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Management of Technology &

Innovation

Anindita Hazra

Management of Technology & Innovation


2015, Anindita Hazra
For Private Circulation only to the Students of ADDOE.

All rights reserved. No part of this book may be reproduced, stored in a retrieval system,
or copied in any form or by any means, electronic, mechanical, photographic or otherwise, without the prior
written permission of the author and the publisher.
Published by: Amity Directorate of Distance & Online Education, Noida

Contents
Page No.

UNIT I
Lesson 1

Hospitality Industry

Lesson 2

Economic and other Impacts

21

Lesson 3

Contribution of Hospitality Industry

29

UNIT II
Lesson 4

Hospitality Organisations

41

Lesson 5

Accommodation Department

54

Lesson 6

Classifications of the Hotels

60

Lesson 7

Hotel Organisation

72

Lesson 8

Food Service Industry

75
UNIT III

Lesson 9

Rooms Division: The Front Office Department

89

Lesson 10

Uniformed Service Departments

97
UNIT IV

Lesson 11

Functional Areas of Hospitality

109
UNIT V

Lesson 12

Hospitality Marketing

121

Lesson 13

Market Segmentation

128

Lesson 14

Target Market

140

Lesson 15

Emerging Trends in Hospitality Industry

154

Lesson 16

Hospitality Industry and Technology

165

Lesson 17

Role of Associations in Hospitality Management

174

5
Innovation

UNIT I

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Technology Innovation
and Sustainable Enterprise

LESSON

1
INNOVATION
CONTENTS
1.0

Aims and Objectives

1.1

Introduction

1.2

What is Innovation?

1.3

Need of Innovation

1.4

Objectives of Innovation

1.5

Technology Innovation

1.6

Importance of Innovation

1.7

Innovation Adoption Process

1.8

Let us Sum up

1.9

Lesson End Activity

1.10

Keyword

1.11

Questions for Discussion

1.12

Suggested Readings

1.0 AIMS AND OBJECTIVES


After studying this lesson, you should be able to understand:
z

What is innovation

Why innovation is required

Different types of innovation

Idea about the objective of innovation

Importance of innovation

Concept of technology innovation

1.1 INTRODUCTION
A good enterprise idea becomes a business opportunity when it generates value. Yes,
but how much? The rule of thumb shared by many venture capitalists and other risk
capital investors is that the entrepreneur should have a gross margin of 35-40 per cent
or better.
However, this will depend on the particular market and industry in which your new
product or service is being launched. There are different opportunities for different
people. Some industries operate with much smaller margins - so it is potentially
unhelpful to try and be prescriptive about it.

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Innovation

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Technology Innovation
and Sustainable Enterprise

Innovation is an essential feature for all businesses, from the smallest to the largest.
You will probably have encountered the terms creativity and innovation in a wide
variety of settings. Both words are used interchangeably.
However, they do in fact mean very different things - especially in the context of
entrepreneurship and enterprise creation. Creativity is the generating new ideas. The
innovation is all about ensuring that these ideas are successfully exploited. Managing
this process can be extremely important for the ultimate success of your enterprise.

1.2 WHAT IS INNOVATION?


The term innovation comes from the Latin word innovare meaning 'to make
something new'. Modern day understanding is that innovation is a process of turning
ideas into new opportunities for value creation and of putting these into widely used
practice.
Innovation is inextricably bound up with the process of entrepreneurship. It can be
defined as a specific tool of entrepreneurs, the means by which they exploit change as
an opportunity for a different business or service. It is capable of being presented as a
discipline, capable of being learned, capable of being practiced.
The commonly held view is that innovation is creativitynew ideas, knowledge
creation. Thats why companies spend mega-bucks for courses where people play
with brightly colored blocks to get their creative juices going. But it isnt just that. It
goes beyond idea generation to putting those ideas into action.
The challenge is getting the steady stream of good ideas out of the labs and creativity
campfires, through marketing and manufacturing and all the way to the customer. In
other words, while you need to keep the pump primed with lots of great ideas, it will
be for naught if they dont see the light of day.
Innovation is the successful exploitation of new ideas. This implies that it is not just
the invention of a new idea that we are interested in, but that this idea is actually
"brought to market", used, put into practice, exploited in some way, maybe leading to
new products, processes, systems, attitudes or services that improve something or add
value.
There are different kinds of innovation. For us the main ones are:
z

Incremental innovation - where something is adapted or modified. This may mean


that an old idea is transferred to a new setting or that existing ideas are embedding
in a new setting.

Radical innovation - which involves completely new ideas.

Developing something innovative can be an individual process but we have


frequently seen this is being done by groups of people who may take on different
aspects of the process, playing to their individual strengths, knowledge and roles
in an organisation.

1.3 NEED OF INNOVATION


There is often an innovation consulting team or unit that is a generalist and will help
the other individual business units. They are almost like innovation consultants within
the organization or intrepreneurs who are always looking for opportunities to
develop and will then approach the specific business unit within the organization
about the opportunity, or the specific business unit will seek the help of the innovation
consultants within the organization.
Generally this is a small team of individuals who are expert on innovation and product
development. This generalist team focused on innovation within the organization is

more valuable then just giving each business unit the responsibility for innovation
without help.
If each business unit were fully responsible for their own innovation without the help
of the innovation consultants, the success wouldnt be as great because the day to day
operations of the business unit prevent the long term and exploratory focus needed.
Plus, the business unit leaders are expert in their own product and market, not
necessarily innovation. It is also a different mindset between operating and
innovating. Innovating is more ambiguous and risky and takes a more entrepreneurial
creative skill set than operations.
In addition, innovation consultants possess specific knowledge about innovation
processes that would take individuals in the business units a long time to learn and
develop and they most prominently, they dont have the additional time to work on it.
These generalists were critical for innovation success not only because they are expert
on innovation but because they also serve as organizational connectors who can bring
best practices from one business unit or product area to the next. They facilitate
sharing of information and resources for innovation.
The good news is that it doesnt take a large team to pull this off. It can be done with
as few as 1-2 professionals to start, but these professionals must be fully engaged in
innovation. So it is to be established an innovation position or team within the
organization that can connect and facilitate innovation initiatives throughout the
organizations.

1.4 OBJECTIVES OF INNOVATION


Programs of organizational innovation are typically tightly linked to organizational
goals and objectives, to the business plan, and to market competitive positioning. In
general, business organisations spend a significant amount of their turnover on
innovation i.e. making changes to their established products, processes and services.
The amount of investment can vary from as low as a half a percent of turnover for
organisations with a low rate of change to anything over twenty percent of turnover
for organisations with a high rate of change.
The average investment across all types of organizations is four percent. For an
organisation with a turnover of say one billion currency units, this represents an
investment of forty million units. This budget will typically be spread across various
functions including marketing, product design, information systems, manufacturing
systems and quality assurance.
The investment may vary by industry and by market positioning.
One survey across a large number of manufacturing and services organisations found,
ranked in decreasing order of popularity that systematic programs of organizational
innovation are most frequently driven by:
z

Improved quality

Creation of new markets

Extension of the product range

Reduced labour costs

Improved production processes

Reduced materials

Reduced environmental damage

Replacement of products/services

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and Sustainable Enterprise

Reduced energy consumption

Conformance to regulations

These goals vary between improvements to products, processes and services and
dispel a popular myth that innovation deals mainly with new product development.
Most of the goals could apply to any organisation be it a manufacturing facility,
marketing firm, hospital or local government.

1.5 TECHNOLOGY INNOVATION


Theoretically, organizational innovation is a broad concept that encompasses
strategies, structural and behavioral dimensions. The notion of organizational
innovation is subject to various definitions and interpretations.
It can be viewed as including components such as workforce training, work design
(more decentralized and flexible allocation of labor in the firm), employee voice
(allowing workers to have greater autonomy and discretion in their work) and shared
rewards (incentives such as profit sharing or stock options). Organizational innovation
encompasses three types of practices:
1. Management practices (teamwork, knowledge management, flexible work
arrangements);
2. Production approaches (change to the work organization: total quality
management, business re-engineering);
3. External relations (outsourcing, networking, customer relations).
Firms who are active in technological innovation usually adopt complementary
organizational practices. Numerous studies have investigated the complementary
between organizational innovation and technological innovation by highlighting the
importance of technological innovation as a driver of organizational changes within
the firm. Firms introducing technological innovation would therefore be constrained
to reorganize their production, workforce, sale and distribution systems.
It can be pointed out the inverse relationship by stressing the role of organizational
innovation in enhancing flexibility, creativity - that in turn facilitates the development
of technological innovation. Using a sample of firms in the fast-moving consumer
goods industry in Germany, Lokshin et al. (2008) studied the effect of organizational
competencies on firms' innovative performance, showing that firms implementing a
combination of customer, organizational and technological competencies tend to
introduce more innovations.
Whatever the research perspective, the crucial role of organizational practices on
competitive advantage and firm performance is acknowledged. Organizational
practices are considered as an input of the firms innovation process and of its
innovation capability.
Check Your Progress 1
Fill in the blanks:
1. A good enterprise idea becomes a business opportunity when it generates
. .
2. Organizational . is a broad concept that encompasses
strategies, structural and behavioral dimensions.

1.6 IMPORTANCE OF INNOVATION


There isnt a business that doesnt want to be more creative in its thinking. According
to one study, 75 per cent of CEOs of the fastest growing companies claim their

strongest competitive advantage is unique products and services and the distinct
business processes that power them to market innovation by another name. In
another survey, the organizations believe that the innovation is a strategic priority.
The importance of innovation in all sectors is growing, and growing significantly.
In todays ever-changing economic landscape, inventiveness has become a key factor
influencing strategic planning. Efficiency, while a necessary condition for business
success, is insufficient to sustain growth over decades. While new levels of efficiency
and productivity require inventive solutions, the goal of efficiency is not the same as
the goal of innovation.
If innovation and the balance sheet are inextricably linked, companies cannot afford to
rely upon flashes of brilliance by individual inventors working alone. Hoping that
what is cooking in the lab will turn up trumps is not a reasonable approach for a
custodian of stockholder value.
Very often, innovation results from the planned and deliberate recombination of ideas,
people, and objects from the past that spark new technological revolutions, sought
after service concepts and effective business models.
Yet to stand as valuable innovations, new products and services must be sufficiently
robust to progress efficiently through the end-to-end commercialisation process and
into the hands of customers. How does this happen? Leading companies continuously
seek out and institutionalize the insights and tools they will need if they are to stay at
the leading edge and be top-rated stars in their sector.
Some companies build enduring capacities for breakthrough innovation. They find
ways to circumvent the years, if not decades, it can take to move from invention to
commercial exploitation of a new technology. They manage the associated risks and
continuously enhance their ability to solve the complex engineering and business
process design problems that would otherwise place limits on their ability to envisage,
and then create sustainable value from, the next generation in their industry.
Innovation is important now because we are facing a number of key challenges.
Globalisation, the technological and knowledge revolutions, cultural debate and
climate change are issues that face us all at some level.
They mean that as well as wanting to innovate in order to improve a process or
product and add value, we also have to innovate because there is an overwhelming
imperative to do so. These issues pose challenges for the private sector, for public
services and for governments and policy makers.
For example, globalisation and shifting patterns of trade and commerce with
manufacturing increasingly being undertaken in countries where labour costs are
lower mean that different skills will be required by the workforce of the future.
Migration patterns and shifting demographics along with climate change will also
impact on the futures of the young people in our society. All this leads us to consider
that innovation is now an essential component of any kind of system.

1.7 INNOVATION ADOPTION PROCESS


Innovation adoption process is the spread of a new idea from its source of invention or
creation to its ultimate users or adopters. This is the process mental pertains to an
individual through which an individual passes from first hearing about an innovation
to final adoption.
The process has five stages. The five stages are:
1. Awareness
2. Interest

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Innovation

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and Sustainable Enterprise

3. Evaluation
4. Trial
5. Adoption
In the awareness stage "the individual is exposed to the innovation but lacks complete
information about it". At the interest or information stage "the individual becomes
interested in the new idea and seeks additional information about it". At the evaluation
stage the "individual mentally applies the innovation to his present and anticipated
future situation, and then decides whether or not to try it". During the trial stage "the
individual makes full use of the innovation". At the adoption stage "the individual
decides to continue the full use of the innovation".
Check Your Progress 2
Fill in the blanks:
1. The term innovation comes from the Latin word . .
2. . is the successful exploitation of new ideas.
3. Firms who are active in technological innovation usually adopt
. organizational practices.

1.8 LET US SUM UP


Innovation is the successful exploitation of new ideas. There are different kinds of
innovation. There is often an innovation consulting team or unit that is a generalist
and will help the other individual business units. This generalist team focused on
innovation within the organization is more valuable then just giving each business unit
the responsibility for innovation without help. Programs of organizational innovation
are typically tightly linked to organizational goals and objectives, to the business plan,
and to market competitive positioning. In general, business organisations spend a
significant amount of their turnover on innovation i.e. making changes to their
established products, processes and services. Theoretically, organizational innovation
is a broad concept that encompasses strategies, structural and behavioral dimensions.
The notion of organizational innovation is subject to various definitions and
interpretations. The importance of innovation in all sectors is growing, and growing
significantly. Some companies build enduring capacities for breakthrough innovation.

1.9 LESSON END ACTIVITY


Write an essay on the role of innovation in the globalization of business.

1.10 KEYWORD
Innovation: It can be defined as a specific tool of entrepreneurs, the means by which
they exploit change as an opportunity for a different business or service.

1.11 QUESTIONS FOR DISCUSSION


1. What are the different kinds of innovation?
2. Why innovation is required for an organization?
3. Describe the goal of innovation.
4. Explain the importance of innovation.

Check Your Progress: Model Answers


CYP 1
1. Value
2. broad
CYP 2
1. Innovare
2. Innovation
3. Complementary

1.12 SUGGESTED READINGS


Harish Chandra Chaudhary, Knowledge Management for Competitive Advantage, Excel Books
Publications, New Delhi.
Deep and Deep, Technology Transfer and Joint Ventures Abroad, R. R. Azad, Publications,
New Delhi.
Thomas, J Kuegler, Web Advertising and Marketing, Jr. 3rd Edition-Prentice-Hall of India,
New Delhi.
Dr. Ravi Kalakota, E-Business Roadmap for Success, Pearson Education.
Ravi Kalakota, Andrew B. Whinston, "Frontiers of Electronic Commerce", Addition-Wesley
2000.

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and Sustainable Enterprise

LESSON

2
KNOWLEDGE MANAGEMENT
CONTENTS
2.0

Aims and Objectives

2.1

Introduction

2.2

What is Knowledge Management?

2.3

Need of Knowledge Management


2.3.1

Explosion of Communications Technology

2.3.2

Advent of the 'Knowledge Worker'

2.3.3

'Learning Organisation' Tools and Techniques

2.4

Business Strategies Related to Knowledge Management

2.5

Knowledge Management Approaches

2.6

Transformation of an Enterprise through Knowledge Management

2.7

Let us Sum up

2.8

Lesson End Activity

2.9

Keywords

2.10

Questions for Discussion

2.11

Suggested Readings

2.0 AIMS AND OBJECTIVES


After studying this lesson, you should be able to understand:
z

Concept of data, information, wisdom and knowledge

Idea about the need of knowledge management

Different approaches of knowledge management

Implementation of knowledge management for business strategy

How to transform of an enterprise through knowledge management

2.1 INTRODUCTION
In todays networked & seamless world, where data and information is available a
plenty, it certainly does create a chaos in an organization if the knowledge resources
are not handled in a proper and smart manner. The concept is a recent one and is in the
developmental stage, a close look at the fundamentals would enable us to appreciate
its utility and effectiveness in todays knowledge based economy.
The concept of knowledge management addresses this lesson.

2.2 WHAT IS KNOWLEDGE MANAGEMENT?


Before attempting to address the question of knowledge management, it's probably
appropriate to develop some perspective regarding this stuff called knowledge, which
there seems to be such a desire to manage, really is:
z

A collection of data is not information.

A collection of information is not knowledge.

A collection of knowledge is not wisdom.

A collection of wisdom is not truth.

Figure 2.1: Relationship between Data, Information,


Knowledge and Wisdom

The idea is that information, knowledge, and wisdom are more than simply
collections. Rather, the whole represents more than the sum of its parts and has a
synergy of its own.
We begin with data, which is just a meaningless point in space and time, without
reference to either space or time. It is like an event out of context, a letter out of
context, a word out of context. The key concept here being "out of context", and since
it is out of context, it is without a meaningful relation to anything else.
When we encounter a piece of data, if it gets our attention at all, our first action is
usually to attempt to find a way to attribute meaning to it. We do this by associating it
with other things. If you see the number 5, you can immediately associate it with
cardinal numbers and relate it to being greater than 4 and less than 6, whether this was
implied by this particular instance or not.
If you see a single word, such as "time," there is a tendency to immediately form
associations with previous contexts within which you have found "time" to be
meaningful. This might be, "being on time," "a stitch in time saves nine," "time never
stops," etc. The implication here is that when there is no context, there is little or no
meaning. So, we create context but, more often than not, that context is somewhat
akin to conjecture, yet it fabricates meaning.
A collection of data is not information. It implies that a collection of data for which
there is no relation between the pieces of data is not information. The pieces of data
may represent information, yet whether or not it is information depends on the
understanding of the one perceiving the data.
While information entails an understanding of the relations between data, it generally
does not provide a foundation for why the data is what it is, nor an indication as to
how the data is likely to change over time. Information has a tendency to be relatively
static in time and linear in nature. Information is a relationship between data and,
quite simply, is what it is, with great dependence on context for its meaning and with
little implication for the future.

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Beyond relation there is pattern, where pattern is more than simply a relation of
relations. Pattern embodies both a consistency and completeness of relations which, to
an extent, creates its own context. Pattern also serves as an archetype with both an
implied repeatability and predictability.
When a pattern relation exists amidst the data and information, the pattern has the
potential to represent knowledge. It only becomes knowledge, however, when one is
able to realize and understand the patterns and their implications.
The patterns representing knowledge have a tendency to be more self-contextualizing.
That is, the pattern tends, to a great extent, to create its own context rather than being
context dependent to the same extent that information is. A pattern which represents
knowledge also provides, when the pattern is understood, a high level of reliability or
predictability as to how the pattern will evolve over time, for patterns are seldom
static. Patterns which represent knowledge have a completeness to them that
information simply does not contain.
Wisdom arises when one understands the foundational principles responsible for the
patterns representing knowledge being what they are. And wisdom, even more so than
knowledge, tends to create its own context. These foundational principles are
universal and completely context independent. Of course, this last statement is sort of
a redundant word game, for if the principle was context dependent, then it couldn't be
universally true now could it?
So, in summary the following associations can reasonably be made:
z

Information relates to description, definition, or perspective (what, who, when,


where).

Knowledge comprises strategy, practice, method, or approach (how).

Wisdom embodies principle, insight, moral, or archetype (why).

Example
This example uses a bank savings account to show how data, information, knowledge,
and wisdom relate to principal, interest rate, and interest.
z

Data: The numbers 100 or 5%, completely out of context, are just pieces of data.
Interest, principal, and interest rate, out of context, are not much more than data as
each has multiple meanings which are context dependent.

Information: If it is established that a bank savings account as the basis for


context, then interest, principal, and interest rate become meaningful in that
context with specific interpretations.

Principal is the amount of money, $100, in the savings account.


Interest rate, 5%, is the factor used by the bank to compute interest on the principal.
z

Knowledge: If you put $100 in your savings account, and the bank pays 5%
interest yearly, then at the end of one year the bank will compute the interest of $5
and add it to the principal and you will have $105 in the bank. This pattern
represents knowledge, which, when you understand it, allows you to understand
how the pattern will evolve over time and the results it will produce. In
understanding the pattern, you know, and what you know is knowledge. If you
deposit more money in my account, you will earn more interest, while if you
withdraw money from your account, you will earn less interest.

Wisdom: Getting wisdom out of this is a bit tricky, and is, in fact, founded in
systems principles. The principle is that any action which produces a result which
encourages more of the same action produces an emergent characteristic called
growth. And, nothing grows forever for sooner or later growth runs into limits.

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Knowledge Management

Figure 2.2: Graphical Representation of the Above Said Example

If one studied all the individual components of this pattern, which represents
knowledge, they would never discover the emergent characteristic of growth. Only
when the pattern connects, interacts, and evolves over time, does the principle exhibit
the characteristic of growth.
Now, if this knowledge is valid, why doesn't everyone simply become rich by putting
money in a savings account and letting it grow? The answer has to do with the fact
that the pattern described above is only a small part of a more elaborate pattern which
operates over time.
People don't get rich because they either don't put money in a savings account in the
first place, or when they do, in time, they find things they need or want more than
being rich, so they withdraw money. Withdrawing money depletes the principal and
subsequently the interest they earn on that principal.
Check Your Progress 1
Fill in the blanks:
1. . relates to description, definition, or perspective.
2. . comprises strategy, practice, method, or approach.
3. . embodies principle, insight, moral, or archetype.

2.3 NEED OF KNOWLEDGE MANAGEMENT


Knowledge assets are the knowledge regarding markets, products, technologies and
organisations, that a business owns or needs to own and which enable its business
processes to generate profits, add value, etc.
Knowledge management is not only about managing these knowledge assets but
managing the processes that act upon the assets. These processes include: developing
knowledge; preserving knowledge; using knowledge, and sharing knowledge.
Therefore, Knowledge management involves the identification and analysis of
available and required knowledge assets and knowledge asset related processes, and
the subsequent planning and control of actions to develop both the assets and the
processes so as to fulfill organisational objectives.
Everyone in business intuitively appreciates the value of knowledge. People need
access to knowledge in order to work, and as they work, they learn, or generate new
knowledge. To get their job done well, individuals need to know what to do and how
to do it.
To make good decisions, they need to know what the true situation is in terms of
relevant data or information, and be able to draw on past experiences or analyses or
records to judge the implications of alternative courses of action.

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As work is done, people learn. This happens naturally to a greater or lesser degree
depending on individual personality and intelligence, and on the degree to which the
corporate environment encourages independent action and experimentation.
It is also typical of businesses that, in various ways, they explicitly set about the task
of learning. They do this by conducting Research and Development and by
systematically collecting and analysing data about their operations, customers, and
markets.
If all this happens now, why is there a need to 'manage' knowledge? The answer lies
in three relatively recent major developments in corporate environments:
z

The explosion of communications technology

The advent of the 'knowledge worker'

The widespread adoption of 'Learning Organisation' tools and techniques,


otherwise known as process-oriented management.

2.3.1 Explosion of Communications Technology


Before the proliferation of corporate networks and application software to support
general communication, access to knowledge was limited to personal contact and
paper-based reports and manuals. However, production time and cost, and the slow
speed of paper-based communication, place severe limits on its practical value.
The advent of the World Wide Web changed this dramatically. Electronic
communication became fast, cheap and flexible. However, when organisations came
to utilize this new communication channel they often found their existing paper-based
knowledge in poor condition. Their desire to use the new communication channels
cast a bright light into some dark corners. They found that existing documented
knowledge was often:
z

Badly written and not 'voiced' for its intended audiences

Disorganised, ill-structured, inconsistent, out-of-date, and of questionable


authority

Not supported by existing management structures and responsibilities ... or simply


not there

In short, the quality and quantity of readily communicable knowledge was low. This is
an issue that needs to be managed.

2.3.2 Advent of the 'Knowledge Worker'


Another by-product of rapid technological development has been the changing nature
of the workplace and the demands placed on employees. As lower-level and repetitive
tasks are increasingly automated, two mutually reinforcing trends take place:
z

To do the remaining more complex work, employees have to apply greater


knowledge and adapt quickly through learning - hence they must become
'knowledge workers' .

Improvements in production capability and flexibility enable new products and


services to be brought to the market more quickly and cheaply; this rapidly
increases the level of competition and the rate of market change, and the need for
employees to learn and adapt quickly.

Supporting knowledge workers' enhanced needs for access to knowledge, and for
capturing, cycling and leveraging the knowledge they generate, are issues that need to
be managed.

2.3.3 'Learning Organisation' Tools and Techniques


Under the banners of 'Continuous Improvement', 'Total Quality Management', 'Total
Quality Control', 'Quality Assurance', or simply 'Quality Management', organisations
have adopted and benefited from the concepts of process-oriented management.
Collectively these concepts represent the notion of the 'learning organisation'; an
organisation that is constantly re-making itself by staying close to its customers and
suppliers, and changing and adapting its processes, products and services to better
meet customer needs and improve operating efficiency. Managers in learning
organisations consciously encourage and support constant investigation and
innovation by staff to improve the way their organisation functions.
Even those organisations that have not explicitly implemented the above programmes
have commonly adopted many of the management tools and techniques associated
with them. Tools and techniques such as:
z

Customer-focused data collection and analysis

Customer-focused accountability

Employee empowerment

Statistical process control

Quality assurance systems based on international standards

Team-based problem solving and process improvement

Benchmarking and 'best practice' implementation

Business process re-engineering

Although the names of the original programmes are now much less commonly used,
the concepts embodied in them have wrought a fundamental and permanent change in
the way businesses are managed. The individual tools and techniques involved have
become an integral part of accepted management practices.
Process-oriented management is 'knowledge work' at the corporate level. It
systematically generates new and better knowledge about how best to tackle the
thousands of interdependent tasks that an organisation relies on in order to be effective
and to improve. But a major problem for process-oriented management is getting it to
'stick'. Like an open fire, much of the heat is going up the chimney. This is because:
z

The techniques used rely on close contact between individuals, so the benefits of
the knowledge generated have tended to be local rather than necessarily
organisation-wide.

Relatively little emphasis has been placed on documenting processes for


audiences wider than immediate team members, thus limiting the ability to
leverage the new knowledge generated.

Beyond the 'workplace team' level, management and communication structures


generally do not exist to support process improvement on division-wide and
company-wide levels.

Initiatives that share process-oriented approaches are often kept separate with
their own implementation teams; for example 'quality assurance' is seen as
different to 'continuous Improvement', and in turn 'Best Practice' is often made
distinct from 'Business Process Re-engineering.

These are problems of knowledge that need to be managed if the organisation is to get
maximum benefit from its process-orientation.

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2.4 BUSINESS STRATEGIES RELATED TO


KNOWLEDGE MANAGEMENT
Organisations are facing ever-increasing challenges, brought on by marketplace
pressures or the nature of the workplace.
Many organisations are now looking to knowledge management (KM) to address
these challenges. Such initiatives are often started with the development of a
knowledge management strategy.
To be successful, a knowledge management strategy must do more than just outline
high-level goals such as 'become a knowledge-enabled organisation'.
Instead, the strategy must identify the key needs and issues within the organisation,
and provide a framework for addressing these.
Strategy development and actual strategy implementation has always been a challenge
for organizations. Mainly because the people that set up the strategy have so little to
do with the actual implementation and there is not enough input, involvement from
the actual implementation people.
First let clarify what is the meaning of implementation people, these are not to be
confused with technical implementation people; these are the people that have senior
managers roles, yet they work in the frontline. They know their customers inside out,
yet they have little say when it comes to what the customers may want to see from the
company in the year to come.
The solution is simple, yet it is on of these remedies that we know what is good for us,
however we fail to follow through. In any case the benefits of involving all parties to
contribute to a strategy are tremendous, companies will not only be able to foresee
problems that they were not able to see through by themselves but they will also gain
commitment and loyalty from their employees. And if you think that the voices of the
implementation folks are heart through their bosses and bosses, just remember the
Arabic telephone.
How accurate is the information that is going to be delivered to the board of directors?
Would it hurt to include people with a variety of roles across the organization? Does it
have to be only the say of few powerful that are most likely saying the same things
anyway?
There have been many attempts to solve this issue in the past decade, with many
initiatives that took place, such as the Management by Objective wave (MBO) yet,
these initiatives faint away as time passes and still the inclusion of important people to
a business strategy seems to be a problem.
The missing link between strategy development and strategy implementation becomes
obvious and demands for an immediate remedy, in today's need for implementing
Knowledge Management initiatives. Companies are heavily investing millions of
dollars in knowledge management software, hardware and technical training so that
these mediums (means) can actually preserve and harvest some of the organizational
knowledge.
Their hope is to store organizational knowledge in large depositories and make it
available to their entire organization. The real question comes, How are companies
making sure that they need to integrate their business strategy with knowledge
management strategy and make sure that the implementation folks will actually be
there to Well, how does this work?
We all know that knowledge is the fundamental basis of competition. If companies
want to compete in this wild economy they need to capitalize on what they know and
align their business strategy to their business strategy. Knowledge management and

Business Strategy need to work together with the prerequisite that the implementation
folks are present when the knowledge strategy is laid out.
Revolutionary companies across the world have begun to develop a new set of
processes for coaching people on how to contribute to a business strategy. There are a
lot of case studies about these companies and a great deal of information can be learnt
of them.
So how can companies make sure that everyone is contributing to a business strategy
or better a knowledge strategy, let's assume that the company decided to merge its
knowledge strategy with its business strategy. Below are few helpful tips(scenarios)
that illustrate how this is possible.
First, goals are set with the whole group in mind, remember our implementation
people, well they get the privilege of having an actually say when it comes to setting
the strategy for next year. Open discussion is encouraged and people seem not to be
afraid to express their opinion. Dialogue in it purest form. What a joy!
Second, the whole plan is not focused only on results. It also focuses on why they
want to achieve the results that they want to achieve? How is there vision going to add
value to their customer base? And also what are the means and methods for achieving
this vision? The actual resources that they are going to use or engage for setting and
executing the strategy.
Third, everyone understands that the environment is constantly changing; therefore
they are not in love with their first strategy. Strategies need to have room for
flexibility and this is not difficult once you know your purpose of engaging in that
strategy in the first place. That's why it is so clear to know the WHY you are doing
anything? What is the ultimate result that you are seeking from it?
Fourth, constructive feedback is encouraged and actually recommendation are
immediately implemented or included for future planning.
Fifth, these knowledge companies focus a lot on personal development and growth
they understand that only then companies can actually be able to engage everyone in a
strategy when people are acknowledged through the entire year not only for one day.
You cannot expect people will want to work for you and contribute their best if you
do not do your part.
As a corporate employer, you will need to be able to see that each person within your
company has the capacity of adding value to your corporate strategy. The real
challenge here is to have all these people work for your strategy for the entire year.
Their voices need to heart, valued and actually given credit for. This is a radical
strategically breakthrough but it is needed if you want to engage your whole company
in contributing to your knowledge- business strategy.
This new thinking of managing and leading companies is revolutionary, cutting edge
and it requires time, space and ongoing support. Many will argue that companies do
not have time to spend time in developing, nurturing their front line managers and
senior executives on how to play this new game called "knowledge leadership
management."

2.5 KNOWLEDGE MANAGEMENT APPROACHES


How do leaders approach the creation of knowledge based environment in an
organization? The basic competencies required can be enlisted as:
z

Socialise: Simply put, it is an effort to bring people together, encourage


collaborative behavior, peer assistance and knowledge sharing.

Energise: This refers to putting in zeal to explore new ideas, best practices and
inspiring people to experiment.

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Combine: This refers to the "BIG PICTURE" or the "VISION" part that is taking
a holistic view of all the collaborative processes.

Integrate: This is related to the combining role above and integrates all the
messages in the form of values, performance management policies, etc.

There are many approaches for developing a knowledge management strategy, each
supported by a holistic model of knowledge management processes.

Figure 2.3: Developing a Knowledge Management Strategy

These can be classified into two main approaches:


z

Top-down: The overall strategic direction of the organisation is used to identify


the focus of the knowledge management initiative. This is reflected in a series of
activities designed to meet this broad goal.

Bottom-up: Research is conducted into the activities of staff involved in key


business processes. The findings of this research highlights key staff needs and
issues, which are then tackled through a range of knowledge management
initiatives.

Each of these approaches has its strengths, and in practice, a success knowledge
management programme must encompass both.
A model that focuses strongly on the needs analysis activities with staff is described
here to drive a primarily bottom-up strategy, as follows:
1. Identify the key staff groups within the organisation. These groups deliver the
greatest business value, or are involved in the most important business activities.
2. Conduct comprehensive and holistic needs analysis activities with selected staff
groups, to identify key needs and issues.
3. Supplement this research with input from senior management and organisational
strategy documents, to determine an overall strategic focus.
4. Based on these findings, develop recommendations for addressing the issues and
needs identified.
5. Implement a series of strategic and tactical initiatives, based on the
recommendations. These will select suitable knowledge management techniques
and approaches.
Check Your Progress 2
Fill in the blanks:
1. Knowledge management can be classified into two main approaches
and .
2. Process-oriented management is 'knowledge work' at the
level.

2.6 TRANSFORMATION OF AN ENTERPRISE THROUGH


KNOWLEDGE MANAGEMENT
In todays complex business environment, many organizations are seeking to leverage
their intellectual capital more fully for improved decision making. At the same time,
they need to initiate changes that can quickly enhance performance, strengthen
competitive position and promote long term growth.
Organizations currently face many challenges. For example, they must control costs in
business cycles and project budgets while improving knowledge sharing and
increasing return on investment. Further more, the average organization, according to
some estimates, loses half of its knowledge base every five to 10 years through
employee turnover and retirement.
In addition to experiencing the effects of this knowledge attrition, organizations
typically must cope with geographically and functionally dispersed resources and
information sources due to globalization, mergers and acquisitions. Other challenges
can include:
z

Eliminating information silos while increasing innovation

Accessing the appropriate information to make timely, accurate decisions

Extending business support functions to customers, clients and partners

The benefits of more effective knowledge management can include enhanced


collaboration and greater sharing of best practices as well as streamlined business
processes through automation and self-service. By improving knowledge sharing
capabilities across the enterprise, you can also enable management and other
personnel to focus on key strategic business objectives more efficiently and
effectively.
Check Your Progress 3
Fill in the blanks:
1. Process-oriented management is .. at the corporate level.
2. Knowledge management processes includes four processes; they are
.., .., .. and .. .
3. .. has a tendency to be relatively static in time and linear in
nature.

2.7 LET US SUM UP


Data is a distinct piece of information. Information is a relationship between data and,
quite simply, is what it is, with great dependence on context for its meaning and with
little implication for the future. Knowledge may be defined as actionable information
which has been refined for a specific purpose. Pattern embodies both a consistency
and completeness of relations which, to an extent, creates its own context. Wisdom is
the judicious application of knowledge. Knowledge assets are the knowledge
regarding markets, products, technologies and organisations, that a business owns or
needs to own and which enable its business processes to generate profits, add value,
etc. Knowledge management is not only about managing these knowledge assets but
managing the processes that act upon the assets. These processes include: developing
knowledge; preserving knowledge; using knowledge, and sharing knowledge.
Therefore, Knowledge management involves the identification and analysis of
available and required knowledge assets and knowledge asset related processes, and
the subsequent planning and control of actions to develop both the assets and the
processes so as to fulfill organisational objectives. Many organisations are now

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looking to knowledge management (KM) to address these challenges. Such initiatives


are often started with the development of a knowledge management strategy. To be
successful, a knowledge management strategy must do more than just outline highlevel goals such as 'become a knowledge-enabled organisation'.

2.8 LESSON END ACTIVITY


Why strategy development and actual strategy implementation has always been a
challenge for organizations?

2.9 KEYWORDS
Data: It is a distinct piece of information.
Information: It is a relationship between data and, quite simply, is what it is, with
great dependence on context for its meaning and with little implication for the future.
Knowledge: It may be defined as actionable information which has been refined for a
specific purpose.
Pattern: It embodies both a consistency and completeness of relations which, to an
extent, creates its own context.
Wisdom: It is the judicious application of knowledge.
Knowledge assets: Those are the knowledge regarding markets, products,
technologies and organisations, that a business owns or needs to own and which
enable its business processes to generate profits, add value, etc.
Knowledge management: It is a process which involves the identification and
analysis of available and required knowledge assets and knowledge asset related
processes, and the subsequent planning and control of actions to develop both the
assets and the processes so as to fulfill organisational objectives.
Socialise: It is an effort to bring people together, encourage collaborative behavior,
peer assistance and knowledge sharing.
Energise: It refers to putting in zeal to explore new ideas, best practices and inspiring
people to experiment.
Combine: It refers to the "BIG PICTURE" or the "VISION" part that is taking a
holistic view of all the collaborative processes.
Integrate: It is related to the combining role above and integrates all the messages in
the form of values, performance management policies, etc.

2.10 QUESTIONS FOR DISCUSSION


1. What are the approaches for developing a knowledge management strategy?
2. What do you mean by pattern? Explain it.
3. What is knowledge asset? How is it related to knowledge management?
4. How knowledge management helps to take good decisions?
5. Write short notes on the following topics:
(a) Knowledge workers
(b) Knowledge based environment in an organization

Check Your Progress: Model Answers


CYP 1
1. Information
2. Knowledge
3. Wisdom
CYP 2
1. Top-down, Bottom-up
2. corporate
CYP 3
1. Knowledge work
2. Developing knowledge; preserving knowledge; using knowledge; sharing
knowledge
3. Information

2.11 SUGGESTED READINGS


Harish Chandra Chaudhary, Knowledge Management for Competitive Advantage, Excel Books
Publications, New Delhi.
Deep and Deep, Technology Transfer and Joint Ventures Abroad, R. R. Azad, Publications,
New Delhi.
Thomas, J Kuegler, Web Advertising and Marketing, Jr. 3rd Edition-Prentice-Hall of India,
New Delhi.
Dr. Ravi Kalakota, E-Business Roadmap for Success, Pearson Education.
Ravi Kalakota, Andrew B. Whinston, "Frontiers of Electronic Commerce", Addition-Wesley
2000.

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LESSON

3
KNOWLEDGE MANAGEMENT SYSTEM
IN ORGANISATION
CONTENTS
3.0

Aims and Objectives

3.1

Introduction

3.2

Creating Knowledge Management System in Organisation

3.3

Establishing Knowledge Management through IT

3.4

Organisational Culture for Knowledge Management

3.5

Future of Knowledge Management

3.6

Innovation Centre Cases

3.7

Let us Sum up

3.8

Lesson End Activity

3.9

Keywords

3.10

Questions for Discussion

3.11

Suggested Readings

3.0 AIMS AND OBJECTIVES


After studying this lesson, you should be able to understand:
z

The step by step procedure of knowledge management system creation in an


organization

Role of knowledge management in organisational culture

Future of Knowledge Management

3.1 INTRODUCTION
Managing knowledge means delivering the information and data people need to be
effective on their jobs. Knowledge is different from information in that information
can be measured in pounds per square inch, millions of instructions per second,
terabytes. Knowledge is managing the information to become effective. Information is
meaningless unless it can be organized and retrieved in a timely manner and fashion.
Now, if you are thinking that employees are the vital thrust to any organization, you
are correct. Proving employees with the tools and information in which they can
process information effectively, can only result in a successful organization.
After all, without employees there is no corporation. And without skillful and
informed employees, a company will perish. If the skillful and informed employees
leave the organization without the organization capturing that information, that
knowledge walks out the door.

How long will it take for the organization to recover after the knowledge leaves. A
few weeks, a couple of months, years! Who knows! But what if you had a simple
approach to retain the knowledge that was intertwined into your day-to-day operation.
What if you had a systematic procedure to capture the knowledge of your employees?
How much would you invest to ensure the continued success of your organization?

3.2 CREATING KNOWLEDGE MANAGEMENT SYSTEM


IN ORGANISATION
In organisational or business terms, knowledge may be defined as actionable
information which has been refined for a specific purpose. Leaders, managers, and
subordinate employees of many organizations may possess information that can be
refined for specific business use. By sharing this knowledge it may be possible to
elevate the collective ability of employees within the organization.
Knowledge Management systems are designed to efficiently share this information
with other employees to help them with their work responsibilities. Here we shall
discuss some ways a Knowledge Management system may be developed and
implemented within an organization.
Step 1: Determine the design of the Knowledge Management system. Knowledge
Management systems can take multiple forms. One of the more efficient methods is
an automated system which may be part of an online network. In organizations where
employees frequently use computers this may be an excellent option.
In larger organizations the company may have an intranet, which allows employees to
stay informed on information within the company. This may be an effective location
for building the Knowledge Management system.
Additionally, if employees travel frequently and require access to the organizations
information while on the road, a Virtual Private Network (VPN) may be a viable
option for the location of the Knowledge Management System. Some things to
consider include (but are not limited to) information security issues, proprietary data
security, and specific user access.
An Information Technology (IT) consultant who is well-informed on information
security may be able to assist with determining what type of users should be granted
access and the best type of information security systems for the organizations needs.
Database tool selection and database design may be another consideration. The tools
should not be too complicated for employees to learn. This would hinder the
Knowledge Management efforts.
Another possibility for system design selection is to examine existing software
applications. Microsoft Outlook may be an option for creating a system for sharing
knowledge. This is a system many employees are already familiar with, and it may be
possible to build the system with customized message and information storage folders.
These folders may also contain a search window which would allow employees to
search for specific information.
Step 2: Determine the knowledge to be shared based on organizational goals. After
determining the design of the system, leaders and managers should consider the type
of knowledge that should be placed on the network. The knowledge should be
industry or organization-specific information and should be designed to help
employees do their jobs better.
It may also be designed to allow multiple employees perform the same or similar
work functions. This may result in increased efficiency. Those designing the system
may choose to consider inputting knowledge based on specific departments. By
partitioning the information by departments it may allow for easier access by
employees searching for specific departmental information.

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Step 3: Hire Information Technology consultants or use in-house IT staff to build the
network. Organizations must determine whether it is more cost-effective for them to
build the system themselves or to hire an outside consultant to perform the endeavor.
The organization may lack the appropriate staff to build the database, set up the user
permissions, and maintain the system. If this is the case it may be more effective to
hire a consultant. Requests For Proposals (RFPs) may be distributed to several
vendors to determine the best price and the most qualified company.
Step 4: Train employees how access and to load information into the Knowledge
Management system. Once the Knowledge Management system is developed and
implemented, employees should be trained on how to use the system. Even the most
well-designed system will have limited use if employees are not trained to use the
system properly. This may also be a task the contractor can perform (if one was
hired).
Additionally, leadership and management staff within the organization may consider
explaining the importance of the system and how they feel it will improve the
organization. When senior leadership believes in the system it may help to motivate
employees and increase their desire to use it.
Step 5: Obtain feedback in the form of surveys and/or informal meetings to determine
the effectiveness of the Knowledge Management system. The system should be
helping to improve employee effectiveness, efficiency, and overall productivity. If it
is not accomplishing this, it may need to be adapted. Feedback from those using the
system may be helpful to management staff and may assist them in determining what
to change.
Step 6: Implement changes and make improvement and feedback an iterative process.
Organizations may decide to consider making improvements on the Knowledge
Management system based on feedback provided by users.
If this type of system is not improved over time and adapted to fit the changes in the
organization it may become obsolete. Incremental improvements may help the system
to become better over time and may help keep employees motivated to continue
sharing their knowledge to improve the organization as a whole.
Check Your Progress 1
Fill in the blanks:
1. Knowledge is managing the . to become effective.
2. Full form of VPN is . .

3.3 ESTABLISHING KNOWLEDGE MANAGEMENT


THROUGH IT
The information systems and computers were often perceived as the core substance of
early knowledge management initiatives, early on it was also noted that organizations
had managed their knowledge already for a long time. For example, corporate
information services and libraries had employed people who were professionals in
categorizing, searching, and distributing knowledge. The increasing competitive
pressures had in particular increased the importance of competitive analysis. As a
result, large corporations had set up competitive intelligence units, often closely
associated with company information and library services.
The focus in competitive intelligence was on strategic analysis of external information
related to market trends and competitors. Whereas the information processing experts
often approached organizational knowledge as a technical problem that could be
solved by appropriate use of computers, the problem for competitive intelligence

people was in finding, understanding, synthesizing, and disseminating relevant


information.
At first, this intellectual work was assigned to back-office specialists. Their work was
greatly facilitated in the early 1990s when online access to external databases and
news services became widely available. Suddenly, it was possible to know in real time
everything that competitors and customers were doing, anywhere around the world.
For a while, the dream of perfect information had become true. Soon, however, it was
discovered that perfect information leads to information overload. As a result, systems
that could categorize information based on user needs were actively studied.
Researchers tried to develop domain specific ontologies, thesauri, and conceptual
models that could be used as the basis for categorizing information and organizational
messages. Although the motivation for developing conceptual models and
categorization tools was to improve human information processing instead of
automatic processing, information technology obviously played an important role also
here.
For example, at MIT, Tom Malone and his colleagues developed an information
lens that was supposed to filter and prioritize documents and messages relevant to the
user and argued that a new science of coordination was about to emerge.
Whereas the original focus on competitive intelligence was on top management
strategic decision-making, the expanding computer networks made it obvious that
organizational intelligence exists also outside executive offices and boardrooms.
Indeed, in a rapidly changing competitive environment the most valuable knowledge
was often distributed among the members of the organization. Moreover, top
management often didnt know who had the critical knowledge.
This, again, led to an emphasis of the communicative aspects of organizational
information processing. As a result, the back-office competitive intelligence analysts
started to redefine themselves as business intelligence professionals. Instead of
decision-making based on pre-analyzed reports and data, knowledge sharing became
the central issue for business intelligence people. Instead of information objects,
organizational knowledge was now in information flows.
This observation also highlighted a contrast between two views on organizational
knowledge. According to the mainstream information processing view, knowledge
was data and facts that were independent of people and their interpretations. This
implicit assumption made it natural to think that knowledge can be stored in
computers.
Business intelligence systems, however, started to evolve toward heterogeneous
systems comprised of networked humans and machines. Information objects were
viewed as enablers of organizational knowledge processes. As such, they perhaps
facilitated organizational knowing. The critical question, however, was how the
organizational knowledge flows should be organized so that the organization
remained well informed.
Relevance, a concept that conventionally remained beyond the limits for traditional
information processing, became a key issue for business intelligence professionals.
Technology, however, pushed itself strongly to the center of organizational spotlights,
creating what one might call a temporary backlash in business intelligence. As the
World Wide Web exploded in the public consciousness around 1994, when all
documents would be on the Web and every document would be linked to every other
possible document, the world could become a better place. Knowledge would be free,
and available when needed.

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Business intelligence professionals naturally had some reservations concerning this


idea. They had learned, for example, that sometimes it was useful to keep information
secret. Another lesson was that to be useful, information had to be actionable. Even
the best analysis was of no value if it remained on the analysts shelf or if the
management was not able to do anything with the information it contained.
Relevance was lost, but gradually found again. Indeed, the early enthusiasm with the
Web often quickly disappeared into those mysterious black holes of cyberspace where
time seemed to stop and ancient organizational history still was ongoing reality.
The World Wide Web didnt have any effective means to manage access rights or
content and it didnt have any support for making information actionable. In one sense
it did, however, continue a tradition that had contested the mainstream artificial
intelligence since early 1960s.
Whereas Herbert Simon and the other pioneers of AI believed that the future of
computers was in intelligent processing of information, Douglas Engelbart argued that
computers were a new medium that could augment human though processes.
Engelbarts Augmentation Research Center at Stanford Research Institute became one
of the hot spots of innovation in computer technology, leading development in
interactive computing, graphical user interfaces, and collaboration systems.
The World Wide Web took this augmentation system concept to its ultimate logical
end: it reduced the problem of knowledge representation to minimum by assuming
that all knowledge can be represented as documents and associations between them.
And the software of the World Wide Web didnt have any intelligence whatsoever. It
left all the theoretical and practical problems of thinking and sense making to its users.
In hindsight, one could say that this was a wise choice. After all, although we dont
know what knowing exactly is, humans do it all the time.

3.4 ORGANISATIONAL CULTURE FOR


KNOWLEDGE MANAGEMENT
Effective knowledge management is at the heart of organisational performance and
enables organizations to realise the value of human capital. However, organisational
culture underpins knowledge management by influencing how members learn and
share knowledge. Paradoxically, organizational culture has been identified as the main
impediment to knowledge management and yet very little is known about how
organizational culture contributes to or impedes knowledge management.
There is a lack of theory to elucidate the impact of organisational culture in initiating
and sustaining knowledge creation and transfer in organisations. There is a growing
recognition which underpins the learning organisation philosophy that the
organizational and social context of learning is an important aspect of knowledge
generation and transfer.
Thus, knowledge management is predicated on developing individual participation in
communities of practice. In other words, organizational success is not so reliant on the
static stock of knowledge, but rather on the dynamic social processes through which
knowledge is enhanced and renewed.
Organizations need to develop cultures where their members are encouraged to share
knowledge in order to gain a strategic advantage. Therefore, the impact of
organizational culture in terms of knowledge management requires further research.
The development of an integrated model of organizational culture and knowledge
management should facilitate organizational learning and lead to the improvement of
knowledge management practices.

Organisational culture has been characterized as the glue that holds organizations
together and isnt just one aspect of the game - it is the game. Culture can support
linkages between technology adoption and organizational growth, it can be a critical
success factor in manufacturing strategy and play a crucial role in determining the
success or failure of mergers and acquisitions.
On a more micro level, researchers have found significant relationships between the
fit of employees and the prevailing organizational culture and a number of
important outcomes such as job commitment and turnover.
As we would expect, organizational culture has also been found to play a significant
role in a number of IT management processes. These can include technology driven
change, E-business initiatives, groupware development and deployment, new
technology and adoption, computer-based monitoring, and management of new
systems development.
But many unanswered questions remain regarding the meaning and content of
organizational culture, the methods by which it should be measured and more
fundamentally, the feasibility of cultural management and change, especially when
attempting to operationalise specific organisational goals.
While debates around these issues continue, culture has been accepted as a "fact of
organizational life" by managers and has become an integral aspect of many
organizational development programs. Previous work on organizational cultures has
focused on descriptors of culture, and frequently resulted in dimensions of culture, or
a typology of culture.
Certain types of organizational cultures, or certain styles of cultures have been
associated with either positive or negative outcomes for both the effectiveness of the
organization and for individual employees within the organization. Positive outcomes
for individuals might include motivation and satisfaction while negative outcomes for
individuals might include job insecurity and stress.

