Friday, July 2, 2010

The Origin and Development of E-commerce

E-commerce is the necessity of international business, vice verse, international business boosts e-commerce. The development of computer science and communications sciences has laid a solid foundation for e-commerce. The development of information security makes e-commerce proceed in a secure way; the laws concerning this field also provide legal guarantees for e-commerce. The origin and development of e-commerce is illustrated in Fig. 1.1. It has been through three phases.

Figure 1.1 The development of e-commerce

Phase One: E-commerce based on EDI (Electronic Data Interchange)

EDI (Electronic Data Interchange): The EDI originated in the 60s of the 20th century. The large-scaled business enterprise in the developed countries carried out the EDI basically in the 80s. The EDI of our country began from the 80s in 20 centuries. EDI is a kind of teleportation method to transmit business documents from one computer to another. Because EDI reduces the paper note greatly, people vividly call it as “trade without paper” or “bargain without paper”. From the perspective of technology, the EDI includes both hardware (mainly the network) and software (mainly software and standard of EDI). For the sake of safety, most EDI were not transmitted by network until the 90s of 20c, but by VAN (the value-Added Network) of exclusive use. What EDI needs is a standard software to translate information in the customer databases into the EDI-standard so as to deliver. Because the business enterprise of different professions adopt different format on the basis of their own business characteristics, therefore when transmitting documents, they must be translated into the EDI standard format. Before EDI, the primary stage of e-commerce, becomes universal in China, electronic commerce has developed quickly to the second stage.

Phase Two: E-commerce based on Internet

EDI enjoys advantages and tremendous strength in decreasing enormously the intensity, mistakes and cost to make and handle documents on the one hand, and in improving efficiency to a large extent on the other hand. Therefore, it speeds up the development of international business. However, the high cost of VAN and EDI communication system hinder the expansion of e-commerce based on EDI. Moreover, EDI is only suitable for large-scaled transnational corporation rather than medium and small-sized ones, for it does not take information share into account. Since both the increasing large-scaled transnational corporations and many a medium and small-sized enterprise thirst for information sharing, the establishment of a new electronic information exchange system of low cost is on the agenda to realize the information sharing.

In the middle and late 90s of the 20th Century, owing to the prompt popularity of Internet, from universities to enterprises, and then even to common people’s families, Internet functions from the information sharing to a popular mass media. After 1991, business that has always been outside of Internet came into the realm and made e-commerce a big hit in Internet, which gives impetus to the rapid development of Internet. Many enterprises made a big success by online direct marketing such as Dell Company, distinguished for direct online selling, online book store Amazon, Yahoo Internet search engine, Baidu Internet search engine, Sina, Sohu, and Ebay. Such websites are up to 424,000 in 1998, comparatively only 2,000 in 1995. By 2001, Internet has become the largest network in the world and covered up to 150 areas and countries, linking more than 25,000 networks and 520,000 mainframe computers. Vint Cerf, “Father of Intel” predicted in 1996 that there would be a hundred million Internet users by 2003. However, he was shocked by the flourisher of Internet, with 150,000,000 Internet users by the end of 1999, trice than that of 1997. According to the latest statistic reports released by CNNIC in July, 2007, there has been over 10,000,000 Internet users, 622,000 registered domain names and 677,000 websites in China. The flourishing of Internet makes flood of enterprises unable to resist the temptation to start e-commerce. The reason why e-commerce based on Internet is so attractive to enterprises is that e-commerce enjoys several evident advantages over e-commerce based on EDI:

1) low in cost. The expense of Internet is low, no more than 1/10 of VAN in general.
2) wide in overlaying. Internet spreads all over the world, by which trade partners can conveniently send commercial information and documents with common telephone wires.
3) complete in function. Internet can help different users to carry out their targets of different levels, such as issuing electronic commercial information negotiating on line and setting up virtual department stores and online banks etc.
4) flexible in use. E-commerce based on Internet is not confined to agreement of special data exchange. Any commercial document can be formed by filing the screen documents that are identical with the current paper documents. Such documents can be understood and used directly by anyone without any translation.

Internet meets the demands of medium and small-sized enterprises to exchange electronic data by overcoming the shortage of EDI. Internet, lower in cost, wider in coverage and better in service, will certainly replace VAN as the hardware carrier of EDI. Electronic information exchange system with the characteristics of being both lower in cost and able to share information makes itself popular among all enterprises. EDI based on Internet enjoys the advantages of both EDI and Internet, therefore, EDI realized by means of Internet is directly called as “Internet EDI”.

In e-commerce based on Internet, at first, people mainly make daily “business correspondences” by e-mails, and then release information by Internet. Since 1995, enterprises have gradually turned to Internet to release information. Therefore, the public can directly access to the enterprise information, goods and services by Internet, which leads to the exploration of information issuing system represented by the technology of Web and becomes the principal application of Internet. E-commerce Demonstration Law, passed by United Nations Commission on International Trade Law on June 14, 1996, symbolized the beginning of real e-commerce. And the sonorous advertisement of IBM in 1998 Are You Ready for e-commerce set up the upsurge of e-commerce all over the world.

Phase Three: E-concept e-commerce

Since early 2000, people’s understanding has developed from e-commerce to higher e-concept e-commerce, and it is realized that e-commerce is in fact the combination of information technology and commerce applications. Apart from business, electronic information technology can be applied in many other fields, such as medical treatment, education, hygiene, military, administration and so on, to form e-concept in the fields. For instance, electronic education—remote education, the combination of electronic information technology and education; electronic treatment—remote treatment, the combination of technology and treatment; electronic administration, the combination of technology and administration; electronic command, the combination of technology and command; online banks, the combination of technology and finance; virtual enterprises, the combination of technology and business organizations and so forth. Various patterns of e-commerce such as E-B, E-C, E-G etc., have come into being by applying e-conept. With the development of electronic information technology and the increasing need of the society, more and more e-concepts will emerge and the genuine e-times will advene.