Electronic Fund Transfer facility provided by banks is an example of Electronic Data Interchange EDI. EDI helps to eliminate paper based system, reduces data entry task and improves business cycle.

Components of Electronic Data Interchange EDI

Standard Document Format – A standard format agreed upon by both parties which do not require complicated hardware or software to access information. Both parties communicate directly through a business application.

Translator and Mapper – A translator is used to convert the raw data into meaningful information according to specifications provided by a mapper. A mapper is used to create conversion specification. It compiles the specification and then gives instructions to the translator on how to convert the data.

Communication Software – A communication software is used to transmit data and convert business documents into a standard format. It follows a standard communication protocol which is incorporated in the software. 

Communication Network – A communication network provides a direct link between trading partners who are will to exchange business documents through Electronic Data Interchange EDI.

• Modem – It is a hardware device that transmits data from one computer to another.
• VAN – A network that connect the computer system of one organization to another.
• Point to Point link – A direct communication link between two computers.

Advantages of Electronic Data Interchange EDI

• It is less costly than traditional system
• It aids in improved customers service and delivery
• It reduces error and clerical work.
• It improves business cycle
• It has a faster response time
• It aids in better planning and forecasting.

Applications of Electronic Data Interchange EDI

Retail Sector – In the retail sector profit margins usually depend upon efficient inventory management. EDI provides a structured way to maintain and replenish goods stocked at a retail outlet. Retailers use a common model stock for each shop location and the point of sale stock position is updated continuously and data in fed via EDI enabled SCM (supply chain management) network. The EDI software monitors all the logistics and makes updates in the original stock.

Manufacturing Sector – EDI ensures effective and efficient management of materials required for production of a commodity. In manufacturing sector EDI facilitates Material requirement planning and just in time manufacturing. The Inventory position of OEM is constantly updated through EDI and the supplier is notified about shortage of materials. This helps the supplier to plan and schedule supply according to requirements of the manufacturer. The suppliers respond via EDI with an ASN to identify the parts/materials to be delivered and the approximate delivery time and as soon as the shipment is delivered at the production plant the inventory is updated again.   

Automobile Sector – In automobile sector EDI is used to keep customers updated with the current product and pricing information during the purchase cycle. An advance shipping notice is transmitted through EDI to the customers to prepare a loading schedule and to ensure proper receipt of the product. The customer may also make payment on receipt of goods via EDI to speed up the payment process.  

Financial Sector – In the financial sector EDI replaces the labour intensive activities of collecting, processing and dispersing payments with an electronic system. It facilitates the flow of payment between the bank accounts of trading partners without requiring any human intervention. A payee`s bank account is electronically credited and the payer`s account is electronically credited on the scheduled day of payment; such an exchange is known as electronic fund transfer (EFT).

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Transaction Security

An online transaction requires a consumer to disclose sensitive information to the vendor in order to make a purchase, placing him-self at significant risk.  Transaction Security is concerned with providing privacy in transactions to the buyers and sellers and protecting the client-server network from breakdowns and third party attacks. It basically deals with –

• Client security – Techniques and practices that protect user privacy and integrity of the computing system.
• Server security – Protect web server, software and associated hardware from break-ins, vandalism and DOS attacks.
• Secure transactions – Guarantee protection against eavesdropping and intentional message modification (tapping, intercepting, diverting)

Security Issues in E Commerce 

1. Malicious Code – It includes a variety of threats such as virus, worms, Trojan horse etc.

• Virus – A virus is a computer programme that has the ability to replicate itself and spread to other files, deliver a pay load include micro virus, script virus, file infecting virus
• Worms – It is a virus designed to spread from computer to computer.
• Trojan horse – It appears to be a benign, but does something other than expected. It is often a way for a virus to enter a computer.

2. Unwanted programmes – There are programmes installed without the users consent.

• Browser parasites – Programmes used to monitor and change settings of a user`s browser
• Adware – Unwanted pop up ads
• Spyware – Programmes used to obtain personal information

3. Phishing and Identity theft – It refers to any deceptive, online attempt by a third party to obtain confidential information for a financial again.

