Acct 316 Acct 316 Chapter 3 Introduction to

Acct 316 Acct 316 Chapter 3 Introduction to E-Business Acct 316 UAA – ACCT 316 Accounting Information Systems Dr. Fred Barbee

Acct 316 Acct 316 E-Business Defined Acct 316

E-Business. . . Acct 316 The use of information technology and electronic communication networks to exchange business information and conduct transactions in electronic, paperless form.

E-Business. . . Acct 316 Refers to technology-enabled interactions between individuals and organizations B 2 C Popular for purchasing books, music, or airline tickets. B 2 B Has a far larger impact on the economy.

E-Business. . . refers to all uses of advances in IT, particularly Acct 316 networking and communications technology, to improve the ways in which an organization performs all of its business processes.

Interactions With. . . Acct 316 Suppliers Creditors Customers The government Investors Media

Acct 316 Acct 316 E-Business Models Acct 316

E-Business Models Acct 316 Business to Consumers (B 2 C): Interactions between individuals and organizations. Business to Business (B 2 B): Interorganizational e-business.

Categories of E-Business Type B 2 C Characteristics • Organization-individual • Smaller dollar value • One-time or infrequent transactions • Relatively simple

B 2 C Issues Trust – i. e. , is this a legitimate business? Acct 316 Security – i. e. , will this transaction be secure?

Categories of E-Business Type B 2 B B 2 G B 2 E Characteristics • Interorganizational • Larger dollar value • Established, on-going relationships • Extension of credit by seller to customer • More complex

B 2 B Issues Acct 316 Larger, more complex transactions – typically between business partners. Accountability Control

Acct 316 Acct 316 Acct 316 Report: B 2 B E-Commerce Gaining Strength Study by Forrester Research and the Institute for Supply Management (http: //www. ecommercetimes. com) January 17, 2002

B 2 B E-Commerce Gaining Strength Acct 316 Nearly half of all large U. S. corporations are now using the Internet to cut down on supply costs. 45% of firms that spend US$100 million or more per year on supplies used the Internet in the 4 th Quarter of 2002 (up from 28% in 3 rd Quarter).

B 2 B E-Commerce Gaining Strength Acct 316 53% described the Internet as “very important” or “critical” to purchasing and cost savings plans in 2002. 87% described the Internet as ”important. ”

Acct 316 Acct 316 Acct 316 Study: E-Commerce to Top $1 Trillion in 2003 Study by IDC (http: //www. idc. com) January 17, 2002

E-Commerce to Top $1 Trillion in 2003 Acct 316 By the end of 2002, more than 600 million people worldwide will have access to the Web. They will spend more than US$1 trillion shopping online. E-commerce grew to $600 billion in 2001, a 68% increase over 2000.

E-Commerce to Top $1 Trillion in 2003 Acct 316 “Once people get over the security and privacy hiccups, as well as other problems that are not directly related to e-commerce, and have access to wider product offerings, e-commerce will become as widespread as offline commerce. ” Carol Glasheen, Vice President IDC Research.

E-Commerce to Top $1 Trillion in 2003 B 2 B will account for 83% of online sales in 2002, and 88% in 2006. Acct 316 The majority of B 2 B sales consists of volume purchasing, meaning that companies are spending huge amounts of money online.

Acct 316 Acct 316 Acct 316 Report: Online B 2 B Surge May Herald Overall Recovery Study by Forrester Research and the Institute for Supply Management (http: //www. ecommercetimes. com) September 11, 2002

Online B 2 B Surge. . . Acct 316 84% of the companies surveyed said they use the Web to purchase indirect materials. Up from 78% in the first quarter. 65% said they buy materials directly from suppliers online.

Acct 316 Acct 316 Acct 316 The Next Wave of ECommerce Technology Lou Hirsch E-Commerce Times July 11, 2002 (http: //www. ecommercetimes. com)

The Next Wave of E-Commerce Technology Acct 316 “In the not-too-distant future, ecommerce technology will become smarter and faster and will completely transform the way companies deal with internal information and customer service. ”

The Next Wave of E-Commerce Technology Acct 316 Interactive company portals that can communicate with other portals in real-time could drastically alter the sales process.

The Next Wave of E-Commerce Technology Acct 316 One promising concept is the idea of “collaborative commerce, ” in which companies set up smart hubs that are not only used by their own customers, but also interact with other companies’ sites.

The Next Wave of E-Commerce Technology There will be movement in the next three years toward shared portals. Acct 316 Using these portals, companies that regularly do business with one another will be able to access realtime information about product availability and pricing.

The Next Wave of E-Commerce Technology Other possibilities. . . Supercharged Kiosks Acct 316 Instant Messaging in both the B 2 B and B 2 C environments

Acct 316 Acct 316 Acct 316 E-Business Effects on Business Processes Electronic Data Interchange (EDI)

Electronic Data Interchange Acct 316 Standard protocol, available since the 1970 s, for electronically transferring information between organizations and across business processes.

E-Business Effects on Business Processes EDI: Reduces Inventory Acct 316 Streamlines business processes, Eliminates paper, and Improves the flow of information

Recent EDI Facilitators Acct 316 Traditional EDI was expensive. New developments that have removed this cost barrier are: The Internet: Eliminates the need for special proprietary third-party networks.

Recent EDI Facilitators Acct 316 XML: Extensible Markup Language – Set of standards for defining the content of data on Web pages. XML + EDI = XML/EDI “By combining XML and EDI we create new powerful paradigm different from XML or EDI!”

Recent EDI Facilitators eb. XML: Acct 316 Defines standards for coding common business documents. Eliminates need for complex software to translate documents created by different companies.