Figure 3.1: The Competing Values Framework: Organizational Culture


(Adapted from Quinn 1988)

Figure 3.1 provides a conceptual representation of organizational culture according to


the Competing Values Framework. Each quadrant is labeled according to its most
notable characteristics. The upper left quadrant, referred to as the human relations
perspective, is characterized by flexibility and an internal focus. The emphasis is on
information sharing and participative decision-making. Members are part of a

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common social system or clan and are bonded together through the development of a
sense of affiliation and belonging.
The upper right quadrant, referred to as the open systems perspective, is characterized
by flexibility and an external focus. These adaptive adhocracies emphasize
innovation, creativity, adaptation, growth, external support, and resource acquisition.
Members are bonded together through being inspired and challenged.
The lower right quadrant, referred to as the rational goal perspective, is characterized
by predictability and an external focus. These market type organizations value
competitiveness, productivity, goal clarity, efficiency, and accomplishment. Members
are bonded together through goal orientation and competition.
The lower left quadrant, referred to as the internal process perspective or hierarchy
culture, is characterized by predictability and an internal focus. The emphasis is on
information management, documentation, stability, routinisation, centralisation,
continuity, and control.
In a hierarchy culture, members are bonded together through internal controls that
maintain rules, policies and procedures. Organizations are seldom characterised by a
single cultural type. Organizations tend to develop a dominant organizational culture
over time as the organization adapts and responds to the challenges and changes in the
environment.
Organizations with all four quadrants represented are considered to be balanced and
perform well. Leaders in these organizations are able to balance conflicting demands,
suggesting that high performance requires the simultaneous mastery of seemingly
contradictory or paradoxical capabilities.
In contrast, cultures considered imbalanced tend to emphasize values associated with
rational goals (market) and internal process (hierarchy) cultures at the expense of
values that characterize other cultures. This results in less effective organizational
performance.

3.5 FUTURE OF KNOWLEDGE MANAGEMENT


In the much wanted "hype cycle" of business trends and fads, knowledge management
has already plumbed the depths of disillusionment. However, as it edges towards
maturity as a business discipline, it is spawning successors that are more relevant to
our times, and that offer more direct business traction.
The original premise of knowledge management was that if the most valuable
resource of organisations is knowledge, then it should be leveraged and made more
productive. This absolutely still holds.
However, the hype around knowledge management over the years has made what was
always an amorphous and slippery concept even harder to grapple with and convert to
business results. Today, managers need more focused frames, first to think about these
issues, and then to take pointed action.
The rapid evolution of our intensely connected global economy means developing
knowledge capabilities is a business imperative. The pioneers of knowledge
management developed valuable tools and approaches. What they learned is now
being applied in a range of emerging business disciplines.
There are five key frames for leveraging knowledge in organisations that are emerging
as the successors to knowledge management, and that executives find relevant,
compelling, and actionable.
Social Networks: Traditional organisational charts and business process maps tell you
very little about how work is actually performed in an organisation. The reality is that

work and knowledge flow in often highly informal patterns, based on who people
actually communicate with in doing their work.
Social network analysis is being applied by many leading companies around the world
to gain insights into this "invisible organisation," and to design interventions that
enhance the productivity and effectiveness of knowledge work.
Collaboration: In an economy based on highly specialised knowledge, collaboration
is essential. Many of the approaches pioneered in knowledge management, such as
communities of practice, are extremely relevant and useful. However what is critical
now is a focus on fostering collaboration between individuals, teams, divisions, and
organisations.
Collaboration tools such as video conferencing and web conferencing are becoming
standard. Now companies are working as a top priority on developing the skills and
culture that enable high-value collaboration. However implementing a whole new set
of businesses processes is also required to unlock the full potential of collaboration.
Relevance: In a world of massive information overload, we want to see only
information that is highly relevant to our work and interests. Among the many
evolving technologies that support this, there are two key practices that will be central
to enhancing information relevance.
Implicit profiling learns from what we search for and look at, when, and for how long,
to improve over time at understanding what we find useful. Collaborative filtering
allows us to draw on the insights and discoveries of people who have similar profiles
and interests to us. Amazon.com uses similar approaches in a basic form to point us to
books and CDs we might like. The future lies in finding relevance for individuals
from vast oceans of information.
Workflow: Knowledge work literally flows through an organisation. The next decade
will see companies shifting their business processes to platforms that enable smooth
and efficient workflow. Once this shift is made, you can reconfigure at will how work
is done, and even allow clients and suppliers to participate in your processes, creating
powerful lock-in.
The emerging discipline of "workflow learning" integrates access to every type of
learning-whether it is information, E-learning modules, or human experts-into the
everyday flow of work, so these are available as and when they are needed.
Knowledge-based relationships: In our global hyper-connected economy, the drive to
commoditisation is relentless. What this means is that an increasing proportion of
business value resides in trusting, knowledge-based relationships, that allow
companies to create value with clients, suppliers, and alliance partners in ways they
could not do otherwise.
Organisations are realising that outsourcing and off-shoring only work if there are
effective flows of knowledge between companies. Professional firms are finding not
only that clients are increasingly demanding knowledge transfer, but also that
engaging in knowledge-based relationships increases customer loyalty and
profitability. Relationships are the future of society and business, and rich knowledge
exchange will be at their heart.

3.6 INNOVATION CENTRE CASES


When executives and experts from India look at their industry's recent past, they see
major improvements in manufacturing capabilities, a growing market with great
potential, and a very positive industry/government vision for the industry's future. But
they also see a number of challenges, including the need for a better transportation
infrastructure, improved product quality, more skilled workers, changes in labor and

33
Knowledge Management System
in Organisation

34
Technology Innovation
and Sustainable Enterprise

tax regulations, and the need to increase the scale of their companies in order to meet
the demands of the global industry.
z

Case 1: Computer Sciences Corporation (a leading global information


technology) in India has established a strategic innovation centre in India to
enhance its commitment to innovation and the key role it plays in serving CSCs
global customers. Their mission is to provide customers in industry and
government with solutions crafted to meet their specific challenges and enable
them to profit from the advanced use of technology.

Case 2: Lenovo has launched its innovation centre in India. The centre will enable
large enterprises and SMBs that are customers of Lenovo as well as its business
partners, solution providers and independent software vendors to collaborate on
the development of personal computing solutions.

Case 3: IBM has expanded its IBM Innovation Center in Bangalore in response
what it sees as a growing demand for IT resources by the burgeoning technology
community in India. The center is intended to assist smaller players in the tech
world, from start-up companies and software developers to IT professionals and
academics, in growing their IT skills, creating new software and hardware
applications and services, and introducing their innovations to the global
marketplace. It also provides IBM with an early chance to become partnered with
these potential innovators. The center is equipped with labs and infrastructure for
working with technologies such as RFID, Pervasive and SOA. IBMs business
partners will also be able to test, develop and demonstrate Software as a Service
business models and even conduct proof of concepts. The center also features
remote access capability and technical support from IBM.

Case 4: GE also has its Innovation Center in India, where they create world-class
products and solutions for their global business. They work on global programs in
areas of expertise such as - Mechanisms, contacts, thermal; Machine design &
analysis; custom engineering; Electronic Test Automation; Human Machine
Interface design; UPS Systems; Electronics design; New product introductions.
Check Your Progress 2
1. Information is meaningless unless it can be organized and retrieved in a
manner and fashion.
2. Effective is at the heart of organizational performance and
enables organizations to realise the value of human capital.
3. Implement changes and
process.

make

improvement

and

feedback

an

3.7 LET US SUM UP


Managing knowledge means delivering the information and data people need to be
effective on their jobs. Knowledge is managing the information to become effective.
In organizational or business terms, knowledge may be defined as actionable
information which has been refined for a specific purpose. Leaders, managers, and
subordinate employees of many organizations may possess information that can be
refined for specific business use. Knowledge Management systems are designed to
efficiently share this information with other employees to help them with their work
responsibilities. The information systems and computers were often perceived as the
core substance of early knowledge management initiatives, early on it was also noted
that organizations had managed their knowledge already for a long time. For example,
corporate information services and libraries had employed people who were
professionals in categorizing, searching, and distributing knowledge. Whereas the
information processing experts often approached organizational knowledge as a

technical problem that could be solved by appropriate use of computers, the problem
for competitive intelligence people was in finding, understanding, synthesizing, and
disseminating relevant information. Soon, however, it was discovered that perfect
information leads to information overload. As a result, systems that could categorize
information based on user needs were actively studied. Effective knowledge
management is at the heart of organizational performance and enables organizations to
realise the value of human capital. However, organizational culture underpins
knowledge management by influencing how members learn and share knowledge.
Paradoxically, organizational culture has been identified as the main impediment to
knowledge management and yet very little is known about how organizational culture
contributes to or impedes knowledge management. Organizations need to develop
cultures where their members are encouraged to share knowledge in order to gain a
strategic advantage. Therefore, the impact of organizational culture in terms of
knowledge management requires further research.

3.8 LESSON END ACTIVITY


Write an essay on organizational culture.

3.9 KEYWORDS
Knowledge: It may be defined as actionable information which has been refined for a
specific purpose.
Managing knowledge: It means delivering the information and data people need to be
effective on their jobs.

3.10 QUESTIONS FOR DISCUSSION


1. Why skillful and informed employees are required?
2. Why business intelligence systems can be called as heterogeneous systems?
3. How organizational culture underpins knowledge management?
4. Describe the role of IT in knowledge management.
5. Discuss the future of knowledge management.

Check Your Progress: Model Answers


CYP 1
1. Information
2. Virtual Private Network
CYP 2
1. Timely
2. Knowledge Management
3. Iterative

3.11 SUGGESTED READINGS


Harish Chandra Chaudhary, Knowledge Management for Competitive Advantage, Excel Books
Publications, New Delhi.
Deep and Deep, Technology Transfer and Joint Ventures Abroad, R. R. Azad, Publications,
New Delhi.

35
Knowledge Management System
in Organisation

36
Technology Innovation
and Sustainable Enterprise

Thomas, J Kuegler, Web Advertising and Marketing, Jr. 3rd Edition-Prentice-Hall of India,
New Delhi.
Dr. Ravi Kalakota, E-Business Roadmap for Success, Pearson Education.
Ravi Kalakota, Andrew B. Whinston, "Frontiers of Electronic Commerce", Addition-Wesley
2000.

37
Technology in Business

UNIT II

38
Technology Innovation
and Sustainable Enterprise

39
Technology in Business

LESSON

4
TECHNOLOGY IN BUSINESS
CONTENTS
4.0

Aims and Objectives

4.1

Introduction

4.2

Technology in Business

4.3

Technology Transfer

4.4

Joint Venture
4.4.1

What is a Joint Venture?

4.4.2

Reasons for Forming a Joint Venture

4.4.3

How does a Joint Venture Work?

4.4.4

Benefits and Risks of Joint Venture

4.5

Policy, Procedure and Practices

4.6

Know-How

4.7

Let us Sum up

4.8

Lesson End Activity

4.9

Keywords

4.10

Questions for Discussion

4.11

Suggested Readings

4.0 AIMS AND OBJECTIVES


After studying this lesson, you should be able to understand:
z

Importance and impact of the technology in business arena

Idea about technology transfer

Overview of joint ventures

Role of policy, procedure and practices in business

4.1 INTRODUCTION
During the last quarter of this century Information Technology (IT) has transformed
the way of human life as no other technology has. IT has potential of converting our
society into a truly knowledge based society. IT also gives us a chance in ensuring
that such an evolution leads to an equitable society. Now, there is no area of human
life, which is not affected by information technology in one way or the other. To
ensure that people reap the benefits of this epoch making development, it is
imperative that the technology should be commercialized.
Globalisation-driven by science and technology discoveries and innovation-has been
an inevitable and irreversible trend of civilization. Some argue that globalization is a

40
Technology Innovation
and Sustainable Enterprise

double-edged sword is that along with perceived benefits it erodes local culture and
tradition. All countries need to evaluate the pros and cons of these processes while
working toward their own balanced strategy to meet unavoidable challenges.
In this lesson the importance and impact of technology in business will be discussed.

4.2 TECHNOLOGY IN BUSINESS


Today, technology plays a fundamentally different role in business. It drives more
than 90 percent of all business processes, such as booking an order, selling an airline
ticket or closing the books at the end of the month.
Its this integration of business and technology that provides the opportunity for
technology organizations to drive business for the company.
Technology provides the tools for business to increase its productivity and
profitability.
Key applications include:
z

Using technology to reduce wastage and resources consumption in the business


process;

Through use of computers, monitor the business performance to ensure changes


to the process are carried out in a timely fashion;

Using the internet to access information to ensure the most appropriate decisions
are made.

Technology and globalization go hand-in-hand. Globalization unleashes technology,


which in turn drives companies to plan production and sales on a global basis.
Technology changes the work we do and the jobs created by it demand more
education and training. It also changes the way business operates by transforming
relationships between suppliers, producers, retailers and customers.
One aspect of globalization that tends to be most apparent in almost every facet of life
is the emergence of technology - particularly the way in which technology is globally
integrating people of the world. The advent of the Internet has over the past decade
provided a common platform upon which countries from all corners of the Earth are
able to communicate and share information.
In the space of thirty years technology has caused widespread improvements in access
to information and economic potential.
If you consider that just twenty five years ago the use of personal computers was still
limited to a fairly small number of technologically advanced people while the
majority of people produced documents with typewriters.
Twenty years ago, large and hefty mobile phones were carried only by a small number
of users and some fifteen years ago only limited universities and scientists were using,
or had even heard about, the Internet.
Today however computers, mobile technology and the Internet have transformed
communication and commerce, creating entirely new ways for retailers and their
customers to transact and for businesses to manage the flow of production and market
their products.
Websites, chat rooms, instant messaging systems, email, forums and other Internetbased communication systems have made it much easier for people with common
interests to find each other, exchange information, and collaborate which was almost
unheard of until the Information Age.
Technology facilitates the expansion of products, ideas, and resources among
countries as well as people regardless of geographic location. Technology can be

leveraged to create efficient and effective channels to exchange information and can
be the catalyst for global integration.
The single greatest benefit of technology is its ability to multiply effort. This
multiplier of technology turns the effort of one person into many.
Any business can leverage technology to work:
z

Faster

Productively

Predictably

Safer

Efficiently

With the advances in technology any business can now do more with less.
Technology innovations have created new jobs, promoted the growth of new markets,
and increased international trade and investment but one of the biggest technology
challenges we need to address, which makes us unique to first-world countries, is the
major divide between mobile and Internet users.
What is evidenced today is that only a small minority access the Internet while the
majority of the population uses their mobile phones for various tasks yet there is little
to bridge the two users together.
The greatest opportunity that exists in our global emergence is the ability to
understand how to use all this technology to our advantage, bridge the gap between
mobile and Internet users, and in turn solve the various communication and
technology problems that we are faced with as a developing country.

4.3 TECHNOLOGY TRANSFER


Technology transfer has been a subject of considerable interest to many groups, such
as government policymakers, international funding agencies, and business executives,
because of the close relationship between technology transfer and economic growth. It
has aroused the interest of academic researchers. Despite all this attention, however,
the concept and mechanism of technology transfer remains vague, controversial, and
inadequately operationalised.
Technology transfer is a crucial and dynamic factor in social and economic
development. Technology has been transferred intentionally or unintentionally.
Sometimes, a generator of technology has acquired a competitive advantage by
undertaking the dissemination of products, processes and maintenance systems.
Sometimes, a recipient (or transferee) has done much better than the original
innovator. For example, it was the Chinese who invented gunpowder, but the
Europeans who used it and developed it for world conquest. Sometimes the
technology has taken a new form at each transfer, absorbing local traditions of design
or local market preferences and there is value added during the process of technology
transfer.
The two words technology transfer seem to convey different meanings to different
people and different organisations. Technology transfer is defined in the Work
Regulations of the United Nations, as the transfer of systematic knowledge for the
manufacture of a product or provision of service. It has been defined in many other
ways. According to Abbott, (1985), it is the movement of science and technology
from one group to another, such movement involving their use.

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and Sustainable Enterprise

Traditionally, technology transfer was conceptualised as the transfer of hardware


objects, but today also often involves information (e.g., a computer software program
or a new idea) that may be completely devoid of any hardware aspects.
Commercializing firms may use technology transfer as a vehicle to connect their
research and development efforts to marketing, manufacturing, and management
expertise. Partnering organizations can include laboratories, universities, government,
or private companies. Technology transfer may help firms access pre-established
infrastructures and distribution channels. The following diagram illustrates the key
elements of the technology transfer process.

Figure 4.1: Key Elements of the Technology Transfer Process

Technology transfer is the practice of transferring scientific findings from one


organization to another for further development so that new products such as
medicines, educational tools, electronic devices, safety equipment and health services
can become available to the public.
Because bringing products based on academic research to the marketplace can require
significant investment and the core mission of academic institutions is to provide
high-level education, not engage in business development many institutions around
the world rely on academic technology transfer to identify commercial partners who
can advance early-stage academic research and guide the resulting products through
any required review or approval processes.
As the transition from manufacturing-based to knowledge-based economies continues,
the importance of academic intellectual property will grow. And the role of academic
technology transfer in improving quality of life, building social and economic wellbeing, and enhancing research programs at academic and nonprofit institutions will
become increasingly meaningful.
Technology transfer is the process of transferring scientific findings from one
organization to another for the purpose of further development and commercialization.
The process typically includes:
z

Identifying new technologies

Protecting technologies through patents and copyrights

Forming development and commercialization strategies such as marketing and


licensing to existing private sector companies or creating new start-up companies
based on the technology

Academic and research institutions engage in technology transfer for a variety of


reasons, such as:
z

Recognition for discoveries made at the institution

Compliance with federal regulations

Attraction and retention of talented faculty

Local economic development

Attraction of corporate research support

Licensing revenue to support further research and education.

The priority that is given to each of these factors varies from institution to institution.
The ultimate benefits of technology transfer, however, are the public benefits derived
from the products that reach the market and the jobs that result from the development
and sale of products.

Figure 4.2: Technology Transfer Methods

The patenting by academic institutions of discoveries resulting from research is a


protection of the investment made in research and ensures that these discoveries have
the opportunity to reach the stream of commerce. Investments in intellectual property
are returned to the public through products that benefit the public, increased
employment, and state and federal taxes. These activities can be pursued without
disrupting the core values of publication and sharing of information, research results,
materials and know-how.
As the transition from a manufacturing-based economy to a knowledge-based
economy continues, the role of university intellectual property will play an
increasingly important part. Many states are developing programs to enhance
economic development through technology transfer from local research universities.
As academic institutions become focal points for economic development, this will
undoubtedly lead to more complicated relationships, interactions and expectations.
Many companies, universities and governmental organizations now have an "Office of
Technology Transfer" (also known as "Tech Transfer" or "TechXfer") dedicated to
identifying research which has potential commercial interest and strategies for how to
exploit it.
For instance, a research result may be of scientific and commercial interest, but
patents are normally only issued for practical processes, and so someone - not
necessarily the researchers - must come up with a specific practical process. Another
consideration is commercial value; for example, while there are many ways to
accomplish nuclear fusion, the ones of commercial value are those that generate more
energy than they require to operate.
The process to commercially exploit research varies widely. It can involve licensing
agreements or setting up joint ventures and partnerships to share both the risks and
rewards of bringing new technologies to market.
Other corporate vehicles, e.g. spin-outs, are used where the host organization does not
have the necessary will, resources or skills to develop a new technology. Often these

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Technology in Business

44
Technology Innovation
and Sustainable Enterprise

approaches are associated with raising of venture capital (VC) as a means of funding
the development process, a practice more common in the US than in the EU, which
has a more conservative approach to VC funding.
In recent years, there has been a marked increase in technology transfer intermediaries
specialized in their field. They work on behalf of research institutions, governments
and even large multinationals. Where start-ups and spin-outs are the clients,
commercial fees are sometimes waived in lieu of an equity stake in the business.
As a result of the potential complexity of the technology transfer process, technology
transfer organizations are often multidisciplinary, including economists, engineers,
lawyers, marketers and scientists. The dynamics of the technology transfer process has
attracted attention in its own right, and there are several dedicated societies and
journals.
Check Your Progress 1
Fill in the blanks:
1. The single greatest benefit of technology is its ability to .
effort.
2. Technology transfer is a crucial and dynamic factor in social and
economic . .
3. Office of Technology Transfer is also known as . .

4.4 JOINT VENTURE


A joint venture involves two or more businesses pooling their resources and expertise
to achieve a particular goal. The risks and rewards of the enterprise are also shared.
The reasons behind forming a joint venture include business expansion, development
of new products or moving into new markets, particularly overseas. Entering into a
joint venture is a major decision.
Your business may have strong potential for growth and you may have innovative
ideas and products. However, a joint venture could give you:
z

More resources

Greater capacity

Increased technical expertise

Access to established markets and distribution channels

4.4.1 What is a Joint Venture?


A joint venture is a strategic alliance where two or more parties, usually businesses,
form a partnership to share markets, intellectual property, assets, knowledge, and, of
course, profits.
A joint venture differs from a merger in the sense that there is no transfer of
ownership in the deal.
This partnership can happen between goliaths in an industry. Cingular, for instance, is
a strategic alliance between SBS and Bellsouth. It can also occur between two small
businesses that believe partnering will help them successfully fight their bigger
competitors.
Companies with identical products and services can also join forces to penetrate
markets they wouldn't or couldn't consider without investing tremendous resources.
Furthermore, due to local regulations, some markets can only be penetrated via joint
venturing with a local business.

In some cases, a large company can decide to form a joint venture with a smaller
business in order to quickly acquire critical intellectual property, technology, or
resources otherwise hard to obtain, even with plenty of cash at their disposal.

4.4.2 Reasons for Forming a Joint Venture


Internal Reasons
z

Build on company's strengths

Spreading costs and risks

Improving access to financial resources

Economies of scale and advantages of size

Access to new technologies and customers

Access to innovative managerial practices

Competitive Goals
z

Influencing structural evolution of the industry

Pre-empting competition

Defensive response to blurring industry boundaries

Creation of stronger competitive units

Speed to market

Improved agility

Strategic Goals
z

Synergies

Transfer of technology/skills

Diversification

4.4.3 How does a Joint Venture Work?


The process of partnering is a well-known, time-tested principle. The critical aspect of
a joint venture does not lie in the process itself but in its execution. We all know what
needs to be done: specifically, it is necessary to join forces. However, it is easy to
overlook the "hows" and "whats" in the excitement of the moment.
We will look at the "hows" in our review of the Eight Critical Factors of Success. For
the moment, let's keep in mind that all mergers, large or small, need to be planned in
detail and executed following a strict plan in order to keep all the chances of success
on your side.
The "whats" should be covered in a legal agreement that will carefully list which party
brings which assets (tangible and intangible) to the joint venture, as well as the
objective of this strategic alliance. Although joint venture legal agreement templates
can readily be found on the internet. It is better to collect the appropriate legal advice
when entering such a business relationship.

4.4.4 Benefits and Risks of Joint Venture


Instead of merging, some firms have tried to bolster their business clout through joint
ventures with competitors. Because these arrangements eliminate competition in the
product areas in which companies agree to cooperate, they can pose the same threat to
market disciplines that monopolies do. But federal antitrust agencies have given their
blessings to some joint ventures they believe will yield benefits.

45
Technology in Business

46
Technology Innovation
and Sustainable Enterprise

Businesses of any size can use joint ventures to strengthen long-term relationships or
to collaborate on short-term projects.
A successful joint venture can offer:
z

Access to new markets and distribution networks

Increased capacity

Sharing of risks and costs with a partner

Access to greater resources, including specialised staff, technology and finance

A joint venture can also be very flexible. For example, a joint venture can have a
limited life span and only cover part of what you do, thus limiting the commitment for
both parties and the business' exposure.
Joint ventures are especially popular with businesses in the transport and travel
industries that operate in different countries.
Partnering with another business can be complex. It takes time and effort to build the
right relationship. Problems are likely to arise if:
z

The objectives of the venture are not 100 per cent clear and communicated to
everyone involved

The partners have different objectives for the joint venture

There is an imbalance in levels of expertise, investment or assets brought into the


venture by the different partners

Different cultures and management styles result in poor integration and


co-operation

The partners don't provide sufficient leadership and support in the early stages.

Success in a joint venture depends on thorough research and analysis of aims and
objectives. This should be followed up with effective communication of the business
plan to everyone involved.

4.5 POLICY, PROCEDURE AND PRACTICES


Small companies and large corporations often have more in common than most people
realize. Whether it's a mom-and-pop shop that loses a key employee or a huge
company coping with frequent turnover, both could benefit from standardized policy
and procedure.
Whether the policies and procedures are outlined in a manual stored on a bookshelf or
are part of an interactive database on an intranet or website, every company can-and
should-embrace the concept of standardizing their policies and procedures.
Having a standardized policy and procedure road map not only increases productivity
but allows for alignment of a company's vision. The strategy is in some ways similar
to employing manufacturing techniques: It helps create a manageable and continuous
flow of work.
The primary purpose of standardized policy and procedure is twofold: It should
support the company strategy, and it should deliver on the department's mission and
vision.
A successful strategy combines tactical knowledge with strong leadership and the
solid implementation of policy. Creating a strong tie between strategy and everyday
policies and procedures develops the internal support your company needs to becomeand remain-successful.
Of course this is true provided employees can see the alignment between the strategy
and policy and procedure. If the tie to strategy and policy and procedure is not so
clear, more times than not it points toward poorly written or, worse, lack of robust
policy and procedure.

As the mission and vision cascade from company leaders through divisions and
departments, the alignment between the two must become stronger. Examine the
policy and procedure within the departments, and seek out the alignment.

4.6 KNOW-HOW
Context of industrial property, now generally viewed as Intellectual Property (IP),
know-how (or knowhow as it is sometimes written) is a component in the transfer of
technology in national and international environments, co-existing with or separate
from other IP rights such as patents, trademarks and copyright and is an economic
asset.
Know-how can be defined as confidentially held, or better, 'closely-held' information
in the form of unpatented inventions, formulae, designs, drawings, procedures and
methods, together with accumulated skills and experience in the hands of a licensor
firm's professional personnel which could assist a transferee/licensee of the object
product in its manufacture and use and bring to it a competitive advantage. It can be
further supported with privately-maintained expert knowledge on the operation,
maintenance, use/application of the object product and of its sale, usage or disposition.
The inherent proprietary value of know-how lies embedded in the legal protection
afforded to trade secrets in general law, particularly, 'case law'. Know-how, in short, is
"private intellectual property". The 'trade secret law' varies from country to country,
unlike the case for patents, trademarks and copyright where there are formal
'conventions' through which subscribing countries grant the same protection to the
'property' as the others; examples of which are the Paris Convention for the Protection
of Industrial Property and the World Intellectual Property Organization (WIPO),
under United Nations, a supportive organization designed "to encourage creative
activity, [and] to promote the protection of intellectual property throughout the
world".
Know-how shall mean technical data, formulae, standards, technical information,
specifications, processes, methods, code books, raw materials, as well as all
information, knowledge, assistance, trade practices and secrets, and improvements
thereto, divulged, disclosed, or in any way communicated to the Licensee under this
Agreement, unless such information was, at the time of disclosure, or thereafter
becomes part of the general knowledge or literature which is generally available for
public use from other lawful sources. The burden of proving that any information
disclosed hereunder is not confidential information shall rest on the licensee.
Check Your Progress 2
1. What is the main difference between joint venture and merger?
...
...
2. What is the primary purpose of standardized policy and procedure?
...
...
3. Write the use of technology in business in one sentence.
...
...

4.7 LET US SUM UP


Today, technology plays a fundamentally different role in business. Technology
provides the tools for business to increase its productivity and profitability.
Technology and globalization go hand-in-hand. Technology transfer is a crucial and

47
Technology in Business

48
Technology Innovation
and Sustainable Enterprise

dynamic factor in social and economic development. Technology has been transferred
intentionally or unintentionally. Sometimes the technology has taken a new form at
each transfer, absorbing local traditions of design or local market preferences and
there is value added during the process of technology transfer. Commercializing firms
may use technology transfer as a vehicle to connect their research and development
efforts to marketing, manufacturing, and management expertise. A joint venture is a
strategic alliance where two or more parties, usually businesses, form a partnership to
share markets, intellectual property, assets, knowledge, and, of course, profits.
Furthermore, due to local regulations, some markets can only be penetrated via joint
venturing with a local business. A joint venture can also be very flexible. Joint
ventures are especially popular with businesses in the transport and travel industries
that operate in different countries.

4.8 LESSON END ACTIVITY


Describe the process of technology transfer.

4.9 KEYWORDS
Technology Transfer: It is the practice of transferring scientific findings from one
organization to another for further development so that new products such as
medicines, educational tools, electronic devices, safety equipment and health services
can become available to the public.
Joint Venture: It is a strategic alliance where two or more parties, usually businesses,
form a partnership to share markets, intellectual property, assets, knowledge, and, of
course, profits.

4.10 QUESTIONS FOR DISCUSSION


1.
2.
3.
4.
5.

What do you mean by technology transfer? Explain it.


What are the benefits of technology in business world?
What is joint venture?
Why joint venture is important?
Discuss the benefits and risks of the joint venture.

Check Your Progress: Model Answers


CYP 1
1. multiply
2. development
3. TechXfer
CYP 2
1. A joint venture differs from a merger in the sense that there is no transfer
of ownership in the deal.
2. The primary purpose of standardized policy and procedure is twofold: It
should support the company strategy, and it should deliver on the
department's mission and vision.
3. Technology provides the tools for business to increase its productivity and
profitability.

4.11 SUGGESTED READINGS


Harish Chandra Chaudhary, Knowledge Management for Competitive Advantage, Excel Books
Publications, New Delhi.

Deep and Deep, Technology Transfer and Joint Ventures Abroad, R. R. Azad, Publications,
New Delhi.
Thomas, J Kuegler, Web Advertising and Marketing, Jr. 3rd Edition-Prentice-Hall of India,
New Delhi.
Dr. Ravi Kalakota, E-Business Roadmap for Success, Pearson Education.
Ravi Kalakota, Andrew B. Whinston, "Frontiers of Electronic Commerce", Addition-Wesley
2000.

49
Technology in Business

50
Technology Innovation
and Sustainable Enterprise

LESSON

5
TECHNOLOGY IN INDIAN BUSINESS
CONTENTS
5.0 Aims and Objectives
5.1 Introduction
5.2 India's Technology Base and Capabilities
5.3 Preference of Indian Technology
5.4 Major Constraints and Problems
5.5 Operational Constraints
5.6 Problems in Indian Business Environment
5.7 Problems in Finalization of Agreement
5.8 Innovation in Small, Medium and Large Enterprises
5.9 Let us Sum up
5.10 Lesson End Activity
5.11 Keywords
5.12 Questions for Discussion
5.13 Suggested Readings

5.0 AIMS AND OBJECTIVES


After studying this lesson, you should be able to understand:
z

Concept of India's technology base and capabilities

Preference of Indian technology

Major constraints and problems faced by Indian business

Operational constraints of Indian business

Problems in Indian business environment

Problems in finalization of agreement

5.1 INTRODUCTION
The tradition of Science and Technology (S&T) in India is over 5,000 years old. A
renaissance was witnessed in the first half of the 20th century. The S&T infrastructure
has grown up from about Rs. 10 million at the time of independence in 1947 to Rs. 30
billion. Significant achievements have been made in the areas of nuclear and space
science, electronics and defence. The government is committed to making S&T an
integral part of the socio-economic development of the country.
India has the third largest scientific and technical manpower in the world; 162
universities award 4,000 doctorates and 35,000 postgraduate degrees and the Council
of Scientific and Industrial Research runs 40 research laboratories that have made

some significant achievements. In the field of Missile Launch Technology, India is


among the top five nations of the world.
Science and technology, however, is used as an effective instrument for growth and
change. It is being brought into the mainstream of economic planning in the sectors of
agriculture, industry and services. The country's resources are used to derive the
maximum output for the benefit of society and improvement in the quality of life.

5.2 INDIA'S TECHNOLOGY BASE AND CAPABILITIES


The last five to six years have been, in many ways, testing times for the Indian
industry. Thanks to the sudden exposure to global markets and competition, they are
going through a metamorphosis. In the same period, even domestic competition has
grown significantly.
Although some of these philosophies are conflicting to each other (e.g., BPR and
TQM), there is a big confusion in the industry about similarities and dissimilarities
among them. This confusion is even higher, if use of management tools are
complementary to each other. Two such major complementary management tools
currently being talked about by one and all are BPR and ERP.
Table 5.1: Capability of BPR and ERP Towards the Customer
S.No.

Customer Expectations

Benefits From BPR

Benefit From ERP

Quality/Reliability

Explicitly

Implicitly

Cost

Explicitly

Implicitly

Delivery Time

Explicitly

Explicitly

Flexibility (customisation, delivery)

Implicitly

Explicitly

After Sales Service

Implicitly

Explicitly

When properly scaled, attention to a business process can pay rich rewards; however,
the company has to be aware of the implications prior to defining a project. When the
scale of the effort is too small, little can be accomplished beyond incremental
improvements.
The term reengineering was originally applied to such sweeping changes as a new
sales and delivery mechanism that increased sales by 60%, reducing the cycle time to
process an order from 10 days to 10 minutes; or a new manufacturing facility that
delivered 10% more products in 25% of the space using 50% of traditional employees.
Hammer and Champy, in Reengineering the Corporation, describe it as fundamental,
radical, dramatic business process change. Davenport used the term innovation, to
distinguish it from incremental improvements.
Symmetrix, one of the pioneers in business process redesign, believes strongly in
reinventing only the critical business process. To make this 80/20 cut, it focuses on a
deep understanding of the economic implications to the proposed changes. By doing
so, it concentrates its efforts on the changes that will substantially improve the
business.
The word reengineering today often implies changes from the most mundane to the
most significant. The term commonly used is BPR (business process redesign).
Not all companies wish to make massive changes to their business processes. The
changes companies require are on a continuum from streamlining to reinvention
(Figure 5.1). Streamlining a business process implies making incremental changes to
the current process to increase quality, decrease cycle time or reduce cost.
Reinventing a business process means scrapping the current one and creating a
process that truly meets the needs of the company. This usually requires a fresh look
at the purpose of the business and the core competencies needed to serve that purpose.

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Projects are often identified at points along this continuum. While some companies
engage in massive full-scale reengineering, many are content to solve major business
problems that plague them today while setting the stage for future efforts. Thus, many
reengineering efforts, especially those that are combined with the implementation of
ERP, are grouped somewhere in the middle of the streamline-to-reinvent continuum.
As such, the effort may be a combination of solving old problems and creative
redesign of selected processes.
Streamline

Reinvent

Magnitude of change

Figure 5.1: Change ContinuumStreamline to Reinvent

Many companies identify changes that are meant to streamline their business
processes and find that to implement change successfully, the project team will need
to reinvent the corporate approach and that change will have major implications for
individuals, jobs and structures. One organisation made up of several divisions
decided to centralise its accounts.
On the face of it, management reasoned, centralisation was not a change in the way
the process operated, only a change in location. When the business owners considered
the change, they realised its value, but identified numerous changes they would have
to make in their operations to extract accounts payable. The organisational impact of
the change pushed it in the direction of reinvention on this continuum.
ERP is well suited to efforts anywhere on this continuum, although a company should
develop a high level design prior to the implementation of any project at the far right
(reinvent) of this line.
There is another dimension worth notingthe scale of the change effort involved
(Figure 5.2).
Projects at any point on the streamline-to-reinvent continuum can involve small to
large portions of the business. The more departments and people involved in the
change, the greater the scale and therefore, complexity of the effort.
Small

Large

Scale of effort

Figure 5.2: Scale ContinuumSmall to Large

A company can decide to start a BPR project with a small element of the business for
any number of good reasons such as:
z

The project may be a pilot to test the changes prior to involving the entire
corporation.

The purpose may be to test a hardware or software product, or to gain the skills
needed in the long-term.

Projects that include major sections of the company will be undertaken by those who
feel they are ready for a larger scale project or who feel the large scale is essential.
We can align these two dimensions in a matrix (Figure 5.3) that will give us a sense of
the sizeand thus difficultyof the undertaking. The indications of possible
difficulties within each quadrant are examples to illustrate the concepts.
In the lower left quadrant, a company may decide to automate the cash applications
process, increasing the speed and quality of this relatively minor process. In the upper
left quadrant, a company may implement a process to standardise the human resource
services. In this example, the change will streamline the collection and delivery of
information to employees across the entire corporation.
Moving to the lower right quadrant, a company may decide that its highest leverage
move is to completely reinvent the lead management process, a minor segment of the
business.
And finally, the effort with the greatest amount of change across the largest portion of
the company may be to implement a new business model across all the strategic
business units that might entail changing the order management, the sales and
distribution and the supporting financial processes.

S
c
a
l
e

H u m a n re so u rce
m anagem ent
s y s te m

D e v e lo p n e w
b u s in e s s m o d e l

A u to m a te c a s h
a p p lic a tio n s

L e a d g e n e r a tio n
m anagem ent
s y s te m

o
f
e
f
f
o
r
t

M a g n itu d e o f c h a n g e

Figure 5.3: Scale/Magnitude Matrix

Identifying the correct quadrant helps the project team and the executive sponsor to
choose the appropriate project process and to appreciate the amount of change
required. This knowledge will positively influence their success rate.
The larger the scale and the closer to reinvent the project is, the more attention must
be paid to the critical success factors and the change management issues. Nothing will
cause a project to fail more spectacularly than less than full attention to these matters.
If you wish to streamline a process, you will engage in detailed analysis of the current
approach, seeking to understand, for example, the gaps in time between each valueadded action. An order may enter the company and go to one department to be
checked for availability; to another group to check that all the pieces of equipment
being ordered actually work together; to sales, in the case of a custom order, to apply
the correct price and relevant discounts; over to the accounts receivable department
for a credit check, back to the order desk to identify the funding source; and so forth.
Many companies have discovered numerous handoffs in their process and inevitably
the customer order, in this case, waits for the next person to be ready to add their
value to the paper. Eliminating those gaps when no value is added by grouping

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activities together or by automating some or all of the process, will shorten the overall
process time and usually lower the cost.
At the other end of the continuum, to reinvent a process you may spend some time to
understand the nature of the current process, but you will quickly move to look at the
business problem. It is useful to start, in the case of a sales order, with the end of the
cyclea satisfied customer. Understanding what the customer wants and needed from
you will begin the process of looking at how your company processes orders. In this
case, you may discover the customer is very familiar with your product line and can
be equipped with the ability to send in orders electronically.
The entire process may be automated with a few individuals available to solve
problems, should they occur. The system should detect these exemptions early rather
than waiting until the customer takes receipt of the product.
The process for reengineering consists of four basic steps: choose a process,
understand it to the extent needed, redesign it and implement the change.
Nothing about this simply stated process is easy. The entire process must be identified
by executive management as essential to the companys success or survival; else why
do it at all? Each step will take considerable deliberation and will be broken into
several components. Along the way, the ultimate recipients of the changes must be
kept involved and informed. The process requires a combination of attention to detail
and creative out of the box thinking which is scarce.
In the past several years, information technology has been recognised as a major force
in reengineering. It is typically identified as an enabler of the changes required. That
is, reengineers develop a conceptual approach to changing the business processes
expecting that IT will make it possible. For example, reengineering the sales order
process means providing a wide range of products, scheduling customer and financial
information online to the order entry people. This is not possible without an integrated
networked information system.
ERP has changed the nature of the reengineering process in two ways: first, it
provides a system that is integrated and based on best practices. It makes available, as
a matter of course, many of the improvements that companies identify in the process
of reengineering. In this respect, it serves as the technology enabler identified by most
reengineers and writers on the subject.
Second and more importantly, ERP is a driver, not merely an enabler of substantive
change. ERP forces the implementation team to specify how it wants to organise and
run the business in an integrated way, at a detailed level. Many companies have not
done this and continue to operate with mixed and often conflicting organisational
structures, processes and standards. This lack of clarity and integration is often based
on history or on culture. The successful implementation of ERP requires you to define
these elements.
ERP will not actually conduct the reengineering for you, but will trigger you to do it
for yourself. With this force in hand, even companies who simply wanted to replace
their 20-year old legacy systems that cannot communicate with one another, will do
some level of reengineering because of the structure of ERP itself and probably more
than they imagined was needed.
With the advent of ERP, information systems have, more than ever, become a major
force in creating efficient and effective business processes. This change in status, from
support function to key driver of change carries with it several significant
implications:
z

You must decide when to reengineer your business

IS and user roles changedramatically

The IS implementation process changesdramatically

Implementation skill becomes a new, distinct competency.

When companies have chosen ERP, the question arises, When should I do
reengineering? The approach you take will, of course, depend upon your business
situation and thus, your motivation for choosing ERP. To provide some structure for
answering this question, let us return to the scale/magnitude matrix and add to it
an indication within each quadrant of the type of approach that is more successful.
(See Figure 5.4).

S
c
a
l
e
o
f
e
f
f
o
r
t

Human resouce
management
system

Streamline
before/during
Streamline
during

Automat e cash
applications

Develop new
business model

Reinvent
before
Reinvent
before/during

Lead generation
management
system

Magni tude of change

Figure 5.4: Scale/Magnitude Matrix, with Indication of


Reengineering Time Line

In the lower left quadrant, the project team can successfully undertake reengineering
during implementation. The system will require identification of the structure,
procedures, relationships and standards and will provide the latest in best practices for
the modules selected.
In the upper left quadrant, the project team should engage in a BPR process to identify
the problems and issues caused by their current processes (streamlining). It should
define a high level design for those changes, but move onto the system as quickly as
possible to identify the details of the changes. Thus, it will do reengineering both
before and during the ERP implementation.
In the lower right quadrant, the project team is tasked with reinventing one of its
business processes. It should begin by designing in some detail, the changes the
company wishes to implement.
In some cases, the system did not provide some functionality and they were faced with
the decision as to whether to eliminate it from their design or to provide a system
work-around that they would have to maintain in the future. The outcomes of these
decisions depended upon the criticality of the missing feature. Many companies have
accepted a somewhat less than perfect solution to save them the time and expense a
fix would entail.
The upper right quadrant identifies efforts that are focused on reinventing significant
portions of the business. These changed projects will take significant time and effort
and are usually accomplished with the help of a consulting firm having expertise and
experience in managing major changes. A successful effort here will focus on the
dramatic, radical changes that are essential to long term survival and growth. Major
reengineering projects should be undertaken prior to implementing ERP. As in the

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lower right quadrant, some relatively minor decisions may be impacted when ERP is
implemented.
This matrix provides some indication of what type of process redesign to attempt
under various circumstances. In any case, it will be counterproductive to delve too far
into the details of the new business environment without understanding something
about ERP.
What about reengineering after the implementation? Some companies assume that
they will implement, without going to the trouble of BPR project and address, any
needed changes after the fact. In cases where the corporate structure and processes fit
well with ERP, this approach is possible, though not recommended.
In cases where ERP requires greater or a different structure than the company
possesses, the project teams will find themselves making decisions that will affect the
company for years to come. Thus, they may reengineer their company without the
benefit of a structured process for doing so. We strongly advise against this approach,
although it may be successful.
Companies that have implemented ERP in several different projects may find their
staff has become very experienced with certain modules. There is so much richness
inherent in ERP that it takes considerable experience to even begin to understand what
it will do. A representative of one manufacturing company, stated that they were
starting to use the system to suggest improvements they might make in the future.
This approach is a creative use of reengineering after implementation.
It is useful to note here that the change in status of IS that results from ERP will
mandate a change in the skills and attitudes of IS individuals. IS will become
increasingly considered by line management as belonging to the business.
The difference in the words and concepts used by business people and IS has already
changed dramatically with the introduction of ERP. Business people talk offhandedly
about line speeds, data feeds, response times and good or bad GUIs. ERP project
teams are typically made up of more business people than IS people. A business
person is the best choice to carry out the detailed customisation, to make entries in the
tables and to define how the system should collect and report the data.
Correspondingly, IS people more than ever speak of the business progress flow and
creatively introduce ideas to reduce costs or improve cycle times. The IS department
is responsible for ensuring that the technical architecture is appropriate to the business
needs and that it can expand as those needs grow.
It must track interfaces, revisions and systems performance. The IS department will
provide the individuals who will write the programmes. These are the customised
reports and interfaces between ERP and other systems and must be written in ERPs
proprietary language.
In the old days (five years ago or so), system users applied IS to their department
when they wanted a new system or a fix to an old one. The business analysts and
programmers assigned would confer with the business owners as to their
requirements. They then began a long, involved process of analysis, design, coding,
testing and finally implementation.
Assuming the business needs stayed the same during this process, the system was
developed with little involvement by users. Usually those needs changed, delaying
implementation and causing universal frustration. Eventually, the system would be
unveiled, to cries of delight, amazement or possibly consternation.
If everyone were to implement ERP where would there be an IS competitive
advantage? Companies have astonishingly varying degrees of success with
implementation. The difference is in their abilities to address each of the critical
success factors that we will discuss in the next lesson.

A companys ability to select a project it can support and manage, to appoint the right
people to the various positions and to walk the line between energising people and
calming their fears is no small task. More than ever, the ability to manage change
must become the job of everyone involved, not just that of a consultant or the project
leader.
Thus, successfully and skillfully managing change is the distinctive competency that
emerges from the integration of reengineering and information technology. This skill
has been required in the past but has been ignored or given lip service. It is needed
even more today and is still given less attention than required. Companies that
recognise this factor will be more successful than those that do not.
The issue is not the technology. Technology, as ever, is neutral. The issue is the ability
to make creative use of that technology and to manage the massive change the system
produces. Managing the changed process, with the same degree of discipline and rigor
as the technology, will begin to happen more regularly when organisations see this as
a core competency and start to manage it as a competitive advantage.
Reengineering (and ERP is a form of reengineering) must be seen as a mechanism for
organisational change. Teams that approach the implementation of ERP with this
mindset are more successful than those that do not. With ERP implementation comes
the need to help employees cope with massive changes in their jobs, their
organisational positioning, their decision-making processes, even their pay.
This is true at all levels of the company. It includes the order entry clerk who is now
asked to make decisions that commit the company to a course of action and the
operations manager who discovers that his or her empire has grown or shrunk by 50%
and that he or she is required to manage in a vastly different way.
Way attention to assisting people to see the potential in the redesign for themselves
and for their company.
It is clear from the fundamental definition that BPR and ERP are quite different from
each other. While BPR focuses more on the transformation aspect of the business
processes, using innovative business concepts, ERP focuses on the automation aspect
of the business processes, using ICT to achieve the same objective.
This can be explained by an example. If a large fertilizer plant has two strong
functional departments (namely operations and maintenance) located far from each
other, there will be considerable delay in sending a work order from the operations
department to maintenance department in case of an equipment breakdown. This
delay would result in low availability of the equipment, hence, higher costs and longer
lead times.
An ERP can make the delay almost zero, where work order generation and
communication is automatic and instant, thereby reducing the delay in attending it,
increasing the availability of the equipment and decreasing cost. A BPR, however,
may result in drastically changing the business process, where there are no separate
departments for operation and maintenance. Additionally, maintenance (at least 95%
of the cases, except where exceptionally high expertise is required) may also be
required to be carried out by the operations man.
This would not only make him more responsible for operations but also eliminate the
need for generating a work order for maintenance department. Of course, this will lead
to multi-skills concepts etc. This BPR would also increase the availability of the
machines (by eliminating delays), reduce cost etc. and may not need automation at all.
Thus, the approach of BPR and ERP can be quite different in achieving the same
goalmore availability of equipment and lesser cost.
For instance, many ERP solutions have graduated from the APICS definition and
presently include many features like human resource management modules, supply

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chain modules (linking suppliers and customers), product data management, electronic
data interchange, engineering change management, multi-currency and multi-location
plants facilities, which is allowing many drastically transformed business processes to
be adopted quickly.
Most consultants take advantage of this overlap and confusion. They talk, whatever is
convenient, at the point of sale to puzzled Indian executives, in order to clinch the deal
and meet their own business interests. The fact is that both ERP and BPR go hand in
hand to helping companies face the 3C crisis.
When it comes to overcoming the 3C crisis, BPR and ERP are complementary to each
other. But questions which top management may ask are:
Whether to transform the business processes first through BPR and then adopt ERP;
or first adopt an ERP solution with world-class proven practices and then keep on
doing reengineering: or adopt them together, business process module wise, one after
the other, till the complete business is covered.
Why reinvent the wheel? Why not adopt proven world-class business practices, as a
part of ERP solutions? Why copy a best-in-class practice of the same industry, when
each enterprise has a different market segment, customer expectations and overall
unique business within the same industry? Why not copy best practices of other
industries? (e.g., copy best distribution process of paint manufacturer for a detergent
manufacturer).
Why aim for major changes (both BPR or ERP) which a company cannot sustain and
risk failure (as clear from many not-so-successful implementations of both BPR and
ERP)? Can we afford a long and time consuming process of implementation (2-4
years) to face the 3C Crisis?
However, with time, BPR has become more and more dependent upon the availability
of ICT; on the other hand, ERP has been upgrading itself in terms of adapting various
proven good business processes in the industries. Many of the business
transformations are possible because of availability of ERP with high ICT.
Similarly, many of the good proven industry-wise transformed business processes
have been built in as business templates in ERP solutions.
Since all the arguments and counter-arguments are justified to some extent, there may
not be one best answer to the problem of making the right choice for the top
management. However, if the main consideration for top management is Time and
the Cost resource for implementation, it would be wiser to go in for a Big Bang
approach (Choice 2). This is because of the following reasons:
1. The present state of ERP solutions, if honestly supported by the top management,
with the help of business modellers and a good seasoned vendor can be
implemented in a short duration of 5 to 7 months.
2. The explicit and implicit benefits of ERP solutions start getting realised
immediately.
3. Most of the reputed ERP solutions are quite flexible and support ability to adopt
any reengineered process quickly. Therefore, as processes are being reengineered,
those can be adopted as and when finalised, without having to change the ERP
much.
4. Although adaptation to the accepted best-in-class practices may not be the best for
the unique requirement (and positioning) of the enterprise, if chosen judiciously,
many of those accepted processes as a base may help to get the benefits faster.
The process of BPR, however, can continue process by process, depending upon
the criticality and urgency of the process.

