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Information Systems Management

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The Challenges Facing Global E-Commerce

Prasad Bingi , Ali Mir & Joseph Khamalah
a b c a b c

An assistant professor of Information Systems at Indiana-Purdue University in Fort Wayne. An assistant professor of Information Systems at Indiana-Purdue University in Fort Wayne.

An assistant professor of Information Systems at Indiana-Purdue University in Fort Wayne. Published online: 21 Dec 2006.

To cite this article: Prasad Bingi , Ali Mir & Joseph Khamalah (2000) The Challenges Facing Global E-Commerce, Information Systems Management, 17:4, 22-30, DOI: 10.1201/1078/43193.17.4.20000901/31249.5 To link to this article: http://dx.doi.org/10.1201/1078/43193.17.4.20000901/31249.5

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WEB-ENABLING THE ENTERPRISE

THE CHALLENGES FACING GLOBAL E-COMMERCE

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Prasad Bingi, Ali Mir, and Joseph Khamalah

The power of Web enablement is that geographical boundaries disappear for an enterprise. Thus, an E-commerce initiative can easily become a global E-commerce initiative. Nevertheless, before conducting E-business globally, Web-enabled enterprises must consider an array of international economic, technological, social, and legal issues, which this article examines.

PRASAD BINGI is an assistant professor of Information Systems at Indiana-Purdue University in Fort Wayne. ALI MIR is an assistant professor of Information Systems at IndianaPurdue University in Fort Wayne. JOSEPH N. KHAMALAH is an assistant professor of Information Systems at Indiana-Purdue University in Fort Wayne.

ACH DAY SEES NUMEROUS NEW INDIviduals, organizations, and government agencies all over the world linking up electronically to get or exchange information and to execute business transactions of one kind or another. Currently, several hundred million individuals and organizations worldwide have Internet access. This figure is expected to reach one billion by the year 2004. Once they are connected, both corporations and individuals find that the Internet has a profound impact on how they run their businesses. With its platform-independent technology and ubiquitous reach, the Internet is allowing companies to open up new distribution channels, forge communities of buyers and sellers, increase revenues, and boost the bottom line (Maddox and Blankenhorn, 1998). Available statistics on the tremendous volume of business currently conducted over the Internet seem to bear this out. By one account, online holiday spending totaled $4.0 billion in 1999 more than 2.5 times the 1998 holiday Internet sales. Electronic commerce (EC) is assuming, and will clearly continue to assume an important role in the modern consumer economy. The growth of EC is taking place so rapidly and in so many directions that even experts

are at a loss to find any established business models for comparison. People have compared the rise of EC to the radio industry in the 1920s, television in the 1950s, video players in the 1970s, and personal computers in the 1980s. These technologies had a significant impact, but they pale in comparison with the impact that EC may eventually have on business (Kalakota and Whinston, 1997). According to a recent press report, Forrester Research reports that 90 percent of the firms surveyed plan to buy and sell on the Internet, and it predicts that worldwide Net commerce will total $6.9 trillion by 2004. Some predict that by 2006, business-to-business (B2B) commerce over the Internet will constitute 40 percent of all U.S. business trade. Given the lack of historical data and the variation in the scope of definitions, widely disparate projections are reported in the literature. For example, the total B2B and B2C (businessto-consumer) commerce projections for year 2002 vary widely from $500 billion to $3 trillion (Turban et al., 2000). EC gives organizations and individuals the ability to transact business anytime and from anywhere and to do it rapidly at a reasonable cost. Just as people often prefer using an automated teller machine to a bank teller for

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ignificant savings were realized through increased efficiencies in order-taking, reduced customer service calls, and lowered distribution costs of software upgrades and marketing materials.

