e-Commerce: The Third Wave - KAMBING.ui.ac.idkambing.ui.ac.id/.../e-commerce-the-third-wave-1999.pdfe-Commerce: The Third Wave In its first wave,e-Commerce was little more than “brochureware.”

ee--CCoommmmeerrccee::The Third Wave

By the Technology Strategy Team of EC Cubed

Table of Contents

Welcome to e-Commerce: The Third Wave.........................................1

Understanding e-Commerce .................................................................2

e-Commerce: The Third Wave ..............................................................3

Agile Software for Agile Companies.....................................................7

The Way Forward ...................................................................................11

Business and Technology Architecture:The Key to e-Commerce Development................................................12

Mission-Critical e-Commerce................................................................14

© Copyright 1999. EC Cubed, Inc. All Rights Reserved.


Welcome to e-Commerce: The Third Wave

1

EC Cubed believes, and Ontology.Org, CSC, Forrester Research, the Meta Group, and others concur, thatapplication components are the key to unlocking the potential of cross enterprise e-Commerce. At ECCubed the approach is referred to as Inter-enterprise Process Engineering (IPE). Quoting from EC Cubed’slandmark white paper,e-Commerce: The Third Wave,“For some forward thinking companies a thirdwave of e-Commerce has begun. Companies have come to realize that e-Commerce is neither just abuy-side nor sell-side package. The third wave companies have learned that mission-critical businessopportunities abound. To them,e-Commerce is an infrastructure for a whole new way of doing business.These companies have learned that if they extend their business processes across company boundariesand integrate them with their suppliers’ and customers’ business processes something totally newstarts to happen.”

The component-based business infrastructure described in the Third Wave white paper highlights howall four major e-Commerce application categories can be integrated with reusable application compo-nents. Going beyond these highlights, EC Cubed has prepared a series of white papers to drill down in each of the categories that form the cornerstone of e-Commerce integration: Vendor ManagementSystems, I-Markets,Customer Care,and Extended Supply Chain. Before reading these application specificwhite papers, we suggest reading the Third Wave white paper to provide background and context. Thepaper is available at EC Cubed’s web site, www.eccubed.com.

A common business strategy theme is woven throughout all of EC Cubed’s educational white papers,“IPE does not result in an end state. It is an on-going process that enables virtual corporations to evolvein a continually changing business ecosystem. Organization form and function must be able to senseand respond to change. Agility is the byword of success—an agile business empowered by agile infor-mation systems. No longer can software development be on the critical path for organizational andprocess change. With change being the constant variable, a new software development paradigm—component-based development—is essential to building agile, virtual corporations.”

The entire EC Cubed team invites you to read, enjoy and profit from these pages. We look forward toyour thoughts and comments as we pursue our vision for the future.

EC Cubed

[email protected]

'The link between technology and business innovation goes back to the very beginning—it was a technology

breakthrough that enabled trade and gave birth to commerce. The development of keeled hull ships by

the Phoenicians in 2000 BC made it possible to sail against the winds and go beyond the shores to the

high seas of the Mediterranean. By doing something never before possible, the Phoenicians broke the

bonds of geography and developed a flourishing trade with other peoples. Today, the Internet has broken

the bonds of both time and distance and set the stage for profound, global change. Some business

observers have given the event little notice, thinking that doing business on the Internet is simply a fad

and will fade—after all, who is actually making money selling their wares on the Web? Furthermore, what

fool would open up their business systems to the world, especially considering the perceived lack of

security of the Internet?

Understanding e-Commerce

revolution are shrouded with themist and fog of dawn. Some busi-nesses have already recognizedthe start of a new era of business,the digital era, and have takendecisive action to change theirbusiness models. Competingagainst these transformed compa-nies will become increasingly difficult, and those who wait forthe full light of day before they act will find themselves at a distinct disadvantage.

According to the Association forElectronic Commerce, a simpledefinition of e-Commerce is“doing business electronically.2”Sound fuzzy and ill-defined? It is.According to this definition, usingthe telephone to conduct businessis e-Commerce. In large corpora-tions e-Commerce is often equatedto electronic data interchange(EDI) where structured messagesrepresenting standard businessforms are exchanged over privatenetworks. Perhaps the most com-mon context in which the term isused as of the writing of this whitepaper relates to the use of theInternet and more specifically theWorld Wide Web as the infrastruc-ture for conducting commerce. Ineveryday usage the terms internetcommerce or I-commerce, web-commerce and e-business are ofteninterchanged with e-Commerce.So, depending on who is asked,e-Commerce will have a wide vari-ety of definitions and even differing

The signs of technology-enabledtransformation are not alwaysclear at first. The British parliamentscoffed at the invention of the tele-phone since the Britons alreadyhad enough messengers. In the1940s,Thomas Watson, Chairmanof IBM, turned down the offer to

buy the patent rights to the elec-tronic digital computer with hisprediction, “I think there is a worldmarket for maybe five computers.”So much for predicting marketsand business impact when disrup-tive technology first appears.Although the Internet enables anew era of commerce, electroniccommerce, the signs of a business

2

names. This is not bad since vaguedefinitions and various names helpto keep our thinking open.

To better capture the spirit of e-Commerce, we can turn to thedefinition proffered by the industryconsortium, CommerceNet,“e-Commerce is the use of inter-networked computers to createand transform business relation-ships.3”CommerceNet elaborates,“It is most commonly associatedwith buying and selling informa-tion, products, and services via theInternet,but it is also used to transferand share information within organizations through intranets to improve decision-making andeliminate duplication of effort.The new paradigm of e-Commerceis built not just on transactions buton building, sustaining and improv-ing relationships, both existing and potential.”Figure 1 provides a structural context for our e-Commerce definition.