5. Having gained experience in business modeller, best-in-class processes and ERP


implementation, the organisation may not require external consultants for
reengineering the processes. It may be done by internal trained resources.
Thus, this approach (Choice 2) can take advantage of both time and cost and generally
be more effective. It must be reiterated here that in order to meet the 3C crisis, the
enterprises have to take benefits of both ERP and BPR. They have to view these as
complementary to each other rather than conflicting with each other. But what is most
critical in all this is that, in overselling both BPR and ERP, top management should
not overlook their limitations. Both BPR and ERP only help the tactical decision on
how to do their business, rather than helping strategic decision on what business
to do.
Check Your Progress 1
Fill in the blanks:
1. India has the . largest scientific and technical manpower in
the world.
2. Reengineering must be seen as a mechanism for organizational
. .

5.3 PREFERENCE OF INDIAN TECHNOLOGY


A new spirit of economic freedom is at work in India, bringing with it great change. A
series of ambitious economic reforms, aimed at deregulating the country and
stimulating foreign investment have taken place.
India is a democracy of one billion people, and economic reform is a consensus shared
by its many political parties. They have been quick to embrace free market enterprise,
which has attracted a number of American corporations, including General Electric,
General Motors, Hewlett-Packard, Johnson & Johnson, and Microsoft, to name a few.
Bangalore is known as the "Silicon Valley of India." The city is a vast entrepreneurial
haven, not only to the software engineering industry, but also hosting companies in a
variety of other industries, including: aeronautical engineering, research &
development, agriculture and biochemistry.
Companies across the globe are coming to realize the opportunity India presents, and
are wasting no time in acting.
IT has changed the way industry does business. Following its impact in the
manufacturing and service industries, the next vertical experiencing the positive
impact of technology in India is the public sector. Technology is making our public
sector more transparent and effective and for the Ministry of Heavy Industries &
Public Enterprises technology will also help us to support further growth in Indias
business community.
As e-government and e-governance become more and more important in the
globalised economy, they will impact positively on the business culture of all
enterprises. Corporate culture in public sector will also need to change in handling the
demands of more open and less hierarchal business processes and systems. Public
sector officials therefore need to raise their levels of e-awareness and apply the tools
of the information age to their day-to-day functioning.
The Indian government has taken several steps to promote IT across the economy, and
is now stepping this up to embrace all government departments and services.
The Ministry of Heavy Industries & Public Enterprises have initiated several steps
such as web-based reporting systems, an intranet, public sector e-tendering,

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web-based complaint and monitoring systems. All of these initiatives are designed to
bring about more responsibility and transparency into the system.
E-commerce solutions are not specific to country situations but more so to the kind of
business individual enterprises are in. In the Indian situation today B2B solutions and
usage is much higher both in the software as well as IT-enabled services.
Several central public sector enterprises are implementing ERP, CRM, and SCM in
their business. The major constraint for introducing IT technologies into our
department has been the poor financial condition of several of the public sector
enterprises that we are responsible for in our department. In order to lessen the upfront
financial burden, many of these organisations are resorting to phased implementation
strategies.
Public sector enterprises do send their managers for specialised training including that
relating to technology. We also try to arrange for higher exposure and interaction with
leading companies through visits to exhibitions, conference as well as site visits to
individual companies.
E-government and e-governance are extremely useful tools for developing countries
as they can help them in economic development to try and leap directly into a digital
age. IT infrastructure and business can be built upon existing infrastructure as also
implemented at relatively lower cost with higher return than say for large engineering
undertakings, projects etc. It is today an established fact that using these tools would
be beneficial for developing countries, especially to enhance social and economic
growth.
There is a need for established standards as also certification of such standards by
reputable bodies particularly those recognised by Government so that small and
medium enterprise can rely on such established standards to access and use ecommerce applications and transactions.
E-health is a major potential both for rural and urban health services. It not only can
provide such services in far-flung areas but can also serve as an alternative source of
diagnosis, second opinion and reliable consultation for health related problems.
Several hospitals in India have already begun to offer such services.
E-commerce in India is growing be leaps and bounds in the area of IT solutions; IT
enabled services; and also usage of e-commerce by our export industry. Major growth
in India as India is fast converting into a knowledge super power.
The Right to Information Act recently introduced is a major step towards greater
transparency and efficiency for Government and citizens. There are specific
provisions being made to ensure that people are able to get information more easily
than before. This will result in strengthening of our democracy.

5.4 MAJOR CONSTRAINTS AND PROBLEMS


India's deficient infrastructure - severe power shortages, congested roads, and poorquality railways and ports - is a major constraint to trade activity in the country.
Its strongest logistics indicator was timeliness of shipments, while its weakest were
efficiency of customs and other border procedures, as well as the quality of transport
and information technology (IT) infrastructure.
Indias macro environment and political conditions are generally conducive for
growth. The key drawbacks are the high fiscal deficit, low penetration of PCs, phones,
and Internet, and especially low education levels.
z

Political stability: Democracy and democratic values are relatively wellentrenched and the political system is largely stable. Handover of power after
general elections held every 5 years is peaceful, and confidence in the stability of

the system is high. However, there are incipient threats to stability from the
extreme left-wing Naxalite movement, which needs to be monitored closely.
z

Rule of law: India ranks above its peers in rule of law due to a relatively wellfunctioning judiciary. However, cases drag on for years, and further
improvements in the legal process are necessary to improve the business climate.

Corruption: Although its score is higher than the developing country mean,
bureaucratic and administrative corruption, and rent-seeking by a large public
sector continue to restrain investor confidence.

Education: India compares very unfavorably with its peers in indicators of


educational attainment at all levels. In 2000, the working-age populations
average year of schooling is about 5.1 in India, compared with 6.4 in China and
6.8 in Malaysia. Both the spending and the efficiency of spending on education
remain weak. The shortfall in education is a key constraint to growth.

Life expectancy: Comparable to developing countries and on the rise due to


increases in income, health care, and nutrition. Fiscal spending on health care,
however, remains inadequate and large sections of the population have no access
to health care.

5.5 OPERATIONAL CONSTRAINTS


A rapidly-growing economy is often accompanied by an initial increase in income
inequality which in Indias case can manifest itself in a growing rural-versus-urban
and an educated-versus-uneducated divide. With rising aspirations, it is critical for the
economy to have inclusive growth, with employment opportunities for all.
Education and labor market reform will be important in this respect. Otherwise, rapid
growth could lead to rising social tensions, political pressure to slow down the reform
process and increasing protectionism from reservations in education and jobs. If
managed badly, this has the potential to kill the growth goose.
The old risk of sectarian disharmony is now supplemented with the new risk of
political discontent spawned by dissatisfaction with the unequal distribution of
economic growth. How effectively the political process manages these risks will be
central to Indias economic performance. Fortunately, thus far, there is a wide
consensus among political parties in India to enhance the reform process.
However, there are considerable risks that India will not be able to achieve inclusive
growth without sacrificing average growth rates. The most direct manifestation of
this risk is costs to the public sector of populist policies, which reduce public savings
and the ability to finance the required investment growth.
India will need to alleviate supply-side constraints in order to absorb the labor coming
out of agriculture and to sustain the growth momentum we have outlined. It takes an
entrepreneur 35 days to start a business, 270 days to obtain various licenses and
permits, 62 days to register a property, nearly 4 years to enforce contracts, and a
shocking 10 years to close a business. It is also extremely difficult to lay off workers
in India, and on average it costs more than a years wage.
Even though India is making progress in reducing red tape, the scale of the problem
remains immense. Action on these issues is important because it is the small and
medium-sized enterprises that create the most jobs.
To embark upon its growth story, India will have to educate its children and its young
people (especially its women) and it must do so in a hurry. Lack of education can be a
critical constraint to the growth of the knowledge-based IT sector, as well as in the
move to mass employment in manufacturing. The demographic dividend may not
materialize if India fails to educate its people.

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The success of Indias elite students from the IITs and IIMs masks the generally
abysmal state of higher education in India. Higher education remains heavily
regulated, with little to encourage private-sector participation or innovation.
There are, however, changes taking place. Labor market returns to education have
risen in recent years, leading to an increase in demand for better quality, and as a
result the private sector is beginning to step in to fill the supply gap.
A critical risk to the long-term growth potential of India is environmental degradation.
The country remains largely rural, and normal monsoons are the life-blood of the
system. With increased urbanization, industrial development, and a burgeoning need
for energy, India will be a large contributor to global warming.
Climate change can cause erratic monsoons, with grave implications for rural incomes
and overall growth. Already, shortages in water are occurring with concerning
rapidity. If water and electricity are not priced at close to long-run marginal social
cost, the shortages will become critical. In order not to hamper the growth process,
India will need to put in place policies that are increasingly environmentally-friendly.
Although these risks are important, there would need to be dramatic deterioration in
them to fundamentally derail the growth process. Comfort can be derived from the
fact that Indias growth experience in the past 2 decades has been achieved with low
volatility.
More recently, strong economic performance has been achieved during a period of
rising oil prices and with the economy remaining relatively closed. A high level of
reserves, a falling fiscal deficit, low external debt, and a low current account deficit
give further reassurance about the underlying strength of the current growth
momentum.

5.6 PROBLEMS IN INDIAN BUSINESS ENVIRONMENT


Following the liberalization and deregulation of Indian economy in 1991,
organizations are passing through a phase of change as never witnessed before. The
new business environment has provided Indian organizations to become global
organizations though acquisition and expansion plans. However it has opened Indian
markets to global players also.
In this two way traffic, even successful Indian organizations are facing challenges
from both, domestic competitors as well as foreign competitors, who can suddenly
appear from anywhere on the globe. To remain ahead of competitors, business leaders
need to have a global vision, be pro-active, able to take calculated risk and initiate and
manage acquisition and consolidation process smoothly.
India has a lot to offer as a country. There are also a number of great people. The vast
majority of Indian people are honest and hardworking. However, business
environment in India is still under development. That is an indisputable fact, and there
are number of problems. The followings are some of problems of running a business
in India.
Banking sector has a couple of problems. To be more specific, those who work in the
banking sector are not exactly a problem. Most of them are honest and hardworking;
theyre probably also quite talented, intelligent and capable. However, there are too
many formalities and procedures than necessary.
For example, it took nearly two weeks to open a bank account in India. There were a
couple of reasons why it took two weeks, but it is unusually a long time to open a
bank account. But in US it only took one day to open each bank account. To transfer a
fund from the US business account to the bank account in India; it took two weeks.
There were a couple of reasons why it took two weeks, but it is also a long time to
transfer a fund; these exemplify problems of the banking sector.

There is delaying mentality not in the sense that everyone is playing and partying
everyday and not getting things done but in the sense that things do not get done on
time.
Lack of the basic infrastructure stands out. Electricity problem is very visible.
Electricity goes off a couple of times a day on average even during winter, while
Indian people use less electricity during winter than during any other season. Using
UPS (Uninterruptible Power Supply), you can prevent data loss, but if you run a kind
of business that requires you to use electricity the whole time that you work such as
web development, you have zero productivity when electricity is off.
Water supply problem is there, though it is not severe; most businesses, specifically
businesses in the service sector, do not suffer from the problem because they typically
do not use water to run their businesses, but it can become a minor problem. Internet
connection works for the most part, but the connection gets cut off occasionally. This
can result in the loss of productivity also.
Most problems can be managed, and as a matter of fact. However, problems described
here are recognizable and they do affect.

5.7 PROBLEMS IN FINALIZATION OF AGREEMENT


Problems commonly arise when there are multiple offers for the work or requests for
exclusive rights and no agreement exists between the collaborators. In effect, a
recalcitrant collaborator can prevent the other collaborator from licensing or assigning
exclusive rights in the work to a third party.
Another disaster scenario is unilateral termination of the project by the subject of an
autobiographical work, as was the case with the failed collaboration between Fay
Vincent, the former commissioner of baseball, and David Kaplan. After 90% of
Vincents memoir was completed, Vincent withdrew the project from his publisher,
and thwarted Kaplans efforts to publish the book under Kaplans own name. If the
parties had a well-written agreement as opposed to oral understanding - legal
entanglements, likely, would have been avoided.

5.8 INNOVATION IN SMALL, MEDIUM AND LARGE


ENTERPRISES
In India, small and medium industries play a vital role in the growth of the economy.
constitute more than 80% of total number of industrial enterprises and form the
backbone of industrial development, suffer from the problems of sub-optimal scale of
operation and technological obsolescence. Indian SMEs are facing a tough
competition from their global counterparts due to liberalization, change in
manufacturing strategies and turbulent and uncertain market scenario.
With the globalization of product and service markets, companies, and in particular
Small and Medium-sized Enterprises (SMEs) face increasing competition not only for
sales but also for technical know-how and skills.
In this environment, competitiveness at the company level depends heavily on the
speed with which new products can be brought to the market place and new costsaving improvements made. Similarly, the creation of newer markets and more
customers depend to a very large extent on the speed with which scientific and
technological breakthroughs are converted into practical and attractive solutions.
Innovation holds the key to increase in productivity and productivity gains are key to
both economic growth and in raising the standards of living.
Innovation is a tool that enables SMEs to reap rewards of scientific achievement and
requires much more than the ability to turn a new idea into a working product.

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Efficient flows of technology are not enough and ready supplies of finance and
business skills are also crucial.
Critical to such a culture of innovation are the SMEs which have, in recent years,
proved themselves to be the engines of economic growth and principal sources of
foreign exchange. And SMEs account for a bulk of all Indian businesses and in many
fields provide the channels along which new technologies develop.
SMEs play a pivotal role in the success of the Indian economy due to their ability to
exploit new technologies and to respond quickly to changing market needs. Support
for the creation of new ventures and spin-offs from research institutions and large
companies, as well as the removal of barriers in their way of their rapid growth and
support for the transfer of know-how, also deserve to be accorded the highest priority.
Despite this, with SMEs facing a financial crunch, they are unable to invest in
innovations and R&D. Investing in R&D to innovate in technology by SMEs has to be
encouraged. However a focused approach on advanced technology products which is
of the utmost importance, is missing. And without all these SMEs stand to lose a great
deal. Sadly government intervention including public investment which can act as a
catalyst for SME growth is still a Utopian dream.
Innovation has always been the hallmark of small and medium enterprises. SMEs that
integrate innovation can reap significant benefits. SMEs, irrespective of size, are
primarily engaged in 'incremental technological innovations' with self efforts. But
average innovation expenditure and innovation personnel increased with firm size.
There is a positive relationship between innovation expenditure and value of output,
and negative relationship between innovation intensity and firm size. Innovation
expenditure with labour and capital has a significant influence on the value of output
in each of the sub sectors.
What is needed is a dynamic, self-sustaining culture of innovation for SMEs. But a
big cloud of uncertainty hangs over when our authorities will focus on this area...at
least as of now!
Innovation is an application of inventions in new and tried combinations. It should
aim towards enhancing speed, imagination and excellence in execution in every
interface that is its customers, its employees, its investors, entrepreneurs, the
government and the society.
The purpose of innovation is to-Reduce costs, improve cycle time, improve quality,
improve productivity, improve comfort level, increase free time, improve customer
base, etc. Thus every piece of information is a path making life better for the
customer. Organizations that are innovative have a clear long term vision. Innovation
attracts rich talent to the organization and provides focus to the aspirations of the
organization. Successful organizations are those who combine such vision with strong
operational capabilities resulting in higher growth and profitability.
In India SMEs are generally depend on jugad (an alternative arrangement, source,
approach, close associates, well known persons, an attempt to get a thing done). Jugad
is not scaleable because it does not have a science or engineering base. It does not
have an organizational base or support, but rather tends to be a one-time activity with
few subsequent improvements. On the other hand successful large organizations
approach innovation in a systematic manner. They create organizational structures and
management processes to nurture innovation.
It is not the result of an understanding of user needs spanning a wide spectrum of
users and is therefore likely to have only restricted application. The difficulties faced
by Indias National Innovation Foundation in commercialising grassroots innovations
are a reflection of the limitations of the jugad approach in a modern economy.
The good news is that some large Indian corporations have displayed the ability to
transcend jugad. Of the six levers of innovation identified by Davila et al, the value

proposition, supply chain, and choice of target customer constituting the business
model; and the product (or service), process technology and enabling technologies
constituting the technology dimension these companies have been particularly
successful on the business model side and backed this up with appropriate choices of
technology.
Arguably the most successful of these has been Bharti Airtels lifetime prepaid
mobile services card that allows a mobile services customer to receive free incoming
calls for 15 years at a cost of 900 rupees (then $20). This innovation opened up a huge
new segment of customers and propelled the growth of the Indian mobile services
industry. Novel supply chain models (such as risk-sharing and pay-by-use
agreements with the suppliers of capital equipment) and a strong yet cost-effective
information technology backbone have allowed the profitable provision of such lowrevenue services.
Other successful innovations have been the global delivery model pioneered by
Indias leading software companies, and the low-cost generic drug molecules from
Indian pharmaceutical companies such as Ranbaxy and Dr. Reddys Laboratories. If
its successful, Tata Motors new low-price car, the Nano, will be an outstanding
example.
Notwithstanding these achievements, India is yet to demonstrate innovation of this
kind on a wide scale. Leading indicators of innovation such as R&D intensity (total
R&D expenditure as a proportion of GDP) and patenting activity are moving upwards,
but at a gentle pace. R&D intensity has never crossed 1% (as compared to roughly 3%
for Korea or Japan). Inventors from India were granted just 546 utility patents by the
U.S. Patent and Trademark office in 2007 against 6,295 granted to inventors from
Korea and 33,354 granted to inventors from Japan.
Check Your Progress 2
Write the full form of the following abbreviations:
1. BPR ..
2. TQM .
3. ERP ..

5.9 LET US SUM UP


Many companies identify changes that are meant to streamline their business
processes and find that to implement change successfully, the project team will need
to reinvent the corporate approach and that change will have major implications for
individuals, jobs and structures. The process for reengineering consists of four basic
steps: choose a process, understand it to the extent needed, redesign it and implement
the change. IT has changed the way industry does business. Corporate culture in
public sector will also need to change in handling the demands of more open and less
hierarchal business processes and systems. Several central public sector enterprises
are implementing ERP, CRM, and SCM in their business. There are, however,
changes taking place.

5.10 LESSON END ACTIVITY


Write an essay on Indian business environment.

5.11 KEYWORDS
ERP: ERP stands for Enterprise Resource Planning; it is a system which provides an
integrated information system for all departments and functions across a company that
can serve all those different departments particular needs.

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Business Process Reengineering (BPR): It is a management approach aiming at


improvements by means of elevating efficiency and effectiveness of the processes that
exist within and across organizations.
CRM: CRM stands for Customer Relationship Management; it is a multifaceted
process that focuses on customers' needs and behaviors in order to develop stronger
relationships between the company and customer.

5.12 QUESTIONS FOR DISCUSSION


1. What is BPR? Why is it required in business?
2. How ERP has changed the nature of the re-engineering process?
3. Compare and contrast between ERP and BPR.
4. What are the major constraints to trade activity in India?
5. Describe the advantages and disadvantages to do business in India.

Check Your Progress: Model Answers


CYP 1
1. Third
2. change
CYP 2
1. Business Process Redesign
2. Total Quality Management
3. Enterprise Resource Planning

5.13 SUGGESTED READINGS


Harish Chandra Chaudhary, Knowledge Management for Competitive Advantage, Excel Books
Publications, New Delhi.
Deep and Deep, Technology Transfer and Joint Ventures Abroad, R. R. Azad, Publications,
New Delhi.
Thomas, J Kuegler, Web Advertising and Marketing, Jr. 3rd Edition-Prentice-Hall of India,
New Delhi.
Dr. Ravi Kalakota, E-Business Roadmap for Success, Pearson Education.
Ravi Kalakota, Andrew B. Whinston, "Frontiers of Electronic Commerce", Addition-Wesley
2000.

LESSON

6
TECHNOLOGY TRANSFER
CONTENTS
6.0

Aims and Objectives

6.1

Introduction

6.2

Problems in Technology Transfer

6.3

Collaboration Agreements

6.4

R&D

6.5

Import Substitution

6.6

Scaling, Diagrams and Patterns of Technology Transfer

6.7

Intellectual Property Rights

6.8

How to Buy Technology

6.9

Technology Transfer Cases

6.10

Let us Sum up

6.11

Lesson End Activity

6.12

Keywords

6.13

Questions for Discussion

6.14

Suggested Readings

6.0 AIMS AND OBJECTIVES


After studying this lesson, you should be able to understand:
z

Idea about the problems of technology transfer

Concept of collaboration agreements

Overview of Intellectual Property Rights

6.1 INTRODUCTION
A fast developing country like India possesses significant domestic scientific and
technological capacity and a large portion of this capacity is employed in public
research organizations. Organizations like academic institutes, national research
laboratories, and sector specific research centres have a sizeable number of
professors, scientists, engineers and researchers, who are at the forefront of
technological innovation in high-technology areas like biotechnology, energy and
information and communications technologies.
Unfortunately, too often the intellectual assets developed by these innovators their
inventions, technologies and know-how are rarely put to any practical or
commercial use or in other words, are not transferred to industry.
Many developing countries including India are still young to provide the institutional
framework necessary for the transfer of technologies from academic institutes and

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government research laboratories to industry, where they can be employed in


activities that stimulate economic growth.
This institutional framework, comprising of policies, guidelines, practices and suitably
trained human resources, are indispensable for meaningful technology transfer to
occur between public research organizations and industry.
The management and transfer of academia spawned intellectual property through
intermediaries like the technology transfer offices is still in a nascent stage in India,
and both policy-makers and technology transfer personnel are learning by doing. Most
policies have been formed ad hoc, with modifications made as problems arise yet the
concept is beginning to mature.
Certain norms have arisen and some issues, such as patenting and licensing, setting up
of incubation units, and taking of equity in start-up companies as a form of royalties,
are slowly becoming accepted as experience is gained. With maturity, however, new
problems and challenges are mounting, as there is an inherent conflict between free
dissemination of knowledge (which is widely accepted as the primary mission of
academia), industry needs for secrecy and control of intellectual property, and the
institutes obligation to protect and promote the development of its intellectual
property in the cause of public economic development.

6.2 PROBLEMS IN TECHNOLOGY TRANSFER


Commercialisation of intellectual property in academic institutes in India requires
much emphasis in the context of growing interface between academia and industry.
However as has been the trend, the firms still overlook academia as potential source of
innovation and import technologies to meet their requirement.
The building up of industrial capacity of the country has proceeded almost totally on
the basis of imported technology. Unfortunately, Indian industry is not particularly
interested in technology development. Indian industry has so far preferred to go for
international collaborations rather than to academic or domestic R&D organisations in
search of new technologies, or even when technological solutions are called for to
address issues like up-gradation or modernisation of the existing process.
With the ongoing economic reforms especially in the era of globalisation,
liberalisation and privatisation, there has been a major shift in the economic
environment confronted by firms, academic institutes and public research laboratories.
Import substitution is being replaced by export promotion and globalisation,
protection is getting replaced with competition, and controls are giving way to
liberalisation.
In the changing scenario nonetheless, the fact that Indian academia has ample
potential and the ability to play a dominant role, cannot be ignored. Given the growth
in the infrastructure and number of academic institutions in India and the build up of
human capital stock in science and technology, there is no doubt that there lies
immense potential for technological innovations to occur.
The achievements in the area of industrial development, telecom and broadcast
communication, railways, all forms of energy including atomic energy and renewable
energy, space and defence production would not have been possible without the
building up of this large stock of human capital in Science and Technology of fairly
high quality.
The issue thus lies in creating trust in industry about indigenous R&D outputs,
especially novel technologies that have potential to be commercially successful. The
focus for technology generation and development should be given to all those
institutes, which have the necessary infrastructure, faculty scientists and researchers
who are willing, dedicated and proficient.

The problems faced in technology transfer are diverse in nature. Few of them are
illustrated hereunder:
1. Non-patented technology: The problem in technology transfer when the
technology is non-patented (consisting of trade secret and know-how). Nonpatented technologies form a major chunk of technology transfer agreement
around the globe, especially in the United States and Japan. Interestingly, in
Japan, 50% of such technology transfer agreements cover know-how or trade
secret. Naisbitt, the author of Megatrends in his first chapter describes the
changeover from an industrial society to an information society, mentions knowhow as the new form of wealth. But when such non-patented technology is to be
transferred, it creates complex problems of scope, duration and termination. For
Illustration, if the technology is patented, the transferee pays royalty only for the
life of such patent (i.e. 20 years). Whereas, if such technology is non-patented,
transferee would have to pay royalty for more than 20 years (since the technology
would have no expiry or protection terms).
2. Black Box problem: The second threshold problem is that of maintenance of
secrecy during negotiation of such non-patented technology. Buyer is not
interested to pay unless they knows what exactly are they paying for and the seller
is not interested to disclose his non-patented technology unless he receives
payment. This is the so-called black box problem.
3. Strategic importance of Trade secret: The Black box problem arise because the
owner of such non-patented technology prefers not to file for patent protection.
Why the owner of such technology does not file for patent protection is a strategic
business decision. Patent provides protection for 20 years while trade secret can
be protected indefinitely. Thus, there may be a clear incentive for the owner of
such technology to not avail patent protection. For illustration, Coca Cola is a
trade secret formula, which was strategically not patented but kept as a
confidential trade secret. Thus, when the technology is a trade secret, it creates
even further problems.
4. Patenting Biotechnology in India: Another major problem in the area of biotech
technology is that the Indian Patents Act 1970 recognizes only process patents and
not product patents. This loophole resulted in the burgeoning pharmaceutical
industry, which is based on reverse engineering. Even though biotechnology is
one of the fast-growing areas, its growth is hampered by patent uncertainty.
Similarly, when an educational institution owns such biotechnology, it cannot
patent it in India creating problems in transfer and policing of such technology.
5. Technical problem in Evaluation of technology: Another unique problem is the
problem of evaluation of the technology. The so-called black box problems
present us with a problem of evaluation. Unless the buyer knows what they are
buying, they may not be able to evaluate the economic feasibility of the
technology. This may lead to either underestimate or overestimate the economic
of such technology creating a business blunder. Furthermore, what are the
mechanisms available for a non-profit organization like UoP to evaluate
technology it wish to buy? Evaluating the economics of technology is a difficult
job for a non-profit organization if it has no such business background.
6. Absence of Technology Transfer Center: In India there is a need of Technology
Transfer Center on the basis of National Technology Transfer Center (NTTC) in
the United States. NTTC is a full-service technology-management center,
providing access to federal technology information, knowledge management and
digital learning services, technology assessment, technology marketing, assistance
in finding strategic partners, and electronic-business development services. The
NTTC fosters relationships with national clients, showcases technologies and
facilitates partnerships between clients and. industry.

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6.3 COLLABORATION AGREEMENTS


Collaboration agreements are executed between institutions irrespective of whether
sponsored funding is anticipated. They cover the same programmatic issues as
teaming agreements. In addition, if collaborators from one institution will be using the
facilities of the other institution, collaboration agreements may include the typical
provisions of a Facility Use Agreement. Collaboration agreements may also have
fairly detailed intellectual property terms.
The essence of the collaboration agreement is copyright ownership. In the absence of
a written agreement, when two people collaborate, there is a good chance the ensuing
work will be considered a joint work The formal legal definition of a "joint work" is
"a work prepared by two or more authors with the intention that their contributions be
merged into inseparable or interdependent parts of a unitary whole".
Many hiring parties are caught unaware of the consequences of working without a
written agreement. When a joint work is created, each collaborator is presumed to coown the copyright, and share equally in royalties.
Further, under the default rules of the Copyright Act which can be altered by a
written agreement - each collaborator can license the nonexclusive rights to the work
to a third party, provided they fairly account for the profits to the other.

6.4 R&D
The scope of international R&D investment and technology flow differs considerable
among the industrialized countries as well as between industries, branches and
company sizes.
The association between industry and globalization of R&D has two extreme cases;
mature technologies and emerging technologies. When the technology is mature, to a
great extent modifiable, and widely disseminated constant and close interaction with
customers is not important.
In this case R&D and production may be separated and the production is more
globalised than research and development. However, rapid technology change in
emerging technologies often requires a close interaction between R&D and
production.
The company size aspect of the global location patterns of R&D investments is
strongly related to financial resources and to absorptive capacity. Both contribute to
the dominance of large companies.
A dispersion of R&D across the border(s) requires extensive resources for the
collection coordination and dissemination of information, and the absorptive capacity
of companies is correlated to a critical mass of accumulated R&D. Some minimum
threshold size of R&D activities exists in every specific location.

6.5 IMPORT SUBSTITUTION


Import substitution is the replacement of goods and services purchased outside a
region with goods and services produced within the region. In this sense, import
substitution creates "growth from within," as local businesses receive supply contracts
and local residents earn wages and income.
Import substitution is a strategy that has enjoyed little explicit practice and limited
academic study. The place of import substitution within economic development is
typically as a justification for a program, and it may be only one of several
justifications.

The ways in which import substitution efforts may be carried out are varied and
malleable. Import substitution strategies are rarely enacted in isolation, but tend to
form one facet of a broader strategy, becoming inextricably linked with other
development goals and programs such as economic self-sustainability, entrepreneurial
development, or location incentives.
Quite commonly, the import substitution portion of a program or strategy remains
implicit or even incidental - that is, import substitution is not acknowledged as an
underlying basis for the economic development measure and in some cases may not
even be considered as a potential justification.

6.6 SCALING, DIAGRAMS AND


PATTERNS OF TECHNOLOGY TRANSFER
Technology transfer is the moving of ideas from a research laboratory to the
marketplace. Thus, technology transfer is an exchange of technical information
between the research and development workers who innovate and the end users. The
problem with these definitions is that they are too academic. In these definitions the
environment of the technology transfer is ignored. It tends to assume that once proper
channels of communication are in place, transfer and diffusion should occur. While
these definitions focus on technology as the core, they also neglect other important
elements, such as socio-cultural, economic, and political environments that impact
technology transfer. An inclusive definition of technology transfer should include the
transfer item; the developer of the technology; various channels to accomplish it,
including communication; and the end users Technology transfer can be classified into
two generic rhetorical pattern: point-to-point and diffusion. Point-to-point implies that
a source develops an innovation for a highly specified purpose to a known audience
user. Diffusion suggests that a source develops an innovation for a more general
audience user whose purpose may or may not be clearly known. Unfortunately, most
of the technology transfers take this latter pattern of diffusion.
The conceptual pattern of technology transfer (see Figure 6.1) has three broad
categories surrounding the core technology: (a) developmental stage,
(b) implementation process, and (c) diffusion. Technology transfer in this pattern is a
cyclical rather than a linear process whereby the developers of the new technology
collaborate with other forces of transfer, including the end users. This arrangement is
important because it gives the developer an opportunity to assess future strengths,
weaknesses, opportunities, and threats that might enhance or inhibit successful
transfer. This way, the developer is able to apply appropriate strategies for
implementation and diffusion of the new technology.
Technology transfer starts with a new idea, or a modification of an existing one. The
double-sided arrows in the model infer that the variables in each of the three
categories (developmental stage, implementation process, and diffusion) reciprocally
affect the core technology being developed or modified. Some elements are found in
more than one category of the diagram. This implies that these elements have multiple
roles in the entire process of technology transfer. For example, an understanding of
cultural, environmental, and political elements is important in the design stage to
enable the developer of new or modified technology to find the "best fit."
Technologies designed and developed with due consideration of the end users' needs
and wants are likely to be adopted faster because many of the transfer barriers will
have been addressed in the assessment. Culture, environment, and politics also play an
important role not only in the transfer process, but also in diffusion.

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Figure 6.1: Conceptual Diagram of Technology Transfer

The elements in the developmental stage are concerned with the intended end users of
the new technology being developed or modified. These elements are specifically
important in the design stage because they enable the developer to comprehend the
culture of the intended local users, their economic capability, and their levels of
willingness to use the new technology. A careful assessment of these elements should
be a prerequisite for further steps in the transfer process. The implementation process
elements are vehicles that facilitate technology transfer. Most international technology
transfers fail at the implementation stage, perhaps because these elements are
underutilized by the developers of new technology. According to the diagram, the
development of human resources, such as capital and research institutions, is
prerequisites for sustainable development of new technology. These institutions may
be used as training centers for the end users to enhance their participation and
ownership.
The diffusion process is the final stage in this diagram. At this stage individuals or
groups of people decide whether or not to adopt and use the new technology. In most
developing nations, given their traditional and cultural orientations, the role of the
government and opinion leaders is paramount to successful diffusion of any new
technology. Although infrastructure may not be under the control of the developer, it
serves as a measure of the potentiality of the intended end users.
Check Your Progress 1
Fill in the blanks:
1. agreements are executed between
irrespective of whether sponsored funding is anticipated.

institutions

2. Technology transfer is the moving of from a research


laboratory to the marketplace.
3. Import substitution is the of goods and services
purchased outside a region with goods and services produced within the
region.

6.7 INTELLECTUAL PROPERTY RIGHTS


Intellectual Property Rights (IPR), very broadly, are rights granted to creators and
owners of works that are the result of human intellectual creativity. These works can
be in the industrial, scientific, literary or artistic domains. They can be in the form of
an invention, a manuscript, a suite of software, or a business name, as examples.
In general, the objective of intellectual property law is to grant the creator of a work
certain controls over the exploitation of that work, as the unfettered ability of others to
copy the work or invention may deprive the creator of reward and incentive.
For some intellectual property rights, the grant of protection is also in return for the
creator making the work accessible to the general public. Intellectual property law
maintains a balance by (in most cases) granting the rights for a limited time. Some
rights require registration, for example, patent right, whilst other rights accrue
automatically upon the work's creation as in copyright.
The principal intellectual property rights are: copyright, patents, trade marks, design
rights, protection from passing off, and the protection of confidential information.

6.8 HOW TO BUY TECHNOLOGY


Technology changes rapidly. Your business needs stay constant. As business-builders,
your needs barely changed: fattening your profits, providing good customer service,
building innovative solutions.
Knowing this keeps you in check to purchase only what your business needs. So,
when you're out buying a tech product you should focus on your business needs.
Forget the super-duper technologically advanced products that those salespeople hype.
Instead, understand precisely how a tech product can serve your company. Three
reasons:
z

Tech features won't build your company.

The wisest companies see how technology will make them more agile, market
quicker, reduce sales cycles, and a solve a variety of other sweet problems.

Know the "latest tech features" this month won't be so hot next month.

Grabbing today's latest and greatest features of the so called "technology" won't build
any sustainable advantage. Before you know it, the tech world will introduce newer
and faster features after a few weeks.
You should understand typical technology investments suck. Negative Return on
Investments (ROIs) serve as the hallmark of most tech projects. The reason is the most
tech products have a (1) tech person, a (2) business person - and no one in between to
connect the two. There is a possibility of lack of communication that can be occur
between the management and technologist.
Before purchasing the tech product, first look for tech companies who provide
solutions to your problems. You don't go to the doctor because he uses the latest Type
Vll gauze pads. You don't go to a lawyer because he has a Barrister Bookcase. You
shouldn't go to some nerdy technology company because it uses all the latest technical
jargon. Instead, you go to a technology provider because you need solutions. If they
can't and won't provide solutions to your problems, you'll run far away. They'll likely
and probably - burn your investment and in worse case weaken your company's shortand long-term growth.
One thing you should remember that the technology can never create your company's
success. It can only complement whatever business operation you're running. Most
tech firms hype their product as if it's some magic pill. It's not. No tech product
ever is.

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6.9 TECHNOLOGY TRANSFER CASES


Technology transfer is an important means by which developing countries gain access
to technologies that are new to them. Most technology transfer has between developed
and developing countries through commercial technology transfers by the private
sector. These include transfers through foreign direct investment, foreign licensing,
turnkey projects, technical consultancy, capital goods acquisition, international
subcontracting and joint ventures.
Internationalization of technologies and production is becoming a common
phenomenon for attaining and retaining global competitiveness. At the same time,
regional and sub-regional trade blocks are being formed. Formation of SAARC is an
example.
India can and should take advantage of its comparative advantages over other
developing countries, particularly in the context of our need of promoting exports of
high value added products and services. We have established strong technological and
industrial capabilities in several areas which could as well be of considerable
relevance and utility to other developing countries. A beginning has been made in
exporting our technologies directly and indirectly to other developing and also to
industrially advanced countries by sending experts and skilled manpower abroad,
establishing joint ventures, undertaking turnkey projects, licensing of know-how,
providing training to foreign personnel etc. Although, these efforts have been very
useful, there is a vast scope to increase these activities for which a systematic and
integrated approach needs to be undertaken. This calls for harmonization of aims and
activities of industry, commerce, finance, trade agencies and government. There is a
need for structured documentation of our technological and industrial capabilities and
strengths, showcasing and demonstration of technology export capabilities and
facilitation of technology transfer and trade at the firm level.
For example, international research centers like the Consultative Group on
International Agricultural Research centers transfer technologies to local research
institutes, farmers and firms in developing countries. Development agencies in
industrialized nations can also help finance training, equipment purchase etc.
Another example is Department of Scientific and Industrial Research (DSIR), under
Ministry of Science and Technology, Government of India has assigned the study on
Profiles of Exportable Technologies from SMEs in Andhra Pradesh and Karnataka to
APITCO (a self-sustaining organisation).
The objective of the study was to present technology export capabilities of Small and
Medium Enterprises (SMEs) in Andhra Pradesh and Karnataka and to document the
exportable technologies & projects available with SMEs for their propagation through
foreign embassies in India, Indian missions abroad and other export promotion
agencies.
Many pharma companies are currently engaged in wide-scale R&D restructuring,
adopting a biotechnological approach to drug development by establishing diseasefocused R&D units, R&D spin-offs, strategic partnerships and joint ventures. This
trend has been reinforced by the emergence of public/private partnerships, cooperatives and open-source research initiatives that have encouraged companies to
target previously neglected disease areas such as biotherapeutics and vaccines.
Emerging markets are also driving change throughout R&D, with companies
increasingly internationalizing their processes to take advantage of tax incentives,
government investment, cheap labor and technology specialists.
A number of regulatory measures have taken by different countries to ensure that the
technology chosen is the best available, appropriate to domestic conditions and that
indiscriminate and unnecessary import of foreign technology is not undertaken.

Check Your Progress 2


1. What is the full form of NTTC?
...
...
2. What is the objective of intellectual property law?
...
...
3. What are the two extreme cases of the association between industry and
globalization of R&D?
...
...

6.10 LET US SUM UP


Organizations like academic institutes, national research laboratories, and sector
specific research centres have a sizeable number of professors, scientists, engineers
and researchers, who are at the forefront of technological innovation in hightechnology areas like biotechnology, energy and information and communications
technologies. This institutional framework, comprising of policies, guidelines,
practices and suitably trained human resources, are indispensable for meaningful
technology transfer to occur between public research organizations and industry. The
management and transfer of academia spawned intellectual property through
intermediaries like the technology transfer offices is still in a nascent stage in India,
and both policy-makers and technology transfer personnel are learning by doing.
Collaboration agreements are executed between institutions irrespective of whether
sponsored funding is anticipated. Import substitution is the replacement of goods and
services purchased outside a region with goods and services produced within the
region. Intellectual Property Rights (IPR), very broadly, are rights granted to creators
and owners of works that are the result of human intellectual creativity. These works
can be in the industrial, scientific, literary or artistic domains.

6.11 LESSON END ACTIVITY


Discuss the importance of science and technology in the area of industrial
development.

6.12 KEYWORDS
Collaboration agreement: It is an agreement which is executed between institutions
irrespective of whether sponsored funding is anticipated.
Import substitution: It is the replacement of goods and services purchased outside a
region with goods and services produced within the region.
Intellectual Property Rights (IPR): Those are rights granted to creators and owners of
works that are the result of human intellectual creativity.

6.13 QUESTIONS FOR DISCUSSION


1. What is technology transfer?
2. Mention the problems faced in technology transfer.
3. What is the black box problem in technology transfer? Explain it.
4. What is an intellectual property right? Describe it.
5. Write short note on collaboration agreements.

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Check Your Progress: Model Answers


CYP 1
1. Collaboration
2. Ideas
3. Replacement
CYP 2
1. National Technology Transfer Center
2. The objective of intellectual property law is to grant the creator of a work
certain controls over the exploitation of that work, as the unfettered ability
of others to copy the work or invention may deprive the creator of reward
and incentive.
3. The association between industry and globalization of R&D has two
extreme cases; mature technologies and emerging technologies.

6.14 SUGGESTED READINGS


Harish Chandra Chaudhary, Knowledge Management for Competitive Advantage, Excel Books
Publications, New Delhi.
Deep and Deep, Technology Transfer and Joint Ventures Abroad, R. R. Azad, Publications,
New Delhi.
Thomas, J Kuegler, Web Advertising and Marketing, Jr. 3rd Edition-Prentice-Hall of India,
New Delhi.
Dr. Ravi Kalakota, E-Business Roadmap for Success, Pearson Education.
Ravi Kalakota, Andrew B. Whinston, "Frontiers of Electronic Commerce", Addition-Wesley
2000.

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Web Marketing

UNIT III

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and Sustainable Enterprise

LESSON

7
WEB MARKETING
CONTENTS
7.0

Aims and Objectives

7.1

Introduction

7.2

Meaning of Web Marketing

7.3

Benefits of Web Marketing

7.4

Myths and Facts in Web Marketing

7.5

Terms and Conditions of Web Marketing

7.6

Let us Sum up

7.7

Lesson End Activity

7.8

Keyword

7.9

Questions for Discussion

7.10

Suggested Readings

7.0 AIMS AND OBJECTIVES


After studying this lesson, you should be able to understand:
z

Meaning of Web Marketing

Benefits of Web Marketing

Myths and Facts in Web Marketing

7.1 INTRODUCTION
The Internet is a dynamic beast; it can literally eat you alive and spit you out unless
you go along with the emerging online marketing trends of today. The World Wide
Web is not alive per se.
It is but a virtual avenue for people to come together and create a cyber world. And as
they say, anything goes when it comes to the Web and most anything here goes out of
fashion... quickly. The same is true when it comes to web marketing trends. What may
have been hip and happening a few years, months or even weeks ago may be pass
today.
Nonetheless, most people who engage in web marketing can be equally relentless
when it comes to promoting their websites, products or services. And for those of you
who wish to find out just how exactly you can crest the wave of success, here are
some of the emerging marketing trends for the World Wide Web.

7.2 MEANING OF WEB MARKETING


Web marketing is a billion dollar industry that is fast overtaking the traditional means
of advertising. The reasons for this are simple.

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The number of internet users is growing everyday.

Most business people and individuals now use search engines when looking to
buy products or services.

Consumers are spending more time and money online.

Customers trust in the safety of online shopping due to secure systems that
combat fraud.

As the need for websites continues to grow with internet demand, the need to develop
more precise strategies for online marketing to has arisen. Online marketing employs
different techniques to those of traditional marketing. It must not only appeal to
consumers but also generate web site visitors through the clever use of its written
content.
The goals of marketing may remain the same, but in electronic commerce they must
adapt to new means. The web marketing can be divided into the following steps:
z

Segment and Identify the Audience

Create a Coherent Advertising Plan

Get the Content to the Customer

Correspond and Interact with Customers

Learn from Customers

Provide Customer Service and Support

The backbone of present-day web marketing depends on five measly laws. They are
mutable, flexible, still growing and changing. These laws are:
z

The Law of the Dead End Street

The Law of Giving and Selling

The Law of Trust

The Law of Pull and Push

The Law of the Niche

7.3 BENEFITS OF WEB MARKETING


Web marketing has only recently made its foray, and yet its charm, speed and time
saving attributes have made it a viable option. Sitting on your chair and just a mouse
click away to make a purchase, seems so simple and effortless, that eyebrows are
raised-Why online marketing, or rather How can one enjoy maximum benefits by
marketing online?
Well, in a nutshell, Internet being a visual medium demands that your website or
product be effective and attractive in terms of web design/development, this tried and
tested strategy ensures that half the battle is won. But, in case you dont want to put all
your eggs in one basket then , online marketing offers scope to employ various
strategies to reach your target. Web marketing has become an energetic & economical
way to buy products and services in less time, without consuming the time and energy
of their customers.
These are the apparent benefits, but the subtext unravels other bounties: like cutting
costs-online marketing helps you do away with legal and professional services, travel
expenses and the charges to market for a stipulated period in journals, newspapers or
magazines.

This also allows for higher profit margins, since your costs are low, you make more
profit form sales. Marketing is an integral part of sales, offline, advertisements costs
can burn a whole in your pocket, whereas online you can submit free ads, do ad swaps
with e-zones or use pay per click search engines etc.
Here are some key factors and guidelines that a web marketer needs to take into
account in order to achieve guaranteed success.
z

Web Design/Development: Web design/development should be according to the


services offered by the provider and targeted community, where content is easily
accessible. Try and avoid critical and heavy images, scrolling text and flashing
graphics. These can be tedious and put off a prospective buyer. Frequently
updating your website in case of alterations will do the trick.

Web Visibility: Enhanced web visibility can translate into higher sales. If your
products and services are easily reachable to the user on the web, there will
always be a chance to be in the top league. Traditional online marketing skills and
various other methods can be employed to increase your web visibility such as
Search Engine Optimisation, newsletters, affiliate marketing etc. The following
are some of these explained further:

Search Engine Optimisation: Did you know that 90% of all online visitors are
attained through search engines. If your website is search engine friendly, you will
always have a chance to be on the top of a search engines results. You need to
ensure that when someone queries a search engine your web site gets returned in
the top 30 results (or first 3 pages).
This will help generate valuable visitors who can be future customers, adding to
your online sales with a high visibility of your products and services. Key to both
acquisition and retention is having good content that will attract visitors in the
first place and then keep them coming back for more.
Search engine crawlers give preference to those web pages which have crisp and
valuable content with targeted key phrases. Search Engine Optimisation has been
controversial in the past by some companies using unethical ways to get to the top
in search engines. These methods are now banned by all major search engines.

Newsletters: Newsletters are by far the most powerful way to communicate with a
group (people with common interests) on a regular basis. Newsletters are great
not just for customers, but also for getting employees, distributors, commission
sales reps, the media, and any other third party excited about your firm. This is a
platform by which you can communicate with your clients, they generate calls and
inquiries, and because they are permission based, your clients will receive them
favorably.
The most important and effective marketing tool because they have a vast reach
and convert, Buyers into Customers. Newsletter marketing is therefore one of the
best ways to keep in touch with your customers if done with caution. The most
prevalent problem with generating newsletters is SPAM! So avoid predefined
keywords and trigger words. To ensure that your newsletter be read it needs to be
interesting, informative and helpful.

Affiliate Marketing: Benefits of affiliate marketing include the potential for


automating much of the advertising process (accepting & approving applications,
generating unique sales links, tracking & reporting of results) and payment only
for desired results (sales, registrations, clicks).
When we talk about affiliate marketing; we can measure affiliate marketing in
terms of Pay-Per-Click (PPC) and Cost-Per-Click (CPC).

PPC: In a PPC agreement, the advertisers payment is based on clickthrough to the destination site based on a prearranged per-click rate.

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CPC: The terms pay-per-click (PPC) and cost-per-click (CPC) are


sometimes used interchangeably, sometimes as distinct terms. CPC indicates
measurement of cost on a per-click basis for contracts not based on clickthrough.

Web Analysis: Set up a procedure to analyse your website activities. You should
be aware about whats happening on your website. There are lots of web analytic
tools and service providers which can help you with a complete tracking of your
website visitors.
You can examine the complete summary of your website visitors by following
those methods. Web analysis can reap benefits for online marketing, since it
allows you to read and monitor your visitors/prospective customers behavior,
where they are concentrated(location), what are their preferences(helps you rate
your products) and further helps in making future marketing strategies and
working on your shortcomings.
People's online expectations have climbed over the last few years and two-thirds
dont ever bother returning to a web site that did not meet their expectations.
Keeping these factors in mind can go a long way in providing great value edition
in your e-commerce and web promotion activities, and make you a rising star in
WWW community, or better still, the only STAR!!
Check Your Progress 1
Fill in the blanks:
1. Search engine crawlers give preference to those web pages which have
crisp and valuable content with key phrases.
2. are by far the most powerful way to communicate with a
group on a regular basis.
3. The most prevalent problem with generating newsletters is .

