You are on page 1of 33

Unit-1 Telecommunication Networks

History of Communication

Communicating with people over a distance is known as telecommunication. The first forms of
telecommunication were smoke signals, drums or fire torches. The major disadvantage with
these communication systems was that only a set of pre-determined messages could be
transmitted. This was overcome in the 18th and 19th century through development
of telegraphyand Morse code.

Invention of telephone and establishment of commercial telephony in 1878 marked a turnaround

in communication systems and real telecommunication was born. International
Telecommunication Union (ITU) defines telecommunication as transmission, emission and
reception of any signs, signals or messages by electromagnetic systems. Now we had the
communication technology to connect with people physically located thousands of kilometers
Telephones slowly gave way to television, videophone, satellite and finally computer networks.
Computer networks have revolutionized modern day communication and communication
technologies. That will be the subject of our in-depth study in subsequent chapters.
Internet is defined as an Information super Highway, to access information over the web.
However, It can be defined in many ways as follows:
• Internet is a world-wide global system of interconnected computer networks.
• Internet uses the standard Internet Protocol (TCP/IP).
• Every computer in internet is identified by a unique IP address.
• IP Address is a unique set of numbers (such as which identifies a
computer location.
• A special computer DNS (Domain Name Server) is used to give name to the IP Address
so that user can locate a computer by a name.
• For example, a DNS server will resolve a name to a
particular IP address to uniquely identify the computer on which this website is hosted.
• Internet is accessible to every user all over the world.

The concept of Internet was originated in 1969 and has undergone several technological &
Infrastructural changes as discussed below:
• The origin of Internet devised from the concept of Advanced Research Project Agency
Network (ARPANET).
• ARPANET was developed by United States Department of Defense.
• Basic purpose of ARPANET was to provide communication among the various bodies of
• Initially, there were only four nodes, formally called Hosts.
• In 1972, the ARPANET spread over the globe with 23 nodes located at different
countries and thus became known as Internet.
• By the time, with invention of new technologies such as TCP/IP protocols, DNS, WWW,
browsers, scripting languages etc.,Internet provided a medium to publish and access
information over the web.
Internet covers almost every aspect of life, one can think of. Here, we will discuss some of the
advantages of Internet:

Internet allows us to communicate with the people sitting at remote locations. There are various
apps available on the wed that uses Internet as a medium for communication. One can find
various social networking sites such as:
o Facebook
o Twitter
o Yahoo
o Google+
o Flickr
o Orkut
• One can surf for any kind of information over the internet. Information regarding various
topics such as Technology, Health & Science, Social Studies, Geographical Information,
Information Technology, Products etc can be surfed with help of a search engine.
• Apart from communication and source of information, internet also serves a medium for
entertainment. Following are the various modes for entertainment over internet.
o Online Television
o Online Games
o Songs
o Videos
o Social Networking Apps
• Internet allows us to use many services like:
o Internet Banking
o Matrimonial Services
o Online Shopping
o Online Ticket Booking
o Online Bill Payment
o Data Sharing
o E-mail
• Internet provides concept of electronic commerce, that allows the business deals to be
conducted on electronic systems

However, Internet has prooved to be a powerful source of information in almost every field, yet
there exists many disadvanatges discussed below:
• There are always chances to loose personal information such as name, address, credit
card number. Therefore, one should be very careful while sharing such information. One
should use credit cards only through authenticated sites.
• Another disadvantage is the Spamming.Spamming corresponds to the unwanted e-mails
in bulk. These e-mails serve no purpose and lead to obstruction of entire system.
• Virus can easily be spread to the computers connected to internet. Such virus attacks may
cause your system to crash or your important data may get deleted.
• Also a biggest threat on internet is pornography. There are many pornographic sites that
can be found, letting your children to use internet which indirectly affects the children
healthy mental life.
• There are various websites that do not provide the authenticated information. This leads
to misconception among many people.
Intranet is defined as private network of computers within an organization with its own server
and firewall. Moreover we can define Intranet as:
• Intranet is system in which multiple PCs are networked to be connected to each other.
PCs in intranet are not available to the world outside of the intranet.
• Usually each company or organization has their own Intranet network and
members/employees of that company can access the computers in their intranet.
• Every computer in internet is identified by a unique IP address.
• Each computer in Intranet is also identified by a IP Address, which is unique among the
computers in that Intranet.

