Electronic Commerce (EC) Technologies and Standards: How They Can Enable Purchasing

Author(s):

Pam Promisel
Pam Promisel, Senior Principal, American Management Systems, Inc. (AMS), Fairfax, VA 22031, 703/227-5814, pamela_promisel@mail.amsinc.com
Patti Hegland
Patti Hegland, Senior Principal, American Management Systems, Inc. (AMS), Fairfax, VA 22031, 703/227-6988, patti_hegland@mail.amsinc.com

83rd Annual International Conference Proceedings - 1998 

Abstract. Based on AMS' understanding of the purchasing business (we have consulted on applying technology to purchasing in over 50 large organizations in both the public and private sector) and electronic commerce technologies and standards (AMS has a Center for Advanced Technology Laboratory on Electronic Commerce and is considered one of the premier thought leaders in this field), we will present a comprehensive review of how EC technologies and standards can be applied to the purchasing business, highlighting an overall definition, a functional overview of how the technology or standard would be applied to the purchasing business and the potential benefits, the issues and challenges, and highlights of existing implementations. Technologies and standards covered will range from traditional EDI to newer Internet and Web-based arenas.

Electronic Commerce technologies are fundamentally changing the way we do business - how we market and sell products and services to our customers, communicate and collaborate with our business partners, and distribute information to our internal staff. Electronic commerce technologies are providing the medium to realize the promise of conducting business electronically to yield competitive advantages.

From computer product catalogs to airline reservations to interactive banking, electronic commerce applications are springing up all around us. But not all electronic commerce applications are equal. While some EC applications can be designed in a number of days, applications requiring advanced security features and integration with back-end systems are major development and systems integration projects. And the business value that EC applications provide seem to be related to the magnitude and complexity of the effort.

Business value of electronic commerce applications vary greatly. For example, an on-line electronic catalog that displays product information provides value to the buyer (and, therefore, to the organization that it belongs to), but a site that offers a catalog, inventory checking, order placement, and on-line payment provides much more value - to the buyer and to the business providing these services.

This presentation will first review traditional Electronic Data Interchange (EDI) and the associated data standards (e.g., ANSI X12), communication technologies (e.g., Value Added Networks (VANs), and data translation technology (e.g., data mappers, translation software). Electronic Commerce (EC) began, in its most formalized state, as Electronic Data Interchange (EDI) in the 1970s. For the past twenty five years, businesses have been implementing EDI technology and standards to increase cost performance and reduce errors. The diagram below summarizes the basic concepts of EDI-enabled purchasing.
(Diagram is not available in text-only format.)

The advent and acceptance of the Internet as a medium to exchange information and transactions has been phenomenal. Reaching your business partners, whether big or small, is more plausible. Not only did the Internet, using TCP/IP, create a common networking infrastructure, but it also solved the problems of downloadable client applications using HTML and JAVA. Hence, any discussion of present day EC technologies capable of enabling purchasing must cover both the Internet as a communication vehicle as well as Web-based EC technologies. Consequently, the majority of this presentation will focus on the integration of EDI and Internet-based technologies, standards, and products.

With the introduction of the Internet and Web based technologies, a whole host of new standards, technologies, and application of both are available to address purchasing transactions. This presentation will cover the use of the Internet vs. VANs as a communications vehicle for purchasing transactions, technologies for sending EDI messages over the Internet (e.g., S/MIME, FTP, etc.), combinations of VANs and the Internet, Web-based EDI, evolving standards (e.g., OBI, XML, VCI, etc.) and the corresponding security technologies and standards (e.g., SET, SSL).

EDI users have been attracted to the Internet by the perception that it represents an opportunity to sharply reduce the cost of using EDI as a business tool. After all, the connection to the Internet is typically priced at a low flat monthly fee with virtually unlimited connect time and no charges for kilocharacters or anything else. But is the Internet a virtually free resource? And how can it effectively support EDI? The presentation will present the advantages and disadvantages of using the Internet vs. traditional VANs for sending EDI messages.

Secure Multipurpose Internet Mail Extensions (S/MIME) and File Transfer Protocol (FTP) are two different methods for sending EDI messages over the Internet. S/MIME is a form of multipurpose Internet mail extensions (MIME) with public key encryption added to address security issues. MIME is designed to attach non-text data to standard Email messages. Standard Email makes use of the Internet's decentralized structure to route mail by the most open route at any particular time. FTP, on the other hand, requires one computer to make a direct connection over the Internet with another computer before data is transferred. Advantages and disadvantages of both methods will be discussed.

Confronted with the lure of the Internet and alternative forms of electronic commerce that eliminate the need for traditional EDI services, major VANs are developing strategies to embrace the Internet rather than compete with it. The presentation will discuss what VAN vendors are doing to confront the Internet challenge.

Web-based EDI provides a browser interface to traditional EDI applications. Because only a browser is required to participate, more small and medium sized companies can now afford to participate in EC initiatives. The Open Buying on the Internet (OBI) standard creates a common set of requirements for purchasing transactions, including streamlining of technical specfications and guidelines for transporting ordering information over the Internet. The eXtensible Markup Language (XML) is a new Web-based markup language designed to allow searching, moving, displaying, and otherwise manipulating information more easily than other languages. XML has the potential to support traditional EDI functions more efficiently and cheaply. Value Chain Initiative (VCI) is a Microsoft-led initiative aimed at creating a plug-and-play, interoperable, low administration standard for supply-chain applications. The VCI goal is to make data across the supply chain more dynamic, making it more useful to all organizations in the supply chain. The presentation will provide updates on the progress of these standards and initiatives and address their potential impact on the purchasing environment. Finally, the presentation will briefly cover current EC security standards and technologies evolving in the purchasing arena.


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