7.4 MYTHS AND FACTS IN WEB MARKETING


You have heard people's story how they're making a fortune on the internet and how
easy it is but the reality is some stories are not out of this world or unrealistic. You
just have to apply a bit of common sense into it, find what you love to do and you my
friend might find the right opportunity to make all your dreams come true.
In every myth there is an element of truth. Some of the web marketing myths are
described here.
Myth #1: Web marketing is EASY
This is probably the biggest myth of all. Web marketing takes time, effort not mention
money. It's comparatively easier to brick and mortar in that there's no inventory to
carry, no shipping of goods and virtually no overhead, but a lot of work is still
involved.
Myth #2: ANYONE Can Make Money Online
This is simply not true. Unless someone gets off that lazy boy recliner and
download/read everything they can about web marketing, and put an action plan in
motion, they will never make a dime on the internet. DO NOTHING, MAKE
NOTHING.
Myth #3: You Can "GET RICH QUICK" On the Net!
This is the trap that a lot of newbie internet marketers falls into, why because
scammers make it sounds so easy and let me tell you, chasing "get rich quick scheme"

is a waste of time, money and energy. It just won't happen overnight, instead do some
research and find out what people really want and need then give it to them.
Myth #4: It's FREE to Do Business Online
Compared to opening your first coffee shop or gift shop in your town, internet
business start-up cost and maintenance cost is pretty low. Once you have your domain
set up, you only pay for internet connection, advertising and ongoing educations,
that's it.
Myth #5: It's TOO LATE to Start an Internet Business
Most super affiliate marketers would love to hear people say "It's too late now, too
many competitions, the internet is too complicated, etc...". You know why? the less
people they have to compete with the better which in turn will make them more
money.
The fact is, it's never ever too late to start anything and that includes internet business.
The internet is not going anywhere and you should too. Every year the stats will show
you the number of people shopping online are increasing, their spending dollars are
growing also.
Myth #6: The BIG Money Talk is JUST HYPE
Have you heard of the phrase, "it takes money to make money?" Well it's true,
although you will be hard pressed to find super affiliate to tell how much they spend
on promoting and advertising. Sometimes, you have to dig a little deeper to find the
truth in every hype you read. If you are willing to take the necessary action to make
'big money' happen for you - it will.
Or criticize, be skeptical and sure that 'big money' can't happen for you - and it won't.
If you believe that you will succeed you're right, if you believe that it won't work,
you're right also.

7.5 TERMS AND CONDITIONS OF WEB MARKETING


All business is conducted and orders are accepted subject to the terms and conditions
of the business. There are some terms and conditions for the web marketing also.
They contain certain matters effecting rights and liabilities. Violation of any of these
could adversely affect your business.
Confidentiality: You are responsible for maintaining the confidentiality of your
account and password on the website. Any activities that occur under your account
and/or password are your responsibility. Therefore, it is important that you take all
necessary steps to ensure that the password is kept confidential and secure. You
should inform us immediately if you have any reason to believe that your password
has become known to anyone else, or if the password is being, or is likely to be, used
in an unauthorised manner.
You should ensure that the details provided by you are correct and complete. You
should inform immediately of any changes to the information that you provided
earlier.
Access to the website: You must not use the website fraudulently or in any way that is
illegal. You must not copy any of the content or designs on the site without
permission.
z

No Spam Site: Do not use spam emails or lists to promote web marketing. Only
use opt-in and verified lists that comply with all conditions of the spam law.

No Porn Site: Do not use pornography to promote the web.

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No Hate Sites: The web marketing cannot be used to promote sites that encourage
hate or discrimination against any group or organization.

No Redirects: The URL you sign up with must be the same site that will show up
when that site gets a visit. This is to insure that there is no one-way linking.
Check Your Progress 2
Fill in the blanks:
1. In web marketing profit margin is .. .
2. The full form of PPC is .. .
3. .. indicates measurement of cost on a per-click basis for
contracts not based on click-through.

7.6 LET US SUM UP


Web marketing is a billion dollar industry that is fast overtaking the traditional means
of advertising. The number of internet users is growing everyday. Most business
people and individuals now use search engines when looking to buy products or
services. Consumers are spending more time and money online. As the need for
websites continues to grow with internet demand, the need to develop more precise
strategies for online marketing to has arisen. Online marketing employs different
techniques to those of traditional marketing. Web marketing has become an energetic
and economical way to buy products and services in less time, without consuming the
time and energy of their customers. Web design/development should be according to
the services offered by the provider and targeted community, where content is easily
accessible. Enhanced web visibility can translate into higher sales. Traditional online
marketing skills and various other methods can be employed to increase your web
visibility such as Search Engine Optimisation, newsletters, affiliate marketing etc.
Benefits of affiliate marketing include the potential for automating much of the
advertising process (accepting and approving applications, generating unique sales
links, tracking and reporting of results) and payment only for desired results (sales,
registrations, clicks).

7.7 LESSON END ACTIVITY


Discuss the recent trends of web marketing.

7.8 KEYWORD
Web marketing: It is a comprehensive strategy that synergizes a given company's
business model and sales goals with its website function and appearance, focusing on
its target market through proper choice of advertising type, media, and design.

7.9 QUESTIONS FOR DISCUSSION


1. What are the web marketing steps?
2. Discuss the factors behind the booming of web marketing.
3. Describe the backbone of present-day web marketing.
4. What are the benefits of web marketing?
5. What are the key factors and guidelines that a web marketer needs to take into
account in order to achieve guaranteed success?
6. Describe some myths and facts in web marketing.
7. What is web analysis? Explain it.
8. Write short notes on affiliate marketing.

Check Your Progress: Model Answers


CYP 1
1. Targeted
2. Newsletters
3. Spam
CYP 2
1. High
2. Pay-per-click
3. CPC

7.10 SUGGESTED READINGS


Harish Chandra Chaudhary, Knowledge Management for Competitive Advantage, Excel Books
Publications, New Delhi.
Deep and Deep, Technology Transfer and Joint Ventures Abroad, R. R. Azad, Publications,
New Delhi.
Thomas, J Kuegler, Web Advertising and Marketing, Jr. 3rd Edition-Prentice-Hall of India,
New Delhi.
Dr. Ravi Kalakota, E-Business Roadmap for Success, Pearson Education.
Ravi Kalakota, Andrew B. Whinston, "Frontiers of Electronic Commerce", Addition-Wesley
2000.

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LESSON

8
WEB PSYCHOLOGY
CONTENTS
8.0

Aims and Objectives

8.1

Introduction

8.2

Web Psychology

8.3

Understanding the Internet Mind

8.4

Let us Sum up

8.5

Lesson End Activity

8.6

Keywords

8.7

Questions for Discussion

8.8

Suggested Readings

8.0 AIMS AND OBJECTIVES


After studying this lesson, you should be able to understand:
z

The philosophy behind the web technology

Idea about the importance and impact of internet in the society

8.1 INTRODUCTION
The first business computer appeared in 1960 and since then information technology
has changed the way business or commerce is conducted across the globe. Companies
are re-orienting themselves in the present competitive era where product life-cycles
are coming down everyday.
Globalization of markets is taking place with formation of trade blocks across the
globe, and world moving towards a global village. Complex issues of cultural divide
within even the same trade block forces the businesses to learn more about the
customer, if possible to an individual level.
From mainframes to accounting systems, the personal computer (PC) revolution, local
area networks, electronic data interchange, client/server design, and enterprise
resource planning have all had a hand in shaping today's business organization. The
past few years have been Internet years, however, when companies worldwide have
embraced a change without equal.
It is a change that promises to have more impact and be more lasting than anything we
have seen to date. Technology is setting the pace for how a company does business,
how it launches new products and enters anew market, how it deals with suppliers,
and how it communicates with customers and others in the new marketplace.
We are now living in the ICE (Information Communication of Entertainment) age
which reflects synergetic combination of Information, Communication and

Entertainment. The primary technology for this transformation is Internet-the global


data network.
The customer has become more important with the advent of Internet and World Wide
Web (WWW). These customers fall in the high-income groups and are more
demanding on quality and price. This makes the business very unconventional and
highly unpredictable.

8.2 WEB PSYCHOLOGY


Television may have been the greatest invention that rocked planet earth in the 1900s
(although many things which contributed to televisions birth were discovered and
invented as early as the 1800s). However, its the internet boom of the 20th century
that is causing the hullabaloo in todays world.
With the Internet, what was impossible before has become possible now. What was
impossible to know then has become possible now, with just a click of your fingertip.
This is the new era of knowledge and of information explosion. This is the era of the
internet revolution.
One thing significantly brought about by the internet craze is the possibility of buying
and selling almost anything through the use of computers. You just need a computer
set, a good internet connection and voila! Before the internet, the catchphrase was let
you fingers do the walking. Today, you sure can use your fingers to do the walking
for you, but not through the telephone system. The internet has revolutionized the way
people buy and sell their products.
Imagine this: A digital camera, its model, and all its specifications right before you
eyes. And you just need to click your mouse to get all other information you want
before deciding on the purchase. So, you want to buy a tent dress but you do not have
the time to go to the department store? Shop right in the privacy of you home. Surf the
internet, look for the dress style you want, indicate your size and color preference,
make arrangements as to how it is to be purchased, whether cash on delivery or
through credit cards and there you are. Did it take you longer than 20 minutes?
The revolutionary method of buying and selling things through the internet has given
rise to internet marketing. Internet marketing is just like your ordinary advertisement
copies published by your local newspapers. But this time, it takes more than the
ordinary way of advertising. Internet marketing is more technology-savvy, more
persuasive and more strategic.
In marketing products or ideas through the internet, the seller does not sell the
products pointblank. Instead, the seller makes you feel like he is offering you an
opportunity that you should not miss. He is not offering you the product, but a
lifestyle that goes with the product.
While marketing has moved on from the newspapers, to the radios and to the boob
tubes, and now to the computer through the internet, its basics have not changed
much. The basics or the psychology behind marketing remains the same, whatever
media is involved. The strategy has only been improved as it can now reach a greater
number of people from all walks of life.
After you read this, you will find out that there is no secret to the psychology of
marketing after all. So what are the basics, and the psychology of internet marketing?
1. First and most important is the existence of a good product. While it is true that
good marketing can sell a not-so-good product, it is better to start off with a good
product or a good idea. Make sure that the product or the idea is novel. Something
that is not commonly heard or found or it may be common but you have
reinvented the product or you have found a new way of doing something.

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2. With a good product or idea in your hand, then you can proceed into concocting a
story that would sell your product or idea. Your clients or buyers will not be able
to physically see the product so you have to exert an extra effort to make them
understand, feel your product and understand its value.
The lack of physical communication between the buyer and the seller makes
internet marketing doubly hard. You have to create a mystery behind your
products; something that will catch the buyers attention at first glance.
Remember, you are competing with thousands of other products and ideas that are
reachable just with the click of the computer mouse.
You have to input dreams in your story excite your buyers and make them feel
you are offering them an opportunity they wouldnt get elsewhere.
3. You have to present your buyers with an offer they could not resist. Box in your
offer and make the presentation complete, leaving the buyer and his questions,
answered and satisfied. Provide everything that your prospective buyer would
need before deciding on you product.
The benefit of internet marketing goes beyond the imagination. You can buy and
sell whatever you want, the fastest possible time and the easiest possible way. Use
it to your advantage.
Check Your Progress 1
State whether the following statements are true or false:
1. The first business computer appeared in 1990.
2. While marketing has moved on from the newspapers, to the radios and to
the boob tubes, and now to the computer through the internet, its basics
have not changed much.

8.3 UNDERSTANDING THE INTERNET MIND


There is a big influence of technique on our daily life. Electronic devices, multimedia
and computers are things we have to deal with everyday. Especially the Internet is
becoming more and more important for nearly everybody as it is one of the newest
and most forward-looking media and surely the medium of the future.
Therefore we thought that it would be necessary to think about some good and bad
aspects of how this medium influences us, what impacts it has on our social behaviour
and what the future will look like.
The Internet changed our life enormously, there is no doubt about that. There are
many advantages of the Internet that show you the importance of this new medium.
First we have to make a differentiation concerning the usage. You can use the Internet
at home for personal or you at work for professional usage. Lets come to the first. To
spend a part of our day on the Internet is for many people quite normal. They use this
kind of medium to get information about all kinds topics. Maybe some of them are
interested in chatting, probably they are members of a community.
Whatever you are looking for, you will find it. Even if you want to have very specific
information, you will find it in a short time. Normally, you often have to send a letter,
than you have to wait for the reception of the reply, or you have to make some
telephone calls and so on. In any case, the traditional way is the longer one. To put
your own information on the Internet is also possible. Create your own homepage, tell
other users about your interests, what you want, thats no problem at all.
As we all know, software costs a lot, if you buy it legal. Free software, free music is
available on the Internet. You just have to download the program, the mp3-file or
whatever and thats it. Why do you want to pay more as you need to? Special websites

are created just to give you the newest programs, or to tell you where you can get it
from. Napster might actually be the most famous one.
The computer is a fix part of every modern office and the greatest part has also an
access to the Internet. Companies already present their products, their services on the
Internet and so they get more flexible.
The next advantage is the faster development. Many universities and research
institutions are also linked. They are able to exchange experiences, novelties and often
they start new projects together. If they are linked, they can save time and money.
Especially at the business sector knowledge is power. If you are the leader of a
product, of a technology or just of an idea you are able to make a lot of money. To get
into this position, the Internet can play an essential part. Companies all over the world
are online.
If you want, it is no problem for you to exchange experiences, you will hear new
things, you will see some facts from another point of view. For this reason you will
find new solutions, new ways to go, so take this chance!
Learning by doing, everybody knows this phrase and its still an essential part
concerning the Internet. Children also use the Internet, most of the time they will
play over the Internet, but they learn to work with the computer.
There is only one way to learn something, you have to do it. Even its the first contact
with the computer, after a few minutes the person will know that the computer-mouse
is no animal running on the monitor. He or she learns to write on the keyboard, to
navigate, to open and close programs, to save data... within hours.
Try to do that on a normal computer course for beginners, you will need more time
and the most important fact, its not as funny as surfing on the Internet and so they
participants are less motivated.
In any case, everybodys private situation is different. For many women their own
children are the main reason for staying at home. Nowadays this wont be a problem
any more, you can do work on your computer at home, called tele-working. Also men
take this opportunity to work at home. What are the consequences, the advantages of
tele-working? Sure, if you have a family, you can spend more time at home, probably
you can spend more time with your children.
Next is, that you can organize every day in the way you want to. Meetings at the
company are reduced to a minimum. Tele-working is also an advantage for the owner
of the company. Official studies substantiate that people who work at home are more
motivated than their colleagues at the office.
You see, the Internet is really a very positive medium. Use the Internet and discover
the advantages of this new, forward-looking medium!
Another advantage of the internet is that you can join a community. You can create
new social contacts all over the world, which you could not do so easy without the
internet.
Such communities can also help people who can not go out to find friends in the real
life because they are disabled. Therefore they can chat with other people via the
internet. Sometimes it is also easier for people, who are afraid to look into the others
face while talking, to chat with a person that they do not know.
There is something between them which makes it easier for them to communicate. It
also does not matter if you have a terrible appearance because you can pretend to be
whatever you want. You can also change your gender and your age to talk about
topics which you do not normally do.

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However, there are no time and place limitations and there are no boundaries, both
geographical and political. You can chat with people in Australia and you have
freedom of your mind in a way.
Moreover the internet is much cheaper than the real life, e.g. phoning a friend in
Australia costs more than to chat with him.
The e-mail has replaced the traditional letter. You do not have to buy stamps anymore
and it is much faster and also for free. You can also add files to your E-mail and thats
why a big data transfer is possible. Therefore you do not have to send disks with
information around the world anymore and you have your information in a digital
way.
Another free service of the internet is sending SMS. You can save a lot of money if
you do not send it with your mobile phone. You also have the opportunity to register
as a user. Then you can use more things, e.g. sending E-postcards, I-messages
(messages between registered users), and lead an address book.
You can also place your digital photos in the internet. With a password and a login
name your friends can look at your photos without sending them to them.
Another important part is online gaming. You can play with people from all over the
world and share your knowledge.
Additionally, another big advantage of the internet is the easy access to information.
Online reference books and dictionaries replace the way to the bookshop or to the
library. It is again cheaper to search for information in the internet than to buy a book
that is old after one year. In the internet a lot of information is renewed and up to date.
You can also find information which is very new and a book does not exist yet.
Moreover you can read the daily newspapers from all over the world, sometimes for
free. You do not have to buy them anymore. In addition, most newspaper sites have an
archive in which you can search for old articles.
However, the internet is also a big advertising company. A lot of enterprises have a
homepage with ads and support opportunities. On some of them you can order
products online. Then you do not have to go to the city anymore. You avoid waiting in
front of the cash because of a long queue.
Moreover, you can get the newest stock exchange courses because the stock exchange
in the Internet is always the most current one. You also have the ability to tell the
computer to buy shares when the course is down.
Besides you can learn with the internet. CBTs (Computer Based Training) already
exist but you can also join an internet course with other members. Furthermore you
can hold video conferences which mean that e.g. your teacher is sitting in his office.
This is very important in the medical sector because doctors from all over the world
can join an operation. So specialists can give tips and help other doctors to complete
the operation successfully. But this is only available because of the internet which is
much faster.
The internet is a database full of information and offers us a lot of services, sometimes
for free. This makes our life easier and sometimes also cheaper.
Clicking on the Internet-Button is getting more and more thrilling nowadays.
Sometimes it is a real adventure not being sure if you have downloaded a virus or if it
is only a hoax. You even cannot be sure to be alone if you are alone.
Is there someone else working on my computer or is it only me? To have more
security you have to install a firewall, buy anti-virus-programmes and update them
regularly. So you have to spend much money only for preventing a virus-caused
breakdown or hacker-attacks. It is annoying not being sure if the money you have

spent will prevent all those things or if there is already a new virus and a new way
hacking into computers.
This is no more an investment into security it is a steady consumption which will not
end. Some people even have to take up a loan to buy a computer. They are forced to
buy one. Otherwise they maybe would not be able to stay in their job. What will the
poor people do? They will be rarely informed about news and the space between rich
and poor will become bigger and bigger.
Having downloaded the latest anti-virus-program it will not prevent meeting bad
people on the internet. If you chat with someone you cannot be sure about the truth of
his/her words. Most people cheat emotions, cheat about their appearance, age, job.
That can be funny but if you want to meet someone talking to each other seriously it
can be hard to do so. Is it a man, is it a woman or is it someone already known? You
never can be sure. Is that something on the other side already hacking into the
computer reading personal information? If you get to a web site of a bank is it a real
bank or only a faked one? There have to be some signs which identify an original
website reliably.
Besides losing our social abilities we are also losing our every-day-abilities. The
computer is a nanny, a dictionary, an information centre, a job, a shopping centre.
Nobody has to know anything about everyday business because the computer does it
for us.
Internet user are becoming younger and younger. For children it is no problem to
work with a computer. They just accept "him" as partner. But what do the older
people do? Some even do not know how to switch the computer on. Some people who
are afraid of the computer.
They think everything they do is wrong and the computer is breaking down on
purpose. For these people the computer is already too complex. There has to be
something like a computer for beginners. Otherwise there will always be some people
who do not want to know how to use the computer because there is too much to know
about it.
There are people who do not read the paper in the morning any more. They are
reading the e-paper. Even in the morning they are sitting in front of the computer and
not talking to each other while drinking a cup of tea. In the future there will be more
and more e-papers and the newspapers will disappear.
Some are beginning to talk to their computer (Come on, lets work!) but they are not
any more able to talk to each other. While chatting in the internet you are frequently
using abbreviations, uncompleted sentences and so on. This leads to speaking
disabilities in everyday life.
One of the most negative aspects of the impact of the internet on our daily life is that
it alters the social behaviour, habits and abilities of people. Especially children are
often badly influenced by the internet.
The world of the world wide web and virtual space is going to become more important
with every year and everybody should be able to use this tool even children. They
should know how to get information, how they can buy something on the web, where
they can meet people online.
They should be able to use the internet because if they are not, they are going to have
great difficulties with getting on in their lives without knowing how to use the internet
later on. Because it is a very powerful media and this is going to be the main media in
the future.
The internet will never replace the real world and therefore it is important that
children see that the internet is a great tool if you know how to handle it but it should

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not be a replacement for real friends, for a real life. Its the parents duty to tell their
children so.
Parents should not just put their children in front of a computer and say Oh well,
thats the internet, go on, have some fun and be quiet. The internet was not made for
children and so it should not be used as a babysitter.
You can never be sure what the child will get to see when it is online without an adult
sitting next to it. There is so much harmful, offending and simply disgusting material
on the internet that it is totally careless when you let your children surf through the net
all by themselves.
It is very difficult to differ between the good and bad aspects of internet. There are
good and bad things about every service of the internet. If you chat you can meet
many interesting people which come from all over the world. Distance is not
important any more. You can meet people which are not able to find friends in reality
because of their appearance.
In cyberspace there is no appearance - the character of a person counts. But you also
can meet people, who cheat on you and fool you. That can be funny, but it is not if
you want to meet real, divine friends. Sometimes, if you meet your online friends it
can be very thrilling. You make your own picture of your chat-partner in your mind.
And what about your friends in reality? There will be less time left for them, if you sit
in front of the PC all the day. But there is also the possibility to make your real friends
your online-friends.
Searching for information you will find a huge amount of it on every topic you are
searching for. This can be very comfortable. You only have to type in a word and you
will find everything about it. But be careful! There is also false information.
Sometimes it is hard to distinguish between true and false information.
Often you have the possibility to listen to music on the internet. You may also
download it for free. That is very cheap because you only have to pay the telephonecosts and the music is for free. What does that mean for the musicians? They will not
get all their money they would normally receive. That is not too dangerous for the
well-known musicians but it can become dangerous to the little ones who cannot
afford to lose a part of their income.
What about communicating with an online-friend? You will send him/her an email. It
is faster than a letter, cheaper than a telephone call and easier to use than a radio set.
But: Is the encryption-code secure enough? Many hackers will try to read the message
you send to your friends. This leads to the next problem of the internet: How can you
provide privacy in a non- private world? Everybody wants to know everything about
everyone. How can you say: This is my private zone, nobody can get into it. A few
minutes later someone will try to get into the privacy-zone. Why? Everyone thinks
there must be something very interesting and secret inside this zone. Nothing is more
interesting than a forbidden place.
There is some special anonymity about the internet. You may tell anything about
yourself and everyone will believe you if nobody checks the information. You also
may swap your gender and nobody will recognise it.
What will happen, if you are ill and cannot leave the house? No problem! You can do
everything on the internet without leaving the house. You can do the shopping, meet
friends and so on. The only problem is the way of paying. It is very easy, you only
have to type in your credit card-number and the goods will be paid. But some
transmission techniques are not very safe and so someone could read your credit cardnumber and use it to buy things himself. You always have to inform yourself about
the transmission-techniques to be sure about security. Otherwise you may pay for
being uninformed later on.

This leads to the costs of the internet. The only good about it is that the surf-cost are
low (depending on the provider). But anything else is very cost-intensive. You have to
buy anti-virus-programmes, software, computer, And that is not enough! Internet is
developing very fast for this you have to update the programmes regularly. You will
also not abandon the option to get a faster computer.
The internet does not care about time or distance. Everyone can be online every time
and communicate with everyone everywhere. Though you have the possibility to meet
many people on the internet frequent use of this will cause loneliness because you
wont have real friends anymore.
It is very difficult to give children access to the internet. There are many things which
are not suitable for children. Either you sit next to them during surfing or you believe
in the internet that it will not show harmful things and in the children that they will not
try to find harmful things.
Check Your Progress 2
Write the full form of the following abbreviations:
1. ICE

..

2. WWW ..
3. CBT

..

8.4 LET US SUM UP


The internet has revolutionized the way people buy and sell their products. The
revolutionary method of buying and selling things through the internet has given rise
to internet marketing. Internet marketing is more technology-savvy, more persuasive
and more strategic. The Internet changed our life enormously, there is no doubt about
that. To put your own information on the Internet is also possible. Free software, free
music is available on the Internet. To get into this position, the Internet can play an
essential part. Children also use the Internet, most of the time they will play over the
Internet, but they learn to work with the computer. You see, the Internet is really a
very positive medium. You can also place your digital photos in the internet.
Additionally, another big advantage of the internet is the easy access to information.
In the internet a lot of information is renewed and up to date. Besides you can learn
with the internet. CBTs (Computer Based Training) already exist but you can also join
an internet course with other members. There is some special anonymity about the
internet. The internet does not care about time or distance. It is very difficult to give
children access to the internet.

8.5 LESSON END ACTIVITY


Describe the importance and impact of internet in modern society.

8.6 KEYWORDS
World wide web: It is an architectural framework of information system which offers
the exchange of documents via HTTP.
Internet: It means a network infrastructure that is built on certain standards, which are
followed by all participants to connect to each other.
E-mail: A process to send information in a digital way.

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8.7 QUESTIONS FOR DISCUSSION


1. The internet has revolutionized the way people buy and sell their products.
Justify the statement.
2. What is the psychology of internet marketing?
3. How internet changed our life?
4. Discuss the role of internet in the business sector.
5. Discuss the impact of internet on children.

Check Your Progress: Model Answers


CYP 1
1. False
2. True
CYP 2
1. Information Communication of Entertainment
2. World Wide Web
3. Computer Based Training

8.8 SUGGESTED READINGS


Harish Chandra Chaudhary, Knowledge Management for Competitive Advantage, Excel Books
Publications, New Delhi.
Deep and Deep, Technology Transfer and Joint Ventures Abroad, R. R. Azad, Publications,
New Delhi.
Thomas, J Kuegler, Web Advertising and Marketing, Jr. 3rd Edition-Prentice-Hall of India,
New Delhi.
Dr. Ravi Kalakota, E-Business Roadmap for Success, Pearson Education.
Ravi Kalakota, Andrew B. Whinston, "Frontiers of Electronic Commerce", Addition-Wesley
2000.

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The Internet and the Law

LESSON

9
THE INTERNET AND THE LAW
CONTENTS
9.0

Aims and Objectives

9.1

Introduction

9.2

The Internet and the Law

9.3

Copyright

9.4

Censorship

9.5

Privacy

9.6

Jurisdiction

9.7

Do's and Don'ts on Web

9.8

Cyber Crimes

9.9

9.8.1

Frequently used Cyber Crimes

9.8.2

Harassment and Stalking

Cyber Crime Cases


9.9.1

Case 1: SCO vs IBM

9.9.2

Case 2: SCO vs Novell

9.10

Let us Sum up

9.11

Lesson End Activity

9.12

Keywords

9.13

Questions for Discussion

9.14

Suggested Readings

9.0 AIMS AND OBJECTIVES


After studying this lesson, you should be able to:
z

Overview of the internet and the law

Idea about copyright, censorship, privacy and jurisdiction

Do's and Don'ts on Web

9.1 INTRODUCTION
The technological basis of e-commerce is basically Web client/server middleware, or
what is called three-tier architectures. The client tier is the Web browser involving
some type of form processing. The middle tier is the Web server, often with
transaction processing. The Web server in turn links to the third tier, a database
processing the order information.

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Some of the issues are strictly Internet-related, such as domain names and trademarks,
linking and framing, clickware (and shrinkware), and metatag use. Others are
traditional issues applied to the Internet, such as copyright, contracts, consumer
protection, privacy, taxation, regulated industries and jurisdiction.
E-commerce site development, its advertising, electronic transaction, money
transactions and such involve many legal issues, which need to be taken into account
step by step. Before developing an e-commerce site a registered domain and a
registered trademark should be established.
There must be some copyright protection on the site. The business must ensure that it
displays the terms and condition/policies within its site. Security involving the privacy
of a user's data is always one of the main concerns while doing business online.
Defining rules and regulations for the advertisement of the site by placing banners on
other known sites is another. It is of great value when dealing with such complex
issues to consult an attorney who specializes in the issues of cyberspace.

9.2 THE INTERNET AND THE LAW


The Internet is a growing and a continually evolving creature that will live on in
perpetuity. As such, it would be wise to ponder the e business legal and Internet
marketing ethical issues of b2b b2c. Whatever is written and published online will be
there forever. Imagine the billions upon billions of text information pages that are and
will be stored for a long time.
There is even a site where you can go Way Back to check out archives of other
websites and view pages that were created at the beginning of their infancy.
Additionally, video, films, movies, and audio in various applications formats are also
viewable.
Now, with the new wireless web mail from cell phones and other pda communication
devices, the Internet will be affecting more lives than ever before. Security and
privacy concerns along with e-business regulatory issues will become more prevalent.
It will become more difficult to figure out who you can trust online; with all the
unethical, illegal, and Internet marketing and online advertising frauds and e-business
email scams.
More than 100 countries now enjoy Internet access, and a recent survey reported that
there are more than 20 million Internet hosts worldwide. The number of Internet users
is currently estimated to be in the region of 100 million people.
The exponential growth of the Internet and online activity raise a number of new
regulatory issues and legal questions. How does copyright apply to digital content?
How can national laws apply to activities in cyberspace? Can privacy and data
protection exist on the Web? Can electronic commerce really be secure? Should
governments tax cyber trade? Can cyberspace be regulated by one, or by many
authorities? In seeking to apply the law to the Internet, problems arise owing to the
fact that most laws largely apply to the pre-cyberspace world.
In the modern era of electronic technology, many people want to get their work done
quickly with little effort. At times, people forget or do not consider the legal and
ethical values of their procedures. In traditional commerce, it's not easy to start a
business.
You must implement strategies that follow rules and regulations enforced by
government. Electronic commerce makes it possible to do almost any kind of business
in a very simple way. What makes it simple? The reason is that existing legal
frameworks and enforcement mechanisms are not strong.

E-commerce presents a world of opportunity for doing businesses, reaching global


markets and purchasing without leaving the home or office. E-commerce can provide
opportunities to improve business processes, just as phones, faxes and mobile
communications have in the past.
However, just as any new business tool has associated issues and risks so does
e-commerce. It's important to understand the legal issues and potential risks to ensure
a safe, secure environment for trading with customers and other businesses.
The issue of law on the Internet is a complex one. Between the two all-or-nothing
extremes lies a broad spectrum of possibilities. Many people revel in the freedom to
express themselves and the freedom from prohibitions such as zoning restrictions that
the Internet apparently affords. With no law at all, however, the Internet would be no
place to conduct business or pleasure. Laws give people certainties about their rights
and responsibilities: they make life more predictable.

9.3 COPYRIGHT
Many attempts have been made to address the issues related to copyrights on digital
content. E-Commerce has a tremendous impact on copyright and related issues, and
the scope of copyrights is affecting how e-commerce evolves. It is essential that legal
rules are set and applied appropriately to ensure that digital technology does not
undermine the basic doctrine of copyright and related rights.
From one perspective, the Internet has been described as the world's biggest copy
machine. Older technologies such as photocopying, recording and taping are bound by
rules and regulations regarding quantity, content, quality and time constraints. In
contrast, on the Internet one person can send millions of copies all over the world.
Generally, a trademark can be owned by an individual, a company, or any sort of legal
entity. When someone else tries to use that trademark (e.g., your distinctive name or
logo) without authorisation, it could be considered an illegal dilution of the distinctive
trademark. If someone uses a trademark in such a way as to dilute the distinctive
quality of the mark or trade on the owner's reputation, the trademark owner may seek
damages.
Some Web-based applications have enabled large-scale exploitation of music samples
and audio formats. Software that is available free of cost on the Net allows the transfer
of songs and videos without the authorization of rights holders (e.g. Napster, MP3
Providers). Moreover, CD burners and portable MP3 players allow copyright
violations to occur rather easily.
A number of important recent developments have occurred in the field of copyright
and related issues that have far-reaching implications for the industry, and are being
addressed in legislatures, judiciaries and international forums.
During the last couple of years, new laws have passed in some countries to ensure
effective protection and enforcement of rights in the digital era. At the same time,
copyright industries are also adapting their business methods and uses of technology
to exploit digital opportunities, while guarding against new risks.
A Pew Research Center survey, conducted among roughly 2,500 Americans through
March and May 2003, indicates that 35 million US adults download music files online
and about 26 million share files online. The downloading population has grown by
approximately 5 million users since February of 2001. Ultimately, the music
industry's war on illegal downloading may never be won.

9.4 CENSORSHIP
Censorship is a word of many meanings. In its broadest sense it refers to suppression
of information, ideas, or artistic expression by anyone, whether government officials,

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church authorities, private pressure groups, or speakers, writers, and artists


themselves. It may take place at any point in time, whether before an utterance occurs,
prior to its widespread circulation, or by punishment of communicators after
dissemination of their messages, so as to deter others from like expression.
In its narrower, more legalistic sense, censorship means only the prevention by
official government action of the circulation of messages already produced. Thus
writers who "censor" themselves before putting words on paper, for fear of failing to
sell their work, are not engaging in censorship in this narrower sense, or are those who
boycott sponsors of disliked television shows. Yet all of these restraints have the
effect of limiting the diversity that would otherwise be available in the marketplace of
ideas and so may be considered censorship in its broadest sense.
There are almost as many justifications offered for the suppression of communication
as there are would-be censors, but at root the motivation is always the same. It is a
fear that the expression, if not curtailed, will do harm to individuals in its audience, or
to society as a whole. Thus so-called obscene material is attacked because of a fear
that it will corrupt personal morality or perhaps even lead to deviant sexual acts.
School textbooks and library materials are sought to be purged by groups who fear
that they may inculcate subversive values in children. Information concerning national
security is controlled by government, with particular severity in wartime, for fear that
its revelation may aid an enemy. In the judicial system, pretrial publicity about a
crime may jeopardize a fair trial.
Publication of personal information by police (such as the names of rape victims) or
by the press (such as one's sexual preferences) may seriously intrude on one's right to
privacy. The fear of such consequences, real or imagined, is what drives the censorial
impulse.
Censorship has been practiced in both the narrower and the broader senses as long as
there have been organized cultures. Those societies which have been most confident
of their principles and of the loyalty of their members have allowed the greatest
freedom from censorship, for they have been the least fearful of the consequences of
dissent.
In societies whose values have not been fully accepted by their people or whose
leadership rests on shaky foundations, the heaviest hand of censorship has fallen. The
relative prevalence of censorship is one of the features that has most distinguished
autocratic from democratic societies and is most obvious in the thorough going
preventive censorship practiced today in nations such as Communist Albania.
Nevertheless, even the freest of nations find some forms of censorship necessary.

9.5 PRIVACY
While shopping on the Internet, most people typically do not think about what is
happening in the background. Web shopping is generally very easy. We click on a
related site, go into that site, buy the required merchandise by adding it to our cart,
enter our credit card details and then expect delivery within a couple of days.
This entire process looks very simple but a developer or businessmen knows exactly
how many hurdles need to be jumped to complete the order. Customer information
has to pass through several hands so security and privacy of the information are a
major concern.
The safety and security of a customer's personal information lies within the hands of
the business. Therefore businesses have to give the customer first their guarantee, and
second peace of mind that the information passed over is of no risk to any invading
eyes.

In traditional and online trading environments, consumers are entitled to have their
privacy respected. Websites should provide the customers with choices regarding the
use of their personal information, and incorporate security procedures to limit access
to customer information by unauthorized parties.
Privacy policies and procedures should be clearly explained to customers. Although
respecting consumer privacy rights is a legal requirement, it also represents good
business practice. If customers trust a site and business then they are more likely to
trade with it.
Many people are not willing to disclose their personal information on the Web. It is up
to individuals to decide how much personal information they are willing to disclose
and how it might be used. Interestingly, one survey found that many people who
disclose personal information do so in hope of financial benefit, such as winning a
sweepstakes.
At the moment, most online privacy policies are produced by private businesses for
individual companies. Governments are developing legislation to support and
strengthen the privacy protection measures of many businesses. These initiatives are
aimed at regulating the storage, use and disclosure by businesses of personal
information.
Privacy legislation is designed to protect a person's personal information. The privacy
laws of their host country affect overseas companies. Every organization should be
very careful while applying terms and conditions for the electronic transaction for
Internet users.
Privacy and security policies not only reflect the organizations practice but also the
rules and regulations for doing business with the company. Major issues regarding the
legalization of electronic transactions include the following:
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Ensure proper online contracts.

Record retention obligations.

Original documentation, in terms of TAX and VAT requirements.

Import/export regulations.

Exchange control regulation.

Foreign data protection law.

9.6 JURISDICTION
Electronic transactions separate e-business from traditional types of businesses. When
a transaction takes place, who has jurisdiction? Who has the authority to apply law
over the transaction?
For example, if you buy a laptop in your local computer store, you know your legal
rights. If the computer does not work when you take it home, and the store refuses to
settle up, then you can probably take the dispute to your local small claims court.
But if you buy the same computer online, from a vendor on the other side of the
world, perhaps through a dealer based in yet a third country, then your rights are a lot
less clear. Which country's protection laws apply: yours, those in the vendor's home
country, or those of the intermediary? Without knowing which particular set of laws
apply, it's impossible to know whom to sue. "Small claims courts don't work in
cyberspace," according to Ron Presser of the American Bar Association.
A little legislation can go a long way toward helping parties to establish better
boundaries to work within. When a transaction that takes place between two different
parties located in two different countries goes wrong then a number of complex
questions arise.

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This is not the first time the question of extra-territorial jurisdiction over Web content
has been raised. In November of last year, Felix Somm, ex-manager of CompuServe
Deutschland, was cleared on appeal of pornography charges brought against him in
Germany after newsgroups carried on parent company CompuServe's US servers were
found to contain pornographic material.
The judge determined that it was technically impossible for Somm to close the illegal
newsgroups in question. Following in the footsteps of the CompuServe's case, Yahoo
is arguing that it would be technically impossible to block only French citizens from
access to its online auctions if should the auctions contain objectionable items.

9.7 DO'S AND DON'TS ON WEB


You've probably read about some of the Internet and e-mail fraud schemes out there,
though. Maybe you sometimes even feel hesitant about going online? You're not
alone: recent studies show that there are a lot of people who are feared about the web
technology. But it is not that bad. The World Wide Web and e-mail have opened a
wonderful world for us. Communicating with friends and family, researching
genealogy, booking vacations, chatting with people from around the world...the virtual
world of the Internet is becoming home to more and more every year. You should use
the internet more cautiously. With a little education on the subject, you can surf the
web safely and avoid e-mail pitfalls.
DO

DO NOT

Do use fake names to identify yourself

Do not give out personal information

Do set up separate accounts for email or


messaging

Do not have in person meetings with people


you don't know

Do keep secrets from strangers

Don't tell your phone number

Do check up on your kid's Internet use

Don't tell your address

Do place the computer in a public spot

Don't tell your city

Do consider using prohibitive software

Don't tell where your parents work

Do believe that strangers on the Internet lie

Don't tell what team you belong to

Do tell your parents if someone in a Chat makes


you feel uncomfortable

Don't tell what school you go to

Do tell your parents or police if someone sends a Do not erase evidence of a crime
child nasty photos (pornography)
Do consider not letting anyone in the family use
chat rooms with strangers

Do not keep secrets for strangers

Do limit the time your kids can be on the Internet Do not let your child use the Internet
unsupervised
Do remember that teens and quiet or lonely
children are most at risk

Do not be fooled by strangers who say they


understand you and your parents do not.

Check Your Progress 1


1. Who can own a trademark?
...
...
2. Why privacy legislation is designed?
...
...
3. Write two issues regarding the legalization of electronic transactions.
...
...

9.8 CYBER CRIMES


Computer crime, cybercrime, e-crime, hi-tech crime or electronic crime generally
refers to criminal activity where a computer or network is the source, tool, target, or
place of a crime. These categories are not exclusive and many activities can be
characterized as falling in one or more category. Additionally, although the terms
computer crime or cybercrime are more properly restricted to describing criminal
activity in which the computer or network is a necessary part of the crime, these terms
are also sometimes used to include traditional crimes, such as fraud, theft, blackmail,
forgery, and embezzlement, in which computers or networks are used to facilitate the
illicit activity.
Cyber crime encompasses any criminal act dealing with computers and networks
(called hacking). Additionally, cyber crime also includes traditional crimes conducted
through the Internet. For example; hate crimes, telemarketing and Internet fraud,
identity theft, and credit card account thefts are considered to be cyber crimes when
the illegal activities are committed through the use of a computer and the Internet.
The first recorded cyber crime took place in the year 1820. That is not surprising
considering the fact that the abacus, which is thought to be the earliest form of a
computer, has been around since 3500 B.C. in India, Japan and China. The era of
modern computers, however, began with the analytical engine of Charles Babbage.
In 1820, Joseph-Marie Jacquard, a textile manufacturer in France, produced the loom.
This device allowed the repetition of a series of steps in the weaving of special
fabrics. This resulted in a fear amongst Jacquard's employees that their traditional
employment and livelihood were being threatened. They committed acts of sabotage
to discourage Jacquard from further use of the new technology. This is the first
recorded cyber crime.

9.8.1 Frequently used Cyber Crimes


When lay people hear the words "computer crime", they often think of obscene
pictures available on the Internet or solicitation of children for sex by pedophiles via
chat rooms on the Internet. The legal problem of obscenity on the Internet is mostly
the same as the legal problem of obscenity in books and magazines, except for some
technical issues of personal jurisdiction on the Internet.
Similarly, many crimes involving computers are no different from crimes without
computers: the computer is only a tool that a criminal uses to commit a crime. For
example,
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Using a computer, a scanner, graphics software, and a high-quality color laser or


ink jet printer for forgery or counterfeiting is the same crime as using an oldfashioned printing press with ink.

Stealing a laptop computer with proprietary information stored on the hard disk
inside the computer is the same crime as stealing a briefcase that contains papers
with proprietary information.

Using the Internet or online services to solicit sex is similar to other forms of
solicitation of sex, and so is not a new crime.

Using computers can be another way to commit either larceny or fraud.

Frequently used Cyber Crimes are listed below:


Unauthorized access to computer systems or networks
This activity is commonly referred to as hacking. The Indian law has however given a
different connotation to the term hacking, so we will not use the term "unauthorized
access" interchangeably with the term "hacking".

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Unauthorized use of computers tends generally takes the following forms:


1. Computer voyeur: The criminal reads (or copies) confidential or proprietary
information, but data is neither deleted nor changed.
In 1999, the Melissa virus infected a [possibly confidential] document on a
victim's computer, then automatically sent that document and copy of the virus via
e-mail to other people. Subsequently, the SirCam and Klez malicious programs
made a similar release of [possibly confidential] documents from a victim's
computer. These malicious programs are a new way to release confidential
information from a victim's computer, with the confidential information going not
to the author of the malicious program, but to some person unknown to the author
of the malicious program.
2. Changing data: This kind of an attack involves altering raw data just before it is
processed by a computer and then changing it back after the processing is
completed. Electricity Boards in India have been victims to data diddling
programs inserted when private parties were computerizing their systems. For
example, change a grade on a school transcript, add "money" to a checking
account, etc. Unauthorized changing of data is generally a fraudulent act. It is
also known as data diddling.
3. Deleting data: Deleting entire files could be an act of vandalism or sabotage.
4. Denying service to authorized users: On a modern time-sharing computer, any
user takes some time and disk space, which is then not available to other users. By
"denying service to authorized users", I mean gobbling unreasonably large
amounts of computer time or disk space, for example:

By sending large amounts of junk e-mail in one day, a so-called "mail


bomb", Email bombing refers to sending a large number of emails to the
victim resulting in the victim's email account (in case of an individual) or
mail servers (in case of a company or an e-mail service provider) crashing.
In one case, a foreigner who had been residing in Shimla, India for almost
thirty years wanted to avail of a scheme introduced by the Shimla Housing
Board to buy land at lower rates. When he made an application it was
rejected on the grounds that the 169 schemes was available only for citizens
of India. He decided to take his revenge. Consequently he sent thousands of
mails to the Shimla Housing Board and repeatedly kept sending e-mails till
their servers crashed.

By having the computer execute a malicious program that puts the


processing unit into an infinite loop, or,

By flooding an Internet server with bogus requests for webpages, thereby


denying legitimate users an opportunity to download a page and also
possibly crashing the server. This is called a Denial of Service (DoS) attack.
This involves flooding a computer resource with more requests than it can
handle. This causes the resource (e.g. a web server) to crash thereby denying
authorized users the service offered by the resource. Another variation to a
typical denial of service attack is known as a Distributed Denial of Service
(DDoS) attack wherein the perpetrators are many and are geographically
widespread. It is very difficult to control such attacks. The attack is initiated
by sending excessive demands to the victim's computer(s), exceeding the
limit that the victim's servers can support and making the servers crash.
Denial-of-service attacks have had an impressive history having, in the past,
brought down websites like Amazon, CNN, Yahoo and eBay.

During 1950-1975, computer programs and data were generally stored on cardboard
cards with holes punched in them. If a vandal were to break into an office and either

damage or steal the punch cards, the vandal could be adequately punished under
traditional law of breaking and entering, vandalism, or theft.
However, after about 1975, it became common to enter programs and data from
remote terminals (a keyboard and monitor) using a modem and a telephone line. This
same technology allowed banks to retrieve a customer's current balance from the
bank's central computer, and merchants to process credit card billing without sending
paper forms. But this change in technology also meant that a criminal could alter data
and programs from his home, without physical entry into the victim's building. The
traditional laws were no longer adequate to punish criminals who used computer
modems.
Most unauthorized use of a computer is accomplished by a person in his home, who
uses a modem to access a remote computer. In this way, the computer criminal is
acting analogous to a burglar. The classic definition of a burglary is the breaking and
entering of a building with the intent to commit a felony therein.
In traditional burglaries, the felony was typically larceny, an unlawful taking of
another person's property. However, in the unauthorized use of another's computer,
the criminal "enters" the computer via the telephone lines, which is not breaking into
the building. Either the burglary statute needed to be made more general or new
criminal statute(s) needed to be enacted for unauthorized access to a computer.
Legislatures chose to enact totally new statutes.
To successfully use a remote computer, any user (including criminals) must have both
a valid user name and valid password. There are several basic ways to get these data:
z

Call up a legitimate user, pretend to be a system administrator, and ask for the
user name and password. This sounds ridiculous, but many people will give out
such valuable information to anyone who pretends to have a good reason. Not
only should you refuse to provide such information, but please report such
requests to the management of the online service or the local police, so they can
be alert to an active criminal.

Search user's offices for such data, as many people post their user name and
password on the side of their monitor or filing cabinet, where these data can be
conveniently seen.

Write a program that tries different combinations of user names and passwords
until one is accepted.

Use a packet "sniffer" program to find user names and passwords as they travel
through networks.

Search through a garbage bin behind the computer building in a university or


corporate campus, find trash paper that lists user names and passwords.

A disgruntled employee can use his legitimate computer account and password for
unauthorized uses of his employer's computer. This can be particularly damaging
when the disgruntled employee is the computer system administrator, who knows
master password(s) and can enter any user's file area. Such disgruntled employees can
perpetrate an "inside job", working from within the employer's building, instead of
accessing a computer via modem.
The computer voyeurs, like petty criminals who peek in other people's windows,
generally hack into other people's computers for the thrill of it. In the 1970s and early
1980s, many of these computer voyeurs also used technology to make long-distance
telephone calls for free, which technology also concealed their location when they
were hacking into computers. Many of these voyeurs take a special thrill from hacking
into military computers, bank computers, and telephone operating system computers,
because the security is allegedly higher at these computers, so it is a greater technical
challenge to hack into these machines.

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The criminals who change or delete data, or who deliberately gobble large amounts of
computer resources, have a more sinister motive and are capable of doing immense
damage.
Of course, there is always the possibility that a computer voyeur will "accidentally"
bumble around an unfamiliar system and cause appreciable damage to someone else's
files or programs. Traditional criminal law in the USA places a great deal of emphasis
on willful or intentional conduct, so such "accidental" damage would not satisfy the
traditional requirement of mens rea (literally "guilty mind" or criminal intent). My
personal opinion is that someone who deliberately hacks into someone else's computer
should be accountable under criminal law for whatever damage is done by the
unauthorized hacking, even if the damage is "accidental". In this regard, I would make
an analogy to a homicide that occurs "accidentally" during the commission of a
felony: the perpetrators are then charged with "felony murder": the intent to commit
the hacking constitutes the malice or intent to cause the damage.
In the 1970s and early 1980s, a common reaction was that hackers were a minor
nuisance. Then, in August 1983, a group of young hackers in Milwaukee hacked into
a computer at the Sloan-Kettering Cancer Institute in New York City. That computer
stored records of cancer patients' radiation treatment. Altering files on that computer
could have killed patients, which reminded everyone that hacking was a serious
problem. This 1983 incident was cited by the U.S. Congress in the legislative history
of a federal computer crime statute.
Altering websites
In recent years, there have been a large number of attacks on websites by hackers who
are angry with the owner of the website. Victims of such attacks include various U.S.
Government agencies, including the White House and FBI. Attacking the FBI website
is like poking a lion with a stick. <grin>
In a typical attack, the hacker will delete some pages or graphics, then upload new
pages with the same name as the old file, so that the hacker controls the message
conveyed by the site.
This is not the worst kind of computer crime. The proper owner of the site can always
close the website temporarily, restore all of the files from backup media, improve the
security at the site, and then re-open the site. Nonetheless, the perpetrator has
committed a computer crime by making an unauthorized use of someone else's
computer or computer account.
The Internet is a medium for freely sharing information and opinions. However the
criminals who trash other people's websites are acting as self-appointed censors who
deny freedom of speech to those with whom they disagree. These criminals often
make the self-serving excuse for their actions that they only attack sites sponsored by
bad corporations or bad people. However, this excuse makes these criminals into
vigilantes who serve as legislature, judge, jury, and executioner: arrogantly
determining what is in the best interests of society.
One example of punishment for the crime of defacing a website is the case of Dennis
M. Moran. On 9 March 2001, Moran (alias "Coolio"), a high school dropout, was
sentenced in New Hampshire state court to nine months incarceration and ordered to
pay a total of US$ 15000 restitution to his victims for defacing two websites:
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In November 1999, he defaced the website of DARE America, an organization


that campaigns against use of illicit drugs, whose website was in Los Angeles,
California.

In February 2000, he defaced the website of RSA Security in Massachusetts.

In February 2000, he made "unauthorized intrusions" into computers at four


different U.S. Army and Air Force installations.

