Extensible Markup Language (XML) - enabling technology that provides a common data format for suppliers and buyers. Commerce One has made XML its standard for application development. By acquiring Veo Systems Inc., Commerce One has advanced its XML effort to the forefront. CommerceNet, an e-commerce consortitum uses Veo's Common Business Library (CBL) to establish the eCo Framework. This initiative deals with the ever-growing complement of electronic commerce relatedspecifications, including Catalog Information Specification, Channel Definition Format (CDF), Common Business Library(CBL), Electronic Data Interchange (EDI), Internet Content Exchange (ICE), Open Buying on the Internet (OBI), Open Financial Exchange (OFX), Open Trading Protocol (OTP), and XML.

Benefits of XML:

• Businesses can describe services in a manner that can be widely understood
• One set of documents, forms and messages can be exchanged by businesses with different internal business systems
• Errors in re-keying data are reduced because data can be transformed through gateways
• Frequent changes in business process can be handled without substantial engineering cost
• Leverages investment in legacy systems and can be used with latest Internet technology

Micropayments and Product Unbundling - payment mechanism for individual product pricing, allowing short-term purchases and offering more choices. Digital coins and smart cards have received much attention for their cash-like anonymity. A more compelling economic rationale for micropayments, however, is their role in enabling short-term contracts and quality-assured intermediation. Product customization means the finest market segmentation. A flexible and profitable product selection strategy would enable firms to charge the maximum price.

The primary argument against micropayments is based a perceived preference for subscription and bundling, such as newspapers and cable programming. However, the reasons for this preference are more technological than economic. Cable system operators have traditionally used "take-it-or-leave-it" marketing, being content with charging monthly fees for a given number of channels, and not invested in elaborate billing systems like the telephone companies. If cable operators had invested in the necessary technologies and equipment to support detailed billing, they would have been well prepared to offer more choices to their subscribers beyond a few tiers. Even with a few tiers, an empirical test shows that two-tier cable systems can charge 15% to 20% more for the same cable service than one-tier systems. The increased price and profit comes from market segmentation (Choi 1996). Profits increase as the segmentation becomes finer. If technologies were not cost prohibitive, there would be finer differentiation and market segmentation even in newspaper production and delivery.

Despite this clear trend toward unbundling, microtransactions and micropayments are dismissed in the digital marketplace in favor of selling large bundles in aggregated bills without encouraging a market for information on demand, small applets or your personal columns. Large digital content providers are engaged in a two-pronged strategy for electronic commerce. On the one hand, they don't see any commercial value in the exploding information offered via millions of World Wide Web homepages. That's bad news for those individuals who wish to cash in by selling bits of information. On the other hand, these large companies are developing technologies to measure and control usage so that every bit of use will be metered and billed for their software and information products. If you are a small player and have no links to large payment clearing service providers, there will be no way of billing visitors to your homepage.

In cross-industry application micropayments open up a whole range of new possibilities. Firms can be established that bundle orders for other firms, offering them the same products at prices that would never have been possible before. With microtransactions electronic intermediaries can offer their services on pay-per-view basis to small companies that cannot afford the full service plans. This is especially valuable to firms that deal with commodity-like goods since profit margins are typically small and large capital investments in information technology present risks that they are often not willing to face.
 
 

Standards

CommerceNet is a non-profit industry association for companies promoting and building electronic commerce solutions on the Internet. Members include more than 500 companies and organization worldwide representing the leading banks, telecommunications companies, online services, software and service companies, as well as end users, who together are transforming the Internet into a global electronic marketplace.

ClearCommerce the leading provider of packaged and modular online transaction processing software for Internet purchasing, announced September 9, 1998 that it has established an E-commerce Advisory Board. The board is comprised of e-commerce experts from @Home Network, Chase Manhattan Bank, The e-tailing group, First Data Merchant Services, J. Crew and ZDNet who represent the hosting, financial, consulting, retail, and publishing industries. The cross-industry advisory board will discuss and promote standards to accelerate the migration of businesses to online selling and transactions. In early fall, the board will deliver to the e-commerce community significant work surrounding issues that impact the industry.
 
 

Payments Mechanisms

Commerce One, Inc. and Signio, Inc., a leading  provider of e-commerce payment connectivity and services, announced  a strategic partnership to integrate Signio's Internet payment platform with MarketSite™, on October 6, 1999. This enables Commerce One to provide a broad range of enhanced electronic payment services to streamline electronic payment processing for all MarketSite trading partners. Customers and trading partners will have access to real-time consolidated payment services for credit cards; debit cards; procurement card (P-card) authorization and capture; digital checks; and automatic clearing house (ACH) transactions. These payment services enable buyers and suppliers to automate commerce and increase efficiencies by replacing traditional paper-based payment processes with an end-to-end integrated payment processing capability, reducing the cost and time associated with traditional billing methods.

