reliable third
party, called a Certificate Authority, such as:
◦ Verisign
◦ Entrust
◦ Digital Signature Trust
The certificate authority’s digital signature is
also included on the digital certificate so that
the validity of the certificate can also be
verified.
 Types of Networks
The global networks used by many
companies to conduct electronic
commerce and to manage internal
operations consist of two components:
1 Private portion owned or leased by the
company
2 The Internet
 The private portion can be further divided into two
subsets:
1 Local area network (LAN) — a system of computers
and other devices, such as printers, that are located
in close proximity to each other.
2 Wide area network (WAN) — covers a wide
geographic area.
Types of Networks
Companies typically own all the
equipment that makes up their local
area network (LAN).
They usually do not own the long-
distance data communications
connections of their wide area
network (WAN).
They either contract to use a value-
added network (VAN) or use the
Internet.
Types of Networks
The Internet is an international
network of computers (and smaller
networks) all linked together.
What is the Internet’s backbone?
– the connections that link those computers
together
Portionsof the backbone are owned by
the major Internet service providers
(ISPs).
Types of Networks
What is an Intranet?
The term Intranet refers to
internal networks that connect to
the main Internet.
They can be navigated with the
same browser software, but are
closed off from the general
public.
What are Extranets?
Types of Networks
Extranets link the intranets of
two or more companies.
Either the Internet or a VAN can
be used to connect the
companies forming the extranet.
Value-added networks (VAN) are
more reliable and secure than the
Internet, but they are also
expensive.
 Types of Networks
Companies build a virtual private
network (VPN) to improve
reliability and security, while still
taking advantage of the Internet.

Company A
AIS VPN ISP
equipment
Internet
 Data Communications
System Components
There are five basic components in any
data communication network (whether
it is the Internet, a LAN, a WAN, or a
VAN):
1 The sending device
2 The communications interface device
3 The communications channel
4 The receiving device
5 Communication software
Data Communications
System Components
The following are
components of the data
communications model:
– interface devices
– communications software
– communications channel
Interface Devices
There are six basic communication
interface devices that are used in
most networks:
1 Network interface cards
2 Modems
3 Remote access devices
4 Hubs
5 Switches
6 Routers
Interface Devices
Company A
Internet service
PC-1 PC-2 PC-3 provider
NIC NIC NIC
Remote access
device

Hub 1 Frame relay

switch
Switch Hub 2 Other
LANs
Router
Router
Communications Software
Communications software
manages the flow of data across
a network.
It performs the following
functions:
– access control
– network management
– data and file transmission
– error detection and control
– data security
 Communications Channels
A communications channel is the medium
that connects the sender and the
receiver.
– standard telephone lines
– coaxial cables
– fiber optics
– microwave systems
– communications satellites
– cellular radios and telephones
Communications Channels

Satellite
Microwave stations
Satellite Communications
Network Configuration
Options
Local area networks (LANs) can
be configured in one of three
basic ways:
1 Star configuration
2 Ring configuration
3 Bus configuration
Network Configuration
Options
A star configuration is a LAN
configured as a star; each device
is directly connected to the
central server.
All communications between
devices are controlled by and
routed through the central server.
Typically, the server polls each
device to see if it wants to send a
message.
 Network Configuration
Options
The star configuration is the most
expensive way to set up a LAN, because
it requires the greatest amount of
wiring.

A B C

H Host computer D
or server

G F E
Network Configuration Options
In a LAN configured as a ring, each
node is directly linked to two other
nodes

B
A C

H D

G E
F
 Network Configuration
Options
In a LAN configured as a bus, each device
is connected to the main channel, or bus.
Communication control is decentralized on
bus networks.

Bus channel
A B C D
Host computer
or server

E F G H
Network Configuration
Options
Wide area networks (WANs) can
be configured in one of three
basic ways:
1 Centralized system
2 Decentralized system
3 Distributed data processing
Network Configuration
Options
In a centralized WAN, all
terminals and other devices are
connected to a central corporate
computer.
Network Configuration
Options
 Ina decentralized WAN, each
departmental unit has its own computer
and LAN.
 Decentralized systems usually are better
able to meet individual department and
user needs than are centralized systems .
Network Configuration Options

A distributed data processing system WAN

is essentially a hybrid of the centralized
and decentralized approaches
 Network Configuration
Options
Many WANs, and most LANs, are set up as
client/server systems.
Each desktop computer is referred to as a
client.
The client sends requests for data to the
servers.
The servers perform preprocessing on the
database and send only the relevant subset
of data to the client for local processing.
What about Africa?
End of Chapter 3