building an e-commerce web site · shopping, banking, brokerage, auction, portal, b2b, and...

After reading this chapter, you will be able to:

■ Explain the process that should be followed in building an e-commerce Website.

■ Describe the major issues surrounding the decision to outsource sitedevelopment and/or hosting.

■ Identify and understand the major considerations involved in choosing Web server and e-commerce merchant server software.

■ Understand the issues involved in choosing the most appropriate hardwarefor an e-commerce site.

■ Identify additional tools that can improve Web site performance.

L E A R N I N G O B J E C T I V E S

C H A P T E R

Building an E-commerceWeb Site

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E-commerce: Business, Technology, Society, Fifth Edition, by Kenneth C. Laudon and Carol Guercio Traver. Published by Prentice Hall.Copyright © 2009 by Pearson Education, Inc.

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Let’s say you’ve decided to create a Website for your successful gardenequipment company. You’ve been in

business for five years, have established a regionalbrand for high-quality gardening tools, and haveabout 12,000 retail customers and 21 wholesaledealers who purchase from you. Based on amarketing report you commissioned, you expectthat in the first year your Web site will have about1,400 visitors a day. The average visitor will lookat eight pages, producing about 4 million pageviews a year. About 10% will purchase something,and the rest will browse to explore prices andproducts. However, in peak times (during themonths of April, May, June, and December), youexpect peak loads of 3,000 customers a day, con-centrated during the hours of 9 A.M. to 5 P.M., producing about 375 visitors per houror 6 per second. During this time, your Web site will have to serve up about 40 screensper second, with most of the content being read from a database of product and priceinformation. Pages must be served up within 2 seconds of a customer click during peaktimes or customers may lose patience and go elsewhere.

Before you can proceed, there are some questions you will need answered. How many Web servers will your site require? How many CPUs should each serverhave? How powerful does the site’s database server need to be? What kind of connectionspeed do you need to the Internet? Until recently, finding the answers to questions suchas these was often done on a trial-and-error basis. However, hardware and softwarevendors such as IBM, Microsoft, and Hewlett-Packard have developed a number ofsimulation tools that can help you find the right answers.

IBM’s simulator is called the On Demand Performance Advisor (OPERA) (formerlyknown as the High Volume Web Sites Simulator). OPERA enables users to estimate theperformance and capacity of a Web server based on workload patterns, performanceobjectives, and specific hardware and software. OPERA has a very easy-to-use interfacethat includes pre-built workload patterns for various e-commerce applications, such as

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shopping, banking, brokerage, auction, portal, B2B, and reservation systems, that canbe modified as necessary based on the user’s own data or assumptions. It can providewhat-if analyses for various performance parameters such as throughput, response time,resource utilization, number of concurrent users, and page view rate. It also providesspecial algorithms to address increases in Web traffic during peak usage periods. The simulator includes built-in performance characteristics for various types of hardware(such IBM, Sun, and HP servers), software, and infrastructure models. OPERA uses ananalytic model to generate reports that allow users to assess the adequacy of proposedhardware and software configurations, forecast performance, and graphically identifybottlenecks that might develop. IBM also offers Sonoma, a Web service based onOPERA, that can be used to estimate the performance and capacity of service-orientedarchitecture (SOA) workloads.

Users of the simulator have included Charles Schwab, Aetna, Fidelity, Visa, Bank ofAmerica, Walmart.com, and eBay, among others. eBay first turned to the simulatorwhen it was attempting to cope with dramatic increases in customer demand. In its earlyyears, eBay needed to serve up only about 1 million pages per hour, but as its customerbase grew, and the number of page views per hour significantly increased, its originalWeb site hardware and software became insufficient, creating customer resistance. After running a simulation of its current and likely future workload, eBay decided torebuild its auction system around IBM’s WebSphere application that integrates a varietyof software tools into an integrated Web site design. Later, eBay returned to OPERA toexamine the performance of its Sell Your Item application on its new three-tier Webserver architecture. The simulation enabled eBay to determine both the number ofservers (36) and the optimal CPU (the IBM x335, which provided a 30% performanceincrease due to a higher-speed CPU, increased amount of RAM, and faster bus speed)required to meet current workloads and future growth targets.

But let’s say you’re not eBay or Fidelity, and are just creating the proverbial “one-person-in-a-garage-just-getting-started” kind of Web site. For instance, DaveNovak created Steamshowers4Less.com using a MacBook Pro computer in a sparebedroom. He now sells over $1 million a year in bath fixtures. For really small sites,micro-businesses with just a few people, there are many less costly alternatives to sizingissues. One solution is to build a Web site using pre-built templates offered by YahooMerchant Solutions, Amazon, eBay, Design.NetworkSolutions.com, or hundreds of otheronline sites. Fees range from a few hundred dollars to several thousand. These firms hostyour Web site and they worry about capacity and scale issues as your firm grows. Forinstance, Yahoo Merchant Solutions offers three different packages—Starter, Standard,and Professional. As the business grows, you can move up to a more comprehensivepackage. Another solution is to hire a local professional designer (for about$1,000–$5,000) and have them build you an e-commerce installation that runs off a sin-gle computer and broadband connection. If you need more computing power, buy a newerPC with more speed and storage. Get a faster Web connection. Still another solution isto do everything yourself (design the Web site, procure and build the Web servers, andconnect to the Internet) at first until you start attracting customers. However, in both ofthese do-it-yourself solutions, you will have to worry about how to keep up with growth.

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SOURCES: “Online Tools GiveHome-Based Firms Office-StyleServices,” by Gwendolyn Bounds,Wall Street Journal, September 11,2007; “Keeping Costs Low ForOnline Business,” by Kelly Spors,New York Times, April 24, 2007;“Guide to E-commerce Technology,2007-2008 Edition,” InternetRetailer, 2007; “Sonoma: WebService for Estimating Capacity andPerformance of Service-OrientedArchitecture (SOA) Workloads”, byEugene Hung, Qi He, Jinzy Zhu,IBM Working Paper, October 9,2006; “HiPODs Model: An eBayCase Study,” by Noshir C. Wadia,Jayashree Subrahmonia, andUmesh Talwalkar, IBM Conferenceon Performance Engineering andBest Practices, June 21, 2004;“More about High Volume WebSites,” by High-Volume Web SitesTeam, IBM Redbook, March 8,2004; “HVWS Simulator: An eBayCase Study,” High Performance OnDemand Solutions Team and eBay,February 27, 2004.

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In Chapter 3, you learned about the infrastructure of the Internet and the Web, e-commerce’s technological foundation. Now it’s time to focus on the next step:building an e-commerce site. In this chapter, you will examine the important

factors that a manager needs to consider when building an e-commerce site. The focus will be on the managerial and business decisions you must make beforeyou begin to build Web pages and Web sites, and which you will continually need tomake during the life of your Web site. While building a sophisticated e-commerce siteisn’t easy, today the tools for building Web sites are much less expensive and far morepowerful than they were during the early days of e-commerce. You do not have to beAmazon or eBay to create a successful Web site. In this chapter, we focus on bothsmall and medium-sized businesses that want to build a Web site, and much largercorporate entities that serve thousands of customers a day, or even an hour. As youwill see, although the scale may be very different, the principles and considerationsare basically the same.

Building a successful e-commerce site requires a keen understanding of business,technology, and social issues, as well as a systematic approach. E-commerce is just tooimportant to be left totally to technologists and programmers.

The two most important management challenges in building a successful e-commerce site are (1) developing a clear understanding of your businessobjectives and (2) knowing how to choose the right technology to achieve thoseobjectives. The first challenge requires you to build a plan for developing your firm’s site. The second challenge requires you to understand some of the basic elements of e-commerce infrastructure. Let the business drive thetechnology.

Even if you decide to outsource the entire e-commerce site development andoperation to a service provider, you will still need to have a site development planand some understanding of the basic e-commerce infrastructure issues such as cost,capability, and constraints. Without a plan and a knowledge base, you will not beable to make sound management decisions about e-commerce within your firm(Laudon and Laudon, 2009).

PIECES OF THE SITE-BUILDING PUZZLE

Let’s assume you are a manager for a medium-sized, industrial parts firm of around10,000 employees worldwide, operating in 10 countries in Europe, Asia, and NorthAmerica. Senior management has given you a budget of $1 million to build an e-commerce site within one year. The purpose of this site will be to sell and servicethe firm’s 20,000 customers, who are mostly small machine and metal fabricatingshops around the world. Where do you start?

4.1 BUILDING AN E-COMMERCE WEB SITE: A SYSTEMATICAPPROACH

B u i l d i n g a n E - c o m m e r c e W e b S i t e : A S y s t e m a t i c A p p r o a c h 201

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First, you must be aware of the main areas where you will need to makedecisions (see Figure 4.1). On the organizational and human resources fronts, you will have to bring together a team of individuals who possess the skill setsneeded to build and manage a successful e-commerce site. This team will make the key decisions about technology, site design, and the social and informationpolicies that will be applied at your site. The entire site development effort mustbe closely managed if you hope to avoid the disasters that have occurred at somefirms.

You will also need to make decisions about your site’s hardware, software, andtelecommunications infrastructure. While you will have technical advisors help youmake these decisions, ultimately the operation of the site is your responsibility. The demands of your customers should drive your choices of technology. Yourcustomers will want technology that enables them to find what they want easily,view the product, purchase the product, and then receive the product from yourwarehouses quickly. You will also have to carefully consider your site’s design. Once you have identified the key decision areas, you will need to think about a planfor the project.

PLANNING: THE SYSTEMS DEVELOPMENT LIFE CYCLE

Your second step in building an e-commerce site will be creating a plan document.In order to tackle a complex problem such as building an e-commerce site, you will have to proceed systematically through a series of steps. One methodology for developing an e-commerce site plan is the systems development life cycle (see Figure 4.2).


Building an e-commerce Web site requires that you systematically consider the many factors that go into theprocess.

FIGURE 4.1 PIECES OF THE E-COMMERCE SITE-BUILDING PUZZLE

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The systems development life cycle (SDLC) is a methodology for under-standing the business objectives of any system and designing an appropriatesolution. Adopting a life cycle methodology does not guarantee success, but it is far better than having no plan at all. The SDLC method also helps in creatingdocuments that communicate to senior management the objectives of the site,important milestones, and the uses of resources. The five major steps involved inthe systems development life cycle for an e-commerce site are:

• Systems Analysis/Planning

• Systems Design

• Building the System

• Testing

• Implementation

SYSTEMS ANALYSIS/PLANNING: IDENTIFY BUSINESS OBJECTIVES,SYSTEM FUNCTIONALITY, AND INFORMATION REQUIREMENTS

The systems analysis/planning step of the SDLC tries to answer the question, “Whatdo we want the e-commerce site to do for our business?” The key lesson to be learnedhere is to let the business decisions drive the technology, not the reverse. This willensure that your technology platform is aligned with your business. We will assumehere that you have identified a business strategy and chosen a business model toachieve your strategic objectives (see Chapter 2). But how do you translate yourstrategies, business models, and ideas into a working e-commerce site?


FIGURE 4.2 WEB SITE SYSTEMS DEVELOPMENT LIFE CYCLE

systems developmentlife cycle (SDLC)a methodology forunderstanding the businessobjectives of any systemand designing anappropriate solution

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One way to start is to identify the specific business objectives for your site, andthen develop a list of system functionalities and information requirements.Business objectives are simply a list of capabilities you want your site to have.

System functionalities are a list of the types of information systemscapabilities you will need to achieve your business objectives. The informationrequirements for a system are the information elements that the system mustproduce in order to achieve the business objectives. You will need to provide theselists to system developers and programmers so they know what you as the managerexpect them to do.

Table 4.1 describes some basic business objectives, system functionalities, andinformation requirements for a typical e-commerce site. As shown in the table,there are nine basic business objectives that an e-commerce site must deliver. These objectives must be translated into a description of system functionalities andultimately into a set of precise information requirements. The specific informationrequirements for a system typically are defined in much greater detail than Table 4.1 indicates. To a large extent, the business objectives of an e-commerce siteare not that different from those of an ordinary retail store. The real difference liesin the system functionalities and information requirements. In an e-commerce site,


business objectives a list of capabilities youwant your site to have

system functionalitiesa list of the types ofinformation systemscapabilities you will needto achieve your businessobjectives

informationrequirementsthe information elementsthat the system mustproduce in order to achievethe business objectives

TABLE 4.1 SYSTEM ANALYSIS: BUSINESS OBJECTIVES, SYSTEM FUNCTIONALITY, ANDINFORMATION REQUIREMENTS FOR A TYPICAL E-COMMERCE SITE

B U S I N E S S S Y S T E M I N F O R M A T I O NO B J E C T I V E F U N C T I O N A L I T Y R E Q U I R E M E N T S

Display goods Digital catalog Dynamic text and graphics catalog

Provide product information (content) Product database Product description, stocking numbers,inventory levels

Personalize/customize product Customer on-site tracking Site log for every customer visit; data miningcapability to identify common customer paths and appropriate responses

Execute a transaction Shopping cart/payment system Secure credit card clearing; multiplepayment options

Accumulate customer information Customer database Name, address, phone, and e-mail for all customers; online customer registration

Provide after-sale customer support Sales database Customer ID, product, date, payment,shipment date

Coordinate marketing/advertising Ad server, e-mail server, e-mail, Site behavior log of prospects and customerscampaign manager, ad banner linked to e-mail and banner ad campaignsmanager

Understand marketing effectiveness Site tracking and reporting system Number of unique visitors, pages visited,products purchased, identified by marketing campaign

Provide production and supplier links Inventory management system Product and inventory levels, supplier ID andcontact, order quantity data by product

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the business objectives must be provided entirely in digital form without buildingsor salespeople, twenty-four hours a day, seven days a week.

SYSTEM DESIGN: HARDWARE AND SOFTWARE PLATFORMS

Once you have identified the business objectives and system functionalities, andhave developed a list of precise information requirements, you can begin toconsider just how all this functionality will be delivered. You must come up with asystem design specification—a description of the main components in the systemand their relationship to one another. The system design itself can be broken downinto two components: a logical design and a physical design. A logical designincludes a data flow diagram that describes the flow of information at your e-commerce site, the processing functions that must be performed, and thedatabases that will be used. The logical design also includes a description of thesecurity and emergency backup procedures that will be instituted, and the controlsthat will be used in the system.

A physical design translates the logical design into physical components. For instance, the physical design details the specific model of server to bepurchased, the software to be used, the size of the telecommunications link that willbe required, the way the system will be backed up and protected from outsiders,and so on.

Figure 4.3(a) presents a data flow diagram for a simple high-level logicaldesign for a very basic Web site that delivers catalog pages in HTML in response toHTTP requests from the client’s browser, while Figure 4.3(b) shows thecorresponding physical design. Each of the main processes can be broken down intolower-level designs that are much more precise in identifying exactly how theinformation flows and what equipment is involved.