Intranet is very efficient and reliable network system for any organization. It is beneficial in
every aspect such as collaboration, cost-effectiveness, security, productivity and much more.
Intranet offers easy and cheap communication within an organization. Employees can
communicate using chat, e-mail or blogs.
Time Saving
Information on Intranet is shared in real time.
Information is distributed among the employees as according to requirement and it can be
accessed by the authorized users, resulting in enhanced teamwork.
Platform Independency
Intranet can connect computers and other devices with different architecture.
Cost Effective
Employees can see the data and other documents using browser rather than printing them and
distributing duplicate copies among the employees, which certainly decreases the cost.
Workforce Productivity
Data is available at every time and can be accessed using company workstation. This helps the
employees work faster.
Business Management
It is also possible to deploy applications that support business operations.
Since information shared on intranet can only be accessed within an organization, therefore
there is almost no chance of being theft.
Specific Users
Intranet targets only specific users within an organization therefore, once can exactly know
whom he is interacting.
Immediate Updates
Any changes made to information are reflected immediately to all the users.
Apart from several benefits of Intranet, there also exist some issues.. These issues are shown in
the following diagram:

Intranet applications are same as that of Internet applications. Intranet applications are also
accessed through a web browser. The only difference is that, Intranet applications reside on
local server while Internet applications reside on remote server. Here, we've discussed some of
these applications:
Document publication applications
Document publication applications allow publishing documents such as manuals, software
guide, employee profits etc without use of paper.
Electronic resources applications
It offers electronic resources such as software applications, templates and tools, to be shared
across the network.
Interactive Communication applications
Like on internet, we have e-mail and chat like applications for Intranet, hence offering an
interactive communication among employees.
Support for Internet Applications
Intranet offers an environment to deploy and test applications before placing them on Internet.
Internet vs. Intranet
Apart from similarities there are some differences between the two. Following are the
differences between Internet and Intranet:

Intranet Internet

Localized Network. Worldwide Network

Doesn't have access to Intranet Have access to Internet.

More Expensive Less Expensive

More Safe Less Safe

More Reliability Less Reliability

When DNS was not into existence, one had to download a Host filecontaining host names and
their corresponding IP address. But with increase in number of hosts of internet, the size of host
file also increased. This resulted in increased traffic on downloading this file. To solve this
problem the DNS system was introduced.
Domain Name System helps to resolve the host name to an address. It uses a hierarchical
naming scheme and distributed database of IP addresses and associated names
IP Address
IP address is a unique logical address assigned to a machine over the network. An IP address
exhibits the following properties:
• IP address is the unique address assigned to each host present on Internet.
• IP address is 32 bits (4 bytes) long.
• IP address consists of two components: network component and host component.
• Each of the 4 bytes is represented by a number from 0 to 255, separated with dots. For
IP address is 32-bit number while on the other hand domain names are easy to remember names.
For example, when we enter an email address we always enter a symbolic string such as
Uniform Resource Locator (URL)
Uniform Resource Locator (URL) refers to a web address which uniquely identifies a document
over the internet.
This document can be a web page, image, audio, video or anything else present on the web.
For example, an URL to the
index.html which is stored on tutorialspoint web server under internet_technology directory.
Types of Network
Networks can be categorized depending on size, complexity, level of security, or geographical
range. We will discuss some of the most popular topologies based on geographical spread.


LAN or Local Area Network is a wired network spread over a single site like an office, building
or manufacturing unit. LAN is set up to when team members need to share software and
hardware resources with each other but not with the outside world. Typical software resources
include official documents, user manuals, employee handbook, etc. Hardware resources that can
be easily shared over the network include printer, fax machines, modems, memory space, etc.
This decreases infrastructure costs for the organization drastically.

A LAN may be set up using wired or wireless connections. A LAN that is completely wireless
is called Wireless LAN or WLAN.

MAN is the acronym for Metropolitan Area Network. It is a network spread over a city, college
campus or a small region. MAN is larger than a LAN and typically spread over several
kilometres. Objective of MAN is to share hardware and software resources, thereby decreasing
infrastructure costs. MAN can be built by connecting several LANs.

The most common example of MAN is cable TV network.


WAN or Wide Area Network is spread over a country or many countries. WAN is typically a
network of many LANs, MANs and WANs. Network is set up using wired or wireless
connections, depending on availability and reliability.

The most common example of WAN is the Internet.

