Microsoft Solutions for:
Electronic Commerce
Summary............................................................................................................................ 1
Introduction....................................................................................................................... 2
E-commerce arrives...................................................................................................... 2
Beyond the Online Shop............................................................................................... 3
Moving the Goalposts................................................................................................... 4
Business to Consumer........................................................................................................ 6
Web Marketing............................................................................................................... 6
Delivering Service.......................................................................................................... 6
The Personal Touch....................................................................................................... 7
Advertising for Business............................................................................................... 8
Direct Marketing............................................................................................................ 8
Business to Business.......................................................................................................... 9
New Kids on the Block................................................................................................. 9
Business Communications.......................................................................................... 9
Corporate Purchasing................................................................................................. 10
Re-thinking The Supply Chain................................................................................... 10
An Integrated Approach............................................................................................. 11
Extranets....................................................................................................................... 11
The European Perspective............................................................................................... 12
Enabling Technology........................................................................................................ 13
Platform........................................................................................................................ 13
Windows and Commerce Clients............................................................................ 13
BackOffice.................................................................................................................... 14
Windows NT Server..................................................................................................... 14
Microsoft SQL Server.................................................................................................. 14
Site Server 3.0 Commerce Edition.......................................................................... 15
The Commerce Interchange Pipeline...................................................................... 15
Standard Initiatives..................................................................................................... 15
Portals........................................................................................................................... 16
Partners......................................................................................................................... 16
E-commerce is becoming an everyday event, with more and more people around the world buying an ever increasingly wide range of products and services online. And with the population of web users growing dramatically, there is huge potential to win business through e-commerce.
But online shopping is just part of the opportunity. The Internet can also be used, amongst other methods, to streamline relationships with suppliers. Moreover it can also be used to create entirely new business models that challenge the established norm.
Although business-to-consumer activity is leading e-commerce today, all analysts agree that it is business-to-business that offers the greatest potential in the long term. New approaches to corporate procurement or managing the supply chain, for instance, will significantly change the way most companies do business over the next year.
But while the benefits of electronic commerce systems are enticing, it isn’t always straightforward to develop, implement and then manage these systems once they are in place. To succeed, businesses need the support both of advanced technology and established standards. And in addition to adopting new technology, many companies will need to reengineer their business processes to maximise the benefits of electronic commerce.
In response to this requirement, Microsoft has developed the concept of a digital nervous system to close the gap between business processes and technology implementations. This is a new approach to managing information which allows businesses to exploit their existing technology and build highly efficient integrated systems that collect, manage, organise and disseminate information throughout an organisation (See http://www.microsoft.com/dns).
By adopting this vision, organisations can take full advantage of the opportunities offered by e-commerce and overcome the specific challenges facing European organisations. The potential is clear – for those who respond dynamically, e-commerce can deliver a whole new world of business.
For many millions of people worldwide, buying via the web is becoming a part of everyday life. At home, in the office – or even on the move –
they are using Internet access to purchase everything from new cars to mortgages.
When you consider how convenient e-commerce can be, this is hardly surprising. In fact, a typical customer may now have several different opportunities to trade electronically throughout the course of the day. They might use the office PC to order new stationery supplies, then fine tune their share portfolio on a notebook computer during the train journey home. In the evening, they might order some educational software for the children on the family PC.
The remarkable flexibility and convenience of online shopping is driving rapid growth in e-commerce today. According to an IDC survey at the end of 1998, almost 10% of the European population is online, and this will soon rise to 25%. Worldwide, business-to-business Internet commerce revenues will grow from US$10 bn (9.1 bn euros) to over US$200 bn in 2002.
Apart from the astonishing growth in e-commerce customers and sales, there are other important trends which businesses would do well to note. According to new data from Media Metrix, women now make up half of all US adult Internet users. The ratio hit 1:1 for the first time in January 1999 and contrasts with an 82% to 18% disparity in favour of males just three years ago.
