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E-Business and Technology

Primus Securities is an online trading company. The purpose of this paper is to review the decisions that must be made to launch and maintain an online trading company. Hardware is the first element addressed; servers, system memory, and hosting decisions will be reviewed. The second portion is software and includes items such as design, security and data storage. To make the web site available to customers, connectivity issues and options will be examined. A comparison to sites such as Ameritrade, Charles Schwab and E-Trade is also included.

A lot of customer expectations will have been established by those websites and Primus will have to include many of the same offerings and then add something extra to win customers. Hardware Platform The first consideration in choosing the hardware for the online trading project at Primus is the server type and platform that will be used. There are three basic platforms that should be considered. “In the past, large websites have always run on large UNIX-based systems from companies such as Sun, Hewlett-Packard, and IBM.

However, with the increased stability and reliability of Microsoft Windows servers and the advent of the Linux operating system, more and more sites are turning to Intel-based servers” (Rayport-Jaworski, 2003, pp. 361-362). The Intel-based servers are the best option for Primus, allowing it the flexibility to choose between the Windows Server operating system and the Linux operating system. The software options will be more extensive with this type of server and the cost of purchasing and maintaining them is less (Rayport-Jaworski, 2003, p. 362).

The company will likely need three separate servers – a database server, an application server, and a web server. Considering the amount of software needed, this level of flexibility will surely provide an advantage. System Power For purposes of this analysis, system power refers to system memory, CPU speed, storage capacity, and disk access speed. The requirements are somewhat different depending on which server is being considered. Primus should expect that the number of transactions passing through its online trading website has the potential to be massive.

Therefore, the database server’s specifications are scrutinized the closest. This machine will need to have a huge amount of storage capacity and will need to utilize the latest technology for fast disk access. Ignoring or minimizing the potential volume of transactions could lead to a sluggish system during peak times and could result in a loss of business. The application server will provide the processing power for the transactions that are processed on the website. The most important considerations for this server are its speed and memory.

The website being designed by Primus will eventually include a comprehensive list of features. Each one of these features will place an additional burden on the system processes and memory. In support of the demands placed on an application server’s memory and processing power, Rayport-Jaworski (2003) says “The logic involved in implementing the business rules can at time be convoluted and can require a fair amount of processing power to determine” (p. 362). The requirements of the web server will depend a great deal on the architecture of the site.

If the page displays are largely a product of the logic of the application servers, the web server’s job will be a simple matter of passing data to the application server. If a large number of static pages such as forms and documents are utilized in the site, the web server’s job will be more demanding. The situation expected at Primus is that it will have a number of different page templates and a great deal of processing to generate the content for these templates.

For this reason, the web server will be one with disk storage and access speed beyond the capabilities of the application server, but less than the capabilities of the database server. The processing speed and memory requirements of the web server are not as important of those needed in the application server, but are at least comparable to those in the database server (Rayport-Jaworski, 2003, pp. 362-363). Web Hosting Alternatives Shared hosting and co-hosting are the options Primus must consider for its server. In a shared hosting configuration, Primus would simply rent space and processing time on someone else’s server.

Primus’ applications and databases would reside on servers alongside applications and databases of other customers. The access to the site would be dependent on more than the capabilities of the server. It would also depend on any scheduled or unscheduled downtime and traffic from other websites residing on the server. Security can also be a concern in a shared-hosting arrangement. The one benefit of such an arrangement is its cost. It is a more economical choice than co-hosting. In a co-hosted arrangement, Primus would own the servers, and the server’s resources would be dedicated to meeting the needs of Primus’ customers.

Control over the availability of the system would remain in the hands of Primus in this arrangement. A co-hosted arrangement also solves the security issue, and security is a major concern when the data in question involves financial data of a company’s customers. Even though a co-hosted arrangement is not the best choice from a short-term economics point of view, it is the best choice when all the factors are considered. Software The selection of a trading platform will need to be made after a thorough examination of the requirements approved in the use case, and in conjunction of with the selection of the hardware.

There are two basic options available: Hire software engineers and compete the work in-house, or outsource it to a company experienced in trading platform design. Outsourcing this work is recommended due to the cost and time required to develop it in-house. Companies such as A-1 Technology (http://www. a1technology. com/brokerage. htm) provide comprehensive support to take the project from the conference room to the Internet. Some of the services offered include software development, maintenance and testing, and customer support.

Due to the nature and complexity of online trading, it would be difficult, if not impossible, for a small company such as Primus to fund and complete this work internally. By outsourcing this work, Primus can take advantage of the experience offered by a company specializing in online trading platforms. Security should be a top priority when developing any e-commerce web site. Security becomes especially critical when the site involves the extensive transfer and storage of personal and financial data. There are ethical and financial liabilities involved with security issues, and it should be given immediate and continued attention.