The way in which devices are interconnected to form a network is called network topology.
Some of the factors that affect choice of topology for a network are −
• Cost − Installation cost is a very important factor in overall cost of setting up an
infrastructure. So cable lengths, distance between nodes, location of servers, etc. have to
be considered when designing a network.
• Flexibility − Topology of a network should be flexible enough to allow reconfiguration
of office set up, addition of new nodes and relocation of existing nodes.
• Reliability − Network should be designed in such a way that it has minimum down time.
Failure of one node or a segment of cabling should not render the whole network
• Scalability − Network topology should be scalable, i.e. it can accommodate load of new
devices and nodes without perceptible drop in performance.
• Ease of installation − Network should be easy to install in terms of hardware, software
and technical personnel requirements.
• Ease of maintenance − Troubleshooting and maintenance of network should be easy.

Bus Topology

Data network with bus topology has a linear transmission cable, usually coaxial, to which
many network devices and workstations are attached along the length. Server is at one end of
the bus. When a workstation has to send data, it transmits packets with destination address in its
header along the bus.
The data travels in both the directions along the bus. When the destination terminal sees the
data, it copies it to the local disk.
Advantages of Bus Topology
These are the advantages of using bus topology −

• Easy to install and maintain

• Can be extended easily
• Very reliable because of single transmission line
Disadvantages of Bus Topology
These are some disadvantages of using bus topology −

• Troubleshooting is difficult as there is no single point of control

• One faulty node can bring the whole network down
• Dumb terminals cannot be connected to the bus

Ring Topology

In ring topology each terminal is connected to exactly two nodes, giving the network a circular
shape. Data travels in only one pre-determined direction.

When a terminal has to send data, it transmits it to the neighboring node which transmits it to
the next one. Before further transmission data may be amplified. In this way, data raverses the
network and reaches the destination node, which removes it from the network. If the data
reaches the sender, it removes the data and resends it later.
Advantages of Ring Topology
These are the advantages of using ring topology −

• Small cable segments are needed to connect two nodes

• Ideal for optical fibres as data travels in only one direction
• Very high transmission speeds possible
Disadvantages of Ring Topology
These are some the disadvantages of using ring topology −
• Failure of single node brings down the whole network
• Troubleshooting is difficult as many nodes may have to be inspected before faulty one is
• Difficult to remove one or more nodes while keeping the rest of the network intact

Star Topology

In star topology, server is connected to each node individually. Server is also called the central
node. Any exchange of data between two nodes must take place through the server. It is the
most popular topology for information and voice networks as central node can process data
received from source node before sending it to the destination node.

Advantages of Star Topology

These are the advantages of using star topology −
• Failure of one node does not affect the network
• Troubleshooting is easy as faulty node can be detected from central node immediately
• Simple access protocols required as one of the communicating nodes is always the
central node
Disadvantages of Star Topology
These are the disadvantages of using star topology −
• Long cables may be required to connect each node to the server
• Failure of central node brings down the whole network

Tree Topology

Tree topology has a group of star networks connected to a linear bus backbone cable. It
incorporates features of both star and bus topologies. Tree topology is also called hierarchical

Advantages of Tree Topology

These are some of the advantages of using tree topology −
• Existing network can be easily expanded
• Point-to-point wiring for individual segments means easier installation and maintenance
• Well suited for temporary networks
Disadvantages of Tree Topology
These are some of the disadvantages of using tree topology −
• Technical expertise required to configure and wire tree topology
• Failure of backbone cable brings down entire network
• Insecure network
• Maintenance difficult for large networks
E-Commerce or Electronics Commerce is a methodology of modern business, which addresses
the need of business organizations, vendors and customers to reduce cost and improve the quality
of goods and services while increasing the speed of delivery. Ecommerce refers to the paperless
exchange of business information using the following ways −
Electronic Data Exchange (EDI)
Electronic Mail (e-mail)
Electronic Bulletin Boards
Electronic Fund Transfer (EFT)
Other Network-based technologies

E-Commerce provides the following features −
Non-Cash Payment − E-Commerce enables the use of credit cards, debit cards, smart cards,
electronic fund transfer via bank's website, and other modes of electronics payment.
24x7 Service availability − E-commerce automates the business of enterprises and the way they
provide services to their customers. It is available anytime, anywhere.
Advertising / Marketing − E-commerce increases the reach of advertising of products and
services of businesses. It helps in better marketing management of products/services.
Improved Sales − Using e-commerce, orders for the products can be generated anytime,
anywhere without any human intervention. It gives a big boost to existing sales volumes.
Support − E-commerce provides various ways to provide pre-sales and post-sales assistance to
provide better services to customers.
Inventory Management − E-commerce automates inventory management. Reports get generated
instantly when required. Product inventory management becomes very efficient and easy to
Communication improvement − E-commerce provides ways for faster, efficient, reliable
communication with customers and partners.