Clearly, then, there is a huge business opportunity waiting to be taken. And many companies are already grasping the nettle, generating substantial additional business from online sales. As you might expect, the leaders in this market include those offering hi-tech products such as computer software and PC hardware. But there are flourishing e-commerce businesses in a wide range of industry sectors. From books to online brokerage, and from flowers to travel services, many are already discovering just how profitable online business can be.
But in a highly-competitive world e-commerce is becoming much more than a desirable ‘add on.’ With 10-20% of retail sales predicted to be Internet-based by 2010, it is a fact of business life which can no longer be ignored. Failing to adopt an appropriate e-commerce strategy may mean losing market share to more responsive and progressive competitors.
Although online purchasing is experiencing phenomenal growth, it is just one aspect of the e-commerce story. In fact, the Internet can be used effectively to streamline existing business internal and external processes adding considerable value to the bottom line.
In his latest book, Business @ the Speed of Thought, Microsoft’s Bill Gates predicts that success in the twenty-first century will be about velocity – the speed of business and the speed of change. The Internet provides one means of achieving that speed, facilitating the flow of information through a company’s digital nervous system. This leads to a better understanding, allowing you to act more effectively to achieve competitive advantage.
More and more companies throughout the world are using web technology to enhance relationships with customers and business partners. The result is an increase in efficiency, cutting out delays and errors, and increasing the speed of response throughout the business structure.
Italian motorbike manufacturer Ducati has been exploring the possibilities in this respect – launching an extranet based on Microsoft technology (www.ducati.com). Using a standard Internet browser, this allows staff in the company’s shops worldwide to view and order spares, handle guarantees and much more. In addition, Ducati is using the extranet as a springboard for developing new services, such as smart cards for customers.
At the moment, business-to-business e-commerce is still in its infancy. But with such vast potential, this sector is expected to eclipse business-to-consumer e-commerce by a considerable margin.
E-commerce is not only creating new ways of winning customers, it is also allowing entirely original business models to emerge. Those companies who are prepared to innovate and re-think their approach to business can reap true dividends in the fight for market share.
In the world of books, for example, Amazon.com has grown very rapidly to become one of the world’s largest booksellers and challenge well-established traditional book retailers. This has been achieved by providing customers with the information they want, when and how they want it. Even though people cannot ‘touch’ the product as they would in a bookstore, the search facilities, reviews, easy access to backlist and partnership programmes have created a very successful business.
Dell Computer Corporation, too, is an innovator in this field. Having pioneered direct ordering of PCs on the Internet, it can now offer a customised web site to most of its customers of all sizes. Each site contains up-to-date information on products and prices tailored to individual organisations. This creates an extremely direct relationship between the manufacturer and its customers, making it easier for them to purchase the goods they need without having to wade through many pages of generic information.
In return, Dell can save money by anticipating customer requirements precisely, leading to more efficient inventory management and supplier relationships. Dell has also responded to web issues such as the increased visibility of price differences worldwide, especially in Europe where it has responded to the introduction of the euro by standardising pricing in all countries which have signed up to monetary union.
The same forces will apply in almost every business. Rather than simply adapting your current business world to cater for e-commerce requirements, you can create a new and better way of doing business that really brings results. This is an opportunity that businesses cannot afford to miss and they must be prepared to use the latest technology if they want to stay ahead of the competition. Even well-established companies such as car manufacturers are seizing the initiative, launching into new markets using an online network of showrooms and resellers. A good example is Smart in Europe and also Daewoo which has relied heavily on the Internet to enter the US marketplace.
In the UK retail sector, electronic goods retailer, Dixons, stole a march on its competitors by launching Freeserve, an Internet Service Provider (ISP) that offers free Internet access. Although this is an expensive investment, it has provided Dixons with a huge Internet customer base – all logging in via Dixon’s portal pages. The long-term benefit of this branding and awareness will put the company in a strong competitive position in the UK market.
Taking the process one stage further, you may even be able to create entirely new businesses. Portal sites such as Yahoo have become substantial businesses in a sector that simply did not exist ten years ago. The Microsoft Network (MSN) is becoming increasingly important in this sector, providing business partners with an opportunity to reach millions of people in a cost-effective way.