speed, accessibility, and control, so too are they turning to the Web. In the process, the Web is enabling cost savings for the organizations and their customers. Take the example of Cisco Systems, a successful Californiabased Web commerce company that makes Internet equipment such as routers, hubs, and switches for networking companies (e.g., Sprint and MCI-WorldCom). Cisco set up a Web site called Cisco Connection Online (CCO) in 1994 and started selling its products online. It is estimated that CCO enabled the company to save $600 million in 1998. These significant savings were realized through increased efficiencies in ordertaking, reduced customer service calls, and lowered distribution costs of software upgrades and marketing materials. Nearly 80 percent of Ciscos $12.15 billion in annual sales is now generated through the site (Cisco, 1999). Customers can access the site 24 hours a day, seven days a week from anywhere in the world and place orders, inquire about the status of an order, interactively tailor their applications, access services, and conduct info-gathering processes to meet their specific requirements. Online ordering has resulted in an increase in customers order submission productivity by an average of 20 percent and has reduced the lead times from four to ten days to two to three days. Customers can inquire about their order status around the clock with a few clicks of a mouse. For example, in June 1999, Ciscos Web site received about 300,000 order-status inquiries. According to Chris Sinton, director of Cisco Connection, That means theyre getting information anytime they want it, but its also 300,000 times our customer service or salespeople were not asked for that information. We believe that has raised their productivity by 15 percent (Roush, 1999). This online operation currently handles 70 percent of technical support and customer service calls and has been able to reduce the costs of these operations by roughly $125 million. About 380,000 software downloads of new software releases per month are handled by the Web site, and the company saves about $180 million in distribution, packaging, and duplicating costs. CCO also provides product and pricing information that saves Cisco an additional $50 million in printing and distribution of catalogs and marketing material to customers (Turban et al., 2000). Todays Cisco Connection contains a mind-boggling 40 gigabytes of data on 10 million separate pages. Most of the devel-

opment is done in-house and the Web site is continually evolving at a rapid pace. According to Mark Tonnesen, Ciscos director of information services, the company spends about $20 to $30 million each year on developing new content and applications for the site using 300 to 400 content developers, and $7 million a year or so more on bandwidth and equipment (Roush, 1999). As the site grows, the costs of maintaining it also increase, but Cisco saves millions of dollars through this process while gaining a competitive advantage in the uncharted ecommerce area. EC also allows businesses to directly sell their products and services to consumers all over the world. B2C commerce allows businesses to sell without traditional intermediaries and thus reduce their operating costs; these reductions are ultimately passed on to customers as lower prices. Several virtual storefronts are the new success stories in cyberworld. Examples include Amazon.com, which sells books, CDs, and household items to customers in over 150 countries; Wine.com which offers exotic wines to customers all over the world; and Buy.com, which sells books, electronics, and all other kinds of items at discounted prices. In the world of finance, companies such as E*Trade, Ameritrade, Charles Schwab, and DLJ allow their customers to buy and sell stocks without paying hefty fees to brokers. Traditional brokerage firms such as Merrill Lynch, Goldman Sachs, and PaineWebber that initially scoffed at online brokerages now offer Web-based services to their customers. These examples show that companies based on Internet models have completely shaken the traditional business model. Traditional businesses are forced to take a serious look at the phenomena and offer either partial services like Merrill Lynch over the Internet or start a new business unit to compete with online rivals. Examples of the latter type are Barnes & Noble, and Toys R Us. It is important to recognize that EC is not simply shifting business away from traditional brick and mortar operations to Internetbased operations. As a matter of fact, EC appears to be generating a significant amount of entirely new economic activity activity that would not have occurred in the absence of EC. This is largely because of ECs unique advantages: increased access to markets, which brings more sellers and buyers together, along with better access to information, which allows buyers to discriminate among

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EXHIBIT 1 Challenges Facing Global Electronic Commerce Economic Cost Justification Internet access Telecom infrastructure Skill shortage Technical Security, reliability, and protocols Bandwidth Integration Social Privacy/security Cultural diversity Trust Absence of touch/feel Legal Intellectual Property Rights Legal validity of transactions Taxation issues Policing/Regulation

alternative products and services. For the past few years, the Internet has been lauded as a great educational tool because it provides expanded access to an immense amount of information on a vast array of topics. It appears that the Internet is exerting a similar effect on the economy by providing a marketplace in which consumers have more options and more information to assist them in making purchasing decisions. The broad contention made by most observers is that this makes the electronic marketplace more efficient than traditional marketplaces. EC is also redrawing the global commerce map. As national state boundaries become more and more insignificant to the mobility of capital and as time differences no longer pose any problem to the conduct of business, there are newer challenges that have emerged in the context of commerce in the electronic marketspace. The following sections examine some of the issues that stand in the way of the successful implementation of global electronic commerce. The authors believe that organizations and individuals considering involvement in EC should carefully consider and understand the limitations and challenges that accompany the opportunities existing in electronic commerce. Only then will they be able to successfully develop and implement their business plans in the global market place.
CHALLENGES FACING GLOBAL EC: FOUR DIMENSIONS