History of Ecommerce

One of the most popular activities on the Web is shopping. It has much allure in it — you can
shop at your leisure, anytime, and in your pajamas. Literally anyone can have their pages built to
display their specific goods and services.

History of ecommerce dates back to the invention of the very old notion of "sell and buy",
electricity, cables, computers, modems, and the Internet. Ecommerce became possible in 1991
when the Internet was opened to commercial use. Since that date thousands of businesses have
taken up residence at web sites.

At first, the term ecommerce meant the process of execution of commercial transactions
electronically with the help of the leading technologies such as Electronic Data Interchange
(EDI) and Electronic Funds Transfer (EFT) which gave an opportunity for users to exchange
business information and do electronic transactions. The ability to use these technologies
appeared in the late 1970s and allowed business companies and organizations to send
commercial documentation electronically.

Although the Internet began to advance in popularity among the general public in 1994, it took
approximately four years to develop the security protocols (for example, HTTP) and DSL which
allowed rapid access and a persistent connection to the Internet. In 2000 a great number of
business companies in the United States and Western Europe represented their services in the
World Wide Web. At this time the meaning of the word ecommerce was changed. People began
to define the term ecommerce as the process of purchasing of available goods and services over
the Internet using secure connections and electronic payment services. Although the dot-com
collapse in 2000 led to unfortunate results and many of ecommerce companies disappeared, the
"brick and mortar" retailers recognized the advantages of electronic commerce and began to add
such capabilities to their web sites (e.g., after the online grocery store Webvan came to ruin, two
supermarket chains, Albertsons and Safeway, began to use ecommerce to enable their customers
to buy groceries online). By the end of 2001, the largest form of ecommerce, Business-to-
Business (B2B) model, had around $700 billion in transactions.

According to all available data, ecommerce sales continued to grow in the next few years and, by
the end of 2007, ecommerce sales accounted for 3.4 percent of total sales.

Ecommerce has a great deal of advantages over "brick and mortar" stores and mail order
catalogs. Consumers can easily search through a large database of products and services. They
can see actual prices, build an order over several days and email it as a "wish list" hoping that
someone will pay for their selected goods. Customers can compare prices with a click of the
mouse and buy the selected product at best prices.

Online vendors, in their turn, also get distinct advantages. The web and its search engines
provide a way to be found by customers without expensive advertising campaign. Even small
online shops can reach global markets. Web technology also allows to track customer
preferences and to deliver individually-tailored marketing.

History of ecommerce is unthinkable without Amazon and Ebay which were among the first
Internet companies to allow electronic transactions. Thanks to their founders we now have a
handsome ecommerce sector and enjoy the buying and selling advantages of the Internet.
Currently there are 5 largest and most famous worldwide Internet retailers: Amazon, Dell,
Staples, Office Depot and Hewlett Packard. According to statistics, the most popular categories
of products sold in the World Wide Web are music, books, computers, office supplies and other
consumer electronics., Inc. is one of the most famous ecommerce companies and is located in Seattle,
Washington (USA). It was founded in 1994 by Jeff Bezos and was one of the first American
ecommerce companies to sell products over the Internet. After the dot-com collapse Amazon lost
its position as a successful business model, however, in 2003 the company made its first annual
profit which was the first step to the further development.
At the outset was considered as an online bookstore, but in time it extended a
variety of goods by adding electronics, software, DVDs, video games, music CDs, MP3s,
apparel, footwear, health products, etc. The original name of the company was, but
shortly after it become popular in the Internet Bezos decided to rename his business "Amazon"
after the world's most voluminous river. In 1999 Jeff Bezos was entitled as the Person of the
Year by Time Magazine in recognition of the company's success. Although the company's main
headquarters is located in the USA, WA, Amazon has set up separate websites in other
economically developed countries such as the United Kingdom, Canada, France, Germany,
Japan, and China. The company supports and operates retail web sites for many famous
businesses, including Marks & Spencer, Lacoste, the NBA, Bebe Stores, Target, etc.

Amazon is one of the first ecommerce businesses to establish an affiliate marketing program, and
nowadays the company gets about 40% of its sales from affiliates and third party sellers who list
and sell goods on the web site. In 2008 Amazon penetrated into the cinema and is currently
sponsoring the film "The Stolen Child" with 20th Century Fox.

According to the research conducted in 2008, the domain attracted about 615
million customers every year. The most popular feature of the web site is the review system, i.e.
the ability for visitors to submit their reviews and rate any product on a rating scale from one to
five stars. is also well-known for its clear and user-friendly advanced search
facility which enables visitors to search for keywords in the full text of many books in the

One more company which has contributed much to the process of ecommerce development is
Dell Inc., an American company located in Texas, which stands third in computer sales within
the industry behind Hewlett-Packard and Acer.