Your presence on the web must be taken seriously if it is to add true value to your business. If you offer a site which is little more than an online brochure, you risk alienating customers who are accustomed to much higher standards. On the other hand, a creative and innovative site will attract considerable interest – and traffic – reinforcing the values of your brand.
Clearly, then, you need to think very carefully about your web marketing strategy and take action accordingly. The Internet provides an opportunity to underline and reinforce you brand’s key values. But if you do not take that opportunity, you will find your brand under threat from more aggressive competitors.
For example, in the publishing world most newspapers and magazines are building free Internet pages which complement their printed media and raise awareness of the titles via the web. Very few actually charge a subscription, counting instead on the web’s ability to reinforce their brand and so increase circulation.
Customer service may not be the most exciting element of e-commerce, but it is vitally important. High quality service is essential if your brand is to be protected, or even enhanced. But there are other benefits. Internet customer support is typically much cheaper than telephone support –helping you to manage expensive overheads effectively. In addition, it provides a means of attracting new customers who appreciate the convenience of the service you offer.
Organisations must also be careful that their business systems support the back-end processes as well as the front-end. There is no point in being able to take orders at any time if delivery systems cannot deliver an adequate response time.
Microsoft itself has felt the impact of the Internet on its relationships with its customers. Five years ago, nobody visited Microsoft on the Internet, and the company received about 35,000 phone calls a day. Now it takes about 50,000 phone calls a day, and gets about two-and-a-half million visitors a day on the Internet who come to find out about computer topics and products.
Just as importantly, 18 million people over the course of the last year, have chosen to profile themselves giving name, email address, background information and what products they might be interested in, leading to powerful electronic relationships between Microsoft and its customers.
More importantly, web marketing offers you the ability to personalise your relationship with customers. This is critical, as it provides a benefit which cannot be readily matched by other forms of customer communication.
Because the Internet is interactive, you can build up a sophisticated marketing database, with a profile of each customer – and tailor your responses accordingly. Microsoft’s Commerce Server provides exceptional support in this area, helping you make accurate judgements. Rather than offering the same ‘vanilla’ responses for everyone, you can identify their needs and suggest products and services that are likely to meet them.
Holts Toys provides an excellent example of what can be achieved in this respect. Once customers have registered, its web site sends e-mails keeping them informed of new toys and articles that fit their specific interests.
Launched in 1997, the quality of the personal service offered has led to the site attracting 10,000 new members each week. During the Christmas 1998 holiday season it attracted as many as 100,000 hits a day. By promoting itself as an online supplier of educational toys, it is already challenging some of the more established, traditional retailers in the marketplace.
Advertising is well proven in other forms of media, of course, but has particular relevance on the web. Selling advertising space on your own site provides useful revenue which can subsidise your running costs.
In addition, placing banner ads on other sites provides you with an important promotional tool. Because ads can be linked to search words, etc – chosen by the customer – you can be sure that you are reaching people who have an interest in your products or services.
In response to these developments, MSN has expanded its Internet services for small and medium-sized businesses, with the addition of LinkExchange, which provides online marketing solutions for small businesses and web site owners.
LinkExchange enables MSN to offer business customers the ability to reach more customers and offer a full suite of online marketing solutions for small- and medium-sized businesses on the web.
One of the key benefits of the LinkExchange solution for businesses is its Banner Network ad network that allows small businesses and web sites to advertise on hundreds of thousands of sites at no cost.
E-mail provides a simple and effective way of reaching customers, yet it must be used with care. Any business which starts bombarding customers with junk e-mail is more likely to lose customers than gain them. But if your message is relevant and timely, direct marketing can prove very effective.
For example, a company selling CDs online might identify customers who had previously bought music by a particular band. They could then be sent an e-mail highlighting the band’s latest tour dates – and offering the latest CD at a discounted price.
Today, some 45-50% of top retailers worldwide have a presence on the web. However, because of lower Internet penetration rates in Europe, compared to the US, many of these are not yet commerce enabled. Many of these organisations have been motivated by the success stories of high-profile start ups such as Amazon, Scandinavia’s Boxman, and forward looking traditional retailers such as Dell.
