Table of Contents:

Definition and Overview

1. Basic Function of Electronic-Commerce Systems

2. Hosted Electronic-Commerce Services: A Service Provider's Perspective

3. Electronic-Commerce Requirements

4. Task Categories

5. Components of Hosted Electronic-Commerce Systems

6. Implementation Scenarios

Self-Test

Glossary

PDF of this tutorial

No Common Denominator

There is no single prevailing implementation model in the electronic-commerce marketplace. The electronic-commerce technologies described in this tutorial will typically be implemented in a variety of ways, based on the commerce host's target market, resources, and business strategy.

The market for hosted electronic-commerce services today is a showcase for a wide variety of these implementation models. It is difficult to point to any one single popular model that is winning broad support. At the same time, the newness of the industry—electronic commerce is still at the earliest stages of existence—promotes broad experimentation. Add to that the fact that this nascent technology has barely begun to show a profit for its practitioners, and it is clear that in the short term we will continue to see a variety of implementation models being tested and tweaked.

While the electronic-commerce–hosting market is notable for its variety of implementation models, a number of distinct factors are beginning to emerge across the marketplace. Increasingly, these factors are becoming the critical issues for commerce hosts around which to build their strategy. As these factors gain more and more adherents, they begin to resemble the key points around which an electronic-commerce strategy can be built.

Emerging Strategic Factors

Critical strategy issues that are increasingly being considered in decision-making for electronic-commerce hosting are the following:

• market segment—SMB versus large enterprise
• business model—transaction processor or commerce service provider

Some Definitions

Market Segment

Who is the business customer who will be hosted by the commerce host? A number of factors weigh in the decision of which segment to target, including the following:

• host's existing business relationship with segment—Will this be a totally new offering to unfamiliar clients? Or, will this be a new offering to a captured base of clients?
• business-to-business, business-to-consumer, or both—Will the business clients be selling to other businesses or consumers?
• host's resources and competencies—Large enterprise clients typically require more care and feeding from the commerce host than SMB customers. At the same time, SMB clients typically cannot afford extensive custom services from the host. The host must also weigh which skills will be required in managing these customer relationships and whether they currently exist—or whether they must be developed from the ground up.
• customer requirements—Large enterprises may demand more extensive features and functions than SMB, thus requiring greater expense on the part of the commerce host.
• market dynamics—Which segments will demand commerce services now and in the future?

Business Model

What are the primary business drivers that are directing the host into the electronic-commerce hosting business? What business does the host want to be in? There are some general points about business models that apply regardless of the host's service model, including the following:

• host's long-term electronic commerce strategy and position on future growth of its customer base—Where do I want to be two, five, even ten years from now?
• host's existing business relationship with segment—Will this be a totally new offering to unfamiliar customers? Or, will this be a new offering to a captured base of customers?
• business-to-business, business-to-consumer, or both—Will the business customers be selling to other businesses or consumers?

However, the host faces a key decision point in setting up a hosting environment for electronic commerce around a critical distinction in the marketplace. The critical business model issue that fuels the host's implementation plan is the distinction between a transaction processor (or commerce enabler) and a commerce service provider.

Commerce Enabler

• provides Internet cash register function (remote transaction processing) for business clients whose selling content is created separately
• provides Internet cash register for selling content that may be hosted separately
• provides an outsourced solution for security—thereby saving client expense of implementing firewalls, secure servers, etc.
• leverages backend payment infrastructure to process high volumes of transactions for clients and provide payment services

Commerce Service Provider

• provides end-to-end commerce services for business clients, including content creation, hosting, payment processing, and integration with client back-end systems (inventory, billing, shipping, etc.)
• provides integrated commerce service environment that combines hosting electronic product catalogs with a transaction process
• provides a robust, scalable, secure environment for hosting clients' catalogs with high bandwidth and service levels
• supplies customization and integration services to meet specific needs of clients

These two key issues—market segment and business model—will drive the implementation plans for commerce hosts. Table 1 explores the possible implementation scenarios that might be driven by these issues.