Launched in 1994 as a static page, has made rapid strides, and by the end of 1997 was
the first company to record a million dollars in online sales. The company's unique strategy of
selling goods over the World Wide Web with no retail outlets and no middlemen has been
admired by a lot of customers and imitated by a great number of ecommerce businesses. The key
factor of Dell's success is that enables customers to choose and to control, i.e. visitors
can browse the site and assemble PCs piece by piece choosing each single component based on
their budget and requirements. According to statistics, approximately half of the company's
profit comes from the web site.

In 2007, Fortune magazine ranked Dell as the 34th-largest company in the Fortune 500 list and
8th on its annual Top 20 list of the most successful and admired companies in the USA in
recognition of the company's business model.

History of ecommerce is a history of a new, virtual world which is evolving according to the
customer advantage. It is a world which we are all building together brick by brick, laying a
secure foundation for the future generations.
Difference between E-Commerce and Traditional Commerce
Electronic commerce is very much like traditional commerce. It also involves an
exchange of goods. But the exchange of goods is conducted online. Technologies such as email,
electronic data interchange and electronic fund transfer are used to track transactions and receive
payments. Some of the differences between electronic commerce and traditional commerce are
explained briefly below.
1. Cost effective
E-commerce is very cost effective when compared to traditional commerce. In traditional
commerce, cost has to be incurred for the role of middlemen to sell the company’s product. The
cost incurred on middlemen is eliminated in e-commerce as there is a direct link between the
business and the customer. The total overhead cost required to run e-business is comparatively
less, compared to traditional business.
For example, in running an e-business, only a head office is required. Whereas in traditional
method, a head office with several branches are required to cater to the needs of customers
situated in different places. The cost incurred on labour, maintenance, office rent can be
substituted by hosting a website in e-business method.
2. Time saving
It takes a lot of time to complete a transaction in traditional commerce. E-commerce saves a lot
of valuable time for both the consumers and business. A product can be ordered and the
transaction can be completed in few minutes through internet.
3. Convenience
E-commerce provides convenience to both the customers and the business. Customers can
browse through a whole directories of catalogues, compare prices between products and choose a
desired product any time and anywhere in the world without any necessity to move away from
their home or work place.
E-commerce provides better connectivity for its prospective and potential customers as the
organization’s website can be accessed virtually from anywhere, any time through internet. It is
not necessary to move away from their work place or home to locate and purchase a desired
4. Geographical accessibility
In traditional commerce, it may be easy to expand the size of the market from regional to
national level. Business organizations have to incur a lot of expenses on investment to enter
international market. In e-commerce it is easy to expand the size of the market from regional to
international level.
By hosting a website, by placing advertisements on the internet and satisfying certain legal
norms, a business can penetrate into global market. It is quite easy to attract customers from
global markets at a marginal cost.
5. Introduction of new products
In traditional commerce, it takes a lot of time and money to introduce a new product and analyze
the response of the customers. Initially, cost has to be incurred to carry out pilot surveys to
understand the taste of the customers.
In e-commerce, it is easy to introduce a product on the website and get the immediate feedback
of the customers. Based on the response, the products can be redefined and modified for a
successful launch.
6. Profit
E-commerce helps to increase the sales of the organization. It helps the organization to enjoy
greater profits by increasing sales, cutting cost and streamlining operating processes.
The cost incurred on the middlemen, overhead, inventory and limited sales pulls down the profit
of the organization in traditional commerce.
7. Physical inspection
E-commerce does not allow physical inspection of goods. In purchasing goods in e-commerce,
customers have to rely on electronic images whereas in traditional commerce, it is possible to
physically inspect the goods before the purchase.
8. Time accessibility
Business is open only for a limited time in traditional commerce. Round the clock (24 x 7)
service is available in e-commerce.
9. Product suitability
E-commerce is not suitable for perishable goods and high valuable items such as jewellery and
antiques. It is mostly suitable for purchasing tickets, books, music and software. Traditional
commerce is suitable for perishables and touch and feel items. Purchasing software, music in
traditional commerce may appear expensive,
10. Human resource
To operate in electronic environment, an organization requires technically qualified staff with an
aptitude to update themselves in the ever changing world. E-business has difficulty in recruiting
and retaining talented people.
Traditional commerce does not have such problems associated with human resource in non
electronic environment.
11. Customer interaction
In traditional commerce, the interaction between the business and the consumer is a “face-to-
In electronic commerce, the interaction between the business and the consumer is “screen-to-
face”. Since there is no personal touch in e-business, companies need to have intimate
relationship with customers to win over their loyalty.
12. Process
There is an automated processing of business transactions in electronic commerce. It helps to
minimize the clerical errors.
There is manual processing of business transactions in traditional commerce. There are chances
of clerical errors to occur as human intervention takes place.
13. Business relationship
The business relationship in traditional commerce is vertical or linear, whereas in electronic
commerce the business relationship is characterized by end-to-end.
14. Fraud
Lot of cyber frauds take place in electronic commerce transactions. People generally fear to give
credit card information. Lack of physical presence in markets and unclear legal issues give
loopholes for frauds to take place in e-business transactions.
Fraud in traditional commerce is comparatively less as there is personal interaction between the
buyer and the seller.
Traditional Commerce v/s E-Commerce
Sr. No. Traditional Commerce E-Commerce

