Electronic Commerce Systems

The four main components are as follows Client, Merchant, Transaction system and payment gateway.

A client is a computer system that is directly connected to the Internet via an ISP (Internet Service Provider) such as Netscape. It may also be connected via a smaller more private network that is not as direct but serves the same purpose. The client will use the computer to browse and to purchase things online. The primary concern of a client is to browse and buy. It is possible to find some specialised client applications such as wallets that remember and maintain client payment details or other transactions so that an entire record of all transactions can be kept.

A merchant or seller is a computer system that contains the electronic catalogue of the goods that a merchant wants to sell. The function of the seller is to make available to the client the products that they want to buy. The seller must control the site from which items are being sold and maintain the site. The seller deals directly with the client and provides support and customer services.

Transaction systems are a computer system that processes a particular order and which are responsible for payment, record keeping, and other business aspects of the transaction. It keeps record of all processes that relate to all transactions. It contains the what, who, how and when of all transactions.

Once a buyer has decided to definitely purchase an item, a payment gateway is used to redirect their credit card to the relevant existing authorisation systems. An example of a company that provides this kind of service is Internetsecure. This provides a link with major credit authorisation companies such as Visa and MasterCard. Once a buyer has paid, they are redirected back to the site they purchased from.

It is vital for the e-commerce system to have some kind of architecture, however simple in place. This is essential because it provides a model on which to build. The architecture will describe the concepts and will also describe the relationship between each concept. The architecture will vary from system to system depending on the type of business that it is used for. There are four main types of architecture models; the simple web server with order form model, the SET (Secure Electronic Transactions) model, the Open market commerce architecture and OBI. For this question I will describe the SET model.

The main difference between the web order form system and the SET system is the way that the order form is handled in particular the way that the payments and communications from client and merchant are handled. What the Set architecture does is to takeover the order from the merchant server when the customer is ready to pay for their purchases by credit card. The merchant company does not directly connect with the credit card authorisation network itself but it connects through the SET merchant module.

The merchant module will request details from the computer of the buyer so that it can determine prices of items, totals and some item description. The SET wallet that memorises previous transaction details and payment details are located on the buyers computer, the buyer to determine which card the payment is going to go onto will use these. The buyer can in this way use the wallet application to communicate to the payment gateway. The payment is then made into the merchants chosen account. Existing financial networks are linked to the payment gateway and they authorise or reject payment in the same way authorisation would be given in the store. When the merchant computer receives, the money sends order confirmation to the client computer (usually) and stores the transaction details. The inclusion of the payment gateway introduced a higher security factor into buying online.

Visa and MasterCard designed it jointly, and its principled aim was to, "to establish a single method for consumers and merchants to use to conduct payment card transactions on the Internet. " The main advantages of using the SET Internet protocol is the confidentiality, data integrity-which is vital to transactions on the web- and authenticity. These make it an attractive architecture to employ. The drawbacks to SET are that it is expensive to implement and this coupled with what appear to be adequate alternative payment systems already in place has given SET only steady success.

a) Discuss how outsourcing can be used in the development and operation of an electronic commerce system. Your answer should indicate the possible advantages and disadvantages of at least two different approaches to outsourcing and should give examples of companies providing outsourcing services.

In the process of implementing an e-commerce system, once the initial business requirements have been identified the next steps to consider are the developmental and implementation of the system. There are three main ways in which this can be done and there are relative advantages and disadvantages associated with each. The first is that all design and implementation can take place 'in-house'. A team of experts from the existing company will create an e-commerce system that adheres to the guidelines that they have set themselves. The second option is to hire an external company to provide knowledge and support to design and build a system for you- this is called outsourcing. The third option, and the most commonly used, is a combination of both of the options above where only a certain number of processes are given to the external company and the rest are implemented by the in-house staff.

The most important thing that a company has to decide is how much of its system they will allow an external company to develop. The second option is realistically only theory because even at a very basic level a team must be set up within the company or organisation which will be responsible for the overseeing of the outsourcing. The team will have to consist of members who are aware of how technology can be harnessed to provide an e-commerce system. They will have to simultaneously be equally well versed in the business and managementarial aspect of their jobs so that they are able not only to make technical decisions but also decisions that will affect the business in the long run.

There are significant factors that must be taken to account when considering how much of the system you want to outsource. A company will have to consider its size and the size of the site that it wants to develop. A smaller company will likely have to completely outsource because there may not be sufficient in house expertise available for them to implement the system themselves. Larger companies usually outsource but may find that it is more cost effective and useful for them to have a team of dedicated personnel devoted