Turban Ch.18 - Purdue University 406 e-retailing/Turban... · shipment in the UPS database and relay the information to the customer. Servicing these calls over the phone was an expensive

BUILDING E-COMMERCEAPPLICATIONS AND

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ContentTracking United Parcel Service Shipments18.1 The Development Process

18.2 The Major EC Applications and TheirFunctionalities

18.3 Development Options for ECApplications

18.4 Criteria for Selecting a DevelopmentApproach

18.5 Third-Party EC Components and Suites

18.6 Connecting to Databases and OtherEnterprise Systems

18.7 Rise of Web Services

18.8 Vendor and Software Selection

18.9 Usage Analysis and Site Management

Managerial IssuesReal-World Case: Whirlpool’s Trading Portal

Upon completion of this chapter, you will beable to:1. Discuss the major steps in developing an EC

application.

2. Describe the major EC applications and listtheir major functionalities.

3. List the major EC application developmentoptions along with their benefits andlimitations.

4. Describe various EC application outsourcingoptions.

5. Discuss the major components of anelectronic catalog and EC application suite.

6. Describe various methods for connecting anEC application to back-end systems anddatabases.

7. Describe the criteria used in selecting anoutsourcing vendor and package.

8. Discuss the value and technical foundation ofWeb services in EC applications.

9. Understand the value and uses of ECapplication log files.

10. Discuss the importance and difficulties of EC application maintenance.

Learning objectives

1

THE SOLUTIONIn an effort to reduce transaction costs and to efficiently servicemore customers, UPS created a Web site (ups.com) that enabledcustomers to track their shipments online, to determine the costand transit time for delivery of a package, to schedule a packagefor pickup, and to locate the nearest drop-off facility. Theseonline facilities are accessed from the UPS homepage. For exam-ple, if a customer wants to track a shipment, they click the“Tracking” tab at the top of the homepage. This takes the cus-tomer to an online form where the customer simply enters thetracking number and then hits the “Track” button. The customerthen receives precise information about the location of the des-ignated shipment.

Although the front end of the UPS Web site is simpleenough, the back-end processing used to handle a tracking

request is a little more complicated. When a request first reachesthe UPS site, it is handed off to one of a handful of Web servers.The particular server that is selected depends on a variety of fac-tors such as the current load on the various machines. Next, theselected server passes the request to the appropriate applicationserver. In this case, the application server is a tracking one.From there, the application server passes the request to an IBMAS/400 computer, which is attached to the UPS tracking data-base. This database is one of the largest transaction databasesin the world, containing over 20 terabytes of data. The main-frame actually performs the database search for the status infor-mation associated with the tracking number. Once the informa-tion is found, it is passed back up the line through the variousservers to the customer’s browser. Exhibit 18.1 provides aschematic of the whole operation.

THE RESULTSToday, the UPS site services almost 8 million online trackingrequests per day. It has kept UPS competitive with other ship-ping companies (notably, FedEx) that also offer online trackingservices and customer information. Recently, the UPS site hasbegun to offer customers the option of tracking their packagesthrough wireless devices (cell phones, PDAs, and Web-enabledpagers). In these cases, the Web pages have been modified tosupport the particular wireless device being used. In the samevein, specialized servers are used to deliver the pages over thewireless communication networks.

In addition to their own site, UPS offers a set of e-commerce solutions and a technology infrastructure thatenables other companies to incorporate UPS’ online order entry,shipping, and tracking capabilities (ec.ups.com). For instance,Amazon.com uses UPS’s online tools to provide customers withthe online means to track packages shipped by UPS. UPS alsooffers e-commerce tools and services for managing an enter-prise’s overall supply chain.Sources: ups.com (2003) and Tauscher (2002).

TRACKING UNITED PARCEL SERVICE SHIPMENTS

The ProblemUnited Parcel Service (UPS) has been in the package distribution business since 1907. It is the world’s largest package distribution com-pany, transporting over 3 billion parcels and documents each year in over 200 countries. For years, UPS has provided the means for cus-tomers to track their shipments to determine the status and whereabouts of a particular package. In the past, this was done primarilyover the telephone. Customers would call UPS with the tracking number of their shipment. An operator would look up the status of theshipment in the UPS database and relay the information to the customer. Servicing these calls over the phone was an expensive proposi-tion (estimated at $2 per call).

WHAT WE CAN LEARN . . .

There is more to an EC Web site than meets the eye. For example, on the surface, the UPS Web site appears to be relatively simple.However, behind the scenes a number of hardware and software components are supporting these applications. The same is true of virtu-ally every e-commerce site.

This online chapter describes the process for developing EC applications. The discussion covers the general steps in the process andconsiders a number of different alternatives for implementing e-commerce applications.

Chapter Eighteen: Building E-Commerce Applications and Infrastructure 3

18.1 THE DEVELOPMENT PROCESSSeveral options are available for developing an EC site. In some cases, the components mak-ing up a Web site come from a small number of vendors. In other instances, they come fromseveral different vendors. Small storefronts with a few key components can be developedwith HTML, Java, or another programming language. They can also be quickly imple-mented with commercial packages or leased from an application service provider (ASP), acompany that provides business applications to users for a small monthly fee. (Some packagesare available for a free trial period ranging from 30 to 90 days.) Building medium to largeapplications requires extensive integration with existing information systems such as corpo-rate databases, intranets, enterprise resource planning (ERP), and other application pro-grams. Larger applications can be outsourced or developed in-house. They can also be imple-mented with a commercial package or customized by hand.

Although the cost of developing an EC site of any size has dropped considerably overthe past few years (Carmichael 2001), the cost can still run in the thousands of dollars, evenfor a small site. To ensure at least a modicum of success, a systematic development process isneeded to create, implement, and maintain a site. A project team is also needed to managethe development process, as well as the relationships with outside vendors and business part-ners. The development process should include the steps detailed in the following sections.

STEP 1: CREATING AN EC ARCHITECTUREAn EC architecture is a plan for organizing the underlying infrastructure and applications ofa site. The plan includes the business goals and vision for the site; the information and datarequired to fulfill the goals and vision; the application modules that will deliver and managethe information and data; the specific hardware and software on which the application

application serviceprovider (ASP)A company that providesbusiness applications to users for a smallmonthly fee.

EC architectureA plan for organizing theunderlying infrastructureand applications of a site.

Source: UPS, Atlanta, GA.

AS/400

16-TerabyteDatabase

New YorkRouter

AtlantaRouter

Internet

DNSRoundRobin

NetscapeEnterprise

Servers(Sun Microsystems)

WebApplication

Servers

EXHIBIT 18.1 Architecture of the UPS Web Site

4 Chapter Eighteen: Building E-Commerce Applications and Infrastructure

modules will run, as well as the security, scalability, and reliability required by the applica-tions; and the human resources and procedures for implementing the architecture.

Various IT tools and methodologies can be used to support the creation of an applicationarchitecture (e.g., see Kendall and Kendall 1999). Because the creation of an architecture isan iterative process, collaborative methodologies such as Joint Application Development( JAD) are especially useful in identifying and modifying system requirements.

STEP 2: SELECTING A DEVELOPMENT OPTIONEC applications can either be developed in-house, outsourced to another party, or somecombination of both. If the application is built in-house, it can be built entirely from scratchor commercial products can be used and modified to meet specific needs. If the application isoutsourced, the application can be run entirely by an ASP, run on a third-party marketplace(e.g., an auction site, exchange, or online mall), or run on another company’s Web site. Evenif the application is outsourced, a company will still need to participate in the architecturaldesign. At the end of this step, an application is built (or purchased) and ready to be installed.

STEP 3: INSTALLING, TESTING, AND DEPLOYING EC APPLICATIONSOnce an option has been selected, the next step involves getting the application up and run-ning on the selected hardware and network environment. As the UPS tracking application atthe beginning of the chapter demonstrated, one of the steps in installing an application isconnecting it to back-end databases, to other applications, and often to other Web sites. Forexample, if a prospective customer orders a product from a site, it would be helpful if the sitecould determine if the product was in stock. In order to do this, the ordering system wouldneed to be connected to the inventory system.

During this step, the modules that have been installed need to be tested. A series of testsare required: unit testing (testing the modules one at a time), integration testing (testing thecombination of modules acting in concert), usability testing (testing the quality of the user’sexperience when interacting with the site), and acceptance testing (determining whether thesite meets the original business objectives and vision). Once the applications making up anEC site pass all of the tests, they can be deployed to the end users.

STEP 4: OPERATION AND MAINTENANCEIt usually takes as much time, effort, and money to operate and maintain a site as it does tobuild and install it in the first place. To enjoy continued usage, a site needs to be continuallyupdated. For example, at a B2C site, new products need to be added to the catalog, pricesneed to be changed, and new promotions need to be run. These changes and updates need toundergo the same testing procedures used during the installation process. Additionally, usagepatterns and performance need to be studied to determine which parts of the underlyingapplications should be modified or eliminated from the site.

Section 18.1 ◗REVIEW1. List the major steps in developing an EC application.2. Define the various types of testing used during the EC development process.

18.2 THE MAJOR EC APPLICATIONS AND THEIRFUNCTIONALITIES

When the Web was first getting started, there were few guidelines for developing an ECsite. Today, there are numerous examples of all types of sites, including B2C, B2B,exchanges, and the like. Sites of a particular type generally have the same underlying appli-cations and provide similar sorts of functionality. This simplifies the task of creating theunderlying application architecture for a particular type of site. The discussion that followsdescribes the major characteristics and functionalities of some of the better-known ECapplications.

unit testingTesting application soft-ware modules one at a time.

integration testingTesting the combinationof application modulesacting in concert.

usability testingTesting the quality of the user’s experiencewhen interacting with a Web site.

acceptance testingDetermining whether aWeb site meets the origi-nal business objectivesand vision.


B2C STOREFRONTSAn electronic storefront must support the same steps and tasks that a physical store mustsupport. In particular, an electronic storefront (a seller’s Web site where purchases can be made) needs to offer certain capabilities to buyers and to the merchant. These are shown inExhibit 18.2.