E-Commerce is an infrastructurefor extending a company’s inward-focused, unique business processesto customers, trade partners, suppli-ers and distributors with new,outward-facing applications. Thesenew applications are greater thanthe sum of a company’s internalcomputer applications added tothe applications of its partners.The interconnections make it pos-sible to do things in ways not pre-viously possible by eliminating

In July, 1997, the White House

released a document declaring

a revolution, �� a revolution

that is just as profound as

the change in the economy

that came with the

Industrial Revolution.1 �



e-Commerce: The Third Wave

In its first wave, e-Commerce waslittle more than “brochureware.”The Web has created a globalrepository for documents andother forms of multimedia.Everyone can be a publisher ofinformation with as little as anHTML-enabled word processor,a free file transfer program, and a $19 a month account with anInternet service provider. Productand service information can bedisplayed easily and accessed any-where, anytime, giving the smallestof businesses a “Web presence.”Forrester Research reported thatby the end of 1996 about 80% ofFortune 500 companies had estab-lished a Web presence comparedto 34% in 1995.4

The second wave of e-Commerceis well under way,giving companiesthe capability to handle transactionselectronically. Perceived and realobstacles had to be overcomebefore electronic transactionsbecame a widespread means ofbuying and selling on the Internet.According to the same Forrester

time and distance. Opportunitiesand challenges permeate theenterprise affecting R&D, engineer-ing,manufacturing and production,supply chains, marketing, sales,and customer care. Because itreaches directly into these corebusiness processes that are thelifeblood of the enterprise,e-Commerce is a mission-criticalbusiness issue. From this perspec-tive it becomes clear thate-Commerce is not something acorporation can just go out andbuy. Neither is it based on specula-tion, but rather on the experienceof a handful of companies whoalready are using it to streamlinetheir business processes, procurematerials, sell their products, auto-mate customer service and createnew wealth. Electronic commerceis turning industries upside downand forcing enterprises to refocustheir information systems from theinside out.

3

report mentioned above,only 5% ofthe Fortune 500 companies with aWeb presence handled transac-tions on the Web in 1996. Themajor barriers included securityon the Internet, lack of acceptedstandards for authentication andpayments, non-repudiation, andgeneral fear and uncertainty byconsumers. Fortunately, severalstandards and commercial offeringsfor handling transactions haveappeared including SET for creditcards, Open Buying on the Internet(OBI), Cybercash and InternetBill.Attracted by the dramatic costsavings of electronic transactionsand the opportunity to exploitnew revenue channels, companieshave purchased stand-alone pro-curement packages to streamlinepurchasing and stand-alone store-front packages to begin selling onthe Web.

Most commercially available e-Commerce packages focus oneither the buyer model or the sellermodel of doing business. As aresult, e-Commerce applications

Figure 1. Extending Inward-Focused Processes Outward

Source: EC Cubed

Figure 2. e-Commerce Application Categories


In the vendor management cate-gory, maintenance, repair and oper-ations (MRO) procurement is themost common business-to-busi-ness e-Commerce application. MROprocurement is used to reducecosts in the purchasing of officesupplies and other non-productionmaterials needed by a business.As an example in the procurementcategory,GE bought $1 billion worthof supplies through its TradingProcess Network (TPN) in 1997and expects to be procuring over$5 billion over the Internet by 2000.Meanwhile, in the extendedvalue/supply chain category, GEAircraft Engines used its integratedlogistics solution to reduce ordercycle time by 15 to 30 days andreduced the cost of creating a pur-chase order from $100 to $5. To besuccessful, buy-side initiatives willhave to deliver such breakthroughefficiencies and achieve dramaticcost reductions.

Catalog sales such as Amazon.com’snow famous book and music sellingsite is an example of an I-Market.McKesson, a $17 billion pharma-ceutical wholesaler, has developedsuch a comprehensive customercare system on the Web that it has transformed itself from a drug distribution company to a value-added provider in the healthcareindustry. In-depth discussions ofeach of the four categories areavailable in EC Cubed’s applica-tion white papers.

are usually labeled as either “buy-side”or “sell-side,”depending onwhether the company hosting theapplication is buying or sellingproducts or services. A third business model, the broker model,combines buy and sell-side func-tionality into one site and aggre-gates both buyers and sellers.These cybermediaries add valuefor the buyer by reducing the searchspace for appropriate suppliers,and for the seller by being foundmore easily by potential customers.

E-Commerce applications are fur-ther categorized by the marketsthey serve, business-to-business orbusiness-to-consumer. The differ-ence is largely that of buyingbehavior: shopping versus procure-ment. Consumers do a lot ofbrowsing and price shopping,they are subject to the influence of advertising and merchandising,and many are prone to impulsebuying. Purchasing agents, on theother hand, are time constrainedto get their tasks done, cannot bedistracted with glitzy advertising,do not buy on impulse, and gener-ally order from catalogs whereprices have been prenegotiated.

As shown in Figure 2, e-Commerceapplications fall into four majorcategories:Vendor Management,Extended Value/Supply Chain,I-Market and Customer Care.