BUILDING THE SYSTEM: IN-HOUSE VERSUS OUTSOURCING

Now that you have a clear idea of both the logical and physical design for your site,you can begin considering how to actually build the site. There are many choiceshere and much depends on how much money you are willing to spend. Choicesrange from outsourcing everything (including the actual systems analysis anddesign) to building everything yourself (in-house). Outsourcing means that youwill hire an outside vendor to provide the services involved in building the site thatyou cannot perform with in-house personnel. You also have a second decision tomake: Will you host (operate) the site on your firm’s own servers or will yououtsource the hosting to a Web host provider? These decisions are independent ofeach other, but they are usually considered at the same time. There are somevendors who will design, build, and host your site, while others will either build orhost (but not both). Figure 4.4 on page 207 illustrates the alternatives.

Build Your Own versus Outsourcing

Let’s take the building decision first. If you elect to build your own site, there are arange of options. Unless you are fairly skilled, you should use a pre-built template tocreate the Web site. For example, Yahoo Merchant Solutions, Amazon Stores, and eBay

system designspecificationdescription of the maincomponents in a systemand their relationship toone another

logical designdescribes the flow ofinformation at your e-commerce site, theprocessing functions that must be performed,the databases that will be used, the security andemergency backupprocedures that will beinstituted, and the controls that will be usedin the system

physical designtranslates the logicaldesign into physicalcomponents

outsourcinghiring an outside vendor toprovide the services youcannot perform with in-house personnel

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FIGURE 4.3 A LOGICAL AND PHYSICAL DESIGN FOR A SIMPLE WEB SITE


(a) Simple Data Flow Diagram.This data flow diagram describes the flow of information requests and responses for a simple Web site.

(b) Simple Physical Design.A physical design describes the hardware and software needed to realize the logical design.

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all provide templates that merely require you to input text, graphics, and other data,as well as the infrastructure to run the Web site once it has been created. This is theleast costly and simplest solution but you will be limited to the “look and feel” andfunctionality provided by the template and infrastructure.

If you have some experience with computers, you might decide to build the siteyourself “from scratch.” There is a broad variety of tools, ranging from those that helpyou build everything truly “from scratch,” such as Adobe Dreamweaver and Microsoft Expression, to top-of-the-line prepackaged site-building tools that can createsophisticated sites customized to your needs. Figure 4.5 illustrates the spectrum oftools available. We will look more closely at the variety of e-commerce softwareavailable in Section 4.2.


You have a number of alternatives to consider when building and hosting an e-commerce site.

FIGURE 4.4 CHOICES IN BUILDING AND HOSTING

FIGURE 4.5 THE SPECTRUM OF TOOLS FOR BUILDING YOUR OWN E-COMMERCE SITE

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The decision to build a Web site on your own has a number of risks. Given thecomplexity of features such as shopping carts, credit card authentication andprocessing, inventory management, and order processing, the costs involved are high,as are the risks of doing a poor job. You will be reinventing what other specializedfirms have already built, and your staff may face a long, difficult learning curve,delaying your entry to market. Your efforts could fail. On the positive side, you maybe better able to build a site that does exactly what you want, and more important,develop the in-house knowledge to allow you to change the site rapidly if necessarydue to a changing business environment.

If you choose more expensive site-building packages, you will be purchasingstate-of-the art software that is well tested. You could get to market sooner. However,to make a sound decision, you will have to evaluate many different packages and thiscan take a long time. You may have to modify the packages to fit your business needsand perhaps hire additional outside vendors to do the modifications. Costs rise rapidlyas modifications mount. A $4,000 package can easily become a $40,000 to $60,000development project (see Figure 4.6). If you choose the template route, you will belimited to the functionality already built into the templates, and you will not be ableto add to the functionality or change it.

In the past, bricks-and-mortar retailers in need of an e-commerce site typicallydesigned the site themselves (because they already had the skilled staff in place andhad extensive investments in information technology capital such as databases andtelecommunications). However, as Web applications have become more sophisticated,larger retailers today rely heavily on vendors to provide sophisticated Web sitecapabilities, while also maintaining a substantial internal staff. Small startups maybuild their own sites from scratch using in-house technical personnel in an effort to

While sophisticated site development packages appear to reduce costs and increase speed to market, as themodifications required to fit the package to your business needs rise, costs also rise exponentially.

FIGURE 4.6 COSTS OF CUSTOMIZING E-COMMERCE PACKAGES

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keep costs low. Medium-size startups will often purchase a sophisticated package andthen modify it to suit their needs. Very small mom-and-pop firms seeking simplestorefronts will use templates. For e-commerce sites, the costs of building has droppeddramatically in the last five years, resulting in lower capital requirements for all players (see Insight on Business: Curly Hair and Tattoos: Getting Started on the Cheap).

Host Your Own versus Outsourcing

Now let’s look at the hosting decision. Most businesses choose to outsource hostingand pay a company to host their Web site, which means that the hosting company isresponsible for ensuring the site is “live,” or accessible, twenty-four hours a day. By agreeing to a monthly fee, the business need not concern itself with many of thetechnical aspects of setting up a Web server and maintaining it, telecommunicationslinks, nor with staffing needs.

You can also choose to co-locate. With a co-location agreement, your firmpurchases or leases a Web server (and has total control over its operation) but locatesthe server in a vendor’s physical facility. The vendor maintains the facility, commu-nications lines, and the machinery. Co-location has expanded with the spread ofvirtualization where one server has multiple processors (4–16) and can operatemultiple Web sites at once with multiple operating systems. In this case, you do notbuy the server but rent its capabilities on a monthly basis, usually at one-quarter ofthe cost of owning the server itself. See Table 4.2 for a list of some of the majorhosting/co-location providers. There is an extraordinary range of prices for co-hosting,ranging from $4.95 a month, to several hundred thousands of dollars per monthdepending on the size of the Web site, bandwidth, storage, and support requirements.

Hosting and co-location have become a commodity and a utility: costs aredriven by very large providers (such as IBM and Qwest) who can achieve largeeconomies of scale by establishing huge “server farms” located strategically aroundthe country and the globe. What this means is that the cost of pure hosting hasfallen as fast as the fall in server prices, dropping about 50% every year! Telecommunications costs have also fallen. As a result, most hosting services seekto differentiate themselves from the commodity hosting business by offeringextensive site design, marketing, optimization and other services. Small, local ISPsalso can be used as hosts, but service reliability is an issue. Will the small ISP beable to provide uninterrupted service, 24x7x365? Will they have service staffavailable when you need it?


co-locationwhen a firm purchases orleases a Web server (andhas total control over itsoperation) but locates theserver in a vendor’sphysical facility. The vendormaintains the facility,communications lines, andthe machinery

TABLE 4.2 KEY PLAYERS: HOSTING/CO-LOCATION SERVICES

GoDaddy.com Qwest Communications

Oneandone.com NTT/Verio

IBM Global Services Rackspace

MOSSO ServerBeach

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INSIGHT ON BUSINESS

CURLY HAIR AND TATTOOS: GETTINGSTARTED ON THE CHEAP

With so many big companies withnational brand names dominating

the e-commerce scene, and with thetop 100 retail firms collecting over

90% of the revenues, you may wonder ifthere’s a chance for the little guy anymore, thecomplete amateurs. The answer is yes: there’sstill at least about $20 billion left in potentialonline retail sales to go for, with additionalmoney to be made from advertising revenues.As it turns out, being big does not make younimble.

NaturallyCurly.com is a good example of alow entry cost, niche-oriented portal site. Two reporters, Gretchen Heber and MichelleBreyer, started the site with $500 in 1998. Both had naturally curly hair. “We had long

diatribes complaining about our curly hair onvery muggy days,” says Heber. Or they’d talkabout how good it looked on other days. Based ona hunch that other people also needed help coping with curly hair issues, they launched NaturallyCurly.com. They spent $200 on thedomain name, and bought some curly hairproducts to review on the site. The site was builtwith a simple Web server and the help of a 14-year-old Web page designer. The idea was to actas a content site with community feedback. Theyadded a bulletin board for users to send in theircomments.

There were no competitors at first, andeven without advertising on Google, they startedshowing up in Google searches for “curly hair”near or at the top of the search results list.

(continued)

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There are several disadvantages to outsourcing hosting. If you choose a vendor,make sure the vendor has the capability to grow with you. You need to know whatkinds of security provisions are in place for backup copies of your site, internal mon-itoring of activity, and security track record. Is there a public record of a securitybreach at the vendor? Most Fortune 500 firms do their own hosting so they can con-trol the Web environment. On the other hand, there are risks to hosting your own siteif you are a small business. Your costs will be higher than if you had used a large out-sourcing firm because you don’t have the market power to obtain low-cost hardwareand telecommunications. You will have to purchase hardware and software, have aphysical facility, lease communications lines, hire a staff, and build security andbackup capabilities yourself.


SOURCES: “About Us”, NaturallyCurly.com, 2008; " Curl Tamers," Jewish Woman, Summer 2008; "RIVR Media Interactive Creating Syndicated Inter-net Network Geared toward Male Demographic", PR Newswire, June 25, 2008;"Turning Curls into Dollar Signs," Business Opportunities Weblog, March 2008;“Bad Hair Days Lead Pair to Web Incubator and Venture Capital,” by Bob Tedeschi, New York Times, May 21, 2007; “Naturally Curly Raises $600,000 in Fund-ing,” by Kristen Nicole, Mashable.com, May 20, 2007; “The Perils of Spending Hard-Raised Money,” by Maureen Farrell, Forbes.com, May 3, 2007.

In 2000, after a year of operation, they got an e-mail from Procter & Gamble, the world’slargest personal care products company, askingif they would accept advertising for $2,000 amonth for two years. From there, the site grewby adding additional advertising from leadinghair care products companies such as Aveda,Paul Mitchell, and Redken, among others.Today the site has close to 200,000 monthly vis-itors and revenue in excess of $1 million fromadvertising and sales of products oncurlmart.com, its online boutique for curly hairproducts.. In May 2007, the firm received aninvestment of $600,000 from a venture capitalfirm that will be used to hire a marketing per-son and support staff, improve its Web technol-ogy, and expand its shipping and handlingoperations. Ms. Breyer said the company is stillnot profitable because they have poured moneyback into the firm, but it’s good enough thatboth quit their jobs in 2004.

Internet incubators—firms that providetechnology, money, and space to small venturesin return for a part of the company—areanother source of small, niche-oriented e-commerce sites that are largely advertising-supported. In a development reminiscent of the

early years of e-commerce, when incubatorssuch as IdeaLab and CMGI provided backingfor dozens of retail-oriented e-commerce sites,a company called RIVR Media Interactive willproduce 15 online-only video Web sites. RIVR produces television programming forcable channels such as A&E and Nickelodeon.Leveraging this video background, RIVRlaunched its first advertising-supported site,Needled.com. The site offers video clips, photos,multimedia histories, artists, and contactinformation to the needled crowd—those whohave tattoos. As it turns out, 67 millionAmericans have some kind of tattoo, and 34% of 18-to-34-year-olds have tattoos. The site runs video ads for all things young—motorcycles, video games, beverages, and cars.Needled.com was started as a blog by MarisaDeMattia, and purchased by RIVR for anundisclosed sum. Other RIVR sites includeWidgetgames.com, aimed at the casual gamerand SyncLive.com, which allows users to broad-cast live concerts from venues across the coun-try and the world.

The lesson here is that building startup Websites is much less expensive and much easier thesedays than in the past.

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TESTING THE SYSTEM

Once the system has been built and programmed, you will have to engage in a testingprocess. Depending on the size of the system, this could be fairly difficult andlengthy. Testing is required whether the system is outsourced or built in-house. A complex e-commerce site can have thousands of pathways through the site, each ofwhich must be documented and then tested. Unit testing involves testing the site’sprogram modules one at a time. System testing involves testing the site as a whole,in the same way a typical user would when using the site. Because there is no truly “typical” user, system testing requires that every conceivable path be tested. Final acceptance testing requires that the firm’s key personnel and managers inmarketing, production, sales, and general management actually use the system asinstalled on a test Internet or intranet server. This acceptance test verifies that thebusiness objectives of the system as originally conceived are in fact working. It isimportant to note that testing is generally under-budgeted. As much as 50% of thesoftware effort can be consumed by testing and rebuilding (usually depending on thequality of initial design).

IMPLEMENTATION AND MAINTENANCE

Most people unfamiliar with systems erroneously think that once an informationsystem is installed, the process is over. In fact, while the beginning of the process isover, the operational life of a system is just beginning. Systems break down for avariety of reasons—most of them unpredictable. Therefore, they need continualchecking, testing, and repair. Systems maintenance is vital, but sometimes notbudgeted for. In general, the annual system maintenance cost will roughly parallelthe development cost. A $40,000 e-commerce site will likely require a $40,000 annualexpenditure to maintain. Very large e-commerce sites experience some economies ofscale, so that, for example, a $1 million site will likely require a maintenance budgetof $500,000 to $700,000.

Why does it cost so much to maintain an e-commerce site? Unlike payrollsystems, for example, e-commerce sites are always in a process of change, improve-ment, and correction. Studies of traditional systems maintenance have found 20% ofthe time is devoted to debugging code and responding to emergency situations (anew server was installed by your ISP, and all your hypertext links were lost and CGIscripts disabled—the site is down!) (Lientz and Swanson, 1980; Banker and Kemerer,1989). Another 20% of the time is concerned with changes in reports, data files, andlinks to backend databases. The remaining 60% of maintenance time is devoted togeneral administration (making product and price changes in the catalog) and makingchanges and enhancements to the system. E-commerce sites are never finished: theyare always in the process of being built and rebuilt. They are dynamic—much moreso than payroll systems.

The long-term success of an e-commerce site will depend on a dedicated teamof employees (the Web team) whose sole job is to monitor and adapt the site tochanging market conditions. The Web team must be multi-skilled; it will typicallyinclude programmers, designers, and business managers drawn from marketing,production, and sales support. One of the first tasks of the Web team is to


system testinginvolves testing the site asa whole, in a way thetypical user will use the site

acceptance testingverifies that the businessobjectives of the system asoriginally conceived are infact working

unit testinginvolves testing the site’sprogram modules one at atime

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listen to customers’ feedback on the site and respond to that feedback as necessary. A second task is to develop a systematic monitoring and testing plan to be followedweekly to ensure all the links are operating, prices are correct, and pages are updated. A large business may have thousands of Web pages, many of themlinked, that require systematic monitoring. Other important tasks of the Web team include benchmarking (a process in which the site is compared with thoseof competitors in terms of response speed, quality of layout, and design) andkeeping the site current on pricing and promotions. The Web is a competitiveenvironment where you can very rapidly frustrate and lose customers with adysfunctional site.

