From E-Commerce To E-Business: The Convergence of Business and Technology

From E-Commerce to E-Business
The Convergence of Business and Technology

John A. Foster
Principal E-Business Architect Eastman Kodak Company john.foster@kodak.com
John A. Foster, 2002
Key Questions

Did e-commerce start with the Internet and the Web? Whats the difference between e-commerce and e-business? If the Web is so great, why did all those companies fail? Are web services the next big thing in e-business?
Electronic Commerce (narrow definition)

Conducting business transactions through marketfacing systems. C U S T O M E R S
3
Order-to-Cash
Delivering services online
Selling products on-line
Procurement
Purchasing goods and services electronically
EDI orders from customers
SUPPLIERS
John A. Foster, 2002 From E-Commerce to E-Business
Electronic Commerce (expanded definition)

electronic business
Conducting business through market-facing systems.
PARTNERS
Commercialization
Exchanging engineering drawings with partners
Pre-Sales
Providing product information to prospective customers
Order-to-Cash
Delivering services online
Selling products on-line
EMPLOYEES
Benefits Administration
Reviewing and updating benefits information
Procurement
Purchasing goods and services electronically
EDI orders from customers
Post-Sales
Customer self-help
From E-Commerce to E-Business 4
SUPPLIERS
C U S T O M E R S
The Beginning of E-Commerce

1980s B2B
Phone System Automation
B2C
B2E
1980s
System to Individual
Electronic Transactions
1980s
System to System
and the Supporting Technologies

B2B IVR
B2C IVR IVR
B2E
1980s
EDI
System to System
1980s
The Elements of EDI
A strength of EDI is its transport & infrastructure

But
it came with a price EDI

Standard documents
EDI standards very extensive
Expensive ANSI X12 ISO 9735 UN/EDIFACT Private network

VANs
Vocabulary
Purchased transport Transport

highly reliable very secure
Some middleware Infrastructure

commonly purchased map from one standard to another
Middleware
Brokers, translators, maps
Electronic Data Interchange

Connect with private network Translate documents
EDI standard documents
Middleware
Translator
Private Network
Middleware
Translator
Enterprise A
Enterprise B
Integrated Voice Response Applications

Telephone
Public Phone Network Corporate Phone Network
Install specialized system Connect to phone network
IVR System
Data servers
Middleware
Translator
Make core systems accessible by IVR system
Core Business Systems
Evolution to E-Business
1990s B2B
B2C
Phone System Automation Marketing Info E-Tailing
B2E
Phone System Automation Employee Self-service
1980s 1990s
Marketing Info Customer Self-service
Electronic Transactions
1980s
System to System
Customer Relationship Mgmt
1990s
10
and the Supporting Technologies

B2B IVR
B2C IVR Internet/Web IVR
B2E
1980s
Internet/Web
Intranet/Web 1990s Internet/Web

1980s
EDI
System to System
Internet/XML
1990s
11
The Elements of Internet E-Business
Many choices, but also more challenge and responsibility

Internet
Inexpensive ??? A few XML vocabularies
cXML (Ariba) xCBL (CommerceOne) RosettaNet ebXML
Vocabulary
HTML for presentation XML for content representation Core set of base standards Must address security and redundancy and Many options built or purchased
Transport
Infrastructure
https, https, SSL, ftp Firewalls, PKI Middleware (RPC, MOM, msg. brokers, TP monitors) Web servers, app servers, routers ISPs
Internet System to System

Connect with Internet Add robustness, redundancy, security Connect with other enterprise Translate documents
Middleware
Translator
XML documents
Middleware
Translator
Internet
Enterprise A
Enterprise B
Web Applications
Browser
Internet
Web server
The ubiquitous web browser
Commerce application server
Data servers
Middleware
Translator
Make core systems accessible by apps on app server
Core Business Systems
14
Internet economy poses opportunities and threats
Transform traditional business models using IT as enabler
Compression of time & space

30% of BancAmericas online customers are outside of traditional geographic area Adaptec reduces manufacturing cycle from 12 to 8 weeks, slashing $10M in inventory costs Always open
Friction reduction creating new sources of economic value

Intermediation premium (e.g. brokers fee) Manual sourcing by fax and phone Cost of brick & mortar
But adding market turbulence
The Internet will change everything.