Integrated Electronic Data Interchange (EDI) Acct 316 Reaping the full benefits of EDI requires that it be fully integrated with the company’s AIS.

Integrated EDI System EDI Suppliers Purchase orders EDI Customers Customer orders Company AIS

Stand-alone EDI System Company Suppliers EDI Phone Customers Fax EDI System Customer Orders Sales Order Entry Purchase Orders AIS Customer Orders

Acct 316 Acct 316 Acct 316 E-Business Effects on Business Processes Purchasing and Inbound Logistics

Purchasing and Inbound Logistics Acct 316 The Internet improves the purchasing activity by making it easier for a business to identify potential suppliers and to compare prices.

Purchasing and Inbound Logistics Acct 316 Better information about inbound shipments enables organizations to reduce the amount of inventory buffers carried.

Acct 316 Acct 316 E-Business Effects on Business Processes Acct 316 Internal Operations, Human Resources, and Infrastructure.

Internal Operations, Human Resources, and Infrastructure Advanced communications technology can significantly improve: Acct 316 The efficiency of internal operations. Planning. The efficiency and effectiveness of the human resource support activity. The efficiency and effectiveness of customer payments.

Acct 316 Acct 316 E-Business Effects on Business Processes Acct 316 Electronic Funds Transfer

Information Flows in Electronic Commerce 1. Inquiries 2. Responses 3. Orders 4. Acknowledgment 5. Billing 6. Remittance Data 7. Payments EDI = Steps 1 -6; EFT = Step 7; FEDI = Steps 1 -7

Nonintegrated EDI and EFT Remittance Data (EDI Format) Company A Company B Payment Instructions Company A’s bank Receipts Information Company B’s bank (ACH Format)

Financial Electronic Data Interchange (FEDI) Company A Remittance data and payment instruction Company B Remittance data and receipts instruction Company A’s Company B’s bank Remittance data and funds

Other Electronic Possibilities Financial Value-Added Networks (FVAN) Acct 316 Electronic bill payments Electronic cash

Acct 316 Acct 316 E-Business Effects on Business Processes Acct 316 Application Service Providers (ASPs)

Application Service Provider Acct 316 An Application Service Provider (ASP) is a company that provides access to and use of application programs via the Internet.

Application Service Provider Acct 316 The ASP owns and hosts the software; the contracting organization accesses the software via the Internet.

Acct 316 Acct 316 E-Business Effects on Business Processes Acct 316 Outbound Logistics

Outbound Logistics Acct 316 E-business can improve the efficiency and effectiveness of sellers’ outbound logistical activities. Timely and accurate access to detailed shipment information. Inventory optimization. For goods and services that can be digitized, the outbound logistics function can be performed entirely electronically.

Acct 316 Acct 316 E-Business Effects on Business Processes Acct 316 Sales and Marketing

Sales and Marketing Acct 316 Companies can create electronic catalogs to automate sales order entry. Significantly reduce staffing needs. Customization of advertisements

Acct 316 Acct 316 E-Business Effects on Business Processes Acct 316 Post-Sale Support and Service

Post-Sale Support and Service Acct 316 Consistent information to customers. Provide answers to frequently asked questions (FAQs).

Acct 316 Acct 316 E-Business Effects on Business Processes Acct 316 E-Business Success Factors

E-Business Success Factors Critical Success Factors (CSFs) Acct 316 Characteristics of business transactions: Validity Integrity Privacy

Acct 316 Acct 316 E-Business Effects on Business Processes Acct 316 Addressing Validity, Integrity, and Privacy Concerns

Encryption Single-key systems: Same key is used to encrypt and decrypt the message Acct 316 Simple, fast, and efficient Example: the Data Encryption Standard (DES) algorithm

Encryption Public Key Infrastructure (PKI): Uses two keys: Acct 316 Public key is publicly available and usually used to encode message Private key is kept secret and known only by the owner of that pair of keys. Usually used to decode message

Advantages & Disadvantages of PKI Acct 316 Advantages No sharing of key necessary More secure than single-key systems Disadvantages Much slower than single-key systems

Digital Signatures and Digests Acct 316 Digital signature: An electronic message that uniquely identifies the sender of that message.

Digital Signatures and Digests Acct 316 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. Acct 316 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 & Certificate Authorities Acct 316 Digital certificates are issued by a reliable third party, called a Certificate Authority, such as: Verisign Entrust Digital Signature Trust

Digital Certificates & Certificate Authorities Acct 316 The certificate authority’s digital signature is also included on the digital certificate so that the validity of the certificate can also be verified.

Acct 316 Acct 316 Infrastructure for EBusiness Acct 316

Types of Networks Private portion owned or leased by the company Acct 316 Local-Area Networks (LANs) Wide-Area Networks (WANs) The Internet

Types of Networks Intranet Acct 316 Extranet Virtual Private Network (VPN)

Acct 316 Acct 316 Infrastructure for EBusiness Acct 316 Network Configuration Options

Local Area Networks Star configuration Acct 316 Ring configuration Bus configuration

Star Configuration Each device is directly connected to the central server. Acct 316 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.

Star Configuration A B C Acct 316 Host computer or server H G F D E

Ring Configuration A B C Acct 316 H D G F E

Bus Configuration Bus channel Acct 316 A B C D Host computer or server E F G H

Wide Area Networks Centralized System Acct 316 Decentralized System Distributed Data Processing

Centralized WAN Acct 316

Decentralized WAN Acct 316

Distributed Data Processing Acct 316

Network Configuration Options Many WANs, and most LANs, are set up as client/server systems. Acct 316 Each desktop computer is referred to as a client.

Network Configuration Options The client sends requests for data to the servers. Acct 316 The servers perform preprocessing on the database and send only the relevant subset of data to the client for local processing.