FACTORS IN OPTIMIZING WEB SITE PERFORMANCE

The purpose of a Web site is to deliver content to customers and to complete transac-tions. The faster and more reliably these two objectives are met, the more effectivethe Web site is from a commerce perspective. If you are a manager or marketingexecutive, you will want the Web site operating in a way that fulfills customers’expectations. You’ll have to make sure the Web site is optimized to achieve thisbusiness objective. The optimization of Web site performance is more complicatedthan it seems and involves at least three factors: page content, page generation, andpage delivery (see Figure 4.7). In this chapter, we describe the software andhardware choices you will need to make in building an e-commerce site; these arealso important factors in Web site optimization.


benchmarkinga process in which the siteis compared with those ofcompetitors in terms ofresponse speed, quality oflayout, and design

Web site optimization requires that you consider three factors: page content, page generation, and pagedelivery.

FIGURE 4.7 FACTORS IN WEB SITE OPTIMIZATION

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Using efficient styles and techniques for page design and content can reduceresponse times by two to five seconds. Simple steps include reducing unnecessaryHTML comments and white space, using more efficient graphics, and avoidingunnecessary links to other pages in the site. Page generation speed can be enhanced bysegregating computer servers to perform dedicated functions (such as static pagegeneration, application logic, media servers, and database servers), and using variousdevices from vendors to speed up these servers. Using a single server or multipleservers to perform multiple tasks reduces throughput by over 50%. Page delivery canbe speeded up by using edge-caching services such as Akamai, or specialized contentdelivery networks such as RealNetworks, or by increasing local bandwidth. We willdiscuss some of these factors throughout the chapter, but a full discussion of Web siteoptimization is beyond the scope of this text.

WEB SITE BUDGETS

How much you spend on a Web site depends on what you want it to do. Simple Websites can be built and hosted with a first-year cost of $5,000 or less. The Web sites oflarge firms that offer high levels of interactivity and linkage to corporate systems cancost several hundred thousand to millions of dollars a year to create and operate. For instance, in September 2006, Bluefly, which sells women’s and men’s designerclothes online, embarked on the process of developing an improved version of itsWeb site based on software from Art Technology Group (ATG). It hopes to launch thenew site by early 2009. To date, it has capitalized over $3.6 million in connectionwith the redevelopment of the Web site. (Bluefly, Inc., 2008).

While how much you spend to build a Web site depends on how much you canafford, and, of course, the size of the opportunity, Figure 4.8 provides some ideaof the relative size of various Web site costs. In general, the cost of hardware,software and telecommunications for building and operating a Web site has fallen


FIGURE 4.8 COMPONENTS OF A WEB SITE BUDGET

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dramatically (by over 50%) since 2000, making it possible for very smallentrepreneurs to build fairly sophisticated sites. At the same time, while technol-ogy has lowered the costs of system development, the costs of system maintenanceand content creation have risen to make up more than half of typical Web sitebudgets. Providing content and smooth 24x7 operations are both labor intensive.

Much of what you are able to do at an e-commerce site is a function of the software.As a business manager in charge of building the site, you will need to know somebasic information about e-commerce software. The more sophisticated the softwareand the more ways you can sell goods and services, the more effective your businesswill be. This section describes the software needed to operate a contemporary e-commerce site. Section 4.3 discusses the hardware you will need to handle thedemands of the software.

SIMPLE VERSUS MULTI-TIERED WEB SITE ARCHITECTURE

Prior to the development of e-commerce, Web sites simply delivered Web pages tousers who were making requests through their browsers for HTML pages with contentof various sorts. Web site software was appropriately quite simple—it consisted of aserver computer running basic Web server software. We might call this arrangementa single-tier system architecture. System architecture refers to the arrangement ofsoftware, machinery, and tasks in an information system needed to achieve a specificfunctionality (much like a home’s architecture refers to the arrangement of buildingmaterials to achieve a particular functionality). The SteamShowers4Less andNaturallyCurly sites both started this way—there were no monetary transactions. Tensof thousands of dot-com sites still perform this way. Orders can always be called in bytelephone and not taken online.

However, the development of e-commerce required a great deal more interactivefunctionality, such as the ability to respond to user input (name and address forms),take customer orders for goods and services, clear credit card transactions on the fly,consult price and product databases, and even adjust advertising on the screen basedon user characteristics. This kind of extended functionality required the developmentof Web application servers and a multi-tiered system architecture to handle theprocessing loads. Web application servers, described more fully later in this section, arespecialized software programs that perform a wide variety of transaction processingrequired by e-commerce.

In addition to having specialized application servers, e-commerce sites must beable to pull information from and add information to pre-existing corporate databases.These older databases that predate the e-commerce era are called backend or legacydatabases. Corporations have made massive investments in these systems to storetheir information on customers, products, employees, and vendors. These backendsystems constitute an additional layer in a multi-tiered site.

4.2 CHOOSING SOFTWARE

C h o o s i n g S o f t w a r e 215

system architecturethe arrangement ofsoftware, machinery, andtasks in an informationsystem needed to achieve aspecific functionality

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Figure 4.9 illustrates a simple two-tier and more complex multi-tier e-commercesystem architecture. In two-tier architecture, a Web server responds to requests forWeb pages and a database server provides backend data storage. In a multi-tierarchitecture, in contrast, the Web server is linked to a middle-tier layer that typicallyincludes a series of application servers that perform specific tasks, as well as to abackend layer of existing corporate systems containing product, customer, and pricing information. A multi-tiered site typically employs several or more physicalcomputers, each running some of the software applications and sharing the workloadacross many physical computers.


two-tier architecturee-commerce systemarchitecture in which aWeb server responds torequests for Web pagesand a database serverprovides backend datastorage

multi-tier architecturee-commerce systemarchitecture in which theWeb server is linked to amiddle-tier layer thattypically includes a seriesof application servers thatperform specific tasks aswell as to a backend layerof existing corporatesystems

FIGURE 4.9 TWO-TIER AND MULTI-TIER E-COMMERCE ARCHITECTURES

In a multi-tier architecture, a Web server is linked to a middle-tier layer that typically includes a series ofapplication servers that perform specific tasks, as well as to a backend layer of existing corporatesystems.

In a two-tier architecture, a Web server responds to requests for Web pages and a database serverprovides backend data storage.

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The remainder of this section describes basic Web server software functionalityand the various types of Web application servers.

WEB SERVER SOFTWARE

All e-commerce sites require basic Web server software to answer requests fromcustomers for HTML and XML pages. The leading Web server software choices areshown in Figure 4.10.

When you choose Web server software, you will also be choosing an operatingsystem for your site’s computers. Looking at all servers on the Web, the leading Webserver software, with 50% of the market, is Apache, which works with Linux andUnix operating systems. Unix is the original programming language of the Internetand Web, and Linux is a derivative of Unix designed for the personal computer.Apache was developed by a worldwide community of Internet innovators. Apache isfree and can be downloaded from many sites on the Web; it also comes installed onmost IBM Web servers. Literally thousands of programmers have worked on Apacheover the years; thus, it is extremely stable. There are thousands of utility softwareprograms written for Apache that can provide all the functionality required for acontemporary e-commerce site. In order to use Apache, you will need staff that isknowledgeable in Unix or Linux.

Microsoft Internet Information Services (IIS) is the second major Web serversoftware available, with about 35% of the market. IIS is based on the Windows oper-ating system and is compatible with a wide selection of Microsoft utility and supportprograms. These numbers are different among the Fortune 1000 firms (55% of whichuse Microsoft IIS), and different again if you include blogs which are served up byMicrosoft and Google at their own proprietary sites.


FIGURE 4.10 KEY PLAYERS IN WEB SERVER SOFTWARE

This diagram illustrates the relative market share of the most popular Web server software.SOURCE: Based on data from E-Soft, Inc, 2008.

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There are also at least 100 other smaller providers of Web server software, mostof them based on the Unix or Sun Solaris operating systems. Note that the choice ofWeb server has little effect on users of your system. The pages they see will look thesame regardless of the development environment. There are many advantages to theMicrosoft suite of development tools—they are integrated, powerful, and easy to use.The Unix operating system, on the other hand, is exceptionally reliable and stable, and there is a worldwide open software community that develops and testsUnix-based Web server software.

Table 4.3 shows the basic functionality provided by all Web servers.

Site Management Tools

In Chapter 3, we described most of the basic functionality of the Web servers listed inTable 4.3. Another functionality not described previously is site management tools.Site management tools are essential if you want to keep your site working, and ifyou want to understand how well it is working. Site management tools verify thatlinks on pages are still valid and also identify orphan files, or files on the site that arenot linked to any pages. By surveying the links on a Web site, a site management toolcan quickly report on potential problems and errors that users may encounter. Your customers will not be impressed if they encounter a “404 Error: Page Does NotExist” on your Web site. Links to URLs that have moved or been deleted are calleddead links; these can cause error messages for users trying to access that link.Regularly checking that all links on a site are operational helps prevent irritation andfrustration in users who may decide to take their business elsewhere to a betterfunctioning site.

Even more importantly, site management tools can help you understand con-sumer behavior on your Web site. Site management software and services, such as


TABLE 4.3 BASIC FUNCTIONALITY PROVIDED BY WEB SERVERS

F U N C T I O N A L I T Y D E S C R I P T I O N

Processing of HTTP requests Receive and respond to client requests for HTML pages

Security services (Secure Sockets Layer) Verify username and password; process certificatesand private/public key information required for creditcard processing and other secure information

File Transfer Protocol Permits transfer of very large files from server to server

Search engine Indexing of site content; keyword search capability

Data capture Log file of all visits, time, duration, and referral source

E-mail Ability to send, receive, and store e-mail messages

Site management tools Calculate and display key site statistics, such as uniquevisitors, page requests, and origin of requests; checklinks on pages

site management toolsverify that links on pagesare still valid and alsoidentify orphan files

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those provided by WebTrends, can be purchased in order to more effectively monitorcustomer purchases and marketing campaign effectiveness, as well as keep track ofstandard hit counts and page visit information. Figure 4.11 contains severalscreenshots that illustrate the different types of functionality provided by WebTrendssoftware.

Dynamic Page Generation Tools

One of the most important innovations in Web site operation has been the developmentof dynamic page generation tools. Prior to the development of e-commerce, Web sitesprimarily delivered unchanging static content in the form of HTML pages. While thiscapability might be sufficient to display pictures of products, consider all the elementsof a typical e-commerce site today by reviewing Table 4.1, or visit what you believe isan excellent e-commerce site. The content of successful e-commerce sites is alwayschanging, often day by day. There are new products and promotions, changing prices,news events, and stories of successful users. E-commerce sites must intensively interactwith users who not only request pages but also request product, price, availability, andinventory information. One of the most dynamic sites is eBay—the auction site. There,the content is changing minute by minute. E-commerce sites are just like realmarkets—they are dynamic. News sites, where stories change constantly, are alsodynamic.

The dynamic and complex nature of e-commerce sites requires a number ofspecialized software applications in addition to static HTML pages. Perhaps one ofthe most important is dynamic page generation software. With dynamic pagegeneration, the contents of a Web page are stored as objects in a database, ratherthan being hard-coded in HTML. When the user requests a Web page, the contentsfor that page are then fetched from the database. The objects are retrieved from thedatabase using CGI (Common Gateway Interface), ASP (Active Server Pages), JSP(Java Server Pages), or other server-side programs. CGI, ASP, and JSP are describedin the last section of this chapter. This technique is much more efficient thanworking directly in HTML code. It is much easier to change the contents of adatabase than it is to change the coding of an HTML page. A standard data accessmethod called Open Database Connectivity (ODBC) makes it possible to access anydata from any application regardless of what database is used. ODBC is supported bymost of the large database suppliers such as Oracle, Sybase, and IBM. ODBC makesit possible for HTML pages to be linked to backend corporate databases regardless ofwho manufactured the database. Web sites must be able to pull information from,and add information to, these databases. For example, when a customer clicks on apicture of a pair of boots, the site can access the product catalog database stored in aDB2 database, and access the inventory database stored in an Oracle database toconfirm that the boots are still in stock and to report the current price.

Dynamic page generation gives e-commerce several significant capabilitiesthat generate cost and profitability advantages over traditional commerce.Dynamic page generation lowers menu costs (the costs incurred by merchants forchanging product descriptions and prices). Dynamic page generation also permitseasy online market segmentation—the ability to sell the same product to different


dynamic pagegenerationthe contents of a Webpage are stored as objectsin a database, rather thanbeing hard-coded in HTML.When the user requests aWeb page, the contents forthat page are then fetchedfrom the database

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FIGURE 4.11 WEBTRENDS MARKETING LAB2

Using a sophisticated Web analytics solution such as WebTrends Marketing Lab2, managers can quickly understand the return on investment oftheir online marketing efforts and determine how to improve conversion by drilling down into abandoment paths, product preferences, andsuccessful campaign elements for different types of customers.SOURCE: WebTrends, Inc., 2007.

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markets. For instance, you might want variations on the same banner addepending on how many times the customer has seen the ad. In the first exposureto a car ad, you might want to emphasize brand identification and unique features.On the second viewing you might want to emphasize superlatives like “most familyfriendly” to encourage comparison to other brands (Story, 2007). The samecapability makes possible nearly cost-free price discrimination—the ability to sellthe same product to different customers at different prices. For instance, you mightwant to sell the same product to corporations and government agencies but usedifferent marketing themes. Based on a cookie you place on client files, or inresponse to a question on your site that asks visitors if they are from a governmentagency or a corporation, you would be able to use different marketing andpromotional materials for corporate clients and government clients. You mightwant to reward loyal customers with lower prices, say on DVDs or musical tracks, and charge full price to first-time buyers. Dynamic page generation allowsyou to approach different customers with different messages and prices.

Dynamic page generation also enables the use of Web content managementsystems. As its name implies, a Web content management system (WCMS orWebCMS) is used to create and manage Web content. A WCMS separates thedesign and presentation of content (such as HTML documents, images, video,audio) from the content creation process. The content is maintained in a databaseand dynamically linked to the Web site. A WCMS usually includes templates thatcan be automatically applied to new and existing content, WYSIWIG editing toolsthat make it easy to edit and describe (tag) content, and collaboration, workflowand document management tools. Typically, an experienced programmer isneeded to install the system, but thereafter, content can be easily created and man-aged by non-technical staff. There are a wide range of commercial WCMSs avail-able, from top-end enterprise systems offered by Interwoven, Vignette,Documentum, RedDot, IBM, and Oracle, to mid-market systems by Ingenuix,PaperThin, Ektron and Hot Banana, as well as hosted SAAS (software as a service)versions by Clickability, Marqui, and CrownPeak Technologies. There are also sev-eral open source content management systems available, such as Joomla, Drupal,OpenCMS, and others (CMSWatch.com, 2008).