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ment commitment. At the inter-firm level, there are the topography of the competition, the level of institutional isomorphism in the industry, the nature of the supply chains, and the kinds of networks that define the environment. However, this article takes a broader look at some of the external concerns around global EC. These issues can be categorized along four major dimensions economic, technological, social, and legal (see Exhibit 1). While the issues discussed broadly apply to both B2B and B2C EC, the primary focus is on B2C concerns. The boundaries between these dimensions are not hard and fast, nor are the categories exhaustive. However, an examination such as the one that follows may contribute to a better understanding of the underlying concerns in connection with global E-commerce.
The Economic Dimension

The issues related to global economic commerce can be examined at several different levels. For example, there are intra-firm considerations such as access to technology, availability of appropriate skills, core competencies of the organization, and top-manage-

Economic considerations regarding EC include the cost justification of projects, the number of sellers and buyers and their access to the Internet, the issues connected with infrastructure upgrade, and the question of skill shortage. Justifying the cost of EC projects is a huge challenge. The cost of developing an EC project is typically rather high. Further, mistakes due to lack of experience inflate these costs. Although outsourcing is an option, the issues that must be resolved before making that decision are not simple. Also, when it comes to justification, traditional ways to assess returns are inadequate. It is difficult to rely only on tangible benefits to justify a big EC project. Many times, companies have had to embark on EC projects based solely on intangibles such as improved customer service, the value of advertisement, and accrued competitive advantage. However, intangible factors are extremely difficult to quantify. Overreliance on intangible benefits may jeopardize the project in question or any future endeavors. The commercial utility of the Internet rests in large part on the economys being connected; the value of the connection to the Internet is augmented with increased Internet access and a rise in the number of buyers and sellers. The entire United States, let alone the whole world, is a long way from being connected. Hence, in most applications there are not yet enough sellers and buyers for profitable EC operations. Some sources indicate that less than 40 percent of Americans have Internet access (Daley, 1999). The statistics are signifi-

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he entire United States, let alone the whole world, is a long way from being connected.
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cantly worse among lower-income categories, minorities, and immigrants. The lack of widespread Internet access is an issue in Europe as well. EC operations, especially in small sectors in some European countries, may not be viable because of the high cost of localizing services combined with the low number of households that have access to the Internet. The picture is much worse in the developing nations of Asia, Latin America, and Africa. At the moment, 90 percent of Internet host computers reside in high-income countries that are home to only 16 percent of the worlds population. This digital divide is widening between the developed world and most developing countries, and there does not seem to be a clear solution to this problem in the near future. Furthermore, accessibility to the Internet is still expensive or inconvenient for many potential customers outside North America. In many countries, there is not the same proliferation in the ownership of a computer that is found in developed countries. Furthermore, consumers have to pay hefty fees for Internet access and telephone connections that are billed on a per-minute basis. Only the wealthy can afford a computer and an Internet connection in these countries. Internet connections cost $15 a month in the United States, but $50 in Ghana and $100 in Kenya (Petrazzini, 1999). Shanghai City, China, has only 400,000 Internet accounts for its 12 million residents (Einhorn, 1999). Some progressive countries are devising innovative solutions such as community kiosks to work around these problems. Even if access issues can be adequately addressed, there are other problems with promoting EC in developing countries. Most consumers do not have credit cards, making online purchases difficult. The delivery of goods is slow and often expensive. The global infrastructure of the Web is unevenly developed, and the Internet connection between two Asian or African nations is likely to be routed through the United States. However, it is anticipated that as computer prices plummet and as newer technologies like Web TV develop, a critical mass is likely to form around the world to support global electronic commerce. One major area of concern in global EC is the construction of a telecommunications infrastructure to support its explosive growth. The current infrastructure is inadequate to support the full potential of EC. Most countries need to completely revamp their telecommunication networks and equipment to take