4. Hacking – 

• Hacker – An individual who intends to gain unauthorised access to computer systems.
• Cracker – A hacker with a criminal intent
• Cyber Vandalism – Intentionally, disrupting, defacing or destroying a website

5. Credit Card Fraud – It refers to use of stolen data to establish credit under false identity.

6. Spoofing – Hackers hide their identity, misrepresent themselves by using fake email addresses or masquerading as someone else this threatens integrity and authenticity of the hacked website

7. DOS (Denial of Service) – Hackers flood a website with useless traffic to inundate or overwhelm the network.

8. DDOS (Distributed Denial of Service) – Hackers use numerous networks from numerous launch points to send useless traffic to a website. This may cause a complete shutdown making it impossible for users to access the website.

9. Sniffing – A sniffer is a type of eavesdropping application that monitors information travelling over the network. It enables hackers to steal proprietary information from anywhere on a network including email, files, reports etc.

10. Insider jobs – It involves poorly designed server and client software and complexity of programmes which increase vulnerabilities for hackers to exploit.

Defensive measures against Security Issues in E commerce →

The defensive measures used in Transaction Security are: 

1. Encryption – It is the process of transforming plain text or data into cipher text that cannot be read by anyone except the sender and receiver. It is done with a help of mathematical algorithm the key is required to decode the message.

In an Asymmetric Key Encryption both the sender and receiver use the same key to encrypt and decrypt the messages while Symmetric or Public key encryption uses two mathematically related digital keys which are public key and private key to encrypt and decrypt the messages.

2. Secure Socket Layer – The SSL protocol provides data encryption, server authentication, client authentication and message integrity for TCP/IP connections. It prevents eavesdropping, tampering or forgery when data is transported over the internet between two applications.

3. Secure hypertext transfer protocol – It is a secure message oriented communication protocol designed for use in conjunction with HTTP enabled secure connection and individual message transmission. Under SHTP a message may be signed, authenticated or encrypted.

4. Trust Seal Programmes – Trust seals have been developed to provide assurance about web businesses practices and policies.

5. Digital Signature – It is a signature in encrypted electronic code which is encrypted by the sender with his public key and can be decrypted only with the public key of the sender (by receiver).

6. Digital Certificate – It is a digital document issued by a trusted third party institution known as certificate authority that certifies the name and identifying information of the company. It is signed with the private key of the Certificate Authority. Therefore its authenticity can be known by knowing the public key.

A digital certificate contains the following information:

• The name of the company
• Public key of the company
• Digital Certificate serial number
• Expiry date/Date of Issue
• Digital Signature of the Certificate Authority

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In the computing world Firewall is a software or hardware based network security system that controls incoming and outgoing network traffic by analysing data packets and determining whether they should be allowed through or not based on a certain rule set. It can have a variety of configuration depending upon the user requirement. It builds a bridge between internal and external network and protects against →

• Remote login
• Application back doors
• Virus, spam, malware etc.

 A Firewall accomplishes controlled access using –

• Packet filtering
• Circuit level gateway
• Application level gateway
• Stateful inspection

Types of Firewall

On the basis of Traffic controlling technique Firewall can be categorised into the following four:

Packet Filtering Firewall – It operates by filtering the incoming and outgoing packets using routers or devices that have been configured to screen.

It examines the information contained in TCP and IP packet headers, in order to accept or deny packets from entering or leaving the network.  It checks the following attributes –

• Source address
• Destination address
• Application or protocol
• Source port number
• Destination port number

Circuit Level Firewall – Along with allowing or disallowing packets a Circuit Level Firewall also determines whether the connection between both ends is valid. It validates each session of established connection for exchange of data and monitors TCP handshaking.

It also checks connection request attributes against configured filtering rules and then traffic is filtered based on specified session rules. It checks for the following –

• Destination of IP address / Port
• Source of IP address / Port
• Time of day
• Protocol
• User
• Password

Application Level gateway – An Application Level gateway is similar to circuit level gateways but is application specific i.e. it can filter packets at the application layer of the OSI model. Incoming or outgoing packets are unable to access services for which there is no proxy. Therefore, it is also called proxies. It can also be used to log user activity and logins. They can also filter application specific commands.

