The quick tour: a summary of approaches

RELease 1.0, Jan 24, 1995

SORTING THINGS OUT

The efforts described above take many different approaches to electronic commerce. Here are four dimensions to help distinguish such initiatives from each other. The question of risk - who assumes what kind of risk at what time - cuts broadly.

* The nature of the transaction the system is designed for. The obvious first cut is to identify the parties, the average amounts and the purchase patterns. Some systems target specific transactions, some seek breadth.

* The scope of its efforts. Within any market segment, a company can tackle a thin slice of the process or create an entire environment.

* What means of payment it uses - and how it works. Most systems rely on existing transaction systems such as credit cards. Some use tokens or other proxies for value, effectively creating currencies of dubious liquidity and with interesting tax, risk and float implications.

* The system's approach to security/nonymity/identity/authentication/trust. Different pieces of the system may be open or closed to potentially prying eyes - or even to the participants themselves. Encryption can help with authentication, non-repudiability and asset management.

1. The nature of the transaction

The answer to the question, Who is selling what to whom?" describes both the relationships between buyers and sellers and the nature of the things purchased. It also leads naturally to the other items below, such as how the system might be implemented, what transaction system it will use and the role of privacy and authentication.

Repetitive, high-volume, business-to-business transactions are great candidates for EDI. Consumer relationships require different systems altogether, with an emphasis on ease of use and visual appeal. The middle ground is going through dramatic changes that we began to describe above. In essence, many transactions that used to be handled by purchasing departments are taking on retail characteristics.

As corporate offices downsize, decentralize and virtualize, inventories move. In the past, the purchasing department bought stocks of lined paper pads and ballpoint pens; now departments buy things when they need them. With corporate volume-discount deals, the local Staples, Office Club or Office Depot becomes the stockroom. FedEx saw this trend early and has set itself up to play the warehouse role. Many companies now store goods and parts in Memphis near the main FedEx hub and fulfill orders as late as 2 am.

Internet and private-network connectivity is accelerating this trend. IBM and Egghead Software are working to automate quasi-retail transactions. IBM'S Electronic Market Services (EMS) group has piloted an electronic procurement service for office supplies and equipment. Called the Electronic Purchasing Service, it front-ends EDI systems with browsable, graphical interfaces that can go directly on authorized individuals' desktops, rather than stopping at the procurement department computer. The Electronic Purchasing Service transmits the orders to suppliers, handles shipment notifications and other messages. Suppliers provide the content for the multimedia catalogs; they can also use APIs to integrate their financial, accounting and logistics systems with EPS. The service will be available through VANS, including IBM'S Global Network. The EMS group is headed by Carolyn Chin, who joined IBM a year ago after working at Citibank, Macy's and AT&T; she reports to Fernand Sarrat.