4

To be successful, sell-side initiativeshave to focus on revenue growthopportunities, holistic customerrelationship management, engi-neering consumer processes thatdelight the user, and building com-munities of interest. In addition,sell-side initiatives may need tocater to both business-to-businessand business-to-consumer marketssimultaneously. For example, OfficeDepot sells to large corporateaccounts meeting their procure-ment needs with prearrangedterms and custom catalogs whilereaching the retail consumer mar-ket as well as those in-between, thesmall office, home office (SOHO)market space. Designing their e-Commerce systems specificallyfor the unique requirements ofeach of these subtly different customers is absolutely essentialfor Office Depot.

Most companies, of course, engagein both roles of buyer and seller,sometimes simultaneously in asingle commerce transaction. Thusextending a company’s existingbusiness processes from the insideout must begin with a thoroughanalysis and understanding of customers’, suppliers’ and tradingpartners’ requirements, and design-ing e-Commerce systems from theoutside in.

Whether developing e-Commerceapplications in-house or pursuingthe package route, a holistic viewof e-Commerce initiatives is neededin order to avoid the many pitfallsthat result from taking separateand isolated views. Some largecorporations already have identifiedmore than 70 e-Commerce initia-tives, not just the two buying andselling thrusts. If various lines ofbusiness in these large enterprisesrushed out to buy their individualpoint solutions, the compromisesof packaged software would berevealed quickly. Trying to realizeeach of these initiatives individu-ally would mean attempting to tietogether and maintain a multitudeof business processes and islandsof data in the enterprise’s new andexisting systems. Rather than weav-ing a tapestry, multiple stand-alone initiatives would tie their systemsSource: EC Cubed


and their company into knots asillustrated on the left side of Figure3. Companies experienced with multiple e-Commerce applicationshave learned that they need a unified, incremental approachcapable of supporting and sustain-ing multiple and continuouslyevolving e-Commerce initiatives—they need strategies for e-Commerce integration.

Global 2000 companies have atremendous asset base in theirexisting computer systems. Thesesystems embody their unique business philosophy, policies, andprocesses. Smart companies willseek to adapt, not to obliterate,their legacy applications as theyembrace e-Commerce initiatives.Much of the functionality neededto implement multiple and diversee-Commerce applications is identical or similar and thus canbe reused—a key to e-Commerceintegration. Core e-Commercefunctionality includes user authen-tication and authorization, userprofile management, workflowmanagement, event notification,negotiation and collaboration, anddata integration with enterprisedata. These core e-Commerce components are illustrated on theright side of Figure 3. E-Commerceintegration is the key to sustainablebusiness strategy.

5

applications for e-Commerce failwoefully because they supportonly simplistic procurement and catalog selling scenarios but havenothing to match the complexityof real world commerce.

For some forward thinking compa-nies, however, a third wave of e-Commerce has begun. Withexperience as their teacher, thesecompanies have come to realizethat e-Commerce is neither just a buy-side nor sell-side package.The third wave companies havelearned that mission-critical busi-ness opportunities abound. To them,e-Commerce is an infrastructure fora whole new way of doing business.They have learned that if theyextend their business processesacross company boundaries andintegrate them with their suppliers’

e-Commerce Knots

Figure 4 summarizes the threewaves of e-Commerce. The firstwave was about HTML andbrochureware. The second wave is about transactions using homegrown or packaged software aspoint solutions for procurementand online catalog selling. GabrielGross, President of Centre InternetEuropeen, summarizes the currentstate of electronic commerceapplications as “mainly limited totwo functionalities: cataloging onone side and payment facilities on the other side. The [current]electronic commerce world is inpractice a lot less sophisticatedthan real world commerce whereseveral levels of interaction cantake place between a potentialclient and vendor, and several levels of intermediaries can act or interfere.5”Existing packaged

Source: EC Cubed

e-Commerce Integration

Source: EC Cubed

Figure 3. Untying e-Commerce Knots with core e-Commerce Components

Figure 5. Inter-enterprise Business Processes

Figure 4. Three Waves of e-Commerce


and customers’ business processes,something new starts to happen.

Third wave companies are redesign-ing business processes so that theycross enterprise boundaries toeradicate duplicate processes, inef-fective hand-offs and disconnectsbetween and among enterprises.Virtual corporations are being created that have shared businessgoals, common planning, and performance management tools.Inter-enterprise Process Engineering(IPE) is their competitive weapon

6

facturing, distribution or services.In any industry, an enterprise islocated in a value chain where it buys goods and services from suppliers, adds value, and sells tocustomers. Value chain analysiswas pioneered two decades agoby Harvard’s competitive strategyauthority, Michael Porter. Ratherthat outdate Porter’s work6,e-Commerce enables it. E-Commerceprovides the business infrastructurefor realizing Porter’s visions, andIPE provides the methods for com-petitive value chain engineering.Customer-facing processes includecataloging, order entry, customersupport and overall customer relationship management. Supplier-facing processes include MRO andsupply chain procurement, traveland entertainment procurementand tracking, logistics,and collabo-rative supply and demand planning.

Figure 6 shows how clusters ofinter-enterprise business processesresult in the four major categoriesof e-Commerce applications.Companies will not attempt tobuild these applications all atonce. Such an effort would over-whelm any enterprise. Instead,e-Commerce initiatives will belaunched in the quadrants in anincremental and iterative manner.For example, key inter-enterprisebusiness processes may be engi-neered and deployed in the vendor management quadrant.Functionality will be added tothese processes iteratively, andadditional processes will be engineered and deployed incre-mentally. It is possible to proceedwith work in parallel, but resourcerestrictions and other constraintswill prevent companies fromattempting too much at one time.To maintain the cohesion neededin the ultimate digital business,each e-Commerce initiative mustbe based on a common businessand technology architecturedesigned for inter-enterprise process engineering.

