1.6: The Internet, World Wide Web and E-Commerce

The first long distance transmission between two computers occurred on October 29, 1969 when developers under the direction of Dr. Leonard Kleinrock sent the word “login” from the campus of UCLA to Stanford Research Institute in Menlo Park, California, a distance of over 350 miles. The United States Department of Defense created and funded ARPA Net (Advanced Research Projects Administration), an experimental network which eventually became known as the Internet. ARPA Net began with just four nodes or sites, a very humble start for today’s Internet.

Initially, the Internet was confined to use by universities, government agencies, and researchers. Users were required to type commands (today we refer to this as “command line”) in order to communicate and transfer files. The first e-mail messages on the Internet were sent in the early 1970s as a few very large companies expanded from local networks to the Internet. The computer was now evolving from a purely computational device into the world of digital communications. In 1989, Tim Berners-Lee developed a simpler way for researchers to share information over the Internet, a concept he called the World Wide Web. 4 This invention became the catalyst for the growth of the Internet as a way for businesses to share information about themselves. As web browsers and Internet connections became the norm, companies rushed to grab domain names and create websites.

In 1991 the National Science Foundation, which governed how the Internet was used, lifted restrictions on its commercial use. Corporations soon realized the huge potential of a digital marketplace on the Internet and in 1994 both eBay and Amazon were founded. A mad rush of investment in Internet-based businesses led to the dot-com boom through the late 1990s, and then the dot-com bust in 2000. The bust occurred as investors, tired of seeing hundreds of companies reporting losses, abandoned their investments. An important outcome for businesses was that thousands of miles of Internet connections, in the form of fiber optic cable, were laid around the world during that time. The world became truly “wired” heading into the new millennium, ushering in the era of globalization, which will be discussed in later in the book. This TED Talk video focuses on connecting Africa to the Internet through undersea fiber optic cable. The digital world became a more dangerous place as virtually all companies connected to the Internet. Computer viruses and worms, once slowly propagated through the sharing of computer disks, could now grow with tremendous speed via the Internet. Software and operating systems written for a standalone world found it very difficult to defend against these sorts of threats. A whole new industry of computer and Internet security arose. Information security will be discussed as we move through the chapters.

1.6.1 Web 2.0

As the world recovered from the dot-com bust, the use of technology in business continued to evolve at a frantic pace. Websites became interactive. Instead of just visiting a site to find out about a business and then purchase its products, customers wanted to be able to customize their experience and interact online with the business. This new type of interactive website, where you did not have to know how to create a web page or do any programming in order to put information online, became known as Web 2.0. This new stage of the Web was exemplified by blogging, social networking, and interactive comments being available on many websites. The new Web 2.0 world, in which online interaction became expected, had a major impact on many businesses and even whole industries. Many bookstores found themselves relegated to a niche status. Video rental chains and travel agencies simply began going out of business as they were replaced by online technologies. The newspaper industry saw a huge drop in circulation with some cities such as New Orleans no longer able to support a daily newspaper. Disintermediation is the process of technology replacing a middleman in a transaction. Web 2.0 allowed users to get information and news online, reducing dependence of physical books and newspapers. As the world became more connected, new questions arose. Should access to the Internet be considered a right? Is it legal to copy a song that had been downloaded from the Internet? Can information entered into a website be kept private? What information is acceptable to collect from children? Technology moved so fast that policymakers did not have enough time to enact appropriate laws. Ethical issues surrounding information systems will be covered in later chapters.

1.6.2 The Post-PC World, Sort of

Ray Ozzie, a technology visionary at Microsoft, stated in 2012 that computing was moving into a phase he called the post PC world. Now six years later that prediction has not stood up very well to reality. As you will read in future chapters, PC sales have dropped slightly in recent years while there has been a precipitous decline in tablet sales. Smartphone sales have accelerated, due largely to their mobility and ease of operation. Just as the mainframe before it, the PC will continue to play a key role in business, but its role will be somewhat diminished as people emphasize mobility as a central feature of technology. Cloud computing provides users with mobile access to data and applications, making the PC more of a part of the communications channel rather than a repository of programs and information. Innovation in the development of technology and communications will continue to move businesses forward.