Malicious computer programs


Malicious computer programs are also known as malware. It is software designed to
infiltrate or damage a computer system without the owner's informed consent. It is a
portmanteau of the words "malicious" and "software". The expression is a general
term used by computer professionals to mean a variety of forms of hostile, intrusive,
or annoying software or program.
Malicious computer programs are divided into the following classes:
Virus: A virus is a program that "infects" an executable file. After infection, the
executable file functions in a different way than before: maybe only displaying a
benign message on the monitor, maybe deleting some or all files on the user's hard
drive, maybe altering data files.
The word "virus" is also commonly used broadly to include computer viruses, worms,
and Trojan Horse programs. For example, so-called "anti-virus software" will remove
all three classes of these malicious programs.
Beginning with the Melissa virus in 1999, viruses could automatically send e-mail
with the victim's name as the alleged source.
Worm: A worm is a program that copies itself. The distinction between a virus and
worm, is that a virus never copies itself a virus is copied only when the infected
executable file is run.
Beginning with the Klez worm in early 2002, a worm could drop a virus into the
victim's computer. This kind of worm became known as a blended threat, because it
combined two different types of malicious code.
Trojan Horse: A Trojan Horse is a deceptively labeled program that contains at least
one function that is unknown to the user and that harms the user. A Trojan Horse does
not replicate, which distinguishes it from viruses and worms.
Logic Bombs: A logic bomb is a program that "detonates" when some event occurs.
The detonated program might stop working (e.g., go into an infinite loop), crash the
computer, release a virus, delete data files, or any of many other harmful possibilities.
A time bomb is a type of logic bomb, in which the program detonates when the
computer's clock reaches some target date.
To cite an example, an employee of a bank in USA was dismissed from his job.
Disgruntled at having been supposedly mistreated by his employers the man first
introduced a logic bomb into the bank's systems.
Logic bombs are programmes, which are activated on the occurrence of a particular
predefined event. The logic bomb was programmed to take ten cents from all the
accounts in the bank and put them into the account of the person whose name was
alphabetically the last in the bank's rosters. Then he went and opened an account in
the name of Ziegler. The amount being withdrawn from each of the accounts in the
bank was so insignificant that neither any of the account holders nor the bank officials
noticed the fault.
It was brought to their notice when a person by the name of Zygler opened his account
in that bank. He was surprised to find a sizable amount of money being transferred
into his account every Saturday.
E-mail related crimes
E-mail has fast emerged as the world's most preferred form of communication.
Billions of e-mail messages traverse the globe daily. Like any other form of
communication, e-mail is also misused by criminal elements. The ease, speed and
relative anonymity of e-mail has made it a powerful tool for criminals.

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Some of the major email related crimes are:


1. E-mail spoofing
2. Sending malicious codes through e-mail
3. Email bombing
4. Sending threatening e-mails
5. Defamatory emails
6. E-mail frauds
E-mail spoofing: A spoofed e-mail is one that appears to originate from one source
but has actually emerged from another source. Falsifying the name and/or e-mail
address of the originator of the email usually does email spoofing. usually to send an
email the sender has to enter the following information:
1. e-mail address of the receiver of the e-mail
2. e-mail address(es) of the person(s) who will receive a copy of the e-mail (referred
to as CC for carbon copy)
3. e-mail address(es) of the person(s) who will receive a copy of the e-mail (referred
to as CC for carbon copy, but whose identities will not be known to the other
recipients of the e-mail (known as BCC for blind carbon copy)
4. Subject of the message (a short title/description of the message)
5. Message
Certain web-based email services like www.SendFakeMail.com, offer a facility
wherein in addition to the above, a sender can also enter the email address of the
purported sender of the email.
Consider Mr. Siddharth whose email address is siddharth@hotmail.com. His friend
Golu's email address is golu@yahoo.com. Using SendFakeMail, Siddharth can send
emails purporting to be sent from Golu's email account. All he has to do is enter
golu@yahoo.com in the space provided for sender's email address. Golu's friends
would trust such emails, as they would presume that they have come from Golu
(whom they trust). Siddharth can use this misplaced trust to send viruses, Trojans,
worms etc. to Golu's friends, who would unwittingly download them.
Spreading Trojans, viruses and worms: E-mails are often the fastest and easiest ways
to propagate malicious code over the Internet. The Love Bug virus, for instance,
reached millions of computers within 36 hours of its release from the Philippines
thanks to e-mail. Hackers often bind Trojans, viruses, worms and other computer
contaminants with e-greeting cards and then e-mail them to unsuspecting persons.
Such contaminants can also be bound with software that appears to be an anti-virus
patch, e.g. a person receives an e-mail from Compose From To CC BCC Subject.
Message: information@mcaffee.com (this is a spoofed email but the victim does not
know this). The email informs him that the attachment contained with the email is a
security patch that must be downloaded to detect a certain new virus. Most
unsuspecting users would succumb to such an email (if they are using a registered
copy of the McAffee anti-virus software) and would download the attachment, which
actually could be a Trojan or a virus itself!
E-mail bombing: E-mail bombing refers to sending a large amount of emails to the
victim resulting in the victim's email account (in case of an individual) or servers (in
case of a company or an e-mail service provider) crashing. A simple way of achieving
this would be to subscribe the victim's email address to a large number of mailing
lists. Mailing lists are special interest groups that share and exchange information on a
common topic of interest with one another via email. Mailing lists are very popular

and can generate a lot of daily email traffic - depending upon the mailing list. Some
generate only a few messages per day others generate hundreds. If a person has been
unknowingly subscribed to hundreds of mailing lists, his incoming email traffic will
be too large and his service provider will probably delete his account. The simplest
e-mail bomb is an ordinary email account. All that one has to do is compose a
message, enter the email aaddress of the victim multiple times in the "To" field, and
press the "Send" button many times. Writing the e-mail address 25 times and pressing
the "Send" button just 50 times (it will take less than a minute) will send 1250 e-mail
messages to the victim! If a group of 10 people do this for an hour, the result would be
750,000 e-mails! There are several hacking tools available to automate the process of
e-mail bombing. These tools send multiple emails from many different email servers,
which makes it very difficult, for the victim to protect himself.
Threatening e-mails: E-mail is a useful tool for technology savvy criminals thanks
to the relative anonymity offered by it. It becomes fairly easy for anyone with even a
basic knowledge of computers to become a blackmailer by threatening someone via
e-mail.
In a recent case, Poorva received an e-mail message from someone who called him or
herself 'your friend'. The attachment with the e-mail contained morphed pornographic
photographs of Poorva. The mail message said that if Poorva were not to pay
Rs. 10,000 at a specified place every month, the photographs would be uploaded to
the Net and then a copy sent to her fianc. Scared, Poorva at first complied with the
wishes of the blackmailer and paid the first Rs. 10, 000. Next month, she knew she
would have to approach her parents. Then, trusting the reasonableness of her fianc
she told him the truth. Together they approached the police. Investigation turned up
the culprit - Poorva's supposed friend who wanted that Poorva and her fianc should
break up so that she would get her chance with him.
Defamatory emails: As has been discussed earlier cyber-defamation or even cyberslander as it is called can prove to be very harmful and even fatal to the people who
have been made its victims.
Email Frauds: Email spoofing is very often used to commit financial crimes. It
becomes a simple thing not just to assume someone else's identity but also to hide
one's own. The person committing the crime understands that there is very little
chance of his actually being identified. In a recently reported case, a Pune based
businessman received an email from the Vice President of the Asia Development
Bank (ADB) offering him a lucrative contract in return for Rs. 10 lakh. The
businessman verified the email address of the Vice President from the web site of the
ADB and subsequently transferred the money to the bank account mentioned in the
email. It later turned out that the email was a spoofed one and was actually sent by an
Indian based in Nigeria.
In another famous case, one Mr. Rao sent himself spoofed e-mails, which were
supposedly from the Euro Lottery Company. These mails informed him that he had
won the largest lottery. He also created a website in the name of the Euro Lottery
Company, announced n it that he had won the Euro Lottery and uploaded it on to the
Internet. He then approached the Income Tax authorities in India and procured a
clearance certificate from them for receiving the lottery amount. In order to let people
know about the lottery, he approached many newspapers and magazines.
The media seeing this as a story that would interest a lot of readers hyped it up and
played a vital role in spreading this misinformation. Mr. Rao then went to many banks
and individuals and told them that having won such a large sum of money he was
afraid for his safety. He also wanted to move into a better house. He wheedled money
out of these institutions and people by telling them that since the lottery prize money
would take some time to come to him, he would like to borrow money from them. He
assured them that the loan amount would be returned as soon as the lottery money

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came into his possession. Lulled into believing him (all thanks to the Income Tax
clearance) most of these people loaned large amounts of money to him. It was only
when he did not pay back the loan amounts to the banks that they became suspicious.
A countercheck by the authorities revealed the entire scheme. Mr. Rao was arrested.
Later, it was found that some of the money had been donated for philanthropic causes
and also to political parties!

9.8.2 Harassment and Stalking


In general, the harasser intends to cause emotional distress and has no legitimate
purpose to his communications. Harassment can be as simple as continuing to send
e-mail to someone who has said they want no further contact with the sender.
Harassment may also include threats, sexual remarks, pejorative labels (i.e., hate
speech).
A particularly disturbing form of harassment is sending a forged e-mail that appears to
be from the victim and contains racist remarks, or other embarrassing text, that will
tarnish the reputation of the victim.
It is often difficult to get law enforcement personnel and prosecutors interested in
harassment, unless threats of death or serious bodily harm are made, simply because
the resources of the criminal justice system are strained by "more serious" criminal
activities. I put "more serious" in quotation marks, because the victim of harassment
certainly is adversely affected by the harassment, therefore it is a serious matter to the
victim. But the law treats harassment as a misdemeanor, the group of less serious
crimes.

9.9 CYBER CRIME CASES


Internet technology literally changes on a daily basis. With so many new changes
happening every day at record speeds, so comes with these changes Internet disputes
among companies and individuals about Internet technologies. Three cases are
described below:

9.9.1 Case 1: SCO vs IBM


On March 6, 2003, the SCO Group (formerly known as Caldera Systems) filed a
$1 billion lawsuit in the US against IBM for allegedly devaluing its version of the
UNIX operating system. The amount of alleged damages was later increased to
$3 billion, and then $5 billion. SCO claimed that IBM had, without authorization,
contributed SCO's intellectual property to the codebase of the open source, Unix-like
Linux operating system. In May 2003 SCO Group sent letters to members of the
Fortune 1000 and Global 500 companies warning them of the possibility of liability if
they use Linux.
The claims and counter-claims made by both sides then escalated, with both IBM and
Linux distributor Red Hat starting legal action against SCO, SCO threatening Linux
users who do not take out SCO UNIX licenses, and SCO suing Novell (see also SCOLinux controversies), AutoZone and DaimlerChrysler.
On September 30, 2003, Judge Kimball (the presiding federal district judge) granted
the SCO Group's request for a delay until February 4, 2004, to file any amended
pleadings or add parties to this action. The schedule was amended again on July 1,
2005. In December 2006 the trial date was vacated pending the resolution of SCO's
litigation with Novell, all parties agreeing that SCO vs Novell would resolve issues
relating to SCO vs IBM.
In an Order Granting in Part IBM's Motion to Limit SCO's Claims dated June 28,
2006, Judge Brooke Wells (the federal magistrate judge presiding over discovery
aspects of the case) barred SCO from asserting 187 of the 298 allegedly misused items

that IBM had moved to exclude from the lawsuit for lack of specificity, stating many
of SCOs arguments and much of Mr. Rochkinds declaration miss the mark, and
comparing SCO's tactics with those of an officer who accuses a citizen of theft, but
will not disclose what the citizen is accused of stealing. Certainly if an individual
was stopped and accused of shoplifting after walking out of Neiman Marcus, they
would expect to be eventually told what they allegedly stole. It would be absurd for an
officer to tell the accused that you know what you stole I'm not telling. Or, to simply
hand the accused individual a catalog of Neiman Marcus' entire inventory and say it's
in there somewhere, you figure it out.
On August 10, 2007 Judge Kimball, who also presides over the SCO v. Novell case,
ruled that Novell, not the SCO Group, is the rightful owner of the copyrights covering
the Unix operating system. The court also ruled that "SCO is obligated to recognize
Novell's waiver of SCO's claims against IBM and Sequent". After the ruling Novell
announced they have no interest in suing people over Unix and stated "We don't
believe there is Unix in Linux".
SCO's claims
SCO's lawsuit has been consistent only in its claim of breach of contract (since the
abandonment in early 2004 of its claim of misappropriation of trade secrets). SCO's
initial claims were:
z

Misappropriation of trade secrets

Unfair competition

Interference with contract

Breach of IBM Software Agreement

On July 22, 2003, SCO amended its complaint. It added two new claims:
z

Breach of IBM Sublicensing Agreement

Breach of Sequent Software Agreement

On February 27, 2004 SCO amended the complaint again. It dropped the trade secrets
claim, but added the following claims:
z

Breach of Sequent Sublicensing Agreement

Copyright infringement

Interference with contract

Interference with business relationships

SCO's claims in press releases and interviews have changed repeatedly as the affair
has progressed. SCO has also both claimed and denied that the alleged copyright
violations involved the Linux kernel. Computerworld reported Chris Sontag of SCO
as saying:
It's very extensive. It is many different sections of code ranging from five to ten to
fifteen lines of code in multiple places that are of issue, up to large blocks of code that
have been inappropriately copied into Linux in violation of our source-code licensing
contract. That's in the kernel itself, so it is significant. It is not a line or two here or
there. It was quite a surprise for us.
SCO refuses to allow access to the samples of code containing the alleged copyright
violations except under a Non-Disclosure Agreement (NDA). SCO's NDA would not
only require that the signer keep confidential which lines of code SCO contested, but
would also require that they hold confidential any information SCO told them, even if
they already knew that information before being informed of it by SCO; all Linux
kernel developers have considered this to be far too restrictive, so none of them have

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signed it. However, at SCO's annual reseller's convention in August of 2003 they
revealed two short sections of code they alleged were copyright violations, and images
of Darl McBride's presentation of this code were soon after published on German
computer magazine publisher Heinz Heise's website.
On May 30, 2003, SCO Group's CEO Darl McBride was quoted as saying that the
Linux kernel contained "hundreds of lines" of code from SCO's version of UNIX, and
that SCO would reveal the code to other companies under NDA in July. To put this
into context, David Wheeler's SLOCCount estimates the size of the Linux 2.4.2 kernel
as 2,440,919 source lines of code out of over 30 million physical source lines of code
for a typical GNU/Linux distribution. Therefore, as per SCO's own estimate, the
allegedly infringing code would make up about 0.001% of the total code of a typical
GNU/Linux installation. SCO has since upwardly revised this figure to over a million
lines of code, however.
SCO's major claims have now been reported as relating to the following components
of the Linux kernel:
z

Symmetric Multiprocessing (SMP),

Non-uniform Memory Access (NUMA) multi-processing,

the Read-copy-Update (RCU) locking strategy,

This technique is widely believed to have been developed at Sequent


Computer Systems, who were then bought by IBM, who holds several
patents (including patent 5,442,758) on this technique.

SGI's Extended File System (XFS),

IBM's JFS journaling file system

These claims flow from the accusation of breach of contract. The contract between
IBM and AT&T (to which SCO claims to be successor in interest) allows IBM to use
the SVR4 code, but the SVR4 code, plus any derivative works made from that code,
must be held confidential by IBM. According to IBM's interpretation of the contract,
and the interpretation published by AT&T in their "$ echo" newsletter in 1985,
"derivative works" means any works containing SVR4 code. But according to SCO's
interpretation, "derivative works" also includes any code built on top of SVR4, even if
that does not contain, or even never contained, any SVR4 code. Thus, according to
SCO, any AIX operating system code that IBM developed must be kept confidential,
even if it contains nothing from SVR4.
On August 10, 2007 a federal district court judge in Utah ruled that Novell, not the
SCO Group, is the rightful owner of the copyrights covering the Unix operating
system.

9.9.2 Case 2: SCO vs Novell


On September 19, 1995, the Santa Cruz Operation bought certain rights regarding
Unix and UnixWare from Novell. These rights included the right to develop and
market new versions of UnixWare. The Santa Cruz Operation also bought the rights to
act as a licensing agent for an ancillary version of Unix. In 2000 Caldera acquired the
Server Software and Services divisions of Santa Cruz Operation, as well as UnixWare
and OpenServer technologies. Two years later Caldera changed its name to The SCO
Group.
The conflict between SCO and Novell originated in 2003, after SCO filed suit against
IBM and claimed that it owned Unix. Novell publicly responded to these allegations
on May 28, 2003 by claiming that it never sold the copyrights of Unix to SCOs
predecessor, Santa Cruz Operation. On June 6, 2003, SCO held a press conference in
which it revealed a second amendment to the asset purchase agreement between

Novell and Santa Cruz Operation. SCO claimed this amendment supports its claim
that SCO did receive the copyrights to Unix. In response, Novell issued a press release
in which it stated:
To Novell's knowledge, this amendment is not present in Novell's files. The
amendment appears to support SCO's claim that ownership of certain copyrights for
UNIX did transfer to SCO in 1996. The amendment does not address ownership of
patents, however, which clearly remain with Novell.
While SCO publicly claimed victory, behind the scenes a series of heated letters were
sent back and forth. These letters reveal that Novell continued to believe that it was
still the legal owner of the Unix copyrights. On October 14, 2003, Novell registered
several key Unix copyrights. After their registration became public knowledge Novell
issued a press release on December 22, 2003, stating:
Novell believes it owns the copyrights in UNIX, and has applied for and received
copyright registrations pertaining to UNIX consistent with that position. Novell
detailed the basis for its ownership position in correspondence with SCO.
On January 13, 2004, Novell launched its Linux indemnification program and publicly
released the letters that were sent between SCO and Novell in the previous months.
SCO responded the same day with a press release that reiterated its earlier claim and
announced that it was preparing to file a lawsuit against Novell.
On January 20, 2004, SCO filed a Slander of Title lawsuit against Novell. This
lawsuit, filed in Utah State court, requested a preliminary and permanent injunction.
The injunction would require Novell to assign to SCO all copyrights that Novell
registered and that Novell would retract all claims they previously made.
Novell successfully "removed" the lawsuit, transferring it to the Federal court system.
Four days later, on February 10, 2004 Novell filed a motion to dismiss the case.
Novell requested dismissal for failure to state a claim upon which relief can be
granted. In support of its motion Novell argued that:
z

SCO did not show a valid transfer of copyright ownership, because the Asset
Purchase Agreement is merely a promise to assign and that the Agreement is - by
law - not sufficient to transfer the copyrights to SCO.

SCO did not specify specific special damages.

In response, SCO filed several memoranda in opposition to Novell's motion to


dismiss. Additionally, SCO filed a motion to remand (move) the case back to State
court. Novell countered that resolution of the case would require interpretation of
Federal law, which would require it to be tried in Federal Court.
On May 9, 2004, Judge Dale A. Kimball heard arguments of both parties and took
both motions under advisement. On June 10, 2004 Judge Kimball denied SCO's
motion to remand and partially granted Novell's motion to dismiss, on a pleading
technicality. The case was dismissed without prejudice, which would allow SCO to
amend their complaint to include properly pleaded special damages.
On July 9, 2004, SCO filed an amended complaint.
On July 29, 2005, Novell filed a countersuit against SCO claiming Slander of Title,
Breach of Contract, Failure to Remit Royalties and Failure to Conduct Audit
Obligations. Novell sought damages in excess of SCO's net worth, and, as SCO was
quickly burning through its assets and cash on hand, Novell asked the court to
sequester this money from SCO so that it would not be spent before the resolution of
the case. Novell also asked the court to attach SCO's assets pending adjudication of
their claims. If Novell wins this motion it would force SCO to file for bankruptcy.
They accuse SCO of accepting Unix SVR4 licensing money from Microsoft and Sun
Microsystems without remitting back to Novell the full 100% of the monies (after

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which Novell would pay SCO its 5% administration fee). They also mention at the
beginning of the counterclaim that SCO asked Novell to go in together with them on
the Linux IP Infringement Licensing Plan. When Novell refused, SCO asked Novell
to turn the copyrights over to SCO, a request Novell also refused.
On January 3, 2006, SCO filed a proposed amended complaint containing the original
slander of title claim, as well as several new claims, including unfair competition,
copyright infringement and breaching a purported no-compete agreement.
On April 10, 2006, SuSE (part of Novell) filed a Request for Arbitration with the
Secretariat of the ICC International Court of Arbitration in Paris, France. Years earlier
SCO (then named Caldera) had signed contracts with SuSE (now owned by Novell)
involving UnitedLinux. In this contract the UnitedLinux members agreed that each
member would have broad licenses to exploit and distribute Linux products that
include UnitedLinux technology, and they agreed to arbitration of disagreements. This
request by SuSE was in response to SCO's amended complaint against Novell alleging
copyright infringement. The arbitration process has relatively strict timelines, unlike
the U.S. courts' procedures. Novell filed a "Motion to Stay Claims Raising Issues
Subject to Arbitration" in the U.S. courts, saying that four of five SCO claims
(including copyright infringement) have been brought to arbitration, and thus can be
stayed in the U.S. court until the Arbitration Tribunal renders its decision. Novell also
filed an "Answer to SCO's 2d Amended Complaint and Counterclaims", claiming a
large number of affirmative defenses, one of which accuses SCO of conducting fraud
on the U.S. copyright office.
On September 22, 2006, Novell sought leave to file amended counterclaims. Through
discovery, Novell had obtained copies of Unix licensing agreements between SCO
and Microsoft and Sun, and alleged that upon review of the agreements, it was
determined that they breached the APA. The added claims were conversion and
breach of fiduciary duty. Judge Dale Kimball granted Novell's motion, as it was
stipulated to by SCO.
On September 29, 2006, Novell filed a Motion for Summary Judgment, or if that was
rejected, then for a Preliminary Injunction. Novell has alleged that SCO, through their
agreements with Sun and Microsoft, licensed them Novell's property without paying
Novell the owed royalties. Novell has asked for SCO to be forced to turn the royalties
over to Novell, or, in the alternative, be forced to put the money into a Collective
Trust.
On August 10, 2007, Judge Dale Kimball, hearing the SCO v. Novell case, ruled that
"...the court concludes that Novell is the owner of the UNIX and UnixWare
Copyrights". Novell were awarded summary judgments on a number of claims, and a
number of SCO claims were denied. SCO was instructed to account for and pass to
Novell an appropriate portion of income relating to SCOSource licences to Sun
Microsystems and Microsoft. A number of matters are not disposed of by Judge
Kimball's ruling, and the outcome of these are still pending.
On September 17, 2007, a trial in SCO v. Novell was expected to begin in order to
determine how much money SCO owed Novell. However, on September 14, 2007
SCO Group filed a voluntary petition for reorganization under Chapter 11 of the
United States Bankruptcy Code. As a result of the petition for bankruptcy, all pending
litigation was automatically stayed as per U.S.C. 362.
On November 27, 2007 Judge Gross (bankruptcy judge) lifted the stay so as to allow
determination of any money owed, but retained jurisdiction over any constructive trust
which might be appropriate.

Check Your Progress 2


State whether the following statements are true or false:
1. The first recorded cyber crime took place in the year 1920.
2. Gobbling unreasonably large amounts of computer time or disk space
cant be considered as a crime.
3. Malicious computer programs are also known as malware.
4. Hackers often bind Trojans, viruses, worms and other computer
contaminants with e-greeting cards.

9.10 LET US SUM UP


Security and privacy concerns along with e-business regulatory issues will become
more prevalent. The exponential growth of the Internet and online activity raise a
number of new regulatory issues and legal questions. The question arises areHow
does copyright apply to digital content? Can electronic commerce really be secure?
How will legal structure affect international transactions on the Internet? In traditional
commerce, it's not easy to start a business. Privacy legislation is designed to protect a
person's personal information. The privacy laws of their host country affect overseas
companies. Ensure proper online contracts. Electronic transactions separate
e-business from traditional types of businesses. Others are traditional issues applied to
the Internet, such as copyright, contracts, consumer protection, privacy, taxation,
regulated industries and jurisdiction.

9.11 LESSON END ACTIVITY


What are the major issues regarding the legalization of electronic transactions?

9.12 KEYWORDS
Ethics: It is a guidance which makes specific judgment about what is right or wrong.
Censorship: It refers to suppression of information, ideas, or artistic expression by
anyone, whether government officials, church authorities, private pressure groups, or
speakers, writers, and artists themselves.
Client tier: It is the web browser involving some type of form processing.
Middle tier: It is the web server which is related to transaction processing.
Web server: It links to the third tier, a database processing the order information.
Computer Crime: It refers to criminal activity where a computer or network is the
source, tool, target, or place of a crime.
Hacking: It is any criminal act dealing with computers and networks.
Computer Voyeur: It is a cyber crime where the criminal reads (or copies)
confidential or proprietary information, but data is neither deleted nor changed.
Logic Bomb: It is a programme, which is activated on the occurrence of a particular
predefined event.
Time Bomb: It is a type of logic bomb, in which the program detonates when the
computer's clock reaches some target date.
Malware: It is software designed to infiltrate or damage a computer system without
the owner's informed consent.
Virus: It is a program that "infects" an executable file.

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Worm: It is a program that copies itself.


Trojan Horse: It is a deceptively labeled program that contains at least one function
that is unknown to the user and that harms the user.
Spoofed e-mail: It is one that appears to originate from one source but has actually
emerged from another source.

9.13 QUESTIONS FOR DISCUSSION


1. Describe the Privacy and Security issue of E-Commerce.
2. Write short notes on Copyright and Trademark
3. Discuss the issue of jurisdiction in the internet.
4. What do you mean by censorship?
5. Write the does and donts of web.
6. Describe some Frequently Used Cyber Crimes.
7. What is computer voyeur?
8. Why denial of service is a crime? Explain.
9. What was the first recorded cyber crime?
10. Write short notes on:
(a) Logic bomb
(b) Virus
(c) Email Frauds

Check Your Progress: Model Answers


CYP 1
1. Generally, a trademark can be owned by an individual, a company, or any
sort of legal entity.
2. Privacy legislation is designed to protect a person's personal information.
3. Major two issues regarding the legalization of electronic transactions
include the following:

Ensure proper online contracts.

Record retention obligations.

CYP 2
1. False
2. False
3. True
4. True

9.14 SUGGESTED READINGS


Harish Chandra Chaudhary, Knowledge Management for Competitive Advantage, Excel Books
Publications, New Delhi.
Deep and Deep, Technology Transfer and Joint Ventures Abroad, R. R. Azad, Publications,
New Delhi.

Thomas, J Kuegler, Web Advertising and Marketing, Jr. 3rd Edition-Prentice-Hall of India,
New Delhi.
Dr. Ravi Kalakota, E-Business Roadmap for Success, Pearson Education.
Ravi Kalakota, Andrew B. Whinston, "Frontiers of Electronic Commerce", Addition-Wesley
2000.

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Web Marketing Strategies

UNIT IV

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LESSON

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Web Marketing Strategies

10
WEB MARKETING STRATEGIES
CONTENTS
10.0

Aims and Objectives

10.1

Introduction

10.2

Marketing Strategies

10.3

10.2.1

Brand Strategy

10.2.2

Customer Segmentation

10.2.3

Distribution Channel Strategy

10.2.4

Market Research

10.2.5

Pricing

10.2.6

Sales and Marketing

10.2.7

Value Proposition

Web Marketing Strategies


10.3.1

Developing your Product

10.3.2

Developing your Web Site

10.3.3

Developing your Marketing Strategies

10.4

Choosing the Strategy

10.5

On-line Store Fronts

10.6

Target Marketing

10.7

Attracting Customers

10.8

Let us Sum up

10.9

Lesson End Activity

10.10 Keywords
10.11 Questions for Discussion
10.12 Suggested Readings

10.0 AIMS AND OBJECTIVES


After studying this lesson, you should be able to:
z

Overview of marketing strategy

Components of marketing strategy

Idea about web marketing

The fundamental processes of web marketing

The concept of on-line store

How to market the product and attract the customer

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10.1 INTRODUCTION
The Internet has become a powerful tool for reaching consumers. Major companies
have turned to the World Wide Web not only for selling their products, but providing
information and support to their customers.
It has become almost a requirement for any modern business to have a web presence.
Even having simple informational website increases exposure and provides potential
customers with an opportunity to learn about that business.
Yet simply having a website is not enough. The website must appeal to the
appropriate audience, provide them with the information they seek, and build their
trust. And above all, it must stand out from a host of competitors. Only then can a
business website be considered a success.
Markets in high technology contexts are highly dynamic in ways more than just the
evolution of the underlying technologies. Business managers in such situations need
to understand the various drivers of such changes and their manifest impact on the
profit potential of current and alternative strategies.
This lesson will provide with useful overview of the dynamics in the markets.

10.2 MARKETING STRATEGIES


Marketing strategy which focus on understanding markets, competitor landscapes and
the strategic context in which business and policy decisions are made.
Managers with strategic responsibility for commercial businesses are ultimately
concerned with the quest for sustainable advantage. To be practical, advantage for
commercial firms concerns earnings, and sustainable means a concern with earnings
into the future.
A truly valuable approach to developing and directing strategy should therefore say
something about earnings, not just explaining todays results, but showing how to
build performance through time. For non-profit organisations, performance measures
may not be financial, but top managements concern is still with building success into
the future.
Adopting a customer-driven competitive focus is becoming an increasingly common
and successful approach to all elements of business, from product design to delivery.
To achieve a customer-driven position, all levels of a firm - from the foundation of the
firm's value proposition to product design and distribution to marketing strategies
themselves - must be imbued with the customer-driven approach. These changes can
be particularly difficult to make for firms that have traditionally been product-driven
or focused heavily on operations.
Some components of marketing strategy are discussed below:

10.2.1 Brand Strategy


Brand strategy is one of the most fraught areas of marketing, though clearly also one
of the most important. There are many problems with definition. The key point is you
cant have a strategy without a clear objective. Restating a goal is not strategy,
execution is not strategy, and tactics are not strategy. A brand cannot function without
a strategy and the function of brand management is to implement brand strategy.
In marketing you should understand the inherent and potential value of brand. In
consumer products, we know that two primary predictors of brand profitability are
classification as a premium or a value category, and relative market share within that
category. Using this predictive framework organisation compares their implied and

actual profitability and uses this information to strategically manage brands and brand
portfolios.
Strategic imperatives may call for maintaining strong brand equity while investing in
innovation, instituting aggressive cost and price controls and reinvesting savings to
build brand equity or perhaps targeting niche segments. Properly managed within a
category, a powerful brand name can be used to drive higher sales as well as increase
price premiums versus the competition.

10.2.2 Customer Segmentation


Customer segmentation is the practice of dividing a customer base into groups of
individuals that are similar in specific ways relevant to marketing, such as age,
gender, interests, spending habits, and so on. Using segmentation allows companies to
target groups effectively, and allocate marketing resources to best effect.
It is the process of identifying homogenous groups within a company's customer pool
in order to develop unique value propositions reflecting the segment's needs. All
customers are not created equal, and often targeting the highest possible gross market
share can be self-defeating. As the profit potential varies across a customer base,
segmentation allows a company to allocate limited resources where they can be
optimally leveraged - maximizing both customer acquisition and retention.
According to an article by Jill Griffin for Cisco Systems, traditional segmentation
focuses on identifying customer groups based on demographics and attributes such as
attitude and psychological profiles. Value-based segmentation, on the other hand,
looks at groups of customers in terms of the revenue they generate and the costs of
establishing and maintaining relationships with them.
Customer segmentation procedures include: deciding what data will be collected and
how it will be gathered; collecting data and integrating data from various sources;
developing methods of data analysis for segmentation; establishing effective
communication among relevant business units (such as marketing and customer
service) about the segmentation; and implementing applications to effectively deal
with the data and respond to the information it provides.

10.2.3 Distribution Channel Strategy


It is not simply a means of getting products or services from company to customer.
Like all aspects of operations and marketing, distribution offers a range of
multifaceted options that can affect profitability. An effective distribution strategy
must adequately serve the targeted customer segments, minimize distribution costs
and maximize product volume and gain a sustainable competitive advantage. Also
affecting these choices are possible adjustments in sales growth, competition,
consumer needs and desires and technological innovation.
Distribution intensity can be classified into three broad options - intensive, selective
and exclusive distribution:
z

Intensive distribution aims to provide saturation coverage of the market by using


all available outlets. For many products, total sales are directly linked to the
number of outlets used (e.g. cigarettes, beer). Intensive distribution is usually
required where customers have a range of acceptable brands to chose from. In
other words, if one brand is not available, a customer will simply choose another.

Selective distribution involves a producer using a limited number of outlets in a


geographical area to sell products. An advantage of this approach is that the
producer can choose the most appropriate or best-performing outlets and focus
effort (e.g. training) on them. Selective distribution works best when consumers
are prepared to "shop around" - in other words - they have a preference for a
particular brand or price and will search out the outlets that supply.

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Exclusive distribution is an extreme form of selective distribution in which only


one wholesaler, retailer or distributor is used in a specific geographical area.

10.2.4 Market Research


It is the methodical collection and analysis of specific data to facilitate the relationship
between customers and a company or industry. Research helps clarify market
opportunities and problems, and forms the basis of a positive, action-oriented
marketing strategy. Market research reveals the dynamic between the customer and an
industry or company, allowing companies to capitalize on that knowledge. It is only
through a thorough understanding of customer attitudes and market conditions that an
effective analysis of a company's competitive position and strategic options can be
mapped.
Market research will answer questions like:
z

Whether your products or services are needed

Who might want to buy your products - (you may have defined the wrong type of
person)

What age, sex, income occupation etc. are the people I want to sell to

If there are changes taking place and how this might affect what you sell - (there
might be an up an coming decline in the demand for what you are about to sell)

How well your products or services might sell - (It could be better or worst than
what you predicted)

How much demand there is for what you hope to sell - (you may need to increase
or decrease your production depending on the results)

Who wont buy what you hope to sell - (this will help your promotional plan as it
enables you to target the right people)

What price would people be prepared to pay - (this will help when you set out
your pricing policy)

10.2.5 Pricing
In general terms price is a component of an exchange or transaction that takes place
between two parties and refers to what must be given up by one party (i.e., buyer) in
order to obtain something offered by another party (i.e., seller). Yet this view of price
provides a somewhat limited explanation of what price means to participants in the
transaction.
Price is commonly confused with the notion of cost as in I paid a high cost for
buying my new plasma television. Technically, though, these are different concepts.
Price is what a buyer pays to acquire products from a seller. Cost concerns the sellers
investment (e.g., manufacturing expense) in the product being exchanged with a
buyer. For marketing organizations seeking to make a profit the hope is that price will
exceed cost so the organization can see financial gain from the transaction.
Finally, while product pricing is a main topic for discussion when a company is
examining its overall profitability, pricing decisions are not limited to for-profit
companies. Not-for-profit organizations, such as charities, educational institutions and
industry trade groups, also set prices, though it is often not as apparent.
For instance, charities seeking to raise money may set different target levels for
donations that reward donors with increases in status (e.g., name in newsletter), gifts
or other benefits. While a charitable organization may not call it a price in their
promotional material, in reality these donations are equivalent to price setting since
donors are required to give a contribution in order to obtain something of value.

Pricing is an integral part of a company's ability to penetrate a market and optimize


profitability. While a successful pricing strategy can substantially improve current and
future market positioning, such a strategy demands a thorough understanding of the
competition's strengths and weaknesses, as well as a company's own positioning.
Pricing can increase or diminish brand equity and determine a product's placement in
a premium or value category.
Simultaneously, it can be employed through various methods of price discrimination
as a tool to maximize revenue, conduct yield management and screen profitable
customers. Thus, it is essential that companies understand and develop pricing tactics
that lead to desired results.

10.2.6 Sales and Marketing


Revenue and profitability, driven by the product offering, can be equally driven by
selecting sales and distribution channels that are aligned with marketing efforts.
Appropriate sales channel selection varies with factors such as the target customer, the
nature of the product, price and price discrimination efforts along with distribution
costs and logistics. Similarly, marketing efforts must be carefully structured to
efficiently target or screen desired customer segments, create a desired image and
contribute to overall branding.
Developing your marketing plan covers four main aspects:
z

Market research

Marketing goals

Marketing strategies

Monitor and control.

Marketing Do's and Don'ts


Dos:
z

Regularly review your marketing strategies to meet changing situations.

Focus on your customers' wants and needs, not on what you think you have to
offer.

Find a niche - small businesses tend to succeed by offering something that's a bit
different.

Don't:
z

Waste money on promotional opportunities that don't fit with your strategies.

Neglect building networks to help you promote your business and build your
reputation.

Forget to assess the effectiveness of your strategies.

10.2.7 Value Proposition


It is a business or marketing statement that summarizes why a consumer should buy a
product or use a service. This statement should convince a potential consumer that one
particular product or service will add more value or better solve a problem than other
similar offerings.
It is the combination of product, service, pricing and delivery system offered to the
customer. To maximize customer demand, an individual value proposition should be
created for each target customer segment by strategically balancing these four factors.

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A clear understanding of a firm's sources of advantage in providing value and creating


fit with target customer segments is important to defining the firm's value proposition.
In addition, anticipating customer value migration and shifting or expanding the firm's
offering appropriately is required to sustain competitive advantage.
The company has always had the value-proposition of increasing its market share and
growing revenue by:
z

Providing superior customer service

Product differentiation

Operational efficiency

A value-proposition should contain at least five elements:


z

Current situation (including problems, causes and effects)

Target situation

When to reach the target situation

Cost of reaching the target situation and opportunity cost analysis

The benefits of both the targeting and the achievement phases


Check Your Progress 1
1. What is customer segmentation?
...
...
2. How distribution intensity can be classified?
...
...
3. Is pricing and costing implies the same meaning?
...
...

10.3 WEB MARKETING STRATEGIES


Effective marketing together with consistent promotion are the keys to success online. You need a comprehensive web marketing strategy. One that's designed to attract
new prospects, converts leads into sales, and maximize the lifetime value of your
customers.
But the beautiful thing is, once you've got that bit right, it's usually easy to automate
the process, and leverage the Internet to quickly multiply your profits.
Developing a successful internet marketing strategy is an essential part of your on-line
success. In order to succeed, you must develop and implement a strategic plan that
includes all of the following:
z

A great product

A web site specifically designed to sell

A killer marketing strategy

Each step plays an important role in your overall strategy and must be developed to its
fullest potential. If even one step fails, your chances of success will be minimal.

10.3.1 Developing your Product


Your first step will be to develop a great product. You're probably thinking that's
easier said than done, but it's really not. The absolute best product is one that you can
develop yourself and deliver over the Internet. With today's technology, there is
absolutely no reason why you can't create your own product. The knowledge you have
within your own mind is extremely valuable. Everybody is good at something, has a
special talent or some specialized knowledge. Use this knowledge to create a product.
The key to developing a great product is exclusiveness. Your product should be
unique and not be in competition with hundreds of other similar products. You must
give your potential customers exactly what they want. Develop a high-quality product
that fills a void to increase your chance of success.
Another consideration of great importance is your target market. Keep in mind, the
Internet is a global marketplace. Develop a product with a large geographic target and
a wide appeal. A great product will fulfill a need or desire and provide instant
gratification.
Here are a few of the top sellers:
z

Software

Information

Private sites

Internet services

Before you develop your product, do some research - find out exactly what people
want and develop your product accordingly.
The most important consideration when developing your product is quality. Your
product should not only deliver what you promise, but should go above and beyond
the expected and over-deliver. Your customers satisfaction is of the utmost
importance.

10.3.2 Developing your Web Site


Once you've developed a great product, your next step will be to develop a great web
site. Your web site must be specifically designed to sell your product.
Everything within your web site should have one purpose - getting your visitor to take
action. Words are the most powerful marketing tool you have. The right words will
turn your visitors into customers. The wrong words will cause them to click away and
never return.
Your words are the entire foundation of your business. Your product, your web site
and your marketing strategies all depend upon your words. Fancy graphics don't make
sales - words do.
Every word, sentence and headline should have one specific purpose - to lead your
potential customer to your order page. Write your web site copy as if you are talking
to just one person. Identify a problem and validate that one visitor's need for a
solution. Continue to write and explain why your product is the solution to their
problem. Tell them exactly what your product will do for them - why it will solve
their problems and how. Pack your copy with benefits and more benefits. Write to
persuade - that's the bottom line.

10.3.3 Developing your Marketing Strategies


Your marketing strategy is the final process of your plan. Your plan must include both
short-term and long-term strategies in order to succeed.

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Short-term marketing strategies are those that bring you a temporary boost in traffic.
Although these techniques are very important to your over-all plan, they are only a
temporary traffic source and must not be solely relied upon.
Short-term marketing strategies include:
z

Purchasing advertising

Bulletin Boards

Search Engines

Long-term marketing strategies are those that bring you a steady stream of targeted
traffic over time. These strategies will continue to produce results even years down
the road.
Long-term marketing strategies include:
z

Opt-in Lists

Freebies

Content

By creating and implementing a balanced marketing strategy, using both short-term


and long-term strategies, you will drive a steady stream of targeted traffic to your web
site.
Check Your Progress 2
State whether the following statements are true or false:
1. Developing a successful internet marketing strategy is an essential part of
your on-line success.
2. Internet is a global marketplace.
3. Your marketing strategy is the preliminary process of your plan.

10.4 CHOOSING THE STRATEGY


The marketing process consist of four steps:
z

Analyzing market opportunities

Planning marketing programs, which entails choosing the Marketing Mix (the
four Ps of Product, Price, Place and Promotion)

Organizing

Implementing and promotion controlling the marketing effort

The 4 Ps are essential part of any web marketing, and here they are focused on a
particular target market or customer.
Elements

Characteristics

Attributes

Product

Individual goods, product


lines, or services

Includes features, accessories, installation,


instructions, service, warranty, packaging,
and brand names.

Place (Distribution) Getting the product to the


customer

Channels, distribution systems, middlemen,


warehousing, transportation, fulfillment, and
shipping

Promotion

Communicating the product to Personal selling, mass selling, sales


the customer
promotion, sales personnel, advertising,
media selection, copywriting

Price

Setting a price that serves the Price flexibility, level pricing introductory
customer well and maximizes pricing, discounts, allowances, geographic
profits to the company
terms

The 4 Ps is a different part of the web marketing Plan and one may look at this is
uncontrollable factors vs. controllable factors.
Uncontrollable: The current economic environment includes elements such as
consumer confidence, degree of unemployment, new technologies that threaten to
displace your own, competitors that suddenly appear on the horizon, government
regulations thought up by the favorite legislator, and changing consumer preferences.
One cant control these.
Controllable: The 4 Ps represent elements of ones marketing strategy that ones can
control. They depend upon such given as ones budget, personnel, creativity, etc.,
but one can do a lot to influence them.
As one write the Marketing Program section of ones web marketing Plan one will
need to include a section for each of the 4 Ps that define ones current marketing
program. These are the four major ingredients of a traditional marketing mix directed
at the customer or target market.
But are the 4 Ps really applicable to web Marketing? The short answer is yes, with a
few modifications. The long answer is an attempt to apply them to the typical
situations faced by web marketers today. Businesses vary so much that one cant be
exhaustive as we examine each, but only suggestive.

10.5 ON-LINE STORE FRONTS


An on-line storefront, just like a brick-and-mortar store, serves two purposes:
1. Displaying merchandises
2. Checking out customers.
They differ in those two areas as well. The proper on-line storefront design is to take
advantage of easy information access while minimizing the shortcoming of lack of
physical presence.
In an on-line storefront, customers can't touch merchandises and talk to a sales
representative face to face, but they can easily find the products they want to buy, and
collect rich information about the products. They don't has to wait for checkout.
Next time you are in your favorite shop, take a look around. Look at how the products
are displayed, where they are situated, how they are organized, and how lighting,
architecture, and dcor enhance product appeal. Look at the detail involved in creating
atmosphere, in warmly welcoming the client, in providing key information and
facilitating customer interest, customer action.
E-commerce is no different. An on-line store must emulate the same design principles
and accomplish the same strategic tasks of attracting visitors, fixing their attention,
and moving them to action.
Sound web design is the cornerstone of effective on-line commerce, and neglecting
the key details and nuances of storefront development can mean disaster for your
e-enterprise. How a storefront is composed, how a product catalogue is displayed,
how on-line shopping carts and payment options are integrated into the 'total design'
are important - and intricate - questions.
Perhaps the most important principle of storefront design is to build a site that
conforms to the expectations, questions, and demands of your customers. This means
anticipating what your customer needs, predicting what questions will be asked, and
quickly providing the answers in a navigable format that keeps your customer oriented
and engaged. Content and Interface are equally critical to solid design, so pay the
same attention to both. Below are some fundamentals for establishing an effective,
customer-friendly web site.

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Easy navigation is based on sound organization. A storefront should be organized in a


convenient manner that answers customer inquiries before they are even made. Make
your storefront manageable for the reader with efficient directories and indexes that
lead the customer directly to their shopping goal or specific area of interest. Scaffold
information in a logical manner and avoid 'nesting' more than two levels of menus.
Make sure your product lines are categorized and formatted in an orderly fashion. And
never frustrate your visitor with chaotic or superfluous content.
The initial goal of a commercial web site is to educate, so make your content
comprehensive - but also make it compact, clear and forceful in style. Economical,
dynamic writing will keep your web content focused and your visitors engaged.
The 'look' of your site is the first thing to impact your customer. Impressive graphics,
manageable, easy-to-read formatting, and a unique atmosphere that distinguishes your
site from others are all vital in attracting and holding the attention of customers.
Company logos and design layouts should remain consistent between pages so the
customer acquires a sense of company identity, gets a unique feel for your site and
product line. Remember, everything should be fast-loading and tastefully presented.
If your web site is complex or your on-line catalogue is vast, incorporate a search
feature into your storefront. Your store should cater to all types of shoppers. The
person leisurely browsing your virtual shelves may not cast a second glance at a
product search engine; the customer zeroed in on a specific item will choose it every
time. Of course, stores with only a few products can get away with a well-reasoned
organizational system. But if you carry any sort of inventory at all, you need a product
search feature. Customers expect as much.

10.6 TARGET MARKETING


The enterprise must engage its customer's -particularly its best customers -and ensures
they never want to leave. The actual, detailed mechanics of building a relationship
depend on understanding the various ways customers are different and how these
differences should affect the firm's behavior toward particular, individual customers.
It is an idea that is critical to success in high-velocity, highly competitive times. It
recognizes that no two customers are the same and that smart companies can
capitalize on these inherent and essential differences.
Various smart companies have always encouraged the active participation of
customers in the development of products, services, and solutions. For the most part,
however, being customer-oriented has always meant being oriented to the needs of the
typical customer in the market-the average customer. A company must continuously
learn from interactions with individual customers. It must dynamically respond to the
information those interactions elicit.
Most companies sell not to end-users or to consumers directly but to intermediariespurchasing agents, dealers, distributors, retailers, or resellers. Whether your company
sells consumer products through retail outlets or factory machinery to the contracting
officers at large industrial firms, defining the nature of all your "customers" is a first
step.
However, even if a company doesn't sell directly to the end user of its product, it still
has an interest in creating a better relationship with that end user. It is the end user-the
ultimate customer or consumer-who supports everyone in a network of value-creating
relationships.
Ford Motor Company sells almost all of its cars to dealers, not to consumers, but it
must recognize nevertheless that the ultimate drivers of Ford vehicles think of
themselves as having a relationship with Ford. Hewlett-Packard may sell expensive
testing equipment to the purchasing agents at large microchip-manufacturing

companies, but the ultimate users of these products are the bench engineers who
develop new products and test current ones.
Even companies largely thought of as consumer marketing firms usually sell their
products, in actuality, to retail chains, while running tens of millions of dollars in
advertising to pull consumers into these stores to buy their products.
Regardless of how the customer is actually defined, one reason so many firms are
beginning to focus on is that this kind of marketing can create intense customer
loyalty and, as a part of the process, help a firm protect its unit margins. These
benefits appeal to firms allover the world, in every industry, because everyone's
business today is threatened to some extent by declining customer loyalty and by a
kind of "creeping commoditization" that steadily erodes margins.
There are four key implementation tasks that can be used as a guide for good
marketing strategy. These four principles overlap considerably:
z

Identifying your customers

Differentiate your customers

Interact with your customers

Customize your product or service according to the customers requirement.

10.7 ATTRACTING CUSTOMERS


A few years back, people have said that in order to tap into the resources of your
potential market, you need to know exactly what their details are: age, status, income
bracket, etc. These days, everything is a blank canvas. There are no more
demographics over the internet when it comes to on-line marketing. Almost anything
can be sold to anyone at any given time. This means that most of the texts and images
used in advertising should appeal to just about anyone who uses the web. This may
sound easy, but in truth this is quite difficult.
Imagine how anyone can create something that will attract the attention of people who
come from many different countries, from many religious backgrounds, and from
many stratums of society. One cannot hope to be politically correct all the time
because the advertiser has to deal with a whole range sensibility. And yet, it can be
done. There are after all, two basic similarities among internet users.
Of all the texts, blogs and propaganda spreading rampantly over the internet, most online users prefer texts that are easy on the mind which can be comprehended quickly.
This does not mean that treatises and technical documents are shunned by most users.
It just means that in order for internet marketing to become successful, a more
conversational and light-hearted ad construction is needed. Most business sites or
adverts with superlative adjectives are now considered overkill and very often
dismissed faster than you can spell the SPAM.
Yes, it's true. All internet users want instant on-line access to anything. Wouldn't you?
There was a point in internet marketing when, after you click on an ad you found
particularly interesting, you are redirected into a series of adverts that have absolutely
nothing to do with the ones you are looking for. There are a few people who would
push through with the clicking; hoping that something worthwhile will eventually turn
up but nothing ever does.
This can be great ... as a practical joke, but certainly not as an internet marketing tool.
Most internet users now do not want to fill out the newsletter subscription; do not
want to fill out the customer demographic page (for research purposes, they say); do
not want to fill out the friend referral page; do not want to fill out the feed back page
... It is far easier to click on the close button and find an advert that leads directly to
the business website where the information is right there - yes, right there where the

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potential client wants it to be. Information that is often considered as pertinent


includes on-line contact information of the company, rates/costs, special promos and
discounts, guarantees, etc.
On the whole, these emerging internet marketing trends seem to be leaning towards
straightforwardness and simplicity. The faster the internet user can get a hold of
whatever it is wanted, the more successful the ad will be. Traditional internet
marketing still rules - but only just.
Check Your Progress 3
Fill in the blanks:
1. . helps clarify market opportunities and problems, and
forms the basis of a positive, action-oriented marketing strategy.
2. . can increase or diminish brand equity and determine
a product's placement in a premium or value category.
3. An effective . must adequately serve the targeted
customer segments, minimize distribution costs and maximize product
volume and gain a sustainable competitive advantage.

