E-Commerce Integration and Implementation Issues

E-Commerce Integration and
Implementation Issues
Khairiyah Salleh
Nur’Aina Daud
Nurul Izzah Othman
Noor Yahya Sulaiman

Date: 19 May 2012

Introduction

Malaysian government believes that ICT is a strategic driver to support and contribute
directly to the growth of Malaysian economy. For the purpose of deploy resources to
develop knowledge base economy and to enter the digital age with more strategic way,
Malaysian government announced the plan called 8th Malaysian plan.

During the Malaysian plan some of the initiatives were deployed to build vital ICT
infrastructure for public sector as well as private sector. This plan has been focused to
increase the usage of computerization and IT infrastructure in many governmental agencies.

Malaysia would like to promote and facilitate the wider adoption and usage of ICT in
everyday life, such as E-Commerce, industry, education and health. The motive of this plan is
to shift from a knowledge base economy to a competitive knowledge based economy.
Commercial activities on the internet are rapidly increasing all over the world. E-Commerce
becomes a strong and easy way of rapid business.

Opportunities in
Implementation E-Commerce
Opportunities
To gain competitive advantages over other organization.
Open up new distribution channel and increase sales.
Support buy and sell product on Internet from any place to anywhere all
over the world without traditional intermediaries. Example Amazon, E
Bay.
Process and transaction can be done rapidly at reasonable cost.
Cost saving for the organization and their customer.
E-Commerce appears to be generating a significant amount of new
economic activities.
Customer are able to choose and discriminate among alternative
product and services.

CISCO (CISCO CONNECTION ONLINE)

Full implementation online (24 hours a day, 7 days a week)
Increase efficiencies in order taking.
Reduced customer service calls
Lower distribution cost of software upgrades.

Issue and Challenges of Global Implementation
E-Commerce (Economic Factors)

Cost Justification
High cost of implementation.
Mistake due to the lack of experience inflate the cost.
Justification of cost not on tangibles factors.
Justification of cost always based on intangibles factors such as improved the
customer service, increase the value f advertisement and gain competitive
advantages.

Number of sellers and buyers.
Number of people connected to the Internet.
E-Commerce project are viable to the developed country which majority of
resident have high income or salary.

E-Commerce (Economic Factors)

Issue on Internet and Telecommunication Infrastructure
Digital divide between the developed world and most developing countries.
Accessibility to the Internet is still expensive.
Global infrastructure of the web is unevenly developed.

Skill Shortage and lack of trained personal.
The dynamism of the technology and emerging skill such as XML, ASP and PHP
programming.
Need to hire the additional foreign workers form abroad.

E-Commerce (Technical Factors)

Security Issues
Consumers are distrustful about the safety of information.
Incident on unsophisticated hackers can steal information easily.
Many company are not pay enough intention on security.
Reduce the consumer confidence.
Reliability Issues.
Network Infrastructure and application systems must be continuously upgraded,
fine tuned and maintained regularly.
Vulnerable of sites to denial of services attack.
Vulnerable to the virus spread.
Reduce the consumer confidence .

E-Commerce (Social Factors)

Privacy and Security Issues
Customer are reluctant to buy online, reluctant to disclose the confidential data
such as home address, identification number and credit card number.
Companies did not give guarantees on security of information.
Cultural Diversity.
Ability of customization the interface for individual and group needs.
Customization process is expensive.
Translation of language from English into local languages.

E-Commerce (Social Factors)

Lack of Trust Issues
Customer trust is important such as friends recommendation, previous
experience, or through transparent legislative infrastructure.
Company also need to well established the “brand identity” of company.
Absence of “Touch and Feel” functions.
Most of business working around on this limitation.
Customer only buy a reasonable price on E-Commerce website.
Customer did not buy a high price product online. Therefore, web site still in used
for customer for conduct research on product and making comparison on price
offered.