APPLICATION SERVERS

Web application servers are software programs that provide the specific businessfunctionality required of a Web site. The basic idea of application servers is to isolatethe business applications from the details of displaying Web pages to users on thefront end and the details of connecting to databases on the back end. Applicationservers are a kind of middleware software that provides the glue connectingtraditional corporate systems to the customer as well as all the functionality neededto conduct e-commerce. In the early years, a number of software firms developedspecific separate programs for each function, but increasingly, these specificprograms are being replaced by integrated software tools that combine all the neededfunctionality for an e-commerce site into a single development environment, apackaged software approach.


web application serversoftware programs thatprovide specific businessfunctionality required of aWeb site

Web contentmanagement system(WCMS, WebCMS)used to create and manageWeb content

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Table 4.4 illustrates the wide variety of application servers available in themarketplace. The table focuses on “sell side” servers that are designed to enableselling products on the Web. So-called “buy side” and “link” servers focus on the needsof businesses to connect with partners in their supply chains or find suppliers forspecific parts and assemblies. These buy side and link servers are described morefully in Chapter 12, B2B E-commerce, Supply Chain Management, and CollaborativeCommerce. There are several thousand software vendors that provide applicationserver software. For Linux and Unix environments, many of these capabilities areavailable free on the Internet from various sites. Most businesses—faced with thisbewildering array of choices—choose to use integrated software tools called merchantserver software.

E-COMMERCE MERCHANT SERVER SOFTWARE FUNCTIONALITY

E-commerce merchant server software provides the basic functionality needed foronline sales, including an online catalog, order taking via an online shopping cart, andonline credit card processing.


TABLE 4.4 APPLICATION SERVERS AND THEIR FUNCTION

A P P L I C A T I O N S E R V E R F U N C T I O N A L I T Y

Catalog display Provides a database for product descriptions and prices

Transaction processing Accepts orders and clears payments(shopping cart)

List server Creates and serves mailing lists and manages e-mail marketingcampaigns

Proxy server Monitors and controls access to main Web server; implementsfirewall protection

Mail server Manages Internet e-mail

Audio/video server Stores and delivers streaming media content

Chat server Creates an environment for online real-time text and audiointeractions with customers

News server Provides connectivity and displays Internet news feeds

Fax server Provides fax reception and sending using a Web server

Groupware server Creates workgroup environments for online collaboration

Database server Stores customer, product, and price information

Ad server Maintains Web-enabled database of advertising banners thatpermits customized and personalized display of advertisementsbased on consumer behavior and characteristics

Auction server Provides a transaction environment for conducting onlineauctions

B2B server Implements buy, sell, and link marketplaces for commercialtransactions

e-commerce merchantserver softwaresoftware that provides thebasic functionality neededfor online sales, includingan online catalog, ordertaking via an onlineshopping cart, and onlinecredit card processing

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Online Catalog

A company that wants to sell products on the Web must have a list, or online catalog,of its products, available on its Web site. Merchant server software typically includesa database capability that will allow for construction of a customized online catalog.The complexity and sophistication of the catalog will vary depending on the size ofthe company and its product lines. Small companies, or companies with smallproduct lines, may post a simple list with text descriptions and perhaps color photos. A larger site might decide to add sound, animations, or videos (useful for productdemonstrations) to the catalog, or interactivity, such as customer service representa-tives available via instant messaging to answer questions. Today, larger firms makeextensive use of streaming video.

Shopping Cart

Online shopping carts are much like their real-world equivalent; both allowshoppers to set aside desired purchases in preparation for checkout. The difference isthat the online variety is part of a merchant server software program residing on theWeb server, and allows consumers to select merchandise, review what they haveselected, edit their selections as necessary, and then actually make the purchase byclicking a button. The merchant server software automatically stores shopping cartdata.

Credit Card Processing

A site’s shopping cart typically works in conjunction with credit card processingsoftware, which verifies the shopper’s credit card and then puts through the debit tothe card and the credit to the company’s account at checkout. Integrated e-commercesoftware suites typically supply the software for this function. Otherwise, you willhave to make arrangements with a variety of credit card processing banks andintermediaries.

MERCHANT SERVER SOFTWARE PACKAGES (E-COMMERCE SUITES)

Rather than build your site from a collection of disparate software applications, it iseasier, faster, and generally more cost-effective to purchase a merchant serversoftware package (also called an e-commerce server suite). Merchant serversoftware/e-commerce suites offer an integrated environment that promises toprovide most or all of the functionality and capabilities you will need to develop asophisticated, customer-centric site. E-commerce suites come in three general rangesof price and functionality.

Basic packages for elementary e-commerce business applications are provided byBizland, Hypermart, and Yahoo! Merchant Solutions. Freewebs.com also offers freeWeb building tools and hosting services. PayPal can be used as a payment system onsimple Web sites, and widgets can add interesting capabilities.

Midrange suites include IBM’s WebSphere Commerce Express Edition andMicrosoft’s Commerce Server 2007. High-end enterprise solutions for large globalfirms are provided by IBM WebSphere’s Commerce Professional and Enterprise Edi-tions, Broadvision Commerce, and others. There are several hundred software firms


online cataloglist of products available ona Web site

shopping cartallows shoppers to setaside desired purchases inpreparation for checkout,review what they haveselected, edit theirselections as necessary,and then actually make thepurchase by clicking abutton

merchant serversoftware package (e-commerce serversuite)offers an integratedenvironment that providesmost or all of thefunctionality andcapabilities needed todevelop a sophisticated,customer-centric site

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that provide e-commerce suites, which raises the costs of making sensible decisionson this matter. Many firms simply choose vendors with the best overall reputation.Quite often this turns out to be expensive but ultimately a workable solution. Table4.5 lists some of the most widely adopted midrange and high-end e-commerce suites.

Choosing an E-commerce Suite

With all of these vendors, how do you choose the right one? Evaluating these tools andmaking a choice is one of the most important and uncertain decisions you will makein building an e-commerce site. The real costs are hidden—they involve training yourstaff to use the tools and integrating the tools into your business processes andorganizational culture. The following are some of the key factors to consider:

• Functionality

• Support for different business models

• Business process modeling tools

• Visual site management tools and reporting

• Performance and scalability

• Connectivity to existing business systems

• Compliance with standards

• Global and multicultural capability

• Local sales tax and shipping rules

For instance, although e-commerce suites promise to do everything, yourbusiness may require special functionality—such as streaming audio and video. Youwill need a list of business functionality requirements. Your business may involveseveral different business models—such as a retail side and a business-to-business


TABLE 4.5 WIDELY USED MIDRANGE AND HIGH-END E-COMMERCESUITES

P R O D U C T A P P R O X I M A T E P R I C E

Microsoft Commerce Server Standard Edition, $6,999 per processorEnterprise Edition, $19,999 per processor

IBM WebSphere Commerce Express Edition, single user license,$3,610; Processor Value Unit (PVU)license, $20,000

Professional edition, PVULlicense,$100,000

Enterprise Edition, PVU license, $159,000

Broadvision Commerce $60,000 per processor

IntershopEnfinity Suite 6 Consumer Channel $125,000–$250,000

ATG (Art Technology Group) $380,000 for a four-CPU license

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side; you may run auctions for stock excess as well as fixed-price selling. Be sure thepackage can support all of your business models. You may wish to change yourbusiness processes, such as order taking and order fulfillment. Does the suite containtools for modeling business process and work flows? Understanding how your siteworks will require visual reporting tools that make its operation transparent to manydifferent people in your business. A poorly designed software package will drop offsignificantly in performance as visitors and transactions expand into the thousandsper hour, or minute. Check for performance and scalability by stress testing a pilotedition or obtaining data from the vendor about performance under load. You willhave to connect the e-commerce suite to your traditional business systems. How willthis connection to existing systems be made, and is your staff skilled in making theconnection? Because of the changing technical environment—in particular, changesin mobile commerce platforms—it is important to document exactly what standardsthe suite supports now, and what the migration path will be toward the future. Finally,your e-commerce site may have to work both globally and locally. You may need aforeign language edition using foreign currency denominations. And you will have tocollect sales taxes across many local, regional, and national tax systems. Does the e-commerce suite support this level of globalization and localization?

BUILDING YOUR OWN E-COMMERCE SITE: WEB SERVICES AND OPENSOURCE OPTIONS

While existing firms often have the financial capital to invest in commercial merchantserver software suites, many small firms and startup firms do not. They have to buildtheir own Web sites, at least initially. There are really two options here, the key factorbeing how much programming experience and time you have. One option is to utilizethe e-commerce merchant services provided by hosting sites such as Yahoo’s Mer-chant Solutions. For a $50 setup fee, and a starter plan of $39.95, the service will walkyou through setting up your Web site and provide Web hosting, a shopping cart, tech-nical help by phone, and payment processing. Other less well-known hosting servicesinclude Freemerchant.com, which offers a free turnkey (complete) solution thatenables you to build a fair sophisticated online store. Bigstep.com takes users step bystep through the process of building an online store. Entrabase.com and Tripod pro-vide easy-to-use site-building tools and e-commerce templates for e-commerce sites.An e-commerce template is a pre-designed Web site that allows users to customize thelook and feel of the site to fit their business needs and provides a standard set of func-tionality. Most templates today contain ready-to-go site designs with built-in e-com-merce suite functionality like shopping carts, payment clearance, and sitemanagement tools.

If you have considerable, or at least some, programming background, then youcan consider open source merchant server software. Open source software, asdescribed in Chapter 3, is software developed by a community of programmers anddesigners, and is free to use and modify. Table 4.6 provides a description of someopen source options.

The advantage of using open source Web building tools is that you get exactlywhat you want, a truly customized unique Web site. The disadvantage is that it willtake several months for a single programmer to develop the site and get all the tools


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to work together seamlessly. How many months do you want to wait before you getto market with your ideas?

One alternative to building a Web site first is to create a blog first, and developyour business ideas and a following of potential customers on your blog. Once youhave tested your ideas with a blog, and attract a Web audience, you can then move onto developing a simple Web site.

As the manager in charge of building an e-commerce site, you will be heldaccountable for its performance. Whether you host your own site or outsource thehosting and operation of your site, you will need to understand certain aspects of thecomputing hardware platform. The hardware platform refers to all the underlyingcomputing equipment that the system uses to achieve its e-commerce functionality.Your objective is to have enough platform capacity to meet peak demand (avoiding anoverload condition), but not so much platform that you are wasting money. Failing tomeet peak demand can mean your site is slow, or actually crashes. Remember, the

4.3 CHOOSING THE HARDWARE FOR AN E-COMMERCE SITE


TABLE 4.6 OPEN SOURCE SOFTWARE OPTIONS

M E R C H A N T S E R V E R O P E N S O U R C E S O F T W A R EF U N C T I O N A L I T Y

Web server, online catalog Apache (the leading Web server for small and mediumbusinesses)

Shopping cart Many providers: ZenCart.com; AgoraCart.com; X-Cart.com;OSCommerce.com

Credit card processing Many providers: Echo Internet Gateway; ASPDotNetStorefront.Credit card acceptance is typically provided in shopping cartsoftware but you may need a merchant account from a bankas well.

Database MySQL (the leading open source SQL database for businesses)

Programming/scripting PHP (a scripting language embedded in HTML documents butlanguage executed by the server providing server-side execution with

the simplicity of HTML editing). PERL is an alternativelanguage. JavaScript programs are client side programs thatprovide user interface components.

Analytics Analytics keep track of your site’s customer activities and thesuccess of your Web advertising campaign. You can also useGoogle Analytics if you advertise on Google, which providesgood tracking tools; most hosting services will provide theseservices as well.

hardware platformrefers to all the underlyingcomputing equipment thatthe system uses to achieveits e-commercefunctionality

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Web site may be your only or principal source of cash flow. How much computing andtelecommunications capacity is enough to meet peak demand? How many hits perday can your site sustain?

To answer these questions, you will need to understand the various factors thataffect the speed, capacity, and scalability of an e-commerce site.

RIGHT-SIZING YOUR HARDWARE PLATFORM: THE DEMAND SIDE

The most important factor affecting the speed of your site is the demand thatcustomers put on the site. Table 4.7 lists the most important factors to consider whenestimating the demand on a site.

Demand on a Web site is fairly complex and depends primarily on the type of siteyou are operating. The number of simultaneous users in peak periods, the nature of

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TABLE 4.7 FACTORS IN RIGHT-SIZING AN E-COMMERCE PLATFORM

P U B L I S H / C U S T O M E R W E B S I T E T Y P E S U B S C R I B E S H O P P I N G S E L F - S E R V I C E T R A D I N G S E R V I C E S / B 2 B

Examples WSJ.com Amazon Travelocity E*Trade Ariba e-procurementexchanges

Content Dynamic Catalog Data in legacy Time sensitive Data in legacy Multiple authors Dynamic items applications High volatility applicationsHigh volume User profiles with Multiple data Multiple suppliers Multiple data Not user specific data mining sources and consumers sources

Complex Complextransactions transactions

Security Low Privacy Privacy Privacy PrivacyNon-repudiation Non-repudiation Non-repudiation Non-repudiationIntegrity Integrity Integrity IntegrityAuthentication Authentication Authentication AuthenticationRegulations Regulations Regulations Regulations

Percent secure Low Medium Medium High Mediumpages

Cross session No High High High Highinformation

Searches Dynamic Dynamic Non dynamic Non dynamic Non dynamicLow volume High volume Low volume Low volume Moderate volume

Unique items High Medium to high Medium High Medium to high(SKUs)

Transaction Moderate Moderate to Moderate High to Moderatevolume high extremely high

Legacy integration Low Medium High High Highcomplexity

Page views (hits) High to very high Moderate to high Moderate to low Moderate to high Moderate

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customer requests, the type of content, the required security, the number of items ininventory, the number of page requests, and the speed of legacy applications thatmay be needed to supply data to the Web pages are all important factors in overalldemand on a Web site system.

Certainly, one important factor to consider is the number of simultaneous userswho will likely visit your site. In general, the load created by an individual customeron a server is typically quite limited and short-lived. A Web session initiated by thetypical user is stateless, meaning that the server does not have to maintain anongoing, dedicated interaction with the client. A Web session typically begins with apage request, then a server replies, and the session is ended. The sessions may lastfrom tenths of a second per user, to a minute. Nevertheless, system performancedoes degrade as more and more simultaneous users request service. Fortunately,degradation (measured as “transactions per second” and “latency” or delay inresponse) is fairly graceful over a wide range, up until a peak load is reached andservice quality becomes unacceptable (see Figure 4.12).

Serving up static Web pages is I/O intensive, which means it requires input/output (I/O) operations rather than heavy-duty processing power. As a result,Web site performance is constrained primarily by the server’s I/O limitations and thetelecommunications connection, rather than speed of the processor.