Inter-enterprise process engineer-ing, however, does not result in anend state. It is an on-going processthat enables virtual corporations to evolve in a continually changing

for designing and implementinghyper-efficient business processesthat are integrated in real-time andjointly owned by suppliers andcustomers. Cheaper, better, andfaster takes on a whole newmeaning in these 21st centurycorporations.

Drilling down one level, Figure 5illustrates a small sampling of busi-ness processes being integratedelectronically across corporateboundaries. These processes applyto all kinds of businesses: manu-

Source: EC Cubed

Source: EC Cubed


To achieve coherence and managethe complexity and change inher-ent in multiple e-Commerce appli-cations, an overarching structure isneeded—an application architec-ture. An application architecturerationalizes,arranges and connectselements for a purpose. IvarJacobon explains, “The role ofarchitecture is: to conceptualizethe design in a form that develop-ers and stakeholders can under-stand; to guide construction duringthe first development cycle, and inthe future evolution of the system;and to enable management tostructure the project and the orga-nization itself around the architec-tural elements.7 “The results of goodarchitecture will be a cost-effectiveuse of legacy assets and commer-cially available components, andresilience to change. With goodarchitecture business applicationswill be scalable and extensible.Architecture provides a decisionframework for the difficult build or buy dilemma. The structuralelements along with their inter-faces that comprise the systemallow design tradeoffs based oncost and technological constraints.Buy or build decisions and incor-poration of new technology canbe determined for the structuralelements rather than the overall

business ecosystem. Organizationform and function must be able to sense and respond to change.Agility is the byword of success—an agile business empowered by agile information systems. Nolonger can software developmentbe on the critical path for organi-zational and process change. Withchange being the constant variable,a new software developmentparadigm—component-baseddevelopment—is essential to building agile, virtual corporations.

7

architecture. Likewise, companiescan upgrade their applicationsover time while maintainingintegrity and interoperability with other enterprise applications.

Distributed object computing isnow recognized as the way forwardin building enterprise informationarchitectures that can operate inadvanced client/server, intranetand internet environments. Inessence, using objects to buildinformation systems is like build-ing a simulation with businessobjects representing the people,places, things and events that arefound in the business setting ordomain. Business objects reflectthe real world and thus greatlyenhance understanding and communication among systemsdevelopers and business people.And business objects reduce complexity because programmersdo not need to know how anobject works internally. They onlyneed to know what the object isand the services it provides.

Object technology, however, doeshave some downsides including a steep learning curve. Businessobjects, though they representthings in the real world, becomeunwieldy when they are combinedand recombined in large-scalecommercial applications. What is

needed are ensembles of businessobjects that provide major chunksof application functionality (e.g.pre-programmed workflow, transac-tion processing and user eventnotification) that can be snappedtogether to create complete busi-ness applications. This approach is embodied in the next step in theevolution beyond objects, softwarecomponents.

Components are self-containedpackages of functionality that haveclearly defined,open interfaces thatoffer high-level application services.Components can be distributeddynamically for reuse across mul-tiple applications and heteroge-neous computing platforms. Thelater characteristic is why Java™has had such a dramatic impacton enterprise computing and com-ponent development, and why theeXtensible Markup Language (XML)is essential for developing a sharedInternet file system.

Components take the best featuresof objects to a higher level ofabstraction that is learned moreeasily by mainstream commercialsoftware developers. Chris Stone, aNovell Vice President and formerCEO of the Object ManagementGroup explains, “Componentspromise to be the Lego blocks of computing. To accomplish this,

Agile Software for Agile Companies

Source: EC Cubed

Figure 6. Inter-enterprise Process Integration With e-Commerce Applications


of business rules and quickresponse to changing businessrequirements. And because majorsoftware vendors are committed to a component architecture,applications can mix and matchbest-of-breed solutions.

In his 1986 landmark book, Object-Oriented Programming, Brad Coxforecast a software revolution thatwould result from taking an engi-neering approach to programming.Electrical engineers do not designand build hardware from scratch.Instead they create a continuingstream of new and ever more marvelous electronic devices usingprefabricated ingredients, integratedchips (hardware ICs). Cox redictedthat software factories would fabri-cate, customize, and assemble software from standard reusableparts—Software ICs. After a decadeof advances that took the theoryand practice of object technologyfrom a programming construct to a distributed computing infrastruc-ture, Cox’s software revolution isnow at full fervor. New de facto andopen standards have emerged tomake it possible to develop large-scale distributed computing systemswith “plug and play”Group’s CORBA3, Sun Microsystems’ EnterpriseJavaBeans, and Microsoft’s DCOM.

components must encapsulateuseful, manageable and intuitivesolutions to real-world businessproblems. Components, then, mustenable IT professionals to useobject technology at meaningfuland relevant levels of abstraction,

while the system and serviceproviders worry about the low-levelobject and system interactions.8”

A component-based applicationarchitecture provides the businessbenefits of rapid applicationsdevelopment for quick time tomarket,enterprise-wide consistency

8

The telephone is easy to use whiletelecommunications technology isvery complex. Likewise, a browseris easy to use while Web technologyis very complex. Industrialstrength server-side componentsare needed to deal with the com-plexity of the underlying informa-tion systems and distributedcomputing infrastructures. Withcomponents, solution developerscan “plug into”standard prepro-grammed services such as userauthentication, workflow, datainterchange, transaction process-ing, permanent storage of objects,and event handling services.Developers ask for the serviceswithout having to know the internalworkings of the components thatdeliver them. The low level systemsservices call on the actual technol-ogy infrastructure that may consistof wrapped legacy systems as well as services provided by native objects.