Era	Hardware	Operating System	Applications
Mainframe(1970s)	Terminals connected to mainframe computer	Time- sharing (TSO) on Multiple Virtual Storage (MVS)	Customs- written MRP software
PC: (Mid-1980s)	IBM PC or compatible. Sometimes connected to mainframe computer via network interface card.	MS-DOS	WordPerfect Lotus 1-2-3
Client- Server ( Late 80s to early 90s)	IBM PC " clone" on a Noveli Network	Windows for Workgroups	Microsoft Word, Microsoft Excel
World WIde Web ( mid-90s to early 2000s)	IBM PC " clone " connected to company intranet	Windows XP	Microsoft, Office, Internet Explorer
Web 2.0 (mid- 2000s- present)	Laptop connected to company WI-FI	Windows 10	Microsoft Office
Post PC: (today and beyond)	Smartphones	Android, iOS	Mobile-friendly websites, mobile apps

1.6.3 Can Information Systems Bring Competitive Advantage?

It has always been the assumption that the implementation of information systems will bring a business competitive advantage. If installing one computer to manage inventory can make a company more efficient, then it can be expected that installing several computers can improve business processes and efficiency. In 2003, Nicholas Carr wrote an article in the Harvard Business Review that questioned this assumption. Entitled “I.T. Doesn’t Matter.” Carr was concerned that information technology had become just a commodity. Instead of viewing technology as an investment that will make a company stand out, Carr said technology would become as common as electricity – something to be managed to reduce costs, ensure that it is always running, and be as risk-free as possible. The article was both hailed and scorned. Can I.T. bring a competitive advantage to an organization? It sure did for Walmart (see sidebar). Technology and competitive advantage will be discussed later in the book.

1.6.4 Case Study: Walmart Uses Information Systems to Become the World’s Leading Retailer

Walmart is the world’s largest retailer, earning 8.1 billion for the fiscal year that ended on January 31, 2018. Walmart currently serves over 260 million customers every week worldwide through its 11,700 stores in 28 countries. In 2018 Fortune magazine for the sixth straight year ranked Walmart the number one company for annual revenue as they again exceeded $500 billion in annual sales. The next closest company, Exxon, had less than half of Walmart’s total revenue. Walmart’s rise to prominence is due in large part to making information systems a high priority, especially in their Supply Chain Management (SCM) system known as Retail Linking $14.3 billion on sales of $30.

This system, unique when initially implemented in the mid-1980s, allowed Walmart’s suppliers to directly access the inventory levels and sales information of their products at any of Walmart’s more than eleven thousand stores. Using Retail Link, suppliers can analyze how well their products are selling at one or more Walmart stores with a range of reporting options. Further, Walmart requires the suppliers to use Retail Link to manage their own inventory levels. If a supplier feels that their products are selling out too quickly, they can use Retail Link to petition Walmart to raise the inventory levels for their products. This has essentially allowed Walmart to “hire” thousands of product managers, all of whom have a vested interest in the products they are managing. This revolutionary approach to managing inventory has allowed Walmart to continue to drive prices down and respond to market forces quickly.

the suppliers to use Retail Link to manage their own inventory levels. If a supplier feels that their products are selling out too quickly, they can use Retail Link to petition Walmart to raise the inventory levels for their products. This has essentially allowed Walmart to “hire” thousands of product managers, all of whom have a vested interest in the products they are managing. This revolutionary approach to managing inventory has allowed Walmart to continue to drive prices down and respond to market forces quickly.

Today Walmart continues to innovate with information technology. Using its tremendous market presence, any technology that Walmart requires its suppliers to implement immediately becomes a business standard. For example, in 1983 Walmart became the first large retailer to require suppliers to the use Uniform Product Code (UPC) labels on all products. Clearly, Walmart has learned how to use I.T. to gain a competitive advantage.