Typology of IOIS

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To gain an understanding of an IOIS in relation to modern Web-based technology, it is useful to perform a comparison of Internet Web sites, intranets, extranets, B2B virtual markets, and EDI. Each type of system will be compared first by looking at the structure of the relationship. Structural characteristics include the identification of the interacting parties, which party acts as the system host, and the requirements for security. Finishing off this portion is Barrett and Konsynski’s Model of Inter-Organization Information Sharing, which addresses firm participation. Then, the typology continues with a look at the level and nature of the information exchanged. Here, these relevant features are discussed: the general functions performed by each system, the format of the information that is transferred, the types of information communicated, the requirements for confidentiality of the data, and the cost of the technology and system implementation.

A Structural Comparison of Systems Types

For an overview of the structural differences between systems, see Table 1. Parties to the exchange differ between systems. An Internet Web site involves an entity and the general public, while the intranet involves parties strictly within the organization. Intranets are primarily used by companies to provide information exchange and data resources for employees. Extranets and EDIs, on the other hand, involve an entity and its business partners. Business partners can include suppliers, vendors, and business advisors. B2B virtual markets offer platforms for interactions between business partners that are members of the proprietary virtual market.

Table 1: Comparison of Web-based and EDI systems—structures

	Internet Web Site	Intranet (Internal)	IOIS
			Extranet	B2B Virtual Market	EDI
Interacting parties	General public	Employees	Organization with business partner(s)	Organization with virtual market business partner(s)	Organization with specific business partner
System host	Organization	Organization	Organization	Network market facilitator	Organization
Security	Data remains outside of outer firewall	Data stays inside inner firewall	Data stays between inner and outer firewalls	Inside inner firewall of network facilitator	Transactions allowed inside of inner firewall
Barrett and Konsynski IOIS level	Level 2— Application (Information) Processing Node	Not applicable	Level 4— Network Control Node	Level 5— Integrated Network Node	Level 3— Multiparticipant Exchange Node

The host entity also differs among the systems. A single organization typically hosts an Internet Web site, an intranet, an extranet, and EDI. In contrast, the B2B market is hosted by a network market facilitator. The facilitator may be a dominant member of the market or, more frequently, a separate company formed by a group of market members. An example of a market facilitator is Covisint, which represents a global Internet-based electronic marketplace with eight major auto manufacturers and thousands of suppliers (Applegate et al., 2002). This marketplace has the potential to dramatically reduce inefficiencies and improve productivity in the global auto industry. Covisint was formed through a joint venture between Ford Motor Company, General Motors, DaimlerChrysler, Oracle, and CommerceOne (Applegate et al., 2002).

Next, we address the structural requirements for security. Figure 1 graphically depicts where these systems are positioned relative to the inner and outer firewalls of a corporation. A firewall is a set of hardware and software components that provide security by preventing outsiders from accessing internal, proprietary corporate data. Many organizations find it necessary to create more than one level of network security to protect corporate resources and core systems from unlawful access. For an organization with two levels of network security, the intranet is the most secure Web-based system, operating inside the inner firewall. Intranet security controls restrict access to only authorized personnel. Conversely, the company’s Internet Web site is the least secure, as it resides outside the external firewall. Public Web sites often have limited or no restrictions for access and most do not require passwords. For those Web sites that do, access is often free by just registering. The extranet is a more secure environment than a public Web site, as it operates between the inner and outer firewalls. Extranets maintain security controls and provide access only to authorized business partners. In contrast to the extranet, a B2B virtual marketplace contains one firewall that protects the network facilitator’s site. The community of business partners interacts inside the security protection of the outer firewall. The EDI systems are the most unusual IOISs, as they pass transactions through multiple levels of security in order to reach core systems. This poses an added security risk, which is mitigated by using predefined data formats and encryption technology.

The literature describes several IOIS frameworks, and each is slightly different in its focus. Barrett and Konsynski (1982) developed a model of inter-organizational information sharing that is useful here in analyzing linkage differences in Web-based and EDI systems. Other models that were identified but not described in detail are summarized below:

• Johnston and Vitale (1988) developed a classification framework based on dimensions of an IOIS business purpose, the relationship of the business partners, and the information function.

• Kumar and van Dissel (1996) provided a framework for an IOIS based on inter-organizational interdependence including information resources, value and supply chains, and networks.

• Choudhury (1997) provided a framework for classifying IOISs based on exchange relationships.

• Hong (2002) developed a framework based on the two dimensions of role linkage (horizontal versus vertical) and system support level (strategic versus operational).

