Electronic commerce is within a year of becoming a global economic force; everyone in the computer industry is jockeying for a strategic position in what promises to be an extremely lucrative business.
Witness the news last month from database software giant Oracle that it is about to embark on a major technology trial of an electronic commerce system for the Internet. Code-named Project Apollo, the trial is intended to produce a system that will allow customers to buy goods electronically over the World Wide Web, and permit retailers to electronically pass on customer orders to suppliers and then on to the delivery company.
According to Mark Jarvis, VP of marketing for Oracle's server technologies, the company will start the trials worldwide this summer in conjunction with Verifone, a global provider of transaction automation and Net commerce solutions.
News of these trials follows hot on the heels of an announcement earlier this year about a strategic alliance between Oracle and Verifone. The companies say the alliance will create an integrated end-to-end Internet payment system that is safe for open electronic commerce. Expected to ship by the third quarter of 1996, the system is designed to allow customers to purchase products and services quickly and securely over the Web.
The alliance is combining Oracle's Webserver software with Verifone's secure payment software to produce the first payment-enabled Webserver on the market. Oracle and Verifone say that by using this electronic commerce product, merchants, banks and other financial providers would be able to offer an open online payment system to handle Internet transactions.
They also claim that this Webserver would mark the end of window-shopping-only on the Internet whereby users can look at an endless variety of products and services on the Web, but have no consistent or secure means of paying for them.
TURNING THE TIDE
'Internet commerce is at a trickle today, but will rapidly become a torrent once the issue of handling large volumes of transactions is solved,' says Dudley Nigg, executive VP of Wells Fargo Bank, a key customer of both Oracle and Verifone and a participant in developing the alliance. 'This announcement paves the way for commerce-enabled business on the Internet.'
Verifone and Oracle also plan to incorporate Verifone's Pay Window software into Oracle's Powerbrowser - an embeddable Web browser - for consumer use. The Pay Window software would provide transaction options, such as different credit cards, and make the Powerbrowser more user-friendly without excluding users of third-party browsers from the system.
The two firms say they also intend to develop an Oracle/ Verifone Internet Gateway that would be used by financial institutions and related businesses interested in accepting payment transactions over the Internet. Verifone will provide software that offers secure payment-processing solutions, and Oracle will provide Web server and systems integration services. The companies say this Internet Gateway would be designed to support all standard compliant software supplied by Internet Commerce providers, such as the SET standard proposed by Mastercard and VISA.
'This alliance is the first to make the Web safe for broad-scale electronic commerce,' says Ray Lane, Oracle president of worldwide operations. 'Oracle's Webserver combined with Verifone's payment processing expertise creates an ideal solution that eliminates concerns about the viability of Internet commerce.'
GATEWAY TO THE FUTURE
Both Oracle and Verifone say they are strongly committed to open solutions and plan to work with existing systems, such as credit card transaction protocols, and new ones to be developed in the future, such as micro payments and chip cards. They also vow that they do not intend to build a proprietary system based on charging vendors or customers per transaction. Instead, their aim is to provide the transaction infrastructure and gateway to bring existing electronic payment systems to the Internet.
'Providing our payment technology through Oracle's Web-server moves us towards our goal of making the Internet commerce-ready for the huge volume of transactions we see on the horizon,' says Hatim Tyabji, chairman, president and CEO of Verifone. 'We want to repeat in the virtual world what we successfully achieved in the physical world with our point-of-sale systems. We plan to accomplish this by universally installing open and interoperable payment technology that is secure and easy to use.'
Initially, the alliance will offer payment modules with two levels of capability. The first system would use Verifone's basic merchant-payment capabilities, enabling merchants to use Web servers for Internet credit card processing and automatically handle authorisation, credits and settlements, and basic payment administrative management. The enhanced system for larger and more complex merchant requirements would include extensive administrative functions such as transaction reporting. Verifone says it will extend functionality over time that allows vendors to add options such as electronic cash, electronic cheques, smartcards and debit cards.
SAFE AND SOUND
The system would integrate Oracle's security technology with Verifone's secure payment software based on industry and de facto standards, creating one of the most secure Internet payment products available. Oracle Webserver 2 supports the SSL 2 (secure sockets layer) security standard for encrypting data between the Web browser and Web server. The server also provides basic and digest authentication to prevent unauthorised access to Web server content and integrates with the Oracle 7 database's security features, which provide the most advanced security available within corporate networks.
Oracle's Secure Network Services incorporates leading encryption capabilities and advanced systems for authenticating users and ensuring data integrity.