In order to provide these capabilities, an electronic storefront must contain at least threeinterrelated subsystems (DeWire 1998):

1. A merchant system or storefront that provides the merchant ’s catalog with products,prices, and promotions. A shopping cart is usually included.

2. A transaction system for processing orders, payments, and other aspects of the transaction.3. A payment gateway that routes payments through existing financial systems primarily

for the purpose of credit card authorization and settlement.

For a comparison of various software packages that support the creation of an B2C storefrontsee ecommerce.internet.com/reviews/glance/0,,3691_3,00.html.

SUPPLIER SELL-SIDE B2B SITESA sell-side B2B site is similar to a B2C storefront, enabling one business to purchase goodsand services from another. However, a B2B site also has additional features, including:

◗ Personalized catalogs and Web pages for all major buyers◗ A B2B payment gate◗ Electronic contract negotiation features◗ Product configuration by customers (e.g., Cisco or Dell)◗ Affiliate program capabilities◗ Business alerts (e.g., special sales)

EXHIBIT 18.2 Capabilities Needed by Users of Electronic Storefronts

Buyers Need Ability To: Sellers Need Ability To:• Discover, search for, evaluate, and compare products • Provide access to a current catalog of product offerings,

for purchase using e-catalogs. allowing prospective buyers to analyze and evaluate the • Select products to purchase and negotiate or determine offerings.

their total price. • Provide an electronic shopping cart in which buyers can • Place an order for desired products using a shopping cart. assemble their purchases.• Pay for the ordered products, usually through some form • Verify a customer’s credit and approve the customer’s purchase.

of credit. • Process orders (back-end services).• Confirm an order, ensuring that the desired product • Arrange for product delivery.

is available. • Track shipments to ensure that they are delivered.• Track orders once they are shipped. • Provide the means for buyers and visitors to register at the

site, to make comments, or to request additional information.• Answer customers’ questions or pass queries and requests to

a Web-based call center.• Analyze purchases in order to customize buyers’ experiences.• Provide Web-based post-sale support.• Create the capability for cross-sell and up-sell.• Provide language translation if needed.• Measure and analyze the traffic at the site in order to modify

and maintain the various applications.


E-PROCUREMENTAn e-procurement site is an online intermediary that offers businesses access to hundreds ofparts and services provided by suppliers. There are several variations of e-procurement sys-tems, each with their own specialized capabilities.

Aggregating CatalogsIn large organizations, multiple buyers are involved in making purchases from a large numberof suppliers. One way to reduce costs and other inefficiencies in the purchase process is toaggregate the items from approved suppliers into a single online catalog. Some of the spe-cialized requirements for this type of site include:

◗ Search engine for locating items with particular characteristics◗ Comparison engine for alternative vendors◗ Ordering mechanism◗ Budget and authorization feature◗ Usage comparisons (among various departments)◗ Payment mechanism (e.g., use of a purchasing card)

Reverse AuctionsIn a reverse auction, buyers list the items they wish to purchase and sellers bid to providethose items at the lowest price. Sites of this sort provide the following capabilities:

◗ Catalog of items to be tendered and their content management◗ Search engine (if there are many items)◗ Personalized pages for potential large bidders◗ Reverse auction mechanisms, sometimes in real time◗ Facility to help prepare, issue, manage, and respond to a buyer’s request for quotes (RFQs)◗ Ability to bid dynamically◗ Automatic vendor approval and workflow (e.g., SmartMatch’s supplier identification

technology)◗ Electronic collaboration with trading partners◗ Standardization of RFQ writing◗ Site map◗ Mechanism for selecting suppliers◗ Automatic matching of suppliers with RFQs◗ Automatic business process workflow◗ Ability for bidders to use m-commerce for bidding◗ Automated language translation

EXCHANGESAn exchange is an e-marketplace tying many buyers to many suppliers. In addition to com-bining the functionalities of buy-side, e-procurement, and auction sites, they also have anumber of other capabilities:

◗ Collaboration services (including multichannel ones)◗ Community services◗ Web-automated workflow◗ Integrated business process solutions◗ Central coordination of global logistics for members, including warehousing and ship-

ping services◗ Integration services (systems/process integration into e-marketplace, trading partners,

and service providers)◗ Data mining, customized analysis and reporting, real-time transactions, trend and cus-

tomer behavior tracking


◗ Transaction flow managers◗ Negotiation mechanisms◗ Language translation◗ Comprehensive links to related resources

These lists of major characteristics and functionalities can be used by application developersas outlines or checklists from which to develop plans for specific EC applications. For a list-ing of software packages that support the various capabilities of B2B sites seebusiness2.com/webguide/0,,3789,00.html?ref=wg_el.

Section 18.2 ◗REVIEW1. List the major subsystems of an electronic storefront.2. Describe some of the major functions required by an aggregating catalog.3. Describe some of the major functions needed to build a reverse auction.4. List some of the functional requirements of an online exchange.

18.3 DEVELOPMENT OPTIONS FOR EC APPLICATIONSThere are three basic options for developing an EC Web site: (1) develop the site in-houseeither from scratch or with off-the-shelf components, (2) use a packaged applicationdesigned for a particular type of EC site, or (3) lease the application from a third party. Eachof these approaches has its benefits and limitations.

IN-HOUSE DEVELOPMENT: INSOURCINGAlthough in-house development—insourcing—can be time-consuming and costly, it may leadto EC applications that better fit an organization’s strategy and vision and differentiate it fromthe competition. Rarely is a site built from scratch. Instead, the required applications are oftenconstructed from standard components (e.g., Web servers such as Apache or Microsoft’s IIS)using Web scripting languages such as PHP, Microsoft’s Active Server Pages (ASP), JavaServerPages ( JSP), or ColdFusion. These scripting languages make it easier to integrate applicationfunctionality with back-end databases and other back-office systems (e.g., order entry).

Insourcing is a challenging task that requires specialized IT resources. For this reason,most organizations usually rely on packaged applications or completely outsource the devel-opment and maintenance of their EC sites.

BUY THE APPLICATIONS: TURNKEY APPROACHA number of commercial packages provide the standard features required by EC applica-tions. A turnkey approach involves buying a commercial package, installing it, and starting itup. Buying a commercial package requires much less time and money than in-house devel-opment. When selecting a particular package, the package should not only satisfy currentneeds, it must also be flexible enough to handle future ones. Otherwise the package mayquickly become obsolete. Additionally, because one package can rarely meet all of an organi-zation’s requirements, it is sometimes necessary to acquire multiple packages. In this case, thepackages need to be integrated with each other and with other software and data.

This option has several major advantages:

◗ Many different types of off-the-shelf software are available.◗ It saves time and money (compared to in-house development).◗ It requires fewer personnel.◗ The company knows what it is getting before it invests in the product.◗ The company is not the first and only user.

This option also has some major disadvantages:

◗ Software may not exactly meet the company’s needs.◗ Software may be difficult or impossible to modify or it may require huge process changes.

insourcingIn-house development ofapplications.


◗ The company may experience loss of control over improvements and new versions.◗ Off-the-shelf applications can be difficult to integrate with existing systems.◗ Vendors may drop a product or go out of business.

The buy option is especially attractive if the software vendor allows for modifications.However, the option may not be attractive in cases of high obsolescence rates or high soft-ware cost. In such cases, one should consider leasing.

LEASINGLeasing an application package can result in substantial cost and time savings. In those cases where extensive maintenance is required or where the cost of buying is very high,leasing is very advantageous, especially for small to medium enterprises (SMEs). Leasing is also advantageous when a company wants to experiment with a package before mak-ing a heavy up-front investment, protect its own internal networks, quickly establish a pres-ence in the market, or rely on experts to establish a site over which they can later assumecontrol.

Leasing can be done in one of two ways. The first way is to lease the application from anoutsourcer and then install it on the company’s premises. The vendor can help with theinstallation and frequently will offer to contract the operation and maintenance of the sys-tem. Many conventional applications are leased this way.

The second way is to lease the application from an ASP that hosts the application at itsdata center (Kern and Kreijger 2001). The applications are then accessed via the Internetthrough a standard Web browser interface. In such an arrangement, applications can bescaled, upgrades and maintenance can be centralized, physical security over the applicationsand servers can be guaranteed, and the necessary critical mass of human resources can be effi-ciently utilized. Leasing from ASPs not only saves various expenses (e.g., labor costs) in theinitial development stage, it also helps reduce the software maintenance, upgrading, and usertraining costs in the long run.

EC Application Case 18.1 describes the hosting services provided by a typical ASP.

CASE 18.1EC Application

HOSTING SERVICES FROM VERIOVerio (verio.com) hosts Web sites at various service levels,each priced higher than the previous level. In each case,Verio offers state-of-the-art servers, a tier-1 network, and ateam of experts to assist in the process. It also promises the following features: availability (get started quickly),reliability (99.9% uptime), confidentiality (secure files), data integrity (they perform daily backups to protect filesfrom loss or corruption), throughput (pages come upquickly), scalability (upgrade account as client grows), sup-port (24/7 access), control (easily changed Web design), andinformation (Web site traffic statistics, etc.). Clients canacquire self-service accounts for simple transactional func-tionality or they may work closely with Verio to design andbuild robust systems to be hosted by Verio. For an additionalcharge, clients may also purchase payment-processing func-tionality to ease some of the security concerns in a trans-actional Web site.

Verio also offers other value-added services related toWeb site design and hosting. It offers NetAnnounce Premiere,a professional Web site promotional service, to help Web sites

get noticed. Besides registering its clients’ sites with over250 search engines, it also offers several proprietary tech-niques to help a site get listed prominently, including opti-mized word relevancy advice and optimized meta tags. Italso offers load balancing, server monitoring, security, andsystem administration services. Some of their clients shareservers with other clients (essentially renting space on a Webserver alongside other “tenants”), whereas others pay higherfees to have their own dedicated servers. Clients can alsoutilize additional technology applications such as ActiveServer Pages (ASP) and ColdFusion. Although most of theseservices are B2C oriented, Verio hosts B2B sites as well.