advantage of this new medium. However, the difficult question involves the sources of funding for this massive project that could run into billions of dollars. Capitalist countries like the United States are handing over this responsibility to private corporations. This route is often problematic for countries in which governments have always led the way and controlled the growth. For example, the Chinese government exercises tight control over Internet activities, including business ownership, foreign capital influx, and Internet access (Einhorn, 1999). These controls govern the expansion of electronic trade in China. In most countries in Asia, Africa, and Latin America, neither private individuals nor corporations have adequate capital to invest in these technologies, and the government is slow to initiate any meaningful effort because of bureaucratic procedures or lack of funds. Because global EC depends on the electronically mediated connection of consumers and producers across the world, the absence of an adequate infrastructure is a major impediment to its growth. There is a significant clamor in the press about the skill shortage and the dearth of information technology personnel trained in EC application development. Numerous hearings in the U.S. Congress have attempted to present evidence that corporations are losing millions of dollars simply because they cannot fill their vacant positions with qualified workers. The dynamism of the technology contributes a great deal to this shortage and emerging skill arenas such as XML and ASP programming have far more openings than can be filled in the current labor market. While attempts are underway to retrain current professionals and teach them the newer skills, the learning curve is often prohibitively steep, and many positions continue to remain unfilled. As a temporary measure, Congress is currently considering legislation that will allow corporations to hire additional foreign workers to fill these vacant slots. Some of these bills include provisions that will levy a fee on corporations hiring temporary workers from abroad and use the money to develop a local skilled workforce through education and retraining. Proponents of these bills contend that improper staffing resulting from the skill shortage is causing delayed projects and opportunity losses and that retraining is not an adequate short-term solution. The skill shortage is felt in both the industrial and the developing nations, resulting in increased project costs in the for-

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mer and sometimes prohibitively high barriers to EC projects in the latter.

The Technical Dimension

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ecause global EC depends on the electronically mediated connection of consumers and producers across the world, the absence of an adequate infrastructure is a major impediment to its growth.

The technical considerations concerning EC are security, reliability, communication protocols, bandwidth availability, and integration with existing applications. As the Internet evolves into a global information infrastructure, the issue of security becomes a major concern. Consumers are distrustful about the safety of the information they give out on the Web. Recent incidents indicate that relatively unsophisticated hackers can easily steal the information. Incidents such as the one at CDUniverse, in which a hacker sold credit card information he or she stole from the site after failing to get a ransom from the company, cause a drain in consumer confidence. Unfortunately, in their haste to implement EC solutions, corporations do not pay enough attention to security. It was revealed after the CDUniverse theft that many companies store credit card data and other confidential corporate and customer information in plaintext format without any encryption. Incidents such as these are the reason for reduced consumer confidence in online transactions. Reliability is another significant concern in electronic commerce. Network infrastructure and application systems must be continuously upgraded, fine-tuned, and maintained to keep the systems running. Evidence indicates that current online systems may not be totally reliable, especially when the transaction volume goes northbound. Major online brokers such as E*Trade, AmeriTrade, and Charles Schwab have experienced system failures during heavy trading. Other companies such as AOL and eBay have also faced similar system setbacks. Added to this is the vulnerability of sites to denial-of-service attacks, as demonstrated by the success of a 15-year old prankster in temporarily shutting down popular sites such as eBay, AOL, Yahoo, CNN, and MSN by overwhelming them with bombardments of service requests. Further, virus attacks such as the recent Melissa and Love Bug have highlighted the susceptibility of this medium to acts of wanton vandalism. Some estimates place the resulting financial loss incurred by corporations, their customers, and the economy in general at billions of dollars. Such vulnerability further erodes general confidence in EC. The question of communication protocols

needs attention as EC moves forward along its current path. The current IPv4 addressing scheme that relies on a 32-bit address system is likely to be a serious limitation in the coming era of Internet-connected appliances from personal digital assistants to cars. Makers of Internet equipment have not yet adopted the proposed IPv6 protocol with its 128-bit addressing. As Internet-based commerce enters the sustained development stage, these issues will have to be resolved. Insufficient telecomm bandwidth is another stumbling block in the quest for the rapid expansion of Web commerce. The current Internet 2.0 backbone operates at 45 to 155 megabits per second (Bell and Gemmelle, 1996); however, this bandwidth may not be sufficient for high-demand applications such as video-on-demand. The possibility of the development of the multimedia Internet 3.0 backbone that can carry simultaneous data, video, and voice communications is still a wide-open issue. Aside from the financial risk and technological problems, public policy questions of access have to be debated and resolved (Zwass, 1998). Currently, many consumers are connected to the Internet through low-speed links that take a long time to download Web pages. Even though technologies such as cable modems and those based on ISDN and ADSL are being introduced into some markets, they are very expensive and not widely available. An emerging alternative to these physically tethered transmission technologies is wireless transmission through air and space. Common applications such as pagers, cellular telephones, and microwave transmission of data have been used for decades. More recent developments herein include mobile data networks, personal communication services (PCS), personal digital assistants, smart phones, and other applications based on mobile computing power that facilitate the downloading, uploading, and manipulation of increasing amounts of datathus making it possible for operatives and individuals in remote locations or on mobile assignments to also be connected. Currently, however, wireless applications are more expensive, slower, and more error-prone than wired connections (Laudon and Laudon, 2000). Further, because data can be more easily intercepted in a wireless medium, it is much more difficult to maintain security and privacy in such applications. Again, bandwidth and energy supply in wireless devices require careful management from