10.8 LET US SUM UP


The Internet has become a powerful tool for reaching consumers. Major companies
have turned to the World Wide Web not only for selling their products, but providing
information and support to their customers.
Effective marketing together with consistent promotion are the keys to success online.
Developing a successful internet marketing strategy is an essential part of your on-line
success. In order to succeed, you must develop and implement a strategic plan that
includes all of the following:
z

A great product

A web site specifically designed to sell

A killer marketing strategy

Sound web design is the cornerstone of effective on-line commerce, and neglecting
the key details and nuances of storefront development can mean disaster for your
e-enterprise.
Perhaps the most important principle of storefront design is to build a site that
conforms to the expectations, questions, and demands of your customers.
Almost anything can be sold to anyone at any given time. This means that most of the
texts and images used in advertising should appeal to just about anyone who uses the
web. This may sound easy, but in truth this is quite difficult.

10.9 LESSON END ACTIVITY


Write an essay on marketing strategy.

10.10 KEYWORDS
Marketing Strategy: It is the art and science of understanding markets, competitor
landscapes and the strategic context in which business and policy decisions are made.
Brand strategy: It is the blue print to establish a brand.

Customer segmentation: It is the practice of dividing a customer base into groups of


individuals that are similar in specific ways relevant to marketing, such as age,
gender, interests, spending habits, and so on.
Distribution strategy: It is the policy to adequately serve the targeted customer
segments, minimize distribution costs and maximize product volume and gain a
sustainable competitive advantage.
Market Research: It is the methodical collection and analysis of specific data to
facilitate the relationship between customers and a company or industry.
Price: It is a component of an exchange or transaction that takes place between two
parties and refers to what must be given up by one party (i.e., buyer) in order to obtain
something offered by another party (i.e., seller).
Value Proposition: It is a business or marketing statement that summarizes why a
consumer should buy a product or use a service.
Web marketing: It is a comprehensive strategy that synergizes a given company's
business model and sales goals with its website function and appearance, focusing on
its target market through proper choice of advertising type, media, and design.

10.11 QUESTIONS FOR DISCUSSION


1. Why strategy is considered as an important part in marketing?
2. What does web marketing mean? How it is used in current era?
3. What are the essential laws of web marketing?
4. Write the key elements of internet marketing.
5. Write short notes on:
(a) Value proposition
(b) Market research
(c) Pricing

Check Your Progress: Model Answers


CYP 1
1. Customer segmentation is the practice of dividing a customer base into
groups of individuals that are similar in specific ways relevant to
marketing, such as age, gender, interests, spending habits, and so on.
2. Distribution intensity can be classified into three broad options intensive, selective and exclusive distribution.
3. No, they are different.
CYP 2
1. True
2. True
3. False
CYP 3
1. Market research
2. Pricing
3. Distribution strategy

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10.12 SUGGESTED READINGS


Harish Chandra Chaudhary, Knowledge Management for Competitive Advantage, Excel Books
Publications, New Delhi.
Deep and Deep, Technology Transfer and Joint Ventures Abroad, R. R. Azad, Publications,
New Delhi.
Thomas, J Kuegler, Web Advertising and Marketing, Jr. 3rd Edition-Prentice-Hall of India,
New Delhi.
Dr. Ravi Kalakota, E-Business Roadmap for Success, Pearson Education.
Ravi Kalakota, Andrew B. Whinston, "Frontiers of Electronic Commerce", Addition-Wesley
2000.

133
Web Advertising

LESSON

11
WEB ADVERTISING
CONTENTS
11.0

Aims and Objectives

11.1

Introduction

11.2

Web Advertising

11.3

11.2.1

Sellers

11.2.2

Buyers

E-mail Marketing
11.3.1

Direct e-mail

11.3.2

Retention e-mail

11.3.3

Advertising in Other Peoples e-mails

11.4

Instant Market Research

11.5

Let us Sum up

11.6

Lesson End Activity

11.7

Keyword

11.8

Questions for Discussion

11.9

Suggested Readings

11.0 AIMS AND OBJECTIVES


After studying this lesson, you should be able to:
z

The fundamental concepts of advertising

The conceptual difference between the traditional approach and modern approach

Concept of internet advertising

Overview of web marketing

Idea about email marketing

11.1 INTRODUCTION
Internet marketing does not simply entail building or promoting a website, nor does it
mean placing a banner ad on another website. Effective Internet marketing requires a
comprehensive strategy that synergizes a given company's business model and sales
goals with its website function and appearance, focusing on its target market through
proper choice of advertising type, media, and design. Internet advertising can be
defined as convergence of branding, information dissemination and sales transaction
all in one place. It is the convergence of traditional and direct response marketing. In
this lesson well discuss about the internet advertising.

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11.2 WEB ADVERTISING


Web advertising is the convergence of traditional advertising and directs response
marketing. Web advertising gives advertisers the opportunity to precisely target an
audience enabling them to deliver advertisements that are customised to each users
particular interest and tastes.
The advertising basics for online have brought into the various advantages over
traditional advertising. These are as follows:
z

Targetability: Online advertisers have an entirely new range of targeting


capabilities. They can focus on users form specific companies, SIC codes and
geographical regions and nations or any other hardware specific platforms.
browsers etc.

Tracking: Marketers can track how users interact with their brands and learn what
is of interest to their current and prospective customers. Advertisers can also
measure the response to an advertisement, which is difficult for traditional
advertisers.

Deliverability and flexibility: Online advertisements can be delivered in real time


24 hours a day all round the year. The ad campaign can be launched, updated, or
cancelled immediately. This is a costly and expensive affair for traditional
advertisers.

Interactivity: The consumers can interact with product test the product, and if
they choose they can buy the product. No other medium moves the consumer
from information seeker to purchase friction free.

Figure 11.1: Relationship between Traditional Advertising and Web Advertising

The players in the advertising industry are the sellers and the buyers and the
advertising infrastructure. The companies that make Internet advertising possible by
developing tools to deliver the ads, measure the ads, audit ad campaign, and complete
the other tasks that makes advertising on the Internet. The division between the buyers
and sellers is very thin. Many publishers buy ads to promote their web site and
advertisers develop web sites to promote their products.

11.2.1 Sellers
The sellers are web site publishers and their sales channels. The web site publishers
like AOL has signed up more those 400 advertisers hoping to sell advertising that
targets a number of demographics.
The sales channels like ad networks; representation firms and auctions are the sales
channels, which as facilitators gains by selling the advertising.
The ad networks: IT assists in generating revenues form advertising; ad networks have
formed to sell advertising. The networks make it possible for advertisers to extend

their reach into a variety of sites with one media buy. The advertising agencies gains
from meeting to an ad network rather than meeting individual web site publishers.
Representation firms: Sites with advertising to sell can hire a firm sell to sell the ad
space on their behalf.
Auctions: Publisher can offer soon to expire ad space on the auction block for quick
sale. There are also ad networks that allow publishers to sell their sell their excess ad
inventory in real time.

11.2.2 Buyers
The buyers consist of the advertisers who have products, services or web sites to
promote. They are often represented by interactive or traditional agencies that designs
online advertising campaigns and media buyers who actually purchase the ad space.
Advertisers: The first advertisers were the Internet publishers themselves.
Interactive agencies: The interactive agencies are the link between the advertisers and
publishers. These agencies were basically the web site developers, which on strong
technological background later turn on to marketing or sites through direct marketing
and advertising. The ad agencies also have come toward into interactive businesses
now.
Check Your Progress 1
1. Who are the sellers in internet advertising?
...
...
2. Who are the buyers in internet advertising?
...
...

11.3 E-MAIL MARKETING


E-mail marketing is, as the name suggests, the use of email in marketing
communications. In its broadest sense, the term covers every email you ever send to a
customer, potential customer or public venue. In general, though, it's used to refer to:
z

Sending direct promotional emails to try and acquire new customers or persuade
existing customers to buy again

Sending emails designed to encourage customer loyalty and enhance the customer
relationship

Placing your marketing messages or advertisements in emails sent by other


people.

You can think of these three main forms of email marketing as the electronic
equivalent of:
z

Direct mail

Sending people a print newsletter

Placing advertisements in subscription magazines and newspapers

Let's briefly review the three types of email marketing:

11.3.1 Direct e-mail


Direct email involves sending a promotional message in the form of an email. It might
be an announcement of a special offer, for example. Just as you might have a list of

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customer or prospect postal addresses to send your promotions too, so you can collect
a list of customer or prospect email addresses.
You can also rent lists of email addresses from service companies. They'll let you
send your message to their own address lists. These services can usually let you target
your message according to, for example, the interests or geographical location of the
owners of the email address.

11.3.2 Retention e-mail


Instead of promotional email designed only to encourage the recipient to take action
(buy something, sign-up for something, etc.), you might send out retention emails.
These usually take the form of regular emails known as newsletters. A newsletter may
carry promotional messages or advertisements, but will aim at developing a long-term
impact on the readers. It should provide the readers with value, which means more
than just sales messages. It should contain information which informs, entertains or
otherwise benefits the readers.

11.3.3 Advertising in Other Peoples e-mails


Instead of producing your own newsletter, you can find newsletters published by
others and pay them to put your advertisement in the emails they send their
subscribers. Indeed, there are many email newsletters that are created for just this
purpose - to sell advertising space to others.
There is, however, one extremely important difference - the issue of permission.
Email marketing is so popular because:
z

Sending email is much cheaper than most other forms of communication

email lets you deliver your message to the people (unlike a website, where the
people have to come to your message)

email marketing has proven very successful for those who do it right

This all sounds great of course. Imagine how much cheaper it is to send a message to
thousands of email addresses, rather than thousands of postal addresses!
It's not that simple, unfortunately. Quite apart from the complexities of designing and
delivering email messages to the right people, getting them to actually read and
respond to your message, and measuring and analysing the results, there is the issue of
permission.
Responsible email marketing is based on the idea of permission. This is a complex
issue and the subject of intense debate in the marketing community.
Essentially, you need an email address owner's permission before you can send them a
commercial email. If you don't have this permission, then the recipients of your mail
may well regard your message as spam; unsolicited commercial (bulk) email.
You do not want to send spam!
If you are accused of sending spam, then you may find your email accounts closed
down, your website shut off, and your reputation in tatters. In some parts of the world,
you may even be breaking the law.
Quite apart from these practical considerations, there is also a strong argument which
says that long-term successful email marketing relationships with customers and
others can only work anyway if they're permission based.
The big question, of course, is what constitutes permission...and that is the main
subject of debate. It's important to remember that it's not your views, or even the

views of the majority, that count, but the views of those receiving your emails and
those responsible for administering the infrastructure of the Internet.
An example of permission is when your customer buys something from your online
store and also ticks a box marked "please send me news about product updates via
email". You now have "permission" to send that person product updates by email,
provided you also give them the opportunity to rescind that permission at any time.
It's important to stress that anyone considering email marketing must read up on the
subject of permission and spam. If you don't understand the importance of permission
and the risks of ignoring it, then you could be heading for commercial disaster.
Don't panic, though. It's actually relatively easy to ensure that the address lists you use
or build yourself are permission-based.

11.4 INSTANT MARKET RESEARCH


Instant market research offer tremendous potential to the marketing research industry.
It allows marketers to construct sophisticated surveys and capture and analyze
information quickly and securely. It is potentially faster to conduct, generate more
accurate information and cheaper by several magnitudes. Used properly, Web-based
market research will in the near future vastly increase the amount of customer
feedback on which managers in all industries base critical business decisions. It can
handle an enormous number of respondents simultaneously, limited only by the
servers' speed and connection bandwidth.
Check Your Progress 2
1. Who are the interactive agencies in internet advertising?
...
...
2. What is e-mail marketing?
...
...

11.5 LET US SUM UP


Internet advertising can be defined as convergence of branding, information
dissemination and sales transaction all in one place. Web advertising is the
convergence of traditional advertising and directs response marketing. The advertising
basics for online have brought into the various advantages over traditional advertising.
The players in the advertising industry are the sellers and the buyers and the
advertising infrastructure. The companies that make Internet advertising possible by
developing tools to deliver the ads, measure the ads, audit ad campaign, and complete
the other tasks that makes advertising on the Internet. The sellers are web site
publishers and their sales channels. Email marketing is, as the name suggests, the use
of email in marketing communications. Sending direct promotional emails to try and
acquire new customers or persuade existing customers to buy again. Sending emails
designed to encourage customer loyalty and enhance the customer relationship.

11.6 LESSON END ACTIVITY


Write an essay on e-mail marketing.

11.7 KEYWORD
Internet advertising: It can be defined as convergence of branding, information
dissemination and sales transaction all in one place.

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11.8 QUESTIONS FOR DISCUSSION


1. What is meant by internet advertising?
2. How it is different from the traditional advertising?
3. What are the key elements of electronic advertising?
4. What are the advantages of web advertising over the traditional advertising?
5. What is e-mail marketing? Explain it.

Check Your Progress: Model Answers


CYP 1
1. The sellers are web site publishers and their sales channels.
2. The buyers consist of the advertisers who have products, services or web
sites to promote.
CYP 2
1. The interactive agencies are the link between the advertisers and
publishers.
2. E-mail marketing is, as the name suggests, the use of email in marketing
communications.

11.9 SUGGESTED READINGS


Harish Chandra Chaudhary, Knowledge Management for Competitive Advantage, Excel Books
Publications, New Delhi.
Deep and Deep, Technology Transfer and Joint Ventures Abroad, R. R. Azad, Publications,
New Delhi.
Thomas, J Kuegler, Web Advertising and Marketing, Jr. 3rd Edition-Prentice-Hall of India,
New Delhi.
Dr. Ravi Kalakota, E-Business Roadmap for Success, Pearson Education.
Ravi Kalakota, Andrew B. Whinston, "Frontiers of Electronic Commerce", Addition-Wesley
2000.

139
Securities Issues

LESSON

12
SECURITIES ISSUES
CONTENTS
12.0

Aims and Objectives

12.1

Introduction

12.2

Security in the Cyberspace


12.2.1

Designing for Security

12.2.2

Firewall

12.2.3

Application Gateway

12.2.4

Anti-virus Software

12.2.5

Regular Backups

12.2.6

Virus

12.2.7

Security Protection and Recovery

12.3

Let us Sum up

12.4

Lesson End Activity

12.5

Keywords

12.6

Questions for Discussion

12.7

Suggested Readings

12.0 AIMS AND OBJECTIVES


After studying this lesson, you should be able to understand:
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Concept of computer security

Different security measures

Idea about virus and anti-virus

Knowledge of firewall, backup etc.

12.1 INTRODUCTION
The incredible growth of the Internet has excited businesses and consumers alike with
its promise of changing the way we live and work. But a major concern has been just
how secure the Internet is, especially when youre sending sensitive information
through it.
It seems that everything relies on computers and the Internet now communication
(email, cellphones), entertainment (digital cable, mp3s), transportation (car engine
systems, airplane navigation), shopping (online stores, credit cards), medicine
(equipment, medical records), and the list goes on. How much of your daily life relies
on computers? How much of your personal information is stored either on your own
computer or on someone else's system?

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Cyber security involves protecting that information by preventing, detecting, and


responding to attacks.

12.2 SECURITY IN THE CYBERSPACE


Cyberspace provides a complex digital network that is ever-expanding, linking
various aspects of life. While cyberspace serves as a fertile soil for growth in
efficiency, productivity, business and communications, it is prone to the infestation of
digital threats.
The same infrastructure we exchange information on is a verdant platform for the
execution of malicious intent, whereby ICT is exploited and its elements abused for
the interest of insidious parties. As such, it is imperative that countries protect their
digital environment from being defaced or infiltrated by sinister forces.
More and more consumer electronics platforms will be connected to the Internet. This
increasing connectivity will enable new distribution mechanisms, but it will also
increase the risks for both the devices and the content owners and distributors.
Cyberspace security that we refer to is a big field, including physical and virtual
security of personal computers, servers and other Internet working devices. The
Cyberspace security should not only cater for the technical view of cyberspace
security, but also the social aspect too which has caused lot of damage by social
engineering.
Today typical computing platforms lack the most important aspect - trust. Past
security solutions are not normally integrated into the Operating System (OS) kernel
of a computer. They come in the form of standard unsafe OS kernels, which are then
given enhanced protection by several skins of protection such as virus scanners,
firewalls and others.
It has been shown that these external protection mechanisms are barely protective
enough against todays threats. It is now known that a real tight protection can be
achieved with focus on seamless integration of the security module and kernel into the
core functionality, as well as through a separated and protected hardware security
kernel.

12.2.1 Designing for Security


Information security is provided on computers and over the Internet by a variety of
methods. A simple but straightforward security method is to only keep sensitive
information on removable storage media like floppy disks. But the most popular forms
of security all rely on encryption, the process of encoding information in such a way
that only the person (or computer) with the key can decode it.
Computer Encryption
Encryption is the transformation of data into a form that is as close to impossible as
possible to read without the appropriate knowledge. Its purpose is to ensure privacy
by keeping information hidden from anyone for whom it is not intended, even those
who have access to the encrypted data. Decryption is the reverse of encryption; it is
the transformation of encrypted data back into an intelligible form.
Encryption and decryption generally require the use of some secret information,
referred to as a key. For some encryption mechanisms, the same key is used for both
encryption and decryption; for other mechanisms, the keys used for encryption and
decryption are different.
Today's cryptography is more than encryption and decryption. Authentication is as
fundamentally a part of our lives as privacy. We use authentication throughout our
everyday lives - when we sign our name to some document for instance - and, as we

move to a world where our decisions and agreements are communicated


electronically, we need to have electronic techniques for providing authentication.
Cryptography provides mechanisms for such procedures. A digital signature binds a
document to the possessor of a particular key, while a digital timestamp binds a
document to its creation at a particular time. These cryptographic mechanisms can be
used to control access to a shared disk drive, a high security installation, or a pay-perview TV channel.
The field of cryptography encompasses other uses as well. With just a few basic
cryptographic tools, it is possible to build elaborate schemes and protocols that allow
us to pay using electronic money, to prove we know certain information without
revealing the information itself and to share a secret quantity in such a way that a
subset of the shares can reconstruct the secret.
While modern cryptography is growing increasingly diverse, cryptography is
fundamentally based on problems that are difficult to solve. A problem may be
difficult because its solution requires some secret knowledge, such as decrypting an
encrypted message or signing some digital document. The problem may also be hard
because it is intrinsically difficult to complete, such as finding a message that
produces a given hash value.
Computer encryption is based on the science of cryptography, which has been used
throughout history. Before the digital age, the biggest users of cryptography were
governments, particularly for military purposes. The existence of coded messages has
been verified as far back as the Roman Empire. But most forms of cryptography in
use these days rely on computers, simply because a human-based code is too easy for
a computer to crack.
Most computer encryption systems belong in one of two categories. Broadly speaking,
there are two types of encryption methods:
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Secret-key cryptography.

Public-key cryptography.

12.2.2 Firewall
If you have been using the Internet for any length of time, and especially if you work
at a larger company and browse the Web while you are at work, you have probably
heard the term firewall used. For example, you often hear people in companies say
things like, I cant use that site because they wont let it through the firewall.
If you have a fast Internet connection into your home (either a DSL connection or a
cable modem), you may have found yourself hearing about firewalls for your home
network as well. It turns out that a small home network has many of the same security
issues that a large corporate network does. You can use a firewall to protect your
home network and family from offensive Web sites and potential hackers.
Basically, a firewall is a barrier to keep destructive forces away from your property. In
fact, thats why its called a firewall. Its job is similar to a physical firewall that keeps a
fire from spreading from one area to the next. As you read through this article, you
will learn more about firewalls, how they work and what kinds of threats they can
protect you from.
A firewall is simply a program or hardware device that filters the information coming
through the Internet connection into your private network or computer system. If an
incoming packet of information is flagged by the filters, it is not allowed through.
Lets say that you work at a company with 500 employees. The company will
therefore have hundreds of computers that all have network cards connecting them
together.

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In addition, the company will have one or more connections to the Internet through
something like T1 or T3 lines. Without a firewall in place, all of those hundreds of
computers are directly accessible to anyone on the Internet. A person who knows what
he or she is doing can probe those computers, try to make FTP connections to them,
try to make telnet connections to them and so on. If one employee makes a mistake
and leaves a security hole, hackers can get to the machine and exploit the hole.
With a firewall in place, the landscape is much different. A company will place a
firewall at every connection to the Internet (for example, at every T1 line coming into
the company). The firewall can implement security rules. For example, one of the
security rules inside the company might be:
Out of the 500 computers inside this company, only one of them is permitted to
receive public FTP traffic. Allow FTP connections only to that one computer and
prevent them on all others.
A company can set up rules like this for FTP servers, Web servers, Telnet servers and
so on. In addition, the company can control how employees connect to Web sites,
whether files are allowed to leave the company over the network and so on. A firewall
gives a company tremendous control over how people use the network.
Firewalls use one or more of three methods to control traffic flowing in and out of the
network:
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Packet filtering: Packets (small chunks of data) are analyzed against a set of
filters. Packets that make it through the filters are sent to the requesting system
and all others are discarded.

Proxy service: Information from the Internet is retrieved by the firewall and then
sent to the requesting system and vice versa.

Stateful inspection: A newer method that doesnt examine the contents of each
packet but instead compares certain key parts of the packet to a database of trusted
information.

Information traveling from inside the firewall to the outside is monitored for specific
defining characteristics, then incoming information is compared to these
characteristics. If the comparison yields a reasonable match, the information is
allowed through.
Otherwise it is discarded What It Protects You From There are many creative ways
that unscrupulous people use to access or abuse unprotected computers:
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Remote login: When someone is able to connect to your computer and control it
in some form. This can range from being able to view or access your files to
actually running programs on your computer.

Application backdoors: Some programs have special features that allow for
remote access. Others contain bugs that provide a backdoor, or hidden access, that
provides some level of control of the program.

SMTP session hijacking: SMTP is the most common method of sending e-mail
over the Internet. By gaining access to a list of e-mail addresses, a person can
send unsolicited junk e-mail (spam) to thousands of users. This is done quite often
by redirecting the e-mail through the SMTP server of an unsuspecting host,
making the actual sender of the spam difficult to trace.

Operating system bugs: Like applications, some operating systems have


backdoors. Others provide remote access with insufficient security controls or
have bugs that an experienced hacker can take advantage of.

Denial of service: You have probably heard this phrase used in news reports on
the attacks on major Web sites. This type of attack is nearly impossible to counter.

What happens is that the hacker sends a request to the server to connect to it.
When the server responds with an acknowledgement and tries to establish a
session, it cannot find the system that made the request. By inundating a server
with these unanswerable session requests, a hacker causes the server to slow to a
crawl or eventually crash.
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E-mail bombs: An e-mail bomb is usually a personal attack. Someone sends you
the same e-mail hundreds or thousands of times until your e-mail system cannot
accept any more messages.

Macros: To simplify complicated procedures, many applications allow you to


create a script of commands that the application can run. This script is known as a
macro. Hackers have taken advantage of this to create their own macros that,
depending on the application, can destroy your data or crash your computer.

Viruses: Probably the most well-known threat is computer viruses. A virus is a


small program that can copy itself to other computers. This way it can spread
quickly from one system to the next. Viruses range from harmless messages to
erasing all of your data.

Spam: Typically harmless but always annoying, spam is the electronic equivalent
of junk mail. Spam can be dangerous though. Quite often it contains links to Web
sites. Be careful of clicking on these because you may accidentally accept a
cookie that provides a backdoor to your computer.

Redirect bombs: Hackers can use ICMP to change (redirect) the path information
takes by sending it to a different router. This is one of the ways that a denial of
service attack is set up.

Source routing: In most cases, the path a packet travels over the Internet (or any
other network) is determined by the routers along that path. But the source
providing the packet can arbitrarily specify the route that the packet should travel.
Hackers sometimes take advantage of this to make information appear to come
from a trusted source or even from inside the network! Most firewall products
disable source routing by default.

Some of the items in the list above are hard, if not impossible, to filter using a
firewall. While some firewalls offer virus protection, it is worth the investment to
install anti-virus software on each computer. And, even though it is annoying, some
spam is going to get through your firewall as long as you accept e-mail.
The level of security you establish will determine how many of these threats can be
stopped by your firewall. The highest level of security would be to simply block
everything. Obviously that defeats the purpose of having an Internet connection. But a
common rule of thumb is to block everything, then begin to select what types of
traffic you will allow.
You can also restrict traffic that travels through the firewall so that only certain types
of information, such as e-mail, can get through. This is a good rule for businesses that
have an experienced network administrator that understands what the needs are and
knows exactly what traffic to allow through.
For most of us, it is probably better to work with the defaults provided by the firewall
developer unless there is a specific reason to change it. One of the best things about a
firewall from a security standpoint is that it stops anyone on the outside from logging
onto a computer in your private network.
While this is a big deal for businesses, most home networks will probably not be
threatened in this manner. Still, putting a firewall in place provides some peace of
mind.

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Check Your Progress 1

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Fill in the blanks:


1. Cyber security involves protecting the by preventing,
detecting, and responding to attacks.
2. is the transformation of data into a form that is as close to
impossible as possible to read without the appropriate knowledge.
3. A is simply a program or hardware device that filters the
information coming through the Internet connection into your private
network or computer system.

12.2.3 Application Gateway


An application gateway is an application program that runs on a firewall system
between two networks. It is also known as application proxy or application-level
proxy. When a client program establishes a connection to a destination service, it
connects to an application gateway, or proxy.
The client then negotiates with the proxy server in order to communicate with the
destination service. In effect, the proxy establishes the connection with the destination
behind the firewall and acts on behalf of the client, hiding and protecting individual
computers on the network behind the firewall. This creates two connections: one
between the client and the proxy server and one between the proxy server and the
destination. Once connected, the proxy makes all packet-forwarding decisions. Since
all communication is conducted through the proxy server, computers behind the
firewall are protected.
While this is considered a highly secure method of firewall protection, application
gateways require great memory and processor resources compared to other firewall
technologies, such as stateful inspection.

12.2.4 Anti-virus Software


Anti-virus software are computer programs that attempt to identify, neutralize or
eliminate malicious software. Anti-virus is so named because the earliest examples
were designed exclusively to combat computer viruses; however most modern antivirus software is now designed to combat a wide range of threats, including worms,
phishing attacks, rootkits, trojan horses and other malware. Anti-virus software
typically uses two different techniques to accomplish this:
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Examining (scanning) files to look for known viruses matching definitions in a


virus dictionary.

Identifying suspicious behavior from any computer program which might indicate
infection. This technique is called heuristic analysis. Such analysis may include
data captures, port monitoring and other methods.

Most commercial antivirus software uses both of these approaches, with an emphasis
on the virus dictionary approach.

12.2.5 Regular Backups


Each computer user has their responsibility to make regular backups to protect their
computer data. The task of backing up the data found on your computer is often the
most overlooked and hardly ever done until its too late action within the computer
end-user community. With the software tools now available, it no longer is the
arduous task that is once was a few years ago.
Once your system is in use, your next consideration should be to back up the file
systems, directories, and files. Files and directories represent a significant investment

of time and effort. At the same time, all computer files are potentially easy to change
or erase, either intentionally or by accident. If you take a careful and methodical
approach to backing up your file systems, you should always be able to restore recent
versions of files or file systems with little difficulty.
When a hard disk crashes, the information contained on that disk is destroyed. The
only way to recover the destroyed data is to retrieve the information from your backup
copy.
There are several different methods of backing up. The most frequently used method
is a regular backup, which is a copy of a file system, directory, or file that is kept for
file transfer or in case the original data is unintentionally changed or destroyed.
Another form of backing up is the archive backup; this method is used for a copy of
one or more files, or an entire database that is saved for future reference, historical
purposes, or for recovery if the original data is damaged or lost. Usually an archive is
used when that specific data is removed from the system.

12.2.6 Virus
A computer virus is a self-replicating program that explicitly copies itself and that can
infect other programs by modifying them or their environment such that a call to an
infected program implies a call to a possibly evolved copy of the virus. Note that
'program' takes a fairly liberal interpretation here, involving much more than the
'obvious' application programs (executables) in a typical computer system.
Almost any code that is executed or interpreted may be 'virusable' so long as, when
running in its normal execution context, that code has write access to some other
executable object (note this need not be the same kind of executable object!).
Some obvious targets for viruses include the boot code in the system boot sectors and
MBRs of PC disks and hard drives. These are clearly programs, but are often
overlooked because they do not reside in files and thus are not readily accessible to
the user, or even 'visible'.
Other less than obvious programs include scripting facilities built into applications,
either in the form of sophisticated macro languages such as Visual Basic for
Applications (VBA), or the simpler procedural languages for automating many
applications such as the scripting feature of popular Windows IRC clients like mIRC
and Pirch.
Another important feature of viruses is that, unlike their biological namesakes, they
need not be parasitic. Various companion infection methods exist and mechanisms
that involve altering the behavior of the host program's environment, rather than
altering the program itself, can be sufficient to classify a program as viral (so long as
it is also self-replicating).
When discussing viruses, it is common to hear talk about obvious symptoms and
damaging payloads. Some viruses display symptoms, and some cause damage to files
in a system they have infected, but neither symptoms nor damage are essential in the
definition of a virus. A non-damaging virus is still a virus, not a prank.
There are no 'good' viruses. Viruses are seldom intentionally installed. Users (and,
more importantly in corporate settings, system administrators) must be able to control
their computers. This requires that they have the power to install and remove software,
and that no software is installed, modified, or removed without their knowledge or
permission.
As viruses are usually surreptitiously self-installed and modify other software in the
system without user or administrator awareness, they break these requirements of
system administration. Further, their removal can be difficult and costly and viruses

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will occupy drive space and space on backup media and use CPU cycles and RAM
that has not been budgeted for.
Many viruses cause intentional damage. But many more cause damage that may not
have been intended by the virus' writer. For instance, when a virus finds itself in a
very different environment from that for which it was written, a non-destructive virus
can suddenly become very destructive.
A good case in point are many common (or formerly common) boot viruses: while a
particular boot virus might not contain any code to damage computers running
Windows NT, booting an NT machine with such a virus is likely to result in system
repairs the user or system administrator may not have been prepared for.
Even if a virus causes no direct damage to a computer, the user's or administrator's
inexperience with viruses can mean that damage occurs during the 'clean up' process.
Many organizations have shredded floppies, deleted files, and done low-level formats
of hard disks in their efforts to remove viruses.
Even when removal is done perfectly, with no damage to the infected system or files,
it is not normally done when the machine is first infected, and the virus in that
machine has had a few weeks to spread. The social costs of infection include a loss of
reputation and good will which in a business setting can be significant.
Types of PC Viruses
Generally, there are two main classes of viruses. The first class consists of the file
infectors, which attach themselves to ordinary program files. These usually infect
arbitrary .COM and/or .EXE programs, though some can infect any program for
which execution is requested, such as .SYS, .OVL, .PRG, & .MNU files. File
infectors can be either direct action or resident.
A direct-action virus selects one or more other programs to infect each time the
program that contains it is executed. A resident virus hides itself somewhere in
memory the first time an infected program is executed, and thereafter infects other
programs when they are executed (as in the case of the Jerusalem 185 virus) or when
certain other conditions are fulfilled. The Vienna virus is an example of a direct-action
virus. Most other viruses are resident.
The second category is system or boot-record infectors: those viruses that infect
executable code found in certain system areas on a disk, which are not ordinary files.
On DOS systems, there are ordinary boot-sector viruses, which infect only the DOS
boot sector, and MBR viruses which infect the Master Boot Record on fixed disks and
the DOS boot sector on diskettes. Examples include Brain, Stoned, Empire, Azusa,
and Michelangelo. Such viruses are always resident viruses. Finally, a few viruses are
able to infect both (the Tequila virus is one example). These are often called "multipartite" viruses, though there has been criticism of this name; another name is "bootand-file" virus.
File system or cluster viruses (e.g. Dir-II) are those that modify directory table entries
so that the virus is loaded and executed before the desired program is. Note that the
program itself is not physically altered; only the directory entry is. Some consider
these infectors to be a third category of viruses, while others consider them to be a
sub-category of the file infectors.
Stealth Virus
A stealth virus is one that hides the modifications it has made in the file or boot
record, usually by monitoring the system functions used by programs to read files or
physical blocks from storage media, and forging the results of such system functions
so that programs which try to read these areas see the original uninfected form of the
file instead of the actual infected form. Thus the viral modifications go undetected by

anti-viral programs. However, in order to do this, the virus must be resident in


memory when the anti-viral program is executed.
The very first DOS virus, Brain, a boot-sector infector, monitors physical disk I/O and
redirects any attempt to read a Brain-infected boot sector to the disk area where the
original boot sector is stored. The next viruses to use this technique were the file
infectors Number of the Beast and Frodo.
Polymorphic Virus
A polymorphic virus is one that produces varied (yet fully operational) copies of
itself, in the hope that virus scanners will not be able to detect all instances of the
virus. The most sophisticated form of polymorphism discovered so far is the MtE
"Mutation Engine" written by the Bulgarian virus writer who calls himself the "Dark
Avenger".
Fast and Slow Infectors
A typical file infector (such as the Jerusalem) copies itself to memory when a program
infected by it is executed, and then infects other programs when they are executed. A
fast infector is a virus which, when it is active in memory, infects not only programs
which are executed, but also those which are merely opened. The result is that if such
a virus is in memory, running a scanner or integrity checker can result in all (or at
least many) programs becoming infected all at once.
The term "slow infector" is sometimes used for a virus that, if it is active in memory,
infects only files as they are modified (or created). The purpose is to fool people who
use integrity checkers into thinking that the modification reported by the integrity
checker is due solely to legitimate reasons. An example is the Darth Vader virus.
Sparse Infector
The term "sparse infector" is sometimes given to a virus that infects only occasionally,
e.g. every 10th executed file, or only files whose lengths fall within a narrow range,
etc. By infecting less often, such viruses try to minimize the probability of being
discovered by the user.
Companion Virus
A companion virus is one that, instead of modifying an existing file, creates a new
program, which (unknown to the user) gets executed by the command-line interpreter
instead of the intended program. (On exit, the new program executes the original
program so things will appear normal.) This is done by creating an infected .COM file
with the same name as an existing .EXE file. Note that this type of malicious code is
not always considered to be a virus, since it does not modify existing files.
Armored Virus
An armored virus is one that uses special tricks to make the tracing, disassembling and
understanding of its code more difficult. A good example is the Whale virus.
Macro Virus
Many applications allow you to create macros. A macro is a series of commands to
perform an application-specific task. Those commands can be stored as a series of
keystrokes, or in a special macro language.
A macro virus is a virus that propagates through only one type of program, usually
either Microsoft Word or Microsoft Excel. It can do this because these types of
programs contain auto open macros, which automatically run when you open a
document or a spreadsheet. Along with infecting auto open macros, the macro virus
infects the global macro template, which is executed anytime you run the program.

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Thus, once your global macro template is infected, any file you open after that
becomes infected and the virus spreads.
Virus Hoax
A virus hoax generally appears as an email message that describes a particular virus
that does not exist. These emails almost always carry the same basic story: that if you
download an email with a particular subject line, your hard drive will be erased (an
impossibility because the text of an email cannot harbor a virus).
Such messages are designed to panic computer users. The writer or writers email the
warning and include a plea for the reader to forward it to others. The message then
acts much like a chain letter, propagating throughout the Internet as individuals
receive it and then innocently forward it. An example of a virus hoax is the "Good
Times" virus which was written in 1994 and since then has circled the globe many
times over. The best thing to do on receipt of such an email is to ignore and delete it.
World Famous Virus
Chernobyl: The Chernobyl, or PE CIH, virus activates itself every year on the 26th of
April - on the anniversary of the Chernobyl, Ukraine nuclear power plant tragedy. It
was allegedly written by a Taiwanese citizen in 1998.
The virus wipes the first megabyte of data from the hard disk of a personal computer
thus making the rest of the files of no use. In addition to this it also deletes the data on
the computer's Basic Input-Output System (BIOS) chip so that the computer cannot
function till a new chip is fitted or the data on the old one is restored. Fortunately only
those BIOSes, which can be changed or updated, face a threat from this virus.
This virus affects only executable files. Since these are distributed less often than
documents, the spread of Chernobyl is more confined than that of most macro viruses.
VBS_Loveletter
The VBS_LOVELETTER virus (better known as the Love Bug or the ILOVEYOU
virus) was reportedly written by a Filipino undergraduate.
In May 2000, this deadly virus beat the Melissa virus hollow - it became the world's
most prevalent virus. It struck one in every five personal computers in the world.
When the virus was brought under check the true magnitude of the losses was
incomprehensible. Losses incurred during this virus attack were pegged at US $ 10
billion.
The original VBS_LOVELETTER utilized the addresses in Microsoft Outlook and
emailed itself to those addresses. The e-mail, which was sent out, had "ILOVEYOU"
in its subject line. The attachment file was named "LOVE-LETTER-FORYOU.
TXT.vbs". The subject line and those who had some knowledge of viruses, did not
notice the tiny .vbs extension and believed the file to be a text file conquered people
wary of opening e-mail attachments. The message in the e-mail was "kindly check the
attached LOVELETTER coming from me".
Since the initial outbreak over thirty variants of the virus have been developed many
of them following the original by just a few weeks. In addition, the Love Bug also
uses the Internet Relay Chat (IRC) for its propagation. It e-mails itself to users in the
same channel as the infected user. Unlike the Melissa virus this virus does have a
destructive effect. Whereas the Melissa, once installed, merely inserts some text into
the affected documents at a particular instant during the day, VBS_LOVELETTER
first selects certain files and then inserts its own code in lieu of the original data
contained in the file.
This way it creates ever-increasing versions of itself. Probably the world's most
famous worm was the Internet worm let loose on the Internet by Robert Morris

sometime in 1988. The Internet was, then, still in its developing years and this worm,
which affected thousands of computers, almost brought its development to a complete
halt. It took a team of experts almost three days to get rid of the worm and in the
meantime many of the computers had to be disconnected from the network.
Pakistani Brain
The Brain, the first virus known to have spread all over the world, was a boot sector
virus. This implies that it would take the system commands, those that help in starting
the computer, from their designated space (sector) on the hard disk and put them in
the next unused space (sector). Then, it would mark the space where the system
commands now reside as bad sectors. This way, it would become impossible to boot
(start) the computer. Moreover, it would continue to take up all the unused space in
the computer's disk and mark it as corrupted sectors.
All the strains of the Brain virus carried the name of the program, the author and often
their address in the boot sector of the virus-infected disk. The other known versions of
this virus include Ashar or Ashar-Shoe viruses, which are very common in Malaysia.
Stoned-Marijuana
Originally reported to have been written in New Zealand, this was another boot sector
virus with a difference. It would infect the boot sector of floppy disks. The File
Allocation Table (FAT) on the hard disk drive - the system used by DOS to identify
and locate files on a disk - would also be affected. The virus would most often
regularly display a message, which said, "Your PC is stoned. Legalize Marijuana."
Moreover, it would damage the File Allocation Table on hard disk drives with more
than one partition. The FAT on floppy disks, which had been formatted as high
density, would also be harmed so that access to files on both the hard disk and the
floppy disk would become nearly impossible to achieve.
Jerusalem
The Jerusalem virus a.k.a. "Israeli" and "Friday the 13th" has several versions
including the Jerusalem-B virus. It starts by infecting the .COM and .EXE files in a
computer. After existing or being resident in a computer for half an hour, it slows
down the system processes by a factor of ten. On a pre-set date, Friday the 13th, the
Jerusalem virus deletes all the infected files from the user's computer. Apart from the
damage that it does, the other strain of the Jerusalem virus, Jerusalem-B, also shows a
"black window" in the center of the screen at regular intervals.
Cascade
The Cascade virus originally appeared between September and December during the
years 1980 and 1988. Its basic target were machines with colour monitors. This virus
is also called "Falling Letters" or "1701". It initially appeared as a Trojan horse in the
form of a program designed to turn off the Num-Lock light on the user's keyboard. In
fact, what it actually did was to make the characters on the screen drop in a heap to the
bottom of the screen. What is special about this virus is that it utilizes an encryption
algorithm to evade detection. Now, variants of this virus occur as a memory resident
.COM virus.
Michelangelo
The Michelangelo virus also referred to by some virus watchers as Stoned.
Michelangelo, first spread in the early 1990's. Since then, a number of strains have
been introduced, and it is now also known by a variety of other names. This virus was
also responsible for the founder of Trend Micro entering the anti-virus business.

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This virus was entitled after the very famous Italian Renaissance artist Michelangelo
Buonarroti. It gets activated every year on the artist's birthday - 6th March. The person
responsible for giving the name was the researcher not the writer of the virus.
The Michelangelo is a boot record virus and on the date that it gets triggered it
destroys files by overwriting certain critical areas of the hard disk or floppy disk.
These areas are overwritten with garbage, making the disk or floppy completely
useless. If this virus infects a bootable floppy (a floppy that can be used to boot a
computer), the floppy no longer remains a bootable floppy.
An infection with this virus is caused by using infected disks for a system boot-up.
After being installed in the memory of the computer, Michelangelo then goes on to
infect all non-write protected disks that are used in the computer.
Virus Creation Tool
A program designed to generate viruses. Even early virus creation tools were able to
generate hundreds or thousands of different, functioning viruses, which were initially
undetectable by current scanners.
Virus Source
Source code is written by a programmer in a high-level language and readable by
people but not computers. Source code must be converted to object code or machine
language before a computer can read or execute the program. Virus Source can be
compiled to create working viruses, or modified and compiled by programmers to
make new working viruses.
Check Your Progress 2
Fill in the blanks:
1. An application gateway is an application program that runs on a
system between two networks.
2. Viruses are intentionally installed.
3. A virus selects one or more other programs to infect each
time the program that contains it is executed.

12.2.7 Security Protection and Recovery


Today, businesses face ever-growing data protection and recovery challenges:
z

Natural disasters and human threats

Explosive data growth, which can increase costs exponentially

New regulations requiring uniform processes and accountability

A litigious environment demanding quick retrieval for discovery purposes

Security breaches from viruses, worms, hackers

Any number of events can impact your business and IT operations from simple enduser mistakes to a failed device to the loss of an entire data center due to a disaster.
Data Protection and Recovery has become more critical than ever. Recent news
reports have highlighted the problems universities, financial institutions and others
have faced with the loss of important customer and employee data. Regulatory
requirements have increased the emphasis on having a solid data protection and
recovery plan in place.
Recovery management goes beyond the backup-and-restore paradigm to offer an
efficient way to protect data and help ensure its continual availability. Using
replication and snapshot technology to create a recovery tier within the storage

environment, a recovery management implementation can provide enterprise IT


organizations with uninterrupted access to data.
When implementing data protection strategies, many organizations face a similar
problem: too much data, too many applications, and not enough time to back
everything up and restore it all. A different approach to solving this problem is an
approach that has the potential to protect any amount of data as often as necessary and
to recover that data virtually instantaneously when needed.
For e-mail applications and databases, such an approach could prevent data corruption
and virus attacks from causing vital operations to go down for hours or even days. For
a business, this approach could mean having continuous access to the data and
information needed for analysis, decision making, and actions, leading to enhanced
competitiveness.
An alternative to traditional backup and restore processes, the modern technique uses
creating and managing online replicas of production data. When a replica is online, it
is immediately available and does not have to undergo a lengthy restore process
before it can be used. This is a dramatic change from data backupeven backup-todiskin which the backup copy is not immediately usable but must first go through a
restore process.
Depending on how much data is involved, a typical restore process for a Microsoft
Exchange or Oracle database can take several daysduring which time the end
users cannot use e-mail or process orders, grinding business operations to a halt.
Creating online replicas using snapshot and replication technologies has been possible
for some time. But whereas in the past, these technologies were restricted to large,
expensive storage devices, they are now becoming widely available. Dell currently
offers entry-level and midtier storage devices that incorporate snapshot and replication
technologies.
Data recovery is a process by which individual data elements such as files or folders
are encrypted for more than one person or entity. By encrypting for more than one
person or escrow entity, An escrow entity may be a designated administrator within an
organization to perform a data recovery role.
Data may be retrieved in clear-text form by a third party. Data recovery does not
necessarily imply that private key recovery has occurred, however, key recovery may
be one method to achieve data recovery. Data recovery can be achieved without
private key recovery in the Windows XP operating system that is based on
symmetrically encrypted data blocks.
Both Secure Multi-purpose Internet Mail Extensions (S/MIME) and Encrypting File
System (EFS) use symmetrically encrypted data blocks, with the symmetric key being
protected by one or more public keys of a public/private key pair. In this scenario, the
symmetric key may be protected (encrypted) with more than one user, and therefore
more than one public key.
Data recovery can occur through a second user decrypting the data. In the case of
EFS, files can be opened and data recovered through the use of a Data Recovery
Agent (DRA) as shown in the figure below.

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User

Recovery Agent

Recovery Agent
User

Figure 12.1: Data Protection and Recovery

Check Your Progress 3


State whether the following statements are true or false:
1. A computer virus is a self-replicating program.
2. There are some good viruses.
3. A virus hoax generally appears as an email message.
4. The basic target of cascade virus were machines with multiprocessors.

12.3 LET US SUM UP


Information security is provided on computers and over the Internet by a variety of
methods. Most computer encryption systems belong in one of two categories - Secretkey cryptography and Public-key cryptography. A firewall is simply a program or
hardware device that filters the information coming through the Internet connection
into your private network or computer system. The company will therefore have
hundreds of computers that all have network cards connecting them together. The
firewall can implement security rules. Operating system bugs - Like applications,
some operating systems have backdoors. A virus is a small program that can copy
itself to other computers. Viruses range from harmless messages to erasing all of your
data. An application gateway is an application program that runs on a firewall system
between two networks. It is also known as application proxy or application-level
proxy. Since all communication is conducted through the proxy server, computers
behind the firewall are protected. Antivirus software are computer programs that
attempt to identify, neutralize or eliminate malicious software. Each computer user

has their responsibility to make regular backups to protect their computer data. Once
your system is in use, your next consideration should be to back up the file systems,
directories, and files. A non-damaging virus is still a virus, not a prank. Data recovery
does not necessarily imply that private key recovery has occurred, however, key
recovery may be one method to achieve data recovery. Data recovery can be achieved
without private key recovery in the Windows XP operating system that is based on
symmetrically encrypted data blocks.

12.4 LESSON END ACTIVITY


Discuss about the different types of controls in a computer security environment.

12.5 KEYWORDS
Computer Security: It is a technological and managerial procedures applied to
computer systems to ensure the availability, integrity and confidentiality of
information managed by the computer system.
Confidentiality: It means that information cannot be access by unauthorized parties.
Authentication: It means that users are who they claim to be.
Availability: It means that resources are accessible by authorized parties. Integrity
means that information is protected against unauthorized changes that are not
detectable to authorized users.
Encryption: It is a process of coding information which could either be a file or mail
message in into cipher text a form unreadable without a decoding key in order to
prevent anyone except the intended recipient from reading that data.
Firewall: It is a dedicated appliance, or software running on another computer, which
inspects network traffic passing through it, and denies or permits passage based on a
set of rules.
Application Gateway: It is an application program that runs on a firewall system
between two networks.
Virus: A computer virus is a self-replicating program that explicitly copies itself and
that can infect other programs by modifying them or their environment.
Antivirus Software: It is a computer program that attempts to identify, neutralize or
eliminate malicious software.

12.6 QUESTIONS FOR DISCUSSION


1. What is firewall? How can it be implemented? Describe different types of
firewall.
2. What is the difference between threat and risk in computer science?
3. Write about the various protection and recovery measures of computer.
4. What is computer security? Why it is required? Describe the role of password in
computer security.
5. What is virus? How is it harmful to a computer system?

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Check Your Progress: Model Answers


CYP 1
1. information
2. Encryption
3. Firewall
CYP 2
1. firewall
2. seldom
3. direct-action
CYP 3
1. True
2. False
3. True
4. False

12.7 SUGGESTED READINGS


Harish Chandra Chaudhary, Knowledge Management for Competitive Advantage, Excel Books
Publications, New Delhi.
Deep and Deep, Technology Transfer and Joint Ventures Abroad, R. R. Azad, Publications,
New Delhi.
Thomas, J Kuegler, Web Advertising and Marketing, Jr. 3rd Edition-Prentice-Hall of India,
New Delhi.
Dr. Ravi Kalakota, E-Business Roadmap for Success, Pearson Education.
Ravi Kalakota, Andrew B. Whinston, "Frontiers of Electronic Commerce", Addition-Wesley
2000.