E-Commerce (Legal Factors)

Protection of Intellectual Property Right Issues
Digital media are compact, easily stored, easily to being replication, transmission
and alteration.
Internet was designed to be open and transmit information freely around the
world.
Different country have different attitudes towards intellectual property rights.
New laws should be design and inadequate action should be impose to protect
the original copyrighted contribution.
Taxation Issues.
Collecting the Internet sales taxes are rather complicated.
Different country or nation have different tax structure.

E-Commerce (Legal Factors)

Product Sale that are restricted or illegal by another country
Companies should more careful and fully obey the rules and laws of other
country.
Example such as selling the wine, weapons, restricted chemical items or online
gambling.

Legal Validity of the Electronic Transaction.
Traditional business are based on face to face meeting, paper documentation
and “wet signature” as verifier.
Electronic documents must be customize and should have the same legal validity
standard as written signature.

Critical Success Factors for
E-Commerce Implementation

Success factors have been used to identify information needs, to list and describe
elements critical to program and system success, and to help define and focus
management’s responsibilities and efforts.

Griffin and Kenneth [8] write “Success factors are the limited number of areas in
which results, if they are satisfactory, will ensure successful competitive
performance for the organization. They are the few key areas where things must go
right for the business to flourish. If results in these areas are not adequate, the
organization’s efforts for the period will be less than desired.”

According to Rockart [16], “the success factors are areas of activity that should
receive constant and careful attention from management. The current status of
performance in each area should be continually measured, and that information
should be made available.”

Critical Success Factors for
E-Commerce Implementation

Policy factors.
Organization factors.
Human resources management factors.
Business factors.
Customer relationship management factors.
Technology factors.
Security factors.
Environment factors.

Critical Success Factors for E-Commerce Implementation
(Approach of Using an E-Business)

Phase 1: Identify the business opportunity.
Identify the kinds of technology and business partners

Phase 2: Select the technology infrastructure.
A tool that can enable web applications would require network
bandwidth, computer security, and applications to make electronic business
a reality.

Phase 3: Implement the electronic business solution.
This phase involves complex technology and organization issues. It is important to
make sure that a solution is tightly integrated with other systems and operations.
The implementation also needs to have the partners, customers, suppliers, and
employees built into it.

(Three Area That Affect the Implementation of E-Business
by Newton S, 1999)

1. Business Trends
• Enterprise Collaboration
• Customer Relationship Management (CRM)
• Identifying Return on Investment
2. Organization Trends
• Specialization
• Skill Management
• Process Visibility
• The Learning Organization
3. Technological Trends
• Managing Security and Standards.
Enterprise Integration
• Technology Convergence

by Carton S, 2000)

Carton [3] claims that to make business-to-consumer electronic commerce
successful, special attention must be paid to privacy and loyalty of
customer; the organization should ensure the following:

• Build Trust - to build customer loyalty, an organization must first build
trust. The organization should be open, honest, clear, and concise in
terms of letting the customer know what it will do or will not do.

• Provide Added Value - The organization should provide added value, which
actually makes the customer’s life more interesting.

• Give Customers a Choice - The organizations should make sure that the
customers are given enough choices and are allowed to make decisions
themselves.

by Newton)

 Transaction Software -The transaction and payment software must
perform correct calculations, especially with respect to taxes and
shipping costs.

 Site Maintenance - The organizations should have enough trained
programmers to maintain the web site.

 Security - Details regarding personal information and data regarding
electronic money transactions must be highly secure.

by Newton)

Chan and Swatman [5] studied the key factors involved in
implementation of business-to-business electronic commerce in BHP
(Broken Hill Proprietary Company Limited) Steel and present several
factors influencing its implementation.
1. Internal Factors
 Commitment
 Trading Partner Participation
 Pro-active Approach
 Business Value
 Training and Educational Program
2. External Factors
 Rapid Changes in Technology.
 Complexity and Compatibility of Technology and Process

Food-Dominos
Dommal Food Services Sdn Bhd

Florist-Blooming Florist Sdn Bhd

Online Shopping-Aidijuma Scarf

Flight Booking-AirAsia
AirAsia Bhd

Key e-Commerce Players in Malaysia

Blooming.com.my, a florist delivery service, has already been engaged in e-
Commerce activities since they first reached Malaysian shores in the mid
1990’s for example.