Stateful Multilayer Inspection – Such a firewall is the combination of all the three. Traffic is filtered based on specific application rules, such as specified app, browser or protocol (FTP) or combinations. It filters packets at network layer which determines whether a session is legitimate or not and then evaluates the contents of the packet at application layer.

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A typical E Commerce Business Model 

The following E commerce business Model shows the step by step process and activities followed and used by business firms, seeking to expand their business through help of electronic and telecommunications networks . 

A. Business to Business (B2B) E-commerce Models

A B2B Model involves trading of goods and services between two corporate entities. A B2B model enables a business to interact and trade with other organization i.e. business houses trade goods and services with other businesses. Both the parties strike a deal directly through electronic networks and exchange products, services, information etc. This model is generally used for –

• E-procurement
• E- HRM (Human resource management)
• E-CRM (Customer relationship management)

Intermediaries are usually market makers and direct service providers (DSP) who assist in matching buyers and sellers.

It involves use of electronic medium for –

• Supply of Inventory
• Channel Management
• Distribution management and order processing
• Delivery and payment management

There are three types of B2B e commerce Models 

 (1) Supplier Oriented or Supplier Centric Model 

In such a model a supplier sets up an electronic marketplace in the domain of the products it supplies. Suppliers provide customized solutions and pricing according to the needs of the buyers.

(2) Buyer Oriented  or Buyer centric Model 

Such a model is generally used by Big business houses which make very high volume purchases and have a very high purchasing capacity. The organization sets up an electronic platform and places requests for quotations. Sellers contact the organization and place a bid online with his offer. The organization selects the offer that suits its needs, the entire purchase process is carried out using electronic mediums.  

(3) Intermediary Oriented or Intermediary Centric Model 

In such a model an electronic market maker provides an electronic platform to connect many buyers and sellers and facilitate transactions between them though its potential database of buyers and sellers. The market maker is generally an intermediary of a specific segment who quickly, conveniently and inexpensively connects many buyers and sellers of the segment.    

 B. Business to Consumer (B2C) E commerce Models

In a B2C Model Consumers get an opportunity to browse, select, customize and buy products online from a variety on online marketplace and portals. Sellers offer price cuts, discounts, shipping and delivery options, online customer service through an electronic portal and allow for personalization and customization of products. This model is generally used by existing businesses for channel enhancement purposes and by small producers or retailers to set up an online internet based store or surpass any entry barriers.   

Benefits of B2C model –

• Convenience of online buying
• Customization of products
• Online customer service
• Online delivery and payment

Types of B2C Models –

E-retail or E-tailing – It refers to retailing of consumer goods online through a website.

Brick & Click Retail – It refers to combination of a brick and mortar shop with e-tailing.

Virtual Malls – It is a website that hosts several merchants on one website. Owners of the website charge a small fee from sellers to display and sell their products through its structured revenue model.

This model is suitable for –

• Goods that can be transformed into digital format e.g. books, music, movies, software etc.
• Experience – Educational programs, tutorials and training, Games, Events
• Physical products – consumer durables
• Products that have standard specifications universally
• Branded items with return security

C. Consumer to Consumer  (C2C) E commerce Model

Under this model, Consumers sell directly to other consumers through online classified ads and auctions. A C2C Model essentially involves financial interaction of non-business entities using the web.

Consumers usually sell their personal possessions, second hand and homemade products, information services and freelance services to other consumers. Goods and services are generally sold at market determined prices and negotiations between parties are very common. C2C portals may or may not charge fees from its users.

NOTE: E commerce Models may be also categorized into Business to Government (B2G), Government to Business (G2G), Government to Citizen (G2C) and  Peer to Peer (P2P)  apart from the above three e commerce business models. The explanation of these e commerce models is beyond the scope of this article.

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It simply refers to the buying and selling of products, services and information via computer networks including internet.