There are some steps you can take to make sure that you stay within anacceptable service quality. One step is to simply purchase a server with faster CPUprocessors, multiple CPU processors, or larger hard disk drives. However, theimprovement that results is not linear and at some point becomes cost-ineffective.Figure 4.13 on page 230 shows the theoretical performance of a Web server as proces-sors are added from a single processor up to eight processors. By increasing processorsby a factor of eight, you get only three times more load capacity.

A second factor to consider on the demand side is the user profile, which refersto the nature of customer requests and customer behavior on your site (how manypages customers request and the kind of service they want). Web servers can be veryefficient at serving static Web pages. However, as customers request more advancedservices, such as site searches, registration, order taking via shopping carts, ordownloads of large audio and video files, all of which require more processing power,performance can deteriorate rapidly.

The nature of the content your site offers is a third factor to consider. If your siteuses dynamic page generation, then the load on the processor rises rapidly andperformance will degrade. Dynamic page generation and business logic (such as ashopping cart) are CPU-intensive operations—they require a great deal of processingpower. For instance, a site with only dynamic page content can expect performanceof a single processor server to fall to one-tenth the levels described in Figure 4.13.Instead of effectively serving 8,000 users, you can only service 1,000 concurrentusers. Any interaction with the user requiring access to a database—filling out forms,adding to carts, purchasing, and completing questionnaires—puts a heavy processingload on the server.

A final factor to consider is the telecommunications link that your site has to theWeb, and also the changing nature of the client connection to the Web. Figure 4.14on page 231 shows that the number of hits per second your site can handle depends


statelessrefers to the fact that theserver does not have tomaintain an ongoing,dedicated interaction withthe client

I/O intensiverequires input/outputoperations rather thanheavy-duty processingpower

user profilerefers to the nature ofcustomer requests andcustomer behavior at a site

CPU-intensiveoperations that require agreat deal of processingpower

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Degradation in Web server performance occurs as the number of users (connections) increases, and as thesystems resources (processors, disk drives) become more utilized. In (a), user-experienced delay rises gracefullyuntil an inflection point is reached, and then delay rises exponentially to an unacceptable level. In (b), thetransaction rate rises gracefully until the number of users rapidly escalates the transaction rate, and at acertain inflection point, the transaction rate starts declining as the system slows down or crashes.

FIGURE 4.12 DEGRADATION IN PERFORMANCE AS NUMBER OF USERSINCREASES

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on the bandwidth connection between your server and the Web. The larger the band-width available, the more customers can simultaneously hit your site. For example, ifyour connection to the Web is a 1.5 Mbps DSL line, the maximum number of visitorsper second for 1 kilobyte files is probably about 100. Most businesses host their sitesat an ISP or other provider that contractually is (or should be) obligated to provideenough bandwidth for your site to meet peak demands. However, there are no guar-antees and ISPs can blame Web congestion for their own bandwidth limitations.Check your ISP’s bandwidth and your site performance daily.

While server bandwidth connections are less a constraint today with thewidespread deployment of fiber-optic cable, the connection to the client is improvingand this will have implications for your customers’ expectations. In 2008, there areapproximately 72 million broadband households in the United States, and thisnumber is expected to increase to around 87 million by 2012 (eMarketer, Inc., 2008;Telecommunications Association of America, 2008). This means your customers willbe able to make far more frequent requests and demand far richer content like videos,games, podcasts, and simulations. This demand will translate quickly into dynamiccontent and the need for additional capacity.

RIGHT-SIZING YOUR HARDWARE PLATFORM: THE SUPPLY SIDE

Once you estimate the likely demand on your site, you will need to consider how toscale up your site to meet demand. Scalability refers to the ability of a site to


A typical Web server with a single Pentium 4.2 GHz processor that is serving only static Web pages can handleabout 8,000 concurrent users. With eight processors, the same computer could handle about 25,000concurrent users.

FIGURE 4.13 CAPACITY OF STATIC PAGE WEB SERVERS

scalabilityrefers to the ability of a siteto increase in size asdemand warrants

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increase in size as demand warrants. There are three steps you can take to meet thedemands for service at your site: scale hardware vertically, scale hardwarehorizontally, and/or improve the processing architecture of the site (see Table 4.8).

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TABLE 4.8 VERTICAL AND HORIZONTAL SCALING TECHNIQUES

T E C H N I Q U E A P P L I C A T I O N

Use a faster computer Applies to edge servers, presentation servers, data servers, etc.

Create a cluster of computers Use computers in parallel to balance loads

Use appliance servers Special-purpose computers optimized for their task

Segment workload Segment incoming work to specialized computers

Batch requests Combine related requests for data into groups, process as a group

Manage connections Reduce connections between processes and computers to aminimum

Aggregate user data Aggregate user data from legacy applications in single data pools

Cache Store frequently used data in cache rather than on the disk

FIGURE 4.14 THE RELATIONSHIP OF BANDWIDTH TO HITS

The greater the bandwidth available, the more customers can simultaneously access a Web site without anyperceived degradation in performance.SOURCE: IBM, 2003

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Vertical scaling refers to increasing the processing power of individual components.Horizontal scaling refers to employing multiple computers to share the workloadand increase the “footprint” of the installation (IBM, 2002).

You can scale your site vertically by upgrading the servers from a single processorto multiple processors (see Figure 4.15). You can keep adding processors to a computerdepending on the operating system and upgrade to faster chip speeds as well.

There are two drawbacks to vertical scaling. First, it can become expensive topurchase new computers with every growth cycle, and second, your entire sitebecomes dependent on a small number of very powerful computers. If you have twosuch computers and one goes down, half of your site, or perhaps your entire site, maybecome unavailable.

Horizontal scaling involves adding multiple single-processor servers to your siteand balancing the load among the servers. You can also then partition the load so thatsome servers handle only requests for HTML or ASP pages, while others are dedicatedto handling database applications. You will need special load-balancing software (provided by a variety of vendors such as Cisco, Microsoft, and IBM) to directincoming requests to various servers (see Figure 4.16).

There are many advantages to horizontal scaling. It is inexpensive and often can be accomplished using older PCs that otherwise would be disposed of. Horizontal scaling also introduces redundancy—if one computer fails, chances are thatanother computer can pick up the load dynamically. However, when your site growsfrom a single computer to perhaps 10 to 20 computers, the size of the physical facilityrequired (the “footprint”) increases and there is added management complexity.

A third alternative—improving the processing architecture—is a combination ofvertical and horizontal scaling, combined with artful design decisions. Table 4.9 onpage 232 lists some of the more common steps you can take to greatly improveperformance of your site. Most of these steps involve splitting the workload into I/O-intensive activities (such as serving Web pages) and CPU-intensive activities (such


You can scale a site vertically by both improving the processors and adding additional CPUs into a singlephysical server.

FIGURE 4.15 VERTICALLY SCALING A SYSTEM

vertical scalingincreasing the processingpower of individualcomponents

horizontal scalingemploying multiplecomputers to share theworkload

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as taking orders). Once you have this work separated, you can fine-tune the servers foreach type of load. One of the least expensive fine-tuning steps is to simply add RAM toa few servers and store all your HTML pages in RAM. This reduces load on your harddrives and increases speed dramatically. RAM is thousands of times faster than harddisks, and RAM is inexpensive. The next most important step is to move your CPU-intensive activities, such as order taking, onto a high-end, multiple processorserver that is totally dedicated to handling orders and accessing the necessarydatabases. Taking these steps can permit you to reduce the number of servers requiredto service 10,000 concurrent users from 100 down to 20, according to one estimate.


You can horizontally scale a system to meet demands by adding inexpensive single-processor servers to thesite and using load-balancing software to allocate incoming customer requests to the correct server, shown inthe diagram as a Cisco LocalDirector.

FIGURE 4.16 HORIZONTALLY SCALING A SYSTEM

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Now that you understand the key factors that affect the speed, capacity, and scalabilityof your site, we can consider some other important requirements for your Web site. You will need a coherent Web site design effort that makes business sense—notnecessarily a site to wow visitors or excite them, but to sell them something. You will alsoneed to know how to build active content and interactivity into your site—not justdisplay static HTML pages. You will definitely want to be able to track customers whocome, leave, and return to your site in order to be able to greet return visitors (“Hi Sarah,welcome back!”). You will also want to track customers throughout your site so you canpersonalize and customize their experience. Finally, you will need to establish a set ofinformation policies for your site—privacy, accessibility, and access to informationpolicies.

In order to achieve these business capabilities, you will need to be aware of somedesign guidelines and additional software tools that can cost-effectively achieve therequired business functionality.

WEB SITE DESIGN: BASIC BUSINESS CONSIDERATIONS

This is not a text about how to design Web sites. (In Chapter 7, we discuss Web sitedesign issues from a marketing perspective.) Nevertheless, from a business manager’sperspective, there are certain design objectives you must communicate to your Website designers to let them know how you will evaluate their work. At a minimum,your customers will need to find what they need at your site, make a purchase, andleave. A Web site that annoys customers runs the risk of losing the customer forever.For instance, a survey by Hostway found that about 75% of respondents said theywere extremely or somewhat likely to not visit an offending site again and tounsubscribe from the offending company’s promotional messages when they

4.4 OTHER E-COMMERCE SITE TOOLS


TABLE 4.9 IMPROVING THE PROCESSING ARCHITECTURE OF YOURSITE

A R C H I T E C T U R E I M P R O V E M E N T D E S C R I P T I O N

Separate static content from dynamic Use specialized servers for each type of workload.content

Cache static content Increase RAM to the gigabyte range and storestatic content in RAM.

Cache database lookup tables Cache tables used to look up database records.

Consolidate business logic on dedicated Put shopping cart, credit card processing, and servers other CPU-intensive activity on dedicated servers.

Optimize ASP code Examine your code to ensure it is operatingefficiently.

Optimize the database schema Examine your database search times and takesteps to reduce access times.

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encounter one of their “pet peeves,” and around 71% said they might refuse topurchase from the Web site and would view the company in a negative way. About55% said they would complain about the Web site to friends and associates, and 45%said they might even refuse to make purchases in the company’s offline stores (Hostway, 2007). See Figure 4.17 for a list of the most common consumer complaintsabout Web sites.

Some critics believe poor design is more common than good design. It appearseasier to describe what irritates people about Web sites than to describe how to designa good Web site. The worst e-commerce sites make it difficult to find informationabout their products and make it complicated to purchase goods; they have missingpages and broken links, a confusing navigation structure, and annoying graphics orsounds that you cannot turn off. Table 4.10 on page 236 restates these negativeexperiences as positive goals for Web site design.

O t h e r E - c o m m e r c e S i t e T o o l s 235

SOURCE: Hostway Corporation, 2007.

FIGURE 4.17 E-COMMERCE WEB SITE FEATURES THAT ANNOYCUSTOMERS

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TOOLS FOR WEB SITE OPTIMIZATION

A Web site is only as valuable from a business perspective as the number of peoplewho visit. Web site optimization (as we use it here) means how to attract lots ofpeople to your site. One answer, of course, is through search engines such as Google,Yahoo, MSN, Ask, and several hundred others. The first stop for most customerslooking for a product or service is to start with a search engine, and follow the listingson the page, usually starting with the top three to five listings, then glancing to thesponsored ads to the right. The higher you are on the search engine pages, the moretraffic you will receive. Page 1 is much better than Page 2. So how do you get to Page1 in the natural (unpaid) search listings? While every search engine is different, andnone of them publish their algorithms for ranking pages, there are some basic ideasthat work well.

• Keywords and page titles: Search engines “crawl” your site and identify keywordsas well as title pages and then index them for use in search arguments. Pepper yourpages with keywords that accurately describe what you sell or do. Experiment: usedifferent keywords to see which work. “Vintage cars” may attract more visitorsthan “antique cars,” or “restored cars.”

• Identify market niches: instead of marketing “jewelry,” be more specific, such as“Victorian jewelry,” or “1950s jewelry” to attract small, specific groups who areintensely interested in period jewelry.

• Offer expertise: White papers, industry analyses, FAQ pages, guides, and historiesare excellent ways to build confidence on the part of users and to encourage themto see your Web site as the place to go for help and guidance.

• Get linked up: Encourage other sites to link to your site; build a blog that attractspeople and who will share your URL with others and post links in the process. List your site with Yahoo Directory for $300 a year.


TABLE 4.10 THE EIGHT MOST IMPORTANT FACTORS IN SUCCESSFUL E-COMMERCE SITE DESIGN

F A C T O R D E S C R I P T I O N

Functionality Pages that work, load quickly, and point the customer towardyour product offerings

Informational Links that customers can easily find to discover more about youand your products

Ease of use Simple fool-proof navigation

Redundant navigation Alternative navigation to the same content

Ease of purchase One or two clicks to purchase

Multi-browser functionality Site works with the most popular browsers

Simple graphics Avoids distracting, obnoxious graphics and sounds that theuser cannot control

Legible text Avoids backgrounds that distort text or make it illegible

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• Buy ads: Complement your natural search optimization efforts with paid ads onsearch engines. Choose your keywords and purchase direct exposure on Webpages. You can set your budget and put a ceiling on it to prevent large losses. See what works, and observe the number of visits to your site produced by eachkeyword string.

• Local e-commerce: Developing a national market can take a long time. If your Website is particularly attractive to local people, or involves products sold locally, thenuse keywords that connote your location so people can find you nearby. Town andcity names in your keywords, or regions can be helpful, such as “Vermont cheese”or “San Francisco blues music.”

TOOLS FOR INTERACTIVITY AND ACTIVE CONTENT

As a manager responsible for building a Web site, you will want to ensure that userscan interact with your Web site quickly and easily. As we describe in later chapters,the more interactive a Web site is, the more effective it will be in generating sales andencouraging return visitors.

Although functionality and ease of use are the supreme objectives in site design,you will also want to interact with users and present them with a lively “active”experience. You will want to personalize the experience for customers by addressingtheir individual needs, and customize the content of your offerings based on theirbehavior or expressed desires. For example, you may want to offer customers freemortgage calculations or free pension advice, based on their interaction withprograms available at your site. In order to achieve these business objectives, you willneed to consider carefully the tools necessary to build these capabilities. Simpleinteractions such as a customer submitting a name, along with more complexinteractions involving credit cards, user preferences, and user responses to prompts,all require special programs. Here is a brief description of some commonly usedsoftware tools for achieving high levels of site interactivity.

Bling for Your Blog: Web 2.0 Design Elements

One easy way to pump up the energy on your Web site is to include someappropriate widgets (sometimes called gadgets, plug-ins, or snippets). Widgets aresmall chunks of code that execute automatically in your HTML Web page. They are pre-built and many are free. Millions of social network and blog pages use widgetsto present users with content drawn from around the Web (news headlines fromspecific news sources, announcements, press releases and other routine content),calendars, clocks, weather, live TV, games and other functionality. You can copythe code to an HTML Web page. A good place to start is Google Gadgets and YahooWidgets.