Source: Compiled from verio.com (July 2003).

Questions1. What are some of the major features provided by Verio?

2. What are the value-added services offered by Verio?


Leasing from ASPs does have its disadvantages. Many companies are concerned withthe adequacy of protection offered by the ASP against hackers, theft of confidential informa-tion, and virus attacks. More importantly, with the demise of many dot-com companies, alarge number of ASPs have gone out of business (Koch 2000). Before an ASP is used, it isimperative that a prospective customer investigate the ASP’s financial viability.

A detailed list of the benefits and risks associated with ASPs is provided in Exhibit 18.3.Information about the general state of the ASP marketspace can be obtained from theComputing Technology Industry Association’s (CompTIA) Software Services (comptia.org/sections/ssg/default.asp).

OTHER DEVELOPMENT OPTIONSIn addition to ASPs, several other leasing and hosting options are available for developingand maintaining an EC site. These include:

◗ E-marketplaces, exchanges, auctions, or reverse auctions. With this option, a companyplugs itself into an existing EC Web site. For example, a company can place its catalogsin Yahoo’s marketplace and rely on Yahoo’s store to attract buyers. In this instance, acompany pays Yahoo a monthly fee for the catalog space. In other cases, fees are chargedfor each transaction or for a percentage of the sales revenues. In most of these cases,templates are provided for plugging into the site.

◗ Joint ventures and consortia. Several different partnership arrangements may facilitateEC application development. In some cases, companies can team up with a company ora consortium that already has an application in place or they can join with a series ofpartners to create a new application and site (e.g., Covisint).

◗ Internet malls. The Web has several thousand Internet malls. Like a real-world mall, anInternet mall consists of a single entry displaying a collection of electronic storefronts. Incontrast to earlier cybermalls, today’s malls have a common look and feel. A well-runmall offers cross-selling from one store to another and provides a common paymentstructure by which buyers can use a single credit card purchase to buy products frommultiple stores. Theoretically, a mall has wider marketing reach than a stand-alone siteand, as a consequence, generates more traffic. The downside is that income must beshared with the mall owner.

EXHIBIT 18.3 Benefits and Risks of Using an ASPType Benefits Potential RisksBusiness Reduces the need to attract and retain skilled IT professionals Loss of control and high level of dependence

Enables companies to concentrate on strategic use of IT on ASPEnables small- and medium-sized companies to use tier-1 Inability of ASP to deliver quality of service;

applications (e.g., ERP, SCM, and CRM) lack of skills and experienceApplication scalability enables rapid growth of companies

Technical Fast and easy application deployment Level of customization and legacy applicationHigher degree of application standardization integration offered by ASP is insufficientAccess to wide range of applications Low reliability and speed of delivery due toApplication maintenance simplified and performed by ASP bandwidth limitationsSimplified user support and training Low capability of ASP to deal with security

and confidentiality issues

Economic Low total cost of ownership Pricing changes by ASP unpredictable for Low up-front investments in hardware and software application updates and servicesImproved cost control as result of predictable subscription costs

Source: Kern and Kreijger (2001).


◗ ISPs. In addition to providing Internet access to companies and individual users, a largenumber of ISPs offer hosting services for EC. For the most part, ISPs are focused onoperating a secure transaction environment and not on store content. This means thatmerchants using the services of an ISP must still design their own pages. Of course, thistask can be outsourced to a third party.

◗ Telecommunication companies. The major telecommunication companies, such as MCI(global.mci.com/us/enterprise/internet/hosting) and AT&T (business.att.com/products/category.jsp?categoryid=hosting), provide Web hosting services that can support a fullrange of EC solutions.

◗ Software houses. Many software companies, such as IBM and Ariba, offer a range of out-sourcing services for developing, operating, and maintaining EC applications.

Section 18.3 ◗REVIEW1. Define insourcing.2. List some of the pros and cons of using packaged EC applications.3. Describe the major forms of application leasing.4. List some of the alternative leasing and hosting options.

18.4 CRITERIA FOR SELECTING A DEVELOPMENTAPPROACH

If a company decides to buy or lease an EC application, the following selection criteria needto be considered.

◗ Flexibility. Commercial packages need to be modified or adapted to the specific require-ments of an application. Therefore, it is important to evaluate the extent to which apackage can be adapted and the willingness of the vendor to perform or support theadaptation.

◗ Information requirements. The selected package should satisfy the information require-ments of the EC application. Information collection, storage, and retrieval capabilitiesand the database structure should be carefully examined.

◗ User friendliness. User friendliness is especially important for B2C, G2C, and some B2Bsites. In these cases, if an application is hard for the average visitor or customer to use,then it will have an immediate impact on the bottom line.

◗ Hardware and software resources. The computer type and the operating system requiredby the package must be compatible with the existing platform. The CPU and storagerequirements are also important considerations.

◗ Installation. The installation effort required to implement the package should also betaken into account. Some packages are complex, and their installation requires extensiveconsultation. The installation process may also take a considerable amount of time.

◗ Maintenance services. Because EC application requirements are constantly changing,continuous maintenance is required. It is important to consider how often the packageneeds to be upgraded and whether the vendor provides assistance for its maintenance.

◗ Vendor quality and track record. It is less risky to acquire an EC package from a vendorthat has a good reputation and track record than from one with a less-than-stellar orunknown reputation. The quality of the vendor can be indicated by their related experi-ence in the particular application and their sales and financial records, as well as theirresponsiveness to clients’ requests. Vendor support may include online help and cus-tomer relationship management (CRM) programs, as well as partner relationship man-agement (PRM) tools. To minimize risk, minor applications should be leased first.

◗ Estimating costs. The costs of EC projects are usually difficult to assess and oftenunderestimated. In addition to the obvious costs associated with EC development, it isalso important to factor in the costs of installation, integration, customization, andmaintenance.


◗ Personnel. Staffing requirements should be planned for in advance to ensure that theorganization has the appropriate human resources for systems development (in the caseof in-house development), implementation, operation, and maintenance. Currently, it isdifficult to recruit and retain IT personnel with appropriate knowledge and experiencein EC application development. Special expertise can be acquired from external consul-tants, but usually at a very high cost.

◗ Technological evolution. Planning ahead for technological evolution facilitates theupgrade of EC applications and enables the organization to adopt innovations morequickly than the competition. It is therefore very important to allow for flexibility in the application design so that the chosen options do not impose major limitations onfuture choices. Given the rapid pace of IT evolution, it is sometimes preferable todevelop EC applications incrementally in order to take advantage of the latest develop-ments in the technology.

◗ Scaling. System scalability refers to how big a system can grow in various dimensions toprovide more service. Scalability can be measured in several ways, including the totalnumber of users, the number of simultaneous users, and the transaction volume. Thesedimensions are not independent, because scaling up the size of the system in one dimen-sion can affect the other dimensions. The growth of scale is facilitated or constrained bythe system architecture.

◗ Sizing. The required size and performance of an application are also difficult to predict,because the growth of the user population of certain EC applications is hard to antici-pate. Overloading the application decreases performance. For regular IT applications,deterioration in performance may affect productivity and user satisfaction; for EC appli-cations, it could result in a major loss of business.

◗ Performance. System performance is a critical factor for business success, particularly ifthe system is used for EC. In addition to convenience, good performance also bringscustomers and competitive advantages. Performance is measured by two main metrics:latency and throughput. Latency measures the time required to complete an operationsuch as downloading a Web page. It is an indicator of the users’ experience with thesystem. Throughput measures the number of operations completed in a given periodof time. It indicates the capacity or number of users that a system can handle.Throughput and latency are interrelated. An increase in either measure will lead to anincrease in the other.

◗ Reliability. Reliability is an essential requirement for a successful system. System failuresand downtime may lead to public embarrassment. When an EC application fails, busi-ness is interrupted and the company loses customers. System reliability can be enhancedthrough redundancy (i.e., back-up systems).

◗ Security. Security is one of the most important factors for the adoption and diffusion ofEC. Data and information flow in EC, as well as stored data, may include private and/orproprietary information. Thus, a selected package must meet strict security require-ments. Systems, communication, and data security must be addressed early in the designof EC applications and not after their implementation. In addition to technologicalsolutions such as firewalls and encryption, physical and procedural security measuresmust also be enforced.

Section 18.4 ◗REVIEW1. List some of the major criteria to consider when deciding whether to buy or lease an EC

application.2. Define latency.3. Define throughput.

18.5 THIRD-PARTY EC COMPONENTS AND SUITESIf a company opts to purchase its EC applications from a third-party vendor, two basic cate-gories of software are available: electronic catalogs and EC suites.

scalabilityHow big a system cangrow in various dimen-sions to provide more ser-vice; measured by totalnumber of users, numberof simultaneous users, ortransaction volume.

latencyThe time required tocomplete an operationsuch as downloading aWeb page.

throughputThe number of operationscompleted in a givenperiod of time; indicatesthe number of users thata system can handle.


ELECTRONIC CATALOGSElectronic catalogs are the virtual version of traditional product catalogs. Like its papercounterpart, an electronic catalog contains written descriptions and photos of products, alongwith information about various promotions, discounts, payment methods, and methods ofdelivery. Electronic catalogs, also known as merchant server software, include features thatmake it simple and relatively inexpensive (usually less than $10,000) to set up a catalog oper-ation that has a straightforward pricing and product configuration.

This type of software commonly includes the following features:

◗ Templates or wizards for creating a storefront and catalog pages with pictures describingproducts for sale

◗ Electronic shopping carts that enable consumers to gather items of interest until they areready for checkout

◗ Web-based order forms for making secure purchases (either through SSL encryption orthe SET protocol)

◗ A database for maintaining product descriptions, pricing, and customer orders◗ Integration with third-party software for calculating taxes and shipping costs and for

handling distribution and fulfillment

Exhibit 18.4 outlines the major components of merchant server software. As shown in thefigure, a single server is used to handle product presentation, order processing, and paymentprocessing (Treese and Stewart 1998). Likewise, in such systems a single database is used tostore the catalog (i.e., product descriptions) and handle the details of customer orders. Thepages of the electronic catalog are created dynamically from the product descriptions con-tained in the catalog database. For those merchants with only a few products for sale, there isno need to store the product descriptions in a database. Instead, the pages of the Web catalogcan be created ahead of time.