Market Turbulence
Travel, Brokerage, Books
Internet
The Actor
Schwab Sabre, Travelocity Barnes & Noble
(New Channel)
Internet-Only Competitor
ETrade
Internet
Preview Travel Amazon.com
Traditional Competitor
Merrill Lynch Travel Agencies Local Bookstores
Courtesy: Cisco Systems
Customer Space (Physical World)
New Customer Space
Out-of-Market Competitor
Intuit MS Expedia
16
The Ultimate Impact
The Internet dramatically lowers the cost of communication

Likely Incremental Impact Retailing Manufacturing Travel Power
Courtesy: Business Week
Potential Revolutionary Impact Financial Services Entertainment Health Care Education Government But:
Privacy issues Need for additional technology (e.g. broadband, on-line bill paying) Who controls the information
Why? physical factors overrule

virtual Top of the line web site $15-25M Warehouse & distribution system $150M
New Tools for the Old Economy
Tremendous tools for old economy companies to apply to business processes.

Annual Growth Rate in Nonfarm Business Productivity Worldwide B2B Transactions 4
Annual growth rate (%)
2.5 2 1.5 1 0.5 0 '80-'85 '85-'90 '90-'95 '95-'00 Source: Bureau of Labor Statistics
Trillions of dollars
3 2 1 0 '99 '00 '01 '02 '03 Source:Forrester Research Inc.
18
Challenge: Process Improvement
E-Business is like putting a magnifying glass in front of your core processes

Legacy Back Office Systems
Legacy Business Operational Processes
from
New Business Operational Processes
ERP
Order to Cash Manufacturing Finance Procurement
to
Challenge: Systems Development
Product software development and information systems development are becoming intertwined
from
to
Network
Product Software
Information Systems
Challenge: Commercialization
Product commercialization must become business commercialization

Innovation Phases
C 0 Discovery & Innovation Business Hypothesis A Definition Business Development Planning
Commercialization Phases
2 Design Implementation Business Development B C 4 Mfg./Operations Implementation 6 Production 7
Opportunity Selection
Business Start-Up D
Business Building
New Business Development Phases
21
Why Did the .com Companies Fail?
Flawed business model

Companies
view the technology as their business, rather than having a business Lose money on individual transactions
Amazon.com loses almost $3 per order on multi-product orders
Lack All
of control over supply of what they sell
Priceline.com
the good ideas duplicated by established concerns with deep pockets and staying power
22
Likely Winners
NOT
?
John A. Foster, 2002 From E-Commerce to E-Business 23
Web Services the Future?

2000s B2B IVR
B2C IVR Internet/Web IVR
B2E
Internet/Web
Intranet/Web Internet/Web
EDI
System to System
Internet/XML
Web Services Web Services Web Services
24
Web Services
Built on the foundation from Internet e-Business

Web Services
??? WSDL, UDDI for service interaction But business, security,
XML-based (e.g. SOAP) Over http, https,
Vocabulary
New standards but built on XML. Built on a ubiquitous core but is it robust enough? Much the same as for Internet e-Business
Transport
Infrastructure
Middleware (RPC, MOM, msg. Brokers, TP monitors) Web servers, app servers, routers ISPs
Web Services ready for prime time?
Favorable Signs
Challenges
Takes component foundation

Reuse culture Semantic agreement
and leverages Internet technologies

http XML
Cross-vendor interoperability Simplicity Security Pre- and post-transaction processes

Trading partner agreements
26
Core Services
Who does this service? Directory Services
-UDDI
Deploy Service
Requestor
Request Service
Provider
Deliver Service
27
Helper Services
Who does this service?
-Products -Price
Define business and business terms
Directory Directory Services Services

-UDDI -UDDI -other
Deploy Service
Do we want to do business with them?

-T&Cs -Reliability
Provider
Do we want to do business with them?
-T&Cs -Risk
Request Service
Credit Services Evaluating risk Underwriting risk
Deliver Service
Record activity & settle payment
Billing & Payment Services Tax Import/export
Requestor
28
Summary
E-business has been around for 20+ years, but the opportunities have been accelerated by the Internet and the web. Business is still business
The
Internet hasnt changed that though for a while many thought it might have.
Web services may be the next big thing, but EDI, IVR, etc. will probably still be around.
29

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From E-Commerce to E-Business

The Convergence of Business and Technology

John A. Foster, 2002