The Barrett et al. (1982) model involves five different levels of information sharing and is based on the purpose and organizational objectives of the system. The levels are based on firm participation and are generally independent of the system’s technology. Low-end participation involves minimal amounts of participant responsibility, cost commitment, and complexity of the operating environment. High-end participation includes significant levels for all three areas. At the lowest level, Remote I/O Node is the remote input to and output from another organization’s systems with minimal firm participation. The next level, Application Processing Node, involves a firm hosting and sharing of a single application with other organizations. The third level, Multiparticipant Exchange Node, involves the development of a network linking with other organizations. This level involves an increased level of complexity and cost from the previous level, along with shared responsibility between the firm and its business partners to maintain the network. The fourth level, Network Control Node, involves the sharing of a network with diverse applications that is maintained solely by the firm and used by many different types of business partners. The fifth level, Integrated Network Node, involves a data communication facility processing transactions in real- time mode. At Level 5, the operating environment is more complex, with simultaneous processing at multiple participant sites. This mode requires significant security and coordination costs to manage communications throughout the network.

To highlight the B2B virtual market’s and extranet’s relative positions in the Barrett et al. IOISs model, they are compared with the other Web-based systems and EDI. The intranet is not applicable to the model, as it is not an inter- organizational system. Internet sites are considered to be at Level 2 participation, Application Processing Node, where an organization hosts the Web site to facilitate the communication of information. The “application” in this case is information processing, so the authors feel that this level could also be termed the “Information Processing Node.” EDI represents a Level 3 situation, Multiparticipant Exchange Node, as it provides limited types of transmissions in a shared network that is maintained by the business partners. Conversely, extranets are at a Level 4 situation, Network Control Node, where the system is maintained by one firm and can be designed to fulfill diverse purposes with many different kinds of business partners. One benefit of the extranet is the potential for developing numerous interlocking networks. For example, a firm creates an extranet with partners for information sharing. One of the partners joins an additional partnership and creates another extranet for information sharing. As more extranets are created, a loosely linked network of real-time systems can evolve. This loose network structure is different than the Level 5 situation described by Barrett and Konsynski, because the information is not available to all parties equally. Rather, the information sharing is selectively tied to extranet nodes based on membership.

The B2B virtual markets fit Barrett and Konsynski’s model as a Level 5 situation, Integrated Network Node, for the network provider. The network application is hosted by the network provider, which is typically an association of firms or an outside sponsor. The B2B marketplace involves numerous applications and parties participating in a virtual community to buy and sell goods. This software serves as the infrastructure of the marketplace, supporting several processes such as purchasing, ordering, auction bidding, collecting payments, authenticating members, and communicating technical information (such as CAD and CAM specifications). Market member applications can be linked to the virtual market. These can involve the use of intelligent agents to generate optimum bid amounts for suppliers and to optimize the evaluation of bids for the purchaser.

Barrett and Konsynski (1982) stressed that integrated network nodes require strong security and data communication capabilities. A major concern is transaction security for B2B virtual markets and extranets. Message encryption and authentication through certificate authorities are paramount to IOIS success. Advancements in data communications capabilities, especially higher bandwidths, enable the extranet and B2B markets to provide greater multimedia capabilities.

Barrett and Konsynski’s (1982) taxonomy highlights the different levels of participation in maintaining an IOIS. Firms require varying levels of resources depending on the complexity of their systems and their participation in hosting their systems. Organizations should design e-commerce strategies that balance IOIS participation levels with the benefits from these systems.

An Information Exchange Comparison of Systems Types

In this section, the spotlight is on the level and nature of the information provided or exchanged in Web-based systems and EDI (see Table 2). This includes the general functions performed by each system, the format of the information that is transferred, the types of information communicated, the requirements for confidentiality of the data, and the costs of the technology and system implementation.

Table 2: Comparison of Web-based and EDI systems—information exchanges

	Internet Web Site	Intranet (Internal)	IOIS
			Extranet	B2B Virtual Market	EDI
Function	Electronic marketplace	Interactive communication	Interactive communication Electronic marketplace	Interactive communication Electronic marketplace Reverse auctions	Electronic marketplace
Format of information transfer	Multiformat Flexible	Multiformat Flexible	Multiformat Flexible	Multiformat Flexible	Fixed format Rigid
Types of information communicated	Financial transactions Product and service offerings Advertising	Financial transactions Product and service offerings Organizational data	Financial transactions Product and service offerings Advertising Organizational data (limited)	Financial transactions Product and service offerings Advertising Virtual market communication	Financial transactions Purchase orders or sales data
Confidentiality	Nonconfidential	Confidential	Confidential	Confidential	Confidential
Cost of technology, implementation	Low cost Limited changes to core systems	Low cost Limited changes to core systems	Moderate cost May require changes to core systems	Moderate cost Complex	Costly Requires changes to core systems
Global issues	Cultural differences Language Foreign exchange Technology infrastructure Legal issues	Cultural differences Language Foreign exchange Technology— Infrastructure Legal issues	Cultural differences Language Foreign exchange Technology infrastructure Legal issues Intellectual property rights	Cultural differences Language Foreign exchange Technology infrastructure Legal Issues Intellectual property rights Antitrust legislation	Language Foreign exchange Technology infrastructure Legal issues

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