EC SUITESEC suites offer builders and users greater flexibility, specialization, customization, and integra-tion in supporting complete front- and back-office functionality. In an EC suite, the function-ality is distributed across a number of servers and databases instead of relying on a single serverand database, as is done in merchant server systems.The elements displayed in Exhibit 18.5 areindicative of the components contained in an EC suite, the processes supported by an EC suite,and the back-end databases and operational systems utilized by the processes.

Internet

WebServer

WebBrowser Database

CatalogOrder

MerchantServer

StoreHTML Pages

Third-PartyApplications

FinancialNetwork

EXHIBIT 18.4 Merchant Server Architecture

electronic catalogThe virtual-world equiva-lent of a traditional prod-uct catalog; containsproduct descriptions andphotos, along with infor-mation about various pro-motions, discounts, pay-ment methods, andmethods of delivery.

merchant serversoftwareElectronic catalogs.


Internet

WebServer

WebBrowser

PaymentDatabase

OrderDatabase

CustomerDatabase

CatalogDatabase

OrderCapture,

Completion

CatalogApplication

FulfillmentSystems

FinancialNetwork

CustomerManagement,Registration,

Profiles,Service

PaymentProcessing

(SET &Purchase

Order)

EXHIBIT 18.5 Components of an EC Suite

Over the past few years, the EC suite marketspace has experienced a substantial amountof consolidation. Among the major products that remain on the market are Microsoft ’sCommerce Server (microsoft.com), IBM’s WebSphere Commerce Suite (ibm.com), andOracle’s EC applications (oracle.com).

Microsoft’s Commerce ServerMicrosoft’s Commerce Server offers a comprehensive framework for building tailored ECsolutions. The framework consists of five main systems:

◗ Product Catalog System. Enables the creation, management, and syndication of customer-specific and location-specific catalogs with specialized pricing and sophisticated searchcapabilities.

◗ Targeting System. Used to create and deploy multilingual merchandising and advertisingcampaigns that support advanced discounting, cross-selling, and customer profiling.

◗ Profiling System. Enables catalog personalization, pricing, business processing, mer-chandising, and advertising to specific needs of customers, suppliers, and partners.

◗ Business Processing Pipelines System. Allows a business to tailor its order and merchandis-ing processes to handle currency conversion, multiple shipments, and complex discounting.

◗ Business Analytics System. Offers businesses the ability to analyze, forecast, and mine thebusiness data resulting from EC activities and processes including clickstream usage,purchase histories, browsing behaviors, campaign effectiveness, and currency preferencesso that they can make informed decisions about the success of their online business.

Microsoft ’s Commerce Server comes in three editions—Standard, Developer, andEnterprise—which are designed to handle medium, large, and extremely high-traffic sites,respectively. All three editions are built on top of Microsoft’s Windows operating system,SQL Server database, and Visual Studio .NET development environment. All three editionsalso operate seamlessly with Microsoft ’s other .NET servers (e.g. Microsoft ’s ContentManagement Server). An example of a business built using Microsoft’s Commerce Server isdescribed in EC Application Case 18.2 (next page).

Source: Courtesy of InterWorld Corporation, www.interworld.com.


CASE 18.2EC Application

FLORICULTURE PARTNERSHIP STREAMLINES REAL-TIME ORDERINGThe floriculture market consists of brokers who take ordersfrom growers for plants and rootstock produced by plant-material suppliers. Until recently, the market relied on mobilesalesmen to take handwritten orders from growers. The orderwould later be keyed into the broker’s computer system andrekeyed into the suppliers’ systems. From start to finish, theprocess required an average of 12 manual touch-points,including tasks such as entering orders, determining inven-tory availability, establishing prices, and reentering databecause of lost, duplicate, or inaccurate orders.

In 2002, Syngenta/S&G Flowers, a major broker, part-nered with the Flower Fields Alliance (FFA), whose combinedmarket share represents about 40 percent of the plant mate-rials sold, to build a portal that would make it easier forgrowers to buy plants from suppliers in the alliance. The por-tal was actually developed by the Advantage Factory, aMicrosoft Certified (Development) Partner. The portal wasbuilt using Microsoft’s Commerce Server 2002, the SQL Server2000 relational database, and the .NET development frame-work. The portal provides growers with a single, real-timeinterface to the suppliers’ inventory databases and the bro-ker’s order entry system. In this way, a grower can search for

product items across multiple suppliers and can place anorder without the need for manual assistance.

The portal not only reduces entry errors and makes thevarious processes more efficient but, more importantly, itreduces by approximately 80 percent the risk that the plantmaterials will perish before they reach the grower.

The portal took six developers 6 months to build. The system has about 10,000 users and had an uptime of99.995 percent during its first 8 months of operation. In thefirst 18 months since its inception, the portal resulted in anestimated savings of approximately $2.5 to $3.0 million dol-lars in operating costs for the suppliers in the alliance.

Source: Flower Fields Alliance (2002).

Questions1. What business problems were addressed by the FFA

portal?

2. What are the business benefits provided by the FFAportal?

IBM’s WebSphere Commerce SuiteIBM’s WebSphere Commerce suite is a comprehensive EC development platform designedto support B2C, B2B, or private exchange business models. The suite provides the follow-ing functions:

◗ Order management that optimizes movement of products through the supply chain◗ Collaborative filters that enable an enterprise to better understand customers’ buying

patterns and preferences◗ Portal capabilities that provide customers with personalized access to multiple commerce

and noncommerce site applications◗ Localization support that enables customized price, tax, and shipping calculations in the

currency format and language dictated by the shopper’s locale◗ E-coupons that can be used by customers during online shopping◗ Additional bundled products, including WebSphere Catalog Manager and WebSphere

Payment Manager

IBM’s suite is built on open industry standards such as Java, Java Servlets, JavaServer Pages( JSP), Enterprise JavaBeans (EJB), and XML. These standards make it easier to integratenew products with existing back-office transaction systems and databases.

Oracle’s EC ProductsOracle 11i E-Business Suite provides a vast array of applications aimed at supporting mar-keting, selling, and servicing of customers, suppliers, and partners online. Among the appli-cations that are specifically aimed at B2C and B2B operations are:


◗ Oracle iStore. Enables merchants to build, deploy, manage, and personalize onlinestorefronts. iStore is one of Oracle’s key applications. It supports product catalog andcontent management, interactive and complex selling, personalized pricing, flexiblecheck and payment options, account and contract management, and post sales order andshipping service. iStore integrates easily with Oracle’s online marketing andeMerchandising functionality.

◗ Oracle Marketing. Provides automation and tools for the entire marketing process,ranging from initial marketing analysis to determine what and who should be targeted,campaign planning, budget and list maintenance, and multichannel execution, to cam-paign monitoring.

◗ Oracle iPayment. Offers risk management capabilities, transaction routing features, anda flexible payment architecture that supports every major online payment option.

◗ Oracle Quoting. Automates the creation and management of quotes for customizedsales and service.

◗ Oracle iSupport. Provides customers with the ability to service and assist themselvesover the Web.

◗ Oracle Configurator. Used to interactively capture, configure, and validate specializedmanufacturing, sales, and service orders from customers, suppliers, and partners.

Like IBM’s EC suite, Oracle’s EC applications are also built on open industry standards suchas Java, Java Servlets, JSP, EJB, and XML. As one would expect, Oracle’s applications rest onthe market-leading Oracle database.

Section 18.5 ◗REVIEW1. List the major features of an electronic catalog.2. Describe the basic business systems in Microsoft’s Commerce Server.3. Describe the functions supported by IBM’s WebSphere Commerce suite.4. Describe the key EC applications provided by Oracle for building B2C and B2B sites.

18.6 CONNECTING TO DATABASES AND OTHERENTERPRISE SYSTEMS

Like the UPS system described at the beginning of the chapter, virtually every EC applica-tion requires database access. For example, when a customer orders a product online, theproduct description, inventory count, and order information are likely to be retrieved fromand stored in one or more databases (see Exhibit 18.6). An EC application can be connectedto a back-end database in a variety of ways. Today, most of these connections are accomplished

Browse data source,make transactions

WebServer

ApplicationServer

DatabaseServers

Gateway anddocument delivery

Netscape API

CGI

Microsoft API

Brokers requestbetween clientand database

Data repository

Web Browser

EXHIBIT 18.6 Example of Multitiered Application Architecture Connected to Database


via a multitiered application architecture like the one depicted in Figure 18.6. In this archi-tecture there are four tiers:

1. A Web browser where data and information are presented to and data are collected fromthe end user.

2. A Web server that delivers Web pages, collects the data sent by the end user, and passesdata to and from the application server.

3. An application server that executes business rules (e.g., user authorization), formulatesdatabase queries based on the data passed by the Web server, sends the queries to theback-end database, manipulates and formats the data resulting from the database query,and sends the formatted response to the Web server.

4. A database server in which the data are stored and managed and database requests areprocessed.

This separation of functions makes it easier to change any tier (or layer) without impacting theother layers.Thus, an application server can be designed to interface or communicate with a widevariety of databases and database management systems (e.g., Oracle, MS SQL Server, DB2).

In some cases, the data being accessed are stored in an existing (legacy) database (e.g.,inventory or order databases). In these cases, it is better to tie the application server directlyto the legacy database rather than duplicating the data in a database established solely for theEC application. This approach ensures that the data are up-to-date, that they are consistentacross the applications accessing the data, that a minimum of storage space is used, and thatthere is only one database to create and maintain rather than two.

Several technologies can be used to integrate an EC application with a back-end data-base. All of the commercial electronic catalogs and EC suites have built-in integration capa-bilities. If a company wants to build its own database interface, a couple of options are avail-able. First, all of the Web scripting languages (e.g., PHP, JSP, and ASP) have commands thatsimplify the process. More specifically, these scripting languages enable a programmer to buildWeb pages that can issue queries to a back-end (relational) database and process the database’sresponse to the query. Second, a number of specialized application servers are available thatsimplify the task of integrating an EC application with one or more back-end databases.Among these specialized servers, BEA Inc. WebLogic Server (bea.com) is the market leader.

