This paper examines the intersection of e-commerce development and software security as drivers of new business models, with emphasis on system integration, analytics, and best practices. Drawing on case studies from consumer electronics manufacturers like Sony, Apple, and Gateway, the analysis explores how companies leverage distributed order management, Web 2.0 design principles, and enterprise security management (ESM) strategies to optimize performance. Key findings highlight the critical role of back-office integration, role-based security, encryption, proxy servers, and authentication in enabling scalable B2B and B2C e-commerce platforms. The paper demonstrates measurable cost reductions and performance improvements achieved through analytics-driven KPIs and integrated security architectures.
The combination of e-commerce technologies, systems, and platforms with ongoing developments in Web security is serving as a catalyst for growth in new business models. The effects of continual innovation on e-commerce and software security are streamlining the value chains of companies, creating a more direct link between their supply chains, selling organizations, production and manufacturing locations—all focused on maximizing customer satisfaction.
The many innovations and improvements in e-commerce and security are most visible in industries with high inventory turnover and where transaction accuracy and velocity are critical business drivers. The consumer electronics industry, which serves both B2B and B2C markets, exemplifies these impacts most clearly. As companies like Sony compete in this space, their daily operations provide valuable case studies for understanding how e-commerce and security drive business transformation (Aldiri, Hobbs, & Qahwaji, 2008).
The effects of e-commerce on order accuracy, performance, and long-term value of Enterprise Resource Planning (ERP) systems have been quantified, demonstrating the critical importance of system integration (Legner, 2008). Manufacturers of consumer electronics, including Sony, have developed specific integration strategies focused on measuring the return on investment (ROI) of integrating e-commerce technologies with ERP systems while staying aligned with evolving customer preferences (Aldiri, Hobbs, & Qahwaji, 2008).
Social networks are completely redefining e-commerce and expanding the traditional definition of multichannel selling and partner relationship management (PRM) to focus on customers' changing preferences for how they want to learn and buy (Bernoff & Li, 2008). As e-commerce systems and platforms based on social networks develop, the widespread adoption of analytics within e-commerce and security has become commonplace (Ranjan & Bhatnagar, 2011). Since all activity online can be measured and analyzed through analytics applications, dashboards for evaluating e-commerce performance have accelerated rapidly over the past several years (Ranjan & Bhatnagar, 2011). Throughout this analysis, analytics will be used to illustrate how companies manage these business strategies.
From studying consumer electronics and high-technology industries whose distribution channels and multichannel selling strategies serve both B2B and B2C markets, several key insights emerge. In analyzing the e-commerce systems and platforms at Sony, for example, several best practices stand out. First, Sony is deeply passionate about metrics, which is evident from studying their e-commerce platform, infrastructure, and how they measure overall e-commerce performance over time (Harney, 2001). Sony's culture treats e-commerce as a continual work-in-progress or strategy to stay aligned with customer needs (Liu & Mackie, 2008). Sony, like Amazon and others, views customization of the user experience online as the most critical success factor in defining e-commerce systems.
Among the companies studied, Sony demonstrates the most pervasive use of integration between back-office and front-office systems. Sony believes that their e-commerce strategies are only as effective as the level of process and forecast-level data collaboration between its e-commerce systems and supply chain planning (SCP) and supply chain management (SCM) (Lovell, Saw, & Stimson, 2005). This is because the company relies heavily on a build-to-order e-commerce model that can quickly combine various product components to create new laptops, desktops, and netbooks. Figure 1 illustrates the Sony Corporation global supply chain topology, showing the integration points their e-commerce channel management systems depend on to successfully manage orders from their website, distributors, and system integrator partners.
Figure 1: Analyzing the e-commerce supply chain of Sony Corporation
Source: Sony Annual Reports, 2009, 2010, 2011
The Distributed Order Management systems of e-commerce platforms serve as the "glue" or central coordination point that unifies all activity, demand management, and fulfillment of customized orders over the Internet. Sony has one of the most advanced distributed order management systems in the consumer electronics industry today (Lovell, Saw, & Stimson, 2005). Social networks have accelerated transaction velocity and speed of e-commerce in general and continue to redefine how consumers choose build-to-order and mass-customized products (Bernoff & Li, 2008).