E-commerce is concerned with system and business processes that support –

• creation of information sources
• movement of information over global networks
• effective and efficient interaction among producers, consumers, intermediaries and seller

It utilizes electronic networks to implement daily economic activities such as pricing, payments, contracting, shipping and delivery.

Features of E commerce →

1. Ubiquity – It is everywhere i.e. e-commerce is not restricted to a physical place.
2. Global reach – It is possible to conduct business transactions worldwide.
3. Universal Standards – E-commerce makes use of Internet and World Wide Web to reach customers which has the same technical standards worldwide.
4. Richness – E-commerce provides rich content in form of interactive graphics, videos, animations etc.
5. Interactive –A two way communication between business and customers is possible.
6. Personalisation and customization – It allows for personalization and customization of products.
7. Information density – E-commerce technologies provide useful and quality information thereby reducing information costs.

Driving forces behind E commerce

The Major Driving forces behind the growth of E-commerce are 

• Global Customers – Presense of customers of a product worldwide.
• Global Products – Demand for foriegn products by customers.
• Global Operations – Development of Transnational and Multinational Corporations
• Global Resources – Use of foreign raw material, labour, machines for production 
• Global Collaborations – Joint ventures, Mergers, Strategic Alliances 
• Global Competition – Race to capture market share in developing countries

Factors Affecting E-commerce –

Key drivers of e-commerce  may be categorized in terms of  4 key business environment factors which influence the e-commerce industry. They are

1. Technological Factors –

• State of telecommunication infrastructure
• Access to new technological developments
• Bandwidth availability and Internet rates

2. Political Factors –  

• Number and type of government initiatives to support use and development of modern technology
• Discouraging rules and regulations of the government
• Ability of the government to to adapt and plan for technological growth and development

3. Social Factors –

• Literacy level of the people and penetration rate of PC`s 
• Number of internet users  
• Willingness and ability of the people to adopt new technology

4. Economic Factors – 

• Economic growth of the country 
• Average income of the people
• Cost of Hardware and Software
• Cost of access to telecom infrastructure
• Commercial Structure and Innovative 

Traditional Commerce Vs E-commerce

Issues in implementing E Commerce

Advantages of E commerce  

Advantages to business –

1. Increased potential market share and global reach
2. It is easy to expand market with minimal capital outlay
3. It enables a business to procure material and services from other companies
4. It shortens or even eliminates marketing distribution channels, making products cheaper and vendor’s profit higher
5. It enables customization of products
6. Low cost advertising cost and entry barriers
7. It allows lower inventories and other cost savings like cost of creating, processing, distributing, storing and retrieving paper based information
8. No 24 hour time constraint
9. It is easier to launch a new product online

Advantages to Consumers –

• It enables 24/7 access
• It saves time, money and effort
• It provides more choices i.e. wide range of products and services
• Price and Product comparisons are available online
• Improved buying experience and delivery processing
• It provides a global market place
• It enables personalization and customization of products and services
• Customer enjoy benefits of a competitive environment

A typical E-Commerce Model –

Business Applications of E commerce –

E-commerce Models –

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Wireless networks like GSM, CDMA, TDMA, GPRS and UMTS enables a user of a mobile device to access a variety of information stored on databases of connectivity providers, information providers, service providers and web servers.

Mobile devices refer to devices that connect to a wireless network and are capable of accessing, interacting and displaying information on screen eg. –

1. Cellular phones or Smart phones
2. Pager devices
3. Handheld computers, palmtops, tablets
4. Laptop
5. Personal digital Assistants (PDA)

The main idea behind M commerce is to enable various applications and services available on the internet to portable devices (mobile phones, tablets, laptops etc.) to overcome the constraints of a desktop computer. M commerce aims to serve all information and material needs of the people in a convenient and easy way.

