Understanding E-Commerce From the is Perspective

While the term "e-commerce" has become very common, it is still broad enough to connote different images to different individuals. For some, it is primarily B-to-B, for some it is primarily B-to-C, while for others it is C-to-G ^[1]. The author should probably define these terms such as B2B for an uninformed reader. We will take a decidedly IS-centric stance to e-commerce in this paper. This is reflected in how we conceptualize e-commerce in Figure 1.

Figure 1: E-Commerce Architecture. (Adapted from Krasner, 2000.)

Figure 1 depicts an organization that operates in the e-commerce layer of companies (those that conduct business in the context provided by the other three layers ^[2]). What are the e-commerce layers? Stated differently, we will focus only on those organizations that "conduct commercial transactions with their business partners and buyers over the net" (Mahadevan, 2000) to either complement existing businesses or as exclusively new and separate businesses. From this standpoint, therefore, just having a web page to allow information access and interaction does not qualify an organization as an e-commerce participant. Therefore, this paper concentrates only on B2B e-commerce companies. This is important because organizations employing e-commerce appreciate the importance of understanding and responding to the entire supply chain rather than just focusing on their immediate upstream and downstream partners.

A major implication of e-commerce (as depicted in Figure 1) is that an organization becomes tightly coupled to upstream and downstream players than before. While levels of inter-organizational trust and the degree and nature of organizational linkages directly affect such coupling, the requirement for transparency (that arises out of such coupling) not only impacts internal systems, but also imposes stringent requirements of high reliability and functionality on internal systems. An enhanced understanding of e-commerce is required to address the subject of e-commerce strategy. Such an understanding is provided by the concept of business models. "A business model is a blend of three streams ^[3] that are crucial to the business. These include the value stream from the business partners and the buyers, the revenue stream, and the logistical stream. The value stream identifies the value proposition for the buyers, sellers, and the market makers and portals in an Internet context. The revenue stream is a plan for assuring revenue generation for the business. The logistical stream addresses various issues related to the design of the supply chain for the business" (Mahadevan, p. 59).

It should be clear that while none of these streams are mutually exclusive, there are some that are more relevant for product/service providers as compared to those for market makers. It takes organizations significant time and effort to create and deploy strategies. E-commerce applications are often developed and deployed in response to market forces and competitor moves. Often the e-commerce strategy is reactive and is a manifestation of a "me too" organizational reaction so as not to be left out of the e-commerce race. Consequently, a fully thought-out and integrated strategy takes time to develop. Many organizations may choose to not deploy an integrated e-commerce strategy and adopt a wait and watch strategy. This behavior resembles the delays and learning processes exhibited by organizations in the 1970s and 1980s when the influx of information technologies presented increasing opportunities for creating competitive barriers to entry (for competitors) and for exit (for existing customers). While these may sound familiar to principles that were key to developing and deploying effective IS strategies, there are differences when it comes to e-commerce. Before we study those differences, it will be instructive for us to review the lessons that we can learn from the IS strategy body of knowledge.

^[1]B-to-B, B-to-C and B-to-G stand for business-to-business, business-to-consumer and business-to-government, respectively.

^[2]The Internet infrastructure layer is composed of organizations that provide internet services. The Internet applications layer provides support systems for the Internet economy ranging from web-page design to security. The intermediary layer is composed of companies that are involved in the market-making process of the Internet (Barua et al., 1999).

^[3]Virtual communities (e.g., WebMD/Healtheon), significant reductions in transaction costs (e.g., electronic marketplace), gainful exploitation of information asymmetry (e.g., Priceline.com) and value-added market-making processes (e.g., providing third-party trust or authentication) are four possible value streams. The six revenue streams that are hard to replicate in a brick-and-mortar setup include increased margins over brick-and-mortar operations, revenue from online seller communities, advertising, variable pricing strategies, revenue streams linked to exploiting information asymmetry and free offerings. The logistic streams include dis-intermediation, infomediation, and meta-mediation.