1 Heavy dependency on information Information sharing is made easy via

exchange from person to person. electronic communication channels making
little dependency on person to person
information exchange.

2 Communication/ transaction are done Communication or transaction can be done in

in synchronous way. Manual asynchronous way. Electronics system
intervention is required for each automatically handles when to pass
communication or transaction. communication to required person or do the

3 It is difficult to establish and maintain A uniform strategy can be easily established

standard practices in traditional and maintain in e-commerce.
4 Communications of business depends In e-Commerce or Electronic Market, there is
upon individual skills. no human intervention.

5 Unavailability of a uniform platform E-Commerce website provides user a

as traditional commerce depends platform where al l information is available at
heavily on personal communication. one place.

6 No uniform platform for information E-Commerce provides a universal platform to

sharing as it depends heavily on support commercial / business activities
personal communication. across the globe.

E-Commerce advantages can be broadly classified in three major categories −

• Advantages to Organizations
• Advantages to Consumers
• Advantages to Society

Advantages to Organizations
• Using e-commerce, organizations can expand their market to national and international
markets with minimum capital investment. An organization can easily locate more
customers, best suppliers, and suitable business partners across the globe.
• E-commerce helps organizations to reduce the cost to create process, distribute, retrieve
and manage the paper based information by digitizing the information.
• E-commerce improves the brand image of the company.
• E-commerce helps organization to provide better customer services.
• E-commerce helps to simplify the business processes and makes them faster and
• E-commerce reduces the paper work.
• E-commerce increases the productivity of organizations. It supports "pull" type supply
management. In "pull" type supply management, a business process starts when a
request comes from a customer and it uses just-in-time manufacturing way.
Advantages to Customers
• It provides 24x7 support. Customers can enquire about a product or service and place
orders anytime, anywhere from any location.
• E-commerce application provides users with more options and quicker delivery of
• E-commerce application provides users with more options to compare and select the
cheaper and better options.
• A customer can put review comments about a product and can see what others are
buying, or see the review comments of other customers before making a final purchase.
• E-commerce provides options of virtual auctions.
• It provides readily available information. A customer can see the relevant detailed
information within seconds, rather than waiting for days or weeks.
• E-Commerce increases the competition among organizations and as a result,
organizations provide substantial discounts to customers.
Advantages to Society
• Customers need not travel to shop a product, thus less traffic on road and low air
• E-commerce helps in reducing the cost of products, so less affluent people can also
afford the products.
• E-commerce has enabled rural areas to access services and products, which are otherwise
not available to them.
• E-commerce helps the government to deliver public services such as healthcare,
education, social services at a reduced cost and in an improved manner.
Disadvantages of E-Commerce
The disadvantages of e-commerce can be broadly classified into two major categories −

• Technical disadvantages
• Non-Technical disadvantages
Technical Disadvantages
• There can be lack of system security, reliability or standards owing to poor
implementation of e-commerce.
• The software development industry is still evolving and keeps changing rapidly.
• In many countries, network bandwidth might cause an issue.
• Special types of web servers or other software might be required by the vendor, setting
the e-commerce environment apart from network servers.
• Sometimes, it becomes difficult to integrate an e-commerce software or website with
existing applications or databases.
• There could be software/hardware compatibility issues, as some e-commerce software
may be incompatible with some operating system or any other component.
Non-Technical Disadvantages
• Initial cost − The cost of creating/building an e-commerce application in-house may be
very high. There could be delays in launching an e-Commerce application due to
mistakes, and lack of experience.
• User resistance − Users may not trust the site being an unknown faceless seller. Such
mistrust makes it difficult to convince traditional users to switch from physical stores to
online/virtual stores.
• Security/ Privacy − It is difficult to ensure the security or privacy on online transactions.
• Lack of touch or feel of products during online shopping is a drawback.
• E-commerce applications are still evolving and changing rapidly.
• Internet access is still not cheaper and is inconvenient to use for many potential
customers, for example, those living in remote villages.
Factors stressing the need for e-business
1. E-Business helps in Cost Reduction
1. E-business enables business organizations to advertise products, receive orders, collect
payments and deliver goods at lower cost.

