E Commerce Essay, Research Paper

Remember the time when there was no Internet? Where advances in telecommunications and computing largely occurred side-by-side in the past, today, they converge in the Internet. Timesharing, the concept of linking a large numbers of users to a single computer via remote terminals, was developed at MIT in the late 50s and early 60s. In 1973, Bob Kahn and Vint Cerf developed the basic ideas of the Internet. Now days almost everybody is connected to Internet.

WORLD INTERNET CONNECTIVITY (As of 6/15/95)

(http://www.pbs.org/nerds/timeline/network.html)

There is another thing that Internet brought us at affordable price: it is electronic commerce (e-commerce). There is no specific definition for what is e-commerce everybody interprets it differently. Some view it as selling products and services on the net others more educated people see it as any networked enabled business practice such as Electronic Data Interchange (EDI), the World Wide Web, or email. Before the Internet small businesses were restricted on electronic communications because of high cost on installation and maintenance of networks. Business communications were performed by fax or telephone. Although, the Internet gave the ability for small businesses to become automated, which is advantageous for them, it also brought some costs and disadvantages, and it is facing bigger obstacles that will decide the future of electronic-commerce like government regulations.

There are four functions of e-commerce: communication, process improvement, service management, and transaction capabilities. The perfect example form communication function is email. It delivers information or documents to facilitate business transactions. The process improvement function covers the automation and improvement of business processes. A good example of this would be networking two computers together so they could share and transfer data rather than have a person take data from one machine and input into another. Service management is the third function of EC. This is the application of technology to improve the quality of service. A good example of this function is any courier company web site. It permits customers to track shipments and schedule pick-ups 24 hours a day worldwide without having to talk to a customer service representative. Customer service is greatly enhanced due to the capabilities of the site. The final function EC is transaction capabilities. This provides the ability to buy and sell on the Internet or some other on-line service. The retail Web sites of Amazon.com and Drugstore.com offer good examples. The primary purpose of these sites is to sell the company’s supplies, although they do combine other functions such as communication and service management. These examples also highlight the fact that the four functions are not mutually exclusive. (Kalakota 6)

There are a lot of advantages with EC it is hard to mansion them all but some of them include low cost, low barriers to enter, error reduction, and increased efficiencies. One good example of low cost is advertising. It can run a company well over 50,000 dollars to put a full-page advertisement in a newspaper with a circulation of 1 million. In contrast, assuming that there are at least 1 million Web browsers and the annual costs (hosting and maintenance) for a small corporate Web site are $900, then the daily cost for 1 million viewers ($900/365) on any given day is approximately $2.50. (http://www.ncsa.uiuc.edu/SDG/IT94/Proceedings/ComEc/kling/compare.html)

Another benefit of Web sites are the low barriers to entry they offer companies in certain industries. For example, Amazon.com is a completely virtual based company. Without the Web, it would probably never have started selling books given the dominate position of its competitors like Barnes and Nobel and the tremendous amount of money they would have to invest to open and operate a store like that. Other benefits of Web sites include error reduction because orders don’t have to be re-keyed into order entry systems. When putted together the business process may be considered automated and its efficiency is increased.

Although there are a lot of advantages of having an Internet based business there are also some disadvantages and costs that follow. The first cost a company faces when it decides it wants a Web presence is hosting. Hosting determines where the files and images associated with the Web site going to reside. Large companies or those that want total control tend to perform this function in-house while small businesses or those that do not consider this function a core competency will out-source the service with an Internet Service Provider (ISP) or Web Service Provider (WSP). It is hard to break down hosting costs for companies that perform the service in-house because a lot of the costs get absorbed into general overhead. In any event you have to account for such things as the salaries of the staff that runs the operation, the connection to the Internet, domain registration and equipment. Costs start in the low thousands of dollars for a small operation and rise quickly as needs grow. It is much easier to track the costs for out-sourced hosting. A local ISP will typically charge a $30.00 setup fee and $30.00 a month for a small business basic package of 5MB of disk space, 33.6/56Kbps dial-in connection, an email account, and 1GB of throughput per month.

After the place to host the site is found, the next task is to design and build it. Again, if you are a large corporation or you want to control this process then it will be performed in-house. If contracted out, costs range from $10.00/hour for a local high school student to over $100.00/hour for an experienced Web designer in a large metropolitan market. Construction costs for a small corporate Web site are estimated between $2,800 and $5,000. A large corporate Web site can range in price from tens of thousands of dollars to millions depending on size and complexity. And let?s not forget it will probably have to be updated from time to time. For example, if the price list has to be changed or new information has to be added it?s time to call the web designer. Given these reoccurring costs, it is easy to see how a Web site, especially for large company, can become an expensive and daunting task. The stakes can be even higher if they want to use leading-edge technology. BigBook, a San Francisco based company that runs an advertising-based 3-D yellow pages, spent $5 million to build its Web site. (http://www.zdnet.com/enterprise/e-business/)

The future of the electronic-commerce heavily depends on government regulations. So far, it is hard to tell what government is doing to regulate internet, but the more important questions is what is supposed to be regulated by government and how. For example, the Internet taxation issue is heavily debated, how the tax laws should apply to Internet based businesses. If a firm has a location in a state, it is required to charge sales tax on goods and services sold in the state. Many reputable sites do this. But what about those firms that register corporations overseas, where state and federal governments have little, if any powers of enforcement. Then, they buy server space in any state and avoid paying taxes. Should the government propose a new Internet tax, which would help, regulate that or should it be left alone? There are two major arguments to this issue. Too many government regulations can cause an end to a new medium, on the other hand; too few regulations can result in anarchy, which eventually will have the same ending.

Electronic commerce is a great invention and hopefully it will overcome all the obstacles it is facing now. The first step in perfecting the Internet is to educate the public. A majority of the U.S. population has a misguided impressions of cyberspace being a place where anarchy rules. While some less than desirable activities and pursuits certainly exist on the Web, none are worse than can be found in society at large. In many respects the Web is just a reflection of our societal norms and behavior. However, EC development, especially on a retail level, will lag until large segments of society feel more comfortable with the medium. The government could help facilitate this with a more proactive position on such issues as encryption, security, and privacy. My prediction on the future of electronic-commerce is since it is already here it is not going anywhere. And like any other invention will be perfected and advanced with time.

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Cringely, Robert X. ?A History of the Computer: Network.?

At: http://www.pbs.org/nerds/timeline/network.html

Kalakota, Ravi., and Andrew B. Whinston. ?Electronic Commerce, A Manager’s Guide.?

Addison-Wesley, 1997

Kling, Arnold. ?The Economic Consequences of WWW?

At: http://www.ncsa.uiuc.edu/SDG/IT94/Proceedings/ComEc/kling/compare.html

ZDNet E-Commerce

At: http://www.zdnet.com/enterprise/e-business/