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UNIT V

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LESSON

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13
ENTERPRISE RESOURCE PLANNING
CONTENTS
13.0

Aims and Objectives

13.1

Introduction

13.2

Enterprise Resource Planning

13.3

13.4

13.2.1

Meaning of ERP

13.2.2

Characteristics of ERP

13.2.3

Components of ERP

13.2.4

Objectives of ERP

13.2.5

Benefits of ERP

The E-Business Backbone


13.3.1

Electronic Commerce Application Services

13.3.2

Information Brokerage and Management

13.3.3

Interface and Support Services

13.3.4

Secure Messaging and Structured Document Interchange Services

13.3.5

Middleware Services

Commercial ERP Package Description


13.4.1

Ramco Marshal

13.4.2

Oracle Applications

13.4.3

Baan IV

13.4.4

SAP

13.5

Let us Sum up

13.6

Lesson End Activity

13.7

Keywords

13.8

Questions for Discussion

13.9

Suggested Readings

13.0 AIMS AND OBJECTIVES


After studying this lesson, you should be able to understand:
z

What is ERP

Characteristics of ERP

Components of ERP

Objectives of ERP

Benefits of ERP

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Backbone of ERP

Meaning of ERP

13.1 INTRODUCTION
The Information technology industry is galloping into globalization at a very rapid
rate. It was evolved from mainframe based computing through the client server era
and internet era to where we are now heading - the convergence era.
These distinct phases are marked by parallel development in hardware technologies.
Client server era began when computing power delivered at desktop machines
increased manifold and matched mainframe computing power.
These technologies limited the availability of information services to users within an
organization. The Internet era has brought in the ability to deliver information around
the globe. This convergence era integrates business and technology together. This is
made possible with advancements in communication infrastructure.
The business landscape is constantly changing and enterprises are seeking to gain
competitive advantage through mergers and acquisitions as well as increased
proximity to customers and suppliers. This consolidation, along with the more macro
trend toward globalization, means that many enterprises now operate from several
different geographical sites, between which large volumes of time-sensitive, mission
critical data is transferred.
Now the business organizations are demanding such technologies which can deliver
complete (best business practices), usable (high productivity) and adaptable (easy
installation and post implementation maintenance) business systems.
With this ever-changing business environment, enterprises are adopting ERP systems
is to set up and integrate information resources across geographically spread business
units, to enable optimization across the organization.

13.2 ENTERPRISE RESOURCE PLANNING


Enterprise Resource Planning (ERP) system provides an integrated information
system for all departments and functions across a company that can serve all those
different departments particular needs. These systems implement business processes
within the organisation to achieve synergy in operation across various business units.

13.2.1 Meaning of ERP


ERP is back office software which focuses on the key business functions of
manufacturing, supply chain management, CRM, financial management and Project
Management. A well implemented ERP solution will improve the efficiency of the
enterprise, reduce money tied up in stock/work in progress, and run a Just in Time
inventory system.
That is a tall order, building a single software program that serves the needs of people
in finance as well as it does the people in human resources and in the warehouse. Each
of those departments typically has its own computer system optimized for the
particular ways that the department does its work. But ERP combines them all
together into a single, integrated software program that runs off a single database so
that the various departments can more easily share information and communicate with
each other.
That integrated approach can have a tremendous payback if companies install the
software correctly.

Take a customer order, for example. Typically, when a customer places an order, that
order begins a mostly paper-based journey from in-basket to in-basket around the
company, often being keyed and re-keyed into different departments computer
systems along the way.
All that lounging around in in-baskets causes delays and lost orders, and all the keying
into different computer systems invites errors. Meanwhile, no one in the company
truly knows what the status of the order is at any given point because there is no way
for the finance department, for example, to get into the warehouses computer system
to see whether the item has been shipped. "Youll have to call the warehouse" is the
familiar refrain heard by frustrated customers.
ERP vanquishes the old standalone computer systems in finance, HR, manufacturing
and the warehouse, and replaces them with a single unified software program divided
into software modules that roughly approximate the old standalone systems. Finance,
manufacturing and the warehouse all still get their own software, except now the
software is linked together so that someone in finance can look into the warehouse
software to see if an order has been shipped.
Most vendors ERP software is flexible enough that you can install some modules
without buying the whole package. Many companies, for example, will just install an
ERP finance or HR module and leave the rest of the functions for another day.

Figure 13.1: Enterprise Resource Planning

13.2.2 Characteristics of ERP


z

ERP facilitates company-wide Integrated Information System covering all


functional areas like Manufacturing, Selling and distribution, Payables,
Receivables, Inventory, Accounts, Human Resources, Purchases etc.

It bridges the information gap across the organisation.

It provides for complete integration of Systems not only across the departments in
a company but also across the companies under the same management.

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ERP performs core corporate activities and increases customer service and
thereby augmenting the corporate image.

ERP is the only solution for better Project Management.

ERP eliminates the most of the business problems like Material shortages,
Productivity enhancements, Customer service, Cash Management, Inventory
problems, Quality problems, Prompt delivery etc.,

The system should be flexible to respond to the changing needs of an enterprise.

It should run across various data base back ends through Open Data Base
Connectivity (ODBC).

ERP system should have open system architecture. This means that any module
can be interfaced or detached whenever required without affecting the other
modules.

ERP allows automatic introduction of latest technologies like Electronic Fund


Transfer(EFT), Electronic Data Interchange (EDI), Internet, Intranet, Video
conferencing, E-Commerce etc.

ERP provides business intelligence tools like Decision Support Systems (DSS),
Executive Information System (EIS), Reporting, Data Mining and Early Warning
Systems (Robots) for enabling people to make better decisions and thus improve
their business processes

It should support multiple hardware platforms for the companies having


heterogeneous collection of systems. It must support some third party add-ons
also.

In ERP systems, information is often recorded in a form that cannot be read


without the use of a computer.

Financial and business information is often generated automatically by ERP


systems based on data previously entered, without further human instructions.

It must have a collection of the best business processes applicable world-wide.

Last but not the least, it must simulate the reality of business processes on the
computers. In no way it should have the control beyond the business processes
and it must be able to assign accountabilities to the users controlling the system.

13.2.3 Components of ERP


ERP Software: Module based ERP software is the core of an ERP system. Each
software module automates business activities of a functional area within an
organization. Common ERP software modules include product planning, parts
purchasing, inventory control, product distribution, order tracking, finance, accounting
and human resources aspects of an organization.
Business Processes: Business processes within an organization falls into three levels strategic planning, management control and operational control. ERP has been
promoted as solutions for supporting or streamlining business processes at all levels.
Much of ERP success, however, has been limited to the integration of various
functional departments.
ERP Users: The users of ERP systems are employees of the organization at all levels,
from workers, supervisors, mid-level managers to executives.
Hardware and Operating Systems: Many large ERP systems are UNIX based.
Windows NT and Linux are other popular operating systems to run ERP software.
Legacy ERP systems may use other operating systems.

13.2.4 Objectives of ERP


Enterprise Resource Planning (ERP) systems which are coming into vogue are built
with the vision to provide businesses with an integrated information system. These
systems implement business processes within the organisation to achieve synergy in
operation across various business units. The challenge for ERP systems is to set up
and integrate information resources across geographically spread business units, to
enable optimisation across the organisation.
Even though a multitude of technologies is involved in building ERP systems, the
implementation and post-implementation maintenance should be made simple.
Towards this objective, it is imperative that the ERP systems satisfy some basic
requirements of the customer.
Objectives of ERP systems:
z

Provide support for all variations of best business practices

Enable implementation of these practices with a view towards enhancing


productivity

Empower the customer to modify the implemented business processes to suit their
needs.

13.2.5 Benefits of ERP


There are many advantages of ERP system. The foremost advantage of an ERP
system is bringing down the costs and saving the valuable time which would have
otherwise been wasted in procedural maneuvers and unwanted delays. Other benefits
are as follows:
z

Reduce paper documents by providing on-line formats for quickly entering and
retrieving information.

ERP provides greater accuracy of information with detailed content, better


presentation, fully satisfactory for the Auditors.

Company can track the orders and get detailed information on their customers.

Accounting application can integrate the cost, profit, and revenue information of
sales that are made, and it can be presented in a granular way.

It can protect a company against crimes such as embezzlement or industrial


espionage.

It helps in tracking the 3-way match between Purchase orders (what was ordered),
Inventory receipts (what arrived), and costing (what the vendor invoiced)

Helps to achieve competitive advantage by improving its business process.


Check Your Progress 1
1. Define ERP.
...
...
2. Write two features of ERP system.
...
...
3. What are the popular operating systems to run ERP software?
...
...

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13.3 THE E-BUSINESS BACKBONE


It is important to understand that the aim of the architectural frame-work itself is not
to build new database management systems, data repository, computer languages,
software agent based transaction monitors, or communication protocols. Rather, the
architecture should focus on synthesizing the diverse resources already in place in
corporations to facilitate the integration of data and software for better applications.
The electronic commerce application architecture consists of six layers of
functionality, or services:
1. Applications;
2. Brokerage services, data or transaction management;
3. Interface, and; support layers;
4. Secure messaging, security and electronic document interchange;
5. Middle ware and structured document interchange;
6. Network infrastructure and basic communications services.
These layers cooperate to provide a seamless transition between todays computing
resources and those of tomorrow by transparently integrating information access and
exchange within the context of the chosen application. Electronic commerce
applications are based on several elegant technologies. But only when they are
integrated do they provide uniquely powerful solutions.
In the ensuing discussion of each of these layers, we will not elaborate on the various
aspects of the network infrastructure that transports information. These were discussed
extensively earlier and will not be addressed here. We begin our discussion with the
application level services.

13.3.1 Electronic Commerce Application Services


The application services layer of e-commerce will be comprised of existing and future
applications built on the innate architecture. Three distinct classes of electronic
commerce application can be distinguished: customer-to-business, business-tobusiness, and intra organization.
Consumer-to-Business Transactions
We call this category marketplace transaction. In a marketplace transaction, customers
learn about products differently through electronic publishing, buy them differently
using electronic cash and secure payment systems, and have them delivered
differently.
Also, how customers allocate their loyalty may also be different. In light of this, the
organization itself has to adapt to a world where the traditional concepts of brand
differentiation no longer hold where quality has a new meaning, where content
may not be equated to product, Where distribution may not automatically mean
physical transport. In this new environment, brand equity can rapidly evaporate
forcing firms to develop new ways of doing business.
Business-to-Business Transactions
We call this category market-link transaction. Here, businesses, governments, and
other organizations depend on computer-to-computer communication as a fast, an
economical, and a dependable way to conduct business transactions. Small
companies are also beginning to see the benefits of adopting the same methods.
Business-to-business transactions include the use of EDI and electronic mail for
purchasing goods and services, buying information and consulting services,

submitting requests for proposals, and receiving proposals. Examine this scenario. The
current accounts payable process occurs through the exchange of paper documents.
Each year the trading partners exchange millions of invoices, checks, purchase orders,
financial reports, and other transactions. Most of the documents are in electronic form
at their point of origin but are printed and key-entered at the point of receipt. The
current manual process of printing, mailing is costly, time consuming, and errorprone. Given this situation and faced with the need to reduce costs, small businesses
are looking toward electronic commerce as a possible savior.
Intra-organizational Transactions
We call this category market-driven transaction. A company becomes market driven
by dispersing throughout the firm information about its customers and competitors; by
spreading strategic and tactical decision making so that all units can participate; and
by continuously monitoring their customer commitment by making improved
customer satisfaction an ongoing objective.
To maintain the relationships that are critical to delivering superior customer value,
management must pay close attention to service, both before and after sales. In
essence, a market-driven business develops a comprehensive understanding of its
customers business and how customers in the immediate and downstream markets
perceive value.
Three major components of market-driven transactions are:
z

customer orientation through product and service

customization; cross-functional coordination through enterprise

integration; and advertising, marketing, and customer service.

13.3.2 Information Brokerage and Management


The information brokerage and management layer provides service integration
through the notion of information brokerages, the development of which is
necessitated by the increasing information resource fragmentation.
We use the notion of information brokerage to represent an intermediary who
provides service integration between customers and information providers, given
some constraint such as a low price, fast service, or profit maximization for a client.
Information brokers, for example, are rapidly becoming necessary in dealing with the
voluminous amounts of information on the networks. As on-line databases migrate to
consumer information utilities, consumers and information professionals will have to
keep up with the knowledge, and owner-ship of all these systems. Whos got what?
How do you use it? What do they charge? Most professionals have enough trouble
keeping track of files of interest on one or two database services.
With all the complexity associated with large numbers of on-line databases and
service bureaus, if it is impossible to expect humans to do the searching. It will have
to be software programs information brokers or software agents, to use the more
popular term-that act on the searchers behalf.
Information brokerage does more than just searching. It addresses the issue of adding
value to the information that is retrieved. For instance, in foreign exchange trading,
information is retrieved about the latest currency exchange rates in order to hedge
currency holdings to minimize risk and maximize profit. In other words, the act of
retrieving the information is the input to other transactions.
With multiple transactions being the norm in the real world, service integration
becomes critical. Taking the same foreign exchange example further, service
integration allows one to link the hedging program (offered on a time-sharing basis by

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a third party) with the search program (could be another vendor) that finds the
currency rates from the cheapest on-line service to automatically send trades to the
bank or financial services company. In effect, a personalized automated trading
system can be created without having to go to any financial institution. This is just one
example of how information brokerages can add value.
Another aspect of the brokerage function is the support for data management and
traditional transaction services. Brokerages may provide tools to accomplish more
sophisticated, time-delayed updates or future compensating transactions. These tools
include software agents, distributed query generator, the distributed transaction
generator, and the declarative resource constraint base which describes a businesss
rules and-environment information. At the heart of this layer lies the work-flow
scripting environment built on a software agent model that coordinates work and data
flow among support services.
As pointed out earlier, software agents are used to implement information brokerages.
Software agents are mobile programs that have been called healthy viruses, digital
butlers and intelligent agents. Agents are encapsulations of users instruction that
perform all kinds of tasks in electronic marketplaces spread across networks.
Information brokerages dispatch agents capable of information resource gathering,
negotiating deals, and performing transactions. The agents are intelligent because they
have contingency plans of action. They examine themselves and their environment
and if necessary change from their original course of action to an alternative plan.
For example, suppose you send an agent to an on-line store with a request to order a
bouquet of roses for $25 or less. If the shop offers roses starting at $30, your agent can
either choose a different bouquet or find a different store by consulting an on-line
Yellow Pages directory, depending on prior instructions.
Although the notion of software agents sounds very seductive, it will take a while to
solve the problems of interregna communication, interoperable agents, and other
headaches that come with distributed computing and net-working. To some critics, the
prospect of a single-agent language like Telescript as a world standard is disturbing.
They worry that agents sound a bit too much like computer viruses, which instead of
running errands may run amok. Vendors such as General Magic go to great lengths to
explain the precautions it has taken to make this impossible: the limits placed on the
power of agents, the self destruct mechanism built into their codes. Yet until
electronic commerce services are up and running on a large scale, it is impossible to
know how well software agents will work.

13.3.3 Interface and Support Services


The third layer, interface and support services, will provide interfaces for electronic
commerce applications such as interactive catalogs and will support directory
services-functions necessary for information search and access. These two concepts
are very different. Interactive catalogs are the customized interface to consumer
applications such as home shopping. An interactive catalog is an extension of the
paper-based catalog and incorporates additional features such as sophisticated
graphics and video to make the advertising more attractive.
Directories, on the other hand, operate behind the scenes and attempt to organize the
enormous amount of information and transactions generated to facilitate electronic
commerce. Directory services databases make data from any server appear as a local
file. A classic example of a directory is the telephone White Pages, which allows us to
locate people and telephone numbers.
In the case of electronic commerce, directories would play an important role in
information management functions. For instance, take the case of buying an airline
ticket with several stopovers with the caveat that the time between lay overs be

minimized. This search would require several queries to various on-line directories tofind empty seats on various airlines and then the availability of seats would; be
coordinated with the amount of time spent in the airport terminals.
The primary difference between the two is that unlike interactive catalogs, which deal
with people, directory support services interact directly with software applications.
For this reason, they need not have the multimedia glitter and jazz generally
associated with interactive catalogs.
From a computing perspective, we can expect that there will be no one common user
interface that will glaze the surface of all electronic commerce applications, but
graphics and object manipulation will definitely predominated. Tool developers and
designers might incorporate common tools for interface building, but the shape of
catalogs or directories will depend on the users desires and functional requirements.

13.3.4 Secure Messaging and Structured Document Interchange Services


The importance of the fourth layer, secured messaging, is clear. Everyone in business
knows that electronic messaging is a critical business issue. Consider a familiar
business scenario: You hand over an urgent fax Monday and find out Tuesday that its
still sitting on your fax operators desk. What happened?
The line was busy and he thought hed try again later or the number was wrong, but
he forgot to let you know or youre in London and you need to send a spreadsheet that
details a marketing plan for a product introduction strategy to a co-worker in New
York. This must be done today, not tomorrow when the courier service would deliver.
There is a solution to these common and frustrating problems. Its called Integrated
Messaging: a group of computer services that through the use of a network send,
receive, and combine messages, faxes, and large data files. Some better-known
examples are electronic mail, enhanced fax, and electronic data interchange.
Broadly defined, messaging is the software that sits between the network
infrastructure and the clients or electronic commerce applications, masking the
peculiarities of the environment. Others define messaging as a frame-work for the
total implementation of portable applications, divorcing you from the architectural
primitives of your system. In general, messaging products are not applications that
solve problems; they are more enablers of the applications that solve problems.
Messaging services offer solutions for communicating non formatted (unstructured)
data-letters, memos, reports as weft as formatted (structured) data such as purchase
orders, shipping notices, and invoices. Unstructured messaging consists of fax, e-mail,
and form-based systems like Lotus Notes.
Structured documents messaging consist of the automated interchange of standardized
and approved messages between computer applications, via telecommunications lines.
Examples of structured document messaging include EDI. Messaging is gaining
momentum in electronic commerce and seems to have many advantages. It supports
both synchronous (immediate) and asynchronous (delayed) message delivery and
processing. With asynchronous messaging, when a message is sent, work continues
(software doesnt wait for a response). This allows the transfer of messages through
store-and-forward methods.
Another advantage of messaging is that it is not associated with any particular
communication protocol. No preprocessing is necessary, although there is an
increasing need for programs to interpret the message. Messaging is well suited for
both client server and peer-to-peer computing models. In distributed systems, the
messages are treated as objects that pass between systems.
Messaging is central to work-group computing that is changing the way businesses
operate. The ability to access the right information at the right time across diverse

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work groups is a challenge. Today, with the messaging tools, people can communicate
and work together more effectively-no matter where they are located.
When an employee sends an electronic mail form, the information travels along with
the form. So one person can start the form, mail it to the next person, fill it in, sign it,
mail it to the next, and so on. This is known as message-enabled workflow solutions.
The main disadvantages of messaging are the new types of applications it enableswhich appear to be more complex, especially to traditional programmers and the
jungle of standards it involves. Because of the lack of standards, there is often no
interoperability between different messaging vendors leading to islands of messaging.
Also, security, privacy, and confidentiality through data encryption and authentication
techniques are important issues that need to be resolved for ensuring the legality of the
message-based transactions themselves.

13.3.5 Middleware Services


Middleware is a relatively new concept that emerged only recently. Like so many
other innovations, it came into being out of necessity. Users in the 1970s, when
vendors, delivered homogeneous systems that worked, didnt have a need for
middleware services conditions changed-along with the hardware and the software the
organizations couldnt cope: The tools were inadequate, the backlog was enormous,
and the pressure was overwhelming and the users were dissatisfied. Something was
needed to solve all the interface, translation, transformation, and interpretation
problems that were driving application developers crazy.
With the growth of networks, client-server technology, and all other forms of
communicating between/among unlike platforms, the problems of getting all the
pieces to work together grew from formidable to horrendous. as the cry for distributed
computing spread, users demanded interaction between dissimilar systems, networks
that permitted shared resources, and applications that could be accessed by multiple
software programs.
In simple terms, middleware is the ultimate mediator between diverse software programs that enables them talk to one another.
Another reason for middleware is the computing shift from application centric to data
centric. That is, remote data controls all of the applications in the network instead of
applications controlling data. To achieve data-centric computing, middleware services
focus on three elements: transparency, transaction security and management, and
distributed object management and services.
Transparency
Transparency implies that users should be unaware that they are accessing multiple
systems. Transparency is essential for dealing with higher-level issues than physical
media and interconnection that the underlying network infrastructure is in charge of.
The ideal picture is one of a virtual network: a collection of workgroup,
departmental, enterprise, and inter enterprise LANs that appears to the end user or
client application to be a seamless and easily accessed whole.
Transparency is accomplished using middleware that facilitates a distributed
computing environment. This gives users and applications transparent access to data,
computation, and other resources across collections of multi-vendor, heterogeneous
systems.
The strategic architectures of every major system vendor are now based on some form
of middleware. The key to realizing the theoretical benefit of such architecture is
transparency. Users need not spend their time trying to understand where something
is. Nor should application developers have to code into their applications the exact
locations of resources over the network.

The goal is for the applications to send a request to the middleware layer, which then
satisfies the request any way it can, using remote information.
Transaction Security and Management
Support for Transaction Processing (TP) is fundamental to success in the electronic
commerce market. Security and management are essential to all layers in the
electronic commerce model. At the transaction security level, two broad general
categories of security services exist: authentication and authorization.
Transaction integrity must be a given for businesses that cannot afford any loss or
inconsistency in data. Some commercial sites have had gigantic centralized TP
systems running for years. For electronic commerce, middleware provides the
qualities expected in a standard TP sys-tem: the so-called ACID properties (atomicity,
consistency, isolation, and durability).
Distributed Object Management and Services
Object orientation is proving fundamental to the proliferation of network-based
applications for the following reasons: It is too hard to write a network-based
application without either extensive developer retraining or a technology that
camouflages the intricacies of the network. Objects are defined as the combination of
data and instructions acting on the data. Objects are an evolution of the more
traditional programming concept of functions and procedures.
A natural instance of an object in electronic commerce is a document. A document
carries data and often carries instructions about the actions to be performed on the
data. Today, the term object is being used interchangeably with document resulting in
a new form of computing called document oriented computing. Here, the trend is to
move away from single data-type documents such as text, pictures, or video toward
integrated documents known as compound document architectures.
The best example of this approach is an active document. If you create a new
document that is an integration of the spreadsheet, word processor, and presentation
package, what youll see in the next generation of operating systems is that as you
scroll through your document, the tool bar will automatically change from a
spreadsheet too bar, to a word processing tool bar, to a presentation package tool bar.
These applications will also be able to access and retrieve data from any file in the
computing network.
The implications are clear: Were going to see a gradual movement toward active
documents that will be designed out of linked applications.
Check Your Progress 2
Fill in the blanks:
1. is the ultimate mediator between diverse software programs that enables them talk to one another.
2. A natural instance of an object in electronic commerce is a
.
3. Transparency implies that users should be unaware that they are accessing
systems.

13.4 COMMERCIAL ERP PACKAGE DESCRIPTION


Enterprise resource planning systems integrate all the departments and functions
across a company onto a single computer system that can serve all those departments?
particular needs. Two types of ERP software packages are Open Source ERP software

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and Commercial ERP software. Two well known Commercial ERP softwares are
described below:

13.4.1 Ramco Marshal


This Software is developed by Ramco Systems Limited, an Indian Company, which
has a good global base in the field of ERP. This is the only Indian Company except
for a few other small players in the field of ERP. The company has excellent Research
and Development facilities to help it in developing world class ERP solutions.
The focus of the product is on the domestic market as well as the global market. This
product is suitable for small and medium enterprises without any industry specific
solutions. Some of the key features of the product are described below under the
following heads:
Architecture
z

Client server Architecture (1989+)

Wedded to Microsoft

Win NT (Unix), Great GUI, SQL Server

DCOM Based

Well integrated suite from grounds-up

Designed for distribution

Strengths
z

Engineered using 80s technology

Focus using Microsoft Technology

GUI including multimedia support

Early learning through internal use

Global client base

1000+ Engineers in Chennai

Better support for Indian clients

Weakness
z

Not available on many platforms

Does not support n tier architecture

Non robust software engineering

Lacks access to world class practices

Implementation Methodology not well developed

Blessing of Big Six consultants, Rating Agencies

Opportunities
z

World class software product from India

Access to high quality, large pool of manpower

Partnership with Microsoft - with the winning combination (Wintelco)

Single product

Swadeshi spirit

Better support due to limited platform

Threats
z

Suffer from Image - No rating

Too small in size (70M Vs 1-5 B)

Shake out in the market

No industry specific solutions

ERP too mission critical to be left to babies

13.4.2 Oracle Applications


Oracle Applications is the ERP package which has been developed by Oracle
Corporation. The company has been present in the software market for quite a long
time with its proven and time tested Oracle products. The company has a global client
base who use the range of Oracle products. Some of the key features of the package
are described below:
Architecture
z

Late entrant (1985+)

Genuine client server but more of 2 Tier

Grown from financials and manufacturing

Less tighter integration compared to others

DBMS driven rather than application driven

Loosely coupled systems

Strengths
z

Industry leader in the enterprise market

Every one needs Oracle engine

Great GUI

Internal beta site

Outstanding courseware

Focused applications in specific areas

Weakness
z

Dual Product (DBMS and ERP)

Lacks tighter integration

Wedded to Oracle DBMS

Belated support to Windows NT

Non model-based development

Not strong in India (though very strong in DBMS in India)

Opportunities
z

Established clients easily move to Oracle Apps

Financial services industry

Manufacturing industry

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Special solution for Oil and Gas industry

Special solution for media industry

Threats
z

Dominance of SAP

ERP is reference based industry

Consultants indifference

Technology dominated approach vs. Business dominated approach

13.4.3 Baan IV
The Baan Company is a worldwide leader in enterprise wide business software
applications and consulting services for companies in the hybrid manufacturing,
automotive, electronics, process and heavy equipment and project services industries.
Its corporate mission is to provide companies with innovative business software
solutions which are aligned with a companys organisational structure, business
practices and operational procedures.
The Baan Company is a leading provider of enterprise and inter-enterprise business
software solutions. The companys family of products is designed to help corporations
maintain a competitive advantage in the management of critical business processes by
means of a product architecture that lends itself to fast implementations and ease of
change.
Baan IV is an integrated family of manufacturing, distribution, finance and
transportation, service, project and orgware modules. The solutions offer a new
concept in business management software that incorporates and goes beyond ERP.
Using the principle of Dynamic Enterprise Modelling (DEM) implemented via its
Orgware capabilities, Baan IV enables a company to match its specific business
processes and organisational model with the extensive functionality of the Baan
applications.
Baan IV is specially designed to meet the needs of key vertical markets. Furthermore,
Baan also extends supply chain support beyond the boundaries of an organisation to
support trading partner management as well. Some of the key features of Baan IV are
described below:
Architecture
z

Unix and Client Server (1978+)

Uses object technology more than anyone else

Quick to adapt to new technology - DCOM

DEM Model based application development

Well documented three phase development

Conference room pilot (rapid prototyping)

Strengths
z

Manufacturing industry needs well met

Reasonably complex models

Model based development

Blessings from Big Six

Suits SME sector well

BaaN Series addresses version problems

Truly open with provision for mix and match

Wider support for hardware and software

True support for n tier architecture

Multi location development

Weaknesses
z

Small compared to SAP (1 Vs 4 B USD)

DEM not fully integrated with product

No industry specific solutions

Late entrant into Fortune 100 companies

Not very large site

Limited client base

Yet to break into major accounts

Courseware availability

Training infrastructure

Opportunities
z

Growing faster due to technology leadership

SME Sector

New packaged option reduces time/cost implementation

Conducive organisational style for innovation

Threats
z

No new major accounts to capture (they are all gone!)

SAPs ability to do cost cutting

Less aggressive marketing

CIOs backing SAP R/3

13.4.4 SAP
SAP was founded in 1972 and has grown to become the worlds leading software
company. SAP is a German company but operates all over the world, with
28 subsidiaries and affiliates and six partner companies maintaining offices in
40 countries.
SAP is both the name of the company and the ERP package. The SAP system
comprises a number of fully integrated modules which cover every aspect of business
management. The system has been developed to meet the increasing needs of
commercial and other organisations that are striving for greater efficiency and
effectiveness.
While many software companies have looked at areas of business and developed
systems to support those areas, SAP has looked toward the whole business. They offer
a unique system that supports nearly all areas of business on a global scale.
SAP provides the opportunity to replace large numbers of independent systems that
have been developed and implemented in established organisations with one single
modular system. Each module performs a different function but is designed to work

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with other modules. It is fully integrated, offering true compatibility across business
functions. Some of the key features of SAP R/3 are described below:
Architecture
z

Both mainframe (R/2) (1975+)

Client Server (R/3) (1988+)

Internet (SAP Java, R/3 Ver 4) (1996+)

Truly scalable through n tier architecture

Large software with very large number of features (mostly unused)

Robust, industry class

Strengths
z

World leader with impressive accounts

Largest business processes embedded

Great reference model

Tools for all round support

Most generic model (not truly object based)

Support built in data warehouse

Big Six near total support

Weakness
z

Monolith, large software - very resource hungry

Difficult to master and use

Very expensive from every count

Overkill for many organisations

Too simplistic models

Overly centrist, rigid

Opportunities
z

Early lead advantage

Ability to price out for SME

Brand Image to hold on to the market

Large consultant base

Great business model

Threats
z

Victim of early success

Market perception as old overweight

New players like People Soft edging out with better practices

Difficult to adapt to new technologies

Check Your Progress 3


1. What are the two types of ERP software packages?
...
...
2. Name one ERP software which is developed by Indian Company?
...
...
3. Name three companies who market ERP software?
...
...

13.5 LET US SUM UP


Enterprise Resource Planning (ERP) system provides an integrated information
system for all departments and functions across a company that can serve all those
different departments particular needs. These systems implement business processes
within the organization to achieve synergy in operation across various business units.
Components of ERP are ERP Software, Business Processes, ERP Users and Hardware
and Operating Systems. The electronic commerce application architecture consists of
six layers of functionality, or services- applications; brokerage services, data or
transaction management; interface and support layers, secure messaging, security and
electronic document interchange; network infrastructure and basic communications
services. The application services layer of e-commerce will be comprised of existing
and future applications built on the innate architecture. Three distinct classes of
electronic commerce application can be distinguished: customer to business, businessto-business, and intra organization. Information brokerages dispatch agents capable of
information resource gathering, negotiating deals, and performing transactions. The
interface and support services will provide interfaces for electronic commerce
applications such as interactive catalogs and will sup-port directory services-functions
necessary for information search and access. In general, messaging products are not
applications that solve problems; they are more enablers of the applications that solve
problems. Messaging services offer solutions for communicating non formatted
(unstructured) data-letters, memos, reports as weft as formatted (structured) data such
as purchase orders, shipping notices, and invoices. Structured documents messaging
consist of the automated interchange of standardized and approved messages between
computer applications, via telecommunications lines.

13.6 LESSON END ACTIVITY


Write an essay on ERP.

13.7 KEYWORDS
ERP: ERP stands for Enterprise Resource Planning; it is a system which provides an
integrated information system for all departments and functions across a company that
can serve all those different departments particular needs.
e-commerce Application Service Layer: It is a layer of e-commerce architecture
which comprised of existing and future applications built on the innate architecture.
Information Brokerage and Management Layer: It is a layer of e-commerce
architecture which provides service integration through the notion of information
brokerages, the development of which is necessitated by the increasing information
resource fragmentation.

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Interface and Support Services: It is a layer of e-commerce architecture which


provides interfaces for electronic commerce applications such as interactive catalogs
and supports directory services-functions necessary for information search and access.

13.8 QUESTIONS FOR DISCUSSION


1. What is ERP?
2. Explain the meaning of ERP.
3. Discuss the characteristic features of ERP.
4. What are the components of ERP?
5. What are the advantages of ERP?
6. Information brokerage does more than just searching. Explain.
7. Describe the application services layer of e-commerce.
8. Explain the middleware services of e-commerce.

Check Your Progress: Model Answers


CYP 1
1. Enterprise Resource Planning (ERP) system provides an integrated
information system for all departments and functions across a company
that can serve all those different departments particular needs.
2. Two features of the ERP system are:

ERP eliminates the most of the business problems like Material


shortages, Productivity enhancements, Customer service, Cash
Management, Inventory problems, Quality problems, Prompt delivery
etc.,

ERP facilitates company-wide Integrated Information System


covering all functional areas like Manufacturing, Selling and
distribution, Payables, Receivables, Inventory, Accounts, Human
resources, Purchases etc.

3. UNIX, Windows NT and Linux.


CYP 2
z

middleware

document

multiple

CYP 3
1. Open Source ERP software and Commercial ERP software
2. Remco Marshal
3. Companies like SAP AG, Baan, Oracle markets ERP software.

13.9 SUGGESTED READINGS


Harish Chandra Chaudhary, Knowledge Management for Competitive Advantage, Excel Books
Publications, New Delhi.
Deep and Deep, Technology Transfer and Joint Ventures Abroad, R. R. Azad, Publications,
New Delhi.

Thomas, J Kuegler, Web Advertising and Marketing, Jr. 3rd Edition-Prentice-Hall of India,
New Delhi.
Dr. Ravi Kalakota, E-Business Roadmap for Success, Pearson Education.
Ravi Kalakota, Andrew B. Whinston, "Frontiers of Electronic Commerce", Addition-Wesley
2000.
Vinod Kumar Garg and N.K.Venkita Krishnan, "Enterprise Resource Planning Concepts
and Practice", PHI, 1998.
Jose Antonio Fernandz, the SAP R/3 Handbook, TMH, 1998.
Lau, Enterprise Resource Management, McGraw Hill.
Daniel E OLeary, Enterprise Resource System: Systems, Lifecycle, Electronic Commerce,
Risk.

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LESSON

14
ERP PLANNING AND IMPLEMENTATION
CONTENTS
14.0

Aims and Objectives

14.1

Introduction

14.2

ERP Decision

14.3

14.2.1

Business Realisation

14.2.2

Assigning Responsibility Matrix

14.2.3

Approach Selection

14.2.4

Communication

14.2.5

Crafting the Project Crew

14.2.6

Change Management

Enterprise Architecture Planning


14.3.1

14.4

Multi-tier Architecture

ERP Implementation
14.4.1

What to Look for in an ERP Package

14.4.2

Approaches to ERP Implementation

14.4.3

ERP Implementation Life-cycle

14.4.4

ERP Implementation Technology

14.4.5

Guidelines for ERP Implementation

14.5

Let us Sum up

14.6

Lesson End Activity

14.7

Keywords

14.8

Questions for Discussion

14.9

Suggested Readings

14.0 AIMS AND OBJECTIVES


After studying this lesson, you should be able to:
z

Understand how to introducing ERP in the organization

Concept of ERP architectural planning

Overview of ERP implementation

14.1 INTRODUCTION
It is very well recognized that technological advances of any nature bring change.
Enterprise Resource Planning is no different. The introduction of ERP systems has

created a mini revolution in the functioning of industries. Like problems faced with
any new technology, ERP implementation and usage has its own set of unknowns to
be tackled. These have to be proactively handled to derive maximum benefits.
Needless to add, there are mechanisms for putting in place a continuous improvement
programme.

14.2 ERP DECISION


It has been believed that implementation of an ERP is a technology decision, which is
not true. In fact, it is a decision that ideally should be based on business needs and
benefits. Ideally speaking, the top and the middle management must be more than
clear as to what they expect from the ERP implementation. But the expectations are
met in most of the cases.
It is quite common in the organisations that there is conflict of objectives between the
CEO and CIO.

14.2.1 Business Realisation


The pilot of the organisation i.e., the CEO, must insist upon benefits from the ERP
team that would be felt as a onetime measure and those on a recurring basis. The costs
of the entire initiative must also be calculatedon a capital and a revenue basis. The
system must be positioned as a tool and an enabler to achieve organisational mission
and objectives. These desired outcomes, in turn, should be articulated in a business
case.
For example a CEO should ask, during the course of project appraisal, the following
questions for a clear understanding and communication of needs and expectations
from the new proposed system:
1. Create a base case of annual savings from cost cuts that could be made without
the ERP system in place.
2. Create an ERP case of annual savings that could be made with the ERP. This
should include savings that do not depend on ERP.
3. Substract the base case savings from the ERP case savings on an annual basis,
(i.e., step 1 savings from step 2 savings) and calculate the NPV of the residual
cash flow. A positive NPV will indicate that you should proceed with the
deployment of the ERP.
4. If step 3 produces a positive NPV, conduct a sensitivity analysis to ensure that the
business case is strong enough to withstand time overruns and cost overruns.
5. Back allocate all ERP system deployment costs to individual business units so that
they can factor them into their planning. Ensure that each unit is held responsible
for producing the promised results.

14.2.2 Assigning Responsibility Matrix


Getting an enterprise system up and running is only the beginning. To ensure that the
system will meet the organisations business objectives, the CEO and the apex
management must establish key matrices and assign key process owners specific
responsibility for achieving the benefits.
The top management must also assign individual responsibilities for achieving the
benefits. An organisations motive could be achieving better quality (less scrap, fewer
returns, lower warranty costs etc.). Others may set faster product development times,
improved customer satisfaction, more accurate order fulfillment or faster delivery
times as benefit goals.

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Apart from the hard benefits that he is likely to earn and a case for ROI, the top
management should also look at the security of the investments and the rate of
obsolescence. One cannot expect to be technology proof in the current state of
technological boom, but, all the same one should ensure that it does not become a
losing proposition either. One way to do it is by ensuring that the product in a few
years will be supported by evolving standards, the technology upgradation and change
management.
A case in point is the argument on proprietary versus open systems. Selection of the
IT framework, though highly technical and subjective must be delved into by the top
management for a comfort on future investments (in the long-term). The CIO of the
organisation should provide a clear IT strategy for the organisation to the top
management.

14.2.3 Approach Selection


A very critical decision here is whether one should go the big-bang way or the
incremental route. In weighing this, a lot has to do with culture and politics of the
organisation. In some organisations, lots of small success are needed to build up the
case. Here, the organisation might opt for the incremental approach. The consensus
between the top management and the middle management is of utmost importance.
A issue that should be addressed early in the stages of the ERP initiative is the
approach to BPR. The top team must understand that enterprise packages are
customisable, but only within limits. The ERP applications already have a gamut of
standard and best-practices incorporated by design. They also assume standardisation
of business processes across the enterprise.
A sound approach is to develop a philosophy at the outset of the project about the
level of reengineering and package changes needed and then communicate that
philosophy to the project team. The best known method is to reengineer processes
concurrently with implementation, up to a point.

14.2.4 Communication
Deployment of the ERP is a tricky job as it involves a whole variety of people with
different attitudes, all interacting or rather trying to communicate at the same time. A
whole lot of personal goals surface during this periodfor instance, operational and
tactical staff, whose interests were earlier trampled by the IT staff, try to settle scores.
Hence, it becomes imperative that the key stakeholders in the initiative agree upon the
project plan at the beginning of the project.
The project plan should also clearly mention dates for steering committee meetings,
etc. and these meetings must be used by the top management as a platform to
communicate the original vision, the mission, the strategies and objectives of the
project. Continuously re-emphasising the message helps in reducing the chances of
straying off from the target objectives, as well as the target dates.
The success of the ERP initiative, on the softer side, can be attributed to two things.
First, in all communications about the project, there is need of a practice of tying
central messages and specific department objectives and needs back to the overall
organisation.
Second, a regular mix of efforts to include everything from conducting workshops,
publishing newsletters and holding focus groups to organising lunch time discussions
and traveling road shows; each designed to suit different stages across the
implementation life cycle.
We should explicitly, candidly and constantly communicate the business case and
realities, including goals, timetable and expectations. An organisation which
implements ERP should have a well-laid out communications plan, even when the

initial project charter is being discussed. The communications plan should mention the
message that needs to be transpired in a one-to-many matrix.
A message can have more than one audience to be impacted. An audience could reap
a set of benefits and a benefit could involve multiple risks. The time frame of the
message to transpire should also be established in the matrix. This includes top down
as well as bottom up information flow and communication channels.
Steering committee meetings are usually the starting point for the top down approach
whereas brain storming sessions are of the bottom up approach. The execution and the
timing of the communications plan is extremely important.

14.2.5 Crafting the Project Crew


Selecting the right project leader is as important as selecting the right product. Core
team leadership is a full time assignment. Team leader is like an engine of the train
who should know the business well and have across functional experience. He should
also be politically savvy, have credibility within the organisation and be a good
communicator and of course, be from the functional side of the business and not the
hardcore IT manager.
The team is as important as its leader. The top management must ensure that the best
and the brightest join the team. The members must have some cross-functional
knowledge. Creative thinking must be an integral part of the members thinking
curriculum. The member must have some benchmarking experience and above all,
must be a team player and participant who knows the rules of the game.
A lot of good and creative people dont like to be pulled out of their jobs to serve on
an ERP team. The challenge is to convey not only how important the teams work is
to the company but the invaluable career enhancement benefits that accrue to each
member as a result of his involvement. If attracting the best and brightest people in the
organisation to the team is important to successful implementation, so is their
motivation and their retention.

14.2.6 Change Management


The enterprise systems are all about the enterprise and not about systems. So, a top
management leader can play a critical role in effective change management and
implementation of an enterprise system. However, a lot of people feel that the chief
executive officer isnt always the best choice. The higher up the organisation we go,
the more risk we run that the champions involvement will be delegated.
An executive who delegates leaders role wont be seen as a winner. The support of a
leader doesnt replace the need to sell to other members of top management the
benefits of the system. It has to be done early and often by using multiple approaches.
All senior managers in the organisation should be able, not only to support the
enterprise system project, but also to pass what one executive dubbed the elevator
test. In the time it would take to reach the 10th floor, every manager should be able to
clearly explain to any employee who asks (as they enter the elevator on the ground
floor) why the organisation is doing what it is doing. The explanation provided must
be reasonably consistent across the organisation.
Because of the large range and magnitude of alterations that are required, ERP
demands fundamental shifts in assumptions, beliefs, day-to-day behaviours and
positive attitudes throughout the organisation. For many organisations, the level of
centralisation required to standardise operations comes as a surprise.
For others, the biggest leap is the necessity for each person to have a basic
understanding of the overall organisational system rather than just their piece of it. In
each case, organisations find that just as they begin to address the demands they

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anticipated, they are engulfed by a second wave of implications that they had not
anticipated.
Unless the organisation is prepared to come to a dead stop while putting the new
system in place, people must maintain performance levels while preparing to shift to
the new system. The level of effort required continues to escalate throughout the
process and typically does not diminish for a substantial period after the conversion.
When these demands are placed on top of an already-high workload, the resulting
strain leads to decreased output, increased turnover, delays in work in process and
negative attitudes towards the organisation. If issues related to increased workload are
not managed effectively and resistance is driven underground, the resulting problems
can be very costly to the organisation in terms of quality and productivity.

14.3 ENTERPRISE ARCHITECTURE PLANNING


Enterprise Resource Planning (ERP) refers to the integration of all data and processes
of an organization into a single unified system. This is achieved by using a single
software package that serves all the data crunching needs of the various departments
within the organization.
This software package must also be connected to just a single, central database to
effect full integration. Such a fully-integrated software system allows the various
departments to conveniently communicate and share information with each other.
ERP is what you need to automate, plan, collaborate, and execute according to your
specific business requirements. It is designed for a wide range of manufacturing
industries and used by more companies to actually manufacture products than any
other ERP system.
Its modern, flexible architecture and Web-based user interfaces deliver competitive
advantage, while its superior functionality enables you to automate key business
processes, meet changing demands, and collaborate internally between departments
and externally across the supply chain.
All the ERP packages have some core technology which is defined as the technical
premise on which the ERP system is builtthe total system architecture. It includes
the client/server structure, the network and the hardware platform.
It also includes issues of scalability, the database engine and performance
management. Most ERP packages are hardware vendor neutral and will run in a wide
variety of environments, from a small Windows NT application up to massively
parallel systems.
The system manager will find several online help documents to aid in the
development of an optimally functioning system. All of these documents are available
in CD/ROM format, primarily Windows-based.
The central system configuration consists of an application server, a message server, a
gateway server and the database system. These three servers are generally combined
at the server layer and addressed by the desktop or presentation layer.
The system manager will need to decide, based upon projections of throughput and
response time, how to distribute the system. The purpose is to divide up the most
time-intensive uses of the system to balance the load. Background processing, for
example, might be moved to its own server.
The system manager will plan and monitor the distributed system to maximise
performance and availability. The database server will prove to be the bottleneck for
throughput. It should be loaded with the database, shared files, the update server, the
message server and the lock server. Other functions that can be offloaded should be
offloaded.

14.3.1 Multi-tier Architecture


The choice of an architecture can affect all aspects of software design,
implementation, and maintenance. Important factors to be considered include the
business objectives, the complexity of applications based on that architecture, the
desired level of integration, the number of users or transactions, and various technical
constraints.
If the design of the architecture is not appropriate, then the consequences may be that
application system development takes longer, maintenance is difficult, and response
times in the operation of the system are inacceptable.
Many application systems today have three major layers: presentation layer, business
or application logic layer, and services layer, The presentation layer provides the user
interface and is responsible for the interaction between the user and the device.
The application or business logic layer contains the business rules that drive the given
enterprise. The services layer provides general services needed by the other layers,
usually including database services, file services, print services, and communication
services.
The functionalities of these three layers can be assigned to logical entities called tiers.
Conventional client-server systems had two tiers, one for presentation and one for the
business logic including the database.
Mobile and wireless applications are typically deployed with three-tier or multi-tier
architectures. The three-tier architecture attempts to overcome some of the limitations
of the two-tier scheme by separating presentation, processing (business logic), and
data into distinct tiers.
It allows for parallel development of individual tiers by application specialists and
provides flexible resource allocation. This architecture requires more planning but
reduces development and maintenance costs over the long term by leveraging code reuse and elasticity in product migration.
In a three-tier architecture the business logic can be entirely or partially contained in a
middleware component called application server. If the designer moves most or all of
the business logic to the application server and clients are exclusively responsible for
the presentation layer, then such clients are called "thin".
If significant portions of the business logic are on the client, then the client is
considered a "fat" client. Browsers in mobile applications are examples of thin clients
they can connect to different applications and provide a suitable user interface
without knowing about the application logic.
The term multi-tier architecture usually refers to the fact that more servers than just
one application server are included. An immediate example is a Web server as part of
an application that is accessed over the Internet. Generally speaking an application
server can request services from many other servers, i.e. the services themselves use
other services to respond properly to the client's original request.
"Tier" can be defined as "one of two or more rows, levels, or ranks arranged one
above another" "Any number of levels arranged above another, each serving distinct
and separate tasks." To gain a better understanding of what is meant, let's take a look
at a typical N-tier model.

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Figure 14.1: A Typical N-Tier Model

Data Tier
Since this has been deemed the Age of Information, and since all information needs to
be stored, the Data Tier described above is usually an essential part. Developing a
system without a data tier is possible, but I think for most applications the data tier
should exist. So what is this layer?
Basically, it is your Database Management System (DBMS) - SQL Server, Access,
Oracle, MySql, plain text (or binary) files, whatever you like. This tier can be as
complex and comprehensive as high-end products such as SQL Server and Oracle,
which do include the things like query optimization, indexing, etc., all the way down
to the simplistic plain text files (and the engine to read and search these files).
Some more well-known formats of structured, plain text files include CSV, XML, etc.
Notice how this layer is only intended to deal with the storage and retrieval of
information. It doesn't care about how you plan on manipulating or delivering this
data. This also should include your stored procedures. Do not place business logic in
here, no matter how tempting.
Presentation Logic Tier
Let's jump to the Presentation Logic Layer in Figure 14.1. You probably are familiar
with this layer; it consists of our standard ASP documents, Windows forms, etc. This
is the layer that provides an interface for the end user into your application.
That is, it works with the results/output of the Business Tier to handle the
transformation into something usable and readable by the end user. It has come to my
attention that most applications have been developed for the Web with this layer
talking directly to the Data Access Layer and not even implementing the Business
Tier.
Sometimes the Business Layer is not kept separated from the other two layers. Some
applications are not consistent with the separation of these layers, and it's important
that they are kept separate. A lot of developers will simply throw some SQL in their
ASP (using ADO), connect to their database, get the recordset, and loop in their ASP
to output the result. This is usually a very bad idea.

Proxy Tier and the Distributed Logic


There's also that little, obscure Proxy Tier. "Proxy" by definition is "a person [object]
authorized to act for another". This "object," in our context, is referring to any sort of
code that is performing the actions for something else (the client). The key part of this
definition is "act for another."
The Proxy Layer is "acting" on behalf of the Distributed Logic layer (or end-user's
requests) to provide access to the next tier, the Business Tier. Why would anyone ever
need this? This facilitates our need for distributed computing. Basically it comes down
to you choosing some standard method of communication between these two entities.
That is, "how can the client talk to the remote server?"
This is where we find the need for the Simple Object Access Protocol (SOAP). SOAP
is a very simple method for doing this. Without too many details, SOAP could be
considered a standard (protocol) for accessing remote objects. It provides a way in
which to have two machines "talking" or "communicating" with each other. (Common
Object Request Broker Architecture [CORBA], Remote Method Invocation [RMI],
Distributed Component Object Model [DCOM], SOAP, etc., all basically serve the
same function.)
Client Interface
In this unit in Figure 14.1 we notice that the end-user presentation (Windows forms,
etc.) is connected directly to the Business Tier. A good example of this would be your
applications over the Local Area Network (LAN). This is your typical, nondistributed, client-server application. Also notice that it extends over and on top of the
Distributed Logic layer.
This is intended to demonstrate how you could use SOAP (or some other type of
distributed-computing messaging protocol) on the client to communicate with the
server and have those requests be transformed into something readable and usable for
the end user.
Business Tier
This is basically where the brains of your application reside; it contains things like the
business rules, data manipulation, etc. For example, if you're creating a search engine
and you want to rate/weight each matching item based on some custom criteria (say a
quality rating and number of times a keyword was found in the result), place this logic
at this layer.
This layer does NOT know anything about HTML, nor does it output it. It does NOT
care about ADO or SQL, and it shouldn't have any code to access the database or the
like. Those tasks are assigned to each corresponding layer above or below it.
We must gain a very basic understanding of Object-Oriented Programming (OOP) at
this time. Take time to read over and make sure you understand the important benefits
of OOP. To clarify, let's look at another example, such as a shopping cart application.
Think in terms of basic objects. We create an object to represent each product for sale.
This Product object has the standard property getters and setters: getSize, getColor,
setSize, setColor, etc. It is a super simple implementation of any generic product.
Internally, it ONLY knows how to return information (getters) and understands how it
can validate the data you pump into it (ONLY for its limited use). It is self-contained
(encapsulation).
The key here is to encapsulate all the logic related to the generic product within this
object. If you ask it to "getPrice," it will return the price of the single item it
represents. Also if you instruct it to "validate" or "save," it has the brains to be able to
handle this, return any errors, etc.