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urrently, many consumers are connected to the Internet through low-speed links that take a long time to download Web pages.

both hardware and software standpoints (Imielinski and Badrinath, 1994). As technological developments address these stumbling blocks, it is expected that wireless applications will play an increasingly important EC role, especially in settings in which the traditional telecommunication infrastructure is lacking. There are difficulties in integrating Internet and EC software with some existing applications and databases. Many of the integration solutions are provided by software systems called middleware that connect disparate systems. The middleware programs are designed to work with popular software systems, but many organizations have homegrown applications or other commercial software for which they develop their own interfaces. Integration software is also difficult to maintain, and organizations often expend an inordinate amount of ongoing resources to maintain them.
The Social Dimension

There are a number of social and cultural issues that need to be addressed when considering global EC. Some of them are the concerns with privacy and security on the Internet, the challenges of cultural diversity, the questions raised by user resistance and inadequate trust, and the absence of a tactile medium for online sales. Security and privacy issues are major stumbling blocks for the growth of EC. Consumers hesitate to disclose confidential data such as their home address, Social Security number, and credit card number over the Internet. A significant percentage of the general public does not believe that conducting business on the Internet is safe (GVU 10th User Survey, 1999). Privacy & American Business, an industry newsletter, contends that 61 percent of U.S. Internet users have at one time or another declined to buy something online because of privacy concerns. Forrester Research indicates that online privacy is almost always reported as the number-one concern of consumers. According to their research, this lack of confidence resulted in lost sales of $2.8 billion in 1999 alone. Consumers continue to question whether EC offers sufficient safeguards that protect their privacy from being breached or their money from being stolen. In a bid to provide customized service to visitors, most Web sites use cookies to collect information about an individuals comings and goings, usually without the persons knowledge or consent. Most companies neither provide any explanation about how the information collected will

be used nor offer any assurances about the security of the information. It is also clear that many businesses do not know how to protect themselves against crackers and hackers; many do not disclose information about online attacks against them for fear of losing consumer confidence. This silence contributes to the increased vulnerability of corporations to hacker strikes (Gaudin, 1998). Many law enforcement authorities do not have enough resources or a sufficient number of experts working on cyber crimes. In any case, it is neither prudent nor feasible for any one government to attempt to police The cultural diversity of consumers needs to be taken into account while designing EC sites. The ability to customize the interface for individual and group needs is one of the greatest assets of EC. However, developing an EC site in a fashion that allows it to meet local needs and the preferences of many different customer groups is a major challenge for developers. Further, customization tends to be rather expensive. The lack of sophisticated translation tools does not allow an easy translation of Web pages from English, the dominant language of the Web, into local languages. These tools are slowly being developed and other languages are coming online. The current costs of translation run from $10,000 to $500,000, depending upon the complexity of the Web site. It is also clear that EC sites need to be tailored to take local variances into account. Sometimes, an in-depth study of cultural tastes is warranted before offering products or services to consumers. For example, Andersen Consulting conducts research into the differing tastes of travelers from various parts of the world and manages its Web sites in a way that reflects local preferences and tastes (Gupta, 2000). In a traditional business environment, trust is generated transitively (for example, a friends recommendation), from previous personal experiences, or through transparent legislative infrastructures (depositing money in a bank that is subjected to strict banking regulations). In the EC environment, an entirely new method of trading, none of these factors may exist. This lack of trust often results in user resistance toward buying products or services through EC. Some studies show that only a small fraction of Web surfers actually buy at ecommerce sites. E-commerce companies have realized the importance of brand identity that creates a sense of trust in the company. Online companies are spending enormous

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ost companies neither provide any explanation about how the information collected will be used nor offer any assurances about the security of the information.