MPH, a popular Malaysian bookstore, has also been doing great on the e-
Commerce front since 2004.

Lelong.com.my, a Malaysian homegrown e-Bay, was established in 1999
and for the first five years did not charge any fees for its services, instead
relying on its own investments and advertisement sales to stay afloat.

AirAsia, one of the most successful Malaysian e-Commerce examples

Appendix

Source from: Malaysia
Department of
Statistics

Source from:
International Data
Corporation (IDC)

Source from:
Malaysia
Department of
Statistics

Source from:
Malaysia
Department
of Statistics

Opportunities of E-Commerce in
Malaysia

Opportunities
Development of information and communication technologies
New technologies are providing easy and fast online transactions which are
enhancing consumers to go online and take the advantages of E-Commerce.

Geographical position
The business are no longer in local but also in global areas.

Foreign investment
It helps in promoting business and introduces new technologies which are effecting
on the growth of E-Commerce. Malaysia is enjoying fruitful foreign investment in the
region.

Opportunities of E-Commerce in
Malaysia (cont…)

Stability of policy and regulatory
Government is willing to develop and introduce E-Commerce with new
technologies. There is continuity in policies, strategies implementation
and strategies formulation which are enhancing the effectiveness of
online trading.

Government created institutions that help industries and people to adopt E-
Commerce
These organizations have also announced some plan and strategies to
improve E-Commerce in Malaysia. Government bodies have announced
and built ministry of multimedia and communication for the improvement
of information and communication technologies, information technology
infrastructure to create knowledge based economy. Government has built
an organization for small businesses which called Small and Medium
Industries Development Corporation (SMIDEC).

E-Commerce Implementation Issues
in Malaysia

Challenges
1. E-readiness
2. Cyber Crime
3. Security
4. Privacy
5. Legal issues

E-readiness

A country’s e-readiness is essentially a measure of its e-business
environment, a collection of factors that indicate how amenable
market is to Internet-based opportunities. E-readiness is not
simply a matter of the number of computer servers, websites and mobile
phones in the country, but also things such as its citizen’s ability to utilise
technology skilfully, the transparency of its business and legal systems, and the
extent to which governments encourage the use of digital technologies.

Malaysia ranked 34th among 70 countries (Economist Intelligence Unit).

The lacks of understanding about new technologies are affecting E-Commerce.
The awareness and knowledge about information and communication
technologies are still in the formative phases. Some new technologies are still
new for buyers. As a result buyers are still reluctant to implement these
technologies.

Cyber Crime

Cyber crimes emerge as a threat to E-Commerce in
current scenario. The advancement of technological
capabilities and its usage for crimes like hacking
information of credit cards and other important
information became a major threat for online
businesses. The hacker could hack the credit card
details and users hindered to give this kind of
information.

Articles on Cyber Crime in Malaysia

Security Issues

Security is one of the most addressed issues in implementing e-
commerce whether it is safe to conduct on-line transactions
As business move towards adapting on-line trading, issues of on-
line transaction security become more important.
The major threats to business are information losses, theft of
data, infection with a computer virus, and manipulation of their
internal systems or software applications.
Based on survey on Malaysian companies’ interest in e-business,
70 % believed that security was the most important barrier to
ecommerce development.

Types of Attack

Non Technical Technical
Attack Attack

Deception or persuasion to An attack perpetrated
trick people into revealing using software and system
sensitive information knowledge

Social engineering is a type
of non technical attack that Denial of service attack,
uses some trick users into Malicious Code: Viruses,
revealing sensitive Worms, and Trojan Horse
information

Identity Theft

Identity theft is possible with the help of digital information
technologies (Caeton, 2007) and by the nature of modern payment
systems.
Identity theft involves acquiring enough data about another
individual to counterfeit this link, enabling the thief to acquire
goods while attributing the charge to another person’s account
(Anderson et al, 2008).
In addition, identity theft is the taking of a victim’s identity to obtain
credit or credit cards from banks and retailers, steal money from the
victim’s existing accounts, apply for loans, establish accounts with
utility companies, rent an apartment, file bankruptcy, or obtain a
job using the victim’s name (identity theft, 2010). In short, identity
theft occurs when someone appropriates your personal information
without your knowledge to establish a parallel identity.

