Shoppers Plug in to Cyberspace

A number of upstart technologies are taking an early lead in the race to put shopping malls in cyberspace after having cleared a few of the major hurdles cluttering electronic commerce's ever-winding path.

"The electronic catalog market is still in its infancy, but it's in a perfect position to begin a very hyper rate of growth because all of the components are finally falling into place," predicted Dave Beers, president of FedCenter, which facilitates electronic commerce transactions between government procurement employees and General Services Administration Schedule vendors. (See sidebar) "That's not just with us, but everywhere."

Of course, the industry has long had high hopes for electronic cataloging -- the selection, purchasing and delivery arrangements of products via electronic exchange. This promises huge benefits to its supporters, including significantly lower procurement cycle costs, faster turnaround times, improved efficiency, the ability to do the same amount of business with less employees, and improved customer service thanks to the automation of repetitive processes, access to real-time information and the ability to conduct business 24 hours a day, seven days a week.

"It's the ultimate incarnation, having a situation where buyers can sit at a PC, look through products, make their selection, have access to accurate pricing, availability and specification, place the order, and receive accurate delivery options and delivery confirmation," said David Wolf, president of Elcom Systems, a Norwood, Mass.-based provider of electronic commerce solutions. "And then on the seller's side, everything is done electronically, meaning that from the beginning of the procurement cycle, the product is never handled until it needs to be taken off the shelf."

In one-to-one, directly connected electronic commerce programs, such advantages have already been demonstrated. But now government and businesses are beginning to broaden their systems to include multiple (albeit already established and therefore trusted) trading partners and across varied communication vehicles such as the Internet.

"One of the things that is really fueling the takeoff in electronic commerce and cataloging programs is a user bias and comfort level that is increasing over time," Wolf said. "What's more, practitioners on the supply side are actually starting to see some of the benefits that have been talked about for years. That's making a huge difference."

Solving the Security Issue

In a technical sense, security has become the biggest hurdle, according to Internet experts. Most systems now rely on three different components to guarantee the safety and integrity of data shipped over unsecured lines. Authentication ensures that the user requesting entry to an electronic commerce system is exactly who he claims to be. Encryption of data packets offers both privacy and integrity. Finally, non-repudiation is a system mechanism such as an electronic signature that secures the system against users who later might try to deny making the transaction.

"The security issues are being addressed right now, and to a large degree they've been solved," said Liz Sara, vice president of sales and marketing for SpaceWorks Inc., a Rockville, Md.-based company that offers client/server electronic commerce software. "The RSA Data Security Encryption software, for example, is being used by many companies including us, which adds that level of assurance that people needed to feel comfortable giving out more sensitive information, such as people's account numbers."

Nonetheless, legal questions run rampant concerning the issue of commerce between computers, especially as more and more software applications become Internet-enabled. According to security experts, determining the legal pitfalls inherent in electronic commerce is an issue that must be resolved fully before electronic catalogs can become a pervasive offering.

The solution? A public key infrastructure. This relatively simple technical concept consists of a piece of cryptography software running on a UNIX server that allows users to encrypt data and prove their identity through a digital signature. The business and legal implications involved, however, are considerably more complicated.

"A public key infrastructure would broker trust in a network, but it's really more of a legal issue than a technical one," said Brian O'Higgins, director of Northern Telecom Secure Networks, Ottowa, Ontario, which has developed Entrust, a scalable security product.

"If a company conducts an electronic transaction and someone disputes the transaction by claiming they didn't make the transaction, the company must be certain they will win in dispute resolution. So their lawyers and auditors must understand the potential issues involved and what in this case will constitute due process, due care, due diligence."

As a result, the rollout of electronic catalogs, mirroring the adoption of other technologies such as ATM machines and electronic data interchange, will occur in a hub and spoke fashion. Many companies have begun implementing narrowly defined public key infrastructures for internal use by creating electronic identities for their employees. Eventually, they'll extend the infrastructure to include their most trusted trading partners.

Rounding the Turn

A well-orchestrated public key infrastructure is optimal, but that hasn't stopped many companies from conducting electronic buying and selling with established customers. Some existing programs simply offer pricing and availability information. Others take orders but still bill in the traditional way. Other companies are already using full-cycle electronic catalog systems, including El Segundo, Calif.-based Merisel Inc. and Dallas-based Daisytek International, both major wholesale distributors of computer products. Merisel, in fact, is offering its resellers access to the private system (called SELline) via the Internet.

Wolf noted that most electronic commerce software providers are focusing on the business-to-business marketplace. "For us, the key is to attract relationships that have the following attributes: an established relationship between the buyer and seller, typically a relationship of some level of familiarity and trust; a purchasing and procurement activity that has repetition in its kinds of products or kinds of transactions; and when information is extremely critical because of volatility, such as prices are always changing, delivery terms are very critical or coordination among multiple deliveries is critical."

Such relationships, he added, are more likely to be found among companies providing computer and industrial products or those with "a distribution-oriented focus where it's very important that the transaction be consistent, secure and complete."

Although legal issues remain, most businesses believe the existing security features are strong enough to protect transactions conducted with trusted partners. "I think people are considering whether the level of security available is appropriate to their needs," Sara said. "A different level of security is obviously required for a known and trusted partner than for an unknown user who wants to make a one-time or occasional purchase over the system."

Down the Stretch

Experts say setting up an effective and successful electronic catalog involves technical, practical and legal considerations. Their list of do's and don'ts follows:

- Coordinate enterprisewide to avoid redundancy of effort and tasks in different departments. "When senior managers are sitting down and looking at ways to be more efficient, remember that different departments are likely going to interact with the same customer on a different set of products or for a different set of reasons," said Sara. "Electronic commerce is a chance to bring everything together in one place, but it requires a great deal of up-front and deliberate planning."

- Listen to your users and determine what benefits they're looking to gain from on-line commerce. Is it lower prices or lower cost of procurement cycle? Access to real-time, reliable pricing and availability information? It's often not obvious at first glance. An oil drilling products company noted that one of its customers' most critical needs was the ability to accurately identify an individual component. The reseller is addressing this requirement by building a graphically rich catalog that gives users the ability to zoom closely in on each product.

- Make certain there's a strong and practical need for such a service among your customers. Again, the most successful electronic commerce solutions currently in place work best with established customers who procure large, repetitive volumes of products or who require timely information or delivery options. At this juncture, companies that cater to customers with infrequent purchases are wasting their efforts.

- Technically, a full-cycle electronic ordering system requires, among other things, EDI capability, security features that include authentication, encryption and non-repudiation, and electronic commerce software that can work with several different link-up methods, including direct modem, local and wide area networks, and the Internet.

- When partnering with a provider of electronic commerce solutions, be certain it offers more than just an enabling infrastructure. Look for a surrounding support system of consulting, custom coding, systems analysis, product and project management, and strong customer service and availability.

- Finally, don't just take the way you've always done business and convert it to an electronic medium. That's the fastest way to fail.

Eyeing the Finish

Despite the advances of the past 18 months, electronic ordering systems and other electronic commerce technologies are likely to be a phenomenon in 2000 rather than in 1997, industry watchers note.

Still the future is clear. Security issues are slowly being solved, and demand among customers increases further as government looks to efficiencies posed by the technology and as wireless technologies come on-line. "The market will expand significantly," Sara concluded. "It's the old any-to-any, where anybody will be able to connect anywhere to anybody else in the world. That's a very enticing proposition for businesses in today's global economy."

O'Higgins agreed. "Electronic commerce really is poised to take off. No question, there will be exponential growth. You just have to define the time scale."