Another issue to consider is the prospect of FMCG companies starting to sell direct to consumers. Traditional retailers must take all of these emerging threats into consideration, and respond accordingly.
Although the initial focus on e-commerce has been squarely on the business-to-consumer sector, this is just one element in the overall story. In fact, it represents only the tip of the iceberg. Below the surface, there is a vast business-to-business opportunity which we are only just beginning to explore.
Corporate purchasing has attracted a great deal of attention, and is certainly showing how much potential there is to add value by applying Internet technologies to existing processes. But the scope of e-commerce reaches far beyond purchasing into the very heart of your business.
Using intranets and extranets you can improve business processes and relationships, increase responsiveness and reduce costs. This may lead to a complete re-shaping of your business model. But even if you do not change your business substantially, you can still benefit from streamlined processes and improved efficiency.
Boeing, Microsoft, Cisco and Intel, amongst other companies, are now achieving substantial savings by dealing with customers online. They are realising not just reduced staffing costs, but also lower infrastructure overheads, allowing them to compete more effectively in their markets.
Business purchasing over the Internet may be in its infancy, but is already proving to be a highly effective – and cost-effective – business strategy. Services such as CommerceOne provide new channels of communication that open up exciting possibilities in the business world. Experience to date shows that returns on investment can be very high indeed, allowing companies to obtain greater value from their investment in PCs and networks.
Above all, the Internet offers tremendous time and cost savings for corporate purchasing of low-cost, high-volume goods for maintenance, repair, and operations (MRO) activities. Typical MRO goods include office supplies such as pens and paper, office equipment and furniture, computers and replacement parts. The Internet can transform corporate purchasing from a labour- and paperwork-intensive process into a self-service application. Company employees order equipment on web sites; company officials automatically enforce purchase approval and policies through automated business rules; and suppliers can keep their catalogue information centralised and up to date. Purchase order applications can then use the Internet to transfer the order to suppliers. In response, suppliers can ship the requested goods and invoice the company over the Internet. In addition to reduced administrative costs, Internet-based corporate purchasing can improve order tracking accuracy, better enforce purchasing policies, provide better customer and supplier service, reduce inventories, and give companies more power in negotiating exclusive or volume discount contracts.
As manufacturing becomes ever more specialist in nature, industry has become totally dependent on suppliers for the provision of the products needed to facilitate manufacture. As a result, we have seen companies move away from confrontational customer-supplier relationships towards more productive business partnerships.
But achieving closely co-ordinated production scheduling, just-in-time delivery and electronic order processing requires support from easy-to-use, flexible, cost-effective technology. As a result, the supply chain is an ideal candidate for e-commerce solutions.
For example, UK supermarket Sainsbury’s has developed SID (Sainsbury’s Information Direct) which includes a supplier’s guide to terms and conditions, information on promotional planning, issues and stock movements, and supplier performance data including service levels, depot stock data, and range distribution. Access is not limited to major suppliers and the company has invested in an Internet-based, EDI-style system to allow the many smaller companies with which it trades to tap into the same information source. The number of these smaller suppliers is growing because with a Windows PC and Microsoft Internet Explorer they can easily benefit from powerful corporate information sources, and provide retailers and then customers with specialist, rather than mass produced goods.
Although e-commerce is becoming the driving force in business IT today, it is important to remember that it is just a part of the overall picture. A company’s existing investment in IT systems will be a core factor in the success of the enterprise overall. In particular, those organisations which have committed to Enterprise Resource Planning (ERP) systems will be looking to gain substantially improved business performance through improved efficiency and communication.
Clearly then, it is essential that e-commerce solutions are fully integrated into the overall IT structure. They should complement and extend IT capabilities, rather than offering independent solutions to specific issues.
By extending the reach of your organisation into suppliers’ and customers’ businesses, extranets allow you to integrate business processes more easily across the supply chain. In particular, they provide a quick and convenient way of making up-to-date information available. Vital data such as price lists and product specifications can be presented to a worldwide audience in seconds – eliminating errors and inconsistencies.