In his article, Mahadevan (2005) discusses the primary security concerns with e-Commerce: Verifying the identity of the sender  The concern for Primus would be to have the capability to verify the sender was authorized to access the account and to conduct business “Data Integrity”  “Is the message complete; has it been altered en route; can I prove that my copy of the message has not been altered? ” Denying entry to unauthorized users o The purpose of denying entry to the site is to prevent the introduction of viruses and Trojans, which could disable the system. Non Repudiation – Proving up the message in court, that the sender cannot falsely deny sending the message, ensuring that the sender cannot falsely deny the contents of the message. ” “Confidentiality – Ensuring that information is not disclosed to unauthorized parties” The risks for not investing in adequate security are substantial. The company may be held financially liable in court for lost/stolen data and money, or may experience loss of revenue due to a tarnished reputation. A heightened level of security to protect against these threats can be obtained through the use of a Secure Sockets Layer (SSL).

However, there is protocol available within the SSL known as Server Gated Cryptography (SGC), which can raise the level of encryption to 128-bit, currently the strongest available (http://www. verisign. com/). Online stock trading will produce a tremendous amount of data, which will have to be backed up and stored. In addition to the necessity to retrieve historical data for clients, this data may also be used to resolve customer complaints, for defense in civil suits, or to respond to information requests from the Securities and Exchange Commission (SEC).

Also, a data recovery plan must be in place in the event of a catastrophic failure. One option for Primus would be to outsource this function. Companies such as AmeriVault (http://www. amerivault. com/recovery_services. html) offer comprehensive data storage and recovery services: Online back up- Data is stored in a secure, off-site location Data replication- Continuous data capture capabilities ensure that, in the event of a system failure, operations can resume in a short period of time E-Mail archiving- As mentioned previously, it would be important for Primus to archive e-mail in the event of a complaint or civil action.

Recovery- Data recovery can normally be performed using existing Internet connections. However, companies such as AmeriVault, also have the capability to physically ship data storage and recovery devices to businesses in the event normal recovery methods re not effective Internet Connections Primus also needs to make a decision of hosting their own website or outsourcing that service. The downside Primus would face by supporting their own website is the lack of expertise for networking, database administration, and Internet connectivity.

A company like WebPerception can host the website for minimal fees. WebPerception offers support services, rack space for servers, server monitoring, and support. (http://www. webperception. com/site/services/hosting. htm) Fees for outsourcing the website through a third party organization like WebPerception are less than Primus would realize by hiring the staff required to support their operation internally.  Charge during business hours is $100 per hour  ALL non-business hour service is billed at $165 per hour #61656; Web Site Storage Cost $50 setup plus Monthly Storage plus $35. 00 month  $25/month if you have existing service with us  Email Domain – $50 on time setup plus $5. 00 per month per account with a $5 setup per account (http://www. webperception. com/site/services/hosting. htm) Regarding connectivity, Primus has a few different options. Whether Primus opts to host its own website or outsource that activity, the question of an Internet connection still remains. The most common connectivity methods today are a frame relay or a T1 line.

A Frame Relay is an Internet connection method that offers greater reliability, security and speed than DSL. The cost of a Frame Relay is scalable, and is more economical for larger companies as there are no additional fees for multiple users. A Frame Relay is often used in organizations such as medical offices, day trading firms, real estate brokerages, or e-commerce sites that provide mission critical services. A T1 is a “point-to-point” Internet connection method that sends and receives data at a rate of 1. 4million bits per second.

A T1 uses a private, secure line that does not fluctuate in speed or reliability, regardless of the number of users. In addition to high-speed reliable connections, a T1 line can offer additional features for Primus, including VOIP (voice over IP- long distance telephone calling without incurring long distance charges), video conferencing, and is ideal for multi-office company communications and data backup. Pricing for a Frame Relay is less than for a T1 line, but the advantages of connectivity and reliability may persuade Primus Securities to select the T1 connectivity option.

Comparison The Internet revolution has been changing the fundamentals of our society. It shapes the way we communicate and the way we do business. It brings us closer and closer to vital sources of information. It provides us with the means to directly interact with service-oriented computer systems tailored to our specific needs; therefore, we can serve ourselves better by making our own decisions. For a company like Primus, this shift of the business paradigm is reshaping the financial industry and transforming the way people invest.

For the financial industry the business advantages are many: Global market access 24 hours per day Businesses access to increased customer base Easy price comparisons for customers Immediate feedback Changing information can be available quickly FAQ (frequently asked questions) pages can provide easy access to customer support Ability to gather customer information, analyze it, and react New and traditional approaches to generating revenue Options to create a paperless environment The importance in online trading lies in low-cost transactions and cutting-edge, real-time market information.