Components suppress the com-plexity of the underlying systemstechnology, meeting Chris Stone’srequirement for a clear separationof concerns: component construc-tion versus component assembly.Plug-and-play business applicationcomponents can be assembled or“glued together”rapidly to developcomplex distributed applicationsneeded for e-Commerce. Howimportant is component-baseddevelopment to large corporations?Research by the META Grouprevealed that “By 2001,most Global2000 companies will use a “softwarefactory”model to implement newapplication systems, requiringdevelopers to move from a “crafts-man” approach to a culture ofassembly and reuse. These applica-tions will be component-based,message-enabled, and event-driven,using an n-tier design that willleverage enterprises’ capacity-on-demand capability. “Today compo-nents are often thought of as beingclient-side technology, but the roleof server-side component technol-ogy will be paramount as compa-nies demand agile software in theface of accelerating business change.

Source: EC Cubed

Figure 7. E-Commerce Applications

and Component Logical Architecture

� use object technology at

meaningful and relevant

levels of abstraction, while the

system and service providers

worry about the low-level

object and system interactions �


housing and logistics in manufac-turing industries.

The final step in the component-based development process is theconfiguration of the componentsto incorporate the organization’sunique business rules and userpresentation and navigation. It is in this step that a company’s com-petitive advantage is built on topof best-of-breed cross-application,application-specific and industry-specific components, and embed-ded in its e-Commerce applications.The user may be a human in whichcase the presentation and naviga-tion layer is browser centric. Theuser also may be another computerapplication, perhaps a supplier’sorder entry application. In thiscase the presentation and naviga-tion layer concerns program-to-program interactions and data—aprocess known as web automation.In modern distributed computingarchitectures both users and appli-cations can be distributed aroundthe globe.

The position of e-Commerce application components within adistributed computing architectureis shown in Figure 8. Residing onstate-of-the-art application servers,application components use standards-based middleware

A logical architecture for compo-nent-based development of e-Commerce applications can be described in layers as shown in Figure 7. The technology infras-tructure consists of combinationsof legacy applications that havebeen wrapped to appear andfunction as business objects,and services provided directly by a distributed object platform(persistence, transaction process-ing, event services and the like).

Component-based developmentfor e-Commerce applications is a process of assembly and refine-ment. The process begins withcross-application components that provide functionality commonto most types of e-Commerceapplications. Typical of such corecomponents are user profile man-agement,authentication,authoriza-tion, data management,workflow,negotiation, collaboration, andevent notification. These cross-application components can becustomized and extended to formapplication-specific components.For example, in a procurementapplication,a profiling componentwill contain attributes for identifyinga user’s role and buying power.When applied to an I-Market application, the profiling compo-nent will be extended to holdinformation that can be used totrack customer buying patterns.In addition to the tailored cross-application components, applica-tion-specific components willinclude best-of-breed searchengines, shopping carts, catalogsor other elements required for theapplication. These may be built in-house or purchased.

Cross-application components alsocan be extended to develop indus-try-specific components. For exam-ple, in a manufacturing industry a workflow component can beextended to handle work-in-progressand integrate workflows acrossenterprises to make “just-in-time”a reality. Additional best-of-breedindustry-specific components areadded to the framework to providestructure and behavior commonto companies in a given industry:for example,cost accounting,ware-

9

(e.g. CORBA, COM+, EJB) to inte-grate e-Commerce applicationswith legacy applications, existingdatabases, and ERP systems. Thedistributed component architectureallows the enterprise to leverage itsunique business processes and poli-cies embedded in these systems andrefocus them from the inside,out.

These brief paragraphs reveal abreakthrough that has been soughtsince the beginning of softwaredevelopment—true software reuse!Notice that the common, cross-application components will beused throughout the growing port-folio of e-Commerce applications.The architecture is flexible andmeant to evolve. Initially, of course,a company has no components.As it proceeds to build its nextgeneration systems it will make or,more likely, buy the componentsthat will populate a growing repos-itory. When necessary, the architec-ture allows developers to godirectly to the underlying businessobjects that the componentsencapsulate or directly to theunderlying technology infrastruc-ture or legacy systems. Over timethe architecture will accommodaterobust and adaptive informationsystems that embrace rather thancringe at business change. Its over-arching structure will allow compa-

Source: EC Cubed

Figure 8. A Distributed Component Architecture for

e-Commerce Applications


form the foundation for refocusinginformation systems from theinside out.

The leading IT research firms confirm the approach as shownin Figure 10. The Meta Group identifies seven fundamental components at the heart of theirelectronic process interchangemodel: information boundaries,business rules, messaging, work-flow, event/process management,interchange protocols, and tradingservices. Forrester Research rein-forces the message as they advisecompanies to create object wrap-pers for their legacy applicationsand snap in new, outward-facingcomponents to build internetcommerce applications. They

nies to grow the software theyneed to compete for the future.

Joined electronically, third wavecompanies must share a commonfoundation for integrating theirunique business processes andembrace the component paradigmas the way forward. Their corebusiness processes are embeddedin legacy, enterprise resource planning (ERP) and client/serversystems. In order to retarget theseinternal systems outward, commoninter-enterprise application func-tions are needed. As shown inFigure 9, information boundaries,workflow/process management,trading services, searching andinformation filtering, data/processintegration, and event notification

10

advocate an outward-in replace-ment of legacy functionality over time.