In addition to connecting to back-end databases, most EC applications also require integra-tion with a variety of other systems—ERP, CRM, SCM, EDI, data warehouses, and otherimportant internal systems—both inside and outside the company. Again, electronic catalogsand EC suites usually have built-in modules for integration with these systems. The integrationcan also be handled with a class of software called enterprise application integration (EAI).These products focus on the integration of large systems. TIBCO (tibco.com) and webMethods(webmethods.com) are examples of companies that have offerings in the EAI arena.

Section 18.6 ◗REVIEW1. Describe the basic elements of a multitiered application architecture.2. List the ways in which an EC application can be connected to back-end databases and

other transaction processing systems.

18.7 RISE OF WEB SERVICESExcept in the simplest of cases, EC sites require the integration of software applications writ-ten in different programming languages and residing on different computer hardware dis-tributed across the Internet. For example, on many B2C sites order entry is handled by onesoftware application or module, payment authorization by another application or module,and shipping by yet another application or module. In these cases, there is a good chance thatthe order entry, payment authorization, and shipping software modules all reside on separateapplication servers linked through a Web server (recall the architecture used to track UPSshipments). Even when packaged applications are used, a substantial amount of the imple-mentation effort revolves around the task of tying together these disparate applications ormodules in such a way that the underlying connections are transparent to the end users.

multitiered applicationarchitectureEC architecture consistingof four tiers: Webbrowsers, Web servers,application servers, anddatabase servers.

enterprise applicationintegration (EAI) Class of software thatintegrates large systems.


Existing technologies make the integration a difficult task for a number of reasons(Tabor 2002):

◗ Platform-specific objects. Existing EC software applications consist of a series of soft-ware objects. Software objects have properties (attributes) and methods (actions that can beperformed on or by the object). For example, an order-entry application might have an“order” object that has a property specifying the “quantity” being ordered and a methodcalled “set” that allows the quantity to be updated. In a distributed application, such as anEC storefront, the application objects residing on different computers must have a wayto communicate with one another across the network.

There are two main technologies for accomplishing this task: Microsoft ’sDistributed Component Object Model (DCOM) for Microsoft ’s Windows operatingsystems and the Object Management Group’s (OMG) Common Object Request BrokerArchitecture (CORBA) for Unix-based systems. The problem is that there is limitedinteroperability between these two technologies. If one component or application isbased on DCOM and another component or application is based on CORBA, then theycannot communicate easily with one another. Special software called a DCOM/CORBA bridge must be used to accomplish the task.

◗ Dynamic environment. In today’s rapidly changing business environment, business part-ners come and go and so do software vendors and their applications. If a software com-ponent or application is no longer available because the vendor is no longer in business orhas dropped a particular product line, then an existing EC application has to be flexibleenough to substitute a new component or application for the old. If a new business part-ner requires additional functionality, then an existing EC application has to be flexibleenough to incorporate new features, functions, or applications. Again, existing EC appli-cation architectures make it difficult to accommodate these types of changes.

◗ Security barriers. Companies use firewalls to protect their networks against securityrisks. Firewalls are designed to limit the types of communications and requests that canbe made from one computer to another. In most cases, only the simplest sorts of Webrequests using standard communication protocols (such as HTTP) are allowed. Thismakes it very difficult for one component or application residing on one computer tocommunicate with another component or application residing on another computer.

THE ROLE OF XMLWhat is required to address these problems is a technology that can be integrated across differ-ent hardware and operating systems, that can interface with both new and legacy systems, andthat minimizes network security risks. This is where Web services come into play. According tothe World Wide Web Consortium (W3C), a Web service is defined as (Champion et al. 2002):

A software system identified by a URI (uniform resource indicator), whose public inter-faces and bindings are defined and described using XML. Its definition can be discoveredby other software systems. These systems may then interact with the Web service in a man-ner prescribed by its definition, using XML based messages conveyed by Internet protocols.

As the definition indicates, Web services are based on XML (see Appendix B). The opera-tions (or methods) that a Web service can perform are “defined and described” using XML.Likewise, when another program or application wants to invoke the operations or methodsof a Web service, the request is sent as an XML message.

An XML document or message is a text file with a set of tags and content (or values).The tags within an XML document (denoted by “� �”) describe the content. For instance,the following XML document might be used to represent an order placed by a customer fora digital camera:

�ORDER�

�ORDER_ID�123�/ORDER_ID�

�ORDER_ITEM�Digital Camera ABC�ORDER_ITEM�

�ORDER_QUANTITY�1�ORDER_QUANTITY�

�/ORDER�

Web serviceA software system identi-fied by a URI (uniformresource indicator),whose public interfacesand bindings are definedand described using XML.


Because XML messages are text based, they can be sent over the Web using standard Webcommunication protocols (e.g., HTTP). This makes it easy for programs or applicationswritten in different program languages and running on different hardware to interoperate. Italso means that the messages sent from one program or application to another can easily passthrough firewalls.

KEY TECHNOLOGIES IN WEB SERVICESIn addition to XML, three other technologies are also instrumental in providing Web ser-vices. These include:

◗ Simple Object Access Protocol (SOAP). SOAP is the most frequently used protocol ormessage framework for exchanging XML data across the Internet. A SOAP message,which is written as XML, consists of three parts: an envelope, an optional header, and abody. The envelope encapsulates the message, the header provides optional informationabout the message, and the body is the XML data being exchanged. For example, thefollowing SOAP message might be used to request the number of items in inventoryavailable for purchase:

�SOAP-ENV: Envelope�

�SOAP-ENV:Body�

�s:getInventoryQuantity�

�item�Digital Camera ABC�/item�

�/ s:getInventoryQuantity ��/SOAP-ENV:Body�

�/ SOAP-ENV: Envelope�

When a program wants to invoke a process or method performed by a specific Webservice (e.g., getInventoryQuantity in the example), it simply sends a SOAP message tothe service over the Web. In turn, the Web service sends a SOAP message in response.

◗ Web Services Description Language (WSDL). WSDL is an XML document thatdefines the programmatic interface for a Web services. The document specifies the oper-ations or methods that the Web service can perform, along with the parameters that theservice needs to carry out the operations and the values that the service will return inresponse to a particular request.

◗ Universal Description, Discovery, and Integration (UDDI). UDDI is a general busi-ness registry that originally was used as a way for the participants in a B2B exchange toshare information about their business and business processes (Deitel et al. 2003). Morerecently, UDDI has been used as a XML framework for businesses to publish and findWeb services online. The Web service entries in a UDDI typically point to the Webaddress (URL) of the WSDL file associated with the Web service.

Exhibit 18.7 describes the interaction of these of the key components in a Web service.

A WEB SERVICES EXAMPLEAs a simple example of how Web services operate, consider the following example of an air-line Web site that provides consumers with the opportunity to purchase tickets online. Theairline recognizes that customers also might want to rent a car and reserve a hotel as part oftheir travel plans. The consumer would like the convenience of logging on to only one systemrather than three, saving time and effort. Also, the same consumer would like to input per-sonal information only one time instead of three. The airline does not have car rental or hotelreservation systems in place. Instead, the airline relies on car rental and hotel partners to pro-vide Web service access to their systems.

The specific services that the partners provide are defined by a series of WSDL docu-ments. When a customer makes a reservation for a car or hotel on the airline’s Web site,SOAP messages are sent back and forth in the background between the airline’s and thepartners’ servers. In setting up their systems, there is no need for the partners to worry aboutthe hardware or operating systems each is running. Web services overcome the barriers

Simple Object AccessProtocol (SOAP) Protocol or messageframework for exchangingXML data across theInternet.

Web ServicesDescription Language(WSDL) An XML document thatdefines the programmaticinterface—operations,methods, and parameters—for Web services.

Universal Description,Discovery, andIntegration (UDDI)An XML framework forbusinesses to publish andfind Web services online.


Source: Web Services: A Technical Introduction by Deitel, H. et al. © 2003. Reprinted by permission of PearsonEducation, Inc., Upper Saddle River, NJ.

WebService

Client

WDSLDocument

UDDIRegistry

1

2

3

4

5

6

1. Client queries registry to locate service.

2. Registry refers client to WSDL document.

3. Client accesses WSDL document.

4. WSDL provides data to interact with Web Service.

5. Client sends SOAP- message request.

6. Web Service sends SOAP-message response.

EXHIBIT 18.7 Key Components of Web Services

imposed by these differences. An additional advantage for the hotel and car reservation sys-tems is that their Web services can be published in a UDDI so that other businesses can takeadvantage of their services.

WEB SERVICES PLATFORMSA number of the major hardware and software vendors have created software developmentenvironments that help programmers create and deploy Web services. The developmentenvironments provided by two of the leaders in this arena—Microsoft and IBM—are brieflydescribed here. For a more extensive list, see Newcomer (2003).

◗ Microsoft .NET. Microsoft has been a leader in the Web service marketplace. Microsoft’s.NET framework provides the foundation for Web services that can be created anddeployed on Windows 2000 and XP. The development environment for the .NETframework is Visual Studio .NET. Visual Studio .NET enables software developers todesign, develop, and deploy Web services with the major Windows programminglanguages—C��, C# (C Sharp), and Visual Basic .NET.

◗ IBM WebSphere. The foundation of IBM’s Web-based applications, including their ECofferings, is the WebSphere Application Server (see Section 18.5). Over the past coupleof years, IBM has integrated various Web services technologies (e.g., SOAP andWSDL) into its application server. To assist software and application developers withthe design, development, and deployment of Web services on the WebSphere platform,IBM has enhanced its existing development environment—the WebSphere StudioApplication Developer—to support Web services and has created a new developmentenvironment called the Emerging Technologies Toolkit.