But when building extranets, however, particular care must be taken over security. Opening up your business to the outside world naturally creates the possibility of security breaches. But use of technology such as digital certificates and privacy keys can deliver the level of security required to protect your business – without making transactions unduly cumbersome.
With the US leading e-commerce development, it is tempting to look across the pond to forecast evolution in the European market. Yet there are dangers in taking this approach.
It is important to remember that Europe is very different to North America in many respects. As well as the diversity of languages across the continent, there are still many different currencies to contend with. Cultural differences must be taken into account, as well as legal and regulatory requirements.
Consequently, it is important that Europe should not be seen as a single market – even in the era of the EU. You need to consider the continent on a country by country basis, taking all the above factors into account, and responding accordingly.
So e-commerce is no longer a future prospect, but a reality in our world today. With the right technology, and the right approach to business, you can reap enormous benefits from e-commerce - both now and the future.
Microsoft’s vision for electronic commerce is to help businesses establish stronger relationships with customers and industry partners. Microsoft’s strategy for delivering this vision is described by three elements – platform, portal, and industry partners – each backed by comprehensive technology, product and service offerings.
Microsoft has a strong history of developing platform products. The MS-DOS® platform fuelled the PC revolution, and the Windows operating system has done the same for 32-bit computing. From this, Microsoft has developed a great understanding of what a platform should deliver –
a foundation for building solutions that are easy to develop, manage, and grow, and comply with open standards. Microsoft’s electronic commerce platform accomplishes these goals with several key building blocks: Windows-based clients for consumer and business Internet access; Windows NT Server and the BackOffice® family for server applications; and Visual Studio for applications development. Across these elements, the Windows Distributed Network Architecture provides the infrastructure for integrating and extending these products and for leveraging investments in existing systems.
Windows provides consumers and business people with access to Internet-based commerce applications. A variety of Windows-based initiatives are expanding the market for electronic commerce by widening the range of options and lowering the price for consumer Internet access. For example, Microsoft’s WebTV® Network service provides rich Internet access over conventional televisions at a price much lower than personal computers. The Microsoft Windows CE operating system delivers Internet access for a number of consumer devices. Microsoft’s Smart Cards for Windows platform provides secure storage for personal and payment information. Across this wide range of form factors, the Windows platform helps ensure secure, private, and inexpensive consumer access to the Internet. Specific examples of these benefits include:
See http://www.microsoft.com/windows98, http://www.microsoft.com/windowsce, http://www.microsoft.com/wallet, http://www.microsoft.com/smartcard, and http://www.webtv.com for more information.
Microsoft’s server application platform, BackOffice, provides a wide range of products for implementing electronic commerce systems. The breadth of this commerce server platform, its ease of use, its integration and ability to interoperate with existing systems, are all best of breed. The BackOffice products central to building scaleable, robust commerce systems are: Windows NT Server for applications server and web sharing, Site Server Commerce Edition for commerce site management, and Microsoft SQL Server™ for storing a company’s product and customer information.
Windows NT Server
Windows NT Server is the foundation for Microsoft commerce applications. It delivers the ease of use and low cost that are the hallmarks of all Microsoft products in addition to the scalability and robustness required to support mission-critical commerce applications. Some of the world’s largest online businesses – Dell Computer Corporation, for example – have implemented their electronic commerce systems on Windows NT Server.
Database systems are the engines that manage the volumes of information required to run businesses online. Microsoft SQL Server performance, scaleability, and tight integration with Windows NT Server and Site Server Commerce Edition make it very well suited for powering electronic commerce systems. For example, the SQL Server full text search and English query give shoppers the power to search for products while using plain English, enhancing their shopping experiences. SQL Server online and incremental backup and restore capabilities improve system availability and reduce management costs. Businesses can mine customer data by using the SQL Server Decision Support Server with Online Analytical Processing (OLAP). In addition, the sample sites Site Server Commerce Edition provides are distributed in SQL Server format. These sample sites are the building blocks for many operational commerce sites, and can be used as learning aids, templates, and reusable components to speed site deployment.