Virus, Worm, and Trojan Horse

Referred to as malware , it is classified by how it
propagates.
A virus is a piece of software code that inserts itself into a
host, including operating system. In order to propagate, its
requires its host program be run to activate it.
Worm is a software program that runs independently,
consuming resources of its host and able to propagate a
complete working version itself.
Trojan horse is a program that appears to have useful
function but it contains a hidden function that presents a
security risk.

Denial of Sevice

An attack on a website in which attacker uses
specialized software to send a flood of data packets
to target computer with the aim of overloading its
resources.

Privacy Issues

Privacy is the right to be left alone and the right to be
free of unreasonable personal intrusion.
There are a number of opportunities to collect
information about individuals

Ways of Gathering Information of An
Individual

Reading an individual’s blogs, or newsgroup postings.
Looking up in an individual’s name and identity in internet.
Reading an individual’s email, IM or text massages.
Monitoring and conducting observation on employees.
Wiretapping wire-line and wireless communication lines.
Complete registration form online.
Record individual’s action using cookies as they navigate
the website.
Using spy ware, keystroke loggers, and similar methods.

Website Registration

A study by TNS and TTRUSTe (2004) user doubt to give personal
information to online businesses.
Among the 1068 participants, 71% dislike registering at websites
they visit, 15 % refuse to register at all while 43% do not trust
companies not to share their personal information.
All B2C, marketing Websites and social network ask visitor to fill
up registration form (ex: win a prize or some of item exchange).
The site may use it to improve customer service or sometimes
they may sell the information to other company.

Cookies

Website gather information about an individual by using
cookies.
Cookies enable sites to keep track of users without having
constantly ask the user to identify themselves.
Originally, cookies were designed to help with personalization
and market research. However cookies can invade an individual’s
privacy.
Cookies enable user’s information such as preferences, interests
and surfing patterns to be collected.
User can disable the cookies, but the problem is that the user
will have to keep reentering information or may be blocked from
viewing certain pages.

Spyware

Spyware is defined as unwanted software programs designed to
steal information or confidential information.
Spyware may enter the user’s computer as a virus or a result of
the user’s clicking an option in deceptive pop up window.
Spyware tracks user’s web surfing habit and scan computer hard
drives for sensitive files and send the result to hackers and
spammers.
Therefore, spyware is a violation of computer’s user privacy.
For example: Keystroke Logger run in the background of the
user’s computer and record every keystroke that user makes.
Hacker can steal the user’s password, account number, etc

Privacy Protection

There are several laws and regulations that governed
e-commerce activities.
Some countries have enacted comprehensive laws on
e-commerce while some others are still in the process
of enacting laws.
Some e-commerce laws were developed and
reviewed in order to keep up with the changes in
technology.

Privacy Protection In Malaysia
In Malaysia, the right of privacy is not as a fundamental right under
the Federal Constitution.
However, with the development of e-commerce a new law was
passed in January 2010 which is known as a Personal Data
Protection Act 2010 (PDPA).
This Act seeks to regulate the processing of personal data of
individuals who involved in commercial transactions by data users.
It also protect to the individual’s personal data and safeguarding
the interests of the individual.
This Act defines the meaning of ‘personal data’ and ‘sensitive
personal data’.
It also outlines the data protection principles and the exemptions,
right of data subject including right to access personal data, to
correct it, to prevent its processing for unlawful purposes and what
amount to criminal offences under the Act.
(Mohamed, 2011)

Legal Remedies for Invasion of
Privacy in E-Commerce
In Malaysia, claim for remedies for cases of breach of online privacy are
forwarded to Financial Mediation Bureau (FMB) .
This FMB is an alternative to courts or arbitration which in charge of
settling disputes between individuals or corporations and the financial
services providers who are under the supervision of Bank Negara
Malaysia or ‘National bank’ and a member of the bureau.
It was reported that the FMB is handling 3000 cases in October 2011
since there are increasing numb
The protection on violation of personal privacy in Malaysia is limited to
informational privacy only.