The essence of e-Commerce applications is that they mustdefine “the rules of engagement”needed for process and data inte-gration with trading partners.These are expressed in businesslogic that is unique and specific toeach organization and applicationscenario. However, what is not specific to each business are thecore e-Commerce componentsunderlying the business logic.These common, cross-applicationcomponents form the foundationfor inter-enterprise integration andimplementing the third wave of e-Commerce.

In the very first line of their classicwork, Reengineering the Corpora-tion, Hammer and Champy declare“that American corporations mustundertake nothing less than a radi-cal reinvention of how they dotheir work.9”Their clarion call tomanagement in the early 1990sushered in a business revolutionand reshaped the landscape ofbusiness practice. Their messagewas to tear down the stovepipes of

Source: META Group

Source: EC Cubed

Source: Forrester

Figure 9. e-Commerce Common

Application Functionality

Figure 10. Meta�s Electronic Process Interchange

and Forrester�s Outward-In Replacement Model

The WayForward

© Copyright 1999. EC Cubed, Inc. All Rights Reserved. 11

functional management. They dis-pensed with the wisdom of AdamSmith’s specialization of labor andhundreds of years of industrialmanagement “best practice.” Theytore apart organizations whosespecialized departmentsoptimized their individual tasks(often at the expense of the over-all customer-facing process) andreunified those tasks into coher-ent, end-to-end business processesthat delivered value to customers.Their prescriptions were not basedon magic, they were based on theenabling role of information tech-nology. Herein lies the wisdom oftheir message. They recast the waya company must think about tech-nology. They assert that a companythat equates technology withautomation cannot reengineer.A company that looks at and seeksto automate what they are doingcannot innovate, they simply rein-force and speed up old ways ofdoing things. Hammer and Champyrephrased the technology question:“How can we use technology toallow us to do things we are notalready doing?” The focus of thisnew business reengineering revo-lution was underway. The focus of the business reengineering revolution was internal, on howthe company must reorganize and streamline work.

As the ’90s draw to a close it isonce again time to ask, “What ifyou could do something that hasnever before been possible? Whatif that something fundamentallyalters what it is you do?” The resultwould be a paradigm shift. TheInternet makes it possible to dothings that were never before pos-sible. The Internet’s distinguishingcharacteristic is ubiquity (existingor apparently existing everywhereat the same time), an attribute thatcan transform the very fabric ofsociety and commerce. Déjà vu—it’s reengineering all over again,only this time it’s on steroids. TheInternet calls to us to reengineernot just our business, but toreengineer complete industries.It calls to us to extend our internalbusiness processes to the worldoutside the corporation: customers,suppliers, and business partners.

And it turns the producer-consumerrelationship upside down, placingthe consumer in control. It calls tous to reengineer our corporationand shift the focus of businessengineering from the inside, out.

Today’s forward thinking businessleaders recognize the challengeof e-Commerce as a strategic busi-ness issue, not just one more tech-nical issue to be delegated to theIS department, perhaps the exist-ing EDI group. They already havelooked below the surface of thedaily press hype about the internet.What they have seen is nothingshort of a business revolution.They recognize the Net not as justanother technology, informationmedium or distribution channel,but as the infrastructure that willcause profound change in theway companies organize workand conduct business, and ultimately in the structure of theeconomy itself. It’s the death ofdistance and the eradication of time between participants in markets. Pioneers are making mistakes. They are chalking upwins and losses, but they recognizethat the winners and losers of the future will be determined bythose who are able to capitalizeon the Net’s capability to inter-network suppliers, customers andpartners in a way never beforepossible—in real-time.

Although a company may alreadyhave reengineered its internalbusiness processes and perhapspainfully installed an enterpriseresource planning (ERP) system to bring efficiencies to the backoffice, e-Commerce is about engi-neering outward-facing processes—inter-enterprise process engineer-ing versus business process reengi-neering (IPE vs. BPR). It’s aboutredefining industry boundaries,inventing new industries, reposi-tioning, disintermediation (canni-balizing distribution channels),and reintermediation (establishingportals to the Web). It’s about 1-to-1marketing, segmenting the needs of a single customer instead ofsegmenting mass markets. Its aboutoutsourcing customer service to the customers themselves. It’s

about relationship marketing andbuilding communities. It’s abouthonoring the customer not asking, but as dictator who is but one mouse click away from turninghis back on you. This is the stuff withwhich CEOs,not just programmers,must grapple.

Bob Metcalfe, Inventor of Ethernetand Founder of 3COM, explains,“The Internet is the InformationAge. Business people know that,even if they don’t have a clearidea of what the business modelis.10”What is a business model? Itprovides an architecture for theproduct, service and informationflows across various business actorswho play specific roles and addvalue along the way. BPR is a toolfor analyzing a company’s internalbusiness model, disassembling theactors and roles contained in thedepartmental stovepipes of tradi-tional companies and reassemblingthem around end-to-end businessprocesses that are seen by and addvalue to customers. In their classicBPR book, Improving Performance,Rummler and Brache use “manag-ing the white space on the organi-zation chart”as the book’s subtitleand metaphor for this process. Justas the BPR movement eradicatedduplicate processes, ineffectivehand-offs and disconnects betweendepartments within a company, thenew, real-time interconnectionsenabled by e-Commerce allow abusiness to tear down process barriers between its customers,suppliers and partners. While BPRcrosses departmental boundaries,IPE crosses enterprise boundaries and is about “managing the whitespace in the value chain.”