There are a number of brokerage. com sites out there, such as Ameritrade, Charles Schwab and E-Trade to name a few. Important elements for Primus to consider will be cost to trade, system reliability, customer service and value-added services. The stock market is vastly complex and dynamic and for a company such as Primus the competitive environment becomes important in enhancing their online platform. Gomez, an Internet performance management company compared online brokerage sites for Web site speed and availability.

Their performance evaluation does transactions using proprietary software agents that record tests each day across numerous ISPs from multiple co-location facilities throughout the country. (Gomez, 2005) Their GPI Benchmark findings for May 2, 1005 – May 13, 2005 show E*Trade as number one in response time (speed) and number three in availability, with Charles Schwab as number three and number six respectively. (Gomez, 2005) A comparison of costs is as follows: Broker Minimum to open account Cost per trade Ameritrade $2,000 Online trades $10. 99 – Touchtone trades $14. 9 Broker assisted trades $24. 99 E*Trade 2,000 Online trades $6. 99 – $9. 99 Touchtone trades $6. 99 Broker assisted trades $45. 00+ commission Charles Schwab & Co. $2,500 $30. 00 + 3/share The costs quoted above are for the general or standard accounts In 2001, Forbes Magazine picked Charles Schwab as their favorite online trading site. It stated ease in navigation via tabs and pull-down menus with quote trade banners on the bottom of each page. The Schwab site provides stock analysis and performance, reports, transaction history, transfer ability and e-statements.

Customer focused features include web-casts and articles on investing, retirement strategies and market information. The downside is in the trading fee and hidden costs. Forbes impression of E*Trade is one of high costs from trades to handling fees that aren’t supported by their offerings. A well-organized site but can become busy as they push people to become a higher end customer. Ameritrade offers $10. 99 trades across the board focusing on the customers need for simple pricing and no fees, but not a site for the beginning investor because it doesn’t offer much insight into the market.

Each site offers enhanced benefits and services for the higher end customers from decreased trade price, access to market analyst, quotes, real-time streaming news, free bill paying, portfolio evaluation but that means $100,000 in assets for Ameritrade, $500,000 and over for Schwab and for E*Trade regular trading at 9 times per month or 27 times per quarter. Charles Schwab (Start talking, We’re listening) has an amendment to their pricing guide for individual investors which based on household balance and the number of trades occurring previous quarter or calendar year range from $9. 9 – $19. 95 for the first 1,000 shares and $0. 15 for additional shares. Online trades, $9. 95 base commission + $1. 40; phone trades, $29. 95 base + $1. 40; broker assisted, $43. 95 + $1. 40. Under their trading and investing tab, one could receive information from an advisor providing active trading, fees & commissions information. Where Schwab offered market information on their home page, Ameritrade (tools, technology, value) focused on providing information about who and what they offer; features, account information, investment options.

Navigation was easy with pull-down menus and the site itself wasn’t as busy as the Schwab site although it didn’t provide as much detailed information. Ameritrade also offered a 5-second guarantee for trades and anything over the 5 second execution would be commission free. In a world where speed is important Ameritrade’s guarantee may create an opportunity for a leg-up on the competition. That leg-up may not be as high as Ameritrade would like, E*Trade offers a 2-second guarantee on trades or commission free.

As a customer with e-Trade an account login and password allows access to transaction history, orders, balances, and trading. In an easy access pull-down tab, up-to-date, detailed market information was available from Reuters as well as information regarding NASDAQ and NYSE losers and gainers, market headlines, indexes, as well as an economic calendar, earnings calendar, sector ratings, market view and much more from briefing. com. Each site offered various options for opening an account – online, mail or download, as well as easy contact information to a broker.

Although Primus may not be able to from the beginning offer a specific second guarantee on trades, they can have a solid understanding and knowledge, of the industry and what customers are already experiencing, to effectively launch their online offering. One of the first steps is determine their focus; high online trading, trading research or information and education. It appears that a site that can offer a balance of these while maintaining easy navigation, up-to-date information and competitive market costs will be the winner.

Conclusion The list of items covered in this review of Primus’ online trading formula was extensive. The Intel-based servers were deemed the best option for Primus, allowing it the flexibility between the Windows Server and the Linux operating system. A co-hosted server was selected due to the security and speed issues that Primus would face. Software design and outsourcing potential were reviewed in detail. T1 and Frame Relay Internet connections were compared, as well as the option of outsourcing the maintenance of the website.

The comparison to competitors is one of the most critical elements for Primus. Primus has the opportunity to see what the competition is offering, how the critics have rated the sites, how the market has reacted, etc. Learning from others’ mistakes and innovations is one of the smartest moves that Primus can make, and the research and analysis cost is minimal. Ultimately, the analysis from this paper is an excellent blueprint for building and maintaining an online trading website which appeals to customers and leads to growth and profitability for Primus.

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