Social networks have a very significant impact on e-commerce channel performance, with Twitter emerging as a promotional channel for consumer electronics manufacturers, including airlines that frequently offer discounts to customers who follow them online (Bernoff & Li, 2008). The emergence of social CRM—the integration of e-commerce systems, social networking platforms, and CRM systems to provide a 360-degree view of the social buyer—continues to expand exponentially (Ranjan & Bhatnagar, 2011). Social CRM is an emerging yet dominant force in e-commerce and has begun to reshape online and Web-based application security strategies as well.
Any company involved in e-commerce is seeing its online initiatives and security strategies altered by the pervasive adoption of Web 2.0 design concepts and philosophies, originally defined by Tim O'Reilly, founder and CEO of O'Reilly Media. His original definition of Web 2.0 is shown in Figure 2, the Web 2.0 Meme Map. This framework focuses on how Web-based applications are becoming more egalitarian in focus, promoting high levels of collaboration and communication within and between companies and their customers (O'Reilly, 2006). These design objectives serve as the foundation for many of the world's leading social networks, including Facebook, Friendfeed, Twitter, and hundreds of others that have not achieved the critical mass and popularity of these platforms (Bernoff & Li, 2008). The Web 2.0 Meme Map serves as a "roadmap" for the future of e-commerce application development. The future of e-commerce will resemble Facebook chat or profile sections rather than the large-scale, difficult-to-use Web applications that characterized the e-commerce wave of innovation in the late 1990s and early 2000s.
Figure 2: Web 2.0 Meme Map
Source: O'Reilly, 2006
The impact of these design objectives on e-commerce has not always been widely visible. In researching the effects of e-commerce and security on the future of online commerce, the concept of password-protected Intranets with advanced e-commerce and Service Lifecycle Management (SLM) applications emerged as a dominant trend. Consumer electronics manufacturers, including Apple and Sony, have encrypted Intranet sites for their best institutional or enterprise customers, giving them direct access to e-commerce applications specifically built to their unique purchasing and service needs (Aklouf & Drias, 2008). These applications include order status tracking, online ordering for custom configurations needed in hundreds or thousands of units, definition of leasing vehicles for entire fleets at rental car companies, and online applications for stock balancing and price protection (Aklouf & Drias, 2008).
Apple and Sony have both used these Intranet sites for managing suppliers more effectively and for selling to institutional customers, including national, state, and local governments (Lovell, Saw, & Stimson, 2005). Many consumer electronics manufacturers have developed a stealth strategy for e-commerce by creating initiatives for enterprise customers that provide long-term competitive advantages. This strategy remains highly effective as Intranets become embedded in how companies operate. Sony specifically has achieved significant success with their e-commerce efforts as a result of the revenue streams their dedicated e-commerce sites generate. The financing of the low-end netbook, printer, and laptop business can be attributed to the higher gross margins Sony generates through these programs.
Proctor & Gamble uses a similar strategy for launching new e-commerce products with Walmart, which represents nearly 16% of total P&G demand in soft goods businesses. Walmart uses P&G's Intranet sites to define which specific buyers can view which specific products and pricing options, and also relies on role-based security to develop entirely new pricing strategies. The role of Intranets is often overlooked compared to traditional, visible e-commerce systems consumers access. Yet the Intranets that Apple, Sony, and others depend on represent a larger proportion of their e-commerce revenue relative to what is ordered over their public websites.
The role of security in managing these Intranet sites is significant and relies on a role-based approach to defining which company members can view which products, set pricing levels, and establish alerts and rules for product replacement orders. All of these security areas are defined by role-based access privileges for each member of a customer's company involved in purchasing, procurement, and supply chain functions.
Social networks continue to redefine what e-commerce is and how it evolves, largely influenced by Web 2.0 design objectives (O'Reilly, 2006) and the evolution of company Intranets as dominant platforms for B2B-oriented e-commerce, supply chain management (SCM), and supply chain planning (SCP) in conjunction with enterprise customers. Apple, Sony, Ford Motor Company, Toyota, Proctor & Gamble, IBM, and HP have been using Intranet sites for years. Dell, mentioned in a press release, has 50,000 Intranets running and supporting 14 different languages (Aklouf & Drias, 2008).