WEB SERVICES IN THE MAINSTREAMA survey of corporate IT buyers conducted in 2002 by International Data Corporation (IDC)found that close to 80 percent of the respondents expected to be deploying Web services bythe end of 2003. Among these buyers, the total spending for Web services will reach an esti-mated $3 billion during that same time period (McMillan 2003). Most of these services will


be deployed on existing hardware and will provide interfaces to existing applications. Therate-quote system of Yellow Transportation, a subsidiary of Yellow Corporation (yellowcorp.com), a $2.5-billion-dollar trucking company, exemplifies the kinds of services thatthese buyers expect to deploy (Salkever 2003). At the end of 2001, Yellow Transportation cre-ated a Web-services function that would let its customers access Yellow’s internal systems andpull out shipping rates based on schedules the two parties had already negotiated. The systemis based on IBM’s WebSphere technologies, accessing an Oracle database on the back end.

Some of the more popular sites on the Web are also turning to Web services as a way ofproviding access to their internal systems. In this way, the content and operations supportedby these systems can be transparently integrated with applications developed by other com-panies or individuals. Among these sites, Google’s and Amazon.com’s services have receivedthe most publicity.

Google’s Web services API (application programming interface) enables programmersand application developers to issue (SOAP-based) search requests to Google’s index of morethan 3 billion Web pages and to receive results as XML data. As Google notes (Google2003), its Web services provide a range of possibilities, including issuing regularly scheduledsearch requests to monitor the Web for new information on a subject; performing marketresearch by analyzing differences in the amount of information available on different subjectsover time; and searching via non-HTML interfaces, such as the command line, pagers, orvisualization applications.

Amazon.com also offers an extensive set of Web services that can be used by its“Associates” and other product sellers and vendors. The Amazon.com Associates programallows Web sites to link to Amazon.com’s site and to earn money for sales generated throughthe link. For Associates, Web services provide a way to make their Web sites fresher and moredynamic. For example, Associates can use Amazon.com’s Web services to dynamically re-trieve prices, generate lists of products, display search results, produce recommendation lists, and even add items to the Amazon.com shopping cart directly on their Web sites(Amazon.com 2003). Other companies use Amazon.com’s development platform to selltheir products on Amazon.com’s Web site. In this case, Amazon.com’s new Web servicesenable these companies to do things such as manage their inventory, generate orders, andproduce competitive pricing information.

ADVANTAGES AND HURDLESOver the years, a number of programming initiatives have attempted to solve the problem ofinteroperability (i.e., getting software and applications from different vendors running ondifferent hardware and operating systems to communicate with one another in a transparentfashion). The Web services initiative is just the latest. Why is this initiative different from itspredecessors? Web services offer a number of distinct advantages, including the following(Deitel et al. 2003; Shirky 2003):

◗ Web services rely on universal, open, text-based standards that greatly simplify the prob-lems posed by interoperability and lower the IT costs of collaborating with external part-ners, vendors, or clients.

◗ Web services enable software running on different platforms to communicate, reducingthe cost and headaches of multiple platforms running on everything from mainframes toservers to desktops to PDAs.

◗ Web services promote modular programming, which enables reuse by multiple organizations.◗ Web services are easy and inexpensive to implement because they operate on the existing

Internet infrastructure. They also offer a way to maintain and integrate legacy IT sys-tems at a lower cost than typical EAI efforts.

◗ Web services can be implemented incrementally, rather than all at once.

In spite of these advantages, Web services are not a panacea. Among the current barriersinhibiting widespread adoption of the technology are the following:

◗ The standards underlying Web services are still being defined, thus interoperability isnot automatic. Even in those instances where the standards are relatively stable, it stillrequires programming skill and effort to implement and deploy Web services.


◗ One area where the Web services standards are not well-defined is security. In terms ofinteroperability, the good news is that Web services enable distributed applications to com-municate with ease. The bad news is that Web services also enable applications to bypasssecurity barriers (such as firewalls) with ease. Standards such as XML, SOAP, WSDL, andUDDI say nothing about privacy, authentication, integrity, or nonrepudiation.

In an effort to bridge the gap between these standards and existing security stan-dards (such as public key encryption), several vendors and organizations have proposedand are currently debating a number of Web service security standards. One of these isWS-Security, which is being proposed by Microsoft, IBM, and VeriSign.

◗ Although Web services rely on XML as the mechanism for encoding data, higher-levelstandards are still required, especially in B2B applications. For example, if two bankswant to communicate, they still need standards to define the specific content that isbeing communicated. This is where standards such as OFX (Open FinancialExchange), which defines the content of transactions between financial institutions,come into play. The lack of coordination among all interested parties for high-levelstandards is why Web services will first be adopted within organizations and later acrossorganizations.

Section 18.7 ◗REVIEW1. List some reasons why it is difficult for applications running in different environments on

different computers to communicate with one another.2. Define Web services.3. What role does XML play in Web services?4. Describe the key technologies underlying Web services.5. What types of Web services do Amazon.com and Google offer application developers?6. What are some of the advantages of Web services?7. What are some of the factors limiting the adoption of Web services?

18.8 VENDOR AND SOFTWARE SELECTIONFew organizations, especially SMEs, have the time, financial resources, or technical expertiserequired to develop today’s complex e-business systems. This means that most EC applica-tions are built with hardware, software, hosting services, and development expertise providedby outside vendors. Thus, a major aspect of developing an EC application revolves aroundthe selection and management of these vendors and their software offerings. Martin et al.(2000) identified six steps in selecting a software vendor and a package.

STEP 1: IDENTIFY POTENTIAL VENDORSPotential application vendors can be identified from software catalogs, lists provided by hard-ware vendors, technical and trade journals, consultants experienced in the application area,peers in other companies, and Web searches.

These sources often yield so many vendors and packages that one must use some prelimi-nary evaluation criteria to eliminate all but a few of the most promising ones from furtherconsideration. For example, one can eliminate vendors that are too small or that have notrack record or a questionable reputation. Also, packages may be eliminated if they do nothave the required features or will not work with available hardware, operating system, com-munications network, or database management software.

STEP 2: DETERMINE THE EVALUATION CRITERIAThe most difficult and crucial task in evaluating a vendor and a packaged system is to deter-mine a weighted set of detailed criteria for choosing the best vendor and package. Some areasin which detailed criteria should be developed are characteristics of the vendor, functionalrequirements of the system, technical requirements the software must satisfy, amount andquality of documentation provided, and vendor support of the package.


service level agreement(SLA)A formal agreementregarding the division ofwork between a companyand its vendors.

request for proposal(RFP)Notice sent to potentialvendors inviting them tosubmit a proposaldescribing their softwarepackage and how it wouldmeet the company’sneeds.

These criteria should be documented in a request for proposal (RFP), which is sent topotential vendors inviting them to submit a proposal describing their software package andhow it would meet the company’s needs. The RFP provides the vendors with informationabout the objectives and requirements of the system, the environment in which the systemwill be used, the general criteria that will be used to evaluate the proposals, and the condi-tions for submitting proposals. It may also request a list of current users of the package whomay be contacted, describe in detail the form of response that is desired, and require that thepackage be demonstrated at the company’s facilities using specified inputs and data files.

STEP 3: EVALUATE VENDORS AND PACKAGESThe collective responses to an RFP generate massive volumes of information that must beevaluated to determine the gaps between the company’s needs (as specified by the require-ments) and the capabilities of the vendors and their application packages. Often, the vendorsand packages are given an overall score by assigning an importance weight to each of the cri-teria, ranking the vendors on each of the weighted criteria (say 1 to 10), and then multiplyingthe ranks by the associated weights. A short list of potential suppliers can be chosen fromthose vendors and packages with the highest overall scores.

STEP 4: CHOOSE THE VENDOR AND PACKAGEOnce a short list has been prepared, negotiations can begin with vendors to determine howtheir packages might be modified to remove any discrepancies with the company’s desired ECapplication.Thus, one of the most important factors in the decision is the additional develop-ment effort that may be required to tailor the system to the company’s needs or to integrate itinto the company’s environment. Additionally, the opinions of the users who will work withthe system and the IT personnel who will have to support the system have to be considered.

STEP 5: NEGOTIATE A CONTRACTThe contract with the software vendor is very important. Not only does it specify the price ofthe software, but it also determines the type and amount of support to be provided by thevendor. The contract will be the only recourse if the system or the vendor does not performas specified. Furthermore, if the vendor is modifying the software to tailor it to the company’sneeds, the contract must include detailed specifications (essentially the requirements) of themodifications. Also, the contract should describe in detail the acceptance tests the softwarepackage must pass.

Contracts are legal documents, and they can be quite tricky. Experienced contract nego-tiators and legal assistance may be needed. Many organizations have software purchasingspecialists who assist in negotiations and write or approve the contract. They should beinvolved in the selection process from the start. If an RFP is used, these purchasing specialistsmay be very helpful in determining its form and in providing boilerplate sections of the RFP.

STEP 6: ESTABLISH A SERVICE LEVEL AGREEMENTService level agreements (SLAs) are formal agreements regarding the division of workbetween a company and its vendors. Such divisions are based on a set of agreed-upon mile-stones, quality checks, “what-if ” situations, how checks will be made, and what is to be donein case of disputes. If the vendor is to meet its objectives of installing EC applications, it mustdevelop and deliver support services to meet these objectives. An effective approach to man-aging SLAs must achieve both facilitation and coordination. SLAs do this by (1) definingthe partners’ responsibilities, (2) providing a framework for designing support services, and(3) allowing the company to retain as much control as possible over their own systems.

Section 18.8 ◗REVIEW1. List the major steps in selecting an EC application vendor and package.2. Describe a request for proposal (RFP).3. Describe a service level agreement (SLA).


access logA record kept by a Webserver that shows when auser accesses the server;kept in a common log fileformat, each line of thistext file details an indi-vidual access.

18.9 USAGE ANALYSIS AND SITE MANAGEMENTTo improve EC Web sites, it is advisable to monitor what customers are doing (usage analy-sis). Both B2C and B2B Web sites require a thorough understanding of the usage patterns oftheir sites—the who, what, where, when, and how.