amounts of resources on building brand identity. Brand identity is considered even more important (and is correspondingly more expensive) for corporations that wish to conduct business globally. As several studies have indicated, the absence of touch and feel in online commerce is a significant problem. However, most businesses are working around this limitation. Typically, consumers do not buy big-ticket items such as cars without physically seeing them and test-driving them. The Web is able to offer a host of services (e.g., research, comparisons, pricing) that lead to the final purchase, and organizations are arranging for test drives at dealerships. Here, both the traditional and Web-based models are merging to provide a suitable business model for this industry.
The Legal Dimension

Many legal issues have yet to be resolved in this new cyber medium. The introduction of new technologies especially those with profound ramifications such as the Internet and the World Wide Web is a highly disturbing force that shocks the existing norms in a society. The legal system gets perplexed with the new challenges that question the validity of existing laws. New laws have to be enacted to take care of the new problems or issues that technology introduces into the society. This section, we discusses issues related to intellectual property rights, the legal validity of electronic transactions, taxation issues, and the question of violation of local laws. Digital media are vastly different from traditional media such as books, periodicals, and journals. They are far more amenable to replication, transmission, and alteration. They are compact and can be stored easily. They are difficult to classify, categorize and catalog. These characteristics significantly alter the terrain concerning intellectual property rights (Laudon and Laudon, 1999). The issue becomes even more complicated in the international arena. Typically, different countries have different attitudes toward intellectual property rights, and, despite attempts by global bodies such as the World Trade Organization, the debate around these rights is far from resolved. Furthermore, the manner in which information is obtained and presented on the Web challenges intellectual property protections. A Web page can be constructed in such a way that each one of its components can

come from different sources, making the issue of ownership and compensation very complicated (Okerson, 1996). For example, several Web sites use frames that create an on-screen border around the page content. This allows easy navigation of the Web site through a consistent interface that lists menu options in the border. A Web page surrounded by a border can contain multiple elements of text, pictures, sound, and video from several different sources while giving the false appearance that all the information comes from the source being visited. Web sites often use this technique to offer content from one site while surrounding it with their own information or advertisements. In a fallout from one such case, six large news companies The Washington Post, Cable News Network, Inc., Dow Jones & Co., Reuters New Media, Inc., Time, Inc., and Times Mirror Co.brought a lawsuit against TotalNews (http://www.totalnews.com). The news companies claimed that TotalNews took their copyrighted editorial content and placed the TotalNews brand around it. TotalNews settled the lawsuit out of court and changed its methods of presenting others content (Deck, 1997). The issue of intellectual property rights promises to be a major factor in the development of global EC. On a related note, many argue that the Internet was designed to be open and transmit information (even copyrighted information) freely around the globe. They contend that the continued development of the Internet is contingent on its loose and chaotic organization, which allows the transmission of free-flowing ideas and processes. Others claim that new laws should be designed to protect original and copyrighted contributions. The latter give rise to a new question: what exactly is patentable or copyrightable in the EC environment? It is not quite clear what constitutes a new and useful process or improvement. Patents have been issued for broad ideas that one would be hard pressed to describe as original. Examples include Amazon.coms billing and shipping processes and Priceline.coms airline finder process. By 1998, 2200 patents had been issued in connection with the Internet. The opponents of this patent frenzy suggest that the application of offline patent laws to online systems will only serve to stifle the Internets development. One of the most important concerns thrown up in the EC debate has been the issue of the legal validity of electronic transactions.

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he issue of intellectual property rights promises to be a major factor in the development of global EC.