This aspect of e-commerce is pushing the development of advanced forms of role-based and authentication-based security, which is in turn redefining how e-commerce strategies are implemented and upgraded over time. All of these developments are predicated on a culture of accountability and performance, two areas receiving much focus within companies as they adopt analytics and business intelligence to better manage their online initiatives (Ranjan & Bhatnagar, 2011).
The key performance indicators (KPIs) that companies competing with e-commerce strategies rely on are more focused on measuring overall process performance across the entire company, not just on results from a single website or series of product sales online. The KPIs or performance measures used by best-performing e-commerce companies are often divided into company-specific metrics, sales, quotes and order activity (which measure supply chain performance), customer service, and warranty and returns (Bois, 2004). All of these areas are critical for successful execution of an enterprise-wide e-commerce system as they track—with KPIs and metrics—the customer experience over the long term, providing insights into areas where a company excels and areas needing improvement (Ranjan & Bhatnagar, 2011).
Based on study of e-commerce strategies across B2B and B2C industries, the companies mentioned have been analyzed to develop common KPIs. These metrics are standard across manufacturing and service companies attempting through analytics and business intelligence to capture the lifetime value of customers based on their interactions with e-commerce websites and ordering sessions. Table 1 presents the Analysis of e-Commerce Key Performance Indicators, showing baseline measurements and strategic accomplishments across five areas.
Table 1: Analysis of e-Commerce Key Performance Indicators
Sources: Columbus, 2001; Columbus, 2003; Bois, 2004; Lovell, Saw, & Stimson, 2005; Pritchard, 2002
This analysis highlights that e-commerce strategies over time can contribute to significant reductions in operating costs. When e-commerce systems are well integrated into supply chain, pricing, ERP, and fulfillment systems, substantial cost reductions can be achieved by minimizing inventory costs and the cost of incorrect orders. Studies indicate that by reducing inventory investment through better demand management, increasing higher lifetime customer value, and reducing Days Sales Outstanding (DSO) by ensuring complex products are built exactly to specification the first time without rework, cost savings can be achieved quickly—typically within six to nine months (Sharif, Irani, & Lloyd, 2007).
Security is also a critical factor in these KPIs and metrics as they allow for greater levels of accuracy and data quality defined by roles first and not just by the systems from which they originate (Ranjan & Bhatnagar, 2011). Companies are relying on these metrics and KPIs to redesign entire system strategies to ensure greater levels of customer responsiveness and protection from a broadening array of security threats. The escalation of threats within e-commerce strategies is leading to the development of architectures that support independent systems and strategies, where each online channel is segmented away from the entire e-commerce platform and back-office enterprise systems (Stoecklin-Serino & Paradice, 2008).
Analytics are giving companies insight into how best they can achieve this segmentation without degrading e-commerce website and server performance (Stoecklin-Serino & Paradice, 2008). One company that has done this extensively is Gateway Computers, now part of Acer America (Gateway, 2006). Gateway learned through metrics and KPIs just how much the security precautions they were taking was impacting the performance of e-commerce websites and applications. These slowdowns were reflected in lower order counts, incomplete product configurations being defined online, lengthening order cycle times, and customer complaints about website e-commerce application performance.
Gateway redesigned their entire e-commerce system with customer responsiveness as the most critical criterion, followed by a segmented architecture that would allow the Tibco middleware layer to arbitrate resource requests while protecting enterprise-wide applications. Figure 3 illustrates Gateway's e-Commerce Infrastructure, reflecting decisions made by the CIO and e-commerce team to more effectively manage e-commerce strategies with customer responsiveness and security as primary design objectives.
Figure 3: Gateway's e-Commerce Infrastructure
Source: Gateway and Acer Annual Reports, 2004–2006, 2010, 2011
e-Commerce is undergoing a series of disruptive innovations driven by Web 2.0 technology adoption (O'Reilly, 2006), flourishing social networks (Bernoff & Li, 2008), and reliance on analytics and business intelligence to unprecedented levels (Ranjan & Bhatnagar, 2011). All of these factors are creating an exceptional level of security threat, forcing companies that rely on e-commerce for a large percentage of their revenue to create enterprise security management (ESM) strategies that address multiple dimensions of vulnerability.
ESM strategies encompass each aspect of e-commerce platforms' vulnerabilities and potential areas of compromise. The core components of an ESM strategy include enhanced support for encryption, support of proxy servers and firewalls, and development of more effective authentication and security technologies for protecting enterprise systems. These systems face greater risk than ever due to cloud computing and Software-as-a-Service (SaaS) development strategies. Each of these areas is detailed below in the context of their impact on e-commerce platforms and strategies.