2. E-business is very cost effective as it helps eliminate the role of the middlemen.

3. Advertisements on internet enable a better customer to cost ratio. They enable business
organization to spend less by cutting down the cost.
4. The total overhead cost required to run e-business is comparably much cheaper than
traditional business. Hosting a website reduces the cost incurred on labour, office rent and
5. Lack of information about product schedules of the buyers results in high inventory build up
for the seller. The speedy flow of information between the buyers and sellers in electronic market
helps to eliminate unnecessary inventory cost.

6. E-Business organizations can enter international market at lower cost; the primary benefit of
e-business is global accessibility at marginal cost.
7. Web enables a business organization to introduce and market a new product without incurring
huge investment.

2. E-Business helps in Customer satisfaction

1. E-business allows business organizations to have intimate relationship with customers.

2. E-commerce enables the customers to choose and order products according to their
3. E-business allows customers to perform online shopping. The convenience, flexibility and
speedy flow of information help the business organizations to provide improved customer
4. Advertisements placed on internet attract customers from domestic and global market.
5. The gains obtained in e-business are passed on to customers through lower prices or as
additional features of products or services, this provides customer satisfaction.

6. Customer satisfaction helps to increase the customer base.

7. E-business enables a business organization to keep the doors open for business, whenever a
customer requires it.

8. Up-to-date information available on an organization’s website provides more information to

customer, thus educating them better.

3. E-Business helps to acquire Just-In-Time Information

1. E-business enables business organizations to have direct links with suppliers, distributors and
customers through improved information systems.

2. Speedy flow of communication paves way for quick processing of orders.

3. The cost incurred on communication in e-business environment is low and allows

instantaneous communication between anyone from anywhere from the world.

4. E-business enables instant flow of communication regarding goods, services, transmission of

orders and the status of delivery. The services of the organization are available 24 hours a day
and 365 days a year.

5. E-business helps to deliver just in time information and removes communication barriers
between employees, customers, suppliers and business associates.

4. E-Business helps in Transaction Efficiency

1. Business process is automated. Reduction in operational waste and the automation of business
process and practices lead to transaction efficiency.

2. The time taken to complete business transactions is very less in electronic environment.

3. E-business enables business organizations to have direct links with customers and this enables
to a business to become more customer-focused.

4. E-business helps to streamline the operating processes and enables to integrate the various
business activities of an organization.

5. Ease of Access to Global Market through E-Business

1. Internet provides the basis for global communication. Advertisements placed on internet helps
to attract customers from anywhere in the world.

2. E-business allows business organizations to enter international markets easily and effectively.
3. The information about the organization, products, services, features are available online. The
information and price transparency allow business organizations to expand their business

E-commerce and e-business involve the creation of new value chains and business relationship
between an organization and its customers and suppliers, as well as within the organization itself.
There are lot of organizational obstacles in developing an e-business strategy. It involves major
and potentially disruptive organizational change.

E-business has got a wider scope than e-commerce. E-commerce is a subset of e-business. It is
essential for all companies to have an e-commerce strategy. But some companies need to move
beyond e-commerce and form e-business strategies especially large companies that already have
links to Electronic Data Interchange networks or have completed major Enterprise Resource
Planning implementation. Companies that are successful in implementing e-commerce have a
bright chance of being successful in an e-business strategy.

Tpes of E-Commerce

E-commerce business models can generally be categorized into the following categories.

• Business - to - Business (B2B)

• Business - to - Consumer (B2C)
• Consumer - to - Consumer (C2C)
• Consumer - to - Business (C2B)
• Business - to - Government (B2G)
• Government - to - Business (G2B)
• Government - to - Citizen (G2C)
Business - to - Business
A website following the B2B business model sells its products to an intermediate buyer who
then sells the product to the final customer. As an example, a wholesaler places an order from a
company's website and after receiving the consignment, sells the endproduct to the final
customer who comes to buy the product at one of its retail outlets.
Business - to - Consumer
A website following the B2C business model sells its products directly to a customer. A
customer can view the products shown on the website. The customer can choose a product and
order the same. The website will then send a notification to the business organization via email
and the organization will dispatch the product/goods to the customer.