Mashups are a little more complicated, and as explained in Chapter 3, involvepulling functionality and data from one program and including it another. The mostcommon mashup involves using Google Maps data and software and combining itwith other data. For instance, if you have a local real estate Web site, you candownload Google Maps and satellite images applications to your site so visitors can


widgeta small, pre-built chunk ofcode that executesautomatically in yourHTML Web page; capableof performing a widevariety of tasks

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get a sense of the neighborhood. There are thousands of Google Map mashups, frommaps of Myanmar political protests, to maps of the Fortune 500 companies, all withassociated news stories and other content. Other mashups involve sports, photos,video, shopping and news.

The point of these Web 2.0 applications is to enhance user interest and involve-ment in your site, and to easily include sophisticated functionality and unique data inyour Web site.

Common Gateway Interface (CGI)

Common Gateway Interface (CGI) is a set of standards for communication betweena browser and a program running on a server that allows for interaction between theuser and the server. CGI permits an executable program to access all the informationwithin incoming requests from clients. The program can then generate all the outputrequired to make up the return page (the HTML, script code, text, etc.), and send itback to the client via the Web server. For instance, if a user clicks the Display theContents of My Shopping Cart button, the server receives this request and executes aCGI program. The CGI program retrieves the contents of the shopping cart from thedatabase and returns it to the server. The server sends an HTML page that displaysthe contents of the shopping cart on the user’s screen. Notice all the computing takesplace on the server side (this is why CGI programs and others like it are referred to as“server-side” programs).

CGI programs can be written in nearly any programming language as long asthey conform to CGI standards. Currently, Perl is the most popular language for CGIscripting. Generally, CGI programs are used with Unix servers. CGI’s primarydisadvantage is that it is not highly scalable because a new process must be createdfor each request, thereby limiting the number of concurrent requests that can behandled. CGI scripts are best used for small to medium-sized applications that do notinvolve a high volume of user traffic. There are also Web server extensions available,such as FastCGI, that improve CGI’s scalability (Doyle and Lopes, 2005).

Active Server Pages (ASP)

Active Server Pages (ASP) is Microsoft’s version of server-side programming forWindows. Invented by Microsoft in late 1996, ASP has grown rapidly to become themajor technique for server-side Web programming in the Windows environment. ASP enables developers to easily create and open records from a database andexecute programs within an HTML page, as well as handle all the various forms ofinteractivity found on e-commerce sites. Like CGI, ASP permits an interaction to take place between the browser and the server. ASP uses the same standards as CGI for communication with the browser. ASP programs are restricted to use on Windows 2003/2000/NT Web servers running Microsoft’s IIS Web serversoftware.

Java, Java Server Pages (JSP), and JavaScript

Java is a programming language that allows programmers to create interactivity andactive content on the client computer, thereby saving considerable load on the server.


Active Server Pages(ASP)a proprietary softwaredevelopment tool thatenables programmers usingMicrosoft’s IIS package tobuild dynamic pages

CGI (CommonGateway Interface)a set of standards forcommunication between abrowser and a programrunning on a server thatallows for interactionbetween the user and theserver

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Java was invented by Sun Microsystems in 1990 as a platform-independentprogramming language for consumer electronics. The idea was to create a languagewhose programs (so-called Write Once Run Anywhere [WORA] programs) couldoperate on any computer regardless of operating system. This would be possible ifevery operating system (Macintosh, Windows, Unix, DOS, and mainframe MVSsystems) had a Java Virtual Machine (VM) installed that would interpret the Javaprograms for that environment.

By 1995, it had become clear, however, that Java was more applicable to the Webthan to consumer electronics. Java programs (known as Java applets) could bedownloaded to the client over the Web and executed entirely on the client’s computer.Applet tags could be included in an HTML page. To enable this, each browser wouldhave to include a Java VM. Today, the leading browsers do include a VM to play Javaprograms. When the browser accesses a page with an applet, a request is sent to theserver to download and execute the program and allocate page space to display theresults of the program. Java can be used to display interesting graphics, createinteractive environments (such as a mortgage calculator), and directly access the Webserver.

Different vendors, including Microsoft, IBM, HP, and others, have producedseveral versions of the Java language, and even different VMs. Java applets built usingMicrosoft Java can play well only on Microsoft’s Internet Explorer browser. Therefore,the objective of having Java applets play the same on all Web clients has notsucceeded. Many corporations will not allow Java applets through their firewalls forsecurity reasons. Despite the fact that Java applets do not have access to local clientsystem resources (they operate in a “sandbox” for security reasons), informationsystem security managers are extremely reluctant to allow applets served fromremote servers to come through the firewall. Many Java applets crash or do not perform well, wasting system resources, and when they do perform, the functions areoften trivial (such as flashing logos).

Java Server Pages (JSP), like CGI and ASP, is a Web page coding standard thatallows developers to use a combination of HTML, JSP scripts, and Java to dynamicallygenerate Web pages in response to user requests. JSP uses Java “servlets,” small Javaprograms that are specified in the Web page and run on the Web server to modify theWeb page before it is sent to the user who requested it. JSP is supported by most of thepopular application servers on the market today.

JavaScript is a programming language invented by Netscape that is used tocontrol the objects on an HTML page and handle interactions with the browser. It is most commonly used to handle verification and validation of user input, aswell as to implement business logic. For instance, JavaScript can be used oncustomer registration forms to confirm that a valid phone number, zip code, oreven e-mail address has been given. Before a user finishes completing a form, thee-mail address given can be tested for validity. JavaScript appears to be much moreacceptable to corporations and other environments in large part because it is morestable and also it is restricted to the operation of requested HTML pages. Insight onTechnology: Pumping Up the Customer Experience Using AJAX and Flash furtherdescribes the use of JavaScript and other tools to create highly interactive Websites.


Javaa programming languagethat allows programmersto create interactivity andactive content on the clientcomputer, thereby savingconsiderable load on theserver

Java Server Pages(JSP)like CGI and ASP, a Webpage coding standard thatallows developers todynamically generate Webpages in response to userrequests

JavaScripta programming languageinvented by Netscape thatis used to control theobjects on an HTML pageand handle interactionswith the browser

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(continued)

INSIGHT ON TECHNOLOGY

PUMPING UP THE CUSTOMER EXPERIENCEUSING AJAX AND FLASH

The truth is, despite the success of e-commerce retail and services, many

people still prefer to shop in real storesso they can feel, touch, and see the goods.

The online shopping experience has until recentlybeen limited to online catalogs with prettypictures and a cumbersome check-out procedureeuphemistically called a “shopping cart.” There’svery little meaningful interactivity in most onlineretail shopping. Less than 20% of the people whovisit even the best Web sites buy something, whilemost Web sites find less than 5% buy anything.Arpund 60% of shopping carts are abandonedbefore purchase. Over 50% of those who visit butdo not buy say they cannot see or touch the prod-uct as the main reason.

If ordinary physical retail stores performedthis badly they would not call the United States a“consumer economy” and Macy’s and Wal-Martwould go broke. Looked at another way: ifshopping cart abandonment went to zero andeveryone who visited a Web site boughtsomething, it is likely that retail e-commercewould double to over $300 billion a year. That’sthe upside.

The days of static HTML pages are hopefullycoming to an end, and the shopping experiencemade more virtual, highly interactive andenjoyable through the use of a set of techniquescalled AJAX. You can see these new techniquesmost clearly in mapping services such as GoogleMaps, MapQuest, and Yahoo Maps. Once the mapis drawn on the screen, you can grab the map tomove it in any direction without causing the entireHTML page to reload. On the retail products side,you can see AJAX at work in product configura-tors that allow you to grab the product with yourmouse, and rotate it so you can see the product

from different angles, all without re-loading theHTML Web page. For instance, atTimberland.com, you can build a custom bootwith colors, initials, embroidery, and designs allin real-time, without interruption. Many automo-bile Web sites use these same techniques.

Most Web sites today still work on thestandard Web model: a client computer asks for aWeb page, and a Web server delivers the page.This occurs every time you press a Continue orSearch button. Today’s highly graphical Webpages often contain several hundred kilobytes ofdata. But even if you have entered only a few linesof information containing a few hundred bytes ofdata in the traditional Web client/server model,all the processing is done on a remote server com-puter, and the client is not much more than a key-board, screen, and interface. With this traditionalmodel, entire Web pages of information aretransferred across the Web, creating delays forthe user and hogging bandwidth on the Web.

But there is a different way to create Webpages. Using “AJAX” (for AsynchronousJavaScript and XML, also sometimes just called“rich Internet applications” or RIA), the clientand server work in the background to transferinformation immediately as the user enters it, andthe server responds immediately, all without theuser being aware of the transfer. The result is asmooth, seamless, seemingly continuous userexperience. How does RIA work? There areseveral ways of building rich Internet applica-tions, but they all involve downloading a smallprogram to the client. AJAX and RIA use existingtools to improve the user experience. One methodis to download a small JavaScript program to aclient computer that has a Java-enabled browser.JavaScript was one of the first client-side

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SOURCES: "The Business Benefits of Developing Applications in AJAX," by Andre Charland, UIresourcecenter.com, 2008; "Shopping Cart Abandon-ment Rises," eMarketer, Inc., May 29, 2008; "Making Web 2.0 Usable: Ajax Case Study," Molecular Inc. 2007; ; “Ajax Builds a Better Way to Find Ocean Car-rier Timetables,” by Heather Havenstein, Computerworld, March 9, 2007; “E-commerce: AJAX, Flash Make Websites More Engaging,” by Meredith Levinson,CIO Magazine, March 1, 2006.

languages and technologies with the ability to runa computer program delivered over the Web. This small program carries on a backgroundconversation with the server, retrieving only theinformation the user needs at whatever intervalthe application program requires. This methodrequires that the JavaScript program be capableof running on all target client computers, whichmay be using any one of several differentbrowsers, and which may or may not be Java-enabled.

A different method is supported by Adobe’sFlash plug-in, which nearly 98% of U.S. clientcomputers are currently using. In this method, aFlash program is downloaded to the client. Thisprogram runs within the Flash Player installed inmost browsers. Flash provides a nearly universalclient-side solution.

Whatever method is chosen, the results atconsumer Web sites are encouraging. Tests at

TJMaxx.com and HomeGoods.com showedthat about 50% more customers completed aone-page, AJAX-enabled shopping cart (whichcombined checkout, billing, and shipping pages)compared to a multiple-page shopping cart usedearlier. TravelClicks, an iHotelier unit that sellshotel reservation systems to other hotels, licensesa reservation program built using Adobe’s Flexprogram (a program specifically designed byAdobe to create RIAs). On the roughly 2,000hotel sites using iHotelier, customers now can seeinstantly the impact of changing rooms, orchanging dates, without loading new pages.

As AJAX applications spread, the originalvision of the Web as a highly interactivemedium—as opposed to a slow page-turner—willbecome a reality. And hopefully, shopping cartswill not become places where transactions go todie, but instead the last stop for a pleasingcustomer shopping journey.

ActiveX and VBScript

Microsoft—not to be outdone by Sun Microsystems and Netscape—invented theActiveX programming language to compete with Java and VBScript to compete withJavaScript. When a browser receives an HTML page with an ActiveX control (compa-rable to a Java applet), the browser simply executes the program. Unlike Java,however, ActiveX has full access to all the client’s resources—printers, networks, andhard drives. VBScript performs in the same way as JavaScript. Of course, ActiveX andVBScript work only if you are using Internet Explorer. Otherwise, that part of thescreen is blank.

In general, given the conflicting standards for Java, ActiveX, and VBScript and thediversity of user client computers, many e-commerce sites choose to steer clear ofthese tools. CGI scripts, JSP, and JavaScript are the leading tools for providing active,dynamic content.

ColdFusion

ColdFusion is an integrated server-side environment for developing interactive Webapplications. Originally developed by Macromedia and now offered by Adobe,ColdFusion combines an intuitive tag-based scripting language and a tag-based serverscripting language (CFML) that lowers the cost of creating interactive features.

ActiveXa programming languagecreated by Microsoft tocompete with Java

VBScripta programming languageinvented by Microsoft tocompete with JavaScript

ColdFusionan integrated server-sideenvironment for developinginteractive Webapplications

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ColdFusion offers a powerful set of visual design, programming, debugging, anddeployment tools.

PERSONALIZATION TOOLS

You will definitely want to know how to treat each customer on an individual basisand emulate a traditional face-to-face marketplace. Personalization (the ability to treatpeople based on their personal qualities and prior history with your site) andcustomization (the ability to change the product to better fit the needs of the customer)are two key elements of e-commerce that potentially can make it nearly as powerfulas a traditional marketplace, and perhaps even more powerful than direct mail orshopping at an anonymous suburban shopping mall. Speaking directly to thecustomer on a one-to-one basis, and even adjusting the product to the customer isquite difficult in the usual type of mass marketing, one-size-fits-all commercialtransaction that characterizes much of contemporary commerce.

There are a number of methods for achieving personalization and customization.For instance, you could personalize Web content if you knew the personal backgroundof the visitor. You could also analyze the pattern of clicks and sites visited for everycustomer who enters your site. We discuss these methods in later chapters onmarketing. The primary method for achieving personalization and customization isthrough the placement of cookie files on the user’s client computer. As we discussedin Chapter 3, a cookie is a small text file placed on the user’s client computer that cancontain any kind of information about the customer, such as customer ID, campaignID, or purchases at the site. And then, when the user returns to the site, or indeedgoes further into your site, the customer’s prior history can be accessed from adatabase. Information gathered on prior visits can then be used to personalize the visitand customize the product.

For instance, when a user returns to a site, you can read the cookie to find acustomer ID, look the ID up in a database of names, and greet the customer (“HelloMary! Glad to have you return!”). You could also have stored a record of priorpurchases, and then recommend a related product (“How about the wrench tool boxnow that you have purchased the wrenches?”). And you could think about customiz-ing the product (“You’ve shown an interest in the elementary training programs forWord. We have a special “How to Study” program for beginners in Office software.Would you like to see a sample copy online?”).

We further describe the use of cookies and their effectiveness in achieving a one-to-one relationship with the customer in Chapter 8.

