Examining Electronic Commerce

Simanta C. Chakraborty

Sapient Corporation

18 November, 1998

Agenda

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

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

Brief Internet History (continued)

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• More choices, more

power• Personalization• Anywhere, anytime• Community

Sellers• 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 micro-

payments 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

1997 1998 1999 2000 20010

500

100015002000

2500300035004000

4500

Millions

1997 1998 1999 2000 2001

Year

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)

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)

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

Technology &Architecture

Internet Strategy

CognitiveEngineering

Business Strategy

Components of a Solution

Co

mp

lexi

ty o

f I

mp

lem

enta

tio

n

Increase in Business Value

Intranet / ExtranetOn-line Customer ServiceCatalogs and Fulfillment

II:II:

SearchCorporate InformationMultimediaI:I:

Transform the EnterpriseSecure eCommerceLegacy Integration

III:III:

E-Commerce Growth Enterprise ArchitectureMulti-channel integrationBusiness Logic re-use

IV:IV:

Components of an InternetStrategy

Com

plex

ity o

f Im

plem

enta

tion

Increase in Business Value

I:I:•Navigation•Metaphor •Brand Extension•Content Strategy

II:II:•Business Drivers •Success Measurement Criteria•Business Requirements Prioritization Approach•Customer Service Strategy•Vendor Criteria and Selection Strategy

III:III:

•Long Term Vision •Success Measurement Criteria•Initiative Communication Plan•Phasing Strategy•Impact Analysis and Mitigation Strategy

•Long Term Plan•Competitive Assessment•Customer Segmentation•Business Case•Usability Testing Approach

IV:IV:•IT Transformation Plan•Long Term Strategy•Corporate Architectural Strategy•Technical Migration Strategy•Change Management Plan

+

+

+

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

Web PC Phone ATM CustomerService

DBDBDBDBDBDB

The Current Situation

The Future

Web PC Phone ATM CustomerService

SBA: Common Business Functionality

DBDBDB

Ecommerce Recommendations

Get in early Spend to attract customers Provide “one to one” experience Provide value proposition

• 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