Boeing provides a world classexample of third wave value-chainmanagement. Boeing designed its 777 in cyberspace by bringingtogether engineers, customers,maintenance people, project managers, and component suppliers electronically. No physicalmodel. No paper blueprints. Theresult is the slogan that “the 777 is a bunch of parts flying togetherin close formation.”


Competing for the future with e-Commerce is not just abouttechnology. It is not just aboutbusiness. It is inseparably aboutboth, and architecture is the keyto fusing the two. In his bookSystems Architecting11, EberhardtRechtin paints the picture, “Botharchitects and business managerslive in illstructured, unboundedworlds where analytic rationalityis insufficient and optimum solu-tions are rare.

Both have perspectives that arestrategic and top-down. Top man-agers, like chief architects, mustarchitect strategies that will handlethe unforeseeable, avoid disasterand produce results satisfactory tomultiple clients, to boards of direc-tors, customers, employees and thegeneral public. Their commonmodus operandi is one of fit, bal-ance and compromise in the over-all interest of the system and itspurposes.”

The key components of a businessarchitecture are organization, pro-cesses and technology. The arrange-ment and connections of thesecomponents make up the business

architecture. When a business issimple and small, its architecture is implicit. Without explicit businessarchitecture,however, large complexorganizations would move rapidlyto a state of chaos. The profoundand discontinuous change that isbeing wrought by the emergenceof e-Commerce demands a freshapproach to business design. Nolonger can a company sit comfort-ably in its niche in its industry andcarry out business planning byextrapolating yesterday’s assump-tions. And it cannot plan alonesince forging new electronic rela-tionships with suppliers,distributors,partners and customers requiresdirect participation by these stake-holders. A new approach is neededto design a sustainable, changeablebusiness architecture and to buildthe essential components thatmust cross company and industrybounds, forming a new businessecosystem. An effective approachto business architecture mustinclude an integrated and seam-less method of business engineer-

ing and software development.What is needed are end-to-end,strategy-to-code methods fordesigning and deploying e-Commerce initiatives as illustratedin Figure 11.

Business strategy is not strategy-as-usual when it comes to e-Commerce. Working directly withthe stakeholders inside and outsidethe business,a shared vision mustbe developed that allows the play-ers to invent their shared future.Perhaps the greatest challenge is toachieve out-of-the-box, lateral think-ing.Vince Barabba of GeneralMotors describes GM’s envisioningprocess, “Dealing with uncertaintyrequires that we adopt a “learning”rather than a “knowing”attitudetoward the future.12”Alternativefutures are many for today’s corpo-ration,and building e-Commercescenarios useful for the decisionmaking process requires a multi-disciplinary effort and participationby all stakeholders involved.

This envisioning process centerson asking the right questions.What are our customers’ Internetexpectations? How does theInternet allow us to change our value proposition for our customers? How does the Internetas a communication medium

12

�Dealing with uncertainty

requires that we adopt

a �learning� rather than

a �knowing� attitude

toward the future.�

Source: EC Cubed

Figure 11. E-Commerce Development Method

Business & Technology Architecture: The Key to e-Commerce Development


Workflow Access Protocol (SWAP),a standard that allows the executionof external workflow systems ratherthan the migration of process defini-tions from one system to another.

Process engineering is a model-based approach to problem solving.As functional requirements arepassed through to the processengineering phase, a repository of previously developed modelscan be searched for processes thatmatch the requirements. A sharedrepository of the artifacts producedby business and systems modelingserves as a reference architecture.The repository also contains astandard representation of require-ments, use cases. Use cases notonly serve as a way of capturingthe requirements of a system, theyalso trigger later developmentsteps from analysis through design,implementation and testing. Eachstep provides further elaborationof previous steps. The use casesbind the steps together providingtraceability and thus permit themanagement of inevitable change.Use cases are a part of the UnifiedModeling Language (UML) thathas become the standard for mod-eling business systems. UML is

As e-Commerce becomes the preferred way of doing business it becomes mission-critical; bylowering costs or increasing revenues it directly affects thebottom line. Investments ine-Commerce require the same ROI analysis, risk assessments and solid management as other strategicinvestments. Understanding thenew critical success factors isessential. New opportunities andthreats will become routine affairsamong the players in this bravenew world, and thus agility is thecritical success factor. When new opportunities are discovered,rapid response is essential. Theability to change is now moreimportant than the ability to createinformation systems that underliee-Commerce. Change becomes a

first class design goal and requiresbusiness and technology architec-ture whose components can beadded, modified, replaced andreconfigured. Software solutionsmust be agile, capable of rapidbundling, unbundling, andrebundling.

Formulating e-Commerce strategyshould be at the top of manage-ment’s priorities. Today’s success-ful businesses have developedtheir unique style, form and waysof doing business. Their legacyassets are the basis of their successand should be leveraged, notobliterated, in the process ofdeveloping e-Commerce strategy.A firm’s competitive advantage isembedded in its unique businessprocesses and its communal

affect our value chain? Should wecannibalize our supply chain? Ifwe do not, who will? If we do,what will happen to our existingsupply chain relationships? Whichbusiness model do we use to rein-termediate: aggregator, open mar-ket, or value chain integrator?How can our internal businessprocesses be remapped and inte-grated with our business partners,customers, and suppliers? What istheir readiness for process integra-tion? How does the Internet blurthe boundaries of our existingindustry? What new goods andservices can we aggregate to morefully serve our customers? If wedo cross industry boundaries,what is the competitive landscapeand how will we differentiate ourofferings? If we use the Internet toreach global markets, how do weinternationalize our logistics, lan-guage and legal frameworks?