Applications of M commerce

• Mobile connect time communications
• Mobile equipment and device providers
• Value added services
• Mobile application developers
• Mobile commerce application providers
• Mobile Shopping
• Mobile advertising
• Mobile auctions
• Mobile entertainment
• Mobile financial services
• Location and search service

Advantages of M commerce

• It provides a convenient, secure and easy to use communication and distribution network
• It provides a wider reach as most people use cell phones
• It enables a business to target customers effectively e.g. on the basis of location, service provider, devices etc.
• It reduces transaction and order processing cost
• It encourages competitive pricing
• It streamlines all business processes

Disadvantages of M commerce

• Low acceptance rate of new devices, applications and technology among people
• Lack of supporting infrastructure, professionals and technology in developing countries
• Security and privacy issues
• Expensive 2G, 3G plans
• Customer retention rate is very low

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• Market transactions conducted over electronic networks
• Interactive platform for trade related activities
• Buying and selling of goods and services over public networks

A typical E-Commerce Model –

E-Business refers to a business which uses electronic mediums to carry out its core business operations. It involves business activities which are conducted over electronic networks such as –

• Direct Marketing and selling of goods and services
• Advertising and promotion
• Information exchange and processing
• Value chain trade
• Corporate purchasing or E-procurement

Difference between E-business and E-commerce

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Internet is a global system of interconnected computer networks that use standard internet protocol suite to kink several devices worldwide. It is an international network of networks, linked by optical, wireless and electronic networking technologies which consists of business, public, educational and government networks.

It carries an extensive range of information, resources and services. It utilises –

• IP Addressing Scheme
• Transmission Control Protocol (TCP)
• Peer2Peer (P2P) networks for file sharing and telephony

The main reasons for its establishment was to transmit data, share resources and communicate remotely.

Important Features –

• It is spread over 65 Countries
• There is no regulatory authority for internet therefore any one can access it
• All computers on the internet communicate via IP/TCP protocol using a client/server architecture
• A PC, Router, Browser and an Internet service provider are needed to connect to the Internet
• The main uses are –File sharing, Program sharing, Hardware sharing, Multi-user activities, Communication and Reaching remote areas

• It provides a variety of services such as – File Transfer, Electronic mail, Real-time broadcasting, E-commerce, Information resources etc.
  

Applications of Internet –

• Communication – Email, Online chat, Telephony (Voice, fax, SMS, MMS), video conferencing, file sharing etc.
• Remote login – A user can login to his/her concerned online account from anywhere in the world.
• E-commerce – B2B, B2C, C2C portals,
• Online Banking – Electronic fund transfer, Online account management
• Entertainment – Movies, videos, online books, news etc.
• Advertising – Banner ads, text ads, social media marketing etc.
• Research and Development – Online surveys, private browsers, search engines
• Online Education & Training – Online exams, tutorials, e-books, notes and lectures etc.
• Stock Exchange and Trading
• Social Networking and Blogging

Disadvantages –

• Cyber Crime
• Virus, Malware, Spamming
• Phishing
• Hacking
• Adult and abusive content
• Unrestricted medium
• Theft of personal information and copyright issues
• Online Fraud and terrorism

What is Extranet?

An extranet is a private network that uses Internet technology and the public telecommunication system to securely share part of a business’s information or operations with suppliers, vendors, partners, customers, or other businesses. An extranet can be viewed as part of a company’s intranet that is extended to users outside the company. It has also been described as a “state of mind” in which the Internet is perceived as a way to do business with other companies as well as to sell products to customers.

It is an extension of info system of the company to its partners outside.  It uses internet protocols to link intranets over the public internet.  It involve authentication via a username and password.

Uses of Extranet-

• Exchange large volume of data
• Share product catalogues
• Collaborate with partners & peers
• Joint training programs

What is Intranet ?

An intranet is a private network that is contained within an enterprise. It may consist of many interlinked local area networks and also use leased lines in the wide area network. Typically, an intranet includes connections through one or more gateway computers to the outside Internet. The main purpose of an intranet is to share company information and computing resources among employees. An intranet can also be used to facilitate working in groups and for teleconferences.

Typically, larger enterprises allow users within their intranet to access the public internet through firewall servers that have the ability to screen messages in both directions so that company security is maintained. When intranet is made accessible to customers, partners, suppliers, or others outside the company, it becomes an extranet.

It enhances existing communication between employees and provides a common knowledge and storage base.  It provides access to company, data systems, technical documents etc.

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