Note that the database which stores and manages electronic commerce information complements and does not replace a company’s existing database systems. No conversion or migration of existing systems is required.
See http://www.microsoft.com/sql for more information.
Site Server 3.0 Commerce Edition
Microsoft’s Site Server 3.0 Commerce Edition is the comprehensive commerce server for conducting business online. It provides the business intelligence for doing business online – managing customer profile information and site personalisation, supporting marketing and ad campaigns, running a storefront operation (including catalogue management and shopping cart functionality), and providing the analysis tools to understand consumer behaviour. Behind the scenes, Site Server Commerce Edition controls how all parts of a commerce system interoperate, managing web site content, sending instructions and information to a database server, and exchanging key business documents with trading partners. And, because it is designed around the Windows Distributed Network Architecture as a set of COM component frameworks, it follows the same design rules that third-party developers and Microsoft Certified Solution Providers follow. This means it is the easiest platform for corporate developers to integrate into their existing systems, using the building blocks of Windows interoperability – COM, MTS, MSMQ, COMTI, and SNA Server.
The Commerce Interchange Pipeline
The Commerce Interchange Pipeline (CIP) is perhaps the most significant new feature of Site Server 3.0 Commerce Edition. The CIP provides an environment for the automated exchange of business documents (purchase orders, invoices, receipts, shipping notices, for example) between a company and its trading partners. CIP is implemented as a set of COM components that perform key message exchange functions – encryption, authentication, data transformation, auditing, and data transfer. It is a framework that facilitates and simplifies the tasks required to develop interoperable trading applications.
See http://www.microsoft.com/siteserver/commerce for more information.
Standards lower costs, increase choices, and simplify integration and interoperability when implementing electronic commerce systems. Microsoft is active in standards initiatives that address security, secure payments, privacy and data interchange. For example:
Establishing e-commerce procedures cost effectively will be much easier, thanks to the launch of Microsoft’s BizTalk initiative in March 1999. This is designed to allow businesses to interchange BizTalk documents easily with trading partners, regardless of platform, operating system or underlying technology. From product catalogues to purchase orders, it will provide a means of communicating business information without using EDI protocols when these are not appropriate for the business. Through innovations such as BizTalk, Microsoft is committed to helping a huge number of businesses reap the benefits of e-commerce.
The next version of Microsoft Wallet (http://www.microsoft.com/wallet) will implement Secure Electronic Transactions (SET), a standard for secure, authenticated transmission of payment information.
Windows supports Platform for Privacy Preferences (P3P), a software specification of the World Wide Web Consortium designed to help ensure the protection of consumers’ privacy.
Microsoft has helped lead the industry in establishing Extensible Markup Language (XML) (http://www.microsoft.com/xml), a powerful means of representing structured data to support interchange of business information between companies.
For corporate purchasing, Microsoft supports the Open Buying on the Internet (OBI) standard, designed to standardise transactions between buying organisations and suppliers.
For information on the Microsoft platform and compliance with year 2000 and euro currency symbol handling, see http://www.microsoft.com/y2k and http://www.microsoft.com/euro
Markets are where customers and vendors meet. One of the most well-travelled markets on the Internet is the MSN network of Internet products and services. MSN gives consumers the ability to do online research, and buy a wide range of products and services, all from one convenient location. MSN advertising, partnership and small business services help companies reach, build and strengthen relationships with their customers. The Microsoft online sales team can work with any company to find the best online opportunities to meet specific marketing goals.
Microsoft commerce partners are a critical element of the Microsoft commerce strategy. They provide customers with critical products and services for implementing commerce solutions on the Microsoft platform and portal. Customer choice and competitive pricing are the hallmarks of Microsoft’s partner channel, which is the deepest and broadest partner channel of any software vendor. Commerce partners are no exception to this rule, and they provide support in four important areas: Independent Software Vendors (ISVs), web developers, enterprise developers, and commerce hosting and operation.
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