(Mohamed, 2011)

Legal Issues

Domain Name
Jurisdiction
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Electronic Payment

Domain Name

Domain Name
A company that commences e-commerce activities would at first
have to get its domain name registered. While registering domain
names, if the company chooses a domain name that is similar to
some domain name or some existing trademark of a third party, the
company could be held liable for cybersquatting.

Since registration of domain names is simple and inexpensive,
cybersquatters often register hundreds of such famous names as
their domain names such as www.sony.net andwww.petronas.net.

In Malaysia, cybersquatting issue is addressed by .my DOMAIN
REGISTRY’s Sensitive Name Dispute Resolution Policy (SNDRP) and
the complaints must be made according to the rule given by .my
Domain Registry.

Domain Name

The Complaint must:-

(i) provide the name, postal address, telephone and facsimile numbers and electronic-mail address of
the Complainant and/or its authorised representative(s) in a separate document;

(ii) provide the name of the Registrant and any other relevant information (including the Registrant's
postal address, telephone and facsimile numbers and electronic-mail address), which will be able to
assist the Provider in sending the Complaint to the Registrant; and

(iii) specify the Domain Name which is complained of;

(iv) state the grounds on which it is made, specifically, as to why the Domain Name should be
considered as being a Sensitive Name or otherwise falling within any one or more of the categories
detailed in Paragraph 5 of the SNDRP;

(v) identify any legal proceedings which involve the Domain Name that may have been commenced or
terminated by the Complainant; and

(vi) end the Complaint with the statement and the signature of the Complainant:-

Domain Name

•In Sime Darby Berhad Malaysia v. Mr. Sim e-
Darby (2002) over a domain name
‘simedarby.com’ by respondent in Canada,
the matter went to WIPO Arbitration and
Mediation Center, which heard in
accordance with the Policy and Rules of the
Uniform Domain Name Dispute Resolution
Policy (UDRP).

•The decision of Panel was to transfer the
impugned domain name to the complainant,
because, among other things, the domain
name registered by the Respondent is
identical or confusingly similar to the “Sime
Darby” trade mark in which the Complainant
has rights.

Domain Name

•In a local case of Petroliam Nasional Bhd & Ors v Khoo Nee Kiong (2003)
Malaysian court decided, among other things, that cyber squatting may be
regarded as ‘passing off’. The first plaintiff in that case was a well-known
national petroleum corporation. The second plaintiff was one of the
marketing arms of the first plaintiff and the third plaintiff was in the business
of processing and transmitting natural gas and it conducted its gas business
under the trade name ‘Petronas Gas’. The defendant was an individual
carrying out trading operations as a registered sole proprietor under the
trade/business name ‘Araneum Consulting Services’ and was in no way
associated with the plaintiffs.

•It was held that by registering the said domain names which contained the
word ‘Petronas’, there was a serious issue to be tried in that the defendant
was making a false representation to persons who may have consulted the
register that the registrant, ‘Araneum Consulting Services’ was connected or
associated with the name registered and thus the owner of the goodwill in
the name ‘Petronas’.

•The court maintained that by registering the said domain names, the
defendant had eroded the exclusive goodwill in the name ‘Petronas’ which
had cause damage to the plaintiffs.

Jurisdiction

In addition to the nature of corporate structure, decisions will also have to be taken
with respect to the jurisdiction in which the corporate structure should be situated, as
it will determine the extent of any liability that may arise against the website.
According to the traditional rules of private international law, the jurisdiction of a
nation only extends to individuals who are within the country or to the transactions
and events that occur within the natural borders of the nation.

However, in e-commerce transactions, if a business derives customers from a
particular country as a result of their website, it may be required to defend any
litigation that may result in that country.

As a result, any content placed on a website should be reviewed for compliance with
the laws of any jurisdiction where an organisation wishes to market, promote or sell
its products or services as it may run the risk of being sued in any jurisdiction where
the goods are bought or where the services are availed of.