Moreover, Oracle says it has worked with eight top firewall vendors to pass encrypted data through corporate firewalls, providing end-to-end security from intranet to Internet.
Oracle and Verifone will market their product through their substantial worldwide sales channels. Oracle says it intends to make Net commerce functionality a feature of its Webserver by packaging Verifone's virtual point-of-sale technology as modules for it.
But Oracle and Verifone are not the only firms making inroads into electronic commerce. In March, network market leader Novell announced that it was licensing technology from Open Market to 'enable a new generation of electronic commerce solutions for intranets and the Internet'. Novell will integrate Open Market's OM-Securelink technology with Netware to provide customers with what it says is a high-performance, cost-effective solution for establishing and maintaining online storefronts and managing electronic transactions on the Web.
According to Gary Eichhorn, Open Market president and CEO, there is a huge demand for this kind of software in corporations, many of which are grappling with just how they will exploit Internet/intranet potential.
'There has been a transition over the past couple of months from publishing everything on the Web to realising that it is costing you to do so. It turns out to be a big cost centre for a lot of people.'
Eichhorn says the real opportunity lies not in simply publishing vast amounts of data on corporate Web pages, but in using the Internet as a vehicle for real commerce. 'With commerce on the Internet, the incremental cost of distribution is zero, so it should have quite a profound impact on cost structures.'
The first major impact of electronic commerce on PC software dealers is likely to be Microsoft's move this month to expand its efforts in electronic software distribution (ESD). The company has announced a set of requirements for distributors and resellers interested in distributing and downloading Microsoft software to users via the Internet.
Developed as part of a pilot project in conjunction with resellers to test the enabling technologies and business models necessary for ESD, MS says the requirements create a framework for the ESD process, from order placement to delivery and installation of the software on the user's computer. 'Microsoft wants to be where our customers want to shop,' says Johan Liedgren, director of channel policies at Microsoft.
'Today, that includes the Internet as well as our traditional channels, so we are making our products available to channel partners who want to distribute and download software to users directly from their Web sites.
The open framework for ESD represents an agreement between us, technology providers and the channel partners for how we work out issues relating to reporting, accountability and returns.'
THE SOFTWARE OPTION
With the increasing interest in the Internet as a vehicle for electronic commerce, software has become one of the initial focal points of consumer interest. Because software already consists of electronic bits, it can be both demonstrated interactively on the Internet and downloaded on demand. A recent Yahoo! and Jupiter study of Internet users found that software is the best-selling category on the Web. Fourteen per cent of those queried had purchased software online.
'It's clear that customers see the potential in the Internet as a shopping environment for software,' says Liedgren. 'Some customers will want to be able to download the software, not just call a freephone number or drive to a retail store. We want to give them that option.'
Microsoft is making the requirements available to resellers and distributors so they can define more precisely the 'best practices' in facilitating the ESD process. 'If every vendor and reseller choses a proprietary way of handling reporting and returns, it would be years before we found efficiencies with ESD,' says Liedgren.
He suggests the pilot project supports Microsoft's view that its existing distribution model involving distributors and resellers is appropriate for ESD. The value of the channel extends beyond merely fulfilling customer demand.
'Much of the value provided by distributors and resellers is present regardless of whether the product is delivered physically or electronically,' Liedgren says. 'We also hope the channel will go beyond just adding ESD to the sales mix, and use ESD as a platform for creating innovative services not possible in the packaged-product paradigm, such as loyalty programmes, electronic coupons, virtual bundles, pay-per-view and subscription.
'Focusing on open channel requirements spurs the creation of an infrastructure that can be used by all vendors. Distributors and resellers will be able to make their own technology implementation and integration choices for front-end and back-end solutions and will be able to develop technology over time to take advantage of the latest innovations,' he says.
Microsoft says its open approach to ESD has been validated by industry analysts. The company cites comments from Allen Weiner, director and principal analyst of online strategies for Dataquest, as a supporter of its channel-centric approach for ESD. 'Microsoft understands that the channel adds key elements to the sales mix, such as marketing, credit and collection, technical support and a virtual sales force that Microsoft could not hope to duplicate.'
All these issues are critical for dealers. If other software and hardware manufacturers stay with a channel-centric model, it will mean dealers will not be 'cut out of the loop' as sales of PC products increasingly move to the Web.
But dealers will need to make sure they know what they are doing, and start working now to have an understanding of what it takes to operate a cyberspace storefront. If electronic commerce - particularly software sales - proves popular, dealers that hesitate to get webbed may find themselves out of work.
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