Most businesses developed over a period of time during which the means of conducting commerce was in person and was based on paper documentation and wet signatures. Existing laws in almost every country require that contracts be evidenced by written documents (in physical media). For EC to flourish, this recognition needs to be extended so that electronic documents and signatures evidencing contracts can have the same legal validity as written signatures and documents. It is widely believed in the EC community that digital signatures and other forms of electronic authentication can provide greater security and certainty regarding the identity of individuals and the content of important documents than traditional written and printed documents. Without this recognition (through appropriately enacted laws), EC expansion will certainly be hampered. Appropriate legislation is also required to address other aspects of electronic transactions. Currently, it may be difficult to say with certainty where a commercial EC transaction actually takes place and which jurisdiction may have regulatory authority over the transaction. A stopgap measure used by most Web sites is the so-called Forum Selection clause that a consumer is required to agree to. This binds the consumer to travel to the sellers local jurisdiction for the settlement of any disputes that may arise from the electronic transaction. Global standards concerning this are still being debated. Taxation in the EC environment is another important issue that needs to be resolved. It is also one of the major issues among the presidential candidates in the 2000 U.S. elections. So far, U.S. legislators have been successful in preventing the imposition of new sales taxes on Internet-related businesses until late 2001. On the one hand, state and local governments want sales tax to be imposed to protect their own tax revenues as well as the local businesses and the local economy. On the other hand, both legislators and think tanks argue that imposing any sales tax at this early stage of development would impede the growth of the Internet economy. Furthermore, the modalities of implementing and collecting Internet sales taxes are rather complicated, to say the least. These complications increase substantially in the international arena. Different nations have different tax structures and the question of jurisdiction is not easily resolvable when the seller and buyer are in different states or countries. A related issue of concern for many cor-

porations is the sale of commodities that are restricted or illegal by the laws of the country in which the product or service is being sold. A company such as Wine.com must be careful not to break any of the local, state and national laws while selling wines around the world. This is also an area of concern in the United States, especially with regard to the sale of pornographic materials, illegal weapons, restricted chemical items, and online gambling services. Instances of this occurring at popular well-respected sites without the knowledge of the sites owners (such as Amazons auctions and zShops, and eBays auctions) have been reported (Wolverton & Sandoval, 1999).
CONCLUSION

A paradigm shift is occurring in the way business is conducted in the current economy. EC represents one of the several significant changes that are sweeping across the business landscape, redefining it in entirely novel fashions. This article has attempted to examine the challenges to global EC along four dimensions economic, technical, social, and legal. There are several economic issues that pose significant difficulties to EC. Traditional methods of accounting are proving inadequate as cost-justification mechanisms. Infrastructural limitations, especially in developing nations, the relatively small number of buyers and sellers, the question of who will finance and control the infrastructure, the skill shortage and the resulting high project costs are all issues that need to be resolved adequately in the near future if global EC is to live up to its potential. There are a number of technical issues such as security, reliability, communication protocols, bandwidth availability, and integration problems that are proving to be significant in global EC. In B2C settings, consumer confidence is extremely critical, and low security or poor reliability might impede the EC phenomenon. The current communications protocols will soon become inadequate, and new protocols are urgently needed to sustain the growth of EC. The current Internet backbone cannot support high-demand Internet applications, and building a new infrastructure will take time. Further, EC applications need to be seamlessly integrated with existing applications within organizations for the smooth flow of information and the efficient processing of transactions. Middleware programs have been proposed as a solution to integration problems, but they have so far proved to be main-

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he modalities of implementing and collecting Internet sales taxes are rather complicated, to say the least.

tenance nightmares. On the social level, issues such as privacy and security, cultural diversity, and user trust need to be addressed. The power of EC lies in its ability to customize goods and services that are specific to the needs of the users. Companies feel they need to understand and profile their customers to better serve them. However many consumers are very concerned about the privacy of the information that they divulge. The possibility that hackers and crackers can steal and misuse it adds to their concern. Building EC sites to suit the local needs of the global community is another challenge. Companies have realized that trust is extremely critical in translating a visit to a Web site into a fruitful transaction and are consequently spending a major portion of their revenues on building consumer confidence. At the legal level, important areas of concern include intellectual property rights, the validity of electronic transactions, the taxation of electronic transactions, and the enforcement of regulations. The open nature of the medium requires the enactment of new laws that will make electronic transactions valid and legally enforceable. The questions related to taxing electronic transactions and its modalities are complex and have yet to be resolved. Laws vary from state to state and country to country, making EC a landminestrewn field for Internet-based businesses. Global EC is significantly altering the contours of space and time, reshaping the meaning of value, shifting power to consumers, and reinventing the nature of management. In this dynamic environment, traditional institutions need to redefine their roles and reposition themselves. Though EC is in its formative stages of development, its extraordinary growth over the past years is a clear indication of its enormous potential for influencing the way business will be conducted in the future. These new opportunities, however, come accompanied with a large number of concerns and questions that need to be resolved. This article has discussed some of the challenges that face organizations embarking upon this new path. The issues outlined are merely representative; they are neither collectively exhaustive nor mutually exclusive. However, they must be addressed serious if global EC is to negotiate the uncharted waters ahead. L
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