The most prevalent security strategy used throughout e-commerce systems at both the enterprise platform and application level through Web browsers is encryption. e-Commerce platforms often support a specific level of encryption at a default level, with options for supporting a range of byte-length options. Advanced Intranet portals typically use 512K byte encryption and also employ role-based sign-in and authentication procedures to ensure that supply chain, procurement, and purchasing personnel can access Intranets only to order products, supplies, or request specific pricing discounts or special orders. The greater the level of specialized B2B e-commerce transactions, the greater the need for security and encryption throughout a private Intranet network.
Companies with Intranets typically create a series of authentication constraint-based logic workflows that require automated codes and continually changing passwords every 60 days to log in. These login and password requirements change to reflect changes in a company's organizational structure and reporting relationships, underscoring how critical it is for companies involved in B2B e-commerce to understand their customer clients thoroughly.
A second security strategy pervasive throughout both B2B and B2C commerce is heavy reliance on proxy servers, and in the case of Gateway (as shown in Figure 3), a unified bus architecture to accomplish dual goals of higher system and application performance in addition to greater security (Kim, Kim, & Hwang, 2008). The design of e-commerce systems with proxy servers, which act as staging areas for transactions away from main servers, has become commonplace as they provide an excellent platform for completing transactions securely while protecting enterprise-wide systems (Aklouf & Drias, 2008). Today Web application servers are being designed to allow for this level of customization through open-source software, significantly reducing the total cost of ownership (TCO) for security platforms designed for e-commerce.
In conjunction with proxy servers, firewalls have continued to progress as a technology for safeguarding entire enterprise system platforms and networks internal to a business. Firewalls create a series of software-based validation points for each entry point into a system. Advanced firewalls are entirely software-based and can capture and quarantine software viruses relatively quickly. They can also be configured to create an entire network of validation points to ensure long-term security. The current focus within firewall development is on creating customizable options for ensuring only the inbound and outbound traffic from trading partners, e-commerce applications online, or support for private Intranet sites mentioned earlier.
Proxy servers and firewalls are being designed to account for transaction workflows and the development of more efficient role-based analysis prior to allowing any inbound or outbound data. Using constraint and rule-based technologies, proxy server and firewall applications can be configured to allow new transactions from trusted applications and locations internally (Stoecklin-Serino & Paradice, 2008). All of these options can be set and implemented literally in real-time, giving e-commerce strategies greater control over the development and implementation of their strategies more securely.
Authentication is the third major area of security investment for companies pursuing e-commerce today. This area has been the most rapidly changing from a technology innovation standpoint, as development of analytics, business intelligence, and constraint engines is forcing entirely new approaches to validating transactions, protecting credit card numbers through encryption, and defining security levels of enterprise systems. Authentication is also progressing beyond the development of Intranet sites that can be configured to specific transaction and process workflows within an enterprise customer's own company.
Where authentication is most paying off is in B2B e-commerce, where streamlining complex transactions with trading partners is reshaping how this aspect of security is managed. Authentication is also redefining how B2C e-commerce sites manage user profiles while streamlining the online ordering process. Amazon.com's One-Click Ordering option is a case in point, simplifying authentication without compromising security.
e-Commerce and security are undergoing a series of disruptive innovations today. The integration options have never been more pervasive and capable of supporting a wide variety of selling and service channels. The impact of Web 2.0 design objectives on social networking applications is now redefining what e-commerce is (O'Reilly, 2006). Facebook and Twitter have emerged as viable platforms for e-commerce as a result (Bernoff & Li, 2008). In addition, the need for back-office systems integration to ensure e-commerce platforms and systems can effectively deliver valuable insights and intelligence while creating a secure and scalable user experience is critical (Aklouf & Drias, 2008).
The best practices in e-commerce revolve around back-office integration and the use of analytics and business intelligence metrics to evaluate the results and profits from online initiatives (Cecere & Martin, 2006). As companies continue to invest in e-commerce and security technologies, those organizations that successfully integrate their systems, measure performance through comprehensive KPIs, and maintain security while delivering responsive user experiences will establish sustainable competitive advantages in rapidly evolving digital markets.
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