Electronic Commerce (E-commerce) - Buying and selling goods or services where a large part of the transaction takes place online. This could involve a catalogue on a web site, online payment using credit cards and even downloading a service (e.g. software).

Potentially global market.
Orders are processed with less human involvement.
Relatively cheap for both seller and buyer (no physical shop, no need for phone calls etc.)
Global problems such as differences in trading laws in different countries, bringing international fraudsters to justice etc.
Customers expect a shorter order delivery time.
No face-to-face contact means handling exceptional events such as customer complaints or return of goods is harder.

Technical terms

The suppliers of the product to a company are upstreamdownstream. Managing orders in both directions is called order management.

You must estimate the amount of physical space and time needed to make the product (capacity requirements plan) and the resources needed in terms of materials (the materials flow), workers and equipment (material requirements plan). Together these form the manufacturing resource plan.

Products need to be directed at a target market, the section of the population to whom you want to sell. The target market is determined by the science of population study, demographics. A particular specialist market is called a niche market.

Branding a product involves giving it a particular look and feel. An aggregator is a business that does not sell products itself but provides facilities for other companies to sell things. They may provide a web storefront for other companies, for example, and then take a percentage of the profits.

Business-to-business (B2B) - One organisation trading with another via the Internet. B2B transactions often involve data indexed using XML. XML does not specify exact names for tags, so businesses agree upon an XML schema - a set of rules determining the structure of XML files and which tags they can use.

Business-to-customer (B2C) - An organisation trading with members of the public online.

Consumer-to-consumer (C2C) - Individuals trading with each other via the services of some third party, such as online auctions using E-bay.

Supply Chain Management

Managing the process of generating a product and getting it to customers:

• Estimate the level of consumer demand for your product. Make sure you can meet the demand as it changes. This includes makeing sure that you have enough money to generate the product during times of high demand (financial management).
• Identify ways in which information travels through your system, usually order tracking and payment tracking. Some companies allow customers to track their own orders through the system.

Enterprise Resource Planning (ERP)

Using software, often "bolt-on" (meaning off-the-shelf), to plan all operations in a company, including accounts, research and development, human resources, manufacture, purchasing and marketing.

Applications Programming Interface (API) - a set of commands, functions and variables that are widely agreed upon so that software programmers can develop programs that can communicate with each other.

Dynamic Link Library - A series of files (often with a .dll extension) that provide additional functionality to a program. Programmers "dip into" them for predefined functions.

Formatting information in transactions

XML is widely used, but two alternatives were developed specifically for business transactions:

• Electronic Data Interchange (EDI) has been around since the mid-eighties and is widely used by banks. It provides standard file formats, controlled by the American National Standards Institute (ANSI), for invoices, bills, purchase orders, inventory lists and supply chain information.

  A transaction in EDI is done using a transaction set, containing a header, followed by one or more data segments and then a trailer. Each data segment is a string of data elements (a fact such as a price, quantity in stock etc.) separated by delimiters (separators such as commas).

  There are several flavours of EDI in existence and both trading partners must agree on a format of EDI to use. EDI is often combined with XML to give more flexibility (for instance, plain EDI can be read only by machines, whereas EDI + XML is human-readable).

• Open Buying on the Internet (OBI). This is based on various open technologies (such as HTML/HTTP for displaying and SSL for security and encryption) so it is compatible with most systems.

  OBI transactions involve a requisitioner (a buyer) which is a member of a buying organisationselling organisation, with payments handled by payment authority. All organisations must have an OBI server.

  1. The requisitioner initiates a transaction by placing an order with the seller's OBI server.
  2. The seller's OBI server confirms the order with the buyer's OBI.
  3. Assuming all details (such as requisitioner's identity) are confirmed, the buyer's server re-sends the order.
  4. The seller contacts the payment authority which handles the money side.

Electronic Funds Transfer

The general term for payment using computers. Any particular system must be widely used to be useful (interoperability). Any software or hardware that mediates in a transaction (payment gateway) must ensure:

• The information must be forwarded to the correct parties.
• Both parties must confirm their identities using digital certificates or digital signatures. This gives non-repudiation (parties can't deny that the transaction took place).
• Must ensure information is not altered in transit (payment information integrity).
• Confidentiality - Encryption ensures transaction remains private.

Automated Clearing House (ACH)

A form of EFT in which participating banks clear funds for transactions (e.g. Merchant Warehouse and Link Point). An originator is any person/organisation that makes an entry in the ACH network via an Originating Depository Financial Institution (ODFI). The entry is received by a Receiving Depository Financial Institution (RDFI) on behalf of a receiver (the person/organisation expecting payment). ACH systems differ from country to country, and payments typically take 24 hours to clear.

Two protocols for EFT are Secure Electronic Transactions and Open Trading Protocol.

Secure Electronic Transactions (SET)

This protocol handles not only payments but also things like refunds and returning goods. All steps in a SET transaction are encrypted.

• To register with a bank, both potential shoppers and potential merchants each fill in a form with credit card details (shopper)/company details (merchant).
• The banks validate forms and gives merchants and shoppers signed certificates.
• The shopper uses his certificate to shop with any registered merchant. Both parties present their certificates to the other. The certificate are authenticated, so each party can trust the other. The merchant can also check the shopper has sufficient funds to make the purchase.

SET has the advantage that no credit card numbers are exchanged during transactions.

Open Trading Protocol (OTP)

Protocol for EFT in which all transactions are held as XML data files. Used for both B2B and B2C. Flexible enough to handle unusual transaction such as discounts. It provides receipts that link any payment to the reason for that payment (non-repudiation) and supports the delivery of goods. OTP supports EDI.

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