In addition, Commerce One and Signio have agreed to collaborate to define XML based payment documents utilizing components from Commerce One's Common Business Library (CBL) 2.0. This collaboration is expected to help further drive the definition of  common payment document standards across key XML industry initiatives. Signio will leverage Commerce One CBL 2.0 elements, XML document framework and XML tools as a basis for its own XML schema-based product development efforts.
 

Ariba, Inc. and U.S. Bancorp, the largest provider of purchasing cards in the world, announced an alliance to develop an integrated electronic buying and payment infrastructure for business-to-business eCommerce. U.S. Bank currently provides purchasing card programs for more than 500 corporations and government clients.The joint solution delivers fully electronic orders and invoices, automatically reconciles purchase orders with purchasing card charges, and integrates purchase data with the buyer’s financial systems, enabling businesses and their suppliers to streamline commerce, reduce operating costs and increase internal efficiencies by replacing paper-based payment processes with integrated electronic payment systems.

As part of the alliance, U.S. Bank will become the preferred provider of business-to-business payment services to buyers and suppliers on the Ariba Network. Additionally, Ariba will become the preferred provider of business-to-business eCommerce solutions to U.S. Bank customers. The two companies will work together to jointly market and sell their combined solutions.

This integrated solution has been successfully implemented at numerous organizations, including Hewlett-Packard Company, Boehringer-Ingelheim and Visa. It is designed to eliminate much of the traditional, labor-intensive paperwork associated with payment processes between buyers and suppliers. These processes include suppliers’ invoice creation and distribution and buyers’ invoice-to-order matching, check-writing, and check distribution. By reducing the cycle time between order and payment, suppliers receive payment more quickly. Buyers benefit from increased management control over purchasing and increased savings from channeling purchases to preferred suppliers.
 
 
 
 

Worldwide investment in electronic commerce systems

• Projected to grow from $187 million in 1998 to $8.5 billion in 2003 ( Treasury & Risk Management, August 1999)

 
• E-commerce software investment estimated $2.8 billion by 2002, up from $167 million in 1997 (Datamonitor, June 25, 1999)

Towards Opens Trade
 

Framework for Global Electronic Commerce is a draft policy developed by interagency working group that has been meeting for eight months, analyzing the issues and consulting with academics, business representatives, consumer groups, and members of the Internet community. Electronic commerce has the potential to revolutionize trade in this area and others by lowering transaction costs dramatically and facilitating new types of commercial transactions. Many businesses and consumers are still wary of conducting extensive business in cyberspace because of the lack of a predictable legal environment governing transactions and resulting concerns about contract enforcement, intellectual property protection, liability, privacy, security, and other matters. Another concern of Internet users is the possibility that governments will impose disparate and extensive regulations on the Internet in areas such as taxes and duties, content restrictions, and standards.

Major policy recommendations include:

• Fostering the Internet as a Non-Regulatory, Market-Driven Medium
• Ensuring a Transparent and Harmonized Global Legal Environment
• Allowing Competition and Consumer Choice to Shape the Marketplace

Open Buying on the Internet (OBI) Consortium was formed out of a roundtable of a number of Fortune 500 buying and selling companies who met to create an open, vendor-neutral, scaleable, interoperable and secure standard for conducting business-to-business (B2B) electronic commerce in October, 1996. Companies involved in developing the OBI standard were driven by a shared vision to facilitate the rapid implementation of Internet-based electronic commerce solutions utilizing interoperable, standards-based Internet purchasing systems that are characterized by:

• universal, high-speed access
• inexpensive and paperless information and transactions
• platform-independent software and services

Members   The OBI Consortium now has over 60 member companies and continues to grow.

Link to OBI
 

Closed Trading Tendencies

In spite of these initiatives, some critics say that B2B E-commerce will only encourage closed trading communities over the next five years. While a restricted market is needed to ensure efficient online trading, this will also reinforce established partnerships. The results will be 1) increase in demand for private IP networks 2) greater business opportunity higher up on the commercial services chain.

Virtual Private Networks (VPN) are a compromise between the security features of EDI and the cost / time savings of Internet technology. Companies can set up encrypted links with known trading partners within hours instead of months. Additionally, VPN offers a solution flexible enough that it can be scaled to support a wide range of needs from small suppliers to even the largest trading networks. Turnkey service providers further simplify the problems of network complexity and compatibility issues associated with having diverse business partners using varying technologies, especially those that need to cross international borders.