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We can plug this Product object into another object, a "Cart" object. This cart can
contain and handle many Product objects. It also has getters and setters, but obviously
on a more global scale. You can do something like "for each product in myCart", and
enumerate (loop through) each product within.
Now, when you call "getPrice" for the Cart object, it knows that it must enumerate
each product that it has, add up the price for each, and return that single total. When
we fire the "saveCart" method, it will loop for each "product" and call its
"saveProduct" method, which will then hit the Data Access Tier objects and methods
to persist itself over to the Data Tier.
We could also take our simple Product object, and plug it into our "Sale" object. This
Sale object contains all of the items that are available for a particular sale. And the
Sale object can be used for things like representing all the items on sale at a given
outlet or the like. I'm sure you are beginning to understand the advantage of using an
OOP environment.
Data Access Tier
This layer is where you will write some generic methods to interface with your data.
For example, we will write a method for creating and opening a Connection object
(internal), and another for creating and using a Command object, along with a stored
procedure (with or without a return value), etc.
It will also have some specific methods, such as "saveProduct," so that when the
Product object calls it with the appropriate data, it can persist it to the Data Tier. This
Data Layer, obviously, contains no data business rules or data manipulation/
transformation logic. It is merely a reusable interface to the database.

14.4 ERP IMPLEMENTATION


It is like swimming in an alphabetical soup, filled by abundance of hot three lettered
acronymsBPR, ERP, MRP, JIT, TQM, ABC and so on. Out of these, ERP currently
seems to be catching up most with the Indian organisations. ERP solutions come in
the form of an integrated software package, with many vendors claiming that
implementing ERP software effects a BPR for an organisation.

14.4.1 What to Look for in an ERP Package


The most important criterion in the package selection is the functional fitment. Some
other criteria you may like to check are:
z

Number of installations in a similar industry segment.

Number of implementation in the country.

Is the package compiled (i.e., does it cover all functional areas)?

Is the package localised?

Is the package too old or too new?

Is implementation of the package easy?

How easy/fast is it to get skills on the package?

Who is supporting the package?

How big is the company? Is the implementation their main focus?

Are they interested in Local implementations or are local projects training ground
for them?

Quality of the consultants.

Financial health of the company.

Will the implementing agency let a third party do a quality check on the
implementation work?

What technology does the package use?

Is the package integrated or interfaced?

An interfaced package is a bundle of package interfaced together to transfer data from


one to the other. We can identify an interfaced package by subtle clues like various
modules being called by different names, the look and feel of various modules being
different and the same functions being done by different key strokes in different
screens.

14.4.2 Approaches to ERP Implementation


The ERP packages come with a repository of options for various business processes.
With hundreds of man-year efforts and experience gained from studying organisations
from almost all industries across the world, the ERP vendors have acquired the
expertise to encode the best practices for various business processes. The user
organisation has the choice of selecting the most suitable option for each of their
business processes.
The task of process selection is far trickier than it sounds. An organisation looking
mainly to automate its processes would simply map its current processes on the
package. Its approach would be quite different from an organisation which is aiming
for process improvement.
Such an organisation again has two options. It can undergo a process improvement or
a BPR exercise first and go ahead with ERP implementation later. In other cases, it
can utilise the packages capabilities to achieve process improvement. Thus, from a
strategic point of selection of processes, there can be three approaches to ERP
implementation.
Start With

Busi

Model

Business
Vision/Needs

New
Processes
to be

Packaged
Solutions

Select
Components

System
Design

Modify
Custom Build/
Configure

IT
Solution

Figure 14.2: ERP Implementation Process

Pure BPR
With pure BPR, business processes are reengineered into an ideal form. While
standard packages are usually still chosen to support these new processors, inevitably
they require modifications and some custom development to achieve the best fit.
Each modification of a package detracts from its value. Moreover, modifications cost
time and money and are not usually supported by the package vendor. Even worse,
upgrades to the basic package are then often impossible to apply. As more upgrades
become available, support for the original package eventually stops. The traditional
approach to BPR is still valid as is the choice of packaged software, even if it is being
used as a starting point for large scale customisation. Pure BPR can produce excellent
results.

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Channeled BPR
Channeled BPR, in contrast, begins with a strategic choice of software package based
on a high level requirement and selection exercise, for example, a conference room
pilot. Business processes are then designed around the known capabilities of the
package.
While businesses are inclined to believe that they have a greater understanding of their
needs than any software vendor, todays modern packages are the result of intensive
research and development, drawing on experience of best business solutions in a wide
range of industries. If carefully chosen, they cannot only fulfill most business
requirements but also provide a broader view of what is possible.
The choice of package to support business processes, which by their nature run across
different functions, in different departments, is relatively small. It is limited to those
which are fully integrated. Even so, no two packages are identical in their capabilities.
Some initial work is necessary to choose the best package based on a companys
vision and business needs. The BPR team can then use process models contained in
the package as a tool to design business processes that exploit the strengths of the
software and meet business needs.
Packaged
Solution

Business
Vision./
Needs

Starting
Point
(As-IS)

Strategic
Choice
of Package

Integrated
Package
Solution

Model

System
Design
(to be)

Configure

IT
Solution

Figure 14.3: ERP Implementation Process

Leading software packages, for example, from SAP, Baan or SSA, already have welldeveloped business process options that are documented and modeled. For instance,
they might support a centralised purchasing function as well as one with devolved
responsibilities.
The advantages of channeled BPR are two-fold. First, it saves time and effort in
modeling the new processes since they are already detailed and documented by the
package supplier. This helps to maintain the momentum of a BPR exercise which is
crucial.
Too often traditional BPR projects flounder in the early stages because the ideal
processes developed on-high cannot be accommodated by the software. Then
processes have to be reworked till a technical solution is at least feasible.
Second, channelled BPR results in the implementation of standard facilities within the
software package. Even if the fit is not perfect, relatively few modifications or custom
developments are needed. The benefits in terms of maintaining the software are
obvious.
Pure ERP
Pure ERP approach implies mapping the organisations current processes onto the
package. The emphasis is not on arriving at a to-be process model as a result of the
business vision and strategy. The process selection exercise boils down to finding out
the closest match to what the organisation is doing at that point in time.

The willingness to change the processes is quite low. However, the sheet integration
of work across the organisation that the package brings in can deliver certain benefits,
although not substantial, to the organisation. The very fact that the enterprise wide
data is available opens the possibility of better decision-making.

14.4.3 ERP Implementation Life-cycle


In any of the above mentioned approaches the following five tracks should be ideally
incorporated which run throughout any ERP implementation life-cycle:
z

Business process analysis

Change management

Technical infrastructure development

Programming for enhancing package features

Project management

These five tracks would incorporate activities spread typically across four broad
sections or stages which are a part of any software implementation: analysis, design,
construction and implementation.
Analysis encompasses activities such as project charter development, as-is analysis
of business processes and target envisioning or the to-be model.
Design mainly consists of configuring the ERP package as per the analysis
specifications and developing design specification for custom code objects. Custom
objects are programmes that are written to augment standard functionality that the
ERP package provides.
Construction deals mainly with development of custom code objects such as reports,
forms, interfaces with legacy applications and data migration routines. This stage also
involves end-user training and integration testing.
Implementation deals with setting up the production environment and making sure
that hardware/software/networking infrastructure is in place.
Once everything is ready, the ERP implementation goes live. Typically, a period of
hand-holding is required after go-live and this is achieved by forming a help desk
which is on-call to assist end-users.
Analysis
Analysis should start off with strategy alignment which should align the project with
the strategic goals of the enterprise. The aim of this exercise should be to arrive at a
set of critical success factors that should henceforth be success-or-failure criteria for
the implementation effort. This phase should also see the determination of the
implementation strategy, the sequence in which the ERP package will be implemented
and rolled out to various business units. Some of the choices that the enterprise has
are:
z

Big Bang, where all modules of the ERP package are implemented at one go
across all business units of the organisation.

Pilot Approach, where all modules are implemented across some key business
units and then rolled out to other offices.

Phased Approach, where implementation is phased out according to the


modules of the package, e.g., finance implementation, followed by materials
management, etc.

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A recent trend in this area has been the business model approach, which is a
combination of the Big Bang and Pilot approaches. In this scheme, a global prototype
is developed followed by a geographical roll-out across all business units.
As-is analysis would typically follow strategy alignment. Here, the existing business
processes of the organisation are studied and documented. Simultaneously, an
evaluation of the existing technical setup of the organisation should be carried out.
While the functional teams (the finance or the logistics team, for example) conduct asis analysis, the project management should look at finalising a detailed project plan
and a quality plan for the project. This can be referred to as the project work plan
development phase.
This is followed by to-be analysis by the functional team. This phase is critical as
the exercise involved is quite tricky and needs the involvement of experienced
resources. The team needs to carefully marry the existing processes with the package
functionality and industry best practicesthe goal is to devise an optimal process that
can be supported by the package.
During this phase, the functional teams should also map the envisioned processes to
the package features and come out with gaps, special reports, forms or interfaces with
existing system that will continue to function in parallel with the ERP package.
It is very important to appreciate that an ERP package comes with standardised
functionality. You are expected to configure the package to follow your to-be
business processes by setting parameter values in tables.
However, the inherent assumption in implementing an ERP is that you will not change
the basic way in which the package is structured, i.e., you will not change the sourcecode of the package.
Customisation or code change is a dreaded word in the world of ERP implementation
and should always be desisted from, however strong the temptation is to make the
package work exactly the way your legacy system used to. Indiscriminate
customisation can lead to a system that is impossible to upgrade; most ERP vendors
such as SAP often withdraw their product warranty if their source code is customised.
Design
The design stage will start off with the functional teams developing the organisation
structure to support the target processes they have designed. During this phase, called
the key data structures, the organisation with business units like company code,
factories, sales offices, branches, warehouses, etc., is developed.
In some cases, the organisation structure is treated as a part of the to-be phase.
However, it is often advisable to first nail down the target processes and then design a
hierarchy to support them, rather than the other way round.
Then comes the prototyping. The prototyping phase will see the ERP package being
configured through parameter settings to reflect the organisation structure and the tobe processes designed earlier. This phase is really the heart of the project.
While the functional teams configure the system, the custom development team will
study the gaps identified during the to-be phase and develop specifications in
consultation with the functional teams. Once the gap analysis is complete, the
development team will start designing the modules that will augment the standard
functionality provided by the package.
During implementation, the number of gaps that you decide to approve for
development should be minimised. This is where most projects slip too many gaps

identified too late in the day prove to be their undoing. Custom code design will
primarily focus on the following objects:
z

Custom reports to meet client-specific requirements

Interfaces to existing legacy applications which need to exchange data with the
ERP system

Data conversion routines to lead historic data

Modifications to the package programmes.

Construction
The construction stage primarily involves custom code construction and unit testing
by the programming team. It is imperative for the functional team to start conducting
end user training after prototyping. It is better for this training to be process driven
with people trained only on that part of the package which figures in his or her daily
task list.
Subsequent to this, the system should be put through a thorough test on a simulated
environment, resembling the production environment. This shows the integration of
the prototyped system and the custom developed objects.
Implementation
The implementation stage performs the last few critical activities necessary for system
live-processing. These mainly involve setting up the ERP front-end on individual
workstations, configuring printers, testing the connectivity and promoting the tested
system to production.

Figure 14.4: ERP Lifecycle

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Check Your Progress 1

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1. What is the advantage of channeled BPR?


...
...
2. When the ERP implementation can goes live?
...
...
3. What are the activities of prototyping phase?
...
...

14.4.4 ERP Implementation Technology


Information systems technologies are evolved from mainframe based computing
through the client server era, to where we are now heading - the Internet era. These
distinct phases are marked by parallel development in hardware technologies.
Client server era began when computing power delivered at desktop machines
increased manifold and matched mainframe computing power. These technologies
limited the availability of information services to users within an organisation. The
Internet era has brought in the ability to deliver information around the globe. This is
made possible with advancements in communication infrastructure.
With the arrival of the Internet, the biggest challenge facing ERP vendors is to address
the global access issues and deployment of information systems that will cater to
intra-organisation and extra-organisation needs effectively.
Over and above these challenges ERP systems need to leverage these technologies to
deliver complete (best business practices), usable (high productivity) and adaptable
(easy installation and post implementation maintenance) business systems.

14.4.5 Guidelines for ERP Implementation


As the cost of an ERP implementation project is very high, it is critical for an
organisation to make the project a success and start deriving benefits out of it as fast
as possible. But what makes an ERP implementation project successful?
z

A well-defined project organisation structure which details the project planning,


execution and monitoring mechanism.

An attitude which stresses on business transformation instead of process


automation and

An approach which brings about the proper integration of people, process and
technology through effective management of change.

In this guide, we would focus on the project organisation structure and present a
generic ERP project organisation structure, which most of the organisations have
followed during their successful ERP implementation.
Defining a Project Organisation Structure (POS) forms the first step in an ERP
implementation project. The POS is the human framework within which, all project
objectives must be achieved. Development of the organisation structure takes into
account project objectives and deliverables and also factors related to project control,
risk and quality.

An ERP implementation project typically involves top management and


representatives from all departments of the organisation, software vendors, hardware
vendors and the implementation consultants. This heterogeneous mix of people
associated with the project makes the development of correct POS an activity of
paramount importance.
Check Your Progress 2
1. What do you mean by hardware vendor neutral feature of ERP?
...
...
2. What are the components of central system configuration of ERP?
...
...
3. What are the common layers of ERP application system?
...
...

14.5 LET US SUM UP


ERP solutions come in the form of an integrated software package, with many
vendors claiming that implementing ERP software effects a BPR for an organisation.
The ERP packages come with a repository of options for various business processes.
An organisation looking mainly to automate its processes would simply map its
current processes on the package. It can undergo a process improvement or a BPR
exercise first and go ahead with ERP implementation later. In other cases, it can
utilise the packages capabilities to achieve process improvement. Thus, from a
strategic point of selection of processes, there can be three approaches to ERP
implementation. ERP implementation life-cycle consists of - Business process
analysis, Change management, Technical infrastructure development, Programming
for enhancing package features and Project management. Analysis encompasses
activities such as project charter development, as-is analysis of business processes
and target envisioning or the to-be model. Design mainly consists of configuring the
ERP package as per the analysis specifications and developing design specification for
custom code objects. Custom objects are programmes that are written to augment
standard functionality that the ERP package provides. Once everything is ready, the
ERP implementation goes live. Big Bang, where all modules of the ERP package are
implemented at one go across all business units of the organisation. Phased Approach,
where implementation is phased out according to the modules of the package, e.g.,
finance implementation, followed by materials management, etc.

14.6 LESSON END ACTIVITY


Do you think process automation is same as process improvement? Explain your
answer.

14.7 KEYWORDS
Interfaced package: It is a bundle of package interfaced together to transfer data from
one to the other.
Customization: It is an integral part of ERP solutions, in which crucial decision needs
to be taken by the organization as it is detrimental in ERP's success.

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Analysis Phase: This is the first phase of ERP implementation life cycle in which the
determinations of the implementation strategy, the sequence in which the ERP
package will be implemented and rolled out to various business units are involved.
Construction phase: This is a phase of ERP implementation life cycle; during this
phase, called the key data structures, the organisation with business units like
company code, factories, sales offices, branches, warehouses, etc., is developed.
Construction phase: This is a phase of ERP implementation life cycle in which
custom code construction and unit testing by the programming team is primarily
involved.
Implementation phase: This is the last phase of ERP implementation life cycle in
which setting up the ERP front-end on individual workstations, configuring printers,
testing the connectivity and promoting the tested system to production are involved.
Tier: It can be defined as one of two or more rows, levels, or ranks arranged one
above another.
Data Tier: This is the layer where the database resides.
Presentation Logic Tier: This is the layer that provides an interface for the end user
into your application.
Proxy Layer: It is a layer which acts on behalf of the Distributed Logic layer (or enduser's requests) to provide access to the next tier, the Business Tier.
The Client Interface: This is a layer where the end-user presentation (Windows
forms, etc.) is connected directly to the Business Tier.
The Business Tier: This is basically where the brains of your application reside; it
contains things like the business rules, data manipulation, etc.
Data Access Tier: This layer is where you will write some generic methods to
interface with your data.

14.8 QUESTIONS FOR DISCUSSION


1. What to look for in an ERP package?
2. The task of process selection is far trickier than it sounds. Justify the statement.
3. What are the popular expectations from ERP implementation?
4. What are the fears of ERP implementation?
5. What are the points that any organisation must keep in mind during ERP
implementation?
6. What are the points that any organisation should take care of at postimplementation of ERP?
7. What are the guidelines for ERP implementation?
8. ERP implementation project should be viewed as an integration of people,
process and technology. Explain.
9. Describe the multi-layer architecture of ERP system.
10. Describe the basic concept of fully-integrated ERP system?
11. Briefly describe the function of various layers of multi-layer ERP system.
12. Explain the Proxy Tier and the Distributed Logic Tier.

Check Your Progress: Model Answers


CYP 1
1. The advantages of channeled BPR are two-fold. First, it saves time and
effort in modeling the new processes since they are already detailed and
documented by the package supplier. Second, channelled BPR results in
the implementation of standard facilities within the software package.
2. Once everything is ready, the ERP implementation goes live.
3. The prototyping phase will see the ERP package being configured
through parameter settings to reflect the organisation structure and the tobe processes designed earlier.
CYP 2
1. Most ERP packages are hardware vendor neutral and will run in a wide
variety of environments, from a small Windows NT application up to
massively parallel systems.
2. The central system configuration consists of an application server, a
message server, a gateway server and the database system.
3. Most of the ERP application systems have three major layers:
presentation layer, business or application logic layer, and services layer.

14.9 SUGGESTED READINGS


Harish Chandra Chaudhary, Knowledge Management for Competitive Advantage, Excel Books
Publications, New Delhi.
Deep and Deep, Technology Transfer and Joint Ventures Abroad, R. R. Azad, Publications,
New Delhi.
Thomas, J Kuegler, Web Advertising and Marketing, Jr. 3rd Edition-Prentice-Hall of India,
New Delhi.
Dr. Ravi Kalakota, E-Business Roadmap for Success, Pearson Education.
Ravi Kalakota, Andrew B. Whinston, "Frontiers of Electronic Commerce", Addition-Wesley
2000.
Vinod Kumar Garg and N.K.Venkita Krishnan, "Enterprise Resource Planning Concepts
and Practice", PHI, 1998.
Jose Antonio Fernandz, the SAP R/3 Handbook, TMH, 1998.
Lau, Enterprise Resource Management, McGraw Hill.
Daniel E OLeary, Enterprise Resource System: Systems, Lifecycle, Electronic Commerce,
Risk.

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LESSON

15
FUTURE OF ERP APPLICATIONS
CONTENTS
15.0

Aims and Objectives

15.1

Introduction

15.2

The Future of ERP Applications

15.3

Procurement
15.3.1

E-Marketplace

15.3.2

Wal-Mart: An E-Business Success Story

15.4

E-Business Blueprint Planning

15.5

ERP Cases
15.5.1

Case 1 - Telecom Sector

15.5.2

Case 2 - Financial Sector

15.5.3

Case 3 - Textile Sector

15.5.4

Case 4 - Electronic Manufacturing Sector

15.5.5

Case 5 - Manufacturing and Marketing Sector

15.5.6

Case 6 - The Business Process Controls

15.6

Let us Sum up

15.7

Lesson End Activity

15.8

Keywords

15.9

Questions for Discussion

15.10 Suggested Readings

15.0 AIMS AND OBJECTIVES


After studying this lesson, you should be able to understand:
z

Idea about the future of ERP

Concept of e-market

Knowledge of e-procurement

How to prepare the blueprint for e-business

15.1 INTRODUCTION
The dream of enterprise resource planning systems is that a single application can
track and monitor all of a businesss functions. In a perfect world, a manager opens a
single ERP app to find data about any aspect of the business, from financials to HR to
distribution schedules. Moreover, there are still a lot of gaps in ERP systems,
particularly in industries where ERP functionality has grown up from its historic
origins in manufacturing. There are even gaps in core ERP areas.

But despite the challenges, the movement toward a global ERP system is a key factor
shaping the future of enterprise resource planning.

15.2 FUTURE OF ERP APPLICATIONS


ERP is evolved from manufacturing resource planning (which originated from
material resource planning). The functioning of ERP has gained much prominence
and utility with the intervention of web enabled and open source technologies. ERP II
the latest advancement in ERP software deserves special mention.
ERP has undoubtedly become an important business application to all industries. It
has almost become a must for all organizations irrespective of the type of business
manufacturing or service. If companies feel that coordination and enterprise
communication are their only problems they don't have any other alternative but to go
for ERP, provided they want to make profits and remove the existing setbacks.
Needles to say ERP has helped companies in monetary and non-monetary aspects if
they are keen in utilizing it to the core and take the necessary steps to overcome the
setbacks. However ERP needs lot of improvement (this statement included the latest
versions also).ERP is an effective application.
It will be great if one can bring an ERP system that id devoid of the drawbacks from
the existing ones. The latest intrusions namely open source and web enabled
technologies has increased the effectiveness of the application. However they are not
enough (technically speaking). ERP applications should be designed to make the
maximum use of internet so that the user can access data from any part of the world
just by a click of the mouse. This has further deepened the future of ERP. ERP's future
is yet to reach saturation.
Formerly ERP was purely restricted to fortune 500 companies, in the sense only they
could afford to invest on them. This put the small and Medium Industries at a large
disadvantage. They were not able to make use of the application to gain the necessary
benefits. ERP's future seemed to be dooming on them.
However this drawback has been removed after the intervention of open source
facilities. The concept of outsourcing has helped in removing the difficulties faced by
small and medium enterprises. Hence a large potential for ERP still exists in the
S.M.E. market.
The ERP vendors can target this market effectively. However both the vendor and the
companies in this segment have to remember that there are lot of competition in this
sector and one is not likely to succeed unless he serves the best product.
ERP has thrown open opportunities for many companies to trade with foreign counter
parts in the name of outsourcing, implementation and deployment of the existing ones.
It has contributed lot to the economy. Academics also boast its own share of ERP
relations.
It has promoted lot of employment and educational opportunities. India happens to be
a key beneficiary in this aspect.
The future of ERP holds an undisputed demand not only in the national level but also
at the global level.
Check Your Progress 1
Fill in the blanks:
1. .. is evolved from manufacturing resource planning.
2. Formerly ERP was purely restricted to .. companies, in the
sense only they could afford to invest on them.

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15.3 PROCUREMENT
Depending on the amount involved in the procurement of new goods, products, or
services, you may choose the option best matching your needs.
Internet-based electronic procurement of goods and services between companies is
called e-procurement. In the same way that B2C e-commerce is often referred to now
as e-tailing, labeling B2B e-commerce as e-procurement better shows how B2B
affects a companys traditional supply chain.

15.3.1 E-Marketplace
Electronic marketplaces, also known as B2B exchanges, serve as electronic hubs
bringing together suppliers and purchasers in common virtual environments.
E-marketplaces are either many-to-many, bringing together many buyers and sellers
in a particular vertical market, or one-to-many where one major supplier or
consumer will attract many of its trading partners to its e-marketplace. Over the past
couple of years, it has been these private, one-to-many e-marketplaces that have
proven to be the most successful.
"E-" or "electronic" marketplace in a business-to-business context is primarily a large
online platform (B2B portal) or website that facilitates interaction and/or transactions
between buyers and suppliers at organizational or institutional rather than individual
levels. Since the builders of such marketplaces primarily aim at facilitating buyerseller interaction (in most cases without being a buyer or seller themselves), these are
also referred to as "third-party" B2B marketplaces.
These marketplaces can do one or more of the following:
z

Help buyers find new suppliers and vice versa

Help reduce the time and cost of interaction for B2B transactions

Help increase trade between distant geographies

Help manage payments and track orders for B2B transactions

Help the environment by using appropriate technology that is environmentally


friendly.

15.3.2 Wal-Mart: An E-Business Success Story


Possibly the single greatest success story of e-business and B2B implementation is
that of the rise to dominance by Wal-Mart in the North American retail market. Love
them or hate them, you have to hand it to Wal-Mart for their impressive growth in
such a short time span. And arguably the single most important factor in this rise was
their harnessing of the power of e-business, e-procurement, and the adjustment of
internal processes to maximize this advantage.
More than any other company, Wal-Mart has revolutionized supply chain
management by using a pull model where customer demands drive the suppliers.
Inventory control is finely honed and purchasing trends are available to suppliers,
whom now must be able to quickly respond to the needs of millions of customers.
The business decision to decentralize the procurement process means that front-line
staff in every store can immediately order the appropriate stock electronically, which
will in turn require rapid turnout of product from the suppliers. This rapid
replenishment system, coupled with accurate purchasing forecasting, helps Wal-Mart
reduce overall costs.
While not always good for suppliers in general, Wal-Marts power as a giant in
business has helped in establishing new standards for B2B e-commerce. Wal-Marts
mindset of cutting costs at all costs resulted in them deploying EDI over the Internet

to eliminate the costly VAN altogether. EDI over the Internet (EDI-INT) uses a new
standard called AS2, a communication protocol that attempts to make EDI
communications over the Internet both secure and reliable.
By mandating their suppliers to use AS2, Wal-Mart leads the way in creating a
demand for a new generation of EDI, and in turn drives the whole world of e-business
forward.

Figure 15.1: Business-to-Business E-Commerce

15.4 E-BUSINESS BLUEPRINT PLANNING


Every serious company maintains a crystal-clear business plan but far too many
serious companies venture onto the Internet without a sharp online vision and without
a well-defined business agenda tailored to the idiosyncrasies of electronic commerce.
As more and more business moves online, solid planning becomes increasingly
critical, and a business plan specifically one that takes into account the unique
properties of e-commerce is key to commercial success.
Like any business venture, starting a successful online store requires vision, planning
and strategic decision-making. And it is precisely the novelty of the Internet that
makes solid planning crucial to realizing your business objectives.
In many respects, e-commerce is an uncharted terrain. So in establishing a blueprint
for action, your plan must address the following fundamental questions:
The Internet poses unique challenges for online business. Beyond defining mission
goals, a business plan should explain how company objectives fit into emergent ecommerce contexts. Such a plan requires that a comprehensive analysis is carried out
and that all contingencies are planned for.
A business plan determines the most powerful models of online promotion and
marketing; it identifies who the competition is; it locates and understands its online
customers; it establishes an online presence and image. And because the Internet is
unique, an online business plan should display an innovative and flexible approach in
elaborating e-commerce goals and solutions.
Whether your business is a start-up or an established brick and mortar firm just now
expanding onto the Internet, developing a business plan means doing research and
gathering viewpoints, as well as studying the errors and successes of existing online
enterprises.

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There are a lot of people that are interested in launching a successful Internet
marketing business. Some people even get to the point where they try but,
unfortunately, many of them fail in their efforts. This isn't necessarily because the idea
that they had was inferior, it is more than likely a matter of not knowing exactly how
to take care of every aspect of their online business.
For this reason, it is often necessary to go with a turnkey package, one that will help
you to develop your entire Internet business in a smooth fashion. Not only will this
help you to be successful, it will teach you the different steps that are necessary to
make any online business a success.
One of the first things that you're going to need to do is decide on which system you're
going to go with. It is better to go for a turnkey system. This system will provide you
with everything necessary to make you a success right out of the starting gate. It is
truly a hands-off experience for you, if that's what you need it to be.
This will allow you to watch people that come into your sales funnel and follow them
the whole way through until they are customers on the other end. It gives you the
experience that is necessary without having to worry about going through a series of
hard knocks that are typically found in the learning process.
Another thing that you're going to have to find is an ongoing stream of interested
prospects to what you are offering. With a system, you will have the ability to have
people who already have the marketing contacts promote your business for you. This
can provide you with an almost unlimited amount of business prospects coming to you
on a regular basis. What are you going to do once these prospects hit your front door?
Any business lives and dies by its marketing efforts. You could have thousands of
people coming to on a daily basis but if you do not have the marketing in place to turn
those people in the customers all of your efforts will be in vain. The entire process of
the marketing should be automated, that will pull your prospects into your system and
make them paying customers. Once they realize the benefits that come from being a
part of a turnkey business, you will reap the rewards of ongoing commissions.
So you really have two choices. You can either launch your Internet business by your
own through a series of steps or you can go with a turnkey system and launch a
successful business
If you want to launch the Internet business without help of a turnkey system then you
have to follow the below mentioned steps.
Things You Need:
z

Telephones

Internet Access

Computers

Web Site Developers

Business Plan Software

Step 1: Pick your niche. If you're passionate about, and have expertise in, a particular
field, stick with it.
Step 2: Set up your Web site. You might need to hire a Web developer to help you
build the site.
Step 3: Write and, if necessary, buy articles that deal with your topic. Post the articles,
calendar items, tips, links to other sites and resources, and other relevant information
on your site.
Step 4: Arrange to have your articles published or referenced on related Web sites.
Offer those sites the same courtesy.

Step 5: Approach potential advertisers. Make sure you know your audience or
market's demographics and that the advertisers you approach fit the character of your
site.
Step 6: Market the site. Consider sponsoring events - for example, a conference - that
allow you to promote the Web site. Agree to plug other Web sites if they will give
your site a plug.
Step 7: Consider selling merchandise on the site. Ensure the merchandise you decide
to sell is directly related to the content of your site.

15.5 ERP CASES


ERP calls for different operations and applications in different industries. Each
industry has their own drawbacks and plus points in dealing with the enterprise
applications. In this lesson we shall discuss some case studies which will help you to
analyzing them precisely.

15.5.1 Case 1 - Telecom Sector


About the Case: ABC
ABC Cellular is a subsidiary of ABC Communications, a global wireless
communications company serving 6.7 million customers worldwide in the areas of
cellular, paging, Personal Communications Services (PCS) and Globalstar satellite
system markets.
Industry: Telecom
Solution Area: Financials.
Problem: ABC financial analysts, located in different functional groups in five
geographic regions, were missing access to the same data, as well as timely access to
information. Dated budget and actual numbers for each business unit resided in seven
different systems, separating critical components of the P&L and inhibiting analysts
ability to assess results. To further complicate matters, analysts in the field could not
go to one universal place to retrieve the data themselvesthey relied on the home
office to deliver it.
Solution: Set some critical financial objectives to help it to remain competitive in the
increased market share. ABC chose Oracle Corporations Online Analytical
Processing (OLAP) tools to better control costs, analyse performance, evaluate
opportunities and formulate future direction. And to improve the basis for making
decisions quickly and accurately with real-time, consistent data; to improve cost
control and to simplify and shorten the budgeting process.
Implementation: ABC Cellular looked at two other vendors before choosing Oracle,
but neither could provide users with the hands-on ability to consolidate budgets,
include actuals in the process or do what-if scenarios online. Air Touch Cellulars
parent company also had a proven, successful track record with other Oracle
applications and a corporate initiative to make Oracle the vendor of choice.
Oracle provided on-site expertise in the product, the concept and the business to create
a user-friendly system. The project came in on time and within budget, with very few
post-implementation issues. Completing the entire implementation in eight months
was quite a feat, given the many changes that occurred in that time frame, according
to the company. Not only did the company convert to a new system, it completely
overhauled the budget process and the P&L reporting formatamid departmental and
company reorganisations.

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Benefits: More than $8 million in hard and soft dollar savings. Reduced the length of
the budgeting cycle and the number of people involved in the process, keeping the
company financially competitive in a growing market. The system now provides
online, real-time access to information.
Now, analysts can individually access the same data warehouse for current, real-time
information for their analyses. This means the vice presidents from each business unit
in the division now have the data they needbudget or actualson a timely basis,
thus, enabling business units to make better, faster business decisions based on more
accurate information. Their increased understanding of the data helps them run their
slices of the business more effectively, because they can now make real-time, online
decisions that help them stay on budget or shift business direction.

15.5.2 Case 2 - Financial Sector


About the Case: ABC
ABC is the international consumer-financing subsidiary of XYZ. It supplies credit
cards, sales financing, personal loans, mortgages, insurance products and a host of
other financing vehicles to customers across the world.
With assets approaching $15 billion in 1998, ABC is also in the business of acquiring
other companies, at the rate of nearly one, every quarter.
Industry: Financial Services
Solution Area: Assimilating its new businesses into its global financial accounting
systems, standardising the financial practices and procedures in the process.
Problem: Acquiring business and integrating it effectively into the global family of
ABC, so that they have a clear structure, common back-office operations. From a
financial accounting and reporting standpoint, this means operations that are
centralised, consolidated and managed in a unique manner, on a unique platform, with
a standard set of policies and procedures that will meet the local regulatory
requirements.
Solution: Implementing Oracle Financials as its central global financial accounting
and reporting strategy. Oracle solution was chosen after its ability to support
multicurrency capability, Euro functionality, Year 2000 compliance, OLAP capability
and revaluation of non-US currencies to the US dollar was proven.
Implementation: ABC set off with a clear definition of what the customer wants to
achieve. The project management team, supported by Price Waterhouse Coopers,
applied rigorous review standards to ensure that the organisation respected strategic
goals set at the projects inception. It made sure the right skills were available inhouse, either through the IT group or through the finance group.
In addition to Oracle Consulting, ABC worked with Price Waterhouse Coopers to help
understand some of the global challenges in financial accounting, reporting and
business-decision support and to identify the critical functionality ABC required.
The plan, as far as finance systems go, is to deploy Oracle Financials to its entire
global finance businesses and where appropriate and desired, support colleagues in
other XYZ Capital businesses in doing likewise. Part of the effort is to consolidate the
back-office finance operations around the world.
ABC has given businesses active on Oracle General Ledgerin Norway, Denmark,
Sweden, Germany and Australia. They are in the middle of the deployment phase of
pulling people onto the General Ledger, Payables and Assets modules.
Through the deployment, they are undergoing a major process improvement as well,
so that they not only have a common platform but also have some homogeneity of

process. Their deployment project will continue for the next 12 to 18 months, as they
move the system out to all additional existing businesses in the UK, Japan, the Czech
Republic, Hungary, Switzerland, France, Poland, etc.
Benefits: As they deployed the applications in Norway and Denmark, they went from
55 days to 4 days. They just deployed the system in Sweden and havent done a close
there with Oracle yet. ABC also deployed in Australia and went from a close cycle of
about 14 days down to 6 days. The intent is to bring the closing cycle down at least to
3 days, with the future expectation of shortening the cycle even more.

15.5.3 Case 3 - Textile Sector


About the Case: ABC
ABC is the leading textile manufacturing company of the country and the third largest
denim producer in the world. In keeping with its growth objectives, the organisation is
investing in new projects in high-value cotton shirting fabric, knit fabric and bottom
weight fabric.
Arvind Mills has always been a pioneer in using modern methods and techniques in
management and technologies. It identified information technology as a major
business driver and enabler for creating the right business infrastructure, to cope with
the pressure of globalisation and increased competition.
Industry: Textiles
Solution Area: Supply Chain Management.
Problem: In keeping with the growth and diversification plans of ABC, Rs 1,2000
crore was invested in state-of-the-art manufacturing facilities in Santej, about 20 km
from A1. These plants have the very latest and most advanced textile machinery
available. The target customers of this greenfield project are top international and
domestic apparel brands. Typically, these brands come up with designs for the coming
seasons and work in close coordination with the fabric supplier for developing and
finalising the look of their end garments. It was felt that to service these discerning
customers, ABC would require a world-class Supply Chain Management system.
Solution: A host of packages were evaluated, keeping in mind the above requirement.
The global presence of the companys customers merited a world-class ERP package
that supported all global practices and conventions in Supply Chain Management.
SAP, the worlds largest ERP package company, was considered to be the best choice.
SAP is a very comprehensive package and has the maximum number of installations
worldwide and has incorporated the best practices in enterprise processes in its
package. SAP also agreed to assist Arvind Mills in addressing certain textile-specific
requirements through innovative process work around as well as in customisation.
Implementation: XYZ, one of the leading information technology management
consultants in the country, was selected by SAP India to provide additional project
management up root and techniques. ABCs core team was taken through extensive
SAP product training at the SAP facility at Bangalore.
As required by SAP, ABC created a war room project facility, resulting in better
focus and also ensured that ABC, SAP and Coopers and Lybrand worked as one team.
The entire project was implemented in about seven months.
Since an ERP implementation involves change management in the organisation, the
constant support of senior management was a key driver. A Project Steering
Committee consisting of senior members of ABC, SAP India and XYZ closely
monitored the progress.

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Benefits: Major benefit was envisaged in strengthening the supply chain management
and customer order execution. It was felt that the planning for raw materials and for
work-in-progress goods would show susbstantial improvement. SAP would help in
standardising business processes in various functional areas within the organisation.
Since, it is an integrated package, it gives a lot of online information to the senior
management regarding the performance of the organisation. Earlier, the same
information required some time in consolidation and compilation.

15.5.4 Case 4 - Electronic Manufacturing Sector


About the Case: ABC
ABC was set up in 1976 to manufacture calculators. Today, it is a $40 million
company with over 1,250 employees in seven factories spread in three states in India.
Its activities today comprise manufacturing of television, computer monitors, vacuum
cleaners and audio products.
The companys clients include brand names like Samsung, Philips, BPL, Sony,
Videocon and ECTV. It exports to countries in the Middle East, South East Asia,
Africa and South America. Its future plans include manufacturing picture tubes,
automobile electronics, UPS and colour monitors.
Industry: Electronics
Solution Area: Inventory management, manufacturing planning and scheduling,
distribution and the financial systems of the company.
Problem: Seven plants located in different states made planning extremely difficult.
Solution: Baan ERP. The company felt Baan IV was stronger in manufacturing,
planning and supply chain management. Initially, it implemented the electronics
module with its multisite capacity and then the manufacturing, warehousing and
distribution management modules. In the next phase, the company will be
implementing the finance module.
Implementation: The implementation was unique for two good reasons. To begin
with, it had to grapple with the complexity of implementing the solution over seven
plants in P1, P2, P3, P4, P5, P6. The company kick-started the exercise by training its
key user groups.
For three months module-wise training was given. It helped immensely as it resulted
in excellent cooperation from end users. Also, support from a strong top management
helped considerably. Secondly, the company implemented it in less than a year.
We planned every activity well, imparting training to as many users as possible,
says the company. Basically, ERP is a management product and each functional head
is the owner and the system professional is only the facilitator, according to the
company. Calcom ensured that end user time was monitored and that master data was
completed as quickly as possible.
SIM-1, SIM-2 and the migration phase was over. The company successfully defined
the process, mapped the functionality and thought of the work around. Actually,
Calcom merely followed the Baan methodology. In SIM-1, it defined the process in
detail and created the feedback loop and ensured no open ended process.
In SIM-2, however, master data was carefully structured and coded. The process was
aided by the fact that DEM was easy to use and Reference Models reduced
implementation time. Secondly, there was absolutely no resistance from key users.
The system used was Windows NT server from Digital-Compaq.
Benefits: The company wanted Baans solution to streamline its planning process by
integrating diverse information. Besides, it wanted its online/ontime data visibility

across the group to improve once the company went live. In short, Calcom should get
better decision support. Most importantly, the Baan solution should help it cut
burgeoning inventory costs yet service orders/order-fulfillment in time.
The company managed to reduce order fulfillment time by a little over 20% and the
inventory costs also by approximately 20%. The company has very good visibility of
data for analysis and there is synchronisation of data and planning across platforms.

15.5.5 Case 5 - Manufacturing and Marketing Sector


About the Case: ABC
ABC India is a wholly owned subsidiary of Giverdon Roure Group based in
Switzerland. ABC is one of the worlds leading perfumery houses, with creation,
manufacturing and marketing functions.
The renowned fragrance and flavour house is the key worldwide supplier of fragrance
and accessories associated with it. Headquartered in Bangalore, the Indian operation
looks after marketing, manufacturing and product development of fragrances. The Rs
27 crore operations have the manufacturing arm as XYZ.
Industry: Manufacturing and marketing
Solution Area: Inventory (from taking stock of raw materials to retailing the end
product).
Problem: Poor time management due to lack of an Integrated Information System for
all the units of the company. Since 75% of the 1600 raw materials were imported, the
need to forecast was vital and due to bad inventory management, response to orders
and timely order acknowledgment was not possible.
Solution: Implementation of an integrated information system that can manage the
inventory system online. This was solved by the installation of QADs Mfg/Pro, an
ERP solution. The complete implementation was done in four months.
Implementation: Conceived, customised and implemented in a record time of a little
over four months, the project plan involved GR India, QAD and LINC Softwarea
local QAD solution provider. Though currently implemented in a single site, the
customer has already started deriving benefits.
Having understood that solutions across the enterprise like MFg/Pro involve
significant culture change and lots of learning, GR India from the beginning
approached the whole implementations with an open minded approach that played a
key role in managing the transition.
LINC assigned a stone technical team with a senior consultant present on-site. The
team closely interacted with GR India not only for implementation of Mfg/Pro but
also to change management from individual oriented manual system to an integrated
online solution.
Benefits:
z

Impressive improvement in efficiency levels in carrying out lot tracking of items


and recertification of expired items.

Drastic time reduction of the customer order acknowledgement cycle.

Complete control at every stage, right from customer requirements forecasting,


processing orders, raw material forecast, inventory management, manufacturing to
accurate and prompt delivery of end products.

Real-time access to information has enabled the senior management of GR India


to closely monitor on a day to day basis, critical metrics like raw material forecast,

203
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inventory management, manufacturing to accurate and prompt delivery of end


products.

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z

Significant increase in the collective responsibility levels across the organisation


leading to increased efficiency. Reduction in the complexity of data entry and data
management.

Better, easier customs management through the customs and excise module
developed by LINC, which is on top of the GTM (global tax management)
module on excise and customers provided as a part of the Mfg/Pro solution.

15.5.6 Case 6 - The Business Process Controls


The ABC, USA is a leading designer and manufacturer of precision fuel and hydraulic
subsystems and hardware compatible with these systems for aerospace and other
defence applications.
The company was started in 1939 with a traditional concept of batch manufacturing
and over a period of time diversified into more and more complex products. Back
until 1986, the company had the traditional way of operating and was finding it
extremely difficult to manage and control the business. In 1987 the company
implemented MRP II and the entire business and planning cycle was coordinated
using the MRP II package.
The target was to meet the monthly budgets. This invariably ended in a hockey stick
phenomena where most of the shipments were shipped on the last two days of the
month. This was termed as the month end crisis and almost every employee of the
company was engaged in shipment of the products.
Now, lets take a look at what actually happens in an organisation where the goal is
monthly budget.
Problem: Monthly budgets are planned based on the sales and operation plan and are
further broken down to weekly and daily plans by the production planning and control
department. Since there is no focus and accountability of daily or weekly budgets,
more than 70% of the shipments do not meet the daily or weekly schedules due to the
fact that one or two manufactured or purchased parts have not arrived on time and
hence the assembly cannot be completed. These unfinished assemblies are placed in
the shortage area, waiting for shortages to be resolved.
The same cycle repeats during the second and third week. So now, the company has a
bunch of unfinished assemblies, each one of them awaiting one or two components.
Just before the last week, the master scheduler looks at what is required to be shipped
to meet the monthly budget, precipitating a crisis.
Vendors and workers are pushed every hour to expedite the shortages. Premiums are
paid for reducing lead times, parts delivered through courier etc. So what do we have
during the last three days of the month?
All shortages arrive, inspection and receiving departments are requested to work
overtime to inspect and receive the parts. Stores is working overtime, issuing parts and
paying off the shortages. Some of the items are issued to assembly without either
being inspected or received in the system.
Assembly is working overtime to meet the month end budget but still unable to ship
all the products. Machine operators, chip pullers, helpers, tool crib attendants etc. are
all roped in to make assemblies to meet the month end budget. Packing and shipping
department is working overtime to pack and dispatch the assemblies. Accounts
department is requested not to close the month till 10 pm on the last day of the month.
If you analyse the entire scenario, which is a common phenomena in almost every
company with monthly targets whether in India or USA, the following observations
can be made:

Increased cost of production due to premium freights, subcontracting etc.

Increase in working capital requirements as there is no realisation on unfinished


assemblies.

Poor on-time performance, as focus is on monthly targets and not on customer due
date.

Decline in quality of products as both skilled and unskilled labour is involved in


assembly and minor quality variations are overlooked by management to meet
monthly targets.

Priorities are not considered resulting in item shortages, unfinished assemblies


and increase in work in process inventory.

Expensive tools like MRP II and ERP are being used formally, but shipment was
being done informally.

So what did ABC get after implementing expensive tools like ERP dissatisfied
customers, high cost of production and poor quality. But werent these systems built
to address these issues? The answer is YES, but only if it is used effectively.
Solution: To eliminate this month end crisis, the company concluded that the month
end should be the end of the week. Hence, the company decided that performance
would be measured on a weekly budget.
Since ERP is capable of date wise planning and scheduling, the teams did not have
any major problem in shifting their focus from monthly to weekly budgets and with an
additional focus on weekly budgets, the company was able to substantially improve on
cost of production, on time performance and quality.
But now the company had a four hockey stick phenomena i.e., weekend crisis.
Shipment for the week were maximum on Fridays and some times Saturdays were
being used to meet the weekly budgets. Now, the company was paying for the labor
cost for overtime on a holiday and for four days in a month but was still less as
compared to monthly budget planning. Shipments were delayed only by a week but
not weeks.
But as the customers became more and more demanding, ABC found that the goal of
weekly budgets was inadequate to meet the customer demands. The question was,
even though they had a tool which could assist in date wise planning and scheduling,
why were they unable to ship the products on the required date? The answer was very
simple wrong focus.
Since the focus was on weekly budgets, everyone was emphasising on meeting the
weekly budgets and not the customers requirements. The focus was not in line with
what the customer required and only solution to it was daily budget. Every day should
be a month end.
Check Your Progress 2
Fill in the blanks:
1. . is evolved from manufacturing resource planning.
2. . e-commerce is often referred as e-tailing.
3. . e-commerce is often referred as e-procurement.

15.6 LET US SUM UP


The dream of enterprise resource planning systems is that a single application can
track and monitor all of a businesss functions. ERP evolved from manufacturing
resource planning (which originated from material resource planning). The

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Future of ERP Applications

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Technology Innovation
and Sustainable Enterprise

functioning of ERP has gained much prominence and utility with the intervention of
web enabled and open source technologies. ERP has undoubtedly become an
important business application to all industries. However ERP needs lot of
improvement (this statement included the latest versions also)."E-" or "electronic"
marketplace in a business-to-business context is primarily a large online platform
(B2B portal) or website that facilitates interaction and/or transactions between buyers
and suppliers at organizational or institutional rather than individual levels. This rapid
replenishment system, coupled with accurate purchasing forecasting, helps Wal-Mart
reduce overall costs. Every serious company maintains a crystal-clear business plan but far too many serious companies venture onto the Internet without a sharp online
vision and without a well-defined business agenda tailored to the idiosyncrasies of
electronic commerce. As more and more business moves online, solid planning
becomes increasingly critical, and a business plan - specifically one that takes into
account the unique properties of e-commerce - is key to commercial success. Like any
business venture, starting a successful online store requires vision, planning and
strategic decision-making. The Internet poses unique challenges for online business.
Beyond defining mission goals, a business plan should explain how company
objectives fit into emergent e-commerce contexts. Any business lives and dies by its
marketing efforts.

15.7 LESSON END ACTIVITY


Write an essay on the future of ERP.

15.8 KEYWORDS
ERP: ERP stands for Enterprise Resource Planning; it is a system which provides an
integrated information system for all departments and functions across a company that
can serve all those different departments particular needs.
Electronic marketplace: In a business-to-business context, it is primarily a large
online platform (B2B portal) or website that facilitates interaction and/or transactions
between buyers and suppliers at organizational or institutional rather than individual
levels.
e-procurement: Internet-based electronic procurement of goods and services between
companies is called e-procurement.

15.9 QUESTIONS FOR DISCUSSION


1. How open source facilities of ERP help the SME market?
2. What do you mean by electronic marketplace? Explain it.
3. Discuss the blueprint of e-business.

Check Your Progress: Model Answers


CYP 1
1. ERP
2. fortune 500
CYP 2
1. ERP
2. B2C
3. B2B

15.10 SUGGESTED READINGS


Harish Chandra Chaudhary, Knowledge Management for Competitive Advantage, Excel Books
Publications, New Delhi.
Deep and Deep, Technology Transfer and Joint Ventures Abroad, R. R. Azad, Publications,
New Delhi.
Thomas, J Kuegler, Web Advertising and Marketing, Jr. 3rd Edition-Prentice-Hall of India,
New Delhi.
Dr. Ravi Kalakota, E-Business Roadmap for Success, Pearson Education.
Ravi Kalakota, Andrew B. Whinston, "Frontiers of Electronic Commerce", Addition-Wesley
2000.
Vinod Kumar Garg and N.K.Venkita Krishnan, "Enterprise Resource Planning Concepts
and Practice", PHI, 1998.
Jose Antonio Fernandz, the SAP R/3 Handbook, TMH, 1998.
Lau, Enterprise Resource Management, McGraw Hill.
Daniel E OLeary, Enterprise Resource System: Systems, Lifecycle, Electronic Commerce,
Risk.

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and Sustainable Enterprise