LOG FILESEvery time a user accesses a Web server, the server logs the transaction in a special access logfile. Access logs are text files. Each line of the file details an individual access. Regardless ofthe type of Web server, access logs use a common log file format. This makes them easy toanalyze and compare. Because log files can become quite voluminous, it is hard to analyze theaccesses by hand. For this reason, most Web server EC software vendors provide “free” soft-ware for analyzing access log files. Commercial products that provide more sophisticated loganalyses are also available (e.g., NetIQ’s WebTrends).

Access logs provide a variety of statistics that can be used for analyzing and improvingmarketing and advertising strategies. Among the more valuable statistics are:

◗ Pageviews by time slot. Pageviews allow frequent review of the number of site accesses.Grouping pageviews by “time bucket” (time slot) also enables the company to ascertain thetime slots, such as morning, afternoon, or evening, during which customers visit the site.

◗ Pageviews by customers’ log-in status. This information helps determine whether requir-ing customers to log in is worthwhile or not. For instance, if the number of pageviews ofcustomers who log in is substantially greater than those who do not, the company mayfind the login requirement effective and worthwhile.

◗ Pageviews by referrers. Some customers are drawn or referred to the site by clicking onbanners or links on other Web sites. Knowing the source of such referrers is useful forassessing the effectiveness of the location of banners, and customers’ interest can also bedetermined from the nature of the Web site with those banners.

◗ Pageviews by visitor’s hardware platform, operating system, browser, and/or browser ver-sion. These types of pageviews allow the company to obtain information on the hardwareplatform (e.g., Macs or PCs) and browser type (e.g., Internet Explorer or Netscape) usedby the viewer.

◗ Pageviews by visitor’s host. This type of pageview provides information on the cus-tomers’ host site. Knowing where customers are coming from can enable the company totarget potential customers via popular hosts such as AOL.

Some of the marketing and business questions to which these statistics can be applied arelisted in Exhibit 18.8 (next page).

E-COMMERCE MANAGEMENT TOOLSManaging the performance of a Web site is a time-consuming and tedious administrativetask. Several vendors offer suites of products or individual packages that can assist with themanagement process. A detailed list of vendors is provided by Hower (2003).

One of the more prominent vendors of IT and Web management tools is BMC Corp.(bmc.com). BMC offers the following products:

◗ Patrol for e-business management. This package includes Patrol for Internet Services formeasuring Web response time, Patrol for Firewalls for firewall administration, andPatrol for Microsoft or Netscape application servers.

◗ MainView for e-business management. This package includes MainView for WebSpherefor managing mainframe-based EC applications, MainView for Network Managementfor monitoring mainframe network connections, and MainView for Systems Manage-ment for systems administration.

Section 18.9 ◗REVIEW1. List some of the statistics provided by an access log.2. Describe some of the uses of an access log.


EXHIBIT 18.8 Areas of Usage Analysis and Sample Business Questions for Online Stores

Area of Analysis Business QuestionsOverall Store Performance • What is the sales value for a specific period of time, say, 1 week?

• What is the number of customer visits for the day?• What is the store conversion rate of the week?• What is the sales value index for the week?

Advertising • Which banner ads are pulling in the most traffic?• How many sales are driven by each banner ad?• What products do shoppers select from a particular banner?• What is the conversion rate for each banner ad?

External Referrals (from others to your site) • Which portal sites are pulling in the most traffic?• Which are generating the most sales?• How many sales are generated by each referral site/search engine?• What products do shoppers from a particular portal site purchase?

Shopper Segmentation • How many visitors are from a specific domain?• What is the distribution of first-time vs. repeat shoppers?• What characterizes shoppers of a particular set of products?• What characterizes shoppers who abandon shopping baskets?

Product Grouping • How much do cross-sells/up-sells contribute to gross revenue?• What are the best performing cross-sell pairs? Worst?• What is the overall conversion rate for cross-sells/up-sells?

Promotions and Recommendations • How much do promotions contribute to gross revenue?• Which promotions are generating the most sales?• What is the overall conversion rate for promotions?• What is the overall conversion rate for recommendations?• At what levels in site hierarchy are the best promotions located?

Shopping Metaphor • What generates the most sales value: searching or browsing?• How much does searching contribute to gross revenue?• What is the conversion rate for searching?

Design Features • What are the features of links customers most frequently click?• What are the features of links customers most frequently buy from?• What parts of pages do customers most frequently buy from?• Do products sell better in the upper-left corner?

Product Assortment • What are the top sellers for the week?• What is the conversion rate for a particular department?• How is a product purchased: purchase frequency and quantity?• What characterizes the products that end up being abandoned?• How much of the sales of each product are driven by searching?

MANAGERIAL ISSUESSome managerial issues related to this chapter are as follows.

1. What is our business perspective? When one thinksof the Web, one immediately thinks of the technology.But some of the most successful sites on the Web relyon basic technologies—freeware Web servers, simple

Web page design, and limited bells and whistles. Whatmakes these sites successful is not the technology, buttheir owners’ understanding of how to meet the needsof their online customers.

2. Do we have a systematic development plan? The cost ofdeveloping and maintaining even a small EC site can besubstantial. To ensure success, development and mainte-nance issues need to be approached systematically, justlike any other IT development project. Within this plan,the specification of the EC architecture is crucial. If thearchitecture is wrong, the entire project is at risk.

3. Insource or outsource? Many large-scale enterprises arecapable of running their own EC Web sites. However,EC Web sites may involve complex integration, security,and performance issues. For those companies venturinginto the EC arena, a key issue is whether the site shouldbe built in-house (insourced), thus providing more directcontrol, or outsourced to a more experienced provider.Outsourcing services, which allow companies to startsmall and evolve to full-featured functions, are availablethrough many ASPs, ISPs, telecommunication compa-nies, Internet malls, and software vendors that offer mer-chant server and EC applications.

4. How should Web services be deployed? Many orga-nizations face problems of integrating systems, appli-cations, and data. The IT costs associated with getting

applications and databases running on different hard-ware and operating systems to communicate with oneanother are substantial. Web services offers the meansto solve this interoperability problem in an open,straightforward, and efficient fashion without the needfor new hardware or application reprogramming. Thekey to deploying Web services is to create a steppedplan for their introduction, concentrating on those sys-tems where the integration needs are greatest.

5. How should we choose a vendor/software? Becausemost EC applications are built from either packagedapplications and components or outsourced to a thirdparty, the success of the EC applications rests onchoosing the best vendor and package. Like any otherpart of the development process, a detailed list ofselection criteria is needed for the selection process.

6. Have we analyzed the data? All EC sites provide themeans to gather data about system usage. These datashould be analyzed frequently to modify and redesign anexisting site to better meet the needs of current andprospective customers and users.This analysis can also beused to personalize the experience of these same users.


SUMMARYIn this chapter, you learned about the following EC issues as they relate to the learning objectives.

1. The major steps in developing an EC application.Because of their cost and complexity, EC sites need tobe developed in a systematic fashion. The develop-ment of an EC site should proceed in steps. First, theEC architecture is defined. Next, a decision is madewhether to build, buy, or outsource the development.Third, the system is installed, tested, and deployed.Finally, the system goes into maintenance mode, withcontinual changes being made to ensure the system’scontinuing success.

2. The major EC applications and their major func-tionalities. Every type of EC application has a long listof functional requirements. Fortunately, most of theserequirements can be met by packaged applications.Online storefronts can be developed with the aid ofelectronic catalog or merchant server software. Simi-larly, B2C, B2B, and exchange applications of all sortscan be constructed from more advanced EC suites

3. The major EC application development optionsalong with their benefits and limitations. EC sitesand applications are rarely built from scratch. Instead,enterprises either buy a packaged EC suite and cus-tomize it to suit their needs or they outsource thedevelopment to a third party. The selection of one

option over another should be based on a systematiccomparison of a detailed list of requirements thatexamines flexibility, information needs, user friendli-ness, hardware and software resources, and so on.

4. EC application outsourcing options. If an enterpriseelects to outsource the development and maintenanceof its EC site and applications, a number of alterna-tives are available. EC applications can be hosted byASPs, ISPs, or by a telecommunication company. Anenterprise can rely on an existing e-marketplace orexchange. An online storefront can be hosted by anInternet mall. Or, an enterprise could enter into a jointdevelopment agreement with a venture partner or aconsortium. Again, the choice depends on the func-tional requirements of the EC site or application.

5. The major components of an electronic catalog andEC application suite. An online storefront has thesame requirements as a brick-and-mortar storefront.Simple sites can be built from packaged electroniccatalog or merchant server software. More complexonline storefronts and other types of EC sites (e.g.,B2B, exchanges, etc.) can be built from comprehen-sive EC suites such as Microsoft’s Commerce Serveror IBM’s WebSphere Commerce Suite.


6. Methods for connecting an EC application to back-end systems and databases. Virtually every EC appli-cation requires access to back-end relational databasesand other transaction systems (e.g., ERP, SCM, CRM,etc.). Integration can be accomplished in a variety ofways, including using integration modules suppliedwith electronic catalog or EC suite packages, customiz-ing the integration with a Web scripting language (e.g.PHP, ASP, or JSP), employing specialized applicationservers, or employing a full-blown EAI tool.

7. The rise of Web services. Web services is the newesttechnology aimed at solving the interoperability prob-lem (getting applications running in different com-puter environments to communicate with one another).Web services rely on open standards, including XML, SOAP, WSDL, and UDDI, to overcome theproblem. WSDL defines the operations that a Webservice can perform. To invoke a Web service, anapplication sends a SOAP/XML message to the ser-vice, which in turn responds with a SOAP/XML mes-sage. Companies can publish their Web services in an UDDI registry, so that any application can takeadvantage of the operations the services perform.Although Web services require minimal changes andreprogramming of existing systems and applications,they still require advanced programming skills toimplement and deploy them. Toward this end, hard-ware and software vendors such as Microsoft and IBM

have provided software development environments toease the task.