Jurisdiction

For example, XYZ, a company in London, having its server in USA, may sell
its products to customers in India or other countries. In such a situation, if
you receive defective goods or if you regret having made the purchase, the
question would arise as to which jurisdiction can you sue the company or
claim damages or withdrawal respectively. The company, on the other hand,
might find itself confronted with foreign laws, which he may not be aware
of.

For example, the US courts have in numerous cases have held a company in
X state
liable in Y state on the basis that the website could be accessed in Y state.

Jurisdiction
Existing System New System

Jurisdiction of dispute Jurisdiction of dispute
Malaysian Court Local or foreign court?

Choice of law Choice of law
MALAYSIA Malaysian Law foreign or local?
LEGAL
SYSTEM Evidence
Evidence Act
electronic document

REFJA (Reciprocal
REFJA is not enforceable in
Enforcements of foreign
some major trading partners
Judgement Act)

The nature of E-Commerce causes existing laws not able to cover the
resolution process especially in cross border issues

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Many websites advertise goods or services to customers. The traditional
laws of advertising, which apply to ordinary sales, are enacted in the interest
of all consumers to prevent deceptive and unfair acts or practices. These
laws would also be applicable to advertising or marketing on the Internet.

The websites may be subject to any liability that may arise due to false
designations, origin, misleading description of fact that are likely to cause
confusion or misrepresent the nature, characteristics, quality or geographic
origin of the goods or services that are offered for sale in an
advertisement. In addition to advertising laws, depending on the kind of
business, the websites would also have to comply with the laws of
applicable to such a business.

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An advertisement may be exposed to liability under the consumer
protection laws since it may be subject to different interpretations by the
consumer in different jurisdictions.

Certain websites simply display advertisements or banners of other
companies. In such a case, would the owner of the website be subject to
liability for misleading or fraudulent advertisements that are displayed on its
website?

The website should contain appropriate disclaimers disclaiming any such
liability. Most countries have stringent laws with respect to spamming.
Website owners must ensure that they use legal methods of advertisements
and that the method used does not amount to spamming.

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Article on Advertisement Issues

Electronic Payment Issues

Electronic Payment
The instrumental growth in e-commerce activities has
necessitated the evolution of electronic payment mechanisms.
In addition to normal currencies, e-financial instruments / digital
currencies such as cyber cash and e-cash can be used for the
purchase of current as well as capital assets over the Internet
and for carrying on other commercial activities.

Before regulating the use of such financial instruments, it would
be essential to identify the issues that these instruments pose.

Electronic Payment

a. Secure Credit Card Transactions:
An e-commerce website that accepts online credit card
payments must ensure that it has adequate security measures to
safeguard confidential customer data that is provided on the
site. In the event that credit card numbers are leaked on the
Internet, the website could be held liable for damages caused to
the consumers.

Electronic Payment

b. Recognition of digital currencies:
To be effective, existing laws would need to recognise the payment of
digital currencies, as enforceable consideration against obligations
undertaken by the other parties. Further, the extent to which these digital
currencies are “valid tender” would also need to be examined.

c. Determining the relevant jurisdiction:
This would mean determining the relevant law that parties will be governed
by in respect of electronic transactions (whether by the contract, or in its
absence, by general principles of law). This may create problems, especially
when the laws in Country A, where the company is registered permit
electronic payment contracts, whereas the laws in Country B, where the
consumer is located, do not regulate electronic payment contracts.

Electronic Payment

d. Risk of Regulatory Change:
The regulatory environment for electronic payment is likely
to change with technological innovations in modes of
payment. Therefore, any form of legislation made in this
regard should be technologically neutral.

e. Transaction risks:
These include the liability for security failures in the system
of transaction and the relevant standard of care for system
security.

Electronic Payment

f. Consumer-
oriented risks:
These include risks
concerning
privacy, consumer
protection, money
laundering, tax
avoidance, online
fraud and crime.

E-Commerce Integration and Implementation Issues

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