Consumer - to - Consumer
A website following the C2C business model helps consumers to sell their assets like residential
property, cars, motorcycles, etc., or rent a room by publishing their information on the website.
Website may or may not charge the consumer for its services. Another consumer may opt to
buy the product of the first customer by viewing the post/advertisement on the website.

Consumer - to - Business
In this model, a consumer approaches a website showing multiple business organizations for a
particular service. The consumer places an estimate of amount he/she wants to spend for a
particular service. For example, the comparison of interest rates of personal loan/car loan
provided by various banks via websites. A business organization who fulfills the consumer's
requirement within the specified budget, approaches the customer and provides its services.
Business - to - Government
B2G model is a variant of B2B model. Such websites are used by governments to trade and
exchange information with various business organizations. Such websites are accredited by the
government and provide a medium to businesses to submit application forms to the government.

Government - to - Business
Governments use B2G model websites to approach business organizations. Such websites
support auctions, tenders, and application submission functionalities.

Government - to - Citizen
Governments use G2C model websites to approach citizen in general. Such websites support
auctions of vehicles, machinery, or any other material. Such website also provides services like
registration for birth, marriage or death certificates. The main objective of G2C websites is to
reduce the average time for fulfilling citizen’s requests for various government services.

ECommerce And ERP Integration

Today, eCommerce has turned into a revolutionized way of selling the products at
relatively cheap cost. With the outbreak of E-commerce in past decades, many businesses have
opted for keeping an online storefront along with their brick and mortar stores. With the advent
of advanced technologies, some business has decided to solely go for the online option. But
often, in this case, business owners use an e-commerce platform and an ERP software as two
separate components making it difficult to manage. Each application acts as an independent silo
with no communication in between, missing out on the benefits of an integrated ERP system. But
if we integrate E-commerce with the ERP system, one can easily manage the online sales along
with efficient internal business functional management.
Top 7 Benefits Of ECommerce Integration In An ERP System
Improves Functionality:
The integration of an ERP software initiates the availability of real-time data to the storefront,
allowing customers to view and access the information pertaining to the available inventory,
latest order status, and also tracking the shipments using the lot/serial or other tracking numbers.
This helps in reducing the cost of operations and improving the customer experience with your

Reduces the inventory cost:

Via integrating the ERP, one can initiate the updated sales information. An ERP gives all web
sales information and also timely updates about the web transactions. The updated web sales
information and inventory details get you to forecast and properly plan the purchase, reducing
the inventory operational cost. With an ERP, one can easily track the inventory in real-time and
also forecast how much inventory you need in the future.

Generate financial reports:

An E-commerce application can easily generate financial reports on sales. Via integrating the E-
commerce with an ERP, the end user can move a step ahead, as an ERP software provides
Balance Sheet, P/L Statement, Trial Balance, Cash Flow, etc. ensuring transparency about on the
web transactions and financial information across the organization.

Increase productivity and saves time:

The integrated ERP software streamlines multiple business processes, reducing the human
resource involvement in the business processes. The employees no longer have to manually input
data from one platform to another (e.g. shipping info, inventory levels, product info); instead,
communication takes place automatically. This saves time and money and also makes employees
free to be productive in other ways.

In addition, all the web sales orders will get timely integrated into the ERP system. Also, an ERP
user can instantly track the order and start further processing. With ERP software integration the
order fulfillment cycle is reduced.

Reduces Data Redundancy and Error:

With integration, all information like the web customer details, web orders, payment & shipping
information will be integrated to ERP software. In addition, the Item and Inventory details can be
uploaded from ERP to e-commerce portal, eliminating the need of re-entering the data. Thus the
integration reduces human involvement, data redundancy and error happening across the two
different platforms.

Increase Customer Satisfaction:

One can easily raise the level of customer satisfaction, via providing the up to date and real-time
product information, inventory availability detail, order tracking detail, etc. in the E-commerce
from ERP software. One can also automatically notify about when the shipment goes out, and
thereby track the shipment along its journey. With real-time information providence like
knowledge about what’s going on behind, adds value to the customer experience. Even if trouble
comes by, e.g. a delay or lack of stock, knowledge about the situation can minimize any

Better Control of your Business:

Integration of eCommerce and ERP business processes provides the business owners to manage
the whole business process from one location. It also unifies the eCommerce system with
inventory, manufacturing, CRM, financials, improving the communication between the
internal departments. Finally, if you make money online and offline, integration allows you to
have one holistic picture of your sales.