THE INFORMATION POLICY SET

In developing an e-commerce site, you will also need to focus on the set of informa-tion policies that will govern the site. You will need to develop a privacy policy—aset of public statements declaring to your customers how you treat their personalinformation that you gather on the site. You also will need to establish accessibilityrules—a set of design objectives that ensure disabled users can effectively accessyour site. There are more than 50 million Americans who are disabled and requirespecial access routes to buildings as well as computer systems (see Insight on Society:Designing Accessibility in Web 2.0). E-commerce information policies are described ingreater depth in Chapter 8.


privacy policya set of public statementsdeclaring to yourcustomers how you treattheir personal informationthat you gather on the site

accessibility rulesa set of design objectivesthat ensure disabled userscan effectively access yoursite

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INSIGHT ON SOCIETY

DESIGNING FOR ACCESSIBLITY WITH WEB 2.0

In 1998, Congress amended theRehabilitation Act to require U.S.

agencies, government contractors, andothers receiving federal money to make

electronic and information technology servicesaccessible to people with disabilities. Known asSection 508, this legislation requires Web sites offederally funded organizations to be accessible tousers who are blind, deaf, blind and deaf, orunable to use a mouse. However, the legislationapplies only to U.S. agencies, governmentcontractors, and others receiving federal money,not to the broader e-commerce environment.

In one of the first law suits seeking to enforceSection 508 for Internet services, Access NowInc., an advocacy group for the disabled, suedSouthwest Airlines in 2001 on behalf of morethan 50 million disabled Americans for operatinga Web site that was inaccessible to the disabled,on the grounds that this violated of the 1990Americans with Disability Act (ADA). In Novem-ber 2002, a Federal District Court in Florida, inone of the first court decisions on the applicabil-ity of the ADA to Web sites, ruled that ADAapplies only to physical spaces, not virtual spaces.However, the judge noted in a footnote that shewas surprised that a customer-oriented firm likeSouthwest Airlines did not “employ all availabletechnologies to expand accessibility to its Website for visually impaired customers who would bean added source of revenue.”

Since this early decision however, both theinterpretation of the law and public sentimenthave resulted in many well-known Web sitesconforming to the spirit of Section 508,sometimes voluntarily and sometimes underthreat from advocacy groups. For instance,RadioShack, Amazon, Ramada, and Priceline

have entered into agreements with the AmericanCouncil for the Blind, and the AmericanFoundation for the Blind. Meanwhile, theNational Federation of the Blind brought a class-action suit against Target for failing tomake its site accessible for the blind. Theyclaimed that blind people could not use Target’sshopping cart because it required use of a mouse,used inaccessible image maps and graphics, andlacked compliant alt-text, an invisible codeembedded beneath graphics that allows screenreading software to vocalize a description of theimage. Target claimed the ADA did not apply toWeb sites.

In September 2006, a federal district courtruled that ADA did indeed apply to Web sites. The court held “the ‘ordinary meaning’ of theADA’s prohibition against discrimination in theenjoyment of goods, services, facilities, orprivileges is that whatever goods or services theplace provides, it cannot discriminate on the basisof disability in providing enjoyment of those goodsand services.” The court thus rejected Target’sargument that only its physical store locationswere covered by the civil rights laws, rulinginstead that all services provided by Target,including its Web site, must be accessible topersons with disabilities. In October 2007, thecourt granted class-action status to the lawsuit.

In August 2008, Target and the NFB settledthe suit. Target made no admission or concessionthat its Web site violated the ADA, but agreed tobring it into compliance with certain online assis-tive technology guidelines by February 28, 2009,and to have the NFB certify that it is compliantwith those guidelines. In addition, Target agree topay damages of $6 million. Many accessibilityadvocates expressed disappointment that the res-

(continued)

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olution of the case via a settlement failed to pro-vide any clear legal precedent.

So how does a blind person access the Weband how should designers build in accessibility forblind persons? Most blind persons use the samePCs as everyone else. But a blind person’s PCuses screen access software that translatesinformation on the screen into synthesized speechor Braille. The program used to surf the Web willmost likely be Internet Explorer, although otherbrowsers are also available, such as Lynx (a text-only browser written originally to run underUnix) and IBM’s Home Page Reader, which gen-erate their own speech.

A blind person enters a Web page bychecking out the hypertext links that are on thepage. This is usually accomplished by jumpingfrom link to link with the Tab key; the screenaccess software automatically reads thehighlighted text as the focus moves from link tolink. If the highlighted text is something like“How to Contact Us” or “Visit Your ShoppingCart,” the blind user will be able to make somesense out of the link. If, however, the highlightedtext is “Click Here,” or “Here,” it will be difficultif not impossible for the blind user to interpret themeaning of the link without using a different nav-igation strategy. With the more recent screenaccess software/browser combinations, it is possi-ble for a blind Web surfer to explore the page oneline at a time, thus alleviating this problem. How-ever, being forced to examine every detail of aWeb page just to learn the meaning of a hypertextlink is a time-consuming process that, ideally,should be avoided. The important point to keep inmind is that the screen access software is lookingfor ASCII text, which it can convert to speech orBraille.

Once the desired hypertext link has beenlocated, the blind person presses the Enter key(clicks on the link) to go where the link points. If

there is a form to fill out on the page, the blindperson will usually tab to the appropriate inputfield and type the information in the usual way.Other controls such as checkboxes, combo boxes,radio buttons, and the like can all be used if thescreen access software can detect them.

There are several simple strategies Webdesigners can use to improve accessibility.Embedding text descriptions behind images is oneexample that allows screen readers to announcethose descriptions. So instead of saying “Image,”when a screen reader passes over an image, thevisually impaired user can hear “Photo of acruise ship sitting in a harbor.” Allowing users toset the color and font schemes can also make adifference for the visually impaired. Addingscreen magnification tools and sound labelswhere hyperlinks appear are two additional waysto increase accessibility.

These are examples of “equivalent alterna-tives” to visual content that disability advocatessuggest should be required, both for visual andauditory content, to ensure individuals withdisabilities have equal access information thatappears on-screen. Guidelines for creatingaccessible Web pages include ensuring that textand graphics are understandable when viewedwithout color, using features that enable activa-tion of page elements via a variety of inputdevices (such as keyboard, head wand, or Braillereader), and providing clear navigation mecha-nisms (such as navigation bars or a site map) toaid users.

Business firms pay a cost for making theirsites accessible to the blind. Today, only about10% of all Web sites in the United States areaccessible and conform to the internationalWeb Accessibility Initiative of the World WideWeb Consortium. But, as graphical elementssuch as video come to play an ever moreimportant role in Web content and navigation,

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it becomes even more important for theseelements to be accessible to the blind. There areabout 10 million visually impaired persons in

the United States alone who represent a formi-dable economic force.

SOURCES: "Target Settles Lawsuit with Advocates for Blind," by Andrea K. Walker, Baltimore Sun, August 28, 2008; "Develop a Web Site Accessibleby Visually Impaired Users and Comply with the Law," by Joe Gross, Tech Republic, February 21, 2008; “Lawsuit Seeks to Improve Web Access for the Blind,”by Carolyn Said, Sfgate.com, October 3, 2007; “Point, Click, and Sue,” by Sherry Karabin, Corporate Counsel, September, 2007; “Web Accessibility: Making YourSite Accessible to the Blind,” by Curtiss Chong, National Federation of the Blind, September 2007; “Legal Precedent Set for Web Accessibility,” Press Release,National Federation for the Blind, September 7, 2006; “Do the Rights of the Disabled Extend to the Blind on the Web?,” by Bob Tedeschi, New York Times,November 6, 2006.

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Washington-based Recreational Equipment, Inc. (REI) is the world’slargest online retailer of outdoor gear. REI is a somewhat unusualcompany. Lloyd and Mary Anderson, mountain climbers fromSeattle, Washington, founded REI in 1938. The Andersons imported

a special ice axe from Austria for themselves and decided to set up a cooperative tohelp their friends and other fellow outdoor enthusiasts acquire high-quality climbingand camping gear at reasonable prices. Today, REI is the largest consumer coopera-tive in the United States, with nearly 3.4 million members who have paid a one-timemembership fee of $20 that entitles them to an annual dividend equal to about 10%of their annual purchases. And the business has grown. Today, REI operates 96 retailstores in 28 states, two online stores, an international mail order operation, and REIAdventures, a travel agency. Kiosks in every store allow customers to access productsat either of REI’s Web sites: REI.com and REI-Outlet.com. REI employs over 9,500people, and in 2007, generated over $1.3 billion in gross revenues, about $225 millionof which comes from its online stores.

REI first started exploring the Internet in the summer of 1995. Netscape had justgone public, and e-commerce was just getting started. As with many business successstories, REI’s online venture began with senior executives who recognized thepotentially transformative power of the Web, and the mixture of opportunity andpossible threat that it represented.

Many traditional bricks-and-mortar retailers at that time feared cannibalization oftheir retail and/or catalog sales if they introduced an online sales outlet. Theirnightmare was that starting an online store would merely “steal” their own customersfrom their regular sales channels. But REI wasn’t deterred. As Dennis Madsen, REI’sformer president and chief executive officer, said, “We knew that if we could not serveour customers who were looking to shop with us online, they would turn to someoneelse online. It was never a question for us. Being online meant better serving the cus-tomer. Our experience has proven that cannibalization is largely a myth and that our multi-channel customers are our best customers. For instance, dual-channelcustomers who shopped both online and at stores spent 114% more than single-channel customers. And customers who shop three channels—retail stores, Web, andkiosks—spent 48% more than dual-channel customers.”

REI charged Matt Hyde, who had previously helped start REI Adventures, thecompany’s travel service (and who now serves as the company’s senior vice presi-dent of marketing and merchandising), with the mission of launching REI’s firstWeb site on a budget of approximately $500,000. At the time, Netscape was the onlycompany offering a complete e-commerce suite, so REI chose Netscape’s Merchant

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R E I C l i m b s t h e W e b M o u n t a i n

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Server software installed on an IBM RS/6000 server. And although Hyde recog-nized that REI was a retailer by trade, not a programming shop, he chose to keepdesign of the site in-house, using off-the-shelf Web authoring tools rather than out-source creation of the Web site. The rationale: “When [we] took the leap of faith thatwe could launch this compelling value proposition, and that it could be big, [we]realized we needed to make this a core competency. It couldn’t be outsourced.”The decision was not without its costs, however: managing REI.com’s growthinternally, with no outsourcing, strained REI’s human resources. REI soondiscovered that finding people with the requisite skills could be difficult, and evenif they could be found, they were a lot more expensive than salespeople. In September 1996, at a time when few traditional retailers were even looking atonline sales, REI.com launched, promoted primarily through direct mail and in-store notices. The first order arrived 20 minutes later. By February 1997, Hydeand his team knew they were on the right track. Traffic was up by 50% in the twomonths following Christmas. But that in itself posed a problem. As Hyde remem-bers, “We chose Netscape early on, and they were clearly the leader [at that time].But not long after getting the system up, we realized that it was too limited. Whenyou go from a few thousand people checking out your site to a million everymonth, you need a lot of infrastructure.”

He also noted, “On the surface, e-commerce sounds relatively easy. It’s not untilyou have experience trying to integrate a high-volume, high-functionality Web siteinto existing business processes and applications that you realize that it’s a lot harderthan it seems. It’s like an iceberg—the view from the browser is only 10% of what ittakes to build a successful and profitable Web site.”

REI had originally hoped to upgrade with Netscape, but, as Hyde said, “that wasn’tworking out.” This time they had more of a choice, and looked at offerings from all themajor vendors, including Microsoft, IBM, Broadvision, and OpenMarket. “When youchange commerce packages, there’s a huge learning curve. I was going to make thischange once, but I wasn’t going to do it again, so I wanted to pick the right package ...for the next several years.” In early 1998, REI decided on IBM’s Net.Commerce serversoftware. An important factor in the decision was IBM’s ability to preserve all thecustom coding REI had done over the past two years to connect its online store to itslegacy system. “I had hundreds of thousands, if not millions of dollars tied up in this[system], and we didn’t want to throw it away. And since Net.Commerce [would alsolessen] the need to do custom coding in the future, it’s a two-fold benefit.”

In August 1998, REI launched a second Web site, REI-Outlet.com, using Net.Commerce server software. Once REI-Outlet.com was successfully launched, REI then turned to migrating REI.com to the new system, completing the move inOctober 1998.

In 2002, REI began a third re-building of its Web site by standardizing on a singleplatform, IBM’s WebSphere, an integrated set of e-commerce site development andoperational tools. Prior to this point, REI’s e-commerce infrastructure was a mixtureof software applications written both in-house and by a variety of different technologyvendors. In the period since REI’s second re-build in 1998, IBM had developed a suiteof tools and functionalities built on standards such as Java and Unix that included

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than 40% of all orders generated on REI.com’s Web site are delivered to stores forpickup, and one-third of the customers who pick up orders purchase an additional$90 in merchandise during the visit. REI’s multi-channel gift registry is anotherexample. The registry can be set up, monitored, and updated through an in-storekiosk, over the phone, or at REI.com. All modifications to the list or purchases areupdated to the list in real time. According to REI, gift registries created onlinebring customers into its retail stores, many of whom are first-time customers.

With the ascendancy of Google and search engine marketing, it has alsobecome critical that REI’s online catalog pages appear in the first page of searchengine queries. REI worked with a Web firm called Netconcepts to redesign its Webpages, end the practice of using dynamic URLs for pages, and in general make thecatalog Web pages more friendly to search engine Web crawlers so its pages couldbe properly read. The result was a 200% gain in “natural search” sales producedwithout making payments to search engines. In 2006, REI began using a softwareservice, Mercent Retail, to help it better manage referrals from comparisonshopping portals such as Shopping.com, and manufacturer Web sites. The service,which is integrated with REI’s back-end retail management software systems, helpsREI maintain brand and merchandising consistency between its own Web sites andthe various third-party sites, and optimizes the product links sent to each of itschannel partners. In 2007, REI switched from its proprietary search engine to onefrom Mercado Software, enabling customers to quickly search for items by brand,price, or best sellers.

As a result of its efforts, REI has been rewarded with steadily increasing onlinesales, which have grown from $111 million in 2004 to $226 million in 2007, andaccording to Internet Retailer’s Top 500 Guide, ranked second in the online Sport-


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WebSphere Application Server, WebSphere Commerce, MQ Series Integrator, and IBMVisualAge for Java, all running on IBM pSeries Unix-based computer servers, whichcan be configured with multiple processors in order to scale with a business. By thattime, REI had come to the realization that it was less costly in the long run to rely ona single vendor such as IBM to provide an integrated set of e-commerce applications,rather than building the applications in-house.

Today, REI offers around 16,000 unique products online—more than in any of itsphysical stores—at prices that are the same as in the retail stores; thousands of pagesof in-depth product information; an interactive community system; and a completeadventure travel service. The outlet store, REI-Outlet.com, sells merchandise that thecompany buys specifically for the outlet.

REI’s technology platform continues to rely on IBM pSeries and iSeries serversthat link the Web sites and stores to backend legacy databases that are used to storeproduct and customer information (see figure). The WebSphere applications provideend-to-end business to consumer commerce from shopping and checkout tofulfillment. Orders from the Web site are processed as seamlessly as those from retailstores or mail-order sales.