8. Criteria used in selecting an outsourcing vendor andpackage. A systematic process should be used in select-ing a third-party tool or outsourcing service. Amongthe key steps in making the selection are: (1) identify-ing potential vendors and packages, (2) detailing theevaluation criteria, (3) using the criteria to produce ashort list of possible vendors, (4) choosing a candidatefrom the short list, (5) negotiating the deal and modifi-cations needed to meet overall application needs, and(6) establishing a SLA to define who is responsible forspecific aspects of the development and maintenanceand the quality metrics for the services to be rendered.

9. The value and uses of EC application log files. MostEC applications produce log files of detailed systemusage. The data in these files can be analyzed with aneye toward modifying the application’s content andflow. In this way, the application can be better alignedwith the enterprise’s marketing and advertising strate-gies. In the same vein, the application can be adjustedto meet user’s needs.

10. The importance and difficulties of EC applicationmaintenance. Maintenance of an ongoing applicationrequires as much, if not more, time and effort than theoriginal development and installation. Several vendorsoffer tools to assist with the process.

KEY TERMSAcceptance testing 4Access logs 23Application service

provider (ASP) 3EC architecture 3Electronic catalog 12Enterprise application

integration (EAI) 16Insourcing 7Integration testing 4

Latency 11Merchant server software 12Multitiered application

architecture 16Request for proposal (RFP) 22Scalability 11Service level agreement (SLA) 22Simple Object Access Protocol

(SOAP) 18Throughput 11

Unit testing 4Universal Description, Discovery,

and Integration (UDDI) 18Usability testing 4Web services 17Web Services Description

Language (WSDL) 18

DISCUSSION QUESTIONS1. Discuss the advantages of leasing an application over

purchasing one.2. A large company with a number of products wants to start

selling on the Web. Should it use a merchant server or anEC application suite? Assuming it elects to use an ECapplication suite, how would you determine whether thecompany should outsource the site or run it themselves?

3. A large chemical manufacturing company is interestedin starting an online exchange. What are some of theways it could achieve this goal?

4. A firm decides to make its EC Web site more dynamicby tying its application to a back-end database. Whatare some of the ways in which the firm could accom-plish this task?


INTERNET EXERCISES1. Access the Choice Mall Web site (choicemall.com).

Visit some of the online stores in the mall. What arethe functionalities of the mall? What are some of thebenefits of the online mall to the participating ven-dors? To shoppers? Do you think a shopper is betteroff using an online mall or using a search engine suchas AltaVista to locate a store providing a product ofinterest? In what ways could Choice Mall improve thechances that buyers will make return visits?

2. Visit a large online storefront of your choice. Whatfunctions does it provide to shoppers? In what waysdoes it make shopping easy? In what ways does itmake shopping more enjoyable? What support ser-vices does it provide?

3. Enter hotwired.lycos.com/webmonkey and find thetracking tutorials. What is the difference between a“hit” and a “pageview”? Write a summary of the threetutorials—gathering data, using databases, and usingpageviews.

4. Go to the WebTrends site (webtrends.com). Whattypes of information does its Analysis Suite provide?How can this information be used to improve a Website? What types of tracking information are not pro-vided by this suite? (See Discussion Question 3.)

5. Visit IBM’s site (ibm.com). Findits WebSphere product. Read someof the recent customer success sto-ries. What makes this software sopopular?

6. Go to the World Wide Web Consortium’s discussionof Web services architecture (w3.org/TR/ws-arch).Based on this discussion, what role does a UDDI playin Web services? If a company wants to publicize itsWeb services, what means are available?

7. Visit Sun Microsystems (sunmicrosystems.com).What type of development platform does Sun providefor creating and deploying Web services? What are thecapabilities and benefits of the platform?

8. Visit the Microsoft Web site (microsoft.com). Findits BizTalk product. What kind of software is this?What role could it play in an EC application?

9. Go to covisint.com. What is Covisint? Who are thepartners involved in Covisint? What types of B2Bfunctionality does it provide? Based on the pressreleases at Covisint’s Web site, has Covisint been suc-cessful? Why or why not?

5. An online vendor wants to hook its shopping cart appli-cation to a credit card authorization Web site. How couldthis be done with Web services? How would the autho-rization site advertise its services for other sites to use?

6. An enterprise wants to modify its EC site so that itconforms more closely with its overall business strate-gies. What sorts of online data are available for thispurpose? What types of business strategy questionscan be addressed by these data?

7. In what ways do you think a Web site’s log files violateconsumers’ privacy?

8. You have decided to use a third-party application todevelop and deploy a sell-side B2B site. Create achecklist for determining which third-party EC ap-plication products will best meet your applicationrequirements.

TEAM ASSIGNMENTS AND ROLE PLAYING1. Select a series of Web sites that cater to the same type

of buyer (e.g., several Web sites that offer CDs orcomputer hardware). Divide the sites among severalteams and ask each team to prepare an analysis of thedifferent sorts of functions provided by the sites, alongwith a comparison of the strong and weak points ofeach site from the buyer’s perspective.

2. Several vendors offer products for creating online stores.The Web sites of these vendors usually list those onlinestores using their software (customer success stories).Assign each team a number of vendors. Each team should

prepare reports comparing the similarities and differencesamong the vendors’ sites and evaluating the customers’success stories. Do the customers take advantage of thefunctionality provided by the various products?

3. As a team, explore the desired capabilities of variousEC applications (B2B, B2C, auctions, portals G2C,etc.). Look at the capabilities of these applications andat their functionalities, and then compare the two. (SeeSection 18.3 for a list of functionalities.) If the func-tionalities of the applications are not sufficient, explainwhat additional functionalities are needed.

4. Amazon.com (amazon.com/webservices) providesWeb services for its Associates, as well as other productsellers and vendors. Assign one team to explore the ser-vices for Associates and another to the services for sell-

ers and vendors. Describe the services provided by each.What are the benefits of these services? What compa-nies are currently using these services? Go to their sitesand describe how they are using these services.


Whirlpool (whirlpool.com) is a world leader in the manu-facture and marketing of major home appliances. Compet-ing in a annual, global market of $75 billion, the com-pany considers its distributors and partners to be criticalplayers in its continual quest to maintain industry leader-ship. As a consequence, Whirlpool is constantly trying toimprove the efficiency of its operations while still provid-ing top-notch service to members of its sales chain.

Until recently, one area of concern was its relation-ships with its middle-tier trade partners. These partnersrepresent 25 percent of Whirlpool’s trading partners butonly 10 percent of its revenues. Because of their size,Whirlpool was unable to dedicate system-to-system con-nections with these partners. Instead, partners had tosubmit their orders by phone or fax.

Wanting to infuse greater efficiency into this process,Whirlpool turned to EC, developing a B2B trading-partnerportal that enables its middle-tier sellers to order online.To make the portal work, the company needed to integrateit with its SAP R/3 inventory system and Tivoli systemsmanagement tools. Whirlpool conducted a vendor andproduct analysis and decided to use IBM integration tools.

Following the guidelines of the IBM ApplicationFramework for e-business, Whirlpool built its portal withthe IBM WebSphere Application Server, Advanced Edition,IBM Net.Commerce (now part of the IBM WebSphereCommerce Suite family), IBM HTTP Server, IBM VisualAgefor Java, and IBM Commerce Integrator with IBM MQSeries.

Through the portal, called Whirlpool Web World,several thousand middle-tier trade partners select thegoods they want to order by checking off the appropriateSKUs and indicating quantities. Aside from applianceordering, they can also log on to the password-protectedsite to track the status of their orders. The portal has cut the cost per order to under $5—a savings of at least80 percent. Whirlpool has also gained an unexpectedbenefit—an extendable EC platform that it has leveragedfor other applications.

Whirlpool’s B2B portal is in its second generation (asof summer 2001). The first-generation portal was developedwith low-level products, giving the company a chance totest the Web waters. However, the portal took off fasterthan the company expected. In its first 3 months, theamount of revenue that flowed through the portal waswhat Whirlpool had planned for the first 12 months. Theinvestment paid for itself in 8 months.

REAL-WORLD CASE

WHIRLPOOL’S TRADING PORTALWith the success of its first-generation trading-partner

portal, Whirlpool was ready to migrate the solution to abigger, more scalable, and easier-to-manage platform. Atthe same time, the company was also implementing SAPR/3 for order entry. Thus, it was important for its second-generation portal to integrate with SAP R/3.

For its second-generation portal, Whirlpool wanted topartner with a vendor that would be around a while. It againchecked out IBM, plus a few others. IBM was selectedbecause IBM has worked with Whirlpool on joint productdevelopment as well as with Whirlpool’s ERP system designand architecture. In addition, when Whirlpool talked tofinancial analysts, it found that an overwhelming number ofFortune 100 companies use IBM e-business solutions. Finally, Whirlpool saw that IBM is on the cutting edge ofindustry Web standards such as Java and XML. After commit-ting to IBM, Whirlpool also decided to develop its e-businessplatform following the Application Framework for e-business,taking advantage of its rapid development cycles and associ-ated cost reductions. In developing the first-generation por-tal, Whirlpool had to build certain functionalities on its own,because the desired functionalities were not included in thetools supplied by IBM. A year and a half later, the suite ofIBM tools included those functionalities, which enabledWhirlpool to get its applications to market much faster.

Source: ibm.com (2002).

Questions1. From Whirlpool’s point of view, what kind of a

B2B application is this: e-procurement, sell-side,collaborative commerce, or other? Justify youranswer.

2. Why did Whirlpool decide to utilize third-partyapplications with its second-generation portal?Explain in detail.

3. Imagine you were in charge of selecting the third-party applications to be used with the second-gen-eration portal. What sorts of criteria would you usein making your choice? How did IBM’s WebSpheremeet these criteria?

4. How can Whirlpool leverage this application withother B2B processes?


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Champion, M., et al. “Web Services Architecture: W3CWorking Draft.” w3.org/TR/2002/WD-ws-arch-20021114, November 2002 (accessed June 2003).

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Turban Ch.18 - Purdue University 406 e-retailing/Turban... · shipment in the UPS database and relay the information to the customer. Servicing these calls over the phone was an expensive