Chapter Five: B2B E-Commerce 1 ONLINE FILE W5.1 BUYING FROM VIRTUAL SELLER BIGBOXX.COM Bigboxx.com (bigboxx.com), based in Hong Kong, is a B2B Bigboxx.com provides numerous value-added services retailer of office supplies. It has no physical stores and for customers. Among these are the ability to check item sells products through its online catalog; thus, availability in real time; the ability to track the status of Bigboxx.com is an online intermediary. The company each item in an order; promotions and suggested items has three types of customers: large corporate clients, based on customers’ user profiles; customized prices for medium-sized corporate clients, and small office/home every product, for every customer; control and central- offices (SOHOs). It offers more than 8,000 items from approval features; automatic activation at desired time 300 suppliers. Bigboxx.com’s goal is to sell its products intervals of standing orders for repeat purchasing; and in various countries in Southeast Asia. a large number of Excel reports and data, including The company’s portal is attractive and easy to use comparative management reports. and includes tutorials that instruct users on how to Bigboxx.com began operations in spring 2000. By the use the Web site. Once registered, the user can start end of 2006, it had over 8,500 registered customers. shopping using the online shopping cart. Users can look for items by browsing through the online catalog or by searching the site with a search engine. The Questions ordering system is integrated with a SAP-based back-office system. 1. Enter bigboxx.com and staples.com and compare Users can pay by cash or by check (upon delivery), their B2B offerings and purchase processes. (Take via automatic bank drafts, by credit card, or by purchasing the tutorial at bigboxx.com.) What support services card. Soon users will be able to pay through Internet- are provided? based direct debit, by electronic bill presentation and 2. Someday customers may become accustomed to payment, or by Internet banking. buying office supplies online. Then, they may try to Bigboxx.com uses its own trucks and warehouses buy directly from the manufacturers. Will Bigboxx.com to make deliveries within 24 hours of when an or Staples.com then be disintermediated? Why or order is placed. why not? REFERENCES FOR ONLINE FILE W5.1 bigboxx.com (accessed January 2008). Chan, W. C., T. C. Chu, A. R. Gold, and G. Leibowitz. “Thinking Out of the Box.” The McKinsey Quarterly, no. 2 (2001). 2 Part 3: Business-to-Business E-Commerce ONLINE FILE W5.2 CISCO CONNECTION ONLINE Customer Service each shipment. CCO can record the shipping date, the Cisco began providing electronic support in 1991 using method of shipment, and the current location of each value-added networks (VANs). The first applications offered product. All new information is made available to were software downloads, defects diagnosis, and technical customers immediately. As soon as an order ships, advice. In spring 1994, Cisco moved its system to the Web Cisco notifies the customer via e-mail. and named it Cisco Connection Online (CCO). By 2004, Benefits Cisco’s customers and reseller partners were logging onto Cisco reaps many benefits from the CCO system. Cisco’s Web site over 2 million times a month to receive The most important benefits include the following, per technical assistance, place and check orders, or download Interwoven (2001): software. The online service has been so well received that nearly 85 percent of all customer service inquiries and ◗ Reduced operating costs for order taking. By taking 95 percent of software updates are delivered online. The its order process online in 1998, Cisco has saved service is delivered globally in 16 languages. The CCO is $363 million per year, or approximately 17.5 percent considered a model for B2B success, and several books of its total operating costs. This is due primarily to have been written about it (e.g., Slater 2003). increased productivity of the employees who take and process orders. Online Ordering by Customers ◗ Improved quality. The system facilitates the Six Sigma Virtually all of Cisco’s products are made-to-order. Before mission of Cisco. CCO, ordering a product was a lengthy, complicated, and ◗ Enhanced technical support and customer service. error-prone process because it was done by fax or by “snail With more than 85 percent of its technical support mail.” Cisco began deploying Web-based commerce tools in and customer service calls handled online, Cisco’s July 1995, and within a year its Internet Product Center technical support productivity has increased by allowed users to configure and purchase any Cisco product 250 percent per year. over the Web. Today, a business customer’s engineer can ◗ Reduced technical support staff cost. Online technical sit down at a PC, configure a product, and find out immedi- support has reduced technical support staff costs by ately if there are any errors in the configuration (some roughly $125 million each year. feedback is given by intelligent agents). ◗ Reduced software distribution costs. Customers By providing online pricing and configuration tools to download new software releases directly from customers, 99 percent of orders are now placed through Cisco’s site, saving the company $180 million in CCO, saving time for both Cisco and its customers. In the distribution, packaging, and duplicating costs first 5 months of online ordering operations in 1996, Cisco each year. Having product and pricing information booked over $100 million in online sales. This figure grew on the Web and Web-based CD-ROMs saves Cisco to $4 billion in 1998, to over $8 billion in 2002, and to an additional $50 million annually in printing and about $12 billion in 2005 (Cisco Annual Report 2005). distributing catalogs and marketing materials to (Note: data for Cisco’s online and offline sales are not customers. separated after 2005.) ◗ Faster service. Lead times were reduced from 4–10 days Tracking Order Status to 2–3 days. Each month Cisco used to receive over 150,000 order- The CCO system also benefits customers. Cisco status inquiries such as, “When will my order be ready?” customers can configure orders more quickly, immediately “How should the order be classified for customs?” “Is the determine costs, and collaborate much more rapidly and product eligible for NAFTA agreement?” “What export effectively with Cisco’s staff. Also, customer service and control issues apply?” Cisco provides self-tracking and FAQ technical support are faster. tools so that customers can find the answers to many of In 2006, Cisco moved to selling its hardware (routers their questions by themselves. In addition, the company’s and switches and VoIP) and the software that powers them primary domestic and international freight forwarders separately. This unbundling gives customers more flexibility update Cisco’s database electronically about the status of (see Hoover 2006). Chapter Five: B2B E-Commerce 3 REFERENCES FOR ONLINE FILE W5.2 Cisco Annual Report. Cisco Systems, 2005. cisco.com/ writeit4u.net/documents/interwoven/casestudy_ web/about/ac49/ac20/ac19/ar2005/index.html cisco.pdf (accessed January 2008). (accessed January 2008). Slater, R. The Eye of the Storm: How John Chambers Hoover, J. N. “The Cisco Premium.” InformationWeek, Steered Cisco through the Technology Collapse. New July 31–August 7, 2006. York: Harper-Collins, 2003. Interwoven, Inc. “Interwoven Solutions Power Cisco Connection Online.” Interwoven case study, 2001. Online File W5.3 Extranets An extranet uses the TCP/IP protocol to link intranets in different locations (as shown in extranet Exhibit W5.3.1). Extranet transmissions usually are conducted over the Internet, which offers A network that uses a little privacy or transmission security. Therefore, it is necessary to add security features. This is virtual private network done by creating tunnels of secured data flows, using cryptography and authorization algo- to link intranets in rithms, to provide secure transport of private communications. An Internet with tunneling different locations over technology is known as a virtual private network (VPN) (see en.wikipedia.org/wiki/Virtual_ the Internet; an private_network). “extended intranet.” Extranets provide secured connectivity between a corporation’s intranets and the intranets of its business partners, materials suppliers, financial services, government, and customers. Access to virtual private network an extranet is usually limited by agreements of the collaborating parties, is strictly controlled, and (VPN) is available only to authorized personnel using a secure password and login. The protected envi- A network that creates ronment of an extranet allows partners to collaborate and share information and to perform these tunnels of secured data activities securely. flows, using cryptogra- Because an extranet allows connectivity between businesses through the Internet, it is an open and flexible platform suitable for B2B. To increase security, many companies replicate phy and authorization the portions of their databases that they are willing to share with their business partners and algorithms, to provide separate them physically from their regular intranets. However, even separated data need to secure transport of be secured. (See Chapter 10 for more on EC network security.) private communications According to Szuprowicz (1998), extranet benefits fall into five categories: over the public Internet. 1. Enhanced communications. The extranet