The system appears to be working well. REI has won a “Best in E-commerceInnovation” Retail Systems Achievement award and been named by ForresterResearch as one of the best multi-channel companies in Forrester’s U.S. multi-channelretail evaluation, which measures the top 30 things a retailer must do to deliver agreat multi-channel experience. REI scored highest for “customer experience” and“technical integration.”

With its focus on an integrated platform from a single vendor, REI hasimplemented extensive customer features utilizing the platform’s capabilities inpersonalized service and information, as well as more convenience for both onlineand in-store shoppers. For instance, REI has the ability to refer new Web customers tonearby stores that are having sales. It can e-mail coupons for bike helmetsredeemable at local stores or online to customers who purchased a bicycle.WebSphere can drop an image of hiking boots featured at REI onto the screen of acustomer reading an REI “Learn and Share” article on backpacking.

REI’s clicks-and-bricks strategy has paid off handsomely. In addition toimproving relationships with existing customers, the online stores have helped cre-ate new customers. About 36% of the online customers are not members of the REIcooperative, meaning they are likely new customers, compared to 15% of REI’sretail customers. And despite management’s early fears, the online stores haven’tcannibalized traditional store sales. In fact, the opposite has occurred: The Web sitehas attracted new customers and strengthened the relationship with existingcustomers. Two services enabled by the WebSphere Commerce platform, REI StorePickup service, and REI’s gift registry, are a case in point. REI Store Pickup serviceprovides in-store pickup as a free shipping option for online orders. To implementthe service, REI combined its Web and store fulfillment systems, shippingcustomer merchandise to the stores on the same trucks that deliver the store’s bi-weekly stock orders. The service has proved to be a tremendous success. In its first 12 months, in-store pickups from online sales accounted for $40 millionin revenue, and they now account for about a third of online sales. Today, more


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ing Goods market and 62st overall. But REI isn’t satisfied with just 20% annualgrowth. According to Brad Brown, REI’s vice president of e-commerce and webstrategy, “We want to grow more aggressively.” To do so, it is implementing morerich media, videocasts, and other Web 2.0 tools. For example, shoppers can watcha video on how to change a flat bicycle tire. Links for related products appear onthe same page. Rich media applications from Heck Yes Productions enable shop-pers to see products in 3D and from different angles. RSS is another new tool thatREI is using. As you learned in Chapter 3, RSS is a data feed that delivers updatedinformation from selected Web sites directly to a subscriber’s desktop. REI uses RSSto drive traffic to REI-Outlet.com’s “deal of the day.” They have added customerreviews of its products, an option which has proved quite popular. And during2008, it is putting the finishing touches on three-year-long, multi-million dollarproject to create a new data warehouse that will combine information collected instores, on the Web, from call centers, and all other customer contacts into a singledatabase. The data warehouse will allow REI to deliver highly targeted marketingmessages and customer service. Staying atop the Web mountain requires both con-tinuing innovation and investment.

But REI is not without competitors. In 2007, Cabela's, another leading sportinggoods retailer, leapfrogged past REI to the top online spot according to InternetRetailer, with $459 million in online sales, and a 30% share of the online market,compared to REI's $226 million and 15% share. Cabela's is using many of the sametechniques as REI, such as online order/store pick-up, interactive kiosks, advancedsearch functions, enlarged product views, product ratings, etc., but apparently withmore success. During the 2007 holiday season, MegaView Online Retail listedCabela's as one of the top 10 "power converters," with a 16.8% conversion rate.Cabela's was also cited by Keynote Systems for having the industry's best reliabil-ity over the holiday season, as well as the best site responsiveness, as measured byhow quickly pages loaded and how many customer transactions were completed.In February 2008, Cabela's implemented RightNow Technologies' on demand cus-tomer relationship management solution, which enables Cabela's customer repre-sentatives to chat with customers online, and as a result the company hassignificantly reduced the number of abandoned shopping carts. Cabela's has alsobuilt a searchable, online knowledge database that ensures consumers can easilyfind the information they need on the company's Web site, and also provides aninformation resource for Cabela employees. The system also automatically routescustomer e-mails to the appropriate staff member, based on customer needs.Cabela's can now reply to most customer e-mails within 2.5 hours, and the volumeof phone calls to Cabela's contact center has dropped. In September 2008, Cabela'sadded MicroStrategy as its provider of business intelligence software, which willallow Cabela's employees to review every item purchased online and better under-stand the items that customers typically purchase together, which should enableCabela's to be able to better present complementary product offerings to its onlinecustomers.

With competition such as Cabela's now in front, and other's such as Bass ProOutdoor Online nipping at its heels, REI cannot afford to rest on its laurels if ithopes to reclaim its top spot atop the Web sporting goods mountain.


SOURCES: “About Us,” REI.com,October 2008; "Cabela's ChoosesMicroStrategy as EnterpriseReporting Standard," InternetRetailer, September 30, 2008; "REICombines 20 Sources of CustomerInformation into One DataWarehouse," Internet Retailer,March 18, 2008; "Driving Sales,"Internet Retailer, March 2008;"RightNow Helps Cabela's DeliverExceptional Customer Experiencesand Support Renowned Service-Centric Brand," Internet Retailer,February 12, 2008; "Holiday WebPerformance at 26 Leading OnlineRetailers Improved," InternetRetailer, February 1, 2008; "InDecember, 10 Retailers Were PowerConverters," Internet Retailer,January 29, 2008;“REI’s OnlinePerformance Climbs with MercentRetail,” March 20, 2007; “Top 500Guide, 2008 Edition,” InternetRetailer, 2008; Case Study: REI”,Netconcepts.com, July 28, 2006;“REI.com Expands Its Store PickupProgram,” Internet Retailer, March15, 2006; “REI Optimizes Saleswith Cross-channel CommerceSolution,” IBM Case Study, August2004; “How REI Scaled the E-commerce Mountain, “ by MeganSantosus, CIO, May 19, 2004; “REIPersonalizes Online Shopping withWebSphere Commerce Suite,” IBMGlobal Industries: Retail CaseStudies, IBM Case Study, April2003.

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Case Study Questions

1. Create a simple logical design and physical design for REI.com using informa-tion provided in the case study, supplemented as necessary by your ownresearch.

2. After reading the case study, identify the key reasons for REI.com’s success thusfar.

3. Visit REI.com and rate its performance on the eight factors listed in Table 4.10on a scale of 1 to 10 (with 1 being the lowest and 10 the highest). Providereasons for your ratings.

4. Prepare a short industry analysis of the online outdoor sporting goods andapparel industry. Who are REI’s primary competitors? How well have theydeveloped multi-channel retailing?

K E Y C O N C E P T S

Explain the process that should be followed in building an e-commerce Web site.

Factors you must consider when building an e-commerce site include:• hardware architecture• software• telecommunications capacity• site design• human resources• organizational capabilities

The systems development life cycle (a methodology for understanding the businessobjectives of a system and designing an appropriate solution) for building an e-commerce Web site involves five major steps:

• Identify the specific business objectives for the site and then develop a list ofsystem functionalities and information requirements.

• Develop a system design specification (both logical design and physical design).• Build the site, either by in-house personnel or by outsourcing all or part of the

responsibility to outside contractors.• Test the system (unit testing, system testing, and acceptance testing).• Implement and maintain the site.

The nine basic business and system functionalities an e-commerce site shouldcontain include:

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• Digital catalog—allows a site to display goods using text and graphics.• Product database—provides product information, such as a description, stocking

number, and inventory level.• Customer on-site tracking—enables a site to create a site log for each customer

visit, aiding in personalizing the shopping experience and identifying commoncustomer paths and destinations.

• Shopping cart/payment system—provides an ordering system, secure credit-cardclearing, and other payment options.

• Customer database—includes customer information such as the name, address,phone number, and e-mail address.

• Sales database—contains information regarding the customer ID, productpurchased, date, payment, and shipment to be able to provide after-sale customersupport.

• Ad server—tracks the site behavior of prospects and customers that comethrough e-mail or banner ad campaigns.

• Site tracking and reporting system—monitors the number of unique visitors, pagesvisited, and products purchased.

• Inventory management system—provides a link to production and suppliers inorder to facilitate order replenishment.

Describe the major issues surrounding the decision to outsource site development and/orhosting.

Advantages of building a site in-house include:• the ability to change and adapt the site quickly as the market demands• the ability to build a site that does exactly what the company needs

Disadvantages of building a site in-house include:• the costs may be higher• the risks of failure may be greater, given the complexity of issues such as

security, privacy, and inventory management• the process may be more time-consuming than if you had hired an outside

specialist firm to manage the effort• staff may experience a longer learning curve that delays your entry into the

market

Using design templates cuts development time, but pre-set templates can also limitfunctionality.

A similar decision is also necessary regarding outsourcing the hosting of the siteversus keeping it in-house. Relying on an outside vendor to ensure that the site islive twenty-four hours a day places the burden of reliability on someone else, inreturn for a monthly hosting fee. The downside is that if the site requires fastupgrades due to heavy traffic, the chosen hosting company may or may not becapable of keeping up. Reliability versus scalability are the issues in this instance.

Identify and understand the major considerations involved in choosing Web server and e-commerce merchant server software.


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Early Web sites used single-tier system architecture and consisted of a single-servercomputer that delivered static Web pages to users making requests through theirbrowsers. The extended functionality of today’s Web sites required the developmentof a multi-tiered systems architecture, which utilizes a variety of specialized Webservers, as well as links to pre-existing “backend” or “legacy” corporate databases.

All e-commerce sites require basic Web server software to answer requests fromcustomers for HTML and XML pages. When choosing Web server software,companies are also choosing what operating system the site will run on; Apache,which runs on the Unix system, is the market leader.

Web servers provide a host of services, including:• Processing user HTML requests• Security services• File transfer protocol• Search engine• Data capture• E-mail• Site management tools

Dynamic server software allows sites to deliver dynamic content, rather than static,unchanging information. Web application server programs enable a wide range of e-commerce functionality, including creating a customer database, creating an e-mail promotional program, and accepting and processing orders, as well as manyother services.

E-commerce merchant server software is another important software package thatprovides catalog displays, information storage and customer tracking, order taking(shopping cart), and credit card purchase processing. E-commerce suites can savetime and money, but customization can significantly drive up costs. Factors toconsider when choosing an e-commerce suite include its functionality, support fordifferent business models, visual site management tools and reporting systems,performance and scalability, connectivity to existing business systems, compliancewith standards, and global and multicultural capability.

Understand the issues involved in choosing the most appropriate hardware for an e-commerce site.

Speed, capacity, and scalability are three of the most important considerationswhen selecting an operating system, and therefore the hardware that it runs on.

To evaluate how fast the site needs to be, companies need to assess the number ofsimultaneous users the site expects to see, the nature of their requests, the type ofinformation requested, and the bandwidth available to the site. The answers tothese questions will provide guidance regarding the processors necessary to meetcustomer demand. In some cases, adding additional processing power can addcapacity, thereby improving system speed.

Scalability is also an important issue. Increasing processing supply by scaling up tomeet demand can be done through:• Vertical scaling—improving the processing power of the hardware, but

maintaining the same number of servers• Horizontal scaling—adding more of the same processing hardware

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• Improving processing architecture—identifying operations with similar workloadsand using dedicated tuned servers for each type of load

Identify additional tools that can improve Web site performance.

In addition to providing a speedy Web site, companies must also strive to have awell-designed site that encourages visitors to buy. Building in interactivity improvessite effectiveness, as does personalization techniques that provide the ability totrack customers while they are visiting the site. Commonly used software tools forachieving high levels of Web site interactivity and customer personalization include:• Common Gateway Interface (CGI) scripts—a set of standards for communication

between a browser and a program on a server that allows for interactionbetween the user and the server

• Active Server Pages (ASP)—a Microsoft tool that also permits interaction betweenthe browser and the server

• Java applets—programs written in the Java programming language that alsoprovide interactivity

• JavaScript—used to validate user input, such as an e-mail address• ActiveX and VBScript—Microsoft’s version of Java and JavaScript, respectively• Cookies—text files stored on the user’s hard drive that provide information

regarding the user and his or her past experience at a Web site

Q U E S T I O N S

1. Name the six main pieces of the e-commerce site puzzle.2. Define the systems development life cycle and discuss the various steps

involved in creating an e-commerce site.3. Discuss the differences between a simple logical and simple physical Web site

design.4. Why is system testing important? Name the three types of testing and their

relation to each other.5. Compare the costs for system development and system maintenance. Which is

more expensive, and why?6. Why is a Web site so costly to maintain? Discuss the main factors that impact

cost.7. What are the main differences between single-tier and multi-tier site

architecture?8. Name five basic functionalities a Web server should provide.9. What are the three main factors to consider when choosing the best hardware

platform for your Web site?10. Why is Web server bandwidth an important issue for e-commerce sites? 11. Compare and contrast the various scaling methods. Explain why scalability is a

key business issue for Web sites.12. What are the eight most important factors impacting Web site design, and how

do they affect a site’s operation?13. What are Java and JavaScript? What role do they play in Web site design?14. Name and describe three methods used to treat customers individually. Why

are they significant to e-commerce?


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15. What are some of the policies e-commerce businesses must develop beforelaunching a site, and why must they be developed?

P R O J E C T S

1. Go to Freewebs.com or NetworkSolutions.com. Both sites allow you to create asimple e-tailer Web site for a free trial period. The site should feature at leastfour pages, including a home page, product page, shopping cart, and contactpage. Extra credit will be given for additional complexity and creativity. Cometo class prepared to present your e-tailer concept and Web site.

2. Visit several e-commerce sites, not including those mentioned in this chapter,and evaluate the effectiveness of the sites according to the eight basiccriteria/functionalities listed in Table 4.10. Choose one site you feel does anexcellent job on all the aspects of an effective site and create a presentation,including screen shots, to support your choice.

3. Imagine that you are the head of information technology for a fast-growth e-commerce startup. You are in charge of development of the company’s Website. Consider your options for building the site in-house with existing staff, oroutsourcing the entire operation. Decide which strategy you believe is in yourcompany’s best interest and create a brief presentation outlining your position.Why choose that approach? And what are the estimated associated costs,compared with the alternative? (You’ll need to make some educated guesseshere—don’t worry about being exact.)

4. Choose two of the e-commerce suite software packages listed in Table 4.5 andprepare an evaluation chart that rates the packages on the key factorsdiscussed in the section “Choosing an E-commerce Suite.” Which packagewould you choose if you were developing a Web site of the type described inthis chapter, and why?

5. Choose one of the open source Web content management systems such asJoomla or Drupal or another of your own choosing and prepare an evaluationchart similar to that required by Project 4. Which system would you chooseand why?

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■ Additional projects, exercises, and tutorials■ Careers: Explore career opportunities in e-commerce■ Raising capital and business plans

W E B S I T E R E S O U R C E S www.prenhal l .com/laudon

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