The business strategy phase of e-Commerce development identi-fies “what” to do. The business pro-cess engineering phase addressesthe “how.” The task at hand is themapping and engineering of theinter-enterprise business processes.Work activities, steps and hand offsare redesigned using the methodsand tools of business processreengineering, only this time themappings are inter-enterprise.Inter-organizational processes maybe loosely coupled as in the case ofopen markets where pass-throughsare made from the I-Market to indi-vidual organizations. Or they maybe tightly coupled as in the case of a supply chain where processhand offs are made electronically.

Best practice BPR methods, suchas Rummler and Brache15 or IDEF,are suitable for extending processdefinitions across organizationalboundaries. There is no need for acompany to change the methodsand tools it already uses. What isdifferent, however, are the externalactors and resources that willresult from modeling inter-enter-prise business processes. Also newis the incorporation of emergingstandards such as SWAP. The inter-operation of workflow systems isembodied in the W3C’s Simplified

13

designed to model componentsand guide in their construction,assembly and reuse. New and existing components are held inthe component repository for reuse.

In summary, a strategy-to-codemethod of developing e-Commercesystems fuses business architecturewith technology architecture.Business strategy involves domainexperts who define the initiativesto be pursued based on an analysisof the company’s strengths, weak-nesses, opportunities and threats.Business strategy determines whatproblem is to be solved, generatingrequirements,goals and constraints.Inter-enterprise process engineeringdefines how the requirements areto be satisfied through new ormodified organizations, processesand data shared among the com-pany’s partners, suppliers and customers. Component-basedapplications implement the newlydesigned business processes, lever-aging the technology infrastructure.The entire process is guided by anarchitectural approach that enablesrapid development of businesssolutions through reuse of all ele-ments in a growing repository ofmodels and software components.

Mission-Critical e-Commerce

ness engineering for competitiveadvantage. A new class of holisticcomputer applications emergethat are greater than the sum of theparts of the participants’ individualbusiness processes. This new class of computer applications,e-Commerce applications,enablesnot only the next level of efficiencybut also a whole new realm of pos-sibility for the corporation to makesomething where once there wasnothing. Management’s ultimatechallenge is organizational designthat not only aligns technology withthe business,but fuses the two withinductive,out-of-the-box thinking.Moving forward, e-Commerceshould be the centerpiece not onlyof technical strategy,but, first andforemost,of business strategy. For inthe third wave of e-Commerce, the

knowledge. By leveraging existingmission-critical processes andextending them to its customers,suppliers and partners, a corpora-tion can build bridges to the digital economy.

Something new happens when a company extends its inwardfacing business processes outward.New value chains can be createdand customer processes can beintegrated with the company’sinternal processes. Likewise withsuppliers and partners. It is theengineering of these inter-organi-zational processes that allowscosts to be cut, revenues to beincreased, time to market to bedecreased, and supply chains tobe converted to dynamic supplygrids—a whole new level of busi-

business is its system.

This paper opened with a briefreference to the difficulty of predicting the business impact ofradical technology breakthroughs.Returning to these thoughts,Peter Drucker summarizes andprescribes, “It is not so very diffi-cult to predict the future. It is onlypointless. But equally important,one cannot make a decision forthe future. Decisions are commit-ments to action. And actions arealways in the present, and in thepresent only. But actions in thepresent are also the one14 and only way to make the future.”Usingthe first principles of business andtechnology architecture, now is the time to act.

© Copyright 1999. EC Cubed, Inc. All Rights Reserved.14

15© Copyright 1999. EC Cubed, Inc. All Rights Reserved.

References

1 President William J. Clinton and Vice President Albert Gore, Jr.,A Framework For Global Electronic Commerce, July 1, 1997.

2 http://www.eca.org.uk/

3 http://www.commerce.net/resources/pw/chap1-9/pg2.html

4 Economist, May 10, 1997.

5 Stephen McConnell, Editor,The OMG/CommerceNet Joint Electronic Commerce White Paper , July 27, 1997.

6 Porter, Michael E. Competitive Strategy: techniques for analyzing industries and competitors, Free Press, 1980; ISBN:0029253608, Competitive Advantage: creating and sustaining superior performance, Free Press, 1985. ISBN:029250900. 1998. ISBN: 0684841460, and On Competition. Harvard Business School Press. 1998. ISBN: 0875847951.

7 Ivar Jacobson,“Use Cases & Architecture in Objectory,”Component Solutions magazine,August, 1998. 1

8 http://www.sigs.com/cso/frompages/9807/sidebar.kara.html

9 Michael Hammer and James Champy, Reengineering the Corporation, HPF HarperBusiness, 1993.

10 http://computer.org/internet/v1/metcalfe9702.htm

11 Eberhardt Rechtin, Systems Architecting: Creating and Building Complex Systems, Prentice-Hall. 1991.

12 Vincent P. Barabba,“Revisiting Plato’s Cave,” in Blueprint to the Digital Economy, McGraw Hill, 1998.

13 Geary A. Rummler and Alan P. Brache, Improving Performance: How to Manage the White Space on the Organizational Chart, Jossey-Bass Publishers, 1995.

14 Peter F. Drucker, Managing in a Time of Great Change,Truman Talley Books, 1995.

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e-Commerce: The Third Wave - KAMBING.ui.ac.idkambing.ui.ac.id/.../e-commerce-the-third-wave-1999.pdfe-Commerce: The Third Wave In its first